5 ms·

Suppose you could create a system to compete with capitalism. What would it be like?

by tlb 7y ago

DrAwdeOccarim 7y ago
It feels like we aren't really in a capitalistic system as much as we used to. The moral hazard of zero percent interest seems to have infected the way we allocate capitol. One example is the We Company S1 where basically, like FB and Snap, investors no longer have a say in how the business is run because the founder(s) control all the voting shares. Basically in the past, capital was scarce and so investors could demand some seat at the table. The system now is so awash in cheap cash, it isn't hard to find funding for any half-decent idea in either tech or biotech. Maybe a competing system to what we have now will be one where capital becomes scarce again? Does that happen only when inflation starts to trickle into the products the average, non-investor buys on a daily basis?
- DennisP 7y ago
  Also, see the book Cornered by Barry C. Lynn, who argues that over the last couple decades, the U.S. economy has been mostly taken over by monopolies, so we don't have much open free market competition anymore. The monopolies generally aren't obvious. For example, we have three major car companies, but they all get their parts from the same suppliers. In 2009 Ford asked Congress to bail out Chrysler and GM, because if either of them went down, so would Ford's suppliers.
  - DrAwdeOccarim 7y ago
    Interesting, that's a point I hadn't considered. So in a system that is awash in cheap credit and every major consumer stable is controlled by a duo/triopolpy, inflation can we controlled while the owners of production continue to gain wealth. It's interesting to look at the things "rich" people buy like houses, vacations/experiences, and high-end consumer goods--those things have all increased in price in the sense that they "now exist" where as in the past the spread between poor quality and high quality was probably tighter. The difference between a cheap car and an expensive car is dramatic in both quality and price, same with food, real estate location, clothes, etc. Does anyone offer a CPI for luxury goods? I bet inflation in that has been dramatic especially in the past decade.
Ididntdothis 7y ago
We don’t need to create a new system. Capitalism is perfectly fine with a few tweaks.
- tlb 7y ago
  I think Animats' argument is that capitalism isn't getting those tweaks because there's no competition. Capitalism as a system has a near-monopoly. Back when it had serious competition from the Soviet Union, people tried much harder to make it work better. So the new system doesn't have to actually be better overall than capitalism, it just needs to provide some competition to light a fire under policy makers.
  - Ididntdothis 7y ago
    I guess we will have to learn how to live without a competitor that brings people together. Otherwise where can we get a replacement for the Soviet Union that scares people enough? China?
    - yifanl 7y ago
      To me, China looks more like the logical conclusion of capitalism than some competing economic system.
      - Animats 7y ago
        Too early to say. The "Asian tigers", Korea, Singapore, Japan, etc. had a similar trajectory. If you believe Pikkety, that type of growth levels off at the level of developed countries once catch-up is achieved. Which is not a bad place to end up. There are then stagnation problems. Japan hit that first. The countries that have hit stagnation, other than the US, tend to build good public infrastructure. This pumps money into the economy, but not through the banks.
  - Animats 7y ago
    I think Animats' argument is that capitalism isn't getting those tweaks because there's no competition. Capitalism as a system has a near-monopoly. Back when it had serious competition from the Soviet Union, people tried much harder to make it work better. Exactly. This led to much government regulation to keep big business from getting too heavy-handed. See the previous price discussion on insulin pricing for a modern example. Although drug prices have not been regulated, until recently there was an assumption that blatant overcharging would lead to government action. It didn't. Unions used to have much more power in the US. They had money and votes. Business only had money, and couldn't use it directly without being accused of bribery. Many little, and not so little, restrictions that used to keep businesses from getting too greedy have been removed in recent decades. Glass-Stegall, which kept banks and brokerages separate. Far fewer restrictions on banks. The removal of the restriction on "gambling" in stock markets, which limited derivatives. Allowing interstate branch banking. Repeal of the Utility Company Holding Act. The NYSE allowing multiple classes of stock (like Facebook, Google, etc.). Weakened telecom regulation. Weakened labor law enforcement. Unregistered hedge funds. Pension funds being allowed to invest in hedge funds. The Interstate Commerce Commission. The Civil Aeronautics Board. The list goes on.
harimau777 7y ago
