Capitalism isn't working! Has time proved that it never can!

General Discussion
61

It seems that amidst the chaos in the Eurozone that Greese, Italy and now Spain should have collapsed. Why haven't they? One theory is that a lot of these economies, and others, operate on a two tier system. One, which includes the banking and government systems whereby the money flows through them and the other, the black economy which can be from basic bartering in swapping skills and goods to separate, quite sophisticated banking systems which in a lot of cases is run by Mafia style organisations. As the real economies fail these alternatives come into play. Several villages in Greece have started up their own currencies and more will do so as the situation gets worse. People need to trade, always have done, always will, enabling them to survive.

Surely the march of technology has increased the number jobs and careers available? The unfortunate part is that school education, especially in the UK hasn't kept up with the life skills that are now needed to be taught to children today. Most people who are teachers have never done another job and expect the one they are in to last until they retire. A lot of politicians have never had a proper job which is another problem.

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Comparing royalty, aristocracy and church with today's billionaires does not work. The people you refer to inherited and took but rarely (if ever) earned a penny. That was simply expropriation of money, goods and land at their whim and to some degree endured until the 19th century, to some extent persists. Arguably, the very rich work their butts off to stay rich and become richer so do at least come at retaining their waelth from a different angle - often avoiding taxes. In most cases, following constitutions and legal systems within them, nobody is actually exempt from taxation but where there is a case such as the unemployed, elderly, etc., that is incorported into legislation. Rich guys withholding taxes are law breakers according to the laws of the land but what disturbs ordinary members of the tax paying public is that in most places they are paying more and more and the wealthy are avoiding as ever, no matter what new laws come in to tax them.

Then to put the cherry on the cake News International publications sometimes have a dig at 'fat cats' but never at members of the Murdoch family. So, who do the public trust any longer. That is where the plot begins to get lost.

63

Mainly clever analyses Jon BUT economic systems evolved long before money. They evolved because A had value goods such as food that B needed and an exchange against a value judged rate was agreed. The beginning of selling power perhaps. That evolved and eventually after several millenia became money. We have begun to move beyond money to credit, but the world is not yet capable of doing it properly so it has a long way to go. Ironically, in this world we still have people who use exchanges of the first described and every step along the route to what the modern world is stumbling toward. When we talk about capitalism (or indeed socialism) it is only the top end that will collapse and the bottom will continue as it has for tens of thousands of years.

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Just a quick second reply.


Someone bought up the issue of technology killing jobs.


Economic systems evolved because we had money and we have money evolved because someone wants what you have got or can supply - it only costs money because it is rare or hard to produce. If it is common or very easy to produce it has little or no value - in this sense, assuming that our behaviour continues in the direction of desire for consumer products then technology may indeed kill of jobs but it may also eventually start a new age where the need for money becomes less. If we have free energy (most fusion estimates are less than 50 years) if we can efficiently recycle all products and if we can create those products as easy as sneezing then you may very well find some new system evolving.

I used to work in the mathematics of advanced computer based design and manufacture systems, I can still remember my disbelief probably about ten years ago (I forget exactly how long ago) when I saw the first 3d laser printer in action - a manufactured part designed on a computer screen and up to that point only a mathematically defined concept started to appear as a solid plastic part in the printer. I was reminded of my childhood when shows like Star Trek loved the idea of some machine being able to make objects at our whim and yet within my lifetime I had seen the first faint glimmer of this reality. I have since left that industry but now you can spend ten thousand pounds or less and get yourself a laptop, cutting edge software and a desktop 3D printer and start making whatever you like - of course the models you make tend to be non-functional with no moving parts but I wonder what ten or twenty years will deliver?

In the light of this kind of speed of technological progress does one want to deal with economic systems on a non-fixed adaptive basis or on a fixed ideological basis? I wonder if political thinking will have a problem just keeping up with the opportunities, dilemnas and ill-effects that accelerating technoologies will throw at us - if we cannot define a global solution then those that choose to leave the adaptive capitalistic system will doubtless find themselves completely at the dictate of those who choose to ride the technological wave.


Choosing an adaptive economic system such as capitalism may bring about its own evils - I am not using technology as a case to support capitalism, merely suggesting that arguments for and against need to keep this one in view. Everyone wants an ipad or an iphone - it is nonsense to consider technology as some second fiddle to the economy - it is the economy - choose your preferred system in the light of this.

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There are more people in employment in the UK, Europe and the USA than ever before. Government report shows that the top 1% of earners in the UK pay nearly 25% of the tax income and that around the same percentage do not pay any tax at all. The number of tax payers in the UK and US is dwindling as pay increases. If you earn the average salary, are married with two children of school age and claim all the benefits you pay no income tax.

