Capitalism isn't working and here are the reasons why(theguardian.com)
theguardian.com
Capitalism isn't working and here are the reasons why
http://www.theguardian.com/commentisfree/2014/apr/12/capitalism-isnt-working-thomas-piketty
32 comments
Indeed, it would be wrong to suppose that if capitalism is flawed, that therefore Socialism or Communism, or in fact any other system proposed so far, must be superior. As the article points out capitalism isn't monolithic, as various parts of the world calibrate it differently. I am becoming convinced though that western capitalism dies need some recalibration.
My understanding is that is actually "Crony Capitalism", which then if the article redefined it as such, I would agree.
Sure, we can label it whatever, but a turd is still a turd. If we're experiencing crony capitalism then we need to take action to correct it.
> Seems important to note that the article doesn't seem to be about capitalism per se, but "business-friendly" capitalism as currently practiced in the U.S. and parts of Europe.
Interesting how I've seen this argument a lot lately. It's a nice mirror of the exact same argument I heard a lot about communism and/or socialism in the 1980s: that criticism of communism wasn't so much about communism per se, but about the Leninist/Stalinist way many countries had implemented it.
I think the big lesson of the 20th century is that both have their weaknesses, and that we should be looking for a good balance between the better aspects of the two. Something like Sweden, I guess.
Interesting how I've seen this argument a lot lately. It's a nice mirror of the exact same argument I heard a lot about communism and/or socialism in the 1980s: that criticism of communism wasn't so much about communism per se, but about the Leninist/Stalinist way many countries had implemented it.
I think the big lesson of the 20th century is that both have their weaknesses, and that we should be looking for a good balance between the better aspects of the two. Something like Sweden, I guess.
> I think the big lesson of the 20th century is that both have their weaknesses, and that we should be looking for a good balance between the better aspects of the two.
Yes, life at the extremes of any philosophy or ideology tends to turn out badly IMO. Things are just too complex to be distilled into very simple solutions, try as we might.
Yes, life at the extremes of any philosophy or ideology tends to turn out badly IMO. Things are just too complex to be distilled into very simple solutions, try as we might.
If "Capitalism" is defined as "An economy where the most important economic signal, the interest rate, is managed by a private cartel" then no, Capitalism is not working.
This is just re-labeled Marxism, so the usual counter-arguments apply.
(1) Bad data: Most wealth is self-made, not inherited.
(2) Misguided goals: Uneven net wealth gain is better than equal increase of poverty
(3) Magical thinking: Wealth is created by effective systems, it does not appear out of thin air to be distributed
(4) Lack of observation: Government is remarkably poor at wealth management
(5) False sentimentality: A system intent on rewarding the ineffective will have great difficulty being effective itself
(6) Fetishizing hopelessness: Anyone determined already has the opportunity to create scalable wealth-creating systems in a suitable vocation
(1) Bad data: Most wealth is self-made, not inherited.
(2) Misguided goals: Uneven net wealth gain is better than equal increase of poverty
(3) Magical thinking: Wealth is created by effective systems, it does not appear out of thin air to be distributed
(4) Lack of observation: Government is remarkably poor at wealth management
(5) False sentimentality: A system intent on rewarding the ineffective will have great difficulty being effective itself
(6) Fetishizing hopelessness: Anyone determined already has the opportunity to create scalable wealth-creating systems in a suitable vocation
Capitalism is working.
Statism isn't.
Statism isn't.
If by Capitalism you mean the rich getting richer, then that is definitely working. But it's not working for us. The extreme concentration of wealth is not really a good thing for society.
What a well reasoned argument you have
I'll just leave this here: http://en.wikipedia.org/wiki/No_true_Scotsman
I could just leave it at https://en.wikipedia.org/wiki/Strawman. After all, this is what most people who are talking about "capitalism" are doing: strawmanning it. I guess the problem is that many of us, neo-cons, neo-liberals, classical liberals, libertarians, anarcho-capitalists are trying to defend capitalism, but all we mean fairly different things.
