Bailouts And The Demise Of Capitalism And Free Markets

Bailouts are the root cause of the dysfunction of capitalism and the demise of free markets.

Over the last decade, the rise of wealth inequality and the failure of markets to function in a “fair manner” is apparent. We can directly attribute it to the influence of Central Banks and Governments.

We talk much about the bailouts and stimulus programs related to the economic shutdown and pandemic. However, the bailouts began back in 2008 when the Federal Reserve intervened with the insolvency of Bear Stearns.

Bailouts, Bailouts And The Demise Of Capitalism And Free Markets

While these massive infusions kept the economy “afloat,” the realization of inequities between the financial system and everyone else led to a significant increase in social unrest. As shown by household net worth, such was the inevitable outcome as the wealth gap between the top 10% and the bottom 90% reached the tipping point.

Bailouts, Bailouts And The Demise Of Capitalism And Free Markets

Capitalism does not distribute wealth “evenly.” However, it historically provided “equal opportunity” for all to participate.

However, following the “financial crisis,” the evolution of “bailouts” perverted the capitalist system by eliminating the “Darwinistic” nature that made it function properly.

“Modern society looks increasingly to government for protection from major crises. Whether recessions, public-health disasters or, as today, a painful combination of both. Such rescues have their place. Few would deny that the Covid-19 pandemic called for dramatic intervention. But there is a downside to this reflex to intervene, which has become more automatic over the past four decades. Our growing intolerance for economic risk and loss is undermining the natural resilience of capitalism and now threatens its very survival.” – Ruchir Sharma