Why Capitalism is Doomed

[Widdekind]

the gov't makes the call [on resource allocation] ... based on political reasons ... to satisfy their constituents at the expense of every one else.

Government = Force
"short-term minded" politicians wield Government Force, for wealthy special-interest-groups, who "socio-pathically" care naught for anyone else

if so, then "un-caring Force" determines how assets are distributed, i.e. "divvied up" ("mercenary minded mercantilism" ?)

 

[itfitzme]

increasing amounts of capital will go into non-productive areas where a "return" can be achieved independent of consumer demand.

how is that possible? Does the return come from the Girl Scouts?? Please tell us where it comes from.

The return comes from consumers paying prices that are in excess of the market value that is driven by current and future consumption needs only. The demand for the investment, based on the additional demand by investors, that are paying prices based on the expectation of increased prices due to future investors drives the price above the natural current and future consumption market demand.

Market prices are based on four factors. They are based on consumers driving prices based on current personal consumption. They are based on consumers driving prices based on their personal expectation of future personal consumption. They are based on investors driving prices based on the expectation of the future personal consumption of others. And they are driven by investors driving prices based on the expectation of future investors driving prices based on thier expectation of the even further future personal consumption of others. And lastly, they are driven by investors driving prices based on the expectation of future investors driving prices based on their expectation of even further future future investors. It is in this last driver, and the mistaking price increases as being based on future consumption rather then future investment, that the error occurs. Not only is the system unable to precisely predict future consumption, but it is completely unable to predict the invesment of future investors that intend to invest based on even future consumption.

Eventually, the investment driven investments becomes so detached from the current level of consumer driven demand that prices collapse. When the current price begins to drive consumer driven demand out of the market, the rate of change becomes based soley on the investment driven demand. At some point, the rate of change of prices begins to fall below the expected ROI.

The housing market presents a return based on nothing more then demand stimulated by the expectation of a return in equity based on increasing housing prices. The stock market presents a return based on nothing more then a demand stimulated by the expectation of a return based on increasing stock market prices. Every manner of investment, every manner of good, is capable of becoming a bubble.

At it's core, current prices are driven by current demand for current consumption. Investing in the product relies on the expectation of future consumption driven prices. It increases the current price above the current demand driven level, spreading the consumption over time. It keeps society from over consuming now as investors, having proven their ability to save by constraining their own consumption, put that savings into the investment and hold on to it until the good becomes more needed in the future. The clue to future consumption is the rate of change of current consumption.

The first and foremost problem is simply that no one has a crystal ball.

delta_Demand(t) = f(delta_Demand(t-1) and no other factors.)

is the basic issue. It is really just that simple.

It is very simply when the "consumer" is the investor, investing for the sake of investing. At that point, the pricing of the good becomes detached from the more basic nature of consumption, the need to sustain life and improve standard of living.

Ideally, investors investing for the sake of the investment, does not exist, isolated from consumption for the sake of consuming. There are always consumers interested in the product, such as housing, for the purpose of personal ownership. And, when it exists to a smaller degree, investing for the sake of investing, that relies on the underlying consumption demand, provides the market with the opportunity to redistribute that consumption to where it is most demanded, where it is most needed.

The failure occurs when investing for the sake of investing, driven primarily by the gains realized by the demand of investors, becomes the primary driving force. At that point, an investment bubble forms. And that bubble bursts when investment driven demand is no longer able to keep the rate of change above the expected ROI. By that time, the market price has become so elevated above the natural level of consumption, that when the market corrects, it falls precipitously. And with it, demand not only falls off as an investment, but it also falls off as a consumption product. And with it, goes the investment of individuals that had invested in future consumption.

 

[itfitzme]

We will do better to look at "oligopolies".

There is merit to this. But in my understandings, this is more of a result of corporatism, than the root cause of this failing economic system. Let's look at some info on both.

1) Ologopolies do set price points. They do it all the time. In markets, the market leader sets price points. BP sets price points. Home Depot sets local market price points. Those advertisements that say, "will beat every price in town" isn't meant for you, it's meant for the other stores, telling them not to try and undercut the price.

2) Corporatism doesn't mean political power. It is influence over it's members and political representation.

You have created your own language and concept that you are calling "corporatism". What you looking at isn't "corporatism". "Corporatism" as a term, exists for other purposes. Corporatism, as a general term, means the collection of individuals into a group that has a common purpose. And it exists, whether is be in capitalism, facism, communism, or any other economic system.

