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Capitalism has Failed.

Started by Renegnicat, September 29, 2009, 09:04:11 PM

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Renegnicat

I think it's important to note that I have no loyalties to capitalism, private control of gooods, corporate control of goods, worker control, or government control. Just so we are clear on where I stand, what I am loyal to is production and higher standard of living. Period.

To me, a higher standard of living is achieved, not through the accumulation of currency, but by the production of goods and services. This is important to note, because although hard-core Capitalism is said to be a great producer of wealth, it, in reality, has no automatic mechanism encouraging the creation of goods and services.

What I mean is that, in capitalism, there are many ways to make money, but only one way to spend money. You can, if you so choose, create a widget and sell it, from which you make money which you can buy whackadoodles. Or, you could take the easy way out and speculate on who makes widgets. You could play the financial gambling game and make money while providing no goods, nor any services to anyone else.

You see, capitalism is a champion of competition, but competition is useless when no goods and services are being produced. And in the last 50 years, America has moved from an industrial power-house that generates so much wealth from it's goods and services to a den of hollow financial institutions where no goods are produced, no services made, and the only form of wealth is little pieces of paper and plastic.

Wealth is not currency. In the past fifty years, people went from thinking, "oh, I can produce this good and make some money" to, "Hey, I can make money by giving others money and demanding they pay me back with interest! Never mind if I'm not producing a good that contributes to a higher standard of living!"

Thoughts and opinions?
 :raised:
[size=135]The best thing to do is reflect, understand, apreciate, and consider.[/size]

Will

Capitalism only works when it's tempered by charity, selflessness, and regulations. Since all three of these things seem not only to be missing from Wall Street, but even most Main Streets, of course we're in trouble. We're going to continue being in trouble until we decide it's time to start living with other people in mind, not just ourselves.
I want bad people to look forward to and celebrate the day I die, because if they don't, I'm not living up to my potential.

Sheeplauncher

I agree with you that currency is not welath esp. when that currency is not backed by an precious metal such as gold as the dollar once was(and as it warrants in the constitution). To say Capitalism has failed is a strech. I'm a minor in economics and have read a lot on the subject. I would say the system in this country is very broken because like you said we do not produce very many products and or goods or services but the undlying problem for that is government regulations. I would say the main reason that the system is broken is from government intervention and policy eliminating competiton and the "the invisible hand."  You said that Capitalism has no means or automatic method  of producing goods and services which is in part true but it does encourage entrepreneurial activities. If a company or individual can produce a good or service better then someone else then they have a comparative advantage and it compels them to make it. Now if a new technology comes along then maybe another firm can come along and make it better then the last company then that encourages competetion and lets the market regulate itself. I agree capitalism is not perfect and in theory is not suppose to be but there just really is no better alterative. Sorry if i have some spelling errors

AlP

Thoughtful post. Thank you.

I think it's all too easy to mistake money for real value. Money is not really value; it is value in flux or value deferred. It's not real value but a kind of abstract value.

I am rather disappointed with the tendency in this country to invert the meaning of value (and not just value but other things too). Some people think when they do some work and receive payment that they have gained value. In fact, they lost value and received a token in exchange. Some people think when they buy something they have lost value because now they have less money. In fact, if they spent it wisely, they will have gained value in exchange for a token.

I am also disappointed by the tendency of some people to mistake the value of something for its price. I read of experiments where people are asked to rate wines for example. They tend to prefer the wine with the higher price. Change the experiment so they don't know the price and they prefer different wines. I think it comes back to this same inversion of value.

I think we need to distinguish between gambling and investment. The two most common kinds of financial investment are equity and bonds. When one buys equity, one is buying partial ownership of a company. That company then attempts to create value and the investors are compensated through dividends and growth in the value of the stock. An investor in equity is creating value in the same way as the owner of a company employing workers.

Bonds are like a loan given to a company or state with an agreed term and rate of interest. It's not gambling. It's a mutually beneficial temporary transfer of means to create value.

