Readers mulled the implications of the collapse of Wall Street's storied firms, our Oct. 13 cover story. Capitalism is a "double-edged sword," one said, as another dubbed the bailout "madness." And one cast it in perspective."Today's crisis is one of those unavoidable events that occur under freedom."
Capitalism, Closely Examined
As governments sift through the collapse of financial markets and the need for reform, they should consider that the non-financial-market side of the world's economies is doing quite well ("The Future of Capitalism," Oct. 13). This crisis is about financial markets. The causes of the failures are easily identified and include ineffective corporate boards, excessive leveraging, speculation beyond prudent risk, human greed and new products introduced into financial markets unscreened by the Securities and Exchange Commission. The immediate focus on reform should address these specific issues and not the whole system. Clearly the financial markets are global, and the international institutional arrangements designed after WWII need to be adapted or changed. Capitalism has achieved significant results over the years. Fareed Zakaria underscores this point well in "The Age of Bloomberg." The risk today is overkill and overreaction. I am encouraged by the election of Barack Obama as president and the team he is likely to pick: experienced, progressive, nonideological, pragmatic and able to discern that elusive balance between regulation and free markets.
J. H. Faulkner
With an ongoing, severe, worldwide financial crisis, certain facts may help us understand and provide perspective. Ronald Reagan's and Margaret Thatcher's policies were right for their time, given the prevailing circumstances. Then it was a bipolar world with capitalism winning the cold war against an "enemy": the Soviet Union and the hapless Eastern bloc. Until the end of the cold war, capitalism had a special appeal because of the stark contrast between the living conditions of the people on the two sides, a contrast most pronounced from 1955 to 1990. Capitalism took seriously the appeal that communism's promises offered, and as a consequence provided and permitted more opportunities for ordinary people (with much help from social democrats). But people should not underestimate the potentials and capabilities of the free world, especially those of the United States, because of its system's strengths and its potential for adaptation and correction. China and Russia, among others, do not possess even traces of these abilities.
A new age of global capitalism starts now. Do we still want to believe that capitalism really works, especially when the rich nations gather their massive wealth at the expense of the poor and weak ones? Or does anybody still want to argue that the democratic system functions when it is subject to umpteen redefinitions and interpretations at the whim of the powerful? Human greed surpasses everything, ending in destruction and chaos. Human idiosyncrasies ignore the suffering of the unfortunate, resulting in a world of disparity and contrast. Yet we think we have been doing the right thing. We are paying a heavy toll for past follies—political, economic and, surely, environmental. The current global upheavals will be a bitter lesson for us all.
The challenge in the coming years will be to guarantee that governments' evident conflicts of interest as owners of the banks they have nationalized do not lead to crony capitalism via favoring their banks in financing public-sector projects. Strong and independent controls will be required to ensure a level playing field. It is unclear how this can or will be done.
Monetarism is dead! If Milton Friedman were alive today, he would probably be very disappointed. The current global financial crisis has shown us that his theory just doesn't work. Monetarism basically states that the markets should be able to work with or without minimal interventions from government. But in recent weeks we have seen that the greed driving global financial institutions needs to be controlled. Some people have called this the death of capitalism, but such a statement is misleading. Capitalism still works, but we have learned that in order to make it work well we must provide trust and power to our governments, which need to impose stricter regulations. Let's just hope that this power doesn't turn against us. Either way, getting through this crisis is going to be a valuable experience for economists long into the future.
Havirov, Czech Republic
Francis Fukuyama writes in "The Fall of America, Inc." that "it is hard to fathom just how badly these signature features of the American brand have been discredited." The American brand is much bigger than any person or policy—bigger and more profound than Ronald Reagan's policies, bigger than left-wing or right-wing tendencies prevailing at any one time. Today's crisis is another of those unavoidable events that occur under freedom, which allows for excesses both good and bad. The American brand is associated with the country where more people enjoy freedom, equal opportunity, rewards for excellence, political stability, separation of powers, an open political process and control by the voters than in any other country on earth.