Marx's argument for the inevitability of extreme wealth disparity and at some point a breakdown in the capitalist system is too long to put here, but I can summarize it somewhat. A worker is creating wealth - why else would a company employ him? Let us say he works as a carpenter for a furniture store. He takes $800 worth of wood, nails etc. every day and through his labor makes it into $1000 worth of desks, cabinets etc. What happens with that $1000 in sales? $800 of it goes to buying wood, nails, hammers etc. for the next day. $200 is left over. Some goes to wages to the worker who created the wealth, some goes to profit to the company owners. Let's say it is split down the middle, $100 each way. If the worker works 10 hours a day, he is creating $20 in worth an hour, but only keeping $10 of that. Or you could say he spends the first five hours a day working for himself, and the next five hours he receives none of his own wealth creation, it is expropriated by the capitalists.
What do the capitalists do with their profit? They invest! They buy more capital. They buy capital equipment so that twice as many cabinets and desks can be manufactured in an hour then before. Now, minus the capital cost, with $2000 worth of desks being made a day, with $1600 of daily costs on materials, and keeping the worker at a wage of $100, the capitalist is making $300 a day once his profits pay off the cost of the capital equipment. So the capital spending means a flood of new commodities.
The question becomes - who buys these new commodities? The worker is not going to be buying more desks - he is not making any more than he did before. So then you have "over-production" - too much over-competition, which is not good for capitalists. Marx believed this, but it is not a notion exclusive to Marx - GE CEO Jack Welch has talked about this, as has Peter Thiel, and others. So you get a situation where it is perceived there is a demand for cloud services - so EC2, Linode, Rackspace etc. fund massive capital funding and get into a price war with each other, and people can buy more and more for less and less. There is a ton of capital out there, and demand is not outrageous, so this happens. The bottom line though is the process of profit to capital to more commodities to more profit to more capital to more commodities can't be endless, especially with the consumers wages stagnating. You can get him to get into credit card debt and home mortgage debt and then pass laws saying he can't get out of certain debt and so forth, but this only kicks the can down the road, and makes the inevitable crash worse.
This in a nutshell is one of Marx's major arguments. It is in a nutshell - he wrote more than three large books on this which are difficult to summarize. Replying to thread to argue with one of Marx's ideas is fine, replying to this post because you found some hole in my incredibly condensed argument would be silly - I'm leaving out dozens of caveats which leaves massive holes in my condensed explanation. I have to leave out those caveats or else I'd have to write tens of thousands of more words.
These are interesting articles, especially the 2008 Marxist interpretation of the financial crisis -
http://monthlyreview.org/2013/03/01/class-war-and-labors-dec...
http://monthlyreview.org/2008/12/01/financial-implosion-and-...
Even if you disagree with the analysis, the data they point to is, I think, interesting. Liberals and moderates talk about wealth inequality, debt, how finance is dominating the real economy etc. They don't talk about the slowdown in real GDP growth, the decline of industrial capacity utilization etc.
What do the capitalists do with their profit? They invest! They buy more capital. They buy capital equipment so that twice as many cabinets and desks can be manufactured in an hour then before. Now, minus the capital cost, with $2000 worth of desks being made a day, with $1600 of daily costs on materials, and keeping the worker at a wage of $100, the capitalist is making $300 a day once his profits pay off the cost of the capital equipment. So the capital spending means a flood of new commodities.
The question becomes - who buys these new commodities? The worker is not going to be buying more desks - he is not making any more than he did before. So then you have "over-production" - too much over-competition, which is not good for capitalists. Marx believed this, but it is not a notion exclusive to Marx - GE CEO Jack Welch has talked about this, as has Peter Thiel, and others. So you get a situation where it is perceived there is a demand for cloud services - so EC2, Linode, Rackspace etc. fund massive capital funding and get into a price war with each other, and people can buy more and more for less and less. There is a ton of capital out there, and demand is not outrageous, so this happens. The bottom line though is the process of profit to capital to more commodities to more profit to more capital to more commodities can't be endless, especially with the consumers wages stagnating. You can get him to get into credit card debt and home mortgage debt and then pass laws saying he can't get out of certain debt and so forth, but this only kicks the can down the road, and makes the inevitable crash worse.
