6 ms·

Why capitalism fails

15 points by robg 17y ago

hop 17y ago
Right, capitalism has been a huge failure. Let's dismiss the meteoric rise of human race since Americas founding, and judge capitalism on a market correction.
- fnid 17y ago
  Aneurysms grow much faster than the surrounding blood vessels, but that doesn't make them good. It makes them bad. It may be the extreme growth that capitalism enables and encourages that is the reason it is a failure. It makes us focus on growth above all else. But why is growth in and of itself a good thing? Why isn't stability better? Growth is risky. Financial analysts focused on the long term are looking for slow stable compounding growth. Long term investors know that rocketing growth is unsustainable and is not the goal.
  - DanielBMarkham 17y ago
    I would be very interested in having you explain that further, because it makes no sense to me at all. Capitalism is bad because it lets us grow too quickly? I don't understand. Are you talking about market bubbles? Like that have been going on for four hundred years or more? If so, that's called a feedback loop: the system overgrows and then contracts. When you make a mistake and correct it, there's some adjustment involved. Surely that's better than no adjustment at all, right? I mean, to have everything perfectly valued would only happen in a fantasy world. Or perhaps I misunderstood.
    - fnid 17y ago
      Aneurysms are made possible through a weakness in the blood vessel. Meteoric growth in a capitalist economy, as the post I was originally responding to mentions, is the result of a weakness in human psychology -- greed. I do not believe judging a phenomenon as a success due to an effect of a weakness is rationally sound. I would say capitalism is not as good an economic system as one that enables steady, predictable co-existence of human society and synergy with the earth above meteoric, unsustainable growth, which on the downside causes pain, suffering, misery, death and perhaps the decimation of spaceship earth.
      - cwan 17y ago
        Meteoric growth in a capitalist economy is just as much about need as it is greed. The beauty of capitalism and markets is that they only provide signals and incentives - reacting to those incentives which are a direct reflection of immediate need/want can come as a result of altruism or greed but in the end, the result is implicit cooperation. Besides, the one driver of commerce and every little transaction isn't and can't be greed anyway - it's trust. It is silly to blame this recent bubble on capitalism and markets when it was just as much driven if not started by state actors. As for the rest - "unsustainable growth, which on the downside causes pain, suffering, misery, death and perhaps the decimation of spaceship earth" - bullocks. Capitalism and markets have resulted in less pain, suffering, misery, and death than any of the alternatives. Indeed it has been a central driver in alleviating many of these problems by ensuring need is reflected in the incentives. Growth in the longer run means innovation and that more needs are being met and more suffering is being averted - and that, at least to me, is a good thing.
        neva 17y ago
        > the result is implicit cooperation. Right. The implicit cooperation. The implicit cooperation by the wealthy few that ultimately best serves the moguls' already grotesquely large fortune.
        DanielBMarkham 17y ago
        Just because I sell you an apple for a dollar doesn't make me an evil mogul and you an oppressed worker. As an aside, we should really teach Marx better in modern schools. We teach the brilliance of his insights without then following it up with the many ways he was mistaken. I think sometimes Marx is being taught by the Humanities department and not Economics professors.
        pbhjpbhj 17y ago
        "more needs are being met and more suffering is being averted" If by suffering you mean the feeling of inferiority someone gets when they don't have leather seats in their caddy and a 12v 2litre engine, don't have the latest iPhone, can't cross the world in 20 hours. Capitalism magnifies inequality as those with money get richer and those without toil to that end.
    - onreact-com 17y ago
      We have only one planet. We already use up more resources than it has. More economic growth equals destruction on a planetary level.
      - DanielBMarkham 17y ago
        destruction on a planetary level Surely you can't believe the planet itself is going to explode or something, can you? I mean, what you're really saying is that more growth will make the planet into a state that you find offensive and hard to live with -- dirty skies, polluted water, etc. If that's the case then I'm with you. Glad to talk about how clean we want to make things and what kind of rules we want to put on ourselves so the world meets our ascetic approval. (offline, of course) I don't think you believe the planet itself is going to be destroyed. Life will continue, right? It'll just get ugly and uninhabitable for poor people -- which is not an acceptable option, by the way, but it's not destruction. Or are you somewhere in the middle, thinking that somehow the planet will manage to kill just us and the rest of the ecosystem (or what's left of it) will continue? When you use words like that, you really still need to explain yourself some more. I'm just grasping at straws here.
      - pg 17y ago
        Hardly. One form of economic growth is increased efficiency.
        neva 17y ago
