Location : Wasted Space Job/hobbies : Cayman Islands Actuary
Subject: Capitalism is still the only system that works Mon Aug 09, 2010 4:55 am
The past three years have seen the most concerted questioning of the merits of capitalism since the Great Depression. The global financial crisis destroyed trillions of dollars of wealth and left taxpayers on the hook for vast losses accumulated by banks. In many countries, that debt will not be repaid for generations. The economic downturn left millions without work in North America and western Europe. Unemployment rates on both sides of the Atlantic remain near double digits.
Little wonder there has been a deluge of criticism of what came to be seen as the best way to organise an economy: the deregulated, open, privatised and market-focused approach that spread from English-speaking countries to much of the world after 1980.
The global financial crisis revealed deep flaws in our contemporary version of capitalism - in particular the instability and excesses it can generate. But nobody has proposed any credible alternative model of economic organisation. The huge public debt created by the global financial crisis will only be paid off when there has been enough private sector wealth created to pay the taxes to repay it.
While many called for changes to regulation, nobody argues the fundamentals of liberal capitalism - price signals, free exchange, open markets - be replaced with central planning or centralised resource allocation.
While some question the relative weight societies place on economic and non-economic objectives, nobody (other than the deepest-green greens) argues material prosperity doesn't matter. Growth remains the best known remedy for poverty.
And while many argued for governments to temporarily step in when private confidence and activity were weak, nobody can deny one lesson from the downturn is there are limits to what governments (and government borrowing) can achieve.
In the end, capitalism is the only viable system we have for organising our economy. It alone harnesses the reality of human nature - our continual striving for progress and our competitive instincts to do our best. It alone is compatible with political and democratic freedoms. And it alone has proven results - advances in material wellbeing over sustained periods, lifting hundreds of millions of our fellow humans out of grinding poverty.
Humans are curious, competitive and infinitely varied. The genius of capitalism is it disaggregates power and decision-making, allowing people to choose their own road. These different priorities, choices, ideas and values allow humanity as a whole to progress.
Adam Smith famously observed that unfettered individual self-interest was collectively beneficial: "By pursuing his own interest, he frequently promotes that of the society more effectually than when he intends to promote it."
We need only think about how difficult it was for centrally planned economies such as the former Soviet Union before 1991 or China before 1978 (or Cuba to this day), to foster innovation and growth to understand the role of economic incentives and freedoms in progress.
Those economies offered a revealing insight into the unfairness and rent-seeking that accompanies government control. The Soviet elite was much less open-ended than the ranks of Fortune 500 chief executives are today.
Regrettably, rent-seeking and protected interests are not unknown in capitalism, too. The roots of the global financial crisis largely lie in government meddling to privilege particular groups. The crisis confirmed capitalism works better when individuals are treated equally and vocal or powerful interests don't get special treatment.
We must consider the record of market-oriented economies in delivering material well-being - in lifting living standards, broadening choice and allowing people to live longer, healthier lives. Nowhere has this record been more remarkable than in formerly centrally controlled economies. Market reforms adopted in China after 1978 and India after 1991 have lifted more people out of poverty in a short timespan than any previous economic transformation in history.
In China, the proportion of the population in poverty fell from 41 per cent in 1978 to 5 per cent in 2001. In India, 300 million people have been lifted out of extreme poverty. We see the beginnings of similar advances in many other poor places, including Africa.
Only as societies become richer, property rights are established and incomes and life expectancy rise do we see greater attention paid to the environment, healthcare and education. As societies become wealthier, we usually see a lessening of economic inequalities that often arise during early industrialisation.
The rise of China and India is surely the greatest triumph of capitalism so far. But how will capitalism be changed by their rise? Will a system of economic freedoms created in the West and in our minds inextricably linked with political and legal rights become something quite different? Almost certainly it will - but it is a safe bet the result will still be very recognisable to us as capitalism. After all, it's the only system that works.
Meeting the challenge of climate change will demand courage, commitment and technological ingenuity. Just as price signals, fair markets and free trade are the cornerstones of the capitalist system for creating goods and services, they should be the foundation of our response to climate change.
Only by harnessing them will we be able to unleash human ingenuity to reduce our emissions cost-effectively. The alternative is heavy-handed regulation and governments trying to pick technological winners. Much of today's awesome technology was unpredicted even a decade ago. The best mechanism for realising the infinite ingenuity of humankind is the market itself.
Subject: Re: Capitalism is still the only system that works Mon Aug 09, 2010 7:59 pm
the rising tide lifts all boats was a crock of shit.
wealth is transferred.
continued growth with technology ends up with jobless citizens.
Either appropriate goods (not that i suggest it) equally, lessen work hours and raise wages, or you going to see a system crash. you cannot overproduce goods to keep people employed. The markets are flooded with goods. you cannot make people under produce or technology to stop increasing production. you cannot force people to work less hours.
the u.s. isn't in growth. It is in debt. Running debt to make up for lack of growth. so you are seeing a transfer of wealth from the english speaking countrys like the u.s. to china and india.
you are not seeing the creation of wealth.
Our system is outdated. Meant for times with less technology, innovation, when having the majority of the population work was necessary. simply put the system is archaic. Explaining the transfer of jobs to the business, sales, service sectors. The large amount of wealth transferred to wallstreet. All other venues for growth having reached its ceiling and ceased. Now we can have less than half the population work and still manufacturer all goods needed or wanted.
