Cowboy Capitalism

Cowboy capitalism is a term used, primarily by its critics, to describe the free market elements of the American (and, less often, the “Anglo-Saxon”) economy. It has been contrasted both with socialism and with modern European “comfy” capitalism. An ongoing debate persists in business ethics circles concerning whether such a free market is morally good or morally bankrupt.

Cowboy capitalism has been likened to shareholder capitalism, where firms experience constant pressure from investors to maximize profits and focus on financial results. A theoretical foundation of this view is the efficient markets hypothesis, which holds that free markets are the ultimate, efficient arbiters of the economic goods in a society. This economic system is often characterized by numerous entrepreneurial startups and bankruptcies, as well as by frequent mergers, acquisitions, and leveraged buyouts. Individuals are encouraged to strive and to pursue their own self-interest, which some argue constitutes satisfying their own greed without restraint.

A hallmark of cowboy capitalism is the laissez-faire relationship between business and government. It is characterized by economic freedom and lower taxes for both businesses and individuals. The government associated with this economic system tends to remain small and noninterventionist, even in the cases of business trusts and mergers and acquisitions. However, some argue that political corruption is endemic in such systems, as businesses may bribe government officials to keep potential regulation at bay.

The long-term consequences of cowboy capitalism have proven to be very high standards of living, very low levels of unemployment, and unprecedented levels of productivity and per capita gross national product. These consequences are often claimed to be products of Adam Smith's invisible hand, which he argued enables the pursuit of individual interests to lead to the greatest macroeconomic output. Advocates argue that these gains have been made despite governmental regulation and interference. Critics, however, claim that it is precisely these regulations and social programs that have stimulated economies by putting money into consumers' pockets. They also focus on the variable distribution of wealth in such an economy, claiming that the system is morally indifferent to its less able or less fortunate members. In addition, firms have no guarantee of survival, nor workers of ongoing employment.

Opinions vary concerning the origins of the term. Some argue that it characterizes a cowboy's tendency to shoot first and think later, while others believe it symbolizes participants' thirst to win the competitive struggle presented by business. Still others go to the extreme of claiming that it means “doing in” rivals so that they can no longer compete.

Icons of cowboy capitalism differ among supporters and critics. Supporters would point to Ronald Reagan (on a horse) and to Reaganomics, as well as to the city that has been called the capital of cowboy capitalism—Houston, Texas, particularly during the 1980s' oil boom. Critics, in contrast, would focus on scandal-riddled Enron, modern Russia, and Eastern European markets after the breakup of the Soviet Union and before the rule of law. Even supporters acknowledge that the concept has sometimes been taken to extremes. Marianne Jennings has likened the Yeehaw culture of Enron and other scandal-ridden firms to distortions of cowboy capitalism.

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