Is capitalism dying?

I can't remember a time when the American economy turned so much on the actions of government. QE3 or no QE3? What will emerge next from the brow of Ben Bernanke? How much longer can the Fed keep buying Treasury debt now that China has left the auction house? Will the government bump its head on the debt ceiling? Will Congress raise taxes? Cut spending? Give the housing market artificial respiration? Subsidize job creation?

I hear it's virtually impossible for ordinary people to get a home loan from a private bank, despite the bailouts made possible by the taxpayers' forced generosity. You have to go, hat in hand and properly subservient, to Fanny or Freddie, the institutional living dead.

Can it really be only a dozen years ago that the financial world was enjoying a contact high from all the wonderful companies with nigh-infinite potential -- Amazon.com, Microsoft, Cisco, eBay, etc.? Currently the investment world's speculation is mainly about who will survive the New Normal. One school of thought believes that the only investments worth buying aren't equities at all, but precious metals and commodities that promise to be scarce in a world that desperately needs them.

How can you blame anyone for feeling this way? We're into Year 3 since the worldwide economic crisis reached escape velocity, and things aren't getting better, nay, are getting worse, for most people. And they're starting to understand that this isn't just another contraction or recession; we've sailed off the map, we're in terra incognita. 

The last time such a mental landscape ruled, in the Great Depression, the United States (and Europe) came this close to going whole hog for Marxism. And neo-Marxism is what the Community Organizer and his posse are all about.

Are we devolving into a system of state capitalism, where the executive branch, Federal Reserve, and other unelected rulers determine -- intentionally or not -- the fate of private businesses and their shareholders?

I don't usually agree with J.R. Nyquist -- he's too much the Prophet of the End Times for my appetite -- but sometimes he makes points to be taken seriously. For instance, that the urge for a government-run economy never dies, no matter how many times it goes pear-shaped in practice:

Since the much-heralded success of the Reagan-Thatcher counter-revolution in the 1980s, many supposed that socialist ideas were discredited. In his book on socialism, Ludwig von Mises offered a more far-seeing analysis. “It is a mistake to think that the lack of success of … Socialism … can help to overcome Socialism,” he wrote. “Facts per se can neither prove nor refute anything.” 

The reason for this was explained by Joseph Schumpter, who said socialism was a new kind of religion. You cannot argue someone out of their religion. When people believe, they believe. Arguments are ineffective. Therefore, socialism is not defeated when it turns out to be a form of dictatorship, or when the economy is ruined under social democracy. It carries on, and mobilizes fresh explanations for paradise delayed. 

Yes indeedy. John Mortimer, author of the Rumpole of the Bailey stories and a bien-pensant leftist, actually wrote a novel titled Paradise Postponed, one of whose themes was Labour's failure to bring about equality and universal prosperity in post-World War II Britain.

Nyquist continues:

Writing more than 60 years ago, Schumpeter allowed that America’s prosperity might last fifty years or so, and this would give capitalism a further lease on life. The advent of socialism, he said, would then be delayed by roughly half a century (after 1950). Through this long period of prosperity, however, “atrocious mismanagement” of national resources would be inevitable. Schumpeter wrote of the problems of bureaucracy, politics and a “flight from labor.” 

Calculating the damage in terms of government regulation, debasing of the currency, and the piling up of debt, the resulting decline in prosperity would nonetheless be blamed on the free market (i.e., on “greedy” businessmen). This would be the signal for the state to finalize its conquest of private production. This seems to be the position we are at today. As storm clouds gather we may expect to see more and more state intervention in our ailing economy; accompanying this will be a further debasing of the currency, more regulation and growing scarcity.

You can argue that business has brought a lot of mischief down on itself by its own willingness to play footsie with the government -- defense procurement being a prime example of soft bribery through subcontracting jobs in as many Senate and Congressional districts as feasible. The relationship between the big money center banks and the executive branch is a poster for crony capitalism. 

Unless we're careful in these trying times, however, we might well get an amalgam of the worst features of capitalism and centralized political direction.