"Every ten years I quote the same adage from the late Austrian analyst Willi Schlamm, and I hope that ten years from now someone will remember to quote it in my memory. It goes, 'The trouble with socialism is socialism. The trouble with capitalism is capitalists.'"
Well, Bill is gone now, but his memory lives, and I'm sure he'd forgive me for taking up his request five years early.
Schlamm's point is still relevant, even though the kind of socialism we're dealing with is less doctrinaire. But it also distorts the issue somewhat. One might just as easily say that the problem with socialism is capitalists, too.If by "capitalist" you mean someone who cares more about his own profit than yours; if you mean someone who cares more about providing for his family than providing for yours; if you mean someone who trusts that he is a better caretaker of his own interests and desires than a bureaucrat he's never met, often in a city he's never been to: then we are all capitalists. Because, by that standard, capitalism isn't some far-off theory about the allocation of capital; it is a commonsense description of what motivates pretty much all human beings everywhere.
And that was one of the reasons why the hard socialism of the Soviet Union failed, and it is why the soft socialism of Western Europe is so anemic. At the end of the day it is entirely natural for humans to work the system -- any system -- for their own betterment, whatever kind of system that may be. That's why the black market economy of the Soviet Union might have in fact been bigger than the official socialist economy. That is why devoted socialists worked the bureaucracy to get the best homes, get their kids into the best schools, and provide their families with the best food, clothes and amenities they could. Just like people in capitalist countries.
It's why labor unions demanded exemptions and "carve-outs" for their own health care plans from ObamaCare. And why very rich liberals still try their best to minimize their taxes.
The problem with socialism is socialism, because there are no socialists. Socialism is a system based upon an assumption about human nature that simply isn't true. I can design a perfect canine community in which dogs never chase squirrels or groom their nether regions in an indelicate manner. But the moment I take that idea from the drawing board to the real world, I will discover that I cannot get dogs to behave against their nature -- at least not without inflicting a terrible amount of punishment. Likewise, it's easy to design a society that rewards each according to his need instead of his ability. The hard part is getting the crooked timber of humanity to yield to your vision.
And it's also why the problem with capitalism is capitalists. Some people will always abuse the system and take things too far. Some will do it out of the hubris of intellect. Some will do it out of the venality of greed.
I bring all of this up because many in Washington seem convinced that the solution to the problem with capitalists is always less capitalism. To be sure, a free market society is in some sense a government program. The government must prosecute criminality, enforce contracts and demand that the rules are observed. Few lovers of free markets are so laissez-faire as to want to strip the government of its role as referee.
But few should want the ref to suit up and play the game.
Washington's solution to Wall Street's problems is to get Washington deeply, deeply involved in Wall Street. So involved that the savvier capitalists will recognize -- once again -- that the safest bets are not to be found in the vicissitudes of a fickle marketplace, but in gaming the system run from Washington. The "reform" coming down the pike will put bureaucrats in charge of investors. If bureaucrats were better than investors, they wouldn't be bureaucrats. The government will decide which firms are worthy -- "systemically important" -- and which are not. Those that are will use their official "importance" to game the system. Instead of eradicating "too big too fail," we will systematize it.
We are fond of saying that the answer to free-speech problems is more free speech. But we seem incapable of grasping that sometimes -- and only sometimes -- the solution to capitalism's problems is more capitalism.