news flash: capitalism works

[Toothache]

Internet, Telephone, Wireless, Cable. It's not that consumers are stupid. It's because we have no choice but to take it up the ass. The nature of these services grant companies a sort of oligopoly and they're free to do what they want unless we have regulators making sure consumers' interests are taken into account. The problem is when the regulators are ex-executives of the companies they're supposed to be regulating...

There are conflicts of interest all the time in government. Look at how many of the US government officials come from Goldman Sachs for example. They like to look after their old banking buddies. I believe Ian Hislop said it best on Question Time "Markets are not moral - they are amoral, which is why you regulate them." If you assume markets are amoral, and make legislation considering this fact, then you'll have much better governance.

 

[Scoopapa]

I find the plateau at ~6.5-9 on the Freedom Index to be the most interesting part of the graph. Where exactly does the US sit in that rating system?

Also don't forget this correlation to HDI:

HDI map

Navy = very high
Blue = high
Sky Blue = medium
Blueish White = low
Gray = no data available

 

[Ancien Régime]

Case in point: FUCKING COMCAST

as a (not so satisfied) comcast customer, yup yup

but but

they are fucking WORLDS better than fucking verizon

I find the plateau at ~6.5-9 on the Freedom Index to be the most interesting part of the graph. Where exactly does the US sit in that rating system?

[/HIDE]

U.S is still high, but has dropped recently.

Also, France is a bit of an outlier - it's really around 7.5, but it has a terrible government spending rating (and this doesn't hurt HDI as much as other indices because overspending doesn't manifest itself in terms of effects on welfare immediately in any given year, the same way as say, a sudden spike in corruption or an erosion of property rights would)

So the plateau is really more around 7.5-9.0.

Also, some aspects of HDI are really flawed for the purposes of this discussion, such as life expectancy, because once you hit 1st world status, we're talking about lifestyle/cultural differences rather than developmental shortcomings.

Here's a thought experiment - what other factors should these indices take into account? Both the economic freedom index, and the HDI.

One big one for the EFI is inflation, especially in regards to the cost of living (since we know that inflation actually increases inequality due to the wealthiest members of a society getting the new money first, then bidding up prices on goods for everyone else, and that the HDI also has a ranking based on overall inequality, I'd be interested if there was a link to an inflation indice and the rankings based on inequality). Conversely, I would have the HDI take into account security, i.e crime rates and the like.

 

[Firestorm]

Yeah, we have the same problem here, but I don't think it's by the nature of the service; there's a lot of "regulation" that is designed to protect the profits of the big providers and lock out competition in certain markets. For the most part, our telecoms have regional monopolies at least partially assured by local or state governments, for example.

Our big telecom companies are subsidized because otherwise they would have no incentive to serve customers in outlying areas. We'd only have service in metropolitan areas without government intervention. However, as a part of that deal, they're required to lease out the infrastructure they build to wholesale providers as well.

Unfortunately, our regulatory board (the CRTC) is increasingly giving our bigger telecom companies power to dictate how the smaller providers behave.

In regards to wireless, they opened up an auction to a new wireless spectrum here and we have had 3 new providers serving major cities with two older telecom giants joining the fray as well. It's starting to look up a bit on that front.

TV and Home Phone slowly becoming antiquated.

 

[MrIndigo]

Australia has a higher top rate but somewhat lower corporate taxes. You also spend less, and your banking system is not heavily regulated.

We spend less, for sure. The Howard Government, in rebuilding the deficit from the prior governments in one term and restoring surplus ended up creating this strange idea that has persisted since, which is that for a Government to have a large surplus is a sign of good management.

But it's not. As I read in an article some time ago, all it does is change one kind of waste (spending large amounts of money on nothing) into another kind of waste (not doing anything but line politicians' pockets with the taxpayer money). When a government is supposed to be providing infrastructure, just holding money in a box isn't helping.

However, our banking system IS very regulated; there's just not a lot of competition. We have one of the tightest finance and banking schemes in the western world, which has been attributed by many economists from inside and outside the country as one of the primary reasons we avoided a recession in the same vein as the US subprime crisis.

It's also seemed that corporations don't have -that- much control in influencing parliament's drafting of company law. They have some, such as the post-Gambotto reforms, but they were more about shareholder rights rather than company activities. Most of the legislative amendments and public-company requirements benefit consumers and shareholders against directors, not the companies, and the tend seems to be towards dismantling the 'corporate veil' these days.