        Which will hardly be able to cope with the looming scarcity of resources, considering the numbers of population growth rate.
      - netsp 17y ago
        That's rubbish. Economic growth is not simply more of the same. The next 20% will not be like the last. The 20% before that was also different. If we can get twice as far on a litre of petrol with no other costs (worse car, etc.) that is economic growth.
  - russell 17y ago
    Sure. Pick some stasis period before modern capitalism. No central heating. Periodic starvation. No health care. Very low literacy. No universal education. Forty percent murder rate for males. Slavery. No Internet!! I sure want to be there.
    - fnid 17y ago
      correlation does not imply causation. There's no reason to believe these advancements were the result of capitalism. Your tone indicates as much. What about the stone age, bronze age, iron age... gun powder, the wheel... Fire! These inventions may have had a much greater impact on human well-being than anything you mentioned and all were way before the promotion of capitalism.
    - onreact-com 17y ago
      Most people in the world don't have central heating, almost one billion is starving (a global food crisis was there before the financial crisis and still goes on), only a few nations guarantee health care, capitalist nations like the US don't. Globally the literacy is very poor and education rudimentary. There are more slaves now in the world than in any other periods of history. Capitalist countries like the US, Mexico, Colombia, South Africa are the most crime ridden in the world. In the US alone more than a million people is in prison. People live in gated communities to protect themselves. Due to the digital divide only a small part of the world population has Internet access.
      - jibiki 17y ago
        > Most people in the world don't have central heating, almost one billion is starving (a global food crisis was there before the financial crisis and still goes on), only a few nations guarantee health care, capitalist nations like the US don't. Surely, a greater portion of the population has access to food and medicine than at almost any other point in history. Communism has scored some massive failures when it comes to feeding people (5 year plans, etc. etc...) > Globally the literacy is very poor and education rudimentary. Surely, the world literacy rate is higher than at almost any point in history. > There are more slaves now in the world than in any other periods of history. As a percentage? > Capitalist countries like the US, Mexico, Colombia, South Africa are the most crime ridden in the world. I believe this point to be accurate and relevant, although the high US crime rate is probably also related to our common law system. > Due to the digital divide only a small part of the world population has Internet access. But still far more than at almost any point in history! The internet is a great sticking point in debates about government investment. I don't think it would exist without capitalism, but I gather that it was greatly accelerated by government R&D money.
- TomOfTTB 17y ago
  In fairness, the article says he's not against capitalism he just believes in regulated capitalism In fact, though I'll be the first to admit I'm not familiar with Minsky's work, the article makes it sound like his theories are basically what we've been doing for the last 2 years (Prop up failing industries, use the government as an employer of last resort, etc...) I have two issues with this: 1. We've been doing just that for 2 years and the end result thus far is we're still in a recession and our government is dramatically poorer. When the government has to hold up "slowing job loss" as an accomplishment that doesn't impress me (It's also what FDR tried for 10 years to no avail) 2. In large part pumping money into failing institutions is what got us here. Let me cut through the economics babble and just put this in logical terms. Capitalism works because the best businesses succeed while the worst fail. If you prop up the worst so they can't fail you get a situation where they'll take crazy risks because there's no fear of failure. Hence where we are now.
  - onreact-com 17y ago
    "Capitalism works because the best businesses succeed while the worst fail." So Microsoft, Wal-Mart, McDonald's and Exxon are the best?
    - fburnaby 17y ago
      They're the best at capitalism.
      - pbhjpbhj 17y ago
        If they could pay their workers nothing and get new ones when they were too sick to work; if they could do more clear cutting of endangered forest to reduce costs; if they could manipulate the markets more to make the poor give more to the rich ... they'd be even better capitalists ...
        onreact-com 17y ago
        Yeah, but they do most of that already unless it's illegal and they can't get away with it.
adharmad 17y ago
Psychology and human nature play a tremendous role in economics - something which folks seem to discount completely.
- maxharris 17y ago
  That's the fad right now - but I doubt that this is much more than tweaking.
  - fnid 17y ago
    this is why capitalism has failed. It has enabled the propagation of negative human traits. Traits we all agree are detrimental to our survival. Greed is not good. We all know it. It promotes overconsumption and hoarding of resources. We need a system that propagates benevolence and vision.
    - maxharris 17y ago
