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Capitalism: the Emperor without any clothesIn a world of propaganda and sound-bites, it is relatively easy to create an ideology blown up out of all proportion to its substance. By far the most pervasive ideology of our times is Capitalism. And while Capitalism has some kernels of truth, its value has been exaggerated and knowledge of its severe limitations suppressed. The purpose of this essay is not to destroy Capitalism, for Capitalism, like all servants is useful in its place. Rather it is to deconstruct Capitalism, to expose its limitations, so that we can use it more effectively. Capitalism rests on three tenets: (i) the primacy of capital; (ii) free markets; and (iii) free trade. All three have been overblown to the point that the fiction outweighs the facts. Economics is, as a body of knowledge, at best a soft science. It is built largely on armchair logic. Evidence, where it exists, is largely interpretation. The double blind studies of the hard sciences are virtually non-existent. Free markets and free trade are theoretical ideas, built on very simplistic concepts. It is like taking Newton’s laws of motion and building a car without an engine. If the car is always parked on top of a hill, the energy from going down the hill can be used to move around, and then climb back up the hill again to park it. Forgetting that there is friction from the air, and the tyres, and the occasional need to brake and turn corners. Having bought the damn car, and refusing to admit being suckered, we are forced to fudge the results. Like Fred Flintstone’s car. Yabba dabba doo. Economics is the study of the production and distribution of goods. It seeks to make best use of scarce resources. It has the mindset of man desperately eking out a living scrounging for depleting resources. Of competing in a jungle. The reality is that we live in a world of plenty. But that won’t do, so we create a consumer society. Where one of the bigger problems we face is waste disposal. Money, Money, Money Several ingredients that need to come together to produce goods – to build and operate a factory or run a farm. Ingredients such as capital, labour, material, motivation, luck, and know-how. A role of one among equals has been finessed into one where Capital has grabbed all power as Owner and Controller. We have created laws that allow Capitalists to create Companies. Companies have a life of their own. Though they cannot vote directly in a democracy, they often wield enormous political power. Companies pay relatively less tax than people: People pay GST, they pay on income rather than profit, and their marginal rates are much higher. The twentieth century saw the development of the stock market, which allowed capital to be sourced from others than a capitalist ruling class. As this happened, we saw the development of a new ruling class, at the top of companies. With even better returns than capitalists - magnified benefits in good times but without losses in bad. We are conned with blaring headlines of 14% pay rises for workers, which in the fine print actually turns out to less than 5% per year. Compare that to the 75% for the CBA’s CEO. Free Markets The theory of free markets states that for free markets to work, a number of conditions must exist: · Free markets are markets in which there are many sellers and many buyers. The truth is that these conditions rarely exist, and even where these conditions do exist, businesses work hard to remove them. There is a widespread misconception that Capitalism equates to free markets. The truth is exactly the opposite. Capitalists hate free markets, because in free markets Capitalists cannot make much money. There is too much competition and profits are low. One of the best examples I can think of is in medical drugs. The modern cost of getting drugs tested and approved is so high that only the very big drug companies can afford to do it. Another is the bundling of services, so that the customer finds it hard to move. Changing your home loan is not only the exit fee, since it means having to forgo a one stop shop. We now spend much more on telecommunications than we used to. The telecom industry loves bundles, and plans. Telstra loves being a monopoly and fights very hard to maintain the status quo. While free markets aren’t what they are cracked up to be, they do have one major advantage. They allow the introduction of Disruptive Innovation. The problem with radically new ideas is that those who are tied to the old idea suppress the new – even if it is in their interest to accept the new. Anyone who has been taught economics will remember the lessons, with worked examples to show that free trade is good for both the developed and the underdeveloped country, even where the developed country produces all its goods more cheaply than the under-developed one. There are definite advantages to free trade. A global market is much bigger than a national market, and thereby increases competition and thereby lowers prices. There are, however, several important factors that the theory of free trade ignores. · The theory is built on a static analysis. In practice, as the