[OPE-L] Nobelist: Capitalism is justified

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Tue Oct 17 2006 - 17:49:07 EDT

What strikes me above all is the weakness of his justification. It simply
does not makes sense of empirical reality, never mind of the moral argument.

Among other things,

(1) Successful start-ups of new businesses by self-employed people which
really produce something tangible (rather than being tax shelters etc.) are
in aggregate at a low ebb in most OECD countries. In many countries,
including many US states, they are taxed more heavily than corporations.

(2) Low-wage workers generally do not reap the benefits of productivity
gains, except through government income support systems.

(3) Most of the "entrepreneurial activity" goes into manipulating financial
and information flows. The total investment in genuinely new business that
produces something tangible adding to real wealth is historically low.

(4) Hourly labour productivity in Western Europe is not lower than in the
US, or if it is, the difference is very small indeed and possibly
exclusively due to how net output is valued.

(5) The rich (millionaires+) as a group invest only a small fraction of
their wealth in entrepreneurial activity.

(6) In most places in Continental Europe, the co-participation or
co-management schemes have been or are being abandoned, or reduced to a
hollow shell.

Phelps argues, "advances in productivity, in generally pulling up wage
rates, make it affordable for low-wage people to avoid work that is tedious
or grueling or dangerous in favor of work that is more interesting and
formative". Stalin or Mao could have said that, in fact Phelps's whole
argument could be duplicated in Marxist-Leninist terms ("socialist
emulation" etc.). Still, somebody has to do the work that is "tedious or
grueling or dangerous". So at best this is an argument for upward labour
mobility, i.e. the ability to ascend to better jobs. But upward labour
mobility in the US is not even increasing - it is declining; most of the
mobility is not vertical but horizontal mobility.

Phelps's rendition of John Rawls's theory of justice doesn't merit a passing
grade. Funny how you can write this kind of stuff in the WSJ, and get away
with it.

Why does capitalism need a justification just now, and why present such a
weak justification for it? Who says a system different from capitalism could
not have a strong entrepreneurial sector? Why indeed identify capitalism
with entrepreneurship, given that for most of human history people innovated
things without having the foggiest about capitalism?


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