This in a nutshell is one of Marx's major arguments. It is in a nutshell - he wrote more than three large books on this which are difficult to summarize. Replying to thread to argue with one of Marx's ideas is fine, replying to this post because you found some hole in my incredibly condensed argument would be silly - I'm leaving out dozens of caveats which leaves massive holes in my condensed explanation. I have to leave out those caveats or else I'd have to write tens of thousands of more words.
These are interesting articles, especially the 2008 Marxist interpretation of the financial crisis -
http://monthlyreview.org/2013/03/01/class-war-and-labors-dec...
http://monthlyreview.org/2008/12/01/financial-implosion-and-...
Even if you disagree with the analysis, the data they point to is, I think, interesting. Liberals and moderates talk about wealth inequality, debt, how finance is dominating the real economy etc. They don't talk about the slowdown in real GDP growth, the decline of industrial capacity utilization etc.
It's unclear whether the slowdown in US/EU real GDP growth is (a) dysfunction of capitalism, due to what you described, or (b) a "cooling" effect as global inequality of nations (as it should) mean-reverts. The good news is that global GDP growth is quite high: about 4% per year and accelerating (faster than exponential, for now). Obviously, there are severe sustainability concerns (such as the need to move away from planet-baking carbon fuels) that must be addressed. But, if we can address those environmental constraints, the global picture is actually pretty positive.
Worth investigation, however, is what happened in the U.S. in the 1920s. We got really good at agriculture, quickly (i.e. over the course of a few decades). We did a bad job of distributing the wealth generated by that. Commodity prices plummeted as the 1920s wore on. By 1925, there was an epidemic of rural poverty, but those were boom times for the urban rich, so it wasn't called a "depression". In 1927, the economy grew volatile and by 1928 large companies were starting to sweat. The "official" start of the Great Depression was Oct. 1929, and by 1933, the U.S. economy had imploded and the stock market was down almost 90% from its highs.
In the late 1920s, prevailing conservative thought was that poverty was a sort of "moral medicine", because the suffering washed away sin. (It was the same backward, moralistic thinking as was behind Prohibition.) The Depression proved that it's a cancer that spreads relentlessly. If the farmers get poor, the factory workers selling to farmers get poor, and those who have money become risk-averse and hoard it (causing asset crashes) and over time almost everyone ends up losing.
What happened to agricultural commodities in the 1920s is happening to nearly all human labor now. And that's pretty terrifying.
Worth investigation, however, is what happened in the U.S. in the 1920s. We got really good at agriculture, quickly (i.e. over the course of a few decades). We did a bad job of distributing the wealth generated by that. Commodity prices plummeted as the 1920s wore on. By 1925, there was an epidemic of rural poverty, but those were boom times for the urban rich, so it wasn't called a "depression". In 1927, the economy grew volatile and by 1928 large companies were starting to sweat. The "official" start of the Great Depression was Oct. 1929, and by 1933, the U.S. economy had imploded and the stock market was down almost 90% from its highs.
In the late 1920s, prevailing conservative thought was that poverty was a sort of "moral medicine", because the suffering washed away sin. (It was the same backward, moralistic thinking as was behind Prohibition.) The Depression proved that it's a cancer that spreads relentlessly. If the farmers get poor, the factory workers selling to farmers get poor, and those who have money become risk-averse and hoard it (causing asset crashes) and over time almost everyone ends up losing.
What happened to agricultural commodities in the 1920s is happening to nearly all human labor now. And that's pretty terrifying.
I always like reading historical analysis, but have a few questions:
> We did a bad job of distributing the wealth generated by that.
I'm not sure what you mean here. Do you mean that those that profited did not reinvest in stocks that may have helped companies grow and provide jobs? Or, that the government did not tax enough to pay its own staff and overhead and then redistribute via programs that do not necessarily target the areas that really need it? Or that they should have given that money to churches and other charities to distribute?
The reason I ask is that there are few pure redistribution models. The closest are some churches and charities, but they typically still have some overhead deducted. The next best can be stock investment, as, depending on the companies, that money is in large part repaid in the form of raises or new jobs. The least efficient is ofter government, because accountability is limited to the % wasted in the process of providing services, unlike capitalism where competition provides accountability; if you do poorly, you don't survive, unless a government bails you out.
