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May 09

Why Capitalism?

A review of the headlines of the past decade seems to show that disasters are often part of capitalist systems – the high-tech bubble, the Enron fraud, the Madoff ponzi scheme, the great housing bubble, massive lay-offs, and a widening income gap. Disenchantment with the market economy has reached the point that many even question capitalism itself. Allan H. Meltzer disagrees.

 Drawing on deep expertise as a financial historian and authority on economic theory, Meltzer provides a resounding answer to the question: “Why capitalism?” Only capitalism, he argues, maximizes both growth and individual freedom. Unlike socialism, capitalism is adaptive, not rigid – private ownership of the means of production flourishes wherever it takes root, regardless of culture. Laws intended to tamper with its fundamental dynamics, such as those that redistribute wealth, fail. European countries boasting extensive welfare programs have not surpassed the more market-oriented United States. Capitalism does require a strong legal framework, he writes, and it does not solve all problems efficiently. But, he finds that its problems stem from universal human weaknesses – such as dishonesty, venality, and expediency – which are not specific to capitalism.

Allan H. Meltzer is Allan H. Meltzer University Professor of Political Economy at the Tepper School of Business of Carnegie Mellon University. Author of A History of the Federal Reserve, Volumes 1 and 2, he is recognized as one of the world's foremost authorities on the institution. From 1973 to 1999, he served as the chair of the Shadow Open Market Committee, a group of economists that critiqued the decisions of the Fed's Open Market Committee. He also served on the Council of Economic Advisers for Presidents Kennedy and Reagan.

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Allan H. Meltzer
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Hosted By

Edwin J. Feulner, Ph.D. Edwin J. Feulner, Ph.D.

Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow Read More