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Nichols: Is true capitalism in our country doomed?

POSTED: December 29, 2008 1:00 a.m.

fThe question of the demise of capitalism in our country has at least three answers: Yes, maybe or no.

Under capitalism, the laws of supply and demand should determine what is produced or what services are provided by our workers, whether on the farm, factory, mine or institutions that serve the public.

First, a product or service is created. Advertising informs the public of that product or service. The customer then votes with his or her dollars, and buys what is most in demand.

The company or person whose product or service is not wanted by the public is forced out of the market. When customers refuse to spend their dollars as votes for their best choices, the product not desired may be withdrawn and replaced by something the public desires or the company has to close down. Capitalism is thus an economic struggle for survival, with winners who get rich, and losers who go broke.

The marketplace is a complex system of technology, management, labor with the required skills, adequate supply of necessary raw materials, available transportation to bring those goods or services to the public, and investment capital (usually borrowed to start up the industry and later repaid from the profits that result when the public likes what is provided.)

Government is the umpire looking over the entire system. It provides the court system in which contractual disputes can be resolved. Government establishes certain agencies to regulate the system to prevent unfair business practices, discrimination against minorities or others, fraud or other criminal offenses.

Government regulates interstate trade, and provides for the minimum that wages can be paid in certain industries. Governmental treaties affect competition of incoming foreign goods that enter our marketplace from abroad, as from China.

Government establishes standards which must be met by producers to protect the health or safety of the workers and customers. When people died because matches were made with poison, our government taxed the poison tipped matches 100 percent and drove them out of the marketplace. Our matches are safe today as a result.

The largest employer in the United States is not any private organization. It is the federal government itself. In addition to the many governmental services provided, the U.S. does own businesses that could be private in other countries. The oldest part of the federal government is the post office, which dates back to British colonial days. UPS is the private competitor to some of the services of the post office. So we have both private and public operations in the mail setting.

Generally, until now, our government permits private industry to operate freely in the marketplace following governmental regulations. When an industry provides a service that cannot be adequately charged to the consumer, or when that service involves national security, then the government can become part of the marketplace and operate the business.

The Tennessee Valley Authority was established because customers could not be charged for all the benefits of new jobs, flood control, water supply to local governments and recreational values that encouraged tourism into the region.

At the time of its creation, the TVA was supposed to set the standard for the production of hydroelectricity for private electric companies. I am not certain, but I believe that the TVA does not pay the same taxes as do private companies, so it cannot really set a standard for those private companies.

The distinction between public and private companies has become blurred by the current economic crisis. The bailout of Wall Street and automobile companies changes the way our system works.

We are spending money that we do not have to buy up huge sectors of the economy. Supposedly we will sell those bad assets that we will now own, but that is not certain at all.

If we do not have tax money to finance all the bailouts currently on the table or likely to appear in the near future, our government has two options. It can print more paper money and likely cause inflation that drops the value of our currency, or it can borrow from abroad, like China or the oil rich Middle Eastern states. Interest on the national debt is becoming a real problem.

Our capitalistic system is being changed on a daily basis as Congress, the president and all the regulatory agencies consider various bailouts.

I do not know what the future holds for the American way of life. I hope our system is better after the crisis is over, than now. We need honest, trustworthy and reliable leadership to steer us through the troubled economic waters of today. Without trust and honesty, our system may not survive.

Tom Nichols is a retired college professor who lives in Gainesville. His column appears regularly in The Times and on gainesvilletimes.com. 



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