> What happened to agricultural commodities in the 1920s is happening to nearly all human labor now. And that's pretty terrifying.
Could you expand on that and provide some references?
> We did a bad job of distributing the wealth generated by that.
I'm not sure what you mean here. Do you mean that those that profited did not reinvest in stocks that may have helped companies grow and provide jobs? Or, that the government did not tax enough to pay its own staff and overhead and then redistribute via programs that do not necessarily target the areas that really need it? Or that they should have given that money to churches and other charities to distribute?
The reason I ask is that there are few pure redistribution models. The closest are some churches and charities, but they typically still have some overhead deducted. The next best can be stock investment, as, depending on the companies, that money is in large part repaid in the form of raises or new jobs. The least efficient is ofter government, because accountability is limited to the % wasted in the process of providing services, unlike capitalism where competition provides accountability; if you do poorly, you don't survive, unless a government bails you out.
> What happened to agricultural commodities in the 1920s is happening to nearly all human labor now. And that's pretty terrifying.
Could you expand on that and provide some references?
In 1920: agriculture was 27% of labor force: http://www.agclassroom.org/gan/timeline/farmers_land.htm
Now, 2-3%. One in 4 people had their profession superseded. A lot of that slack was taken up by industry (and war and death), but that took 20-30 years to catch up.
Is there a pool of work for people to absorb 25% of the present labor force? Most of the emerging technologies I see are labor-saving, not labor consuming.
Two possibilities for big labor demand in the next few decades: - healthcare and assistance for the elderly - removing development restrictions in booming cities, unleashing an epic (or Chinese-level) building boom
Both have fundamental political foundations and won't be solved solely by technology.
Now, 2-3%. One in 4 people had their profession superseded. A lot of that slack was taken up by industry (and war and death), but that took 20-30 years to catch up.
Is there a pool of work for people to absorb 25% of the present labor force? Most of the emerging technologies I see are labor-saving, not labor consuming.
Two possibilities for big labor demand in the next few decades: - healthcare and assistance for the elderly - removing development restrictions in booming cities, unleashing an epic (or Chinese-level) building boom
Both have fundamental political foundations and won't be solved solely by technology.
> removing development restrictions in booming cities, unleashing an epic (or Chinese-level) building boom
Which would be interesting because it is debatable whether we have the resources for that.
On one hand, we have people like Tim Worstall of Forbes claiming that we will never run out of metals that would be used in a building boom, because innovation reduces and replaces use of existing metals, e.g. modern day pennies use steel and a copper coating:
http://www.forbes.com/sites/timworstall/2011/10/15/when-are-...
Although, I think Tim takes a lot of liberty with his assessments, like his recent wild speculation that humanity could never populate another star system because it would take too many people to preserve our culture: http://www.forbes.com/sites/timworstall/2014/04/07/perhaps-c...
On the other hand, in http://en.wikipedia.org/wiki/Iron_ore#Available_iron_ore_res... it states that Lester Brown of the Worldwatch Institute has suggested iron ore could run out within 64 years based on an extremely conservative extrapolation of 2% growth per year, and so if there were a boom, innovation to replace use of iron ore as a structural component would be required.
Which would be interesting because it is debatable whether we have the resources for that.
On one hand, we have people like Tim Worstall of Forbes claiming that we will never run out of metals that would be used in a building boom, because innovation reduces and replaces use of existing metals, e.g. modern day pennies use steel and a copper coating:
http://www.forbes.com/sites/timworstall/2011/10/15/when-are-...
Although, I think Tim takes a lot of liberty with his assessments, like his recent wild speculation that humanity could never populate another star system because it would take too many people to preserve our culture: http://www.forbes.com/sites/timworstall/2014/04/07/perhaps-c...
On the other hand, in http://en.wikipedia.org/wiki/Iron_ore#Available_iron_ore_res... it states that Lester Brown of the Worldwatch Institute has suggested iron ore could run out within 64 years based on an extremely conservative extrapolation of 2% growth per year, and so if there were a boom, innovation to replace use of iron ore as a structural component would be required.