 

[Toothache]

http://www.rawstory.com/rs/2010/10/cnbc-legalize-foreclosure-fraud/

Newsflash: capitalism works - for the banks.

Congress will pass a bill to "forgive" banks the potentially criminal errors made in foreclosure proceedings, a senior CNBC editor predicts.

In a blog column Friday, John Carney argues that lawmakers in DC won't allow the country's largest issuers of mortgages to suffer financial losses following revelations of numerous mishandled foreclosure proceedings, especially when bailing them out this time "won't cost taxpayers a dime."

Here’s what is going to happen: Congress will pass a law called something like “The Financial Modernization and Stability Act of 2010” that will retroactively grant mortgage pools the rights in the underlying mortgages that people are worried about. All the screwed up paperwork, lost notes, unassigned security interests will be forgiven by a legislative act....

The [foreclosure] crisis is not driven by economics. It is driven by legal rights. And there’s simply zero probability that the politicians in Washington are going to let Bank of America or Citigroup or JP Morgan Chase fail because of a legal issue.

Carney predicts that the lame-duck session of Congress following this November's elections will pass the law. "Every member of Congress ... who has been voted out of office will cast a vote for the bill. And the President will sign it."

Major banks' stocks have suffered losses this week as an increasingly large body of evidence has emerged suggesting that banks and their contractors may not have done the most basic vetting of foreclosure paperwork, instead using "robo-signers" to rubber-stamp whatever foreclosure applications were brought forward.

The Associated Press reported this week:

In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in "foreclosure expert" jobs with no formal training, a Florida lawyer says.

In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn't define the word "affidavit." Others didn't know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers' accusations about document fraud.

The result has been a steady stream of allegations of wrongly foreclosed homes. In one notorious incident last month, a Florida man who had bought his home for cash and carried no mortgage was stunned to find his home in foreclosure. In another incident, a woman who was behind on payments but not in foreclosure called 911 when she heard what she thought was a burglar, but was in fact a JPMorgan contractor coming to change the locks on her home.

In many instances, those shortcuts and mistakes may have violated laws. Attorneys general in all 50 states have now launched probes into foreclosure practices. Bank of America has halted foreclosure proceedings in all states, while Ally Financial (formerly GMAC), JPMorgan and others have announced partial suspensions.

Carney admits that, with outrage growing over unscrupulous foreclosure practices, a second bailout of banks would be politically unpopular.

"Will the public be outraged?" he writes. "Probably. Financial bloggers will scream from the high heavens against another bailout of the banksters. Congress may try to create some cost for banks in exchange for the forgiveness, perhaps requiring more mortgage modifications. But the much feared [foreclosure] apocalypse will be laid to rest."

Essentially. they are retroactively legalising the foreclosure fraud that have allowed even fully paid-for homes to be seized. So yeah, capitalism works if you happen to work for the huge banks.

 

[cantab]

So yeah, capitalism works if you happen to work for the huge banks.

I'd say rather it's that democracy works - for the banks.

Maybe I'm getting a biased impression, news does after all tend to highlight negatives, but is seems that every time I hear a story about the USA it just makes the country sound worse and worse.

 

[Deucalion2]

Correlation does not mean causation. I'd say the correlation in this case is because most of the countries with high ratings tended to be either European or ex-European settler colonies, and thus have similar lines of policy and governance, and also coincidentally happen to have particularly good HDI ratings on account of having ridden the industrial wave right back at the beginning.

 

[Ancien Régime]

Correlation does not mean causation. I'd say the correlation in this case is because most of the countries with high ratings tended to be either European or ex-European settler colonies, and thus have similar lines of policy and governance, and also coincidentally happen to have particularly good HDI ratings on account of having ridden the industrial wave right back at the beginning.

uhhhhhhhh, but Japan is a top 15 country, 65 years after being a bombed out wasteland and having 2 major industrial centers nuked. South Korea started off *poorer* than North Korea. Germany was trashed in every fucking way after World War II; right after the war Germany's per-capita GDP was about 2,000 dollars. Japan and Germany (more so Germany, thank you Ludwig Erhard) pursued relatively free market policies and boom, 1st World, baby.

Meanwhile the primary beneficiary of the Industrial Revolution, Great Britain, is languishing at 26. Past wealth created doesn't guarantee present high living standards.

