Capitalism is on a roll. Free market East Asia is booming. America, under an administration of Coolidgian inclinations (Coolidge was the ultimate hands-off president: when his death was announced, Dorothy Parker asked, "How could they tell?"), is enjoying what the Europeans call the American miracle. American liberals are talking growth and incentives. French socialists have given up redistributionist dreams.

And now -- still moving left -- Chinese communists have joined the cult of the market. In fact, they have supplied the most resounding empirical support for it. In the six years since market incentives in farming were introduced, China's grain harvest has grown by a third. For the first time in history China is self-sufficient in staple foods. For 1984, a year of further deregulation, as we say here, it reports an astonishing 12 percent growth in national income. Somewhere in heaven a pair of invisible hands is clapping, and they belong to Adam Smith.

Down here, however, many hands are wringing. They belong to steelworkers, farmers and, now, savings-and-loan depositors. The ravaged steel towns, the bankrupt farmers, the locked-out savers evoke Depression images. When 71 Ohio S&Ls were closed last week by order of the governor, pointed reference was made to the fact that this is the biggest bank closing since the '30s.

The implied analogy is wrong. These disasters are the product not of capitalism's failure but of its success. In 1984 the American economy grew faster than any time since 1951. The paradox of capitalism is that it is most successful when most dynamic; and when most dynamic, it is most destructive. It is, in Schumpeter's fa- mous phrase, a system of "creative destruction." In its purest form it is Darwinian, and meant to be so.

It is not easy, however, to admit the inherent destructiveness of our economic system. Easier to find villains. Hence, for example, the absurd debate on the farm crisis. David Stockman would like us to believe that the culprits are a bunch of speculators in overalls who bet the farm in the '70s on rising land prices and lost. Hollywood pretends that the problem is a bunch of cold-hearted bankers and bureaucrats who, for the sake of a healthy bottom line, are prepared to torment even Jessica Lange.

The real cause makes neither a good political target nor an attractive movie foil. Forty-five years ago, a quarter of Americans lived on farms. Now 90 percent of them are gone -- and we are overproducing food. What made that miracle possible, and is now driving the remaining few off the land, is technology that permits vast economies of scale. When a farm family has to borrow half a million dollars for machinery to keep up with larger operations, it becomes clear that farming on this scale is simply obsolete.

With new crises come new villains. The newest victims of robust capitalism are half a million savings-and-loans depositors. How robust? One bank, the biggest of Ohio's 71 privately insured S&Ls, went out and did chancy business with a fraudulent company, lost everything, and thus bankrupted the private insurance that was protecting the other 70. The S&Ls were shut, and the depositors, not exactly your class of speculator, may never see their savings again.

It seems like a case study in the perils of deregulation. Remove the cap on interest rates and all institutions, even the most staid and old-fashioned S&Ls, will have to compete frantically to pay depositors higher rates. Some will go into more speculative investments. And some will go under. The Wall Street Journal scoffs at the suggestion that the problem is caused by deregulation. The cause is simple, says the Journal: a foolish bank, a bad deal and a couple of wheeler-dealers, particularly "a prominent citizen named Marvin L. Warner."

But surely the larger point is that capitalism welcomes, indeed invites, foolish bankers and wheeler-dealers to the market. Market entrance requirements are based not on ethics or intelligence, but on what my father calls "Lincoln's recommendation," or that of any other face on the currency. The way to protect the system, the banking system in particular, from too much risk and too many rogues is regulation -- i.e., artificial constraints on the market.

It does no good to blame foolish farmers or greedy bankers, if to do so is to assume that without fools and knaves capitalism would be spared its cycles and debacles. The most poignant example is British coal. Arthur Scargill is a Stalinist provocateur, and Margaret Thatcher an iron lady. Both have a high tolerance for other people's pain. But neither will have killed the mining towns that are now to die. They are a victim of energy substitution, foreign competition and environmentalism. Coal is a 19th-century fuel, as much as the family farm is a 19th-century enterprise. Capitalism writes and, having writ, moves on.

The little saver is shaken by deregulation. The family farm is crushed by mechanization. And industrial workers fall to history and technology. Capitalism is working.

It is the first system in history to lift the mass of men out of economic misery. But to keep the engine going, it randomly visits misery on selected groups. Instead of searching for villains, it might be more humane for the rest of society, which benefits from that mighty engine, to devote some of its vast surplus to cushioning the fall of its victims.