Week in Review
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  • Professor Mead may or may not be right that an inflection point has been racehed. The case that he makes that it has is weak, but that doesn’t mean that it is wrong. While Europe has its problems, those problems are associated with European integration. Unless Professor Mead can explain why Northern European nations such as Germany the Netherlands and the Scandinavian countries (not to mention Canada) can afford a welfare state far more generous than the American welfare state, his argument that the blue state model is in extremis is severely weakened.It also bears mentioning that virtually all of the fiscal problems of both the state and federal government can be attributed to out of control health care costs. But for these costs, the blue state model would be far healthier than it is now. A solution to out of control health care costs exists, if we would only adopt it; a single payer system like the one utilized in Canada and France produces superior results to what the American system yields at much lower cost.But for the sake of argument, let’s assume that Professor Mead is right and we are indeed at the cusp of a new form of liberalism.I think the good Professor is entirely correct when he argues that the vector of change in capitalism is technological progress. Technological progress is both inexorable and outside of the control of government. Mead is also right when he argues that this is a good thing; new technologies in medical care make all of our lives healthier both rich and poor alike. Technological improvement in consumer goods makes all of our lives easier and less labor intensive; this is also good. Ten years ago, nobody owned a smart phone, today even poor people do.It is also pretty clear that the direction that technological innovation is driving capitalism is towards disintermediation. Driving out the middleman reduces costs, increases efficiency and makes a wider array of products available to a wider array of people in a timelier and less costly way.As a result of technological change we no longer need an intermediary between airlines or trains and those who want to travel; the travel agent has become extraneous. We no longer need the services of stock brokers; making our own decisions, we can buy stocks, bonds and mutual funds over the internet. We no longer need television networks to choose what TV shows we watch; there is a rapidly expanding number of ways in which we can watch filmed entertainment. Similarly, we no longer need record stores to serve as intermediaries between musical artists and listeners and it is becoming increasingly common for musical artists to sell their wares to listeners without the need for record companies to get in the way.It’s becoming increasingly anachronistic for publishing companies to mediate the relationship between authors and readers. For those inclined towards pornography, we no longer need X rated magazines; sex workers can sell and advertise their wares directly to potential consumers online.It is becoming progressively less necessary for colleges and universities to stand between learned experts (we call them Professors) who want to teach and students who want to learn. How long will it be before some smart academic types figure out that they can market their teaching services to students without the university administrators taking a cut and without the the costs associated with a redundant infrastructure called a campus? How long before we all draft our wills online without a lawyer? How long before we no longer need radiologists to analyze our X-Rays or MRI scans? Already machines are being developed to do the job.For the next couple of decades disintermediation will be the prevailing trend in capitalism and it will enrich all of our lives as consumers. Professor Mead once wrote a post about value added intermediation; he’s right, value added intermediation will produce many of the high paying jobs of the 21st century.But while technological change is inexorable, so are the realities of capitalism. For all of its virtues, capitalism produces winners and losers and in its new incarnation it is possible if not likely that the percentage of losers will significantly outnumber the percentage of winners; we can already discern early indications of this trend.Professor Mead points out that in an earlier form, liberalism adopted strategies which made socialism appear less desirable; at least in the United States. What has not changed is that is that the unequal distribution of wealth and political power that is inherent in a capitalistic system inevitably becomes untenable and threatens to undermine the system itself. It happened in the 1930s; it is happening now and it could happen in a far more explosive form in the future. In part the Marxists are right; capitalism does consist of a series of inherent contradictions that threaten to undermine its viability.For many decades, labor unions helped tame capitalism so that it could thrive in a form that produced benefits for all classes of people. With the demise of labor unions, it has increasingly become the government that serves the critical role of taming capitalism.While many people who consider themselves conservative yearn for the day when we return to the prosperous world we had before big government reared its ugly head; they are yearning for a time that never was. Their nostalgia is little more than an anachronism that provides no roadmap for the future.In fact, if Professor Mead is right that an inflection point has indeed been racehed, it is highly likely that government will expand its role as a regulator and modulator of capitalism; without government playing that role all that faces us is social turmoil and anarchy.While government needs to get more efficient and get out of the businesses that it is bad at (like picking winners and losers in the economy)its role as a regulator of capitalism is likely to expand not contract and its role of redistributing income from societies winners to societies losers is likely to grow.Liberalism, free enterprise and a vibrant state sector are attached at the hip; none can thrive without the other. In the long run, only government intervention can rough out capitalism’s jagged edges and provide the social harmony which capitalism depends on as it amorally pursues its penchant for creative destruction.As decentralization and disintermediation come to dominate the 21st century economy, it is highly unlikely that big government is going anywhere.

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