 

[Deucalion2]

uhhhhhhhh, but Japan is a top 15 country, 65 years after being a bombed out wasteland and having 2 major industrial centers nuked. South Korea started off *poorer* than North Korea. Germany was trashed in every fucking way after World War II; right after the war Germany's per-capita GDP was about 2,000 dollars. Japan and Germany (more so Germany, thank you Ludwig Erhard) pursued relatively free market policies and boom, 1st World, baby.

Meanwhile the primary beneficiary of the Industrial Revolution, Great Britain, is languishing at 26.

You need initial capital with which to invest in a welfare system, and you need at least a basic, stable economy before you can regulate anything. The countries you have named, at the time, did not have that initial capital, nor did they have a stable economy, and thus investing in a welfare system of any sort or introducing regulation was not really a possibility. Thus, the only option available was the free-market. Modern nations are nothing like those above. Different courses for different horses. Laissez-faire has its place, that place is now gone.

I'm not arguing pro-communism here, incidentally, I support the concept of capitalism (or rather, social capitalism and New Keynesian economics), but unfettered capitalism feeds upon itself. Laissez-faire is not the answer, as the economic crisis has revealed. I would argue that the invisible hand often does not act in its own interests, but rather what it believes to be its own interests - and the two are often very different things. Sometimes it needs reminding, nudging in the right direction.

As for Britain languishing at 26, if you read the review a little more closely, you'll discover it actually ranks very highly in almost all areas, especially healthcare. What drags Britain down is the "empowerment and governance" subsection, where Britain is scored rather lowly (also education; that's a more recent problem and is actually as a result of the New Labour government attempting to make the education system ape the market system, rather disastrously, so that was actually the fault of free-market attempts!). This is due to Britain currently being lead by a coalition government, which, in British politics, are notorious for collapsing at the drop of a hat. If you remove political stability from the data, Britain actually ends up at 16th, which is reasonably respectable - by the same measure, the US would end up at 11th, and probably lower now due to the electoral gridlock which wasn't in place at the time of the review.

 

[Shiny_Tyranitar]

I'd have to agree with Deucalion's assertion on causation and correlation. I would even take it a step further to say that you drew the correlation the wrong way, freer markets don't lead to a higher HDI, but a HDI leads to freer markets.

Poorer nations tend to have the highest tariffs (limiting trade freedoms), tend to limit capital mobility (limiting business and monetary freedoms), tend to limit or restrict converting their currencies to other currencies as such a practice can be speculative and result in an influx of that nation's currency and thus devaluation (limiting investment and financial freedoms) just at a quick glance; 5 out of 10 of the criteria to the Heritage Foundation's free markets. On the other hand nations that are wealthy want freer markets because trade liberalization is immediately beneficial to all nations, especially wealthy ones (buying cheaper products, focusing on comparative advantages, and more open markets for their markets to sell to).

But one must also remember that all of the greatest economies today took protectionist policies when they were smaller, so I think its fair to say liberalizing markets is a byproduct of a successful economy (South Korea, America, England, Singapore, Japan, and Taiwan all serve as perfect examples of nations who became successful through export-led growth and then sought to liberalize their markets)

In summary, freer markets are beneficial economically, but nations only seek "free markets" after they are already pretty well off.

 

[Ancien Régime]

I'm not arguing pro-communism here, incidentally, I support the concept of capitalism (or rather, social capitalism and New Keynesian economics), but unfettered capitalism feeds upon itself. Laissez-faire is not the answer, as the economic crisis has revealed. I would argue that the invisible hand often does not act in its own interests, but rather what it believes to be its own interests - and the two are often very different things. Sometimes it needs reminding, nudging in the right direction

Your previous point was that "free markets can't create wealth quickly; the wealth of the free market countries is due to benefiting from the Industrial Revolution", but now you argue that free markets can create wealth quickly, making welfare states possible...which is kind of my point.

Also, calling our economic system prior to the crash "laissez-faire" is just ridiculous. Just because the political class uses the word "deregulation" to refer to "bad economic policy", doesn't mean it has anything to do with free markets.

"Unfettered capitalism" hasn't existed since the early 1800s in America (don't say the Gilded Age, that was more along the lines of state corporatism than "free markets").

And then, I love the idea that a group of highly placed bureaucrats knows more about the interests of society than...society.

