The End of Capitalism
The End of Capitalism
December 16, 2008
Things change. It’s the nature of the universe. Yesterday’s greatest ideas give way to ideas that are better, or better suited to the present, or at least different. Change is the only thing on which you can depend.
So what about capitalism?
I think capitalism had a good run, but it will soon be done. Socialism will be too expensive to maintain as the world economies slow, and communism won’t be making a comeback. The economies of the future will be something new.
Capitalism was conceived before the Internet, and before the gears of commerce became computerized. The system could absorb a lot of con artists because they didn’t have the ability to steal fast enough to cripple the system. As you know, that has changed. Crooks in expensive suits now have the ability to swindle trillions, collectively, thanks to the efficiency of the system. And idiots in expensive suits can do even more damage.
The economy is now too complicated for even the regulators to know when a con or a huge mistake is happening. The balance of power has swung to the crooks and the market manipulators. Even if we could regulate away these problems, it’s already too late. There isn’t enough money left to support the planet under the current social systems, at least not when the boomers start retiring and unemployment starts climbing.
I’ve been wondering what the new economic system will look like. I think the next economy will have the same freedom of employment and entrepreneurship as capitalism. That part seemed to work well. But you might see restrictions on what types of investments individuals can make, to keep them out of trouble. Most people should be restricted to buying only the broad indexes with an ETF. And perhaps the percentage of stock you can legally own as a percentage of your net worth should go down as you near retirement. Stock bubbles could be avoided by restricting how much money can be invested in stocks, on an annual basis, to keep the price earnings ratios around 15. New stock offerings would be funded by existing companies and institutional investors. (Clearly that idea isn’t well thought out. It’s just a directional sort of prediction.)
But the biggest change could be in what sort of consumption is allowed under the new economy. Most of our problems were caused by people who couldn’t control their own spending. Banks could tighten their credit requirements but that won’t be enough to stop the spending junkies from depleting their own nest eggs. So you might see some forced savings rules in the new economy.
Depending on how bad the economy gets, you could also see rules banning single passengers in cars. And working from home might become a legal requirement for economic reasons. Perhaps your health insurance premiums would be based on your body mass index and whether or not you smoke. You could see a whole range of restrictions on how consumers can live, spend, and invest, to prevent market bubbles and waste.
So I think the new economy will allow you freedom of employment, but you won’t be able to spend and invest your money as freely as you once did. That was the part that got us in trouble.
I’m not saying this new economy will be an improvement. It’s just a prediction.