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Capitalism Needs Heavy Government Involvement
Book: "Toward A Truly Free Market", by John C. Medaille, Published 2010 | 2010 | John C. Medaille

Posted on 12/31/2010 6:16:53 AM PST by verdugo

....By purely capitalist standards, capitalism does not work and never has.

What, precisely, does a capitalist mean when he says that capitalism works? Simply this: that the capitalist system can provide a relatively stable and prosperous economic order without a lot of government interference in the market. That is to say, capitalism is basically “self-regulating,” and needs no outside force, such as government, to balance supply and demand and ensure prosperity. ... But he cannot fail to notice, if he is intellectually honest, that capitalism has never been a stable economic order without the heavy involvement of the government. And if this system that we pronounce “working” is really one that requires the heavy hand of government for its stability, can we really call it “capitalist” without at least adding some modifier.....The people who argue that “capitalism works” are the same people who argue that we should have less government interference in the market. Now, I am all for less government; however, the plain fact of the matter is that capitalism cannot function without this interference; capitalism relies on an expanded state to balance aggregate supply and demand. Consider this fact: in the period from 1853 to 1953, the economy was in recession or depression fully 40% of the time. Since 1953 the economy has been in recession only 15% of the time.. Consider the following chart, which depicts the American economy in the period from 1900-2006 (click on the CHART to see a better version)


TOPICS: Books/Literature; Business/Economy; Politics; Religion
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I found a link to the at then unedited Chapter II of "Toward A Truly Free Market", that shows the CHART. If you CLICK ON THE CHART you'll be able to read it clearly.
1 posted on 12/31/2010 6:16:55 AM PST by verdugo
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To: verdugo

The link is http://distributism.blogspot.com/2008/06/chapter-ii-if-it-aint.html


2 posted on 12/31/2010 6:19:36 AM PST by verdugo
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To: verdugo

The problem with socialism is that is rewards only those in government and those who serve their ends and always destroys the middle class and makes the average citizens just another member of the poorest of people. The socialist system bankrupts everyone and eventually destroys itself after much suffering and bloodshed.


3 posted on 12/31/2010 6:24:22 AM PST by kindred (Come Lord Jesus, rule and reign over all thine enemies.)
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To: verdugo

Marxism parading as Catholicsim.


4 posted on 12/31/2010 6:25:56 AM PST by SC_Pete
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Comment #5 Removed by Moderator

To: verdugo

The argument over government and the business cycle continues.

Take your pick: More government involvement with fewer but far more serious recessions. Or less government involvement with morre frequent, but less serious recessions.

The problem with government involvement is that it fuels massive bubbles when it gets involved, either by lowering interest rates (then not raising them in time), or by deregulation of usurious business or banking practices.

Do usch bubbles occur naturally? Sure, but they’re rarely as serious. IMHO, the government needs to regulate usury in all its forms, then pay more attention to immigration and the makeup of the population rather than interest rates.


6 posted on 12/31/2010 6:29:55 AM PST by apoxonu
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To: verdugo

The problem isn’t so much regulation but the irrestible urge of government to tap into the wealth created by capitalism. It’s theft, rationalized initially to defray the cost of regulation, then outright redistribution to the less or nonproductive elements who are quite simply, envious. When government has the access to private wealth, the temptation to steal for political advantage is overwhelming.


7 posted on 12/31/2010 6:30:36 AM PST by Spok (Free Range Republican)
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To: verdugo

I reject the idea that there is a “capitalist system”.

The freedom to own what is yours and to buy and trade with others is natural law, and the biblical way.


8 posted on 12/31/2010 6:33:44 AM PST by Christian Engineer Mass (Capitol Hill operator 866-727-4894 toll free. Just say which Representative/Senator you want to spea)
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To: verdugo

All capitalism needs from government is a stable, predictable legal system, stable and predictable fiscal and monetary policy, and an impartial system of arbitration and courts in which to resolve disputes.

Having secured these, it is then government’s role to stay entirely out of the way.


9 posted on 12/31/2010 6:36:17 AM PST by John Valentine
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To: verdugo

Capitalism always needs order - ability for contracts to be enforced and property rights to be enforced. With a moral people the need for government is less.

But government manipulating aggregate supply and demand? Who is the quack that wrote this?


