How to save capitalism

“What the hell is a credit default swap?” a friend of mine asked at work. It was an odd question since he usually shies from talking politics and instead sticks to football or the latest Kimbo Slice fight on youtube.

Until this current financial crisis, which seems to mushroom by the minute into a full blown global catastrophe, I used to take pride in being an armchair economist. But as a staunch supporter of the free market system, and that evil word “capitalism”, my beliefs have been greatly challenged as of late. I’ve begun to ask myself what is it that works about capitalism and what doesn’t, though I remind myself that its basic definition – an economic system which allows individuals the right to own property and produce goods and services from that property in order to sell them at a profit in a free market – definitely works. And in my humble (and arguably biased) opinion, that specific right is well worth fighting for.

Especially after having seen first hand how communism, capitalism’s  polar opposite, has tragically affected the lives of all my relatives from Cuba who’ve risked everything to leave that tropical “utopian experiment”, and especially the ones who’ve remained and are currently enduring yet another national food shortage. Which is why it shakes me to the core to read editorials such as last week’s Washington Times “The end of American capitalism?” and to hear the overall national dialogue come to such a grim, and drastically misguided conclusion.

But as more conversations around the office shift from who might be in the NFL playoffs to wondering whether we should temporarily freeze our 401Ks by switching our portfolios into short term reserves as opposed to stocks, I’m realizing that the real mess behind this crisis isn’t capitalism per se, or the right to own property. What has wreaked the havoc we’re facing now is more about creative financing,  complicated derivative formulas, securitization, hedge funds, short-selling, and the most deceptively simple term of them all, credit.

Yet credit is a double edged sword. For millions, it is the very reason why they have a roof over their head. It has allowed businesses to prosper and come to life in the first place. When used responsibly, it helps create countless jobs, products and services. Credit is actually a right. But when exploited, it can charge a highly usurious interest on our freedom.

Manhattan Libertarian Party