What Kind Of Capitalism Do We Want?

The big debate in the political economy is not between socialism and capitalism as some politicians are claiming. This article describes the debate as one between two forms of capitalism. In simple terms, it is a debate between social capitalism and anti-social capitalism.

Mitt Romney appears to favor the anti-social form of capitalism.  He claims that Bain Capital produced jobs.  Some of the companies that Bain took over did produce jobs, but that was not the objective of the firm.  Its objective was to earn a return on investment for Bain investors, and for Bain management.  Some of the businesses taken over by Bain were stripped of its assets and eventually closed down.  Jobs, and some communities were destroyed in the process. Romney also defended the huge trading loss at JP Morgan that has risen from $2 billion to $3 billion.  He argued that there are winners and losers in capitalism.  JP Morgan lost some money, but other traders earned a profit.  The problem with his viewpoint is that JP Morgan's deposits are protected by government.  The gains from a successful trade go the firm, but the risks are ultimately born by the taxpayers.  JP Morgan's deposits are insured by government, but it is also to too big to fail.  Romney's view also suggests that capitalism is a sum-zero game.  There is a winner for every looser.  That may be true for a casino economy, in which there is a counterparty for every bet, but it is not the picture that most of us have about capitalism.  It is a picture of a financialized economy in which income is funneled to the managers of money.

The article contrasts Romney's view with that of the Obama administration.  Vice President Biden made a speech about the differences between an economy focused on the production of real products and an economy that produces risky financial assets for sale and for betting purposes.  President Obama is also campaigning with similar messages.  They may not actually represent a strong view of a social economy, but it is less anti-social than the type of economy that Romney seems to favor.  He is campaigning on repealing laws that regulate banking and on cutting spending on social programs.