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How does capitalism as an economic system seek to create checks and balances?

• hajile 6y ago
  First, distinguish from crony capitalism and capitalism. Copyright is not a capitalist idea nor are patents. Government choosing winners and losers via regulations is also not capitalist. Every so-called capitalist monopoly in history has either been vastly beneficial to society or was enforced by the government. Could Microsoft create a non-beneficial monopoly without copyright? Their licensing scheme is entirely dependent on government enforcement. If pricing go too high, another company would move in, reverse the source code, and sell their own. In fact, this motive is so strong that people do this anyway despite the illegal nature of the operation. Standard Oil is probably the go-to monopoly example, but it lacks intent. Oil prices dropped precipitously due to the economies of scale to the point that profit margins were (and still are) fractions of a cent per gallon (most of the "profit" from the cost of fuel is government taxation). This is a monopoly, but one of convenience and mutual benefit. If they started raising oil prices, another company could form. The only sound argument to the contrary is exploiting human ignorance. A knowledgeable person can take advantage of a less knowledgeable person, but this issue isn't solved in any other economic system and in fact, becomes worse historically in Communist countries.
  • xtian 6y ago
    The whole reason government intervention into the economy was introduced (creating your "crony capitalism") was that falling profit margins meant the only way to maintain or grow overall profit levels was to increase production, which led to periodic overproduction and market crises. This happened repeatedly and created (at the very least) massive amounts of unemployment and waste. Nothing intrinsic about free market competition or pursuit of private profit checked or balanced it.
    • hajile 6y ago
      The result was the creation of the Federal Reserve. All of the biggest market crisis in US history (either by total or percentage) have happened under the watch of the Fed. In fact, most of them could not have happened without express intervention by the Fed incentivizing bad behavior. If anything, it seems like crashes are inevitable and government intervention has simply made the crashes bigger and longer-lasting.
      • xtian 6y ago
        So if crises happened both before and after efforts at intervention it almost seems like the tendency is endemic to capitalism itself. Which is one of the many things Marx was right about.