The Basic Problem with Capitalism

Brad DeLong noted Nouriel Robini's call of the double dip.

In comments, Graydon made these observations with which I strongly concur:

I think it's much more basic than that. The problem is that capitalism's core goal -- wealth concentration -- is not actually a good idea in terms of general prosperity. Climax forests are great if you're a mature redwood; they're lousy if you're anything else, and almost everyone is something else. (and even the mature redwoods have crowding-out issues among themselves.)

What we're seeing now is analogous to climax forest formation; all of a sudden, a whole bunch of organisms that were getting by OK aren't getting any light anymore, and the whole ecology changes. (From the point of view of the seriously wealthy, they're all still a bit panicked that they're not going to have a chair when the music stops/their tree isn't going to be quite tall enough to avoid being crowded out by the neighbors.)

Doing the obvious and nigh-certain-to-work things aren't morally acceptable to the mature redwoods -- they'd stop towering over all those little organisms -- so they won't. Indeed, they can't, unless they adopt a different moral position. (Or until they stop being, as Duncan Black keeps pointing out, incompetent.)

So the only two really plausible outcomes are a general, protracted -- generationally protracted -- slow collapse of prosperity into plutocracy in at least the developed world, with widespread resumption of defacto debt peonage for the working and professional classes, or a general replacement of the "redwoods" with persons interested in securing the general prosperity.