Why Capitalism is Doomed

[Liberty]

dragon do you think capitalism and corporatism are the SAME thing?

Please...let me make this simple for your pea brain.

Corporatism (business having influence in government) = problem
Capitalism (business completely separate from government) = solution

You wrote a whole mess of ignorant gibberish on your "blog" and probably wasted a lot of time. You are not an intellectual. At all. You are the equivalent of a 4 year old trying to read Shakespeare after barely getting through green eggs and ham. It's laughable. Cute...but laughable.

 

[itfitzme]

I'm using the word the way most economists use it today, to describe any economic system in which all or most of the means of production are privately owned and operated on a for-profit basis.

Not when you're claiming that a requirement or defining factor of Capitalism is concentration of Capital in the hands of a few, you're not. That's my "quibble," that you're adding on ideas that are not and never have been part of any capitalist ideas.

I'm just observing that that's the way it normally works. A system with non-concentrated capital would still be capitalist by definition. The fact that no such decentralized capitalist economy has ever existed doesn't change that, but it does mean that in describing the social compact permitting capitalism this theoretical possibility isn't very important.

You will find that some authoritarian personalities like to argue about the meaning of a word. They "win" the argument because they know the correct definition. Of course, their definition tends to be according to how their authority of choise uses it. Economicst refer to "inflation" meaning "price inflation" while some Republicans have decided it means "monetary inflation."

Then, of course, other's get a bit annoyed when a term is used differently then the well established meaning. I do that because I go look it up on Merriam, Google, and Wiki.

Sometimes, though, for lack of another word, a term gets co-opted.

The best I can tell, the term "corporatism" is being used to refer to national and global ologopolies that have considerable political influence.

Capitalism is the right of private ownership.

Capitalism and corporatism are not mutually exclusive. In capitalism, monopolies and ologopolies may form due to economies of scale and barriers to entry. There are markets in the global economy that are dominated by ologopolies. These ologopolies are corporations and they do have considerable political influence.

Google:

"The control of a state or organization by large interest groups.."

Wikipedia:

"Corporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common interests

Corporatist types of community and social interaction are common to many ideologies, including: absolutism, capitalism, conservatism, fascism, liberalism, progressivism, reactionism, social democracy (social corporatism), and syndicalism.

For business influence in politics, see Corporatocracy."

Merriam-Webster:

the organization of a society into industrial and professional corporations serving as organs of political representation and exercising control over persons and activities within their jurisdiction.

-----

With respect to what you are talking about, since mechanization, there has been an oversupply of labor. In 1940, about 10% of the population could feed everyone. In 1910 it took 1%.

As a new product and technology develops, it creates an influx of capitalists that race to achieve market dominance. This absorbs the excess labor. Eventually, only a few survive and unemployment rises again until the next new product cycle. And, of course, product development overlaps.

At some point, and who knows when, there will be no more new products. That though doesn't mean that some balance will not be struck. Every time the market cycles down, some established manufacturing and consumption takes a hit. People buy fewer DVDs, pet rocks, or whatever.

At some point, things may stabilize with no more cycles caused by "everyone getting on the band wagon" when a new technology hits the market. At that point, it is quite possible that small capitalists, like the guy that mortgages his equity to create a small start up, will return many products to the market.

Product differentiation becomes big. During the boom times, product quality increases and what were otherwise dominant companies find themselves with more competition. Baskin Robbins offers 31 flavors, some other ice cream shop offers only a few gourmet flavors.

I'm watching for the regulation of oligopolies. We see this starting to happen in the medical insurance market which has been safe from federal anti-monopoly laws.

How this all sorts out will depend on how long the unemployment rate stays at near 10%. As you note, as long as the general population doesn't complain to much, capitalism works just fine.

Here is a nice graph of the spread of income. It is the upper limit for quitiles. It is in real dollars, inflation adjusted, so it shows that inflation adjusted real value. The red line is the lower limit of the upper 5%. So the lower 20% of the population earned the range from zero to the blue line. The second 20% earned from the blue line to the orang line. And up it goes.

The percentage change in real dollars is in the table. The upper 5% have seen a 1.22% increase per year. The lower quintile actually gained more than the middle class.

http://i776.photobucket.com/albums/yy42/thefitz3/Income1.gif

 

[Liberty]

monopolies always fail in a free market because someone will always innovate whatever the monopoly controls.