      But greed, when coupled with reason, is good! What is in your rational long-term self-interest is what is good for you. To want that, to be greedy for it - to desire it above all else - is what you should always strive to do. Please, pick apart the phrase "rational long-term self-interest" - and note that "long-term" means on the timescale of your lifetime. I disagree with your implicit Malthusian assumption that resources can be overconsumed/hoarded in a meaningful way. The universe is chock-full of atoms and energy, and the key to unlocking more is always just a little more technology (which we have a pretty good track record at doing!)
      - fnid 17y ago
        Those bankers on wall street destroyed the world economy and in doing so, secured way more than enough for themselves to satisfy an entire lifetime of living and several more generations to boot. Greed is not good. To quote MGMT, "Take only what you need from it."
        17y ago
maxharris 17y ago
It's not capitalism that failed - it's the government's regulatory interference! The Federal Reserve, by setting a single interest rate for the entire economy, destroys local market signals. (What you want is a locally adjusted rates to reflect natural cycles in decoupled local economies - this is what happens if you don't regulate centrally.) The government's monopoly on the issuance of currency is important, too. And what about the SEC that went after innocent people like Martha Stewart and ImClone founder Sam Waksal, while blind to actual crooks such as Bernard Madoff? What about the federally-owned Fannie Mae and Freddie Mac? They were to a large extent responsible for the housing crisis. They have so much of the market, and it's government regulation and backing that gave it to them. On a national scale, private business, if devoid of these corrupting government influences, would not fail all at once, nor would it fail with such lasting severity as we've seen in the last century. It's notable that all of the regulatory bodies (and a great many more that I did not mention) were created in the last 100 years to "stabilize" the market - but it doesn't take great genius to see that all they have accomplished is to take little local pockets of boom/bust (which add up to overall growth and stability on a national scale), and pack them into huge booms and busts that cause much longer and deeper cycles that you can't escape from as easily by moving to a new city. And don't forget that this sort of centralization is important for marshaling resources necessary to run an expansionist empire (think about the economic policies in America during the two world wars, and the American empire that resulted). To help differentiate between the "capitalism" the article smears (what should be called a mixed economy - some capitalism, some regulation), and actual capitalism, see http://www.capitalism.org/ http://www.capitalism.org/.
- hop 17y ago
  You mean to say there would be unintended consequences to the Fed dropping interest rates after 9/11 to below market rates and cranking up the printing press? No...
- bilbo0s 17y ago
  It was not Capitalism or Government Regulations that caused the current unpleasantness. Capitalism didn't fail. Anymore than Socialism, or any other economic -ism. When nations allocate resources in a foolish manner, they fritter away their resources. End of story. No need to 'restructure' capitalism so that it doesn't happen again. Capitalism is fine. Just don't fritter away your resources. A good example of frittering away resources is diverting roughly 30% of your nation's personal income EVERY YEAR to one sector, Financial Services, in the form of 'guaranteed bonuses'. BTW, these people are managing roughly 20% of our nation's annual personal income. About 20% goes in through mutual funds and 401ks and the like, and for managing it, we pay them 30%. Anyone other than me see a problem here? Another example, starting wars in intractable parts of the world to go after a man whose stated aim is to get us to start a war in an intractable part of the world. And thereby bankrupt us. I heard the other day that the United States and Israel are thinking about placing 'a security umbrella over the Middle East'. I am not a general, but 'security umbrella over the Middle East' sounds pricey to me. Or how about allocating more resources to Real Estate than to new technology development. That's a good example of foolishness. BTW - Fannie and Freddie were not government owned, or even government backed. The entity I believe you are talking about is Ginnie Mae, which takes care of HUD housing, housing for Native Americans and handles housing for our nation's Military Veterans. Basically, Ginnie handles all of the sub prime people. Further . . . and are you ready for this? Ginnie is solvent! The only problems it has, it acquired in clumsy government attempts to save Fannie and Freddie. 