weaker nation’s industries get eroded, the nation becomes poorer and poorer. It loses its technology capability and ends up exporting low value raw materials. Free Markets are Bad for Capitalists Capitalism is about making money, and it is very hard to make money in a free market - there is too much competition, and profits are low. That is the very basis on why free markets are considered good for society, by reducing prices to the bare minimum. When a Capitalist calls for a free market, it is usually they see a big piece of cake that someone else has and want a piece of it. Once they get the cake, they work hard to prevent a free market – to prevent having to give others a slice. Consider the nature of region coding on entertainment systems. It is something very clearly put into place to prevent free trade. I can’t buy my movies from the US, where they are cheaper. Yet organizations like the ACCC who are paid to ensure free markets blithely ignore it. Or consider Copyright and intellectual property laws. They stop free trade. And yet, our free trade agreement with the US reduced the freedoms we previously had. Conclusion The purpose of this essay is to dethrone the king, not kill him. Man is a tool making animal. Capitalism, money and free markets are tools. They have their strengths and they have their weaknesses. We should not idolize them. We should not let them run our society. We need two powers. Firstly, we need the power to understand when capitalism is doing us more harm than good. Secondly, we need the power to stop capitalism from continuing to harm us. Our ability to understand when capitalism is harmful is increasing. But we are still quite powerless to curb capitalism. We have a grasp of the Global Financial Crisis. But we are powerless to prevent the next one. We grasp the need for environmental sustainability and the effects of global warming. But are powerless to prevent it.
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In defence of free market capitalism against statism
It has been a while since I have looked in at Webdiary and thesite has become more of a cheer squad for democratic socialism over time. The economic problems of Europe and the UnitedStates tell us what is in store for us when governments ignore free market (Austrian)economics and conversely what happens when countries liberalise their economieseven imperfectly such as china – a rising average standard of living.
It is unfortunate that the initial promise of this site in bringingtogether diverse viewpoints to discuss topics of interest could notlast....from the viewpoint of the paleo libertarians and conservatives thedemocratic left have some good points on non intervention in foreign affairsand the like but the idea that politicians will allocate resources better thana free market with private property rights is a myth.
It has been the destructive policies of government enforcedcentral banking monopolies that have run too loose monetary policy that hasresulted in the credit expansion boom and the massive misallocation of resourcesand now the inevitable deflationary consequences or the GFC. The Fed. and the othercentral banks by continuing their easy monetary policy to defeat this necessarydeflation is only setting up the world for massive inflation.
The continuing rising prices in commodities such as gold,oil and copper are telling us what is really in store for us....
Commodities such as gold are really nothing more than freemarket money and the price is indicative of people voting with their feet as towhat they think of the soon to be bankrupt modern democratic socialist state.
The Sunset of the State
The Sunset of the State
GFC - get free cash
Robert: "The continuing rising prices in commodities such as gold,oil and copper are telling us what is really in store for us...."
Sounds like heaps of opportunities don't ya think?
In fact I have a wombat plan; you see with rising commodity prices, such as copper (and hopefully nickle) we can all get rich, and this is how we can do it:
Save your five, ten and twenty cent pieces.
You may not know this but at present those coins are now valued at around 75% of their face value (owing to rising commodity prices); while the one dollar and two dollar coins are only worth around 8% and 6% respectively. The paper stuff is worthless, or will be soon enough.
Our "silver" coins consist of 75% CU (copper) and 25% NI (nickle) and at current spot prices are doing OK. If copper was to double in price (on the cards in the medium term) then the "silver" coins would be worth more than their face value (around 117% at today's exchange rate).
Now if NI was to double in price as well, then our "silver" currency would be worth 150% of its face value.
When that happens you could invest in two million bucks of 20 cents coins, melt them down, sell the CU and NI at spot, for three million, thus will make a million less expenses.
Bloody easy - if you don't get caught.
So there ya go, opportunities for all as we fall into the abyss.
The Craftsman
Rats, sinking ships, and debt peonage
This from Michael Hudson is worth watching - 10 minutes.
Follow the money
The Real War Of Terror
And this
Did A System Change Or Did We?