Councils sold off their housing stocks because they couldn't afford their upkeep and because the sold called "poll tax" failed. (Could never understand while the little old lady two doors down from us paid the same amount in council tax or rates as it was known then, as my dad did where I and my sister were earning as well). Nobody claims that capitalism is the best system but is there better? When you look around at the National Trust properties, surely those mill owners of the 17th - 19th centuries were far richer than even the oligarchs of today. Thank god the rich are with us, they have the largest disposable incomes. Good to see that they are still buying Bentleys as the guy who stitches the leather upholstery will get paid at the end of the month and his family can shop at Tesco's and maybe take a trip to Scarborough and ride on the donkeys on the beach so that the donkey owners can....etc.

66

Hi


As an emotional socialist I would have to disagree.


Capitalism has its faults but it is essentially Darwinian - its all about adaptation and evolution to an evolving set of circumstances and as someone has already pointed out it can swing in cycles, its a classic feedback system with chaotic noise and overshoot - in otherwords the reaction to the stimulus is often too much to too little or the wrong thing but the essential nature of Darwinian systems is that they can afford to make 'mistakes', indeed 'mistakes' often result in unforseen advancements - they are an essential part of the proceess.

People who say that capitalism is not working must ask themselves what could better replace it.

The problem with trying to circumvent a Darwinian system is that you have to start inventing rules to dictate how economic processes work and the fast tracks you to worse corruption and abuse than even the worst capitalistic economy exhibits - government has to arm itself with the power to coerce and then instead of relying on an adaptive Darwinian system you start to rely on one man's ( most dictators have been men ) imagination and economic vision - nothing happens organically, everything has to be forced or coerced into action - no more spontaneous discoveries or entrepreneurial spirit just state fed research and development. The global population is too large to support by any measure other than technology - some claim, probably quite rightly that the global population would not have grown so large without that technology ( debatable claim in China ) but any humanitarian perspective has to ask what would happen if we adapted former soviet systems and technologies and then tried to support the global community - it would be far worse than 10% on the dole (unemployment benefit).


There is a hidden factor here and that lies in the domain of chaos theory - humans in their last few hundred years have tended to assume that predicatability implies linear systems - put simply if it appears to be predictable over a reasonable period of time then it probably is predictable. Mathematicians are increasingly showing that many such quasi stable systems are not actually linear and indeed many types of chaotic systems can show linear or predictable characteristics for surprisingly long periods of time. The everyday phenomena is a thin drizzle of water from your tap which can be smooth and laminar flow for minutes and then suddenly for no apparent reason breaks up into a more chaotic, turbulent flow. Some mathematicians worry that our capitalistic systems may not be as predictable as we thought ( they are looking beyond regular crashes from which we recover ) - here we are talking of a fundamental shift of the economic system where like a stalled plane we simply cannot pull out - the correcting factors, the feedback systems that are supposed the correct the overshoot stop working or more accurately stop having any beneficial effect ( analogous to the stalled plane ignoring the controls because the air flow over the wings is now in a pattern that the wings and control surfaces were not designed for ).


If the chaos theory people have got it right then sure, we may be dealing with a system where we havent seen the worst - where previous crashes are mere ripples compared with the true chaos phase that might follow.

If it turns out that our economic systems are relatively stable, that crashes are merely overshoots that in time are corrected by simple feedback mechanisms then I suggest that as unpalatable as capitalism is (sometimes) it is the only sensible choice simply because its the only one that controls itself.


Being what I call an emotional socialist it took me a long time to come around to this way of thinking but I find the mathematical argument compelling.

The strongest feather to my political makeup is my eco concerns and thats actually my greatest fear about rampant capitalism - the economic system when working outside of a chaotic region is self correcting. I see no similar corrective feedback to protect the environment against the consequences of our economic activity. We deal at this very moment with climate change sceptics ( who ignore the concensus scientific opinion and rather rely on the science they read in a tabloid newspaper and drive 3 litre 4x4s but live in an urban environment ). I wonder where the real crisis lies?

I would argue that capitalism is unique and its not really a system at all - it is different to all other systems because it is founded on Darwinian principles - there is no real central belief or principle to believe in or to get right or wrong - capitalism is the only system that allows itself the luxury of acting in one direction today and then another direction tomorrow as circumstances dictate, how can you ever hope to "invent" a system that displays this spontaneous creativity? one without pride - people arent as good as this - individuals find it hard to admit they were wrong and reverse policy yet capitalism has no such issue, if the market thinks X today it will not allow that fact that it thought Y yesterday to hold it back. Imperfect and error prone for sure but it will 'always' get back on track to an optimal response after a painful corrective phase. Seen from a dispassionate angle recessions are just a normal part of the cycle, its where unproductive companies fold and new startups sense fresh grass ( just like a forrest fire spurns new growth ).


