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Inequality vs. Capitalism

12:00 AM, Aug 16, 2014 • By IRWIN M. STELZER
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Then there is trade and immigration policy. Freer trade opens markets to America’s corporations and our financial sector, but at the same time exposes unskilled American workers to increased competition from low-paid Asian and Central American workers. Open immigration, which also keeps the wages of unskilled workers down and relieves Silicon Valley employers of the cost of training American programmers and such, has a similar effect: it is good if you have a large lawn, not so good if you are trying to make a living mowing lawns.   

Finally, and perhaps most important, the perception of rising inequality, especially occurring as it does alongside the obvious fact that America no longer cares to or is incapable of asserting leadership in the world’s trouble spots, is calling into question the viability of Anglo-Saxon market capitalism. The days when Margaret Thatcher’s revival of the UK economy and Ronald Reagan’s “Morning in America” were models for emerging nations are long past. The economic success of China’s state-run capitalism is providing an alternative model, although revelations of corruption, huge income inequality as members of the ruling class profit from their political connections, and the parlous condition of state-owned enterprises (SOEs) and China’s banks is giving thoughtful proponents of the Chinese alternative to America’s system of regulated capitalism pause. Still, this generation’s “useful idiots” seem no less gullible than those who visited Stalin’s Russia, and include key American businessmen now quaking in their boots as China’s regulators storm their offices and take some into custody.

It would be a pity if, having emerged from the blind alleys down which the inequality debate wandered, we failed to defend the system that has produced more freedom and more wealth for more people than any other, demonstrating its ability to reform itself when necessary. Call it regulated capitalism if you prefer, but capitalism it remains.

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