10 posted on 12/31/2010 6:37:20 AM PST by statered ("And you know what I mean.")
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To: verdugo
capitalism has never been a stable economic order

I'm not going to read this drivel, but would like to point out that the goal of "capitalism" is not stability.

Capitalism (which word is itself a Marxist insult to the concept of free market trade among peoples) produces goods and services because humans are productive, but the growth of productivity occurs because humans are also creative. Creativity is all about destruction of old ideas by replacing them with something new and improved.

Introduce government and collectivism into the mix...and see the whole system grind to a halt as the element of creative destruction is replaced with stability and (to use Obama's favorite term) "fairness."

11 posted on 12/31/2010 6:37:49 AM PST by SonOfDarkSkies
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To: verdugo

I would like to know what other capitalistic system has existed out side the USA?

Unless there has been such a system, they must have failed for them to say it has never worked.


12 posted on 12/31/2010 6:38:17 AM PST by Dudoight
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To: verdugo

What price freedom? I’ll take the risk of more economic “instability” over the fascist government/crony protection racket.


13 posted on 12/31/2010 6:41:48 AM PST by ecomcon
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To: Christian Engineer Mass

Marx coined the phrase ‘capitalist system’.
I agree with you. There are many ‘laws’ that pertain to commerce that describe human behavior cause and effect.


14 posted on 12/31/2010 6:42:24 AM PST by griswold3 (Employment is off-shored, away from govt. regulations, price pressure groups, and liabilities.)
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To: verdugo
One of the reasons capitalism does not work is government corruption and involvement. Robber barons bribe the government to get their way and make billions through government enforcement of the robber's will. Examples are the Fed, Sorros, the old standard oil company, rail roads...
15 posted on 12/31/2010 6:47:35 AM PST by mountainlion (concerned conservative.)
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To: verdugo
One unintended consequence in this argument is the cost of government necessary to enforce this "heavy hand" on the economy. Government bureaucracy is economically non productive. All those faceless bureaucrats contribute nothing to the GDP and create no jobs or new investment. Further the cost of this expanded government role must come from either increased taxes or debt. Increased taxes mean less disposable income hence less consumption and investment. Increased debt also decreases private investment due to the "crowding out effect" as investors, particularly foreign investors, buy government debt rather than invest in the US economy.

GDP is the sum of Consumption, Investment, net Exports X and government spending G...GDP=C+I+X+G. The Keynesian idea that increasing government spending G increases the GDP fails to understand that the increased taxes or debt needed to fund this government spending decreases consumption C, investment I and makes net exports X more negative as US production of good and services for export decrease with lowered investment. Consumers necessarily spend and invest less when their disposable income is reduced by higher taxes.

Another important point made by Hayek in The Road to Serfdom is that increased government control over the economy diminishes individual liberty. The economist Milton Friedman also related how government control of the economy means less choice and freedom of enterprise.

We have to no more than look at the government controlled socialist economies of Europe to see the failure of more government involvement.

16 posted on 12/31/2010 6:47:59 AM PST by The Great RJ (The Bill of Rights: Another bill members of Congress haven't read.)
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To: verdugo
"By purely capitalist standards, capitalism does not work and never has."

I don't know.....you know what DOES work?

Paragraphs.

What's my motivation for bothering with anyone - about anything - who doesn't understand the concept and use of paragraphs?

Seriously. What a bunch of self-important nonsense.

17 posted on 12/31/2010 6:49:46 AM PST by Psycho_Bunny (Hail To The Fail-In-Chief)
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To: verdugo

Capitalism needs minimal government involvment.


18 posted on 12/31/2010 6:50:04 AM PST by cripplecreek (Remember the River Raisin! (look it up))
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To: verdugo

The author chooses a time period where our economy was in the midst of a transformation from agrarian to industrial, ending with the Great Depression which was brought about and lengthened by government interference.


19 posted on 12/31/2010 6:51:28 AM PST by Erik Latranyi (Too many conservatives urge retreat when the war of politics doesn't go their way.)
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To: John Valentine

“All capitalism needs from government is a stable, predictable legal system, stable and predictable fiscal and monetary policy, and an impartial system of arbitration and courts in which to resolve disputes.”

Strike “predictable fiscal and monetary policy” and replace it with “national defense against non-Capitalist aggression from Socialist states” and I’ll agree with you.