Sure real people get hurt when there is a crash and lives are wrecked but have those who moan about it tried living in soviet russia or under a dictator?

67

Hi all....my first post, be gentle with me please.

Loving this debate

In my opinion both systems Cap.. and Comm.. could work. But only when they are left to their own devises for perhaps a generation or 2. Problem is the pain during that period of settlement would be and actually is, unbearable for anyone with a conscience. Luckily for some, perhaps that top 1% mentioned don't have a conscience.

The problem is how do you eliminate greed? Education? Religion? Control?.....here we go again....revolution in the true sense of the word.

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I see both the same as in your final paragraph, especially from a professional perspective having worked in the developing world since about 1970. If the rich nations do not redistribute then global poverty will undermine developing markets and producers. One essentially nation economics is pre-Keynesian and no longer works, but Joe Public has never had that sufficiently explained to know why and is beginning to resent the outflow, albeit not their money but that already taken by the state that they have invested and grown and gives but a smidgeon to poor nations but shouts it from rooftops.

69

Then again Brian,was it ALL bad? I was one of those that bought the council house we lived in, and even though very cheaply, I got the loan from the bank very easily; In a very few years I cashed up with 300% profit and then bought into another. Then I needed furniture, carpets, household equipment etc., etc. So my profit was circulated back to the (then) UK manufacturers making all this stuff. That my profit helped the employment of others seems to me the essence of our problems now.

Not the fact that people made profits, and dare I say it that the working classes for the first time had a share in some cash for once in our lives, but that the profit went back into employing people, through product purchasing. This not happening today, and for the life of me I can't see how recovery can come from if no-one is supporting manufacture, which provides jobs directly and indirectly.

Britain shot itself in the foot with the attitude of the trade unions, and when I was working in Liverpool I saw the closure of the Ford factory there literally because of that. Plus don't forget the 'closed shop' which was also a job destroyer. When I ran a studio in London, there were just three of us commercial artists there and each of us was required to join the trade union or NEVER be able to get any of our work printed! What did the union do for us - zilch, zero, nowt! Blackmail pure and simple.

On the other hand we were based in Gray's Inn Road, which was the print centre of London at the time,and the newspapers were being crippled by the unions, who organised strike after strike and then got 300 quid a night as 'minders' of the big pressses.

I hold no brook for Murdoch, but sooner or later this control had to stop,and he did it, although it was Thatcher who had the balls to support doing it. What she did after that I agree had nothing to do with social welfare and she did bring the yuppies into existence and destroyed social conscience.

So it is too simple to say this is good or that is bad; It's not the systems that are endemically bad, but the people who use them. For those who want to seriously get to grips with principles of business and capitalism, who else can I recommend but Adam Smith (another Scot) and his 'Wealth of Nations' written almost 300 years ago, but just as relevant today.

Wealth has to be distributed otherwise it has no purpose. Profit has to be generated to allow for investment and a fair return to those investing. Investment SHOULD be based on development of business and/or social benefits, and not the Scrooge like piling it up in a corner somewhere.

Globalisation has watered down the view that the wealth should start, at least, to be distributed in the nation where the investment was made. We now have a far wider 'public' to consider and not just our own National and narrow one. Do we have the capacity to understand and work with this relatively new concept? I rather suspect we do not.

70

Unfortunately Thatcher drove that up a cul de sac with, for instance, ending the 200,000 new council houses and flats that had been the norm since the 50s, then driving up house prices. Blair continued that to the extreme and killed that source of wealth generation in the construction sector. There are also other sectors like manufacturing where one can only say that the joint forces of Thatcher and Blair completely changed the way a country operated and now they are paying the price.

French economists should look carefully at other countries before adopting any strategy, failed centralised economies would be their best bet right now. They should also avoid choosing a Thatcher-Blair type trajectory or here it will play right into FN hands.

71

Morning Brian,

can you remember the old saw in Britain that 'Conservatives made the money and Labour spent it'?

In essence it seemed to work quite well as I recall. At least it to me at least, it identified the two main parties and their philosophies in simple (even simplistic) terms that most of us oiks could understand. None of us was politically aware really.

72

Good morning Norm. My father was demobbed in 1955. It was pointless going back to Scotland since everything was chaotic failure, so my parents chose London SW19 because my father had been stationed on Wimbledon Common (The Royal Corps of Wombles...?) pre-Asian invasion and then back to wait for the 44/45 job. He was actually an apprenticed butcher a year short of finished but because he stayed in the army 'too long' he was not entitled to go back into his old job. He went round building sites until he found work, OK he did relatively well from there on in and during the 60s boom in estate building very well. Most of what he benefitted from was actually 'socialist' lead programmes from the Labour governments. So, sure I do not disagree but believe it cuts both ways.