'Give us all of your money, we need to save Fannie and Freddie who went private, acted foolishly and fell flat on their faces.' That's basically what they told poor little Ginnie. Foolishness. Additionally, Ginnie was EXPLICITLY backed, whereas Fannie and Freddie were IMPLICITLY backed. Which brings me to another foolish practice, letting private corporations encourage the belief on the part of the general populace that they are backed by the US government. There should be no such thing as implicit backing, that is fraud, plain and simple. In summary, they say no matter how far a jackass travels he will not come back a horse. Foolishness is the cause of our problems, and no matter what structure you place a fool in, he will still be a fool. Capitalism may have problems, or even create them. Government Regulations may have problems, or even create them. But those are not the problems that got us to where we are today. Foolishness did. The abiding belief that money can create money. The belief that ANY economic system can give you something for nothing, is foolish. We can stay with Capitalism. We can even submit to government regulation. But by all means we must invest our money wisely. Realize that in the future you may have to do real work. You may need to produce real things. You may need to sell them to real people, for real money. The whole stock market and real estate thing may not work for you anymore the way it used to. That is the economy, or the market, or whatever you want to call it, doing what it is supposed to do! We are in a different stage of Capitalism. Stock markets may work beautifully for today's Chinese citizens, for today's American's . . . not so much. Don't whine about it, or try to set things up so that they work a while longer. This is Capitalism, the market is showing us the way, we just don't like the road ahead.
rw 17y ago
I believe markets are tools, not rules. This is one of those times when my background in economics threatens to overwhelm me with analysis paralysis while writing a comment. Just to be concise about it: economics is a descriptive science, but we conflate it with a prescriptive one. Sometimes, that is definitely warranted--as a society, markets are a way to get things done, and we need to understand them as much as we can in order to implement them. But the hubris that comes with thinking that we basically get it, that we comprehend these ridiculously complex chaotic dynamical systems, leads to mis-allocated resources and anti-humanist policies.
hvs 17y ago
Learning economics from random articles in the mainstream press is like learning software development from reading Wired. There are many schools of thought in the world of economics, and they often disagree as to the causes of booms and busts (greedy capitalism, regulatory structures, the monetary system, etc). (Correct) economics attempts to describe what has happened in the past, it has very little to actually say about what you should do. If it did, all of the economists of the world would be filthy rich (they aren't).
yannis 17y ago
During 1998, two global leaders came from the Americas to South Africa. Bill Clinton and Fidel Castro. In their speeches before the South African parliament Clinton described the global economy as a partnership, whereas according to Fidel Castro “the world, had become an enormous gambling house”. As a mere observant of the events around me at the time, I considered Clinton’s response bulshiterian and Castro’s response truthy. Fortunately for all of us Castro’s preferred economic system has proven more unstable than capitalism and totally collapsed, but unfortunately the current prevailing economic system of capitalism has also failed to evolve in the right direction. Capitalism has still two inherent disadvantages: (01) It is a highly unstable system (02) It has a propensity to make the richer richer and the poorer poorer. My solution? Code happily and wait for the storm to pass :)
- onreact-com 17y ago
  I agree with you but you make one mistake. The Cuban system is capitalism as well, state capitalism where all capital is accumulated and managed by the state. They might call it communism or socialism to fool the people there but in both systems the means of production belong the people but in Cuba they don't. See: http://en.wikipedia.org/wiki/State_capitalism http://en.wikipedia.org/wiki/State_capitalism The GDR was also called democratic but it never was, so don't get fooled by propaganda labels.
- dgordon 17y ago
  "(02) It has a propensity to make the richer richer and the poorer poorer." The poor in the first world are richer than the rich were for most of history. The poor in the third world are no poorer than in the past. So no.
  - pbhjpbhj 17y ago
    Or if you're a person in the third world (and assuming everything else about your statement is true, which I have doubts on) - we're still poor and the rich in the developed world are richer. So yes.
    - 17y ago
onreact-com 17y ago
Capitalism worked to some extent and for some people, mainly capitalists, during a short period of time, something like 100 - 150 years. Capitalism replaced feudalism, a system that didn't work anymore at all, it did of course only for a few people as well while it lasted. Now capitalism does not work anymore either. It's the information age and the situation has changed to such an extent that a new system will be born out of the current demise of capitalism. Those who will adopt the new system first, the most progressive parts of the world, will succeed first. Some parts of the world still stick to feudalism. In Nepal a monarch just has been ousted. So progress won't happen everywhere at once this time either. We don't exactly know what will follow, maybe Perecon or a similar system but we can't stick to capitalism as if nothing has changed since the steam engine has been invented. The digital economy has it's own rules (see open source, music industry failure, successful companies making no profits like Twitter) and will most probably pave the way. Nobody would suggest that we have to keep using the steam engine when there are better ways to solve the problems we face. Nonetheless most people treat the steam engine capitalism as the end of history. Those people will soon become history themselves.
- dgordon 17y ago
  It remains to be seen whether Twitter will actually succeed.

