Capitalism Sows the Seeds of its Own Destruction?

Karl Marx, as opposed to Joseph Stalin, was not, I suspect, a bad guy. Marxism is essentially a utopian ideology. But utopian societies rarely work, as they often fail to take human nature into account. As a utopian, Marx saw a large group of society in distress and exploited. He saw capitalism and its unbridled pursuit of wealth and power as the source of the distress. That is why he said, “Capitalism sows the seeds of its own destruction.”

As I studied history, economics, and philosophy, I initially disagreed with this statement. But as I continued to read and reflect and watch politics, I realized he was almost right. Perhaps a better statement is unbridled capitalism sows the seeds of its own destruction.

Another interesting aspect of the Communist Manifesto is its treatment of liberty. While “blessings of liberty” is the stated purpose of the US Constitution. Liberty is mentioned only twice in the Communist Manifesto:

“When Christian ideas succumbed in the eighteenth century to rationalist ideas, feudal society fought its death battle with the then revolutionary bourgeoisie. The ideas of religious liberty and freedom of conscience merely gave expression to the sway of free competition within the domain of knowledge.”

“By this, the long wished-for opportunity was offered to “True Socialism” of confronting the political movement with the Socialist demands, of hurling the traditional anathemas against liberalism, against representative government, against bourgeois competition, bourgeois freedom of the press, bourgeois legislation, bourgeois liberty and equality, and of preaching to the masses that they had nothing to gain and everything to lose by this bourgeois movement.”

To make the comparison even more interesting, the Communist Manifesto even attacks the foundations of the US Constitution and liberalism:

“The fight of the German, and especially of the Prussian bourgeoisie, against feudal aristocracy and absolute monarchy, in other words, the liberal movement, became more earnest.

By this, the long wished-for opportunity was offered to “True Socialism” of confronting the political movement with the Socialist demands, of hurling the traditional anathemas against liberalism, against representative government, against bourgeois competition, bourgeois freedom of the press, bourgeois legislation, bourgeois liberty and equality, and of preaching to the masses that they had nothing to gain and everything to lose by this bourgeois movement.”

Now, let us look at two interesting and often opposed founders of The Republic, Alexander Hamilton and Thomas Jefferson. The Republic is based on liberal philosophy, the ideals of the Enlightenment, and the free market. One could call this approach constrained utopia. The founders studied history, philosophy, and economics and saw that utopias do not work, to include unbridled democracy. Therefore, while the Constitution is about liberty, it is also about constraints and bridles.

And that is essentially the difference between Jefferson and Hamilton. Hamilton wanted a strong central government and a central US bank. Jefferson opposed them and envisioned a free agrarian society. Perhaps Hamilton was far more of a free-market capitalist and Jefferson was a bridled capitalist. The conflict between the two caused Washington many an uncomfortable moment.

Now, move forward to the Gilded Age. This was the closest we have been to unbridled capitalism and came replete with the abuses that Marx saw. The US answer came not in Marxism, but in a trust-busting Republican president, Theodore Roosevelt. His reforms kept the bridle on capitalism through the Roaring Twenties and the Great Depression. Again, a bridle was placed on capitalism through laws such as the Glass-Stegall Act of 1933. This act was partially repealed by the Gramm-Leach-Bliley Act in 1999. Again, unbridled capitalism raced ahead and led to the financial crisis of 2008.

Every time we either take the bridle off and give the capitalist horse its head, the capitalist jockeys push the limits and provoke a crisis.

Free-market economics are important. But just as utopian Marxism failed to take human nature into account, unbridled capitalism fails to take human nature into account.

That is why the Constitution has so many checks and balances. But when we apply the checks and balances concept to economics, we need to be careful. Over-regulation can lead to stagnation, lack of innovation, and a poorly performing economy. Too little regulation can allow greed to take over and then create social stresses, monopolies/monopsonies, and potentially fascism as corporations gain power over the government through regulatory capture and other means.

There is an optimal band of government oversight that allows markets to flourish and generate prosperity while ensuring a fair and free economy. But that means we, as citizens and owner-operators of The Republic, need to hold politicians and bureaucrats accountable for their actions and the regulatory process needs to be transparent.

This is more than governance. Citizens need to understand history, psychology/sociology and comparative economics and politics. Liberty is the key.