As a thought experiment; how about taking some inspiration from Georgism to try to make capitalism better live up to its ideals: At least in America, many of the wealthy are able to make money due to inherited resources that they did not earn. For example, their ancestors claimed a tract of land or access to a natural resource. Therefore, Capitalism could be brought more in line with the meritocracy that it claims to be if we taxed on the unimproved value of these resources and potentially on profit gained by rent seeking Capitalism claims the revolve around people freely exchanging their labor for pay. However, since most people do not have access to the resources or capital to support themselves (often due to the resources already having been claimed by someone else's ancestors) they aren't really entering into the exchange freely. Therefore, Capitalism could be brought more in line with its stated libertarian principles by using the proceeds of the previously mentioned taxes to provide people without those resources with the ability to support themselves independently. This could potentially take the form of capital grants, education, farm land. If it weren't possible to actually give people a reasonable opportunity to support themselves, then a guaranteed minimum income could also address the issue (although I don't think its as good of a solution).
- tathougies 7y ago
  Rubbish. My parents, aunts, and uncles came to this country with nothing in the 80s. Their old country didnt let them export cash. My dad was literally forced to work for below minimum wage for many yeara illegally. All of them now own houses, multiple parcels of land, and their children have access to all the supposedly 'claimed' resources. The american dream is alive and well. I work with many many immigrants and their children all of whom put themselves on the path to success. The fact is most 'americans' whose families have been here for many generations are completely lazy and entitled. They want privileges they have not yet earned that they enjoyed while living with mom and dad.
  - notfromhere 7y ago
    Eh, might have worked out for your family, but statistics don't bear it out.
jackcosgrove 7y ago
Capitalism defeated communism because capitalism better aligned rewards and work, so that people in capitalist countries worked harder. Jobs in the USSR were like social clubs and not much actual work went on, because you wouldn't be rewarded even if you did work. The economic system that causes people to work harder will win. To be a challenger to capitalism you need to be serious about getting people to work, and not dream about a society where 90% of people are in the leisure class. Such a society would be defeated by capitalism again. So how do you get people to work? Such a system must respect private property rights. You're DOA if you don't. The main flaw in capitalism is in the name: it's a legal system that favors capital. Given that the holders of capital are few, this is a massive market distortion. What is an "undistorted" market? If your cost function is getting more people to work so that your society is more efficacious, and we know that most people are in the middle along whatever dimension you measure, then a system that favors the middle - because that's where the people are - rather than the right tail is better. The US briefly had such a system in the postwar era. Some may argue that because the right tail individuals are more talented, we should just keep rewarding them as they are more efficient. That ignores that these people's time is limited, and at some point you get diminishing returns. We are way past that point. How do you favor the middle? The middle plays by the rules, so you need to enforce those rules and prevent elites from changing those rules. This means first and foremost campaign finance reform, up to and including public funding of political campaigns and a ban on political donations. This is the hard part. The middle will never be as politically savvy and engaged as the elites. For the middle, the political system is exogenous. Thus making it as exogenous as possible for the elites is necessary. A middle class society can defeat an elitist society because it mobilizes more people. Parliament defeated the king. We need to stop obsessing about the modern right-left divide that has been in place since Marx first appeared. Marx got it wrong by focusing on exploitation of one class extreme by its opposite class extreme. He should have been thinking about maximum middle class mobilization if he wanted to replace capitalism. Instead use our knowledge of the normal distribution of human ability to empower the middle where most people are. This may be a tough pill to swallow, but we need to accept that political engagement is not the middle class's strength. Therefore the more intrusive politics becomes, the more the middle gets sidelined by those who are adept at politics, whatever their alignment. Democracy is a fabulous way to empower the middle class, since the middle class is numerous. We need more democracy, not less, and that democracy should be more expansive and not "guided" by bureaucracy. This is a huge blind spot among a certain set nowadays. A market economy and a political system that favors the middle class over both the first and fourth quartiles could defeat our current system. Maybe you still call that capitalism... that's just a label to me.