15 points by robg 17y ago

hop 17y ago

Right, capitalism has been a huge failure. Let's dismiss the meteoric rise of human race since Americas founding, and judge capitalism on a market correction.

fnid 17y ago
Aneurysms grow much faster than the surrounding blood vessels, but that doesn't make them good. It makes them bad. It may be the extreme growth that capitalism enables and encourages that is the reason it is a failure. It makes us focus on growth above all else. But why is growth in and of itself a good thing? Why isn't stability better? Growth is risky. Financial analysts focused on the long term are looking for slow stable compounding growth. Long term investors know that rocketing growth is unsustainable and is not the goal.
- DanielBMarkham 17y ago
  I would be very interested in having you explain that further, because it makes no sense to me at all. Capitalism is bad because it lets us grow too quickly? I don't understand. Are you talking about market bubbles? Like that have been going on for four hundred years or more? If so, that's called a feedback loop: the system overgrows and then contracts. When you make a mistake and correct it, there's some adjustment involved. Surely that's better than no adjustment at all, right? I mean, to have everything perfectly valued would only happen in a fantasy world. Or perhaps I misunderstood.
  - fnid 17y ago
    Aneurysms are made possible through a weakness in the blood vessel. Meteoric growth in a capitalist economy, as the post I was originally responding to mentions, is the result of a weakness in human psychology -- greed. I do not believe judging a phenomenon as a success due to an effect of a weakness is rationally sound. I would say capitalism is not as good an economic system as one that enables steady, predictable co-existence of human society and synergy with the earth above meteoric, unsustainable growth, which on the downside causes pain, suffering, misery, death and perhaps the decimation of spaceship earth.
    - cwan 17y ago
      Meteoric growth in a capitalist economy is just as much about need as it is greed. The beauty of capitalism and markets is that they only provide signals and incentives - reacting to those incentives which are a direct reflection of immediate need/want can come as a result of altruism or greed but in the end, the result is implicit cooperation. Besides, the one driver of commerce and every little transaction isn't and can't be greed anyway - it's trust. It is silly to blame this recent bubble on capitalism and markets when it was just as much driven if not started by state actors. As for the rest - "unsustainable growth, which on the downside causes pain, suffering, misery, death and perhaps the decimation of spaceship earth" - bullocks. Capitalism and markets have resulted in less pain, suffering, misery, and death than any of the alternatives. Indeed it has been a central driver in alleviating many of these problems by ensuring need is reflected in the incentives. Growth in the longer run means innovation and that more needs are being met and more suffering is being averted - and that, at least to me, is a good thing.
      - neva 17y ago
        > the result is implicit cooperation. Right. The implicit cooperation. The implicit cooperation by the wealthy few that ultimately best serves the moguls' already grotesquely large fortune.
        DanielBMarkham 17y ago
        Just because I sell you an apple for a dollar doesn't make me an evil mogul and you an oppressed worker. As an aside, we should really teach Marx better in modern schools. We teach the brilliance of his insights without then following it up with the many ways he was mistaken. I think sometimes Marx is being taught by the Humanities department and not Economics professors.
      - pbhjpbhj 17y ago
        "more needs are being met and more suffering is being averted" If by suffering you mean the feeling of inferiority someone gets when they don't have leather seats in their caddy and a 12v 2litre engine, don't have the latest iPhone, can't cross the world in 20 hours. Capitalism magnifies inequality as those with money get richer and those without toil to that end.
  - onreact-com 17y ago
    We have only one planet. We already use up more resources than it has. More economic growth equals destruction on a planetary level.
    - DanielBMarkham 17y ago
      destruction on a planetary level Surely you can't believe the planet itself is going to explode or something, can you? I mean, what you're really saying is that more growth will make the planet into a state that you find offensive and hard to live with -- dirty skies, polluted water, etc. If that's the case then I'm with you. Glad to talk about how clean we want to make things and what kind of rules we want to put on ourselves so the world meets our ascetic approval. (offline, of course) I don't think you believe the planet itself is going to be destroyed. Life will continue, right? It'll just get ugly and uninhabitable for poor people -- which is not an acceptable option, by the way, but it's not destruction. Or are you somewhere in the middle, thinking that somehow the planet will manage to kill just us and the rest of the ecosystem (or what's left of it) will continue? When you use words like that, you really still need to explain yourself some more. I'm just grasping at straws here.
