Emerging Markets and Capitalism
Welcome to the first incarnation of The View from Post Road! Yes, up and running and ready to go!
What about Capitalism! It’s taken a bit of a hit as the Administration is busy trying to shore up industries and institutions left and right through government fund injections, subsidies and guaranties.
Truth is, did anyone NOT send GM the memo that it’s cars were not selling and that ? Did the risk management team at Citibank not really understand that it had massive overexposure in mortgage derivative markets? No – everyone got it – they just ignored it.
In Capitalism, Socialism and Markets by J Schumpeter, he puts forth the concept that change is constant and a necessary and vital part of capitalism. Out of chaos, entrepreneurship develops and serves as the equalizing conduit between imbalanced sectors. It is what challenges the status quo, the monopoly and what leads to innovation and excellence. Therefore, are we witnessing the end of capitalism and should emerging markets go back to the managed economy days of Indira Ghandi?
Well you know where I come out on this subject…the private sector is essential for the emerging market economies and never has there been a better time! I can see everyone settling back going, “Oh great here comes the Adam Smith lecture….snore.” Well, in all honesty, there was rarely a true capitalist market where supply, demand and price were the three most dominant factors. Just look at the USA’s agriculture subsidy policy. Money for crops not planted? OK. Nonetheless, the private sector is the most efficient delivery system available. Where governments may not react to true demand, be diverted by corruption or just misread the problem – the private sector gets it – they want to make a profit.
What about Capitalism! It’s taken a bit of a hit as the Administration is busy trying to shore up industries and institutions left and right through government fund injections, subsidies and guaranties.
Truth is, did anyone NOT send GM the memo that it’s cars were not selling and that ? Did the risk management team at Citibank not really understand that it had massive overexposure in mortgage derivative markets? No – everyone got it – they just ignored it.
In Capitalism, Socialism and Markets by J Schumpeter, he puts forth the concept that change is constant and a necessary and vital part of capitalism. Out of chaos, entrepreneurship develops and serves as the equalizing conduit between imbalanced sectors. It is what challenges the status quo, the monopoly and what leads to innovation and excellence. Therefore, are we witnessing the end of capitalism and should emerging markets go back to the managed economy days of Indira Ghandi?
Well you know where I come out on this subject…the private sector is essential for the emerging market economies and never has there been a better time! I can see everyone settling back going, “Oh great here comes the Adam Smith lecture….snore.” Well, in all honesty, there was rarely a true capitalist market where supply, demand and price were the three most dominant factors. Just look at the USA’s agriculture subsidy policy. Money for crops not planted? OK. Nonetheless, the private sector is the most efficient delivery system available. Where governments may not react to true demand, be diverted by corruption or just misread the problem – the private sector gets it – they want to make a profit.
posted by Maurice Johnson at
12:54 PM
2 Comments:
As an epilogue - here are a few points:
1) the NYT today printed an excellent article on Emerging Market investment and how it is continuing. The US will struggle with the GM and financial industry for a while - the rest of the world is "like whatever!"
2) here's the article: http://www.nytimes.com/2009/06/04/business/global/04emerging.html?ref=business
Hey Maurice this is a cool blog. I'm going to subscribe to it so I don't miss any entries.
Post a Comment
Subscribe to Post Comments [Atom]
<< Home