20 posted on 12/31/2010 6:53:20 AM PST by cizinec
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To: verdugo

By the author’s “logic” investing does not work well enough because the returns are too uneven. Only a Madoff-style Ponzi scheme gives satisfactory results.

“Government is not a solution to our problem, government is the problem.”
Ronald Reagan


21 posted on 12/31/2010 6:55:35 AM PST by devere
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To: kindred; cycjec; The_Reader_David; Global2010; bvw; r-q-tek86; griswold3; rollo tomasi; Lloyd227
The author didn't propose Socialism. Why do you bring it up? I believe that you bring it up because you think there are only two choices Socialism/Communism or capitalism.

I posted the article because it shows that capitalism without big government interference, has not existed since like 1920’s. I've always advocated less government, yet, as this chart shows, capitalism needs big government, or so it seems. Maybe bankers need big government.

ANYHOW, no one is proposing socialism, I lost my country to the communists, I know socialism/communism when I see it, from HAVING LOST EVERYTHING TO COMMUNISTS, BUT THE SHIRT ON MY BACK!

22 posted on 12/31/2010 6:56:32 AM PST by verdugo
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To: SC_Pete

Yep, it is not “Liberation Theology”, but almost at weird.

Why would anyone post a thread with a yet unfinished book on such an off the wall subject here on Free Republic?

If you search the web for “distributionism” it will not take long to discover the source. G. K. Chesterton blames the “Enlightenment” for all the failures in the world, guess he thinks the “old order” (feudalism) was better.

What a load of crap.


23 posted on 12/31/2010 6:57:48 AM PST by Texas Fossil (Government, even in its best state is but a necessary evil; in its worst state an intolerable one.)
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To: SC_Pete

I lost my country to the communists, I think I know socialism/communism better than anyone else, when I see it, from HAVING LOST EVERYTHING TO COMMUNISTS, BUT THE SHIRT ON MY BACK!


24 posted on 12/31/2010 6:59:54 AM PST by verdugo
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To: Christian Engineer Mass

True. Very good!


25 posted on 12/31/2010 7:01:36 AM PST by verdugo
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To: verdugo

The problem with the 1853 to 1953 time frame is this the time frame was clearly cherry picked to find the worst 100. This is dishonest. Next, from about 1916, our economy has been centrally planned and always directed towards socialism. Why doesn’t this dishonest writer show us the economy from the beginning of the nation to say,,,, 1900? The world was amazed by us then. We had about 4 times the living standard of Europe. All based on the simple idea that people kept what they earned,,, and that government was only meant to protect from force or fraud.


26 posted on 12/31/2010 7:02:47 AM PST by DesertRhino (I was standing with a rifle, waiting for soviet paratroopers, but communists just ran for office)
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To: devere

But Reagan expanded government BIG TIME!


27 posted on 12/31/2010 7:04:11 AM PST by verdugo
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To: verdugo

Capiltalism needs a strong and unflinching regard for fiduciary duty, honest books, understanding and respect for the rules of agency, trusts and bailments, courts willing to enforce all that, as well as a gold or silver based currency. That’s about it.

But all of the above is ABSENT in modern capitalism.


28 posted on 12/31/2010 7:06:33 AM PST by bvw
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To: mountainlion

Banksters outright own powerful governments and use those governments as a tool.


29 posted on 12/31/2010 7:09:08 AM PST by Milhous (Lev 19:18 Love your neighbor as yourself.)
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To: Texas Fossil

re: Why would anyone post a thread with a yet unfinished book on such an off the wall subject here on Free Republic?

You should read before you write. The book is published, and as I said, I only use the link, for the chart, it does not scan well from the book.


30 posted on 12/31/2010 7:09:26 AM PST by verdugo
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To: devere

Sounds to me like the author is proposing Obama’s brand of “State Capitalism” which is socialism with a happy face.


31 posted on 12/31/2010 7:10:22 AM PST by cripplecreek (Remember the River Raisin! (look it up))
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To: verdugo

Sure,,, nobody is proposing socialism. Just a heavy handed government that centrally plans things to ensure that capitalism works? If you escaped a place like that, don’t bring it with you. Bring your cuisine, literature, music etc. Leave all funny ideas about government there. Ditto if your religion has ideas of theocracy.


32 posted on 12/31/2010 7:12:22 AM PST by DesertRhino (I was standing with a rifle, waiting for soviet paratroopers, but communists just ran for office)
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To: cripplecreek

How on earth can it sound to you that the author is proposing Obama’s brand of “State Capitalism”?

