What Went Wrong with Capitalism

April 1, 2024
“By smothering capitalism’s competitive fire, big government is slowing productivity growth,” according to this unpersuasive treatise. Sharma (The 10 Rules of Successful Nations), founder of the investment firm Breakout Capital, argues that the U.S. government’s reliance on “easy money”—a catchall term for state interventions, including lowering interest rates, buying bonds, and bailing out corporations—is driving wealth inequality, the proliferation of monopolies, and the ballooning of the national debt. According to Sharma, central banks that lend money on generous terms to struggling companies stymie competition and compound market inefficiencies, contributing to losses in national economic production. Because wage growth depends on productivity increases, Sharma contends, these irresponsible lending habits, paired with bailouts for the wealthy, are widening the gap between rich and poor. Unfortunately, the proposed solutions are less than inspiring. He argues that doing away with market interventions will allow companies to rise and fall on their own merit, with the most productive outfits coming out on top. However, the implication that increased productivity will lead to higher worker wages doesn’t address the possibility that executives could simply pocket the gains for themselves. To Sharma’s credit, he’s astonishingly forthright about the downsides of less intervention, admitting somewhat glibly that more frequent downturns are the price society pays for “economic freedom” (“Some degree of suffering is a given in life”). This is unlikely to sway readers who don’t already share its conservative fiscal outlook.

April 15, 2024
A book-length assertion that capitalism's woes can be traced to government interventionism. Sharma, an investments manager, financial journalist, and author of The 10 Rules of Successful Nations, The Rise and Fall of Nations, and other books, opens with the case of his native India. The author argues that it should be in a better position in the global marketplace, possessing an entrepreneurial culture and endless human capital. The culprit was "India's lingering attachment to a state that overpromises and under-delivers," one that privileged social welfare over infrastructure development. Much the same is true in the U.S., where today "President Joe Biden is promising to fix the crises of capitalism by enlarging a government that never shrank." Refreshingly, Sharma places just as much blame on Ronald Reagan for the swollen state that introduced distortions into the market. Moreover, "flaws that economists blame on 'market failures, ' including wealth inequality and inordinate corporate power, often flow more from government excesses." One distortion is the government's bloated debt, as it continues to fund itself by borrowing in order to pay for "the perennial deficit." As any household budget manager would tell you, debt is ultimately unsustainable. Wealth concentration is another outcome of government tinkering that has, whether by design or not, concentrated wealth into the hands of a very small number of people, "a critical symptom of capitalism gone wrong, both inefficient and grossly unfair." Perhaps surprisingly, Sharma notes that in quasi-socialist economies such as the Scandinavian nations, such interventions are fewer and shallower, while autocratic command economies are doomed to fail. "[T]oday every large developed country is a full-fledged democracy," he writes, and the more freedom the better--but that freedom, he argues, is undermined by the U.S. government, which has accrued "the widest budget deficit in the developed world." Sure to generate debate, and of special interest to adherents of free market capitalism.

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