What exists, as a term, is "oligopoly" and it is exactly what you are intending with the exception that you are taking the market force and eventual power that oligopolies obtain and adding them into the definition to make it more specific.

And you doing so on a perception that markets are perfect and that market imperfections do not exist.

That, in a political system, the market forces that oligopolies obtain becomes a leverage into the political area which is intended to balance the markets, doesn't change reality that they are oligopolies at their core.

They are simply oligopolies within the context of politics.

It is all fine and dandy, lacking any other terminology and having not studied the fundamental, to coin one's own phrase. But eventually, when we get around to discussing it in a public forum, we have to take our personal terminology and replace it with the terms that have been coined by the experts that have come before us.

The Carnot monopoly, and the process of the oligopolies are well defined, down to a mathematical model, in describing market imperfections. Oligopolies, like monopolies, are part of the free market and exist because, in practice, the ideal free market does not always exist.

And because it is an imperfection, ologopolies do ultimately set price points. They do it all the time. Home Depot sets price points.

You have taken a very abstract term, "corporatism", and forced it to fit your observation of businesses with political influence. You are doing so based on "serving as organs of political representation and exercising control over persons and activities within their jurisdiction", mistaking the "exercising control over persons and activities within their jurisdiction" to mean political influence. It means, persons and activities within the corporation. The jurisdiction is within the corporation, not external to it. The definition says, "political representation and ....." The political representation is in addition to what follows "and". "And" seperates "political representation" as distinct from "exercising control over...". "A" and "B" makes "A" an object, exclusive from "B".

Ever company is a "corporation".

The problem is, that your definition misses all the fundamental and real physical processes that give your "corporations" the power that they have to have the "excess" political influence. The power comes out of the market leverage and the capital accumulation due to that leverage. Ologopolies, like monopolies, are able to control prices.

 

[whitehall]

Within most of our lifetimes we saw the effects of Nazism and how many murders were committed in the name of socialism and communism and now that we have a left leaning president there is a faction of lazy Americans(?) that want to overthrow the government and create a new Constitution. Why not rename the the Country "the peoples republic of america" sounds about right. It should last about two or three years until criminals who seize power at the point of a gun write another constutution and another.

 

[dblack]

The problem is, that your definition misses all the fundamental and real physical processes that give your "corporations" the power that they have to have the "excess" political influence. The power comes out of the market leverage and the capital accumulation due to that leverage. Ologopolies, like monopolies, are able to control prices.

Disputes over terminology aside, the disagreement seems to be primarily over the source of illicit corporate power. Your view rests on the assumption that the oligopolies are a result of unregulated markets, and ours on the assumption that they are dependent on state intervention. Would you say that's a fair assessment?

For what it's worth, TASB's use of the term 'corporatism' is spot on from what I can see, and it describes the core guiding principle of both major political parties. The existence of oligopolies is largely independent of corporatism, though it certainly supports them.

 

[itfitzme]

free-markets = no Force ("Force vs. freedom")

Not so.

Free-markets do use force. They depend on it.

Force, typically, is not force by physical violence or the threat of it. Force is coercive. A balanced free market depends on a balance of coercion. An imbalanced market occurs because of an imbalance of market power or leverage. Force can come from any one of a combination of punishment or reward, positive or negative. Force does not mean positive punishment only.

Withholding something is modifying behavior by using power. And, in fact, this is the primary element of free market force in negotiation. Either you give me $10, or I won't give you gasoline.

The story of Tom's Toothpaste is one of free market force. Tom's Toothpaste came out with a line that used Arm and Hammer Baking Soda. And, it was in direct competition with Arm and Hammer, which had it's own line. In a meeting, the execs of Arm and Hammer let the president of Tom's Toothpaste know, in no uncertain terms, that if Tom's Toothpaste began to cut into their market share in a discernible manner, then they would be cut off.

The free market relies on force. And it relies on the force of government to exist. Without the government there would be no contract enforcement and no property ownership rights. Without the force of government, the free market would be nothing more then anarchy, slowly building through history to the point we have now, a government founded on the ideals of democracy, using it's force to ensure that the free market exists and is balance.

 

[dblack]

The free market relies on force. And it relies on the force of government to exist. Without the government there would be no contract enforcement and no property ownership rights. Without the force of government, the free market would be nothing more then anarchy, slowly building through history to the point we have now, a government founded on the ideals of democracy, using it's force to ensure that the free market exists and is balance.

