Why Capitalism is Doomed

[Dragon]

This is for discussion of something I wrote for my blog recently. You can find it here: The Dragon Talking: Why Capitalism is Doomed

The basic reasoning goes like this. Economic systems, like governments, exist on popular sufferance -- by the consent of the governed, to use Jefferson's phrase. Each can be described, therefore, in terms of a social compact: the people allow the system to go on, in return for promised gains.

With capitalism, the unwritten agreement was that the people would allow an economic system in which a few privileged and powerful individuals controlled most of the wealth, in return for their managing it so as to create rising standards of living for most people. But in order for that to work, there has to be a high demand for labor, which can be leveraged by one of several means into high wages.

Today, we are increasingly in a situation where labor is not needed to produce wealth. That means that even as the economy grows, demand for labor doesn't grow with it, and capitalism can no longer provide rising standards of living for most people. Unemployment is too intractably high, demand for labor too low, and downward pressure on wages accordingly great.

Since capitalism can't fulfill its side of the tacit bargain, it is losing popular support. When that loss reaches a critical point, the system will be replaced by -- something else. Exactly what else is a good question. But unless high demand for labor can be restored, capitalism is doomed, and I see no way to do that.

 

[Si modo]

What capitalism are YOU talking about?

 

[regent]

Since the Constitution, America has probably never been a totally capitalist nation. The problem has been keeping capitalism, capitalism. When Americans became aware of its possible loss they begin to try and strengthen it, even modify it to save it. We had the progressive period when the competition part of capitalism was almost eradicated, and kept it going. FDR kept it alive when it probably was in most danger and since then we have added more socialism to the mix for equality. Another way to look at the need for less labor, is less working hours, we went from a sixty hour work week to a forty maybe it's time to let machines do even more? Think of what America could do if politicians were more interested in the people than campaign coffers filled with corporate money.

 

[Dragon]

What capitalism are YOU talking about?

Did you read the linked article?

"Capitalism is an economic system characterized by private ownership of the means of production and the defining of ownership of goods by who owns the capital that is used to produce the goods."

Less technically, it's a system in which most people make a living through wages paid for work done on behalf of private for-profit companies.

I'm not just referring to laissez-faire capitalism or to Reaganomics. The death knell is sounding for New Deal capitalism or social democracy as well, since that, too, is dependent on high demand for labor.

 

[TakeAStepBack]

You're mistaking capitalism with corporatism.

 

[Dragon]

Since the Constitution, America has probably never been a totally capitalist nation. The problem has been keeping capitalism, capitalism. When Americans became aware of its possible loss they begin to try and strengthen it, even modify it to save it. We had the progressive period when the competition part of capitalism was almost eradicated, and kept it going. FDR kept it alive when it probably was in most danger and since then we have added more socialism to the mix for equality. Another way to look at the need for less labor, is less working hours, we went from a sixty hour work week to a forty maybe it's time to let machines do even more? Think of what America could do if politicians were more interested in the people than campaign coffers filled with corporate money.

Again, please read the linked article. Here's another quote from it:

The system seemed to break down in the Great Depression, but it proved fixable by some moderate reforms: government regulations on business and encouragement of labor unions. The golden age of capitalism in America was in the decades after World War II, when high demand for labor coupled with strong unions kept wages high and climbing along with productivity. The rich got richer. So did the non-rich. Rising standards of living for almost everyone kept the people happy with the bargain. Capitalism, with proper controls, worked.

But in order to keep that compact, there is one essential factor. The production of wealth MUST require labor. It must be necessary for capitalists to share at least a nonzero amount of the wealth produced in order to produce the wealth at all. Given that, a labor-friendly government and strong unions can leverage this requirement into sharing of the wealth on an almost equitable scale.

Today, increasingly, we are divorcing the production of wealth from the work that used to be required to produce it. It's increasingly possible now to produce wealth without labor. We are well past the era of dumb machines replacing grunt work; today, sophisticated computer technology is replacing human labor for everything from typing to customer service to movie extras. (I've even seen software that can write articles. I have my worried eye on that, believe me.)

Technology can replace most of the work of lawyers other than actual appearance in court. Technology can replace much of a doctor's work apart from a bedside manner. Technology can replace all the craft of an artist short of true creative genius -- and I'm not even sure about that! We still have work in this economy: really high-paying professional work requiring advanced education, and really low-paying service work requiring nothing but a warm body and work ethic. But the middle-ground, decent-paying work that used to comprise the majority of the labor force is rapidly disappearing. We are fast approaching the time when the only jobs left are those too complicated to be worth the effort of automating, and those too low-paying to be worth the expense of doing so.

Under those conditions, even the most liberal version of capitalism must fail.

 

[TakeAStepBack]

The system seemed to break down in the Great Depression, but it proved fixable by some moderate reforms: government regulations on business and encouragement of labor unions. The golden age of capitalism in America was in the decades after World War II, when high demand for labor coupled with strong unions kept wages high and climbing along with productivity. The rich got richer. So did the non-rich. Rising standards of living for almost everyone kept the people happy with the bargain. Capitalism, with proper controls, worked.

That wasn't capitalism.

 

[Dragon]

The system seemed to break down in the Great Depression, but it proved fixable by some moderate reforms: government regulations on business and encouragement of labor unions. The golden age of capitalism in America was in the decades after World War II, when high demand for labor coupled with strong unions kept wages high and climbing along with productivity. The rich got richer. So did the non-rich. Rising standards of living for almost everyone kept the people happy with the bargain. Capitalism, with proper controls, worked.