The system never accounted for the ability to escalate mass production and technology quicker than population. So we always have the ability to manufacture a surplus of goods.
we need a transfer to something. A evolution of the system. To something also capitalsim based (too allow for freedom of course) but not necessarily with the requirments of our current economy (such as near full employment and high levels of growth).
I would suggest a technocracy but they have their own failures and take freedom from the individual.. It is but another version of statism.
Subject: Re: Capitalism is still the only system that works Mon Aug 09, 2010 8:19 pm
Just to pick up on a couple of points:
Quote :
wealth is transferred.
Before any wealth can be transferred, it first needs to be created.
Quote :
continued growth with technology ends up with jobless citizens.
Not so by a long-shot. Today we have more technology than at any time in the history of humanity... correspondingly, we also have more diversified and employed people than ever before. It's a Marxist myth, that technology destroys jobs... it just moves them to other more productive sectors.
Not to mention that most jobs in the economy are not in manufacturing, but in the service industries. Add to all that, basically unlimited human wants and desires, and there's precious little to worry about, re employment/wealth creation, so long as the statists stop interfering in the economy.
zero
Subject: Re: Capitalism is still the only system that works Tue Aug 10, 2010 6:31 pm
CovOps wrote:
Just to pick up on a couple of points:
Quote :
wealth is transferred.
Before any wealth can be transferred, it first needs to be created.
Quote :
continued growth with technology ends up with jobless citizens.
Not so by a long-shot. Today we have more technology than at any time in the history of humanity... correspondingly, we also have more diversified and employed people than ever before. It's a Marxist myth, that technology destroys jobs... it just moves them to other more productive sectors.
Not to mention that most jobs in the economy are not in manufacturing, but in the service industries. Add to all that, basically unlimited human wants and desires, and there's precious little to worry about, re employment/wealth creation, so long as the statists stop interfering in the economy.
how is that workable in real terms. say a wood mill employs a hundred people. The woodmill goes to machinery and increases production. It lays off eighty people. The wood mill employs 4 people in sales. To sell the wood products. With the increased production and cost savings it can sell more products so hires two more sales people. Now the woodmill has six sales people. But two jobs were added and eighty ended. The woodmill starts a online direct sales center. It takes one person to run the website and orders. The sales center replaces two of the sales people while adding one job. Now the woodmill has to secretarys. with the investment in call service and a new computer system the woodmill has laid off one secretary. It takes people to make the new computer system of course. But for many computers so it is one job lost for only perhaps a small fraction of one replaced.
so now we have 82 + people out of work. All going to work in the service sector. Course with more people out of work, less expenditures, less people are buying. It is as likley for the woodmill to lay more off than it is for it to have growth and hire. Since less people are now employed to buy the goods.
But suppose people can still buy goods. It takes many less people to sell a good than manufacture one. And sales are equally able to get replaced, outsourced as technology increase. (such as direct internet ordering).
Now for each service position to have a purpose. It must maintain a middle man status and cannot be circumvented. Sales, service, in many cases are middle men .
so you actually have a inefficiency created within the system to maintain sales jobs. Rather than direct it is further inefficiency. The markets natural tendency is to circumvent inefficiency so over time it has , and will continue to circumvent sales or service positions.
Buy direct etc.....
The u.s. increases, in the financial sector and the health care industry show a greater amount of inefficiency but the need to grow a market for growth. A transfer from manufacturing to those sectors. However the inefficiency has left the economy lopsided, "to o many eggs in one basket" for example. But mostly it is the inefficiency. Jobs created unnecessary. Useless jobs for the actual maket to function.
person makes a widget, sells the widget. Creates a market. Normally you may have a sales widget person, a widget maker, and if the company grows a widget stock seller and of course the market itself. Perhaps a widget stock trader on the floor.
The trader has been replaced by tech. But what they have done is have less widget makers. A widget stock broker, a widget fund investor, and widget insurance investor, a widget law firm, accounting firm, widget insurance company to insure the widget, a widget derivitive creator, a widget lender, etc. etc. etc.
all over one widget. They have created a billion dollars of debt and or/supposed assets, multiple jobs, over a single widget. More people are involved in deciding the fate of the widget and the money made from the widget and the widgets proposed market than it actually took to make the widget or the widget was worth. so for a ten thousand dollar widget purchase they created a million in widget money transactions, with each employed person making a percentage of their part of whatever transaction.
fake jobs, fake market, inefficient
no?
so what do you mean by the jobs have been moved to the service industry?
Subject: Re: Capitalism is still the only system that works Tue Aug 10, 2010 8:36 pm
Quote :
fake jobs, fake market, inefficient
no?
No!
Creating Disequilibrium, and Benefiting Society It’s not just increases in production that create wealth but a radical reforming of the way production itself is done. Entrepreneurial innovations disrupt the unrealistic ideal of a stationary economy, writes Isaac Morehouse. They do destroy the old order — like the classic example of buggy makers losing their jobs when the automobile took hold — but they cause growth because what they create is more valuable than what they replace.
Can you imagine halting the progress of the automobile in order to preserve buggy makers?
The Union Myth Investments in technology, from air-conditioned farm tractors to the robots used in automobile factories, have also made the American workplace safer. But unions have often opposed such technology with the Luddite argument that it "destroys jobs."
Subject: Capitalism is still the only system that works 
Mon Aug 09, 2010 4:55 am
