Dr. Allan H. Meltzer is an American Economist and the Allan H. Meltzer professor of Political Economy at Carnegie Mellon University’s Tepper School of Business. He is the author of a large number of academic papers and books on monetary policy and the Federal Resrve Bank. Dr. Meltzer’s two volume books, “A History of the Federal Reserve”, are considered the most comprehensive history of the central bank. He is considered one of the world’s foremost experts on the development and application of monetary policy. Currently he is also President of the Mont Pelerin Society.
Dr. Meltzer originated the aphorism “Capitalism without failure is like religion without sin. It doesn’t work.”
This Paper was presented in the September 2012 Mont Pelerin (Society) Meeting, Prague, Chekia
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Socialism – public ownership of all (or most) productive assets – failed whenever it was tried. Only two avowed socialist states remain – Cuba and North Korea. Cuba is dragging itself slowly toward some private ownership. Literally no one admires North Korea.
For reasons that Freidrich Hayek and some other founders of this society understood well, most socialist states were authoritarian and non-democratic. India and Britain are obvious exceptions. Both tried so-called democratic socialism. Both eventually increased free market arrangements. Growth rose and poverty declined markedly.
Only capitalism achieves growth in living standards and personal freedom. Freedom depends on ownership of physical and human capital because capital permits people to become one’s own boss. But freedom and capitalist development require the rule of law. Rule of law mandates that all citizens are equal before the law and to the extent possible all are treated the same.
Hayek claimed that the rule of law contributed greatly to the success of British and U.S. capitalism. Socialist countries rarely observe the rule of law. They work to apply someone’s idea of a utopian society. What they believe is good and right replaces the rule of law with decrees that allegedly achieves conformity to the socialist ideal.
In contrast, capitalism adapts to many different cultures. Capitalism in Japan differs from capitalism in Western Europe, as these differ from U.S. capitalism or state capitalism in China and elsewhere. In free societies, people choose the rules under which they choose to live. In socialist societies, rulers impose their utopian vision.
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