"The free marketeers of the Bush administration had announced that they will use a quarter trillion dollars to nationalize a good chunk of the banking system. It means the largest investor in the private sector is now the public sector."
Such is exactly what I have sent my past blogs with the same rationale. Matt Haak sent his letter to the Editor dated Oct.13,2008 on page A20: "The end of American Capitalism?" front page,Oct.10 Anthony Faiola claimed in his analysis that credit was the "lifeblood of capitalism," If that were true, it'd be called creditism,not captalism. The lifeblood of capitalism is capital. But we don't have capital in this country, and we certainly don't have capitalism. What we have is a backwards debt-based monetary system that has done nothing but expand and collapse the economy over and over again since the Federal Reserve Act was forced on our ancestors." The above letter is certainly different from popular thinking! I would challenge the word "capitalism" because any nation has two sectors: Public (government) and Private(enterprises) Maybe mixed in some cases. Moreover, China is the most populous nation with human capital but not under Capitalism per se. The official description is Socialism with Chinese characteristics. Generalization may be misleading for the economic sytem as China does have the market economy. Perhaps readers would have varied views and the views are invited for public understanding.
Francis Shieh a.k.a. Xie Shihao,a student of economics with the passion of nomenclature. Thanks for reading my personal views. Have a great day. Oct. 15, 2008 at 10 a.m.
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Francis - Thank you for picking up my letter from the Washington Post. I agree with your point that practically any economy is going to have some combination of public and private sectors and that this doesn't necessarily disqualify them from being considered Capitalistic. But my point in saying that we "certainly don't have capitalism" wasn't so much about our having a public sector, but rather that the monetary system we have is inherently incompatible with capitalism, in the long-run.
Our monetary system, after all, relies entirely on debt. Every dollar in deposits and paper currency is matched by a dollar in unpaid loan principle. True, you may deposit your salary in savings and not owe it to anyone. But dollar for dollar, the money you were paid can eventually be traced back to its creation in the form of a loan. It could be that your employer used a small business loan to pay you or that your employer was paid by a customer using credit.
So this debt-based nature of our monetary system, which is not a feature of, say, a gold standard, causes two things: perpetual inflation and the destruction of savings. Both of these are harmful to the accumulation of capital, and I believe that the history of our country will show a gradual shift from reliance on capital to a reliance on credit precisely for this reason. The fact that this shift is unsustainable is why I would claim that our monetary system is incompatible with capitalism.
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