    - pg 17y ago
      Hardly. One form of economic growth is increased efficiency.
      - neva 17y ago
        Which will hardly be able to cope with the looming scarcity of resources, considering the numbers of population growth rate.
    - netsp 17y ago
      That's rubbish. Economic growth is not simply more of the same. The next 20% will not be like the last. The 20% before that was also different. If we can get twice as far on a litre of petrol with no other costs (worse car, etc.) that is economic growth.
- russell 17y ago
  Sure. Pick some stasis period before modern capitalism. No central heating. Periodic starvation. No health care. Very low literacy. No universal education. Forty percent murder rate for males. Slavery. No Internet!! I sure want to be there.
  - fnid 17y ago
    correlation does not imply causation. There's no reason to believe these advancements were the result of capitalism. Your tone indicates as much. What about the stone age, bronze age, iron age... gun powder, the wheel... Fire! These inventions may have had a much greater impact on human well-being than anything you mentioned and all were way before the promotion of capitalism.
  - onreact-com 17y ago
    Most people in the world don't have central heating, almost one billion is starving (a global food crisis was there before the financial crisis and still goes on), only a few nations guarantee health care, capitalist nations like the US don't. Globally the literacy is very poor and education rudimentary. There are more slaves now in the world than in any other periods of history. Capitalist countries like the US, Mexico, Colombia, South Africa are the most crime ridden in the world. In the US alone more than a million people is in prison. People live in gated communities to protect themselves. Due to the digital divide only a small part of the world population has Internet access.
    - jibiki 17y ago
      > Most people in the world don't have central heating, almost one billion is starving (a global food crisis was there before the financial crisis and still goes on), only a few nations guarantee health care, capitalist nations like the US don't. Surely, a greater portion of the population has access to food and medicine than at almost any other point in history. Communism has scored some massive failures when it comes to feeding people (5 year plans, etc. etc...) > Globally the literacy is very poor and education rudimentary. Surely, the world literacy rate is higher than at almost any point in history. > There are more slaves now in the world than in any other periods of history. As a percentage? > Capitalist countries like the US, Mexico, Colombia, South Africa are the most crime ridden in the world. I believe this point to be accurate and relevant, although the high US crime rate is probably also related to our common law system. > Due to the digital divide only a small part of the world population has Internet access. But still far more than at almost any point in history! The internet is a great sticking point in debates about government investment. I don't think it would exist without capitalism, but I gather that it was greatly accelerated by government R&D money.
TomOfTTB 17y ago
In fairness, the article says he's not against capitalism he just believes in regulated capitalism In fact, though I'll be the first to admit I'm not familiar with Minsky's work, the article makes it sound like his theories are basically what we've been doing for the last 2 years (Prop up failing industries, use the government as an employer of last resort, etc...) I have two issues with this: 1. We've been doing just that for 2 years and the end result thus far is we're still in a recession and our government is dramatically poorer. When the government has to hold up "slowing job loss" as an accomplishment that doesn't impress me (It's also what FDR tried for 10 years to no avail) 2. In large part pumping money into failing institutions is what got us here. Let me cut through the economics babble and just put this in logical terms. Capitalism works because the best businesses succeed while the worst fail. If you prop up the worst so they can't fail you get a situation where they'll take crazy risks because there's no fear of failure. Hence where we are now.
- onreact-com 17y ago
  "Capitalism works because the best businesses succeed while the worst fail." So Microsoft, Wal-Mart, McDonald's and Exxon are the best?
  - fburnaby 17y ago
    They're the best at capitalism.
    - pbhjpbhj 17y ago
      If they could pay their workers nothing and get new ones when they were too sick to work; if they could do more clear cutting of endangered forest to reduce costs; if they could manipulate the markets more to make the poor give more to the rich ... they'd be even better capitalists ...
      - onreact-com 17y ago
        Yeah, but they do most of that already unless it's illegal and they can't get away with it.