In "The Fall of America, Inc.," Francis Fukuyama states that the "Reagan era should have ended some time ago" and did not, partly because the Democratic Party had "no convincing candidates or arguments" to counter the Republican Party. Furthermore, he claims that this prolongation of the Reagan model occurred because of differences among those who vote for the left, which he considers akin to socialism and communism, in the United States and Europe. He does not enlighten us about the American party or parties of the left that could present electable candidates. Europe's consistently left-wing voters are labeled as "less educated" and "working class"; their American counterparts are less consistent and have swayed between the Republicans, the Democrats and other, smaller parties in recent elections. Therefore, could it be assumed that the American left is an oxymoron? Fukuyama, despite his previous criticism of the endurance of Reaganism, suggests that many non-Americans "would still benefit from emulating certain aspects of the Reagan model." He proposes some of these for continental Europe, where longer vacations, fewer working hours per week and employment security are not sustainable. Fukuyama is personally used to some of these privileges, and others should have access to similar conditions, depending on their economic sector.
"The Fall of America, Inc." Is the most clear and comprehensive analysis that I have read in any media outlet. As an economist myself with more than 30 years of Wall Street and Paris experience in financial markets, I have to say that the mantras of deregulation and of tax cuts for corporations or the top 5 percent of taxpayers are completely false and the cause of our present situation. The real-estate-market follies of 2000–05 and the absence of regulation and supervision, the run for ever-higher profits without any regard for common sense, the race to create more and more exotic financial instruments and the abandonment of any supervision, as well as weakened government regulatory enforcement of the meager existing laws, have ended up producing an environment where no asset can be clearly assessed for value, and a world in recession. The nonending creation of debt in the United States may prove a bitter pill to swallow by the rest of the world and may end up in stagflation by 2009. Fukuyama's article is a clear warning to control a runaway and rudderless Wall Street. As a society requires laws, an economy requires regulation and government oversight—not to constrain it but to control the excesses.
Francois de la Begassiere
Fort Lauderdale, Florida
I categorically reject Francis Fukuyama's notion that America's best days are behind it and that the Chinese and Russian models are more attractive than capitalist democracy—even in the current situation in which we find ourselves. To what could Fukuyama possibly be referring? Certainly it is not the treatment of dissenters, double-digit unemployment or stifling pollution in China. And surely the author does not yearn for the crime and corruption or recent retreat from democracy that plague Russia. Rather than use these post-communist countries as a model, I prefer to think that America's best days lie ahead.
Deregulation done in the name of innovation is not a bad thing. One example would be when Muhammad Yunus broke all the rules and came up with microcredit loans for the poorest of the poor without need for collateral. Counter to expectations, those poor Bangladeshi women paid off their loans and went on to build small businesses. For his effort, Yunus won the Nobel Peace Prize in 2006. The difference between the streets of Dhaka and Wall Street is that while one deregulates to do good, the other sees it as an opportunity to disregard scruples for the sake of quick wealth. The big banks should learn the four principal virtues of Yunus's Dhaka-based Grameen Bank: discipline, unity, courage and hard work.
Chan Chee Leong
I must add something to Francis Fukayama's fascinating essay about the economic and political philosophy of Ronald Reagan and its downfall. I don't believe that deregulation and tax relief alone saved the American economy in the 1980s. Nor did reduced taxes alone create the Reagan deficit. Reagan may have repudiated the era of "big government," but in fact, he borrowed a chapter from Franklin D. Roosevelt's strategy. Like FDR, he turned the government into America's largest consumer. FDR purchased infrastructure and farm commodities. Reagan purchased airplanes, bombs and missiles. The government's willingness to invest in engineering and technology was the beginning of the tech boom that saved our economy when Reagan's successor, the first President Bush, stopped investing in fancy artillery. Now our government is again willing to become a consumer in order to save our economy. Only this time it's investing in bad debt. That is madness. What will the return on this investment be for the American people?