Wall Street has its place, and most working there, would be equally as honest as anyone else. It does have its problems without doubt, and they're probably worse than ever before, I think the more interesting question is why is this the case?
In my opinion any system is only as good as the people involved with it. It matters not if we decide on capitalism, socialism or any ism, people make systems. Values make people. I think of my late Grandfathers era (he was a successful businessman), capitalism was then as it is now, so whats changed? In my opinion it's values and it's not only Wall Streets, it's Western values.
My Grandfather was far from perfect, and I doubt anyone else of that time was. He did though have core values (some would seem very quaint today), and he wasn't budging from those core values for any man, machine or system. Those core values were in fact him! As they were all those in the world around him! I doubt he'd recognise the world of today.
A political or monetary system can't give a person core values (the kind one would go as far as to die for), and a person without values is a person without a soul. A nation or a world isn't any different, it's people and their values that make a nation and a world!
The saddest thing is that people calling themselves capitalists don't recognise this for what it is: a perversion of capitalism. A business makes money doing business, selling whatever that is. Day to day operations, all of them, loosely revolve around improving whatever that product may be.
How does millions upon millions, invested in something unrelated to your product improve your business? More precisely, what part of the capitalist manual will I find this in? Actually, I thought something like this was called a misallocation of resources. Why not a "war chest" to butter up tennis players or people driving green cars? Answer that question and you'll know why I say we don't live in a true capitalist system. And you'll know why it's pointless blaming a capitalist system for the worlds problems, when we actually don't live in one.
Poor fellow America
Corporatism at work:
Attention, Walmart Shoppers: Big Sis Wants You to Spy on One Another
And of course the Powers That Be know this well. America is becoming more like communist Russia every day. Homeland security, a growth industry.
I suppose when the public at large has been complaining about the criminal activity of government and corporations then it's best to turn the punters against each other big time.
And peace activists and others targetted by FBI raids:
And the real criminals do this type of thing to the punters:
Poor fellow America.
Fraud as a business model
And the little boys copy big brother
Kleptocracy
Paul Farrell's 10 Reasons Not To Buy Stocks Until After The Next Market Crash
I'm into shiny stuff these days, my $27 is going swimmingly.
Someone sent me this in an email:
May Ben has dreams of breaking the record.
People love harmony - Greedy bastards love dischord
Richard, me old banjo, good joke and a little bit true.
I have no doubt that we still have an inherent nature to share, to feel and show empathy, and to be mericful - these are very human qualities that of course have been woven into most religions and communities at large. To be otherwise would indicate behaviour that many would consider socio-pathic.
Candidly, I would be quite prepared to argue that these inherent human qualities have evolved (dynamically) over the years to the greater benefit of heterokind.
I suppose the lack of intersupportiveness may have something to do with my initial post on this thread:
You see the punters at large enjoy harmony; however, the greedy bastards thrive on dischord. Unfortunately the greedy bastards own the orchestra and have been playing the same composition for far too long.
Beats my, why the audience put up with it - especially when it is counter-productive to what they want, need and enjoy.
Go with the brain power?
An oldie.. Brit tourist, returned from his Oz holdiay: "Australian people are great- they'll share their home with you, they'll share their grog with you, they'll share everthing with you.
It's the white bastards you'e got to worry about... "
Justin, I like to think we still have an inherent nature of survival by sharing. The studies of late showing that human brains work better when thinking for others suggest this. If so, then why do we see so little intersupportveness?
What do we really want, and do we really know?
Capitalism
Democracy
Socialism
Fascism
Communism
Totalitarianism
Of the above terms (memes?) most in Western nations would identify with the first two. We are democratic capitalists (an oxymoron when you think about it); a group of like minded nations that abhor and will wage war on all the other terms when the "need" arises.
But there is one term above that has enjoyed little justice; in fact it is been contaminated by both capitalists and communists alike for reasons that are obvious.