adharmad 17y ago

Psychology and human nature play a tremendous role in economics - something which folks seem to discount completely.

maxharris 17y ago
That's the fad right now - but I doubt that this is much more than tweaking.
- fnid 17y ago
  this is why capitalism has failed. It has enabled the propagation of negative human traits. Traits we all agree are detrimental to our survival. Greed is not good. We all know it. It promotes overconsumption and hoarding of resources. We need a system that propagates benevolence and vision.
  - maxharris 17y ago
    But greed, when coupled with reason, is good! What is in your rational long-term self-interest is what is good for you. To want that, to be greedy for it - to desire it above all else - is what you should always strive to do. Please, pick apart the phrase "rational long-term self-interest" - and note that "long-term" means on the timescale of your lifetime. I disagree with your implicit Malthusian assumption that resources can be overconsumed/hoarded in a meaningful way. The universe is chock-full of atoms and energy, and the key to unlocking more is always just a little more technology (which we have a pretty good track record at doing!)
    - fnid 17y ago
      Those bankers on wall street destroyed the world economy and in doing so, secured way more than enough for themselves to satisfy an entire lifetime of living and several more generations to boot. Greed is not good. To quote MGMT, "Take only what you need from it."
      - 17y ago

maxharris 17y ago

It's not capitalism that failed - it's the government's regulatory interference! The Federal Reserve, by setting a single interest rate for the entire economy, destroys local market signals. (What you want is a locally adjusted rates to reflect natural cycles in decoupled local economies - this is what happens if you don't regulate centrally.) The government's monopoly on the issuance of currency is important, too. And what about the SEC that went after innocent people like Martha Stewart and ImClone founder Sam Waksal, while blind to actual crooks such as Bernard Madoff? What about the federally-owned Fannie Mae and Freddie Mac? They were to a large extent responsible for the housing crisis. They have so much of the market, and it's government regulation and backing that gave it to them. On a national scale, private business, if devoid of these corrupting government influences, would not fail all at once, nor would it fail with such lasting severity as we've seen in the last century. It's notable that all of the regulatory bodies (and a great many more that I did not mention) were created in the last 100 years to "stabilize" the market - but it doesn't take great genius to see that all they have accomplished is to take little local pockets of boom/bust (which add up to overall growth and stability on a national scale), and pack them into huge booms and busts that cause much longer and deeper cycles that you can't escape from as easily by moving to a new city. And don't forget that this sort of centralization is important for marshaling resources necessary to run an expansionist empire (think about the economic policies in America during the two world wars, and the American empire that resulted). To help differentiate between the "capitalism" the article smears (what should be called a mixed economy - some capitalism, some regulation), and actual capitalism, see http://www.capitalism.org/ http://www.capitalism.org/.

hop 17y ago
You mean to say there would be unintended consequences to the Fed dropping interest rates after 9/11 to below market rates and cranking up the printing press? No...
bilbo0s 17y ago
It was not Capitalism or Government Regulations that caused the current unpleasantness. Capitalism didn't fail. Anymore than Socialism, or any other economic -ism. When nations allocate resources in a foolish manner, they fritter away their resources. End of story. No need to 'restructure' capitalism so that it doesn't happen again. Capitalism is fine. Just don't fritter away your resources. A good example of frittering away resources is diverting roughly 30% of your nation's personal income EVERY YEAR to one sector, Financial Services, in the form of 'guaranteed bonuses'. BTW, these people are managing roughly 20% of our nation's annual personal income. About 20% goes in through mutual funds and 401ks and the like, and for managing it, we pay them 30%. Anyone other than me see a problem here? Another example, starting wars in intractable parts of the world to go after a man whose stated aim is to get us to start a war in an intractable part of the world. And thereby bankrupt us. I heard the other day that the United States and Israel are thinking about placing 'a security umbrella over the Middle East'. I am not a general, but 'security umbrella over the Middle East' sounds pricey to me. Or how about allocating more resources to Real Estate than to new technology development. That's a good example of foolishness. BTW - Fannie and Freddie were not government owned, or even government backed. The entity I believe you are talking about is Ginnie Mae, which takes care of HUD housing, housing for Native Americans and handles housing for our nation's Military Veterans. Basically, Ginnie handles all of the sub prime people. Further . . . and are you ready for this? Ginnie is solvent! The only problems it has, it acquired in clumsy government attempts to save Fannie and Freddie. 'Give us all of your money, we need to save Fannie and Freddie who went private, acted foolishly and fell flat on their faces.' That's basically what they told poor little Ginnie. Foolishness. Additionally, Ginnie was EXPLICITLY backed, whereas Fannie and Freddie were IMPLICITLY backed. Which brings me to another foolish practice, letting private corporations encourage the belief on the part of the general populace that they are backed by the US government. There should be no such thing as implicit backing, that is fraud, plain and simple. In summary, they say no matter how far a jackass travels he will not come back a horse. Foolishness is the cause of our problems, and no matter what structure you place a fool in, he will still be a fool. Capitalism may have problems, or even create them. Government Regulations may have problems, or even create them. But those are not the problems that got us to where we are today. Foolishness did. The abiding belief that money can create money. The belief that ANY economic system can give you something for nothing, is foolish. We can stay with Capitalism. We can even submit to government regulation. But by all means we must invest our money wisely. Realize that in the future you may have to do real work. You may need to produce real things. You may need to sell them to real people, for real money. The whole stock market and real estate thing may not work for you anymore the way it used to. That is the economy, or the market, or whatever you want to call it, doing what it is supposed to do! We are in a different stage of Capitalism. Stock markets may work beautifully for today's Chinese citizens, for today's American's . . . not so much. Don't whine about it, or try to set things up so that they work a while longer. This is Capitalism, the market is showing us the way, we just don't like the road ahead.

