Charles Murray explains the two problems that afflict our dysfunctional markets:
One is the rise of collusive capitalism. Part of that phenomenon involves crony capitalism, whereby the people on top take care of each other at shareholder expense (search on "golden parachutes").
But the problem of crony capitalism is trivial compared with the collusion engendered by government. In today's world, every business's operations and bottom line are affected by rules set by legislators and bureaucrats. The result has been corruption on a massive scale.
The other problem is...
... the emergence of great fortunes made quickly in the financial markets. It has always been easy for Americans to applaud people who get rich by creating products and services that people want to buy. That is why Thomas Edison and Henry Ford were American heroes a century ago, and Steve Jobs was one when he died last year.
When great wealth is generated instead by making smart buy and sell decisions in the markets, it smacks of inside knowledge, arcane financial instruments, opportunities that aren't accessible to ordinary people, and hocus-pocus.He goes on to explain how personal liberty and economic liberty go hand in hand. Sociologists will tell you that human happiness is hard to quantify. It's different for each of us, but...
The pursuit of happiness, with happiness defined in the classic sense of justified and lasting satisfaction with life as a whole, depends on economic liberty every bit as much as it depends on other kinds of freedom.
Arthur Brooks, my colleague at the American Enterprise Institute, has usefully labeled such achievements "earned success." Earned success can arise from a successful marriage, children raised well, a valued place as a member of a community, or devotion to a faith. Earned success also arises from achievement in the economic realm, which is where capitalism comes in.
Earning a living for yourself and your family through your own efforts is the most elemental form of earned success. Successfully starting a business, no matter how small, is an act of creating something out of nothing that carries satisfactions far beyond those of the money it brings in. Finding work that not only pays the bills but that you enjoy is a crucially important resource for earned success.
How can we fix it?
What government can do to help is establish the rule of law so that informed and voluntary trades can take place. More formally, government can vigorously enforce laws against the use of force, fraud and criminal collusion, and use tort law to hold people liable for harm they cause others.
Everything else the government does inherently restricts economic freedom to act in pursuit of earned success.He talks about virtue throughout the article. You can't make someone be virtuous, but taking away perverse incentives to cheat, collude and gamble away other people's money will make market participants virtuous if they want to stay in the game.
... demand that any new intervention meet this burden of proof: It will accomplish something that tort law and enforcement of basic laws against force, fraud and collusion do not accomplish.
... acknowledge that what has happened incrementally over the past half-century has led to a labyrinthine regulatory system, irrational liability law and a corrupt tax code. Sweeping simplifications and rationalizations of all these systems are possible in ways that even moderate Democrats could accept in a less polarized political environment.
Why Capitalism has an Image Problem