Friday, December 18, 2009

Capitalism Is the Driver of Real, Sustained Growth

There’s an old saying: “Everyone’s a capitalist on the way up and a socialist on the way down.” People want it all—to reap the benefits of free markets, but be protected against any downside. Capitalism won’t abide. And that’s a good thing. It’s a system of inherent checks and balances, which can be swift and brutal during the pruning process. In rough times, we seem willing to sacrifice free markets’ benefits for perceived security from this process. Still, if free markets were restricted, what would happen to those checks? Subprime problems (or Bernie Madoff’s) were not revealed by regulators, but by markets. Note, politicians are human, too.

Capitalism and free markets are not ever-stable. They work precisely because they compel folks to take risks and seek to create excess value out of existing capital, in whatever form that might be. They’re examples of constant change and innovation. Change isn’t always comfortable—and much of it will fail—but when it moves society in a more efficient direction, society certainly becomes more profitable.

During crises, the balance always tilts toward government and away from capitalism. This doesn’t mean capitalism is done. But such things are always said in times like these. Government “solutions” can only carry the economy so far—it’s up to capitalism to drive real, sustained growth. That is, it’s up to the people who make an economy, not its turgid overseers.


~
Fisher Investments Editorial Staff (12/26/2008)

MP: I posted this about a year ago, but it's a timeless message that is still as relevant today as last year, maybe even more so.

8 Comments:

At 12/18/2009 1:47 PM, Anonymous CompEng said...

As poignant as this man's message is, he does complete disservice to his "adversary". Government, when properly functioning, provides Obama's "Rules of the roads", and need not be a provider of services in the common sense nor a re-distributor or wealth to perform great good. Don't lose yourself too far in the praise of capitalism to understand the fundamental underlying conflict between the concepts of liberty and ownership. Any agreement between these two is by definition a compromise.

 
At 12/18/2009 1:55 PM, Anonymous Anonymous said...

In other words, profits are the driver...losses are the divider.

 
At 12/18/2009 3:20 PM, Anonymous morganovich said...

government "solutions" can also do an amazing amount of long term harm.

the utter failure to manage and account for social security and the medi programs has left us with over $60 trillion in unfunded liabilities in addition to out external debt.

that's approx 30 years of the entire government budget.

there is no possible way it can be payed as owed. even hyperinflation won't work as they are indexed to inflation.

thanks federal government...

 
At 12/18/2009 4:33 PM, Anonymous Anonymous said...

There’s an old saying: “Everyone’s a capitalist on the way up and a socialist on the way down.” People want it all—to reap the benefits of free markets, but be protected against any downside.

This is exactly the deal that unions have forced on taxpayers across the country. Union pension funds have been allowed to invest in the market reaping the benefits on the upside while forcing the taxpayer to fill in the hole when things go against them:

The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees.

The urgent need for outsize returns by these vast public pension funds, which must hit high investment targets year after year to keep pace with rising retirement costs, is in turn fueling a renewed appetite for risk on Wall Street.

Before the crisis, many public pension funds had experimented with risky trading techniques or committed more of their money to hedge funds and other nontraditional firms, which in turn invested some of it in complex mortgage securities. When these melted down, pension funds got burned.

Now, facing an even bigger funding gap, some systems are investing in the same securities, betting that a rebound in their value will generate huge returns.

Some pension experts say the funding gap has become so great that no investment strategy can close it and that taxpayers will have to cover the massive bill.

Washington Post

A milestone on California's meandering journey toward fiscal insolvency occurred exactly a decade ago when the Legislature enacted a massive increase in state employee pensions on the expedient assumption that it would cost taxpayers nothing.

Although the new pensions would generate almost countless billions of dollars in extra income for retirees in the years ahead, the CalPERS board, dominated by union representatives, told legislators that taxpayers wouldn't have to bear the load because investment income, which was flowing into the pension trust fund from high-tech stocks, would continue indefinitely.

"They (CalPERS) anticipate that the state's contribution to CalPERS will remain below the 1998-99 fiscal year for at least the next decade," said a final Senate analysis of the 1999 legislation that expanded state pensions, allowing Highway Patrol officers, prison guards and other "safety" workers in some cases to get more than 100 percent of their salaries.

Wrong.

Within a few years, the dot-com bubble had burst, CalPERS had suffered major losses and the state's burden for pensions had pushed into the multibillion-dollar range, not counting the heavy impact on local governments that had cavalierly followed the state's lead on boosting pension benefits.

SacBee

The unions have used access to union funds as a lever to reap millions in kickbacks and campaign contributions from Wall Street investment firms. This has allowed them to squeeze politicians who have taken this money, corrupting the entire system and costing the taxpayers billions.

Public employee unions need to be declared illegal. NO ONE should be able to organize against the people of the United States!

 
At 12/18/2009 10:07 PM, Blogger juandos said...

Good comment anon @ 12/18/2009 4:33 PM...

Very informative...

Thanks...

 
At 12/18/2009 11:06 PM, Blogger bobble said...

There’s an old saying: “Everyone’s a capitalist on the way up and a socialist on the way down.” People want it all—to reap the benefits of free markets, but be protected against any downside.

yes indeed, on the way down:

the bush/paulson mandate was socialism for wall street, capitalism for mainstreet.

the obama/geithner mandate is: same

 
At 12/19/2009 6:27 PM, Blogger juandos said...

Don't Blame Citigroup For The Latest Outrage--It Was Tim Geithner's Fault

 
At 12/23/2009 7:20 PM, Anonymous Anonymous said...

The second paragraph is great support for Cap and Trade.

 

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