rw 17y ago

I believe markets are tools, not rules. This is one of those times when my background in economics threatens to overwhelm me with analysis paralysis while writing a comment. Just to be concise about it: economics is a descriptive science, but we conflate it with a prescriptive one. Sometimes, that is definitely warranted--as a society, markets are a way to get things done, and we need to understand them as much as we can in order to implement them. But the hubris that comes with thinking that we basically get it, that we comprehend these ridiculously complex chaotic dynamical systems, leads to mis-allocated resources and anti-humanist policies.

hvs 17y ago

Learning economics from random articles in the mainstream press is like learning software development from reading Wired. There are many schools of thought in the world of economics, and they often disagree as to the causes of booms and busts (greedy capitalism, regulatory structures, the monetary system, etc). (Correct) economics attempts to describe what has happened in the past, it has very little to actually say about what you should do. If it did, all of the economists of the world would be filthy rich (they aren't).

yannis 17y ago

During 1998, two global leaders came from the Americas to South Africa. Bill Clinton and Fidel Castro. In their speeches before the South African parliament Clinton described the global economy as a partnership, whereas according to Fidel Castro “the world, had become an enormous gambling house”. As a mere observant of the events around me at the time, I considered Clinton’s response bulshiterian and Castro’s response truthy. Fortunately for all of us Castro’s preferred economic system has proven more unstable than capitalism and totally collapsed, but unfortunately the current prevailing economic system of capitalism has also failed to evolve in the right direction. Capitalism has still two inherent disadvantages: (01) It is a highly unstable system (02) It has a propensity to make the richer richer and the poorer poorer. My solution? Code happily and wait for the storm to pass :)

onreact-com 17y ago
I agree with you but you make one mistake. The Cuban system is capitalism as well, state capitalism where all capital is accumulated and managed by the state. They might call it communism or socialism to fool the people there but in both systems the means of production belong the people but in Cuba they don't. See: http://en.wikipedia.org/wiki/State_capitalism http://en.wikipedia.org/wiki/State_capitalism The GDR was also called democratic but it never was, so don't get fooled by propaganda labels.
dgordon 17y ago
"(02) It has a propensity to make the richer richer and the poorer poorer." The poor in the first world are richer than the rich were for most of history. The poor in the third world are no poorer than in the past. So no.
- pbhjpbhj 17y ago
  Or if you're a person in the third world (and assuming everything else about your statement is true, which I have doubts on) - we're still poor and the rich in the developed world are richer. So yes.
  - 17y ago

onreact-com 17y ago

Capitalism worked to some extent and for some people, mainly capitalists, during a short period of time, something like 100 - 150 years. Capitalism replaced feudalism, a system that didn't work anymore at all, it did of course only for a few people as well while it lasted. Now capitalism does not work anymore either. It's the information age and the situation has changed to such an extent that a new system will be born out of the current demise of capitalism. Those who will adopt the new system first, the most progressive parts of the world, will succeed first. Some parts of the world still stick to feudalism. In Nepal a monarch just has been ousted. So progress won't happen everywhere at once this time either. We don't exactly know what will follow, maybe Perecon or a similar system but we can't stick to capitalism as if nothing has changed since the steam engine has been invented. The digital economy has it's own rules (see open source, music industry failure, successful companies making no profits like Twitter) and will most probably pave the way. Nobody would suggest that we have to keep using the steam engine when there are better ways to solve the problems we face. Nonetheless most people treat the steam engine capitalism as the end of history. Those people will soon become history themselves.

dgordon 17y ago
It remains to be seen whether Twitter will actually succeed.