But one must also remember that all of the greatest economies today took protectionist policies when they were smaller, so I think its fair to say liberalizing markets is a byproduct of a successful economy (South Korea, America, England, Singapore, Japan, and Taiwan all serve as perfect examples of nations who became successful through export-led growth and then sought to liberalize their markets)

The infant industry argument is a myth. Protected industries often never developed enough to be competitive (for example, Brazil imposes massive tariffs on overseas electronics, but domestic producers simply sold cheap knock-offs at inflated prices, while Brazilians mostly pirate software because it's so expensive), and thus, required protection to be extended indefinitely.

As for South Korea, Japan and Taiwan, their economies either grew in spite of protectionism, or were hindered by it.

But residual protection detracted from overall Korean performance. Data for 38 Korean industries over 1963-1983 demonstrate a negative correlation between protection and productivity growth. “The Korean data present evidence that less intervention in trade is linked to higher productivity growth,” says economist Jong-Wha Lee of Korea University in Seoul. In fact, plain old special interests better explain the pattern of Korean protection than calculations of economic gain.

As for Britain languishing at 26, if you read the review a little more closely, you'll discover it actually ranks very highly in almost all areas, especially healthcare. What drags Britain down is the "empowerment and governance" subsection, where Britain is scored rather lowly (also education; that's a more recent problem and is actually as a result of the New Labour government attempting to make the education system ape the market system, rather disastrously, so that was actually the fault of free-market attempts!).

Fair enough, but trying to make government institutions imitate market systems are generally due to fail, because government institutions are not subject to the profit and loss test.

 

[Shiny_Tyranitar]

The infant industry argument is a myth. Protected industries often never developed enough to be competitive (for example, Brazil imposes massive tariffs on overseas electronics, but domestic producers simply sold cheap knock-offs at inflated prices, while Brazilians mostly pirate software because it's so expensive), and thus, required protection to be extended indefinitely.

As for South Korea, Japan and Taiwan, their economies either grew in spite of protectionism, or were hindered by it.

Way to miss my entire point. I never said free markets aren't beneficial, I said that markets tend to remove their protectionist policies after they are well off. So what you have isn't causation (of free markets to good HDI), but correlation.

In summary, freer markets are beneficial economically, but nations only seek "free markets" after they are already pretty well off.

my exact words.

Also to clarify to some posters I've read in this thread, this chart has nothing to do with regulation, government run programs (health care, roads, education) or anything like what the Faux Noise talking heads call "communist." This chart is more about removal of tariffs and quotas, allowing capital mobility (conversion rates, investing in other nations, Foreign direct investment), and *gasp* property rights (which developing nations by default have a disadvantage in). So in summary, the title, chart, and conclusion drawn are all very misleading.

 

[FlareBlitz]

First off, I'm going to trot out the old "correlation doesn't equal causation" horse here. Even if I accept that countries with high economic freedom have better standards of living, that doesn't mean that the high standards of living are caused by high economic freedom. Simple example that's already been presented, Somalia versus Argentina, and more a multi-faceted example: UAE versus Spain (total wealth versus distribution of that wealth!).

Second, what countries does this graph show? That's an important bit of information with respect to policy goals. Evaluating the USA against, say, Uganda makes no sense, because no one is advocating adopting their economic policy. However, evaluating it against, say, Canada and the UK does make sense, because elements of those countries' policies (such as universal healthcare) are currently being debated here. Disingenuously comparing third-world countries to first-world countries and saying "see, capitalism works better" is silly when comparing first-world countries among each other clearly shows that countries with better social nets have a better HDI (Norway tops the list ffs).

Third, you mention that both metrics are "flawed", but that's an insane understatement as far as the "index of economic freedom" goes...at least within the context of what you're trying to say. Very little of the index involves economic freedom within the context of social welfare or taxation, as you can tell when countries that clearly involve more government intervention in the economy score higher on the index than the US. So, a more accurate title would be "market socialism with an equitable economic system works!", because that's exactly what the results imply.

Credit where credit is due though...despite the inadvisability of using the "economic freedom index" to prove capitalism works, this was a great point in your post: " I think the fact that so-called social welfare states are more economically free than the USA underscores the fact that economic freedom is more than how much free stuff the government gives out, or how high the top marginal rate is." And the reason for this is because all those countries have much clearer and more equitable economic regulation than the United States does, which imo are far more important factors to consider when evaluating the economic policy of a country.

 

[MrIndigo]

http://www.rawstory.com/rs/2010/10/cnbc-legalize-foreclosure-fraud/

Newsflash: capitalism works - for the banks.