What it seems is that Marx view is extremely simplistic
Marx is saying: worker produces X value and is payed Y, and since Y < X, bosses are evil, capitalism is evil, blah blah blah
Well, to begin with, the situation where X < Y is fatal to a company. So it's never going to happen (theoretically)
So X - Y, is what? Pure profit in bosses pocket? Not really...
It's the cost of everything needed for the company and for the worker to do their job
It's the job security (even a tiny one like in some states in the US)
Yes, whatever is left is the profit, and a small profit times the number of employees is the profit of the company, and if someone thinks it's unfair they're welcome to start their own company and compete (which is why cartels, oligopolies, monopolies are so damaging)
Marx is saying: worker produces X value and is payed Y, and since Y < X, bosses are evil, capitalism is evil, blah blah blah
Well, to begin with, the situation where X < Y is fatal to a company. So it's never going to happen (theoretically)
So X - Y, is what? Pure profit in bosses pocket? Not really...
It's the cost of everything needed for the company and for the worker to do their job
It's the job security (even a tiny one like in some states in the US)
Yes, whatever is left is the profit, and a small profit times the number of employees is the profit of the company, and if someone thinks it's unfair they're welcome to start their own company and compete (which is why cartels, oligopolies, monopolies are so damaging)
> Marx is saying...bosses are evil, capitalism is evil
Actually Marx said capitalism was a positive historic development.
> So X - Y, is what? Pure profit in bosses pocket? Not really...It's the cost of everything needed for the company and for the worker to do their job
When I said...
>> What happens with that $1000 in sales? $800 of it goes to buying wood, nails, hammers etc.
...that is what I was covering.
> cartels, oligopolies, monopolies are so damaging
Marx goes into cartels, oligopolies, and monopolies a little bit, but they didn't really hit their stride until after he died. Lenin is who covers this in Imperialism, the Highest Stage of Capitalism. They both go into great detail of why it is economically and politically impossible to stop cartels, oligopolies, and monopolies from forming. Lenin mentions Standard Oil in his paper, which the government tried to break up in 1911. As Lenin knew then, it is impossible to stop monopolies, which is why the old broken up parts of Standard Oil reformed in the 1999 ExxonMobil merger to become the most profitable company in the world, as well as the company with the third largest revenue in the world. And I can go on and on about how government can't break up monopolies (the Bell breakup only lasted a few years, now AT&T and Verizon control most of the US wired last mile and wireless).
Actually Marx said capitalism was a positive historic development.
> So X - Y, is what? Pure profit in bosses pocket? Not really...It's the cost of everything needed for the company and for the worker to do their job
When I said...
>> What happens with that $1000 in sales? $800 of it goes to buying wood, nails, hammers etc.
...that is what I was covering.
> cartels, oligopolies, monopolies are so damaging
Marx goes into cartels, oligopolies, and monopolies a little bit, but they didn't really hit their stride until after he died. Lenin is who covers this in Imperialism, the Highest Stage of Capitalism. They both go into great detail of why it is economically and politically impossible to stop cartels, oligopolies, and monopolies from forming. Lenin mentions Standard Oil in his paper, which the government tried to break up in 1911. As Lenin knew then, it is impossible to stop monopolies, which is why the old broken up parts of Standard Oil reformed in the 1999 ExxonMobil merger to become the most profitable company in the world, as well as the company with the third largest revenue in the world. And I can go on and on about how government can't break up monopolies (the Bell breakup only lasted a few years, now AT&T and Verizon control most of the US wired last mile and wireless).
>>>> What happens with that $1000 in sales? $800 of it goes to buying wood, nails, hammers etc.
>>...that is what I was covering.
But the cost of materials is one thing (and not related to the employees), the value added by the company, another.
>> And I can go on and on about how government can't break up monopolies
Cue the communist states creating the biggest and most useless ones.
>>...that is what I was covering.
But the cost of materials is one thing (and not related to the employees), the value added by the company, another.
>> And I can go on and on about how government can't break up monopolies
Cue the communist states creating the biggest and most useless ones.
> Cue the communist states creating the biggest and most useless ones.
Communism wasn't Marxism. Marxism has the probably even-bigger flaw of being completely impossible to put into practice in the real world.