For all of that, we both agree on the morality of the big boys with excessive wealth and the often destructive nature of their form of capitalism.

73

No argument with the economic analysis Abigail. What you are forgetting is that it is also structural and largely, for that reason, driven by controlling forces that themselves generate profits within capitalist economies so that not only the big corporations, banks and other financial institutions but also the brokers and ratings agencies are amongst those who pull and push economic forces with their analyses and assessments. Bear in mind that purely capitalist economics touch the minority of people in the world still, given that there are still more people living within 'subsistence' economies, many of them below their own national poverty line. That is the world in which I have worked for four decades for the main part and see it only gradually improving in some places but also worsening in some. It is true, as you say, that some countries are hybrid systems. Even they are either a minority of the couple of hundred nations on our planet or even partial. So what you say about China is true for the highly developed S, SE and E China, however the centre, N and W are extremely underdeveloped economically. But analysts and economists do not go to those places because they are not interesting, so do not count. Indeed, I know politologists and human geographers who believe China's best chance will be in breaking up as the Soviet Union did, in effect dumping Tibet, Inner Mongolia and so on that used to be 'independent' countries and developing their industrial economic heartland instead. On a 'never say no' basis and having seen the inconceivable break up of the Soviet Union perhaps they are right. On the same principle Russia could also get rid of some of its eastern and northern hinterlands (my added opinion) and then the BRICs could well be big business again. Capitalism has no conscience so all of that is feasible.

As for blaming the big guys. Actually, I do not think anybody is actually blaming them. It is more the case of questioning the morality of people having personal fortunes that are greater than very many national economies and why they are so averse to redistribution via taxation. Not one of us on this planet needs even a single billion dollars for a lifetime, so having many billions would suggest that these people should have a moral 'duty' to reinvest in the places that could clearly use help to get moving. OK, so no doubt they would lose a bit but with their qualities of analysis, nose for investment and risk taking you name I am fairly sure they would somehow return a profit. They would be richer, moral point difficult to stomach but..., however there would also be beneficiaries of their wealth. Apart from a few examples including Buffett and Gates, very very few are going down that road which to those looking at capitalism from the point of view of more ordinary and including informed people, it looks like sheer greed.

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Hmm, two World Wars created mass employment at the time, and in the UK at least for a long time after (even though the State was officially bankrupt). When I left school in 1955 the after effects of the war could just possibly regarded as 'good' as there were hundreds of jobs available, mostly in factories or rebuilding Britain as they said at the time.

Where I grew up (in Slough) people had work, but were still piss-poor and lived in sub-standard housing and the chances of a lower-working class yob like me elevating himself out of it were close to zero. I got jobs as a factory shift worker with a multinational - Mars, then as a postman working two shifts to earn a living wage, before I seriously started thinking of getting out.

When I left the Uk for Australia I found myself and some dignity, and even decent jobs, through the 'terrible capitalist' system there.

Sorry people blaming capitalism for all the woes is nonsense. The old 4'Ps of Marketing still apply - Product, Price, Place and Promote - and the 5th one Profit, if you've got the others right and have a bit of luck might follow. This applies to one-man bands as much as multi-nationals and is the essence of Capitalism.

Otherwise it is a whinge against those who have made it, and that could be described as Envy.

If you want to complain about anything then consider the wheelings and dealings of the Financial world, that's where the main problem lies, not in Capitalism per se. Those who produce nothing, yet make obscene profits by manipulating money markets and destroying business and lives should be the targets, not a system.

75

My 1974 MGB GT saved my life because it was so well built. My daughter and I were hit from behind and forced into the path of an oncoming car. The ruBber bumpers and the chassis build stood up to the crash better than almost anything on the road at that time.

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Got it in one!

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We make too many things that we don't really need and nothing lasts like it used to.

78

You should. Come on a pilgrimage to Cluny Brian. His house (in what, is now the rue Proudhon) is in desperate need of renovation.
Compare that with the historic sites of Lamartine, the French Wordsworth, which have a special “route” and you can guess how much the French value Monsieur Proudhon.

79

Hmmm. I remember the quality and reliablility of my 1974 MGB produced by government owned British Leyland. Compare socialist Great Britain of the 1960's-1970's with capitalist Great Britian of today - better living standards, higher quality products, happier people. It really is quite terrible, isn't it?

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Plus, Astrid, in the larger 'developing' and middle sized economies, most people work for small enterprises or within families. Stick the two together and the people who are driving us all against the wall are a pinprick sized minority of the world who have too much money and power.