Essentially. they are retroactively legalising the foreclosure fraud that have allowed even fully paid-for homes to be seized. So yeah, capitalism works if you happen to work for the huge banks.

Any such law passed in this fashion will be unconstitutional; they can achieve the same end result by other means, but this one won't work.

 

[Ancien Régime]

First off, I'm going to trot out the old "correlation doesn't equal causation" horse here. Even if I accept that countries with high economic freedom have better standards of living, that doesn't mean that the high standards of living are caused by high economic freedom. Simple example that's already been presented, Somalia versus Argentina, and more a multi-faceted example: UAE versus Spain (total wealth versus distribution of that wealth!).

Never mind that Somalia, prior to the fall of its government, was an avowedly socialist state for over two decades!

However, evaluating it against, say, Canada and the UK does make sense, because elements of those countries' policies (such as universal healthcare) are currently being debated here. Disingenuously comparing third-world countries to first-world countries and saying "see, capitalism works better" is silly when comparing first-world countries among each other clearly shows that countries with better social nets have a better HDI (Norway tops the list ffs).

The idea is that third-world countries are poor because they have failed to follow free-market principles. I defy you to name a single third-world country that can be said to be "free market" at least for an extended period of time. And in doing so, don't just look at taxes and social spending - how much does the state directly intervene in business operations? How many industries are nationalized? Are property rights respected?

Third, you mention that both metrics are "flawed", but that's an insane understatement as far as the "index of economic freedom" goes...at least within the context of what you're trying to say. Very little of the index involves economic freedom within the context of social welfare or taxation, as you can tell when countries that clearly involve more government intervention in the economy score higher on the index than the US. So, a more accurate title would be "market socialism with an equitable economic system works!", because that's exactly what the results imply.

Never mind that you directly contradict your point in the next point - that social welfare and taxation were NOT the sole determinants of economic freedom (which you said was a great point), I only made that statement because I feel that the indices could be structured better in terms of what they took into account.

The title of this thread is that "capitalism works" because simply, countries that have pursued generally capitalistic policies over a period of time have prospered, and those who have not pursued these policies have not, and the graph shows that. (and even that graph is flawed, because by tracking it to 2009 HDI, it penalizes countries that have converted to capitalism fairly recently, like former Soviet Bloc/Warsaw Pact nations, and thus have not had the long-term wealth accumulation needed to sustain higher standards of living)

also "associating social welfare with socialism hurr durr", was fucking Friedrich von Hayek a socialist?

And the reason for this is because all those countries have much clearer and more equitable economic regulation than the United States does, which imo are far more important factors to consider when evaluating the economic policy of a country.

That's an important part of it - but the biggest part of it is whether it is easy and safe to start a business, save money, invest it, etc.

 

[Deucalion2]

Your previous point was that "free markets can't create wealth quickly; the wealth of the free market countries is due to benefiting from the Industrial Revolution", but now you argue that free markets can create wealth quickly, making welfare states possible...which is kind of my point.

-rolls eyes- I'm not arguing against the free market here. I think I should establish that there are levels of freedom. You have absolute state control, or Stalinist communism, and then you have complete freedom, laissez-faire. Neither is beneficial. In between them, you have a vast and varied middle ground, all of which can be called "the free market", as aspects of each of them are free. Yes, certain freedoms lead to growth. However, others act against it.

Also, calling our economic system prior to the crash "laissez-faire" is just ridiculous. Just because the political class uses the word "deregulation" to refer to "bad economic policy", doesn't mean it has anything to do with free markets.

In this case, I agree with you (to an extent). I'm not arguing that free markets should not be allowed (of course not, absolutism is never a good thing). I'm just saying total freedom isn't good either. The only difference between you and I seems to be where you and I draw the line that defines the freeness of a market - I tend to be more small c conservative insofar as that I do not trust businesses.

And then, I love the idea that a group of highly placed bureaucrats knows more about the interests of society than...society.

Alas, if only it were not so. However, you ask the average man on the street what he thinks of the effects of quantitative easing on aggregate demand and whether it will lead to stabilising adverse economic conditions and he will but look at you blankly. The point of representative democracy is that we do not have total control, but rather entrust control to those who know more on the matter.

I also take exception to your automatic assumption all governments must be bureaucratic. This is most certainly not true.

 

[Ancien Régime]

-rolls eyes- I'm not arguing against the free market here. I think I should establish that there are levels of freedom. You have absolute state control, or Stalinist communism, and then you have complete freedom, laissez-faire. Neither is beneficial. In between them, you have a vast and varied middle ground, all of which can be called "the free market", as aspects of each of them are free. Yes, certain freedoms lead to growth. However, others act against it.

