WaPo's Pearlstein Writes Obituary for Capitalism

     The U.S. economy has just barely flirted with a recession, yet one business columnist sounded the death knell for entrepreneurial capitalism on August 1.

     Pulitzer Prize-winning Washington Post columnist Steven Pearlstein predicted the death of the era of free-market capitalism with the hallmarks of “smaller government, lower taxes, freer trade and more deregulation.” Because, according to Pearlstein, the free-market “model” has not delivered “goods” such as safety and fairness.

      “It's always risky to call turns in history, but my guess is that this consensus [toward free markets] is unraveling,” Pearlstein wrote in the Washington Post. “Just as the Gilded Age gave way to the Progressive Era and the New Deal gave way to the post-war era of big government, big business and big labor, the current era of free-market capitalism seems to be giving way to something else.”

      Pearlstein didn’t credit the union movement or the protectionist rhetoric heard every night on CNN’s “Lou Dobbs Tonight” for the demise of free-market capitalism he forecasted. Instead he blamed the government for not raising taxes so it could afford to play the role of provider.

      “Let's be clear: It is not the protectionists of the AFL-CIO or CNN who are primarily to blame for the erosion of public support for trade in the United States, as bone-headed as they may be,” said Pearlstein. “The blame lies squarely with a business community that continues to support Republican politicians who refuse to raise the taxes and spend the money necessary to provide the economic safety net for American workers that a free-market economy has not, and will not, provide.”

      According to Pearlstein policies of lower taxes and less regulation – that grew from President Ronald Reagan’s legacy – have failed to provide other things that Americans value.

     “For the past 25 years, the United States has put its faith in open, unregulated and lightly taxed markets, and there’s little doubt that, over time, that model has expanded economic output and improved economic efficiency,” Pearlstein said. “But what Americans have also come to realize is that the same model is less adept at providing other things that we value highly -- things like safety, fairness, economic security and environmental sustainability. And more often than not, these are ‘goods’ that can be had only by giving up some of that output and some of that efficiency.”

     An August 1 Wall Street Journal editorial wasn’t quite as morose as the Pulitzer-winning Pearlstein. As the Journal pointed out – the economic situation isn’t as bad as the media are making it out to be.

     “Phil Gramm had a point. Based on yesterday's report of a modest second quarter growth bounce, the former John McCain adviser was right when he said last month that we aren't in a recession,” the Journal said. “He was impolitic, but the news is that the U.S. economy is stronger than the wails of Great Depression II on Wall Street and Capitol Hill would have us believe.”