 

[logical4u]

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.

The demand for labor is coming back. The liberal elites are destroying the energy sector. The things that have been done by machines will soon be too expensive to operate. Servitude will be alive and well, thanks to the liberal elites (just look at the other countries that they have managed for any length of time, the are in the pits or going there, quickly).

 

[EdwardBaiamonte]

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, .

of course thats idiotic. To have a $million in wealth you need to sell $20million in wealth. Henry Ford made $1.49 per car for himself but distributed billions in cars to everyone else.

Capitalism is the exact opposite of a 0 sum game.

 

[Paladin]

This is a prime example of how false premises lead to false conclusions, no matter how brilliant the reasoning.

Saying Capitalism is on it's way out is like saying photosynthesis falling out of fashion or the food web is just too difficult to remain feasible. Capitalism is the natural law: I have a need for certain resources. I see that others need or desire certain things. I set about meeting the needs or desires of people according to what I am able to produce. I am compensated according to the adequacy and quality in which I have met those needs and/or desires. Said compensation allows me to attain the resources I need from other who provide it.

It is essentially the same system all living things use to gain energy to survive. There is little difference. Everything suffers at least temporarily. Everything dies eventually. Some things flourish. Some things lack.

It is humanity who has invented the foolish concept that we can avoid these "unfair" truths through ham-fisted manipulation of the natural order. It cannot happen under the Sun, and the results, time and time again, have only shown to spread more misery and destroy dignity..

 

[dblack]

We're still going to be in a situation in which wealth can be produced without labor. I don't just mean without muscle labor, either, I mean without brain labor.

To me, this is the most consistent error of folks opposed to capitalism. Resource allocation IS labor, very important labor, that must be performed in any kind of economy. In a free market, aka 'capitalist' economy, this function is perform by owners of private property. If we reject distributing this function via a system of private property, then what is the alternative? Who makes the call?

 

[Wiseacre]

We're still going to be in a situation in which wealth can be produced without labor. I don't just mean without muscle labor, either, I mean without brain labor.

To me, this is the most consistent error of folks opposed to capitalism. Resource allocation IS labor, very important labor, that must be performed in any kind of economy. In a free market, aka 'capitalist' economy, this function is perform by owners of private property. If we reject distributing this function via a system of private property, then what is the alternative? Who makes the call?

For a lib/dem, the gov't makes the call. The problem there is that they will make the call based on political reasons, for short term gains rather than long term prosperity, or to satisfy their constituents at the expense of every one else. That's just not a road I want for us to go down, I'd rather have the gov't in a supporting role with enough oversight and regulatory power to keep things straight and honest, and yet leave enough economic freedom for the economy to grow.

But we swing too far one way or the other, too much gov't intervention or not enough. At a time when we need cooperation and the best possible solutions, we get gridlock and total partisanship. My side against your side; well guess what, that economic cliff is getting closer all the time and when we go over it's going to be really painful for everybody.

 

[zonly1]

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.

Did we ever know the bottom of the depression since you have a habit of lambasting capitalism? it's the same situatution as of today....more americans are on credit because most americans don't or not brought up the old school way..a penny saved is a penny earned. Marketing studies have exposed this weakness and more uneducated peoople have fallen pray. why is it the consumer the victim when he/she voted for it? american dream just vote for this crap and what happened..unenjoyment..foreclosure..cra and obama sued citibank to force them to make bad loans

Marketing is a product of competition...can't blame consumers..that's what they want...low cost producer.
ps could careless about grammar

 

[DSGE]

ps could careless about grammar

Couldn't care less. If you could care less, that means you care about grammar.


Just goofing.

 

[nitroz]

What capitalism?

That money is being farmed by the wealthy to make more money and control the country while bribing congress to change laws/make laws like SOPA

 

[dblack]

We're still going to be in a situation in which wealth can be produced without labor. I don't just mean without muscle labor, either, I mean without brain labor.

To me, this is the most consistent error of folks opposed to capitalism. Resource allocation IS labor, very important labor, that must be performed in any kind of economy. In a free market, aka 'capitalist' economy, this function is perform by owners of private property. If we reject distributing this function via a system of private property, then what is the alternative? Who makes the call?

