As I understand it,a major difference between capitalism and socialism is that in capitalism private interests accumulate the large pools of money needed for social investment while in socialism it’s the government that does it (through taxes).
But, either way, to be effective, large amounts of money have to be pooled. Small amounts of capital in a multitude of pockets cannot provide the capital needed for development.
That’s the thinking behind those ancient laws that passed a father’s estate on to the eldest son, leaving younger siblings to fend for themselves. Splitting up the estate with each passing generation would eventually have made it so fragmented that it would have become worthless.
Of course the system wasn’t fair to those younger siblings . But it was considered necessary for the greater good of society.
In western capitalism, especially in America, the “private sector” is traditionally the dominant economic driver. And an important engine of this private-sector economy is Wall Street, which provides a means for everyone to participate in building jnvestment capital through the purchase of stocks and bonds.
But Wall Street has become an unjust steward, keeping far more than a fair share of society’s capital as payment for collecting and redistributing it (and wagering investors’ savings on harebrained projects). As a result, the economy has been undermined, investors have been cheated and the public is losing faith in the system.
Americans are responding by backing away from money markets and the stock exchange. For example, the average daily trading in U.S. Treasuries is at a seven-year low. The once glittering financial industry is experiencing widespread layoffs. Wall Street cut some 20,000 jobs last year and more job losses are predicted. The first quarter of this year was one of the worst ever for the financial industry.
The layoffs are due in part to government intervention. Reacting to the catastrophic economic collapse of 2008, Congress has passed laws designed to limit the reckless risk taking that triggered the crisis. Declining employment in the financial industry is also due in part to increasing automation. Still, an important factor is waning investor trust.
Unless investor trust is restored, America’s traditional financial system faces an uncertain future. But the lemmings on Wall Street don’t have the foresight to embrace the reforms needed to restore that trust. They seem intent on making themselves expendable.
Faced with the unraveling of Wall Street, government will have to play a larger role in the pooling and investment of society’s resources. Like it or not, Americans will have to get used to more socialism. The alternative is becoming unacceptable.
The game may soon be over for those rapacious – often crooked – financiers dedicated to the short-term goal of lining their own pockets at the expense of consumers and investors.