Suppose you could create a system to compete with capitalism. What would it be like?

by tlb 7y ago

Suppose you could create a system to compete with capitalism. What would it be like?

It feels like we aren't really in a capitalistic system as much as we used to. The moral hazard of zero percent interest seems to have infected the way we allocate capitol. One example is the We Company S1 where basically, like FB and Snap, investors no longer have a say in how the business is run because the founder(s) control all the voting shares. Basically in the past, capital was scarce and so investors could demand some seat at the table. The system now is so awash in cheap cash, it isn't hard to find funding for any half-decent idea in either tech or biotech. Maybe a competing system to what we have now will be one where capital becomes scarce again? Does that happen only when inflation starts to trickle into the products the average, non-investor buys on a daily basis?

DennisP 7y ago
Also, see the book Cornered by Barry C. Lynn, who argues that over the last couple decades, the U.S. economy has been mostly taken over by monopolies, so we don't have much open free market competition anymore. The monopolies generally aren't obvious. For example, we have three major car companies, but they all get their parts from the same suppliers. In 2009 Ford asked Congress to bail out Chrysler and GM, because if either of them went down, so would Ford's suppliers.
- DrAwdeOccarim 7y ago
  Interesting, that's a point I hadn't considered. So in a system that is awash in cheap credit and every major consumer stable is controlled by a duo/triopolpy, inflation can we controlled while the owners of production continue to gain wealth. It's interesting to look at the things "rich" people buy like houses, vacations/experiences, and high-end consumer goods--those things have all increased in price in the sense that they "now exist" where as in the past the spread between poor quality and high quality was probably tighter. The difference between a cheap car and an expensive car is dramatic in both quality and price, same with food, real estate location, clothes, etc. Does anyone offer a CPI for luxury goods? I bet inflation in that has been dramatic especially in the past decade.

Ididntdothis 7y ago

We don’t need to create a new system. Capitalism is perfectly fine with a few tweaks.

tlb 7y ago
I think Animats' argument is that capitalism isn't getting those tweaks because there's no competition. Capitalism as a system has a near-monopoly. Back when it had serious competition from the Soviet Union, people tried much harder to make it work better. So the new system doesn't have to actually be better overall than capitalism, it just needs to provide some competition to light a fire under policy makers.
- Ididntdothis 7y ago
  I guess we will have to learn how to live without a competitor that brings people together. Otherwise where can we get a replacement for the Soviet Union that scares people enough? China?
  - yifanl 7y ago
    To me, China looks more like the logical conclusion of capitalism than some competing economic system.
    - Animats 7y ago
      Too early to say. The "Asian tigers", Korea, Singapore, Japan, etc. had a similar trajectory. If you believe Pikkety, that type of growth levels off at the level of developed countries once catch-up is achieved. Which is not a bad place to end up. There are then stagnation problems. Japan hit that first. The countries that have hit stagnation, other than the US, tend to build good public infrastructure. This pumps money into the economy, but not through the banks.
- Animats 7y ago
  I think Animats' argument is that capitalism isn't getting those tweaks because there's no competition. Capitalism as a system has a near-monopoly. Back when it had serious competition from the Soviet Union, people tried much harder to make it work better. Exactly. This led to much government regulation to keep big business from getting too heavy-handed. See the previous price discussion on insulin pricing for a modern example. Although drug prices have not been regulated, until recently there was an assumption that blatant overcharging would lead to government action. It didn't. Unions used to have much more power in the US. They had money and votes. Business only had money, and couldn't use it directly without being accused of bribery. Many little, and not so little, restrictions that used to keep businesses from getting too greedy have been removed in recent decades. Glass-Stegall, which kept banks and brokerages separate. Far fewer restrictions on banks. The removal of the restriction on "gambling" in stock markets, which limited derivatives. Allowing interstate branch banking. Repeal of the Utility Company Holding Act. The NYSE allowing multiple classes of stock (like Facebook, Google, etc.). Weakened telecom regulation. Weakened labor law enforcement. Unregistered hedge funds. Pension funds being allowed to invest in hedge funds. The Interstate Commerce Commission. The Civil Aeronautics Board. The list goes on.

