A guide to capitalism over the years

Gretchen Morgenson

TEXT OF INTERVIEW

Kai Ryssdal: After Lehman Brothers went broke last September and the government took charge of a huge chunk of the U.S. economy, there were a lot of questions about whether our economic model, that is, capitalism, still worked. It did. And it still does. Just not in the same way it used to.

So New York Times columnist Gretchen Morgenson thought might be time for a little primer on capitalism. What it is and how it has changed. She's the editor of the new, "The Capitalist's Bible." Gretchen, welcome to the program.

GRETCHEN MORGENSON: Thank you.

Ryssdal: You have taken centuries of human economic interaction and boiled it down to 250, 300 pages but let me ask you to take it a step further. And give me the 30-second version of what the layman, the person who functions in a capitalist economy really needs to know about capitalism and how it works?

MORGENSON: Capitalism is a system that can benefit the greatest array of people, but it is a system that requires an ethical backdrop, a moral compass. And so I think what we're seeing now is that that ethical drive really took a backseat during the credit boom and the mortgage mania that we witnessed during the early part of the century. And so what people have to understand is why that happened. And also capitalism has these kinds of booms and bust cycles. And while this one was tremendously perilous, I do believe that if you look back in time you will see and conclude that capitalism can survive this if certain changes are made.

Ryssdal: Why do you think that happened, that ethics became so much of an issue?

MORGENSON: I think we had a two-pronged failure. First was the failure of people in positions of power to remember that they have a social contract. As you rise in an organization, you have a greater responsibility to do the right thing, to rein in practices, identify practices that are imperiling others. That almost got lost. But the other prong of this failure was the failure of the regulators. These entities, institutions from the highest level down to the very lowest really failed dismally at their jobs. And so you had a combination of failures here that really contributed to this disaster.

Ryssdal: How has capitalism changed though in the past 12 or 18 months? Granted we're talking about a system that's been around for a while, but it's been an extraordinary year-and-a-half.

MORGENSON: Well, I would describe it this way. Capitalism is supposed to be a system in which there is little government intervention. We are now in a type of system where the state, i.e., the United States of America, has investments in much of the automotive industry, has deployed taxpayer money to enormous financial institutions, a great array of them, so we have a, right now in a position where capitalism is not in its sort of true form operating at all. It's really more the government stepping in. And the unfortunate aspect of that is that what has happened is that the gains that were made by reckless lenders, and people who were not overseen by regulators very closely, those gains have now been turned to losses that the taxpayers have to cover. And that is just anathema to a capitalist.

Ryssdal: Gretchen Morgenson is a columnist for the New York Times. Her latest book about how this economy works and sometimes doesn't is called "The Capitalist's Bible." Gretchen, thanks a lot for your time.

MORGENSON: Anytime.

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