Business: Capitalism: Is It Working...? Of Course, but...

In an age of economic anxiety, real and rising concerns about whether free enterprise can surmount the problems of inflation, energy and productivity

The relentless daily pounding of dismal news drives deeper the public's conviction that the economy is in a profound and morose crisis. Feverish inflation, previously a rare malady limited primarily to wartime, has become chronic. Price spurts once associated with profligate banana republics are now common to North America and Western Europe and threaten the foundations of democratic societies. With every sign showing that prices in the U.S. will continue soaring even as the nation begins slumping into recession, President Carter, his re-election jeopardized by the economy more than by anything else, is stuck in an economic morass.

The litany of U.S. economic woes at times seems endless. Week after week, interest rates crack new records; home owners face 17% mortgages, and companies confront 20% business loans. Energy, the oxygen of industrial life, has become so costly and politically controlled that the U.S. can no longer be certain of enough fuel to keep its factories running and homes heated. The output of goods per hour worked has stagnated. From 1948 to 1973, the productivity of American employees increased 2.9% annually, thus permitting steadily higher real wages and higher standards of living. Last year productivity dropped .9%. The real median income of American families jumped 64% from 1950 to 1970, but has crawled up by less than 1% a year in the past decade. Weekly real take-home pay has been declining for two years. That gauge of American economic health, the stock market, has been sharply depressed.

Amid all this, the Carter Administration has appeared paralyzed and unable to cope with problems that it does not fully understand. Quips Alfred Kahn, the hapless presidential anti-inflation adviser: "Anybody who isn't schizophrenic these days just isn't thinking clearly."

While these travails are felt most acutely in the U.S., the situation is common to nearly all Western nations. Since the mid-1970s, industrial economies have grown about as well as wheat in a drought, while inflation has expanded dangerously. Even countries that have adapted best to recent economic problems, notably West Germany and Japan, suffer inflation or slow growth. The world money system that functioned like a Swiss watch for a quarter-century has been sending off alarms. Gold, the barbarous relic that Shakespeare called the "common whore of mankind," has become the refuge for a world fearful of returning to an economic jungle.

As industrialized and developing nations meet the challenges of the new economic era, they must choose between two essentially different economic systems: the market economy and the command economy. Neither exists in pure form. They overlap, and there are myriad variations within each model. But the difference between them is basic. In market economies the principal business decisions are taken by individuals, who freely exchange their goods or services. In the command economy, the state makes the fundamental business decisions.

Capitalism, the system that relies on the maximum use of free markets and the minimum of government controls, is today being challenged as at no time since the Great Depression. On all sides the haunting questions arise: Is