Which freedoms act against growth, may I ask, and do they infringe on the freedoms of others (i.e crimes). Note that I do not view rights and freedoms as "positive".

In this case, I agree with you (to an extent). I'm not arguing that free markets should not be allowed (of course not, absolutism is never a good thing). I'm just saying total freedom isn't good either. The only difference between you and I seems to be where you and I draw the line that defines the freeness of a market - I tend to be more small c conservative insofar as that I do not trust businesses.

I trust business more than I trust the state (which, I admit, is an extremely low bar).

Alas, if only it were not so. However, you ask the average man on the street what he thinks of the effects of quantitative easing on aggregate demand and whether it will lead to stabilising adverse economic conditions and he will but look at you blankly. The point of representative democracy is that we do not have total control, but rather entrust control to those who know more on the matter.

Maybe ask the question differently:

Will printing a shitload of money, making the money he already has worth less, and giving the printed money to rich people fix the economy? (which is what QE does, all new money must go to the people considered credit-worthy, who happen to be already rich).

As for things like market failure, yes the market fails, but in the long run, the market is smarter than the government bureaucrat, because market participants have access to more information as an aggregate than government, even though individual participants may make incorrect decisions.

This idea of "ignorant masses ruled over by wise leaders" is the foundation of all forms of despotism.

I also take exception to your automatic assumption all governments must be bureaucratic. This is most certainly not true.

Name a government, at least a modern one, that does not have a high level of bureaucracy?

 

[Toothache]

Any such law passed in this fashion will be unconstitutional; they can achieve the same end result by other means, but this one won't work.

The current administration have already proved they believe the Constitution is meaningless, what with the way the TSA are behaving in airports, a violation of not only the 4th amendment, but arguably, the 9th and 10th amendments. So, don't think just because something is unconstitutional they won't do it.

 

[Deucalion2]

Which freedoms act against growth, may I ask, and do they infringe on the freedoms of others (i.e crimes). Note that I do not view rights and freedoms as "positive".

Freedom to set wage. It's worth noting in the UK in 1999 the implementation of the minimum wage increased worker productivity and actually had a net positive effect on employment and the economy, where-as left to free market conditions this never would have happened. Clearly, in the majority of the time, freedom is a good thing, but in some cases this freedom can be abused.

Freedom for banks to exceed certain capital limitations. The lack of regulations led to the current financial crisis, for example.

Freedom to form monopolies. Money leads to more money. Eventually, most areas of business began to centralize around a single focal company (or an oligarchy of three or four central companies). This decreases competitiveness. Anti-monopoly regulation prevents this and insures growth.

If you require any more, I'll provide them, but that should provide you food for thought for now.

I trust business more than I trust the state (which, I admit, is an extremely low bar).

And I the opposite.

Maybe ask the question differently:

Will printing a shitload of money, making the money he already has worth less, and giving the printed money to rich people fix the economy? (which is what QE does, all new money must go to the people considered credit-worthy, who happen to be already rich).

You've missed the point entirely. Go back, and read what I said again. (Although if you would like a debate on QE, I'd gladly oblige).

As for things like market failure, yes the market fails, but in the long run, the market is smarter than the government bureaucrat, because market participants have access to more information as an aggregate than government, even though individual participants may make incorrect decisions.

"the market" is not a single entity. Whilst the market as a whole may have all the information, different individuals have different amounts of it, and as such move against other based on speculation of the information they don't have. If the markets all moved in unison, that'd be fantastic. Sadly, they don't. The government is the largest single entity with the most information.

This idea of "ignorant masses ruled over by wise leaders" is the foundation of all forms of despotism.

So you'd be in favour of Athenian-style direct democracy with a referenda on every single issue? The amount of bureaucracy involved in that would be absolutely monumental. We require representatives from a purely pragmatic point of view. Since we're going to have representatives, we may as well make sure they're good ones.

Have you read Plato's Republic? I think Kallipolis would interest you.

Name a government, at least a modern one, that does not have a high level of bureaucracy?

Define what would you would consider high, and your exact definition of bureaucratic.

 

[Ancien Régime]

Freedom to set wage. It's worth noting in the UK in 1999 the implementation of the minimum wage increased worker productivity and actually had a net positive effect on employment and the economy, where-as left to free market conditions this never would have happened. Clearly, in the majority of the time, freedom is a good thing, but in some cases this freedom can be abused.

