booyalab
28 Feb 2005, 07:44 PM
This was inspired by the discussion in Shai Gar's capitalism plug-pulling thread.
I read an interesting op-ed piece in the Business section of the St Paul Pioneer Press on Sunday.
Leave Marx's economic labels in past
EDWARD LOTTERMAN
People should stop using the word "capitalism." It is a poorly defined, much misunderstood word and it causes more problems than it solves.
Karl Marx coined the term 150 years ago. He apparently had a clear idea of what he meant. But Marxists' use of the word "capitalism" always carried more freight than was implied by non-Marxists' use of the word. This caused confusion.
Nevertheless, there was enough of a consensus on the meanings of the words "communism" and "capitalism." Communism implied an economy in which government owned land, factories and other facilities, and economic decisions were made by central planning. Capitalism meant a system in which most productive resources were privately owned and most resources allocated by market forces.
Communism collapsed 15 years ago. While China still claims the title of "communist," the only regimes following the old model are North Korea and Cuba, both of trifling importance in the world economy.
We need to recognize that "capitalism" doesn't exist anymore, either.
We used to classify economies along two axes — public vs. private ownership and market vs. centrally planned resource allocation. No nation in the world has pure private ownership and comprehensive market allocation. New Zealand comes close, but even in that nation the government provides many services.
With the exception of eccentric regimes like North Korea, no nation has complete public ownership and central planning. China still has a huge state sector, particularly in older industries, but private property is widespread and market forces play a major role.
Everything in between falls into what some economists call "mixed market economies." Much property is in private hands, but governments own important assets. Market forces are important, but government also makes important economic decisions.
No two countries are at exactly the same place on this two-dimensional map. France's government plays a bigger role in the economy than Japan's does. Venezuela has more government control, while Chile depends more on economic forces.
Shoehorning countries into arbitrary boxes labeled "capitalist" or "socialist" or even "patrimonial mercantilist" doesn't really aid discussion very much. Yes, Sweden is more "socialistic" than Switzerland. Yes, the United States may be more "capitalistic" than Germany. But the labels obscure more than they reveal.
What we need to talk about are the specific goods and services that government provides and how they are provided. We need to talk about the specific ways that governments regulate resource allocation and ways that they do not. We need to talk about the specific composition of social safety nets or provisions of transfer payments. Talk about what works and what doesn't, and about the effects and side effects of different policies. Don't waste time on archaic labels.
--------------------------------------------------------------------------------
St. Paul economist and writer Edward Lotterman can be reached at elotterman@ pioneerpress.com.
I read an interesting op-ed piece in the Business section of the St Paul Pioneer Press on Sunday.
Leave Marx's economic labels in past
EDWARD LOTTERMAN
People should stop using the word "capitalism." It is a poorly defined, much misunderstood word and it causes more problems than it solves.
Karl Marx coined the term 150 years ago. He apparently had a clear idea of what he meant. But Marxists' use of the word "capitalism" always carried more freight than was implied by non-Marxists' use of the word. This caused confusion.
Nevertheless, there was enough of a consensus on the meanings of the words "communism" and "capitalism." Communism implied an economy in which government owned land, factories and other facilities, and economic decisions were made by central planning. Capitalism meant a system in which most productive resources were privately owned and most resources allocated by market forces.
Communism collapsed 15 years ago. While China still claims the title of "communist," the only regimes following the old model are North Korea and Cuba, both of trifling importance in the world economy.
We need to recognize that "capitalism" doesn't exist anymore, either.
We used to classify economies along two axes — public vs. private ownership and market vs. centrally planned resource allocation. No nation in the world has pure private ownership and comprehensive market allocation. New Zealand comes close, but even in that nation the government provides many services.
With the exception of eccentric regimes like North Korea, no nation has complete public ownership and central planning. China still has a huge state sector, particularly in older industries, but private property is widespread and market forces play a major role.
Everything in between falls into what some economists call "mixed market economies." Much property is in private hands, but governments own important assets. Market forces are important, but government also makes important economic decisions.
No two countries are at exactly the same place on this two-dimensional map. France's government plays a bigger role in the economy than Japan's does. Venezuela has more government control, while Chile depends more on economic forces.
Shoehorning countries into arbitrary boxes labeled "capitalist" or "socialist" or even "patrimonial mercantilist" doesn't really aid discussion very much. Yes, Sweden is more "socialistic" than Switzerland. Yes, the United States may be more "capitalistic" than Germany. But the labels obscure more than they reveal.
What we need to talk about are the specific goods and services that government provides and how they are provided. We need to talk about the specific ways that governments regulate resource allocation and ways that they do not. We need to talk about the specific composition of social safety nets or provisions of transfer payments. Talk about what works and what doesn't, and about the effects and side effects of different policies. Don't waste time on archaic labels.
--------------------------------------------------------------------------------
St. Paul economist and writer Edward Lotterman can be reached at elotterman@ pioneerpress.com.