For a lib/dem, the gov't makes the call. The problem there is that they will make the call based on political reasons, for short term gains rather than long term prosperity, or to satisfy their constituents at the expense of every one else. That's just not a road I want for us to go down, I'd rather have the gov't in a supporting role with enough oversight and regulatory power to keep things straight and honest, and yet leave enough economic freedom for the economy to grow. ...

Yet it's the road we seem to be going down.

I fear we're looking at a potentially long period of corporatism that may mirror the rise of the great theocracies of Europe. Governments have discovered that controlling our economic activities is an even more powerful tool than controlling our spiritual lives. And I believe that merging the coercive power of the state with economic power will turn out to be just as bloody, and just as detrimental to freedom, as combining church and state.

 

[editec]

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.

Depends on how we define capitalism

You're basically right that capitalism as defined in its purest form doesn't exist. I don't think it ever has existed, either

I think that our economic system has been migrating further from that pure capitalist system for a might long time

What we formerly called capitalism has ALREADY morphed into something different...corporate capitalism (aka fascism according to the man who recoined the word fascism Benito Mussolini)

ACtually posters of the right, the middle and the left has all posted sentiments that real CAPITALISM really no longer exists in this nation.

I think it all depends on how one defines capitalism.

From my POV, long as the right to own PRIVATE PROPERTY exists, some VARIATION of a capitalist system still dominates.


Modern capitalism has no problem working with and within authoritarian forms of government.

Fascism is varient form of capitalism for goodness sakes kiddies


CApitalism is an extremely adaptable system that can thrive in states with widely different systems of government

So no, I don't think CAPITALISM is dead.

But representational forms of government might be

 

[Baruch Menachem]

Your argument seems to be that because of the rise of the machines, there will be fewer jobs, and that capitalist systems wont' be able to handle the social pressures.

The first proposition is idiotic and contrary to experience. The second flows from the first and has no place in reality because the anticedent is stupid.

You wonder why we dont' treat your ideas with respect? It is because they don't deserve any.

 

[Dragon]

dragon do you think capitalism and corporatism are the SAME thing?

I think that corporatism is a form of capitalism but not the only form, so -- no.

Corporatism (business having influence in government) = problem
Capitalism (business completely separate from government) = solution

You just redefined the word "capitalism." Laissez-faire capitalism is not a redundancy, though. Here, let me help you out:

"cap·i·tal·ism
   [kap-i-tl-iz-uhm] Show IPA
noun
an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth."

That's the usual definition and it's the one I'm using. You are choosing to use the word in a way that makes "capitalism" a utopian word, equivalent to what free-market libertarians want. But that's not what it means.

 

[Dragon]

Your argument seems to be that because of the rise of the machines, there will be fewer jobs, and that capitalist systems wont' be able to handle the social pressures.

The first proposition is idiotic and contrary to experience.

Why?

An insult is not an argument.

No, I don't wonder why SOME people here don't treat my ideas with respect. It's because they are ideologues who don't treat anyone's ideas with respect, except insofar as they agree with their own.. As I don't have any use for the respect of people like that, and would wonder what mistake I'd made if I had it, I frankly don't care.

Now -- do you have anything in the way of LOGIC or EVIDENCE to present? Any, you know, THINKING? That would be novel.

 

[Dragon]

One thing to emphasize once more is that the same problem afflicting capitalism also afflicts socialism as it has manifested in the past. As long as we're confined in our thinking to those two options, we will not find any solution. It's necessary to think outside the box.

 

[Liberty]

hey dragon, why don't you answer my question?

 

[Dragon]

hey dragon, why don't you answer my question?

I answered it in post #75.

 

[TakeAStepBack]

dragon do you think capitalism and corporatism are the SAME thing?

I think that corporatism is a form of capitalism but not the only form, so -- no.

Corporatism (business having influence in government) = problem
Capitalism (business completely separate from government) = solution

You just redefined the word "capitalism." Laissez-faire capitalism is not a redundancy, though. Here, let me help you out:

"cap·i·tal·ism
   [kap-i-tl-iz-uhm] Show IPA
noun
an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth."

That's the usual definition and it's the one I'm using. You are choosing to use the word in a way that makes "capitalism" a utopian word, equivalent to what free-market libertarians want. But that's not what it means.

Where are you getting that definition from?

Here is what the dictionary says about capitalism.

Capitalism - Definition and More from the Free Merriam-Webster Dictionary
Capitalism

: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

it looks like you're taking yours out of Das Kapital, comrade.