Capitalism, Sustainability, and Inequality

Jon Shayne sent me an interesting piece by economist Kenneth Rogoff, who asks "Is Modern Capitalism Sustainable?"  Rogoff points out that the alternatives to U.S. style capitalism these days are limited to other flavors of capitalism: Northern Europe's compassionate capitalism or China's cut-throat authoritarian variety or any number of other possibilities.  These ultimately boil down to the balance of regulation and laissez faire, between public goods and private rewards.

In previous posts I have extolled the virtues of the German Soziale Marktwirtschaft, and I think Rogoff is too casually dismissive of European model's as being unsustainable.  But he rightly points out key flaws in our own system: undervaluing public goods, growing inequality, provisioning healthcare, discounting the future, and magnified risk.  And these are all things the German system does pretty well.

On the topic on inequality, Jon also passes along a great Paul Solman report on why conversatives are generally happier than liberals--and it is not just a greater tolerance of (and even appetite for) inequality, but a belief in the availability of opportunity and of meritocratic advancement.  If folks have (or even just believe) that opportunities are open to them, they are much more content with their lives (whatever their own present circumstances).    

Amartya Sen has argued that real economic development is about freedom more than income: the freedom to live the sort of life one values.  Central to this conception are opportunity structures (as well as the material resources and agency needed to effect change).  In a study of poor farmers and peasants in rural Mozambique, my colleague Bart Victor and I found that personal ambitions and resources with no outlet, with no opportunity structure to facilitate action, results in "frustrated freedom" and low subjective wellbeing. 

The happiness difference between liberals and conservatives in the U.S. therefore might well be in how open they perceive available opportunity structures.