That term of course is socialism; it inescapably defines our species yet capitalists have conditioned us to associate it with totalitarianism, oppression and poverty. At the same time the commies have embraced the term for it reflects a kinder, fairer form of oppression.
The way I see it we (the punters) are all socialists but are too afraid to admit it.
Is not democracy the attempt to socialise/share power?
Is not democracy an attempt to socialise/share information and knowledge?
Is not democracy an attempt to distribute wealth in the interests of the whole community?
Does not the electorate at large readily vote for (and expect) welfare and benefits from their fellow taxpayer?
Does not the electorate want socialised health and eduction and are willing to pay for it?
Does not the electorate at large mistrust and want protection from corporate power and intrusive government control?
Yep we are socialists all right, whether we like it or not; and that is what capitalists and commies alike fear most - us, and that's obvious.
If we, as social animals want a fair and just social contract then maybe we will have to come to terms with who we really are, and what we really want, or more correctly, need.
How we achieve such will be the answer to life the universe and everything - the question of course remains elusive.
Et tu, Brutus
Tess of the d'Urbervilles
Jay, one could also argue that the Coalition are likewise, don't you think?. Was not the Howard government the generous distributor of consolidated revenue to the middle class, and did not the middle class welcome it with open arms?
And who do the major corporations run to when the going gets tough? As the saying goes: socialise the losses and privatise the profits.
But you will never here the term socialism whispered in a quad-zillion light years by his mob; poor old socialism has been raped, humiliated and forever tainted, but inspite of everything she has a purity and innocence we all secretly respect and desire.
C.O.R.P.O.R.A.T.I.S.M. = P.P.P. ???
Paul M writes: "The writer is describing what's known as crony capitalism or corporatism."
Benito Mussolini stated: “Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.”
Today the merger of state and corporate interests (profit, donations, power?) is called: "Public-Private Partnerships" (PPP and are of course commercial in-confidence - ie secret). Think about it.
Where are we heading?
Let's all be very careful here, because if we are not vigilant then we may find ourselves in a little bit of trouble.
Now, let's ponder that national broadband thingy - will this be a PPP? Think about it and think about the possibility/probability of state and corporate interests being in (total?) control of information and privacy? Under a mongrel government we'd all be well and truly fucked.
Mark Twain: “history does not repeat itself but it rhymes.”Aussie Rabbit stew
Free markets don't work. Paul. Crony capitalism is not the root problem, though it makes it worse. There are two major problems with free markets.
Firstly, free markets are not self correcting systems. When free market rabbits breed, they don't cause foxes to also breed because their food supply increases. The rabbits become large flesh-eating rabbits who gobblke up the foxes.
The second problem with real free markets is that they are a horrible life. The worst jobs of all are to be a small business owner or employee. The owner typically works 15 hour days, 7 days a week just to make a decent living. Being an employee is even worse. Worse job security, low pay, few benefits. As often as not, its the children of the owner or close relatives who end up doing the work. The best jobs of course, is to be a crony capitalist. Failing that, the public service. Next is to be an employee of a crony capitalist. The conditions are often worse than in the public service, but there is always the chance to become a crony capitalist. The problem, Paul is that in a truly free market, there is no fat. It is the breadline. there just isn't enough to put aside for a rainy day or even research and investment. Survival of the fittest. Free markets are for patsies. Capitalists make money in markets that are not free.
Where is Australia headed?
This is a lot like favoring say an expensive industry and then taxing the hell out of its cheaper more productive competitor. Forcing those who can still afford the choice, no choice. Or generally creating a multitude of laws, red tape, and paperwork that only a large existing company will be equipped to deal with it.
Perhaps you're problem isn't with the lack of choice, it's with the particular product?
Australia is a large primary producer of food and energy resources, it should be a national embarrassment if many of its citizens can't afford a reasonable amount of either. If that situation were to arise Australia won't be proving anything to the world, certainly not anything the world would wish to learn.
There's no rabbits in this hat
The article is hard to argue against, in fact I agree with a lot of what's in it. My problem is with the gigantic strawman (I hate that term too) the article builds.