The author is writing AGAINST government involvement in the capitalism!!!!!


33 posted on 12/31/2010 7:16:29 AM PST by verdugo
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To: verdugo

Socialism always fails, always. Capitalism isn’t perfect but it the best. The author is a moron.


34 posted on 12/31/2010 7:16:41 AM PST by VRWC For Truth (Throw the bums out who vote yes on the bailout)
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To: DesertRhino

Obviously, you have not read anything of the article (to say the least). The author is criticizing big governments involvement in the free marketplace. He is against big government!!!!!


35 posted on 12/31/2010 7:20:14 AM PST by verdugo
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To: verdugo

Ahhhhhhh,, now I understand you. Yes, banks are ugly, despotic, and out of control. and indeed they are. I think your motives are sincere. But think of 1 thing, the banks now live by government and do not answer to pure market forces. This is called crony capitalism. The true capitalism we once had is a different animal.


36 posted on 12/31/2010 7:21:17 AM PST by DesertRhino (I was standing with a rifle, waiting for soviet paratroopers, but communists just ran for office)
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To: VRWC For Truth

re: The author is a moron

and who are you to say, what are your credentials? Obviously you have not read one word of what the author wrote. He is totally against big government. He is actually telling you that the USA TODAY is no longer capitalist in the true sense of the term(an economic order that is self-regulating, and needs no outside force, such as government, to balance supply and demand and ensure prosperity.)He is criticizing big government involvement in the market place. How on earth do you get that he’s a socialist from that?


37 posted on 12/31/2010 7:32:01 AM PST by verdugo
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To: verdugo

He said capitalism is not stable without HEAVY government involvement. Thats socialism 101.


38 posted on 12/31/2010 7:36:10 AM PST by DesertRhino (I was standing with a rifle, waiting for soviet paratroopers, but communists just ran for office)
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To: verdugo

“But Reagan expanded government BIG TIME!”

Yes, he expanded our military and won the cold war without firing a shot.

Fractional reserve banking is a morally doubtful activity that does seem to require government to bail out its problems. In a perfect world a reform of the monetary system might alleviate some of these problems.

The one thing capitalism really absolutely needs from government is the uncorrupted rule of law. And that seems to be what we are slowly losing.


39 posted on 12/31/2010 7:40:53 AM PST by devere
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To: Christian Engineer Mass

You are correct. Capitolism is not a system...it is the lack of one, otherwise referred to as freedom.


40 posted on 12/31/2010 7:42:12 AM PST by ez ("Abashed the devil stood and felt how awful goodness is." - Milton, Paradise Lost)
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To: verdugo
Note: This chapter hasn't been through the editor as yet, so it is likely to be full of typos and whatnot. Do your best to ignore them.

I did read it. The first sentence on the "blog" is above. And the idea esposed by G. K. Chesterton is still nonsense. Return to the "old order" (Prior to "Enlightenment") is still Feudalism nonsense.

41 posted on 12/31/2010 7:47:58 AM PST by Texas Fossil (Government, even in its best state is but a necessary evil; in its worst state an intolerable one.)
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To: DesertRhino
re:The problem with the 1853 to 1953 time frame is this the time frame was clearly cherry picked to find the worst 100. This is dishonest... Why doesn't this dishonest writer show us the economy from the beginning of the nation to say,,,, 1900?

I would not call anyone dishonest, without having extensive proof. He likely does not show the economy from the beginning of the nation, we are living in the industrial age, not an agrarian economy. The period from 1850’ till present is more relevant to our times. Besides, the chart does not come from the author, it comes from another source, he is using someone elses chart.

42 posted on 12/31/2010 7:57:45 AM PST by verdugo
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To: Texas Fossil

You are too simplistic in your thinking, and you write as if people understood you. Saying “Chesterton”, “Catholic”, “fuedalism”, “enlightment’, “distributist”, and such, does not define anything.


43 posted on 12/31/2010 8:06:19 AM PST by verdugo
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To: Texas Fossil
Read the title of the thread:

Capitalism Needs Heavy Government Involvement SOURCE:Book: "Toward A Truly Free Market", by John C. Medaille, Published 2010 | 2010 | John C. Medaille

44 posted on 12/31/2010 8:09:43 AM PST by verdugo
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To: Christian Engineer Mass

Amen brother. We cede too much by allowing the Marxists to define the economic lexicon. I believe in economic freedom, not so much in Marx’s “capitalism”, which carries the connotation of greed and the love of money.