And you know this how? Never mind that there was an economic boom during that period that would have a positive effect on employment. McLaughlin's theory about minimum wages forcing employers to invest more in training and productivity rather than on low-wage labor is interesting, but that still doesn't translate to lower unemployment.

Freedom for banks to exceed certain capital limitations. The lack of regulations led to the current financial crisis, for example.

Actually, you misphrased it, you're talking about the freedom of banks to go below a certain amount of capital reserves. In that case, fractional-reserve banking is fraud to begin with.

Freedom to form monopolies. Money leads to more money. Eventually, most areas of business began to centralize around a single focal company (or an oligarchy of three or four central companies). This decreases competitiveness. Anti-monopoly regulation prevents this and insures growth.

Monopolies need government regulation to become monopolies, or to stay monopolies. Things like licensure laws, favored access, and regulatory volume (i.e imposing costs on industry participants that only the monopolistic firm can assume)

You've missed the point entirely. Go back, and read what I said again. (Although if you would like a debate on QE, I'd gladly oblige).

What point did I miss? You think that "everyday man" can't understand economic policy. I think they can as long as psuedo-economists like yourself don't attempt to pretend that it is so complex that only the High Priesthood of Economic Science can "get it".

"the market" is not a single entity. Whilst the market as a whole may have all the information, different individuals have different amounts of it, and as such move against other based on speculation of the information they don't have.

And different individuals may make errors based on information, or lack thereof. However, that does not change that in general, in the long run, people make good decisions.

If the markets all moved in unison, that'd be fantastic. Sadly, they don't. The government is the largest single entity with the most information.

And what leads you to believe that the government has this information? Where does government get information about market conditions on a micro level? How does the government know about the correct distribution of capital goods?

You see, the government cannot utilize a price system, so how does it obtain this information, and how does it use this information in a rational manner? Even if the government were to get this information, how is it to determine whether it is important?

If government can't allocate resources, then how can it tell people how resources should be allocated?

So you'd be in favour of Athenian-style direct democracy with a referenda on every single issue? The amount of bureaucracy involved in that would be absolutely monumental. We require representatives from a purely pragmatic point of view. Since we're going to have representatives, we may as well make sure they're good ones.

No, I am in favor of market anarchy/voluntarism.

 

[TheAmazingFlygon]

Canada does not have complete economical freedom, which is the reason for it's success; capitalism needs to be altered with a little socialism.

 

[Deck Knight]

Canada does not have complete economical freedom, which is the reason for it's success; capitalism needs to be altered with a little socialism.

There is no such thing as "a little socialism." Socialism exists to crush societies under its boot in tiny but ever-accelerating increments. People come to America to leave the bankrupt socialist states and have for centuries. The Command Economy (and all the various -isms to describe it) is not a new invention. It has no place in a civilized society. It is evil. Everywhere it is tried the invariable result is death, misery, and "re-education" when people figure out robbing Peter to pay Paul writ large isn't a sound economic theory.

Socialism fails the test of practice. Where socialism is theory society flourishes despite it, where socialism is practice society crumbles because of it. In America we would never abide people setting vehicles alight because the retirement age was raised from 60 to 62. That violent entitlement mentality is the direct product of a socialist state that tells people they are too base and stupid to understand their own best interests and must wait on hand and knee like a beggar for the government to provide. I will say it again for emphasis: Socialism is evil. It has zero redeeming qualities, and in fact it's most pernicious ugliness is to assume it somehow brings "fairness" to punish the success of regular people in exchange for fattening the wallets of administrators who perform no productive function whatsoever.

Every successful modern nation was built by capitalism. Capitalism is an exceedingly simple economic philosophy. People act in their own self-interest and allot their resources in a way to maximize their standard of living. Anyone who sees a need will use their intelligence and resources to provide that unfulfilled demand at a profit which they then use to purchase other goods and services. If you treat people like intelligent human beings, that is how they will act. People will still make mistakes and they will still fail. And in a capitalist system they are allowed to do so. In a capitalistic society the farmer farms and purchases his tools from the blacksmith by exchanging his harvest. The tools allow the farmer to work more efficiently thus increasing the blacksmith's table as well. Since barter is less efficient than a standardized monetary system barter was eventually replaced because someone figured out a standard medium of exchange would expedite the flow of disparate goods and services.

