What She Said

A recommended WSJ op-ed

A WSJ opinion piece today, “A Capitalist Manifesto,” strikes me as well-worth reading.

True, the author, Judy Shelton, sets up a straw man: that the country’s “founding economic philosophy is in deep trouble.” There’s really no sign of that. But she goes on to lay out what strike me as entirely levelheaded principles, including, fine, that it’s hard for the market to properly value private-government hybrids. I’ll buy that, though I wouldn’t put it first on my list, as she does.

Especially well-put, I thought, was the case for regulation:

Regulatory responsibility. Rule of law is a core requirement for civil society; without it, anarchy reigns. Government regulation does not create wealth, but it is a necessary condition to provide the stable and predictable environment that permits buyers and sellers to carry out economic and financial transactions with confidence. Trust is achieved through transparency, first and foremost. And while government regulation, at its best, merely functions as the incorruptible referee—it will never dream up the breakthrough projects that become capitalism’s greatest success stories, nor have the discernment of the venture capitalist who recognizes an entrepreneur with a brilliant idea—it nevertheless plays a key role. Governments should view economic freedom as a basic human right, to be respected and protected by ensuring that markets function smoothly and openly.

The point that government provides—”a stable and predictable environment”—for markets is apt, I thought. Nobody likes regulation for its own sake, but the idea that less is always better always struck me as a form of magical thinking. I’d add a corollary that regulation has to be real, not the Potemkin regime we’ve had lately.

This principle also makes sense:

Entrepreneurial opportunity. Much of the resentment felt by citizens toward the massive investment companies who peddled bad government paper, and the craven politicians who promoted the practice, stems from the perception that capitalism is rigged toward the most powerful. When the owner of a small retail outlet or medium-sized service firm gets into financial trouble—who steps in to help? Why are the rules to start a business so onerous, why is the bureaucratic process so lengthy, why are the requirements for hiring employees so burdensome? When does the entrepreneur receive the respect and cooperation he deserves for making a genuine contribution to the productive capacity of the economy? Equal access to credit is sacrificed to the overwhelming appetite of big business—especially when government skews the terms in favor of its friends. It is time to pay deference to the real economic heroes of capitalism: the self-made entrepreneurs who have the courage to start a business from scratch, the fidelity to pay their taxes, and the dedication to provide real goods and services to their fellow man.

Amen, especially to the first sentence, and it’s more than a perception. It’s worth noting that many of these views run contrary to the general thrust of the WSJ editorial board.

I also like her warning against financial speculation that becomes completely divorced from actual production. I’d only add that if the above points are followed, we wouldn’t have to worry so much about another of her points, the one about maintaining “monetary integrity.” A more stable financial system would help with that.

I hope this piece is widely read, especially by the members of the Journal’s editorial board.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.