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At the Financial Times, Henry Kaufman suggests an answer to the question, “what comes after capitalism?” He writes:
American capitalism is rapidly disappearing. Its demise has been under way for some time and the economic devastation wrought by the Covid-19 pandemic is the latest blow to our political economy.
Adam Smith remains a useful guide to the hallmarks of capitalism. In 1776’s The Wealth of Nations, he argued that humans innately strive for material progress and the best way to get there is through unfettered competition, the division of labour and free trade.
Smith wrote that the state should play a limited role in economic affairs. For him, governments should be properly confined to national security, the rule of law — including the protection of private property — and the provision of a few public goods such as education. He also cautioned against sharp class divisions that might idle rich people and exploit workers. “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable,” he warned. Smith hoped that whole societies could be enriched through the striving of individual members.
In contrast, the creditworthiness of state and local governments has come under acute pressure because of the coronavirus pandemic, forcing many of them to seek federal help. States and localities will be financially beholden to the federal government, weakening their independence while strengthening the central authority. That is not what the US system of federalism envisions.
With the federal government and the Fed firmly joined at the hip, the transformation of capitalism into statism is gaining momentum, perhaps irreversibly. This is a great departure not only from the vision of the US founders but also, I suspect, it is not the kind of economic system most Americans living today want to leave for future generations.
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