The Middle Way

Surveying the last 200 years of economic history the single most dominant theme is the theoretical battle between capitalism and collectivism.

Largely unfettered Capitalism, following the theoretical underpinnings of Adam Smith that individual self interest was the most efficient economic engine, ruled the 1800's (albeit often with a huge dose of state support).  Growth and development often bordered on manic, but it chewed up workers with little regard for their welfare.

The sheer brutality of its treatment of workers provoked the worker backlash that produced the communist revolutions of the early part of the 20th Century that led to the biggest chunk of the worlds population living under despotic communist regimes for much of the 20th Century.

In the United States the worker backlash was channeled into laws to protect workers that moderated the tendency toward exploitation that the markets produce.  While much of the world was turning communist we enacted workers compensation laws, minimum wage laws, payroll laws, worker safety laws and laws to give labor unions more bargaining power in the early part of the 20th century.  That calmed the worker unrest, but didn't address the tendency of unfettered capitalism to speculate itself into a crisis, so our unfettered free markets let the scramble to get rich obscure good judgment and we led the world into the stock market crash of 1929 and the subsequent depression.  After the stock market blew up in 1929 and we sank into the great depression, we enacted a series of laws to put some limits on unfettered capitalism.  This mix of capitalism with state regulation (which also occurred in most other western democracy's) proved to be much more conducive to growth than the communist state planning approach.  For the rest of the 20th Century we enjoyed a long period of economic stability and growth.

But late in the 20th Century, probably because times were good for so long, people drifted away from labor unions and capitalists chaffing under the government restrictions put in place after the 1929 Stock Market collapse began to sound sensible to voters. When the Soviet Union collapsed in 1989, the true believers in unfettered free markets declared the total victory of Capitalism over collectivist notions and over the next decade and a half dismantled much of what had been enacted after the 1929 crash.  The unfettered market did what it always does, lost sight of common sense in the scramble to get richer and richer and in 2007-08 we led the world economy into disaster once again.

So now we are back in what will probably be years of high unemployment and slow growth, and are seeing worker unrest again.  The Occupy Wall Street protests in the US, and workers unrest around the world are sort of aimless shouts of pain at this point.  Will they coalesce into some pendulum swing toward a collectivist future in some countries?

We need to hash out a middle way.  A coherent body of theory that recognizes the ability of capitalism to organize people and generate growth, but also recognizes that the human emotions that drive capitalism sometimes need to be restrained and channeled.

The notion of a middle way is timeless, from Aristotle teaching moderation in all things, to traditional Chinese culture based on yin and yang, the balance of opposites.  As individual voters we need to cultivate more recognition of Yin and Yang and try not to allow the excesses of the last two decades toward free markets push us into excesses in collectivism.