Reimagining the economy

The word ‘capitalist’ has two utterly different meanings. In company with Ron Paul (a physician and politician) and Milton Friedman (an academic and writer) your columnist (likewise) believes that capitalism is the most efficient and fairest was to organise an economy. We are philosophical capitalists. Warren Buffet is a professional capitalist. He earns his money by investing capital in businesses, but seems to hanker for more government control of the economy. Friederich Engels – co-author, with Karl Marx, of The Communist Manifesto – was also a professional capitalist. Professional capitalists are not necessarily philosophical capitalists, and vice versa.

Sometimes the most successful professional capitalists get that way by striking sweetheart deals with government. Crony capitalists are inimical to philosophical capitalists, and usually vice versa. The habit of both Republican and Democratic presidents of recruiting Commerce and Treasury Secretaries from Wall Street does not mean pro-capitalist policies. 

Mitt Romney, of course, is a professional capitalist. Whether he is also a philosophical capitalist remains to be seen. 

There is need for a major rethink of anti-trust policy. The progressive era’s fear of bigness in and of itself was fatuous. Forcing companies to be inefficient out of a fear that a monopoly would be inefficient seems self-defeating. But if companies get so big that they are ‘too big to fail’ – because they are really too big to fail, or because they are too politically connected – it is a source of danger to the economy. Failure is important in the eco-system of the market. Too big to fail is too big to exist.

Politics needs a more relaxed attitude to business failure. Businesses must be allowed to restructure without political interference. Politically connected creditors cannot be jumped to the front of the line ahead of more worthy creditors, as the Obama administration did when it took over the bankruptcy process of GM and Chrysler. 

A pro-growth policy would remove the status of the IRS and state tax authorities as preferred creditors in bankruptcy. Let suppliers of real goods and services take precedence over federal and state bureaucracies. Corporate taxation raises effectively nothing, but encourages the concentration of markets and wasteful investments. It should be abolished. Regulations seem like a simple solution to market problems – to politicians – but they frequently unbalance markets and cause the need for future regulations. The cost of regulations is frequently ignored. In the case of real market failure, a small tax – such as the pollution taxes advocated by Milton Friedman – is usually more effective than a federal law and the accompanying bureaucracy. Regulation creates technological lock-in – requiring businesses to adopt particular technologies while ignoring the ability of the market to develop something better. Regulatory capture – by which regulators devise laws designed to protect the interests of big business, not those of the consumer – is another core risk.

A vast sweeping away of regulation and bureaucracy is called for. New regulations should be subject to sunset clauses and failure standards, by which they lapse if not renewed and are repealed if they fail to meet their targets. 

There should be a regulatory budget, with new regulations are balanced by the repeal of old and the costs of laws published annually. 

Bankruptcy and anti-trust reform, sunset clauses, failure standards and a regulatory budget would be a powerful legacy for any administration.

Quentin Langley is a Senior Lecturer in Marketing at the University of Bedfordshire Business School as well as a freelance columnist published in the UK and all parts of the US. He blogs on social media and crisis communications at


  1. Reblogged this on POLITIKA.

  2. Jason:Yes, given that the PR cost(time, money, reputation) for a compnay is less for the same effect than it is for an individual. They can steer people more easily to inferior products, or act against the will of the community. Individuals can, but the costs are higher and they can be easily marginalized. An example of this is the focus on developing countries doing that to products destined to developed countries. Products that were designed with developed countries in mind (and adapted to developing countries) are now of lower quality due to the focus on the developing world(and simply localized for the developed world with no thought of developed world markets like the US). Acting against the will of the community is also harder for the flesh & blood individual, as they can be easily marginalized as well.The individual is not on as high of a pedestal as Mackinac places them, nor is the business as servile as Mackinac wishes to describe them. But if they want to say up is down or black is white, the Mackinac Center isn\’t going to be stopped from doing so.

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