Heavy Meddle

"Profit? Fiscal year? Tsk! Tsk! Tsk! Beware, my dear Zilkov. The virus of capitalism is highly infectious. Soon you'll be lending money out at interest!"
--Dr Yen Lo (The Manchurian Candidate)

Many are questioning the merits of capitalism in the face of our economic problems. The claim is that the present crisis 'proves' that capitalism doesn't work. Capitalism, however, is defined as an economic and social system where ownership and administration of production are in private hands. In capitalistic systems, government's sole role is to protect individual property rights.

No such system currently operates in any significant scale on this planet. All economic systems currently involve at least some government interference.

The polar opposite of capitalism is socialism, where ownership and administration of production are controlled by the state. In its pure form, socialistic systems currently aren't practiced either, although some regimes such as North Korea come close.

So, what's it called when an economy operates somewhere between pure capitalism and pure socialism? It's called interventionism. Interventionism reflects an economic and social system where government exercises incomplete control over production and its administration. Interventionism describes current world economies at large, with local economies varying only in the level of state control being exerted.

There are two theories out there concerning the merits of interventionism. Theory #1, which seems more widespread today, is that there is an optimum amount of interventionism necessary for economic functioning. However, precisely what level constitutes optimum here has yet to be ascertained after many decades (centuries) of government meddling.

Theory #2 holds that interventionism, once undertaken, leads only toward more intervention and, ultimately, towards socialism in its pure state. As interventionism escalates so do economic problems.

It is difficult to objectively argue that the past 100 years have not seen increased government interference in markets. And with this interference has come gigantic distortions that now appear to be expressing themselves in perhaps intractable problems.

Seeing as we're in the midst of giant empirical test of these rival theories, I'm placing my money (quite literally in many ways) on Theory #2.