That wasn't capitalism.

Meh. I'm using a broader definition than you are. By your more restricted definition, capitalism failed a long time ago and has disappeared and will never come back. What I'm saying here is that even liberal capitalism is doomed.

 

[Amelia]

Interesting.

 

[TakeAStepBack]

If you're not going to properly use terminology and just make shit up as you go, the entire point you're trying to make becomes self defeated. Capitalism never failed, it was hijacked by central panners and passed off as capitalism to shield the reality of what was really happening. Which is why I find myself correcting people on a constent basis regarding what is, and what is not in economics.

 

[TakeAStepBack]

There is no "broader" definition except for perhaps the one you're making up to fit the agenda. It's like some synthetic a priori judgement value.

 

[Dragon]

If you're not going to properly use terminology and just make shit up as you go, the entire point you're trying to make becomes self defeated.

I'm using the term the way most economists use it. I'm not, admittedly, using it the way ideological right-wing free-market purists like yourself use it. However, I stand by my usage as proper and normal.

Capitalism never failed, it was hijacked by central panners

Oh, please. I have no more patience with that crap than I do with Marxist crap, which is just as pie-in-the-sky nonsense as you're giving us, but certainly no worse. If you're not going to use the term to refer to something in the real world, why bother using it at all?

 

[Baruch Menachem]

Khrushchev said it better "We will bury You" he said.


[ame="http://www.youtube.com/watch?v=8Xv7z5h7yBQ"]Who buried whom?[/ame]

As a system Capitalism since the 17th century has provided the world with more amenities and progress in 400 years than had been seen in the previous 10,000.

It is ugly, but it delivers. Folks have tried everything else saying their new nirvana will do a better job, only to see it deliver slavery and starvation.

Anyone who says it will go away for something better needs to realize that there is no something better. There is no better way of rationing resources. There is no better way of assigning wealth YOu don't like the concentration in few hands in the US? Examine the concentration levels in a socialist dictatorship. You don't like the poverty here? It is better than the deliberate famine you got in Russia with Collectivization, the mass starvation of the Great Leap Forward in China and the chaos in the socialist states in Africa like Zimbabwe.

Humans are who they are. You give them freedom they do both really dumb stuff and totally amazing marvels. If we accept your thesis that Capitalism is bad, you need to recognize that every other system is horrible.

 

[TakeAStepBack]

If you have no more patience for the truth, that's on you.

Your "article" is a giant plop of poopy though.

 

[Si modo]

What capitalism are YOU talking about?

Did you read the linked article?

"Capitalism is an economic system characterized by private ownership of the means of production and the defining of ownership of goods by who owns the capital that is used to produce the goods."

Less technically, it's a system in which most people make a living through wages paid for work done on behalf of private for-profit companies.

I'm not just referring to laissez-faire capitalism or to Reaganomics. The death knell is sounding for New Deal capitalism or social democracy as well, since that, too, is dependent on high demand for labor.

Well, we don't have capitalism here.

So, your point? Rather, your foundation for saying something not tested will fail?

Contempt prior to investigation is a fail.

 

[TakeAStepBack]

Khrushchev said it better "We will bury You" he said.


Who buried whom?

As a system Capitalism since the 17th century has provided the world with more amenities and progress in 400 years than had been seen in the previous 10,000.

It is ugly, but it delivers. Folks have tried everything else saying their new nirvana will do a better job, only to see it deliver slavery and starvation.

Anyone who says it will go away for something better needs to realize that there is no something better. There is no better way of rationing resources. There is no better way of assigning wealth YOu don't like the concentration in few hands in the US? Examine the concentration levels in a socialist dictatorship. You don't like the poverty here? It is better than the deliberate famine you got in Russia with Collectivization, the mass starvation of the Great Leap Forward in China and the chaos in the socialist states in Africa like Zimbabwe.

Humans are who they are. You give them freedom they do both really dumb stuff and totally amazing marvels. If we accept your thesis that Capitalism is bad, you need to recognize that every other system is horrible.

Exactly. This is just another lousy attempt to try and say we need to find a new nirvana to try out because capitalism (which we do not even have) has failed, yadda, yadda, yadda.

I must have spent ten plus years in this debate and it's probably over a few hundred years old. Change the humans! Make them conform....same as it ever was....

 

[Dragon]

BM: Read the linked article, please. Or at least the part I cut and pasted here. Yes, in the past, capitalism has delivered; even when it failed, it was possible to patch the failure and have a modified system that worked.

But the sine qua non of that success is high demand for labor. Capitalism works only when just about everyone has a job. What happens when the jobs go away, or become so low-paying that capitalism no longer delivers? That's the situation we're in now, and it's a new development emerging from technology that didn't exist in the old days, so the failure of capitalism is NEW, and the past is no guide.

As for what should replace it, that's a separate question. I think we can agree that the system Kruschev presided over wasn't better. But something will have to replace capitalism. Exactly what, remains to be seen.

 

[Dragon]

Change the humans! Make them conform....same as it ever was....

Not what this is about. Capitalism is doomed BECAUSE of human nature, and because it can no longer provide prosperity for most people.

 

[Si modo]

Change the humans! Make them conform....same as it ever was....

Not what this is about. Capitalism is doomed BECAUSE of human nature, and because it can no longer provide prosperity for most people.

And, you have no foundation for that claim.

You DO have contempt prior to investigation.

 

[Intense]

You can choose to trade in currency, in goods, or in bullets. It's clear your interests lie in bullets, Mandates, Prisons, and Mass Graves.