There are some kinds of investment where the link to the creation of value is really hard to understand, for example derivatives like options and futures or the practice of short selling (borrowing a security in the hope of later buying it at a lower price before returning it, thereby making a profit). These are more like gambling but they have legitimate uses, for example hedging, which is like buying insurance. Risk reduction has real value in my opinion.

So in summary, I don't think capitalism is fundamentally broken. I think some people are just doing it wrong, either by mistaking money for value or by treating investment as gambling.
"I rebel -- therefore we exist." - Camus

Graham

http://www.erzwiss.uni-hamburg.de/Personal/Lohmann/Materialien/capyr.htm

I don't know. The diagram doesn't make it seem all that bad. Actually why would someone want to be infinitely wealthy anyway? They are just going to die anyway. But I do think that capitalism is useful if you have a goal in mind that everyone agrees on and you've become the regulator to ensure that everyone is doing their work. But I hope that you aren't the lazy sob that sits on his ass and just keeps all the money to himself instead of putting it into the goal. I think that has a different name though....

What kind of goals do humans have nowadays? common goals? That could be a different topic, someone could make it if they want. USA's goals of today as far as I know are; man on mars 2040, whatever they are doing in the Middle East, take Canada's water? create a North American Union, take over the world? LOLZ.

Renegnicat

That graph reminds me of an importnant thing to say. For a while, the majority of workers in this country have been under the illusion that, if they just work hard enough, they too can achieve wealth and luxury. But this hasn't been true since the mid 1800's.

It is incredibly difficult for anyone to become wealthy by simply working hard. It may not seem that way, but the proof is in the statistics, with the top 1% owning 95% of the wealth. Interestingly enough, even though the wealthy say that they are against socialism, it didn't stop them from eagerly accepting government bail-outs, no?

The illusion is still going strong, but the truth is that social mobility used to be a medium as light as air, while now it is thick as mollasses.
[size=135]The best thing to do is reflect, understand, apreciate, and consider.[/size]

Graham

I think that it all depends on what your working on. I think that work should be about achievements and not wealth. Not just increasing someone's wealth at the top or even your own wealth, but doing something that would better humanity as well as other living things. That way you can be successful if and only if you succeed and the best way to be successful is to hard work. Sadly that's merely a pipe dream. Reality is people have to work only to accumulate wealth and by doing something that has only temporary benefits to the consumer and to the owners. But have you ever seen the film V for Vendetta? I liked it. :pop:

SSY

Quote from: "Renegnicat"That graph reminds me of an importnant thing to say. For a while, the majority of workers in this country have been under the illusion that, if they just work hard enough, they too can achieve wealth and luxury. But this hasn't been true since the mid 1800's.

It is incredibly difficult for anyone to become wealthy by simply working hard. It may not seem that way, but the proof is in the statistics, with the top 1% owning 95% of the wealth. Interestingly enough, even though the wealthy say that they are against socialism, it didn't stop them from eagerly accepting government bail-outs, no?

The illusion is still going strong, but the truth is that social mobility used to be a medium as light as air, while now it is thick as mollasses.

Please cite a source for that the 1%, 95% wealth factoid, it sounds like the sort of thing bandied around at a Marxist rally to me. As for social mobility, at least in the UK, I believe it is still quite achievable. I come from a working class Family, and having just come to the end of my degree (which the government mostly paid for)  am now looking at a variety of roles which should prove to be very lucrative, all this despite the fact no one in my family has ever gone to university before now. Obviously an anecdote, put it proves the mechanisms are in place for kids to take advantage of, I am by no means an outlier.

I think that in ages past, it was in fact much harder to work your way up, where school was not free, acquiring even a basic education required your family to have the money to send you off to school, considering most families needed all the children above the age of 5 to be working in some capacity so as to put food on the table, this was a luxury out of reach for the vast majority of people, where as now, every single child is educated up until 17, soon to be longer.

If you have the brains ( I like to flatter myself in thinking I do), then you can still make it, even if it does take slightly longer than the same person working their way up from the launch pad of a middle/upper class family.