That's fine and true, until you throw in the trojan at the end there about 'balance'. What exactly do you mean by that?

 

[Katzndogz]

Capitalism has always worked, communisim and socialism has never worked. That's why communist countries like China and Russia are transititioning to capitalism.

 

[daveman]

Change the humans! Make them conform....same as it ever was....

Not what this is about. Capitalism is doomed BECAUSE of human nature, and because it can no longer provide prosperity for most people.

U.S. millionaires population expanded by 8% in 2010 - Mar. 16, 2011

It is if you're willing to work for it.

No one's going to give you wealth because it's NOT FAIR!!! if they don't.

 

[itfitzme]

What other pursuits?

Health care for a retiring baby boom generation?

And then the new technology will be life time extension which will create a whole new issue, same as the old issue, where we have a shortage of resources on too much demand and an exploding population as a result of too few deaths per birth.

 

[Dragon]

Change the humans! Make them conform....same as it ever was....

Not what this is about. Capitalism is doomed BECAUSE of human nature, and because it can no longer provide prosperity for most people.

U.S. millionaires population expanded by 8% in 2010 - Mar. 16, 2011

It is if you're willing to work for it.

No one's going to give you wealth because it's NOT FAIR!!! if they don't.

Are you saying that we can ALL be millionaires?

The U.S. economy had a nominal size of $15 trillion in 2011. Per capita GDP was $48k -- which means, of course, that it was quite impossible for everyone to be a millionaire last year. With about 24% of income taken by the top 1% richest people, that means the average income of 99% of the people was a bit under $37k.

The problem isn't that you can't do well without working for it. The problem is that for most people, there's no way for them to do well if they ARE willing to work for it.

When I was a boy, capitalism had a lot of popular support because (in the mixed economy version that prevailed at the time) it seemed to work. It allowed most people to find work that gave them a modest middle-class income. Note: that's MOST people. It's not just the smartest, just the most aggressive, just the luckiest. It's MOST people.

If people give up on capitalism ever again providing opportunities like that, it will lose popular support, and it will be brought down. I can see no way for it to restore those opportunities, frankly. Even if we were to restore the programs and policies of the 1960s, those worked only because of high demand for labor that gave unions the bargaining leverage to keep wages high. If demand for labor is slack, collective bargaining won't be successful. The union will be in too weak a position.

That's why I believe that capitalism is doomed. I understand the ideological reasons why some of you don't want to accept that. Your problem is that most people don't give a damn about free market ideology one way or the other. All they care about is results, and the results are lacking.

 

[itfitzme]

Between the time people no longer have to spend laboring to pay for their basic necessities because those necessities are increasingly easier to produce and, thus, increasingly cheaper (prices driven down by competition that can profit with less and less cost per unit), and the time people save through technologies making basic process like acquiring meals and groceries, banking, etc less time intensive, you end up with people who have more time. More of their labor time can be spent moving toward non-essentials once their needs are met, and they end up with more free time to kill in a standard 16 hour day (assuming we're all sleeping well and getting our solid 8). With more free time to kill, people need more stuff to do. . . hobbies and entertainment. This is why occupations like actor and professional athlete have become so lucrative in recent years when, through the VAST majority of human history, these sort of entertainer roles were hardly a path to significant economic prosperity. More free time creates demand for more non essentials. This is also why we live in a country that has a poverty line at which people can afford to live in an apartment with internet access, a flat screen, and a smart phone. If you honestly acknowledge what is and is not a human necessity and take a look back at the labor hours that once had to be dedicated to acquiring -just- those bare basics, it's pretty hard to make the argument that technology slowly chokes out the masses in a capitalist system.

Absolutely right in "Between the time people no longer have to spend laboring to pay for their basic necessities because those necessities are increasingly easier to produce and, thus, increasingly cheaper (prices driven down by competition that can profit with less and less cost per unit), and the time people save through technologies making basic process like acquiring meals and groceries, banking, etc less time intensive, you end up with people who have more time" for some portion of the time period, starting in the dark ages and ending somewhere in the '70s.

And it makes absolute sense that "and the time people save through technologies making basic process like acquiring meals and groceries, banking, etc less time intensive, you end up with people who have more time."