45 posted on 12/31/2010 8:10:56 AM PST by mbs6
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To: DesertRhino
re:The problem with the 1853 to 1953 time frame is this the time frame was clearly cherry picked to find the worst 100. This is dishonest... Why doesn't this dishonest writer show us the economy from the beginning of the nation to say,,,, 1900?

I would not call anyone dishonest, without having extensive proof. He likely does not show the economy from the beginning of the nation because it was a different time than today. We are living in the industrial age, not an agrarian economy. The period from 1850 till present is more relevant to our times. Besides, the chart does not come from the author, it comes from another source, he is using someone elses chart.

46 posted on 12/31/2010 8:12:14 AM PST by verdugo
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To: apoxonu
The real cause between the two recession cycles is GOVERNMENT and nothing else.

In the government directed economy the reason we have major recessions is the government’s response time. by the time the problem is identified, corrections developed, COORDINATED, and DIRECTED response initiated the nature of the problem has changed. All too often the initial correction will aggravate the issue because workers at the face of the problem have already initiated corrections.

In a nongovernmental directed economy your response cycle is much shorter because you cut out the coordination and direction phases. A shorter response time means more frequent but less extensive depressions.

Bottom line - the depression can not be corrected until every politician has gotten every erg of political energy out of it first.

47 posted on 12/31/2010 8:16:14 AM PST by Nip (TANSTAAFL)
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To: verdugo
“Chesterton”

Original source of "distributionist" theory.

“Catholic”

I never used the word, but it is self explanatory.

“fuedalism”

The "old order" (before Capitalism) ie. Monarchy

“enlightment"

Product of the Reformation movement.

“distributist”

The anti-Capitalist subject of the book.

Simple, perhaps. But none of the above seems complicated.

48 posted on 12/31/2010 8:18:58 AM PST by Texas Fossil (Government, even in its best state is but a necessary evil; in its worst state an intolerable one.)
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To: verdugo
But Reagan expanded government BIG TIME!

No, the government expanded during Reagan's term. That doesn't mean that Reagan was the agent who drove the expansion. In fact, it was Tip O'Neil's Dem congress that refused to cut spending. They broke agreement after agreement to cut spending, then blackmailed Reagan into signing their inflated budgets. Reagan went along because it was the only way to get the military built up to combat the Soviets. Your implication that Reagan was a partisan of bigger federal government is counterfactual.

When it comes to expanding the federal gov't, it's much more important to control the U.S. House of Reps than to control the White House. Note that the one slight pull-back in federal government expansion was when the republicans controlled Congress during Clinton's term. That doesn't make Clinton the driving force behind reducing the fed government. Clinton may have been a moderate democrat, but he dragged his feet at every turn when it came to reducing the government. It was the republican House that drove this process.

Many on this board come from communist countries. Many, such as myself, spent a lot of time living in communist or post-communist countries. I lived in the Czech Republic for a number of years, and lived a house owned by a woman whose family lost everything in the expropriations of '47 through '52. I can't imagine her being comfortable with the idea of "government interference" in the economy. Would you be willing to tell us what country you come from, and what you lost? I'm sure you would find plenty of sympathy if you put your cards on the table.

49 posted on 12/31/2010 9:17:04 AM PST by ishmac (Lady Thatcher:"There are no permanent defeats in politics because there are no permanent victories.")
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To: Dudoight

Almost all Western European countries went through a capitalist phase between mercantalism and embracing socialism-lite. It was European socialism that Marx wrong-headedly critiqued, setting the norm for the left in regarding economics as static, rather than dynamic. Likewise Canada.

Even Russia was briefly capitalist between the freeing of the serfs and the imposition of Bolshevism. On some measures, the present Russian Republic is more capitalist than the U.S. presently.

Japan is an example of off-and-on capitalism. There was a capitalist period c. 1920 (when parlimentary democracy and fascism was a near-run thing that went the wrong way) and again after the American occupation. South Korea is capitalist since being freed form the Japanese yoke. Australia is another example, and arguably India.


50 posted on 12/31/2010 10:04:19 AM PST by The_Reader_David (And when they behead your own people in the wars which are to come, then you will know. . .)
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