harimau777 7y ago

As a thought experiment; how about taking some inspiration from Georgism to try to make capitalism better live up to its ideals: At least in America, many of the wealthy are able to make money due to inherited resources that they did not earn. For example, their ancestors claimed a tract of land or access to a natural resource. Therefore, Capitalism could be brought more in line with the meritocracy that it claims to be if we taxed on the unimproved value of these resources and potentially on profit gained by rent seeking Capitalism claims the revolve around people freely exchanging their labor for pay. However, since most people do not have access to the resources or capital to support themselves (often due to the resources already having been claimed by someone else's ancestors) they aren't really entering into the exchange freely. Therefore, Capitalism could be brought more in line with its stated libertarian principles by using the proceeds of the previously mentioned taxes to provide people without those resources with the ability to support themselves independently. This could potentially take the form of capital grants, education, farm land. If it weren't possible to actually give people a reasonable opportunity to support themselves, then a guaranteed minimum income could also address the issue (although I don't think its as good of a solution).

tathougies 7y ago
Rubbish. My parents, aunts, and uncles came to this country with nothing in the 80s. Their old country didnt let them export cash. My dad was literally forced to work for below minimum wage for many yeara illegally. All of them now own houses, multiple parcels of land, and their children have access to all the supposedly 'claimed' resources. The american dream is alive and well. I work with many many immigrants and their children all of whom put themselves on the path to success. The fact is most 'americans' whose families have been here for many generations are completely lazy and entitled. They want privileges they have not yet earned that they enjoyed while living with mom and dad.
- notfromhere 7y ago
  Eh, might have worked out for your family, but statistics don't bear it out.

jackcosgrove 7y ago

Capitalism defeated communism because capitalism better aligned rewards and work, so that people in capitalist countries worked harder. Jobs in the USSR were like social clubs and not much actual work went on, because you wouldn't be rewarded even if you did work. The economic system that causes people to work harder will win. To be a challenger to capitalism you need to be serious about getting people to work, and not dream about a society where 90% of people are in the leisure class. Such a society would be defeated by capitalism again. So how do you get people to work? Such a system must respect private property rights. You're DOA if you don't. The main flaw in capitalism is in the name: it's a legal system that favors capital. Given that the holders of capital are few, this is a massive market distortion. What is an "undistorted" market? If your cost function is getting more people to work so that your society is more efficacious, and we know that most people are in the middle along whatever dimension you measure, then a system that favors the middle - because that's where the people are - rather than the right tail is better. The US briefly had such a system in the postwar era. Some may argue that because the right tail individuals are more talented, we should just keep rewarding them as they are more efficient. That ignores that these people's time is limited, and at some point you get diminishing returns. We are way past that point. How do you favor the middle? The middle plays by the rules, so you need to enforce those rules and prevent elites from changing those rules. This means first and foremost campaign finance reform, up to and including public funding of political campaigns and a ban on political donations. This is the hard part. The middle will never be as politically savvy and engaged as the elites. For the middle, the political system is exogenous. Thus making it as exogenous as possible for the elites is necessary. A middle class society can defeat an elitist society because it mobilizes more people. Parliament defeated the king. We need to stop obsessing about the modern right-left divide that has been in place since Marx first appeared. Marx got it wrong by focusing on exploitation of one class extreme by its opposite class extreme. He should have been thinking about maximum middle class mobilization if he wanted to replace capitalism. Instead use our knowledge of the normal distribution of human ability to empower the middle where most people are. This may be a tough pill to swallow, but we need to accept that political engagement is not the middle class's strength. Therefore the more intrusive politics becomes, the more the middle gets sidelined by those who are adept at politics, whatever their alignment. Democracy is a fabulous way to empower the middle class, since the middle class is numerous. We need more democracy, not less, and that democracy should be more expansive and not "guided" by bureaucracy. This is a huge blind spot among a certain set nowadays. A market economy and a political system that favors the middle class over both the first and fourth quartiles could defeat our current system. Maybe you still call that capitalism... that's just a label to me.