In some ways, I agree that the standard of living for the disabled and the elderly has improved. That they live in an apartment much more the result of that we have an over supply of housing. That we have an oversupply of housing is the result of the improved efficiency of the past decade. The same is true of internet access and cell phones. The availability of internet access and cell phones to all is more to do with the fact that it is simply cheaper to leave the network available for everyone, then cut off access to the poor. It is due to the efficiency, for sure, but ancillary in cause rather then direct. The "free time" increase, if it exists as a predominate factor, isn't a direct cause or even a necessary cause. All that is necessary is that it be cheaper to sell the products to the retiree on SSI or SSDI then it is to pull it back out again or monitor it. Cell phones are cheap. And the network has economies of scale. Once laid, basic cable is in. It costs no more to "turn it on" for a new user then it does to send someone out to put a blocking filter in the line.

It is interesting that, back in the early '70s, there was this utopian ideal of everyone going to a shorter work week, 32 hours a week or whatever. This utopian ideal was never properly realized.

But since the 60's, the labor force has gone from about 30% of the population to almost 50% of the population. And that increase has not been realized by a comenserate decrease in working hours. The labor saving devices, in house work and cooking, has been absorbed by those workers who spent their time on those duties entering the labor force. Much of the increase we have seen, in standard of living, is as attributable to an increase in the measurable portions of the GDP rather then the previously unmeasurable portion that was merely the housewife's duties.

And, for some companies, this did happened as the recession hit. Safeway and Home Depot have this policy of cutting back the hours of some employees, spreading out the burden. Perhaps it is simply because Home Depot finds more utility in having more available employees. Perhaps it is because the Food Workers Union reached a social agreement that workers are better off sharing the burden. Why they choose to has little meaning. In that the final outcome is that one person doesn't end up unemployed. And employees have more free time.

And in engineering, this same process has been part of the economy for a good decade, as companies higher contract workers to do one task or another. This spread out the work among a saturated labor market. Whether they did so to avoid medical insurance costs or other expenses is beside the point. The net effect is that the work, declining relative to the labor force, was spread out. And engineers had more free time.

But, more free time is not necessarily the driving force behind demand for more non essentials. Unless we actually measure the idea it is not clear if it is a predominate factor in creating more demand. More income is the driving force, whether more free time exists.

While we have seen periods of increased demand for non-essentials like flat screen TVs, this isn't the direct outcome of more free time. It is the outcome of the availability of products that make our free time more "efficient" and "productive". I can think of many people that surely miss the opportunity to spend their non-existent free time watching their new flat screen TV.

And there are processes that run counter to "more free time" for workers, from the wage labor to the president. Everyone, in competition in the labor market, simply works as much as they must in order to ensure their position in the labor market.

Just as well, given that people are generally willing to keep working to make as much as they can, if not for current consumption, but because a) they are use to it and b) they want to save just in case, I do not believe that any efficiency gains have resulted in a comparable decrease in working hours.

This is all good hypothesis to test. I think it needs to be tested.

But, from anecdotal experience, the higher income becomes, due advancement in the professional work force, the more hours are demanded. When you take the wage earned by a salaried manager and divide it by hours they put it, their hourly rate suddenly becomes much less then we first assume. (And their dog takes a good brunt of it at home, so he is due his portion of that compensation.) Also, as far as my experience goes, the standard work week has been 40 hours since as far back as I can recall.

All in all, before we can conclude that efficiency has resulted in more free time, we really need to look at the actual labor hours per working person. And, I get a sense that, like all aggregate data, there are likely confounding issues with it. I don't need to know what they are to know that there is a high probability of them existing. And in those confounding issues lies the refinement at to whether "free time' has been a driving force for demand or if it is primarily the availability of products, with little new free time to use them, that has been the driving force behind an increasing workforce and simply having more stuff to play with when we have more free time.

 

[kaz]

With capitalism, the unwritten agreement was that the people would allow an economic system in which a few privileged and powerful individuals controlled most of the wealth, in return for their managing it so as to create rising standards of living for most people

You hope capitalism is dying because you're a socialist. And you have zero knowledge about capitalism. There is no one "managing" capitalism, capitalism is distributed decision making where people make decisions over what's in their own interest. Capitalism is economic freedom. It's best for workers as well as the best workers get the best jobs for the best pay. And your statement we don't need workers is idiotic. As technology changes, job requirements change. But it's the fear mongers like you who fear change who prevent that from happening. If it were up to you a century ago, we'd still have blacksmiths today.

What is killing capitalism are socialists who don't even grasp it and yet fear and demagogue it. In other words...you.

