Big ideas originate from the context of a histortic era and few hold when that context changes. Each era faces a different context in which it operates, so parallels to historic examples are only partially true. Roosevelt’s New Deal in the 30’s was a counter reaction to growing Communism and Socialism in the world and was an effort to maintain free market dynamics (and democracy) in a system that partially was government controlled. But forty years later, large economies with growing governments and control were suffocated by bureaucracies. and performed badly.
In the 70’s Reagan and Thatcher revitalized free market dynamics and initiated the shrinkage of government influence. People that had put there savings in a bank account with low interest rates, now started investing in the more attractive free market. These new measures also lowered tax rates and eased the rights of the employee. After some initial hiccups a new era of prosperity arose. The capitalism system thrived over centrally guided economies like those in the Sovjet Union. Common understanding became that lowered tax rates would pay themselves back and that financial markets would be self regulation.
With the recent failure of the latest era the capitalist system is bound to be change again. New dynamics between market and government will be created in order to protect the well being of a nation’s citizens. The paradigm of “what’s good for Wall Street is also good for Main Street” seemed to have rendered invalid. The extremely free-wheeling capitalism of the three decades is changing - if not in an entirely new system; then into a more moderate version of itself.
Comming from Europe that has followed the path of a more social capitalist system, or social democracy, with its more interventionist state, wider social savety nets, more regulation and higher taxes, I wonder where the American capitalist system is turning to. To America the European model is called social. To rising powers like China and India with there far more governmental influence on the financial system, Europe is liberal. So where is the new form of capitalism looking for? What would this form of capitalism be named?
