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The worst recession in decades has people looking for a culprit, and leftwing ideologues gleefully point the finger at capitalism. "Laissez-faire capitalism should be as dead as Soviet communism," proclaimed Arianna Huffington in late 2008. That same year, even prominent free market advocate Federal Reserve chairman Alan Greenspan told Congress that he should have done more to regulate the financial system. Magazine editor Steve Forbes and economics writer Elizabeth Ames enter into the melee to defend free enterprise with How Capitalism Will Save Us. The book is written as an informal conversation about hot-button topics currently debated in the press and around the dinner table. Chapters are framed using a "rap" and "reality" format where each popular charge against capitalism (the "rap") is followed by an explanation of the "tried-and-true principles that reflect how the economy really works." Follow-up Q&A sections further illustrate specific aspects of the "rap" and the reality. One "rap" is that the free market is brutal, with larger players crushing smaller competitors and companies unceremoniously dumping employees. The reality, say the authors, is that while free markets can be messy and unpredictable, the process of "creative destruction" is critical to economic health and ultimately creates more jobs than it destroys. Follow-up questions and answers on the brutality "rap" address the 2008 financial crisis, individuals who lose their jobs, the sub-prime mortgage bailout, and whether the government should create jobs during an economic crisis. Another "rap" insists that government regulations are the best means to promote public safety and ethical business practices. Forbes and Ames make a persuasive case that overbearing state bureaucracies encourage corruption as people try to circumvent onerous and unfair rules. To wit, a study by Transparency International found that 50% of people in highly regulated countries like Indonesia, Venezuela and Greece report paying bribes as compared to 10% of people in the U.S. Regulatory compliance also siphons off billions of dollars that could be profitably invested. Some of the other "raps" the authors artfully rebut include: Higher taxes are the price we pay for a humane society; the privileged rich prosper at the expense of others; and government intervention is the only way to make health care affordable for poor and middle-class Americans. (Crown Business, 2009, 358 pp., $25) |
Along the way they remind readers of the "explosion of prosperity" and innovation fueled by Reagan’s pro-market reforms following the economically stagnant 1970s; they also demonstrate how overregulation, high taxes and a command-and-control approach have failed to produce prosperity every time they are tried.