NB, this depends on what you mean by wealthy, Am I likely to become a billionaire? No, am I likely to earn a very comfortable living and be considered wealthy by the standards of most people? I hope so.
Quote from: "Godschild"SSY: You are fairly smart and to think I thought you were a few fries short of a happy meal.
Quote from: "Godschild"explain to them how and why you decided to be athiest and take the consequences that come along with it
Quote from: "Aedus"Unlike atheists, I'm not an angry prick

Renegnicat

The statistic I heard on NPR, National Public Radio, 'tiss all. But I didn't research it, and I don't have an online source. Though, if the statistic is on NPR, I'm somewhere there's got to be an online citation for it.  :hmm:

Anyways, you're right about there still being a lot of opportunities for advancement. But compare today with 50 years ago, where, on a union job you could send all your kids to school, or, failing that, you could get financial aid from the school itself, where credit card companies didn't prey on everyone. Now, you either get government aid, or you're up to your neck in student loans. Unions are gone. So, no, it's not completely destroyed. There's still opportunity for advancement, but at the same time, drop out rates are still high, crime is rampant, banks are going out of business.

Hmm... I'll have to think more about this.
[size=135]The best thing to do is reflect, understand, apreciate, and consider.[/size]

AlP

Another anecdote. I grew up in a working class family in the UK. We had just enough means for basics like a house, clothes (which my mom made), food, etc. I went to school and got a degree, paid for by the state. I got a job as a professional programmer. Now I make 6 figures. I don't know if that counts as wealthy but it sure seems like more money than I know what to do with to me.
"I rebel -- therefore we exist." - Camus

Renegnicat

[size=135]The best thing to do is reflect, understand, apreciate, and consider.[/size]

AlP

I think this is a fair criticism of capitalism as practiced in the US. Look at all the banks that failed this year:

http://www.fdic.gov/bank/individual/failed/banklist.html

Banks take the money you deposit with them and use it to make long term investments. These investments will not always do well over the short term. They might also not be sufficiently liquid. So when the depositors all want to withdraw their money on mass, the banks do not have the assets and they fail. Then the government bails them out (FDIC insurance) or another bank buys them.

I'd call what the banks are doing gambling rather than investment. They're gambling that investors won't all suddenly want their money back. Sometimes that happens.

If you want a way to save money that doesn't involve the madness of banking, there are money market funds. Money markets are only allowed to make short term investments and they endeavor to preserve capital, so they are much more likely to survive a scenario like 2009. Since 1980, more than 3000 US banks have failed, compared to 2 money market funds.
"I rebel -- therefore we exist." - Camus

SSY

If you consider banking, whereby the held assets are put to work making more money, to be gambling, then do you also consider insurance to be such a gamble? The insurance company is hoping that not everyone falls ill/has their house burn down etc all at the same time.

I would make a distinction between activities that have a risk element to them, and gambling.
Quote from: "Godschild"SSY: You are fairly smart and to think I thought you were a few fries short of a happy meal.
Quote from: "Godschild"explain to them how and why you decided to be athiest and take the consequences that come along with it
Quote from: "Aedus"Unlike atheists, I'm not an angry prick

AlP

Quote from: "SSY"If you consider banking, whereby the held assets are put to work making more money, to be gambling, then do you also consider insurance to be such a gamble? The insurance company is hoping that not everyone falls ill/has their house burn down etc all at the same time.

I would make a distinction between activities that have a risk element to them, and gambling.
No I don't think putting the assets to work to make money is in itself is gambling. What I think makes it more like gambling is when banks make long term investments that prevent them from letting their customers withdraw their deposits on mass, as sometimes happens. There are shorter term more liquid investments, like short term corporate bonds, that would allow them to beat inflation and meet the occasional high demand for withdrawals. Money markets do this and I wish banks would too.

I don't think insurance is gambling either. In my mind the difference is with investments one expects to make a profit whereas with gambling one expects to make a loss. I'm not aware of the kind of massive failure occurring in the insurance industry as happens in the banking industry whenever the economy goes badly.
"I rebel -- therefore we exist." - Camus

Renegnicat

Also, it's a reasonable assumption that not everyone is going to be struck by a major disaster all at once. If something like that were anywhere near commonplace, there would be no life on earth.  :P
[size=135]The best thing to do is reflect, understand, apreciate, and consider.[/size]