Francis Fukuyama's article is right on, but it fails to give sufficient emphasis to the offshoring of American jobs that is one of the more insidious consequences of the Bush administration's budget deficits. Because those deficits exceed America's domestic debt capacity, we must borrow the balance from abroad. And we must send the foreign lenders the dollars we borrow from them. And the only way we can do that is to buy more from them than we sell to them. And the things we buy from abroad are made abroad with foreign labor. So if we want to reduce the offshoring of jobs, we must first reduce our budget deficit to the point that we can finance it ourselves without relying on foreigners.
Francis Fukuyama's article was a harsh reminder that capitalism is a double-edged sword. Despite what free-market capitalists assert, the current economic debacle demonstrates that capitalism does not work for the common good unless it is regulated. Regulation levels the playing field between the relentless pursuit of profit and the need to temper it with some humanity to provide vital services to all citizens. America's economic system is not based solely on capitalism; it is a blend of capitalism and socialism. Social Security, Medicare, unemployment insurance and public education are examples of government-run social programs. Americans need to restore the balance between unregulated capitalism and regulation that keeps business from its excesses if we are to have a just society that works for all.
Robert J. Prahl
Francis Fukuyama sees the end of the Reagan revolution as due to the now obvious financial consequences of reduced government regulation and the failures of the aggressive promotion of democracy overseas. While he briefly mentions others, such as increased income inequality and the descent of millions into poverty, he apparently doesn't see or regret the concentration of power in fewer corporations, the squeeze on the middle class or the results of deregulation in sectors other than financial, such as decreased food safety and the degradation of the environment.
San Jose, California
Your article places blame for the current economic crisis by saying that "under the mantra of less government, Washington failed to adequately regulate the financial sector and allowed it to do tremendous harm to the rest of society." I think the problem was actually overinvolvement of government, with Congress meddling in the affairs of Wall Street and opening the door to subprime lending via the Community Reinvestment Act of 1977. When you account for additional Clinton administration regulations and the subsequent proliferation of subprime mortgage purchasing through Fannie Mae and Freddie Mac during the Bush years, it's clear that this is a bipartisan problem of overregulation and excessive desire to have the government do everything for everyone.
A couple of weeks ago I purchased a new laptop ("A Gloomy Vista for Microsoft," Oct. 13). Even though it came with Vista preinstalled, I paid extra to go back to Windows XP. My objective was to be able to run Ubuntu, the version of Linux that provides the capability to have both Windows and Linux on the same PC. I have become increasingly disenchanted with Windows, which I regard as layer upon layer of inefficient coding. The computer industry provides more powerful hardware every year, and when I buy a new PC I expect it to be considerably faster than the old one. But Windows seems to eat up all additional PC power. Sometimes more than 50 percent of capacity may be consumed by automatic processes over which I have little or no control. My simplest command has to wait while Windows works on something it considers more important. On top of that, Windows often tries to guess what I want to do, making suggestions that are usually wrong. Another reason to get away from Windows is its exposure to malware. Linux and Mac users can enjoy working in a relatively virus-free environment, and most experts consider that the fundamental designs of these operating systems make them less prone to malware attacks. When my wife's Windows PC recently became infected in a way that could not be cleaned by antivirus software, the decision to convert to Linux was easy and painless. Personally, I am still tied to Windows for compatibility requirements in my business, but Linux and OpenOffice provide a viable migration path. I have taken the first steps in that direction, and I look forward to being able to say bye-bye to Windows within a few years.
Jan H. Guettler
s Far-Right Surge
In "Charging to the Right" (Oct. 13), Rod Nordland appears unaware of what "the far-right's strong showing" in Austria really indicates, apart from a disgust with the bickering inactivity of the two coalition partners: the socialists and the conservatives. A main issue of concern for Austrians is the increased lack of security. Since the European Union's Schengen Agreement abolished internal border control, an alarming influx of criminal individuals have posed as tourists and more frequently as asylum seekers—and not only individuals but highly organized and technically sophisticated criminal gangs. Austrian immigration laws are inept, and the social benefits are considerable. The government is so afraid of being considered racially motivated that it bends over backward to accommodate newcomers, who are often granted accommodation and other grants above those available to low-income locals.