Why do we continue to debate the virtues of capitalism? This is a strange pastime for a free people. At first glance, it seems like debating the virtues of vitamin C and fiber in your diet. Yet at every downturn and every oil spill, the critics come leaping over the barricades to topple what they tell us is the flimsy shell of the capitalist system. Marx and Lenin said it would collapse under the weight of its internal contradictions. Still waiting.
In 2008, the political left in America blamed greed and the system of greed, which is "unfettered capitalism," for the near collapse of the financial system and the unraveling of the world economy with it. But now, by 2010, socialist Greece is going bankrupt and dragging the rest of Europe with it into the black hole of insolvency. After 60 years of social democracy, of shorter workweeks, longer vacations, and ever-more generous social programs, from London to Athens the bills came due.
Americans---people who hail from the land of the free---should know better because economic and political liberty are closely linked. Far from being the bad guy in a suffering world, capitalism, the system of economic liberty, disarms the bad guys by diffusing power. Milton Friedman, in Capitalism and Freedom, said that capitalism "promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other." He defined "competitive capitalism" as "the organization of the bulk of economic activity through private enterprise operating in a free market. . . ." Political freedom, aside from being good in itself, is the opposite of despotic power, and thus anything that preserves that liberty is the best check against despotism. Capitalism, said Friedman, is a necessary condition for political liberty, but it is not a sufficient condition. China is capitalist, but not politically free. But political freedom flourishes only where there is also economic freedom.
To address the current crisis at the London end, British Prime Minister David Cameron is pulling way back on Gordon Brown's "fair" but economically unsustainable society and turning it sharply in the direction of a freer and fiscally responsible society. He is preparing his people for cuts of 25 percent in government spending by 2014-15. (See "The Unlikely Revolutionary," from the Aug. 12 issue of The Economist.) That means government jobs. People presently working for government will have to find positions in the private sector. That's the economic shake-up. But earth-shaking political consequences are coming as well. Many of the services that government is now providing will have to come from citizens themselves. Yes, people will have to serve each other, face-to-face and hand-to-elbow. It may take actual love, even for family members. And people will have to take a larger role in governing their own affairs. Knowing this, Cameron is also keen on "decentralization," shifting power from London to local government and private citizens.
The president and Congress here in the United States do not appear to have the same confidence in liberty to lift their country out of its doldrums. They have been seizing power for Washington in an unbroken 19-month effort to control healthcare, the financial sector, the automotive industry, energy consumption, student loans, and home mortgages. That's all. But most of the American people still have a high view of the dignity and wisdom of independence. That is why our government leadership in Washington has never in living memory been less popular than it is now, and that is also why it is facing an ever growing avalanche of political rebuke due to hit this November.