Author of The Wealth of Nations,Adam Smith, and father of Marxism,

Karl Marx. while apparently at odds over the virtues of capitalism, may

both have been right about its failings.



Hurriyet, Turkey

Capitalism in Crisis: Smith and Marx were both Right


"While Smith emphasized that the market's greatest enemy is a neglect of ethical rules, Marx asserted that insufficient demand would be capitalism's most serious problem. The economic crises of the last 80 years proved them both right."


By Erdoğan Alkin



August 14, 2011


Turkey - Hurriyet - Original Article (English)

Witnessing the serious economic, technical and political difficulties of the founders of Western-type capitalism, Europe and the United States - and the difficulty they are having resolving them - one question refuses to go away: Is this just a short-term fluctuation or an ideological crisis for Western capitalism?


During or after every economic crisis, even the wise jump to accuse social, political and economic system or regimes without taking account of simple human error. For example, while one group praises Adam Smith, others likewise praise Karl Marx. But both of these figures determined the capitalist system's founding principles - as well as the threats that undermine its smooth operation.


While Smith emphasized that the market's greatest enemy is a neglect of ethical rules, Marx asserted that insufficient demand would be capitalism's most serious problem. The economic crises of the last 80 years proved them both right.


It is time to discuss why a reasonable rate of growth in Western economies is not sustainable, and why destructive crises regularly emerge almost without warning. Is it deficiencies in the system or serious mistakes made by democratic governments? It could be both.


Smith was right to emphasize ethics in the smooth operation of the market. The last crisis proves that again. But at the same time, the last crisis also showed that such ethical rules are unrealistic. It is impossible to force irresponsible managers, CEOs, presidents of huge corporations, banks and the like to obey ethical rules. If we accept these things, then how can this ideological crisis of Western capitalism be dealt with? These are perplexing questions to answer.   



New rules that seem logical but in fact are unrealistic are now being discussed, particularly in the United States. For example, stricter regulation and a more reasonable balance between markets and governments have been suggested. That might seem attractive, but it won't resolve anything in terms of decision making. When there is a deep ideological rift between congressional Democrats and Republicans - something we observed during the recent battle over raising the debt ceiling - it would be foolish to expect them to responsibly cooperate and create new rules for “capitalism.”


And even if there were a chance of such wise cooperation over new rules, it would also be foolish to expect such rules to resolve every problem now hampering the smooth operation of the market.



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The situation in Europe is even more difficult simply because there are so many governments, politicians, institutions, banks and whatnot responsible for creating this monumental crisis. It's easy to blame governments in Greece, Ireland, Portugal and even Italy and Spain, but neither are macro-economic indicators in the United Kingdom and even France particularly bright. Germany is quite proud that its economy is healthy, but even Germany lacks the force to be a locomotive for the entire European economy. And there is another question on everyone’s mind that has yet to be openly voiced: When some E.U. nations have been borrowing heavily and irresponsibly, why were those who now accuse them unaware that such a serious debt crisis was looming?


In short, it is clear that Western capitalism is not fading away, and that we will continue to live with all of its deficiencies - which from time to time will create new crises.


Recall what Winston Churchill once said about democracy: “It is the best of the worst.” The same is also true of capitalism.

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[Posted by WORLDMEETS.US Aug. 15 3:59pm



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