The writer isn't describing a capitalist system, certainly not a free market system. The writer is describing what's known as crony capitalism or corporatism. As strange as it may seem, one is able to favor a free market system without being either religious or a multi-national cheer squad.
I agreed with Paul Krugman about one thing, if it's good enough for the government to bail out bad companies, it's good enough for the government to own those companies. That's a simple business arrangement. Personally I don't think a government should bail out any private business. That's not the place of government.
The military say is too big to fail so the government has control over the military. If Ben honestly believes a company is "too big to fail", the government should control that. Personally I doubt Ben really believes the "too big to fail" nonsense.
It's also a bit harsh complaining about free markets, and then complaining about the results of not having a truly free market. That is complaining about taxpayer bailouts of large corporations. If you don't want bailouts campaign for a truly free market system, if you want the control accept the responsibility that comes with control. That means accepting the bad that comes with the good, and the bad will generally involve a large pain in your hip pocket.
It's easiest thing in the world to be a good winner, it's the losing that calls for character.
Government has its role, and private industry its role, never the two should meet.
Now for a word from the great Al Pacino, and yes, it really is just all about inches. And America will be back when it finds its soul http://www.youtube.com/watch?v=WO4tIrjBDkk
Those who don't remember the past...
Jay, yesterday I was in a small supermarket (under new meanagement). The proprietoress must have been having problems with her treatment at the till (dunno if' i't s the same where you live but a lot of Adelaideans feel a sense of domination when they give you money. Anyway, she tells me she's been imagining an alien world wherein everybody is treated with equal dignity. This is aided by nobody having or needing money, and everybody having the same standard of lifestyle.
I didn't have the heart to tell her what she'd reinvented.
A civil society
I used to inwardly shrug my shoulders at the Woolworths check-out, when the operator would give me their standard smile, eye contact and greeting – straight from the company “Check-Out operator procedure manual para 3a”. Here is a tired, bored student, earning minimum wages mostly just interested in finishing her shift. But then I realised I was just being grumpy. Yes, it is a mandatory part of the procedure manual, but there is nothing wrong with a bit of cheerfulness, even if somewhat forced. The operator is a fellow human being, and a bit of friendly chatter does more good than harm.
Telstra, on the other hand, comes across as a mechanical bureaucracy, intent on meeting KPIs. I recently changed plans, and could not get past their complaints management system intent on closing cases within their KPI, to acknowledge that their software did work as expected.
With telemarketers, I am polite but firm. I cut thorugh the "How are you today bullshit" to decide if I have the interest and time to listen to their spiel, and terminate the call quickly. I get annoyed with telemarketers who abruptly hang when they decide I'm not an easy mark. My kids used to be rude to telemarketers. But once they started working, they realised that the telemarketers were just poor sods doing a job.
I did a bit of reading on Confucianism, the foundation of Chinese culture. It places a strong emphasis on the value of rituals of politeness.
Just a few random thoughts, Richard.
Capitalism is built on a fallacy
Well done Jay, a great piece.
I think capitalism is based on a fallacy. The idea that we can continue to grow is false.
Looking at the past sixty or so years, since WWII, family incomes had to grow to cater for increased consumerism demanded by capitalism. The way we managed this growth was by putting our wifes out to work. Two income families became the norm and growth was almost doubled. In the 1980's almost every family had two incomes and we were struggling to maintain growth.
In Australia we increased immigration to continue the demand for growth. We also increased immigration levels putting extra demand on all our infrastructure. Hospitals, aged care centres,roads and schools were underfunded, and were unable to met demands of a forever growing population.
As growth slowed with near full employment we made credit easier and easier enabling us to borrow on future income. Thus slowing future growth.
Today we think increasing government debt and burdening future generations are the way to fund continuous growth.
No thought for what will happen in five years time or fifty years time.
We use up all the planets resources and pollute with no care for the damage we are doing to future generations.
Capitalism going to be the end of civilisation unless we agree to curb its demand for growth.
Growth, Growth Everywhere. But Nary a drop to drink
"A note of appreciation from the rich"