Unregulated Capitalism Doesn’t Work? Is This the Lesson We Should Take from the Current Financial Debacle?

A reader at Andrew Sullivan’s The Daily Dish makes an interesting observation:

One of the most powerful lessons of history was certainly played out in the 43 year period between the end of Word War II and 1988. By the end of that time, it was completely obvious that people living under communism were not doing as well as most people living under some form of capitalism (at least in Europe). This became well known to the folks living in eastern Europe and the former Soviet Union, and contributed greatly to the downfall of communism, among other factors.

For the last 21 years, we have been following a similar social experiment between different styles of capitalism: more regulated and less regulated. Several western countries including Ireland and Iceland, as well as some of the Baltic countries, got rid of many regulations, particularly regulations regarding finance. For a while, their economies were shining stars, but now they are a mess. The US and Britain, the least regulated large economies, are now suffering greatly as well from the financial bubble. While Old Europe (to steal a phrase from Don Rumsfeld) is not nearly as affected by the recent debacle.

About Santi Tafarella

I teach writing and literature at Antelope Valley College in California.
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5 Responses to Unregulated Capitalism Doesn’t Work? Is This the Lesson We Should Take from the Current Financial Debacle?

  1. sole4sail says:

    There must be at least some form of regulation, or else there will be anarchy, such as what happened with non-banking financial institutions worldwide. If your argument were against excessive regulation, I’d agree with you.

  2. aunty dawkins says:

    Santi
    An interesting question. Certainly the ‘property boom’ led prosperity in US and UK and Ireland for that matter has now collapsed. People have benefited from this and it has led to consumer confidence,high spending and economic growth. European economies have been less dependent on the property base for their less spectacular growth. This would appear to be the difference. I’m not informed enough to know about the question of less or more regulation but it seems that over ethusiastic borrowing for property ,in the belief that values could only rise is the main culprit and regulation of that area has obviously been sorely lacking.

  3. James W says:

    Without a doubt it needs to be regulated. I’m Irish, the scale of what has happened here is probably the most extreme of anything that has happened in the wealthy countries of Western Europe. We followed Reaganomics and the idea that we are too rich and too important to have to worry about what the banks did and it’s stung us so hard. We heard all of these stories from the media that we were the second wealthiest country in the World, that the financial system was the envy of Europe and that we should be closer to Washington than Brussels and we followed them (I followed them). Before Americans get offended… The problem with following Washington rather than Brussels is that the wealth of America is just a face, Reagan turned the financial system upside down and let America become a plutocracy lobbyists control what happens in Congress. Brussels on the other hand is much more sound and regulated (you can see this in how little affected countries at the ‘heart’ of Europe have been affected by the crisis) but the problem on a human level with following European economics is that you don’t get the glitz and glamour of booms like we saw here so it isn’t exciting and nobody gets super rich super quickly. On the other hand you don’t get horrific recessions like we are seeing at the moment if you follow it. The point is that conservatives and Republicans can call regulation socialism/communism all that they want but speaking from experience it’s blatantly obvious that the Europeans have it down -they’re dead right.

    No more of this lauding of Reagan and free market capitalists, they destroyed America and to a much lesser extent The UK and Ireland. We can only blame ourselves for it, 100% mortgages were brought in, the average house price in Dublin was $500,000, 90,000 homes were being built every year (The UK, a country of 60million people [Ireland: 4million] were only building 160,000) and more Mercedes and BMWs were bought in Ireland in 2006 than Germany! They’re all signs that the country has gone mad and a GINORMOUS recession is about to take hold. All we have after the past fifteen years is some empty champagne bottles, two year old $100,000 cars and empty apartment blocks -freedom and the free market clearly isn’t worth it.

    (Sorry I rambled on… I’m pretty pissed off)

  4. santitafarella says:

    James W:

    I appreciate your honesty, and as an American, I’m not offended. You offered a very thoughtful post. The politics in the United States is such that the far right here sets the range of debate and its tone in such a way that it is very difficult to consider European models without accusations of “socialism”, and even “communism.”

    —Santi

    • James W says:

      I never like to attack America because I follow the American way of life and would much rather follow it than the Central European way of life, a lot of Irish and British people feel like this -we’re somewhat detached from Europe and the rest of the English speaking world because we have such strong ties with American culture and politics and barely any at all with Europe. I just think that if America on the whole was more centered (dare I say non-partisan) and open to the idea that there is more than one way of doing freedom or capitalism then the world as a whole would be a better and we wouldn’t get into these messes. I have a big fear that we’ll learn nothing at all from this, that would really be the biggest mistake. I could ramble on about this for days, there are so many interesting arguments about it.

      (I appreciate your reply BTW!)

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