Can Capitalism Survive?

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kept the price low, and cheap energy helped to create fabulous economic growth. But the U.S. in particular squandered enormous quantities of energy on oversize cars, sealed buildings and flimsily insulated homes. Some oilmen warned that a supply squeeze was coming and that massive efforts should be made to conserve oil and invest in new sources. The warnings were not taken seriously. When the energy crisis struck, the free market was thrown into near panic. Of course, nobody could have predicted that the crisis would hit so soon, simply because it was hard indeed to foresee the explosive political events that triggered it: the 1973 Middle East war and the subsequent rallying of the Arabs behind the oil boycott. But the fact remains that the market's price signals gave capitalist industry the wrong guidance on energy use, conservation and development. One reason is that while the market is an excellent short-term indicator of supply and demand, it does not purport to do well at forecasting the longer term.

The Debate Over Planning

In order to cope with the inadequacies of the market, a rising number of experts urge capitalist governments to adopt some form of economic planning. But a grave problem is that command planning, in which government bureaucrats decide how much and just what goods are to be produced, is the antithesis of capitalism. Western European nations are even disillusioned with their persuasion-and-incentive plans of the 1960s, which also generally failed to anticipate the economic crises of the 1970s. Yet more and more people in the U.S. seem attracted to the idea of setting up a federal body that would attempt to give early warnings of shortages and bottlenecks that both restrict production and aggravate inflation.

A group of mostly liberal thinkers, including Economist Wassily Leontief, Investment Banker Robert V. Roosa and United Auto Workers' President Leonard Woodcock, have called for the establishment of a U.S. office of national economic planning. They have in mind not a stiff bureaucracy that would sap freedoms by handing down directives, but a forward-looking group of several hundred scientists and technicians (and a few economists) who would study the future of the U.S. economy much as a savvy company studies its market. Relying on such factors as population trends and the likely availability of resources, they would try to estimate the economy's future needs for developing domestic supplies, expanding industries and raising capital. They would also attempt to project how many cars, houses and tons of wheat, steel, paper and other products the economy would demand. Then they would propose guidelines—tax and investment incentives as well as broader monetary and fiscal policies—for meeting those goals. Whenever the President or Congress floated major legislation, they would estimate its effects on prices and jobs.

Ford Motor Co. Chairman Henry Ford II has called for creation of a highly visible and vocal federal planning body—underscoring Nobel Laureate Leontief's prediction that the U.S. will adopt planning "not because some wild radicals demand it but because businessmen will demand it to keep the system from sputtering to a halt." Ford's idea is that a planning organization should examine "cost-effectiveness and set timetables. It should take a look at population growth; usages of raw materials and their