That's the problem with the genius of Marx. He was able to quite convincingly deconstruct the issues with capitalism, without being able to recommend a better replacement that could survive first contact with the masses.
Communism wasn't Marxism. Marxism has the probably even-bigger flaw of being completely impossible to put into practice in the real world.
That's the problem with the genius of Marx. He was able to quite convincingly deconstruct the issues with capitalism, without being able to recommend a better replacement that could survive first contact with the masses.
I don't think the wealthy necessarily represent political power. I think corporate lobbyists are more to blame than the ultra wealthy as individuals.
The gist of the problem in my mind is that the closer one is to the source of money (central banks, the Federal Reserve, etc) the more he or she is able to profit from leverage, until the leverage becomes so high that it dwarfs whatever contribution to society that person makes. Whereas the people who are furthest from it survive merely by their own efforts. This video does a good job explaining the origin of money and capitalism:
http://www.hitrecord.org/users/jeffpeff
So what’s happening is that the people who are sitting on vast quantities of wealth, say in the fossil fuel industry, or mining, agriculture, fishing, etc are able to write IOUs and maintain control of their resources in the meantime to compound themselves.
But people who have nothing but the sweat of their brow are unable to obtain capital, because their IOUs can only be cashed in at a speed of 1:1. So people instinctively don’t extend them credit, because they aren’t willing to wait potentially forever to get paid back.
As overall wealth increases, one would like to see individual leverage increase too. So for example if the net worth of the world doubles, people should be able to borrow against the new wealth that’s been created. But the frequent outcome of capitalism is that leverage reaches runaway positive feedback for people at the source, while the majority of the population on the outskirts becomes mired in day to day survival.
So most of the stuff we generally hear about how low taxes stimulate the economy or whatnot are rubbish because they merely raise the slope of the line from top to bottom. If we want to talk about getting the economic gears turning, then we have to start with giving people at the bottom more leverage so they can multiply their efforts.
For a concrete example: one of the key ways we went wrong since the 80s was compound interest. There are other kinds of loans, for example underwriting, where someone buys a horse with the understanding that they will pay back two horse’s worth of grain. They only have the lifetime of the horse to make it happen. If it doesn’t happen, the lender is out a horse and the borrower is out the several years of life it took to fail in the venture. This idea that upon failure the borrower must then also pay back the original loan is nonsense. The lender relies on the fruit of the borrower’s labors to eat (that is, unless he or she is willing to stop lending and eat horses). The price of that free lunch is risk. There used to be codes of dignity, where if people tried hard and failed, the community helped them try again. But if people let their horse die of thirst, they would get thrown in jail. But now we’re so disconnected from one another that these codes have been reworked into “incentives” which don’t accurately reflect how human beings begin ventures by lending or borrowing capital. We accept the reality that 6 billion people in the world are essentially paying compound interest without questioning why we’ve chosen a system like that among many.
I’m thinking that a possible (and probable) alternative to capitalism in the 21st century is going to be non-capital based leverage. So for example if you can install a solar panel on your roof and not have to pay your electric bill, you’ve just increased your leverage by the amount that you used to pay for electricity. The same could happen with food, transportation, even education. I can easily imagine a point where most goods and services are provided through automated means and the average person would have the leisure time and affluence of say, a millionaire today. I use that as a litmus test whenever I hear new ideas in economics or politics and find that generally the approaches being pitched are contrary to what would help everyone across the board.
http://www.hitrecord.org/users/jeffpeff
So what’s happening is that the people who are sitting on vast quantities of wealth, say in the fossil fuel industry, or mining, agriculture, fishing, etc are able to write IOUs and maintain control of their resources in the meantime to compound themselves.
But people who have nothing but the sweat of their brow are unable to obtain capital, because their IOUs can only be cashed in at a speed of 1:1. So people instinctively don’t extend them credit, because they aren’t willing to wait potentially forever to get paid back.
As overall wealth increases, one would like to see individual leverage increase too. So for example if the net worth of the world doubles, people should be able to borrow against the new wealth that’s been created. But the frequent outcome of capitalism is that leverage reaches runaway positive feedback for people at the source, while the majority of the population on the outskirts becomes mired in day to day survival.