 

[Dragon]

You hope capitalism is dying because you're a socialist. And you have zero knowledge about capitalism. There is no one "managing" capitalism, capitalism is distributed decision making where people make decisions over what's in their own interest. Capitalism is economic freedom. It's best for workers as well as the best workers get the best jobs for the best pay. And your statement we don't need workers is idiotic. As technology changes, job requirements change. But it's the fear mongers like you who fear change who prevent that from happening. If it were up to you a century ago, we'd still have blacksmiths today.

What is killing capitalism are socialists who don't even grasp it and yet fear and demagogue it. In other words...you.

Kaz, you keep doing this. You spout theory and ideology when I'm talking about real-world outcomes and people's reactions to them. This is no different than in the other thread, where I pointed out how unpopular your views are, and you kept giving me a theoretical basis why they were RIGHT, RIGHT RIGHT! As if that were an answer.

This is exactly the same. I'm telling you capitalism is failing. I can give you the symptoms of that failure: there aren't enough good jobs to go around, and so most people don't have the opportunity to make a decent standard of living. And all you can come back with is ad homs (most of them wrong) and ideological bullshit.

If capitalism can't generate enough good jobs for most people to have one -- and by "good" I mean a job that, on 40 hours a week, can provide a middle-class income -- it is doomed. Can you see a way for it to do that? If so, let's hear it. But if it can't, all the pontificating and theorizing and ideological justification in the world won't make a lick of difference, because most people aren't ideologues. Most people just want their lives to work for them. And if capitalism can't deliver that, they'll replace it with something else that can.

 

[kaz]

If capitalism can't generate enough good jobs for most people to have one -- and by "good" I mean a job that, on 40 hours a week, can provide a middle-class income -- it is doomed. Can you see a way for it to do that? If so, let's hear it.

Yes, stop trying to help it. The more socialist we become, the more socialists gloat that capitalism is failing. As for ideology, I own my own businesses, I'm talking about reality on the street. You're the pie in the sky nut job who's shoes don't touch the ground.

 

[Dragon]

If capitalism can't generate enough good jobs for most people to have one -- and by "good" I mean a job that, on 40 hours a week, can provide a middle-class income -- it is doomed. Can you see a way for it to do that? If so, let's hear it.

Yes, stop trying to help it. The more socialist we become, the more socialists gloat that capitalism is failing. As for ideology, I own my own businesses, I'm talking about reality on the street. You're the pie in the sky nut job who's shoes don't touch the ground.

I don't know (or care) what you do in your own real life. (FWIW, I own my own business too.) On here, you're an ideologue with no grasp of reality whatsoever. I can only assume, if you're telling the truth about being a business owner, that you operate differently with your customers, suppliers, and employees than you do here. Either that, or you're doomed, too.

I notice that you never answered the question of how capitalism can generate those good jobs again that it used to. Be my guest.

 

[Widdekind]

Free-markets do use force. They depend on it.

free-markets rely on Government Force, for "Police protection", i.e. "security guards standing in the corner"

non-free-markets rely on Government Force, for "Police Intervention", i.e. "security guards bullying customers at every turn"

there is a difference between Force being "equally available to all", e.g. Courts in which anybody can sue to protect a contract...

and Force "taking sides", e.g. Communism (Force backs workers), Fascism (Force backs businesses)

the former is like "everybody carrying a gun"; the latter is like "somebody has drawn their gun (& disarmed everybody else)"

 

[Widdekind]

...how capitalism can generate those good jobs again that it used to.

entrepreneurism ?

with vast pools of economically available labor...
and a vast universe of untapped raw resources...
we can think of nothing to do, to make money ???

"when they say 'the sky is the limit', they didn't mean there was a literal 'glass ceiling' at 40,000 feet"

 

[Dragon]

"Vast pools of available labor" is exactly the problem. Capitalism works best (from the viewpoint of the people, that is) when there is a tight labor market.

Of course, that's part of the inherent difficulty of capitalism under even the best conditions, that conflict of interest between the capitalist and everyone else. From the capitalist's point of view, a tight labor market is a problem as it drives up operating costs. Thus, capitalists are naturally prone by the logic of business success to seek the conditions under which the people will reject the capitalist system. It succeeds only insofar as they are unable to do this. The problem today is that that inability has been remedied. The success of capitalism is dependent on the failure of capitalists. The success of capitalists results in the failure of capitalism.

 

[kaz]

I don't know (or care) what you do in your own real life. (FWIW, I own my own business too.)

Bull crap. If that were true, you'd know there's nothing "capitalist" about what government is doing to business.