I mean really, economics is that simple. If you can read a graph you can do economics. Supply meets demand at an equilibrium price. If you artificially increase demand while limiting supply you will have a shortage, and it you artificially increase supply while setting a floor on a price you have a surplus. This is fine when the market is doing it as it automatically corrects itself over time. When the government extracts money to cause these artificial fluctuations the most charitable way to descibe it is "wasting resources." Now surely there are advanced formulas for exactly how this process comes to be and very intelligent persons engaging in that study, the minutia of which I am unaware, but I don't need specific numbers to know what is generally discernable through the experience of history. Those societies that worked for what they had and exchanged it for what they did not of their own accord did well, while those societies that waited on the local (or worse, distant) authorities to allocate their labor and wages languished.

 

[Firestorm]

By "a little socialism", I believe he was referring to Social Democracy which is somewhat what Canada has.

http://en.wikipedia.org/wiki/Social_democracy#Ideology

Social Democracy =/= Socialism. The world isn't black and white with the evil commies against the land of the free market.

 

[Deck Knight]

By "a little socialism", I believe he was referring to Social Democracy which is somewhat what Canada has.

http://en.wikipedia.org/wiki/Social_democracy#Ideology

Social Democracy =/= Socialism. The world isn't black and white with the evil commies against the land of the free market.

Social Democracy is just one of the many tiny incremental steps toward full-blown socialism. Even the Wikipedia article acknowledges that social democratic policies are basically a front for Marxism that is more palatable to people who enjoy the prosperity capitalism brings but have been made to feel guilty about it because of socialist criticisms.

If it says "social justice" then run away. Whenever someone wants more "social justice" the funding invariably comes from the productive person's wallet and to the unproductive socialist's slush fund.

The world is actually brimming with evil communists who do want to subjugate capitalist nations. Remember the Cold War? Those guys never died, they just went underground. History is defined by vicious Command Economy strongmen seeking the subjugation and control over labor justified by whatever reasoning they had. It's what ran the entirety of 20th century conflicts as well as 18th century empires. It's what runs China today.

I reiterate, the Command Economy is both evil and ancient. Moreover, "Democracy" is nothing but mob rule. The United States is a republic. The differences are substantial and numerous. The purpose of social democracy is to get enough takers to form a voting bloc that can overpower the producers and steal ever more of their resources to fuel the insatiable appetite of the takers. As far as the ideology itself, it is among the most hypocritical to ever exist. It is not the capitalists who want to place ever more strictures on human behavior. It is not the capitalists who pay lip service to human rights while punishing speech opposing the fiscal and social policies of social democratic leaders.

What little difference there is between social democracy and socialism is a matter of degree, not kind. And socialism is all about changing the degree. Or, as socialist party candidate Norman Thomas' famous quote goes “The American people will never knowingly adopt socialism. But under the name of Liberalism, they will adopt every fragment of the socialist program until one day America will be a socialist nation without knowing how it happened.” Whatever the merits of social democracy as envisioned by its true believers, it is a weak and timid ideology easily manipulated and then taken over by the more assertive socialists. I say there is no such thing as "a little socialism" because the supporters of any such system are soon overtaken by those leaders who want "a lot of socialism." This is the pattern of history. Again, even the Wikipedia article acknowledges that social democracy is considered by socialists to be a palatable interim system until the real socialist takeover can begin. The end goal of social democracy is socialism just as socialism classic's is, it's just socialism classic is more gun-crazy (guns for the socialists only, mind).


This is what is causing much of Europe's financial collapse. Those who got used to "a little socialism" are finding they have run out of money to support their entitlements, and their primary recourse is violent revolution towards the supposed protection of what little they have left. While Americans are also struggling economically, our biggest budget busters are also entitlements! Wherever you look around the world the underfunded promises of bloated big government are the greatest drains on economic growth and fiscal solvency.

Capitalism does not allow for these things to happen because in capitalism you survive on your own merits or fail by your own incompetence. The flaws in most economic systems come about because the attempts to address the harsh social realities of the market have fallen off the cliff to fiscal insolvency. Note that as far as economic theories go, capitalism is the only truly defined one. Socialism is part economic theory and part social theory. If capitalism sounds heartless it is because capitalism is the economic theory that it advertises as. Capitalism is completely removed from social policy. Your society can be as socially permissive as you can imagine and it will be capitalist so long as the government does not attempt to usurp the production of their citizens to pay for redistributive social programs.