So most of the stuff we generally hear about how low taxes stimulate the economy or whatnot are rubbish because they merely raise the slope of the line from top to bottom. If we want to talk about getting the economic gears turning, then we have to start with giving people at the bottom more leverage so they can multiply their efforts.
For a concrete example: one of the key ways we went wrong since the 80s was compound interest. There are other kinds of loans, for example underwriting, where someone buys a horse with the understanding that they will pay back two horse’s worth of grain. They only have the lifetime of the horse to make it happen. If it doesn’t happen, the lender is out a horse and the borrower is out the several years of life it took to fail in the venture. This idea that upon failure the borrower must then also pay back the original loan is nonsense. The lender relies on the fruit of the borrower’s labors to eat (that is, unless he or she is willing to stop lending and eat horses). The price of that free lunch is risk. There used to be codes of dignity, where if people tried hard and failed, the community helped them try again. But if people let their horse die of thirst, they would get thrown in jail. But now we’re so disconnected from one another that these codes have been reworked into “incentives” which don’t accurately reflect how human beings begin ventures by lending or borrowing capital. We accept the reality that 6 billion people in the world are essentially paying compound interest without questioning why we’ve chosen a system like that among many.
I’m thinking that a possible (and probable) alternative to capitalism in the 21st century is going to be non-capital based leverage. So for example if you can install a solar panel on your roof and not have to pay your electric bill, you’ve just increased your leverage by the amount that you used to pay for electricity. The same could happen with food, transportation, even education. I can easily imagine a point where most goods and services are provided through automated means and the average person would have the leisure time and affluence of say, a millionaire today. I use that as a litmus test whenever I hear new ideas in economics or politics and find that generally the approaches being pitched are contrary to what would help everyone across the board.
No Managing Director should earn more than the Prime Minister.
£142,000 per annum - David Cameron
Richard Branson earns that in a little over a week.
£142,000 per annum - David Cameron
Richard Branson earns that in a little over a week.
The state is to blame, not people exercising their right to trade with each other. What a ridiculous concept.
The problem is that corporate capitalism is a system that delivers the best of both systems (capitalism and socialism) to a well-connected elite and the worst of both to everyone else. For a microcosm, look at commercial air travel. The experience (especially in the lower classes) is Soviet, but the fare-setting (read: price gouging) is hideously capitalistic.
Capitalism generates a set of wealthy people, who pull up the ladder by restricting society to the sorts of capitalism that enhance their wealth, while destroying any variety of business activity that challenges it. That's what we see in the VC-funded world. The VCs have enough capital to kill any fledgling business by funding (or creating, this being the purpose of EIRs) a competitor, but their note-sharing and co-funding makes of them a reputation economy that has more in common with the Politburo than a free-market system.
The problem isn't that capitalism is a bad system. It's that, when you don't have checks and balances that prevent financial and political power being traded for one another, you end up with a corporatist-statist structure rather than a free market. As power concentrates, it only gets worse.
Capitalism generates a set of wealthy people, who pull up the ladder by restricting society to the sorts of capitalism that enhance their wealth, while destroying any variety of business activity that challenges it. That's what we see in the VC-funded world. The VCs have enough capital to kill any fledgling business by funding (or creating, this being the purpose of EIRs) a competitor, but their note-sharing and co-funding makes of them a reputation economy that has more in common with the Politburo than a free-market system.
The problem isn't that capitalism is a bad system. It's that, when you don't have checks and balances that prevent financial and political power being traded for one another, you end up with a corporatist-statist structure rather than a free market. As power concentrates, it only gets worse.
In that regard the conclusion (regarding wealth inequality) really isn't that surprising. If the ROI of having money is really higher than the ROI of earning money (i.e. by wages) then the conclusion over time is as simple as the solution to a binary star system containing a black hole... eventually through the iterative process of the economy any given dollar is likely to fall into the basket of the rich guy, and it is much harder to escape that basket than the basket of the poor guy who needs to spend simply to live.
The article doesn't seem to conclude that capitalism is flawed though (at least to the extent that Marxism is called for), but that our actual capitalist system needs corrections made before revolutionary corrects get imposed by force.