Pragmatism with a Human Face
Now, less than twenty years later, it turns out that capitalism has fallen apart under its own weight. The notion of the self-healing powers of capitalism is not mentioned very often today. Does self-healing capitalism exist?
As far as I understand, it does. The problem is that the period of healing and recovery has a tendency to be lengthy, leaving many victims of the disease disabled and even dead along the road. We have seen that happen before. Remember that this is not the first time that a badly regulated market economy has run into problems.
The effects of Manchester Liberalism, the 19th-century incarnation of capitalism, were horrifying. And in the 20th century, capitalism has banged its head against a brick wall a couple of times. In order to get things back on track again, tools from the socialists’ shed have been used, e.g. the New Deal.
There have been middle ways in the form of mixed economies, e.g. India’s and Sweden’s, though the mix has been different in the two cases. In Sweden it has resulted in a situation where Social Democrats have accepted a market economy and the right-wingers have used socialist methods, e.g. nationalizing and rescuing banks — but not in order to introduce socialism. The banks were later re-privatized when the taxpayers’ money could be recovered.
However, both the left and the right have to some extent stuck to their ideological rhetoric. But maybe a new ideology is on the move. It is neither socialism nor capitalism. Let me baptize it pragmatism.
The bottom line is a regulated market economy; but in order not to fall in the pitfalls of socialism and capitalism, an eye, or rather a couple of eyes, should be kept on the regulations and the regulatory tools.
The reason is that if you introduce a regulation in order to counteract unwanted effects, you can be practically sure that after some time, the regulation will have created some other bad side effects, even counteracting its original purpose. A mechanism is needed to observe tendencies of bad side effects when they begin showing their ugly horns. Then it is possible to repair the system before it collapses.
That includes, of course, a method to sort out people, whose main assets are an oiled tongue, an ability to climb up to the top of an organization and a capacity to appropriate for themselves what does not belong to them, while their ability to do what they are supposed to do is nil. Hindering them from reaching leading positions makes it impossible for them to destroy what they are supposed to administer properly.
In other words: in order to keep the financial markets and the economy balanced, the proper instruments should be used. Not to use the right tools because of ideological dogma is an inexcusable sin of omission.
The conclusion is obvious: the principle of the mixed economy must be moved to a higher level — pragmatism with a human face.
Copyright © 2009 by Bertil Falk