
Capitalism Has Gone Off the Rails - phesse14
http://www.spiegel.de/international/business/capitalism-in-crisis-amid-slow-growth-and-growing-inequality-a-998598.html
======
Animats
This is an important article, but I doubt there will be a useful discussion of
it here.

The developed world has incredible productive capacity. With 1% of the
workforce in agriculture and 8% in manufacturing, the US produces as much
stuff as China. There are no significant shortages of any manufactured good
anywhere in the developed world. Quality is pretty good across the board, too.
This is unique in history.

That's great. But there's less productive work to go around. We're out of
buying power. Labor is worth less because there's a labor glut. Our economic
system can't cope with that. On top of this, more of what most people can do
is being automated, and for less money. Automation used to be expensive. Now,
if a computer can do it, it will be far cheaper than a human.

The financial system has become primarily self-serving, running on self-
generated zero-sum tasks. It's part of the problem, not part of the solution.
If we had a capital shortage, that might be a problem. Instead, we have a
capital glut, and no place to put it that produces good returns on investment.
This is "secular stagnation", as the article puts it.

Japan hit this around 1989, when their real estate bubble collapsed. Japan
never came back from that. There was hope that the Japanese would figure out
something. 25 years later, they haven't. They've built up their safety net and
put money into infrastructure projects, so that fewer people are suffering.
That's the best they could come up with.

We have no successful model for dealing with this. What capitalism gives us by
default is a small number of rich people and a large number of poor people
competing for a shrinking pool of low-paying jobs. Nobody really knows what to
do about this, including the people who say they do.

~~~
mattmcknight
This is not an important article, it is a rant against people with "tacky
mansions", a turn of phrase that is more indicative of the author's point of
view than the other conventional points about not understanding creative
destruction. I think it is this overly nationalist view of economics that
needs to die, not "capitalism".

There is not less productive work to go around, it's just not being done in
the US. We are in a difficult situation because we have free trade with lower
cost labor markets. Until labor market costs in free trade enclaves reach
equilibrium, capitalism will continue to raise more people out of poverty, and
prevent wages from rising in places where they are above the demand level in
the global market.

The extraordinary amount of government debt being created is an interesting
phenomenon, as it is failing to cause inflation in most large currencies as
they are increasing the money quantities in a correlated fashion. The
financial entities are spending a lot of energy pricing these various
instruments, and can make low risk money on the spreads.

Japan did have a real estate bubble. The thing about bubbles is not "coming
back", it's that the wealth wasn't real in the first place. We weren't as rich
as we thought we were. Their problem is demographics, an aging population, low
birth rate, and a society that is not practiced at encouraging positive
immigration.

"What capitalism gives us by default is a small number of rich people and a
large number of poor people competing for a shrinking pool of low-paying
jobs." This is just wrong in every way...the number of rich people in the
world is growing, the number of jobs in the world is growing. Just because
every country is not moving linearly up and to the right does not mean things
are falling apart.

~~~
psychometry
A third of the population in the richest nation on earth lives in poverty.
According to you, that's not a problem because even poorer people in
Bangladesh are slightly less poor than they would be if American companies had
never employed them. What kind of callous person could look around at all the
suffering and think this system's working great? Or do you not look around at
all, holed up in a tacky mansion of your own?

~~~
yummyfajitas
95% of the biggest nation in the world (or maybe second biggest, no one really
knows the exact pop of India and China) lives in far deeper poverty than poor
americans. Many of them experience actual suffering - not enough food, no
flush toilet, no power.

What, precisely, do you believe poor Americans are suffering from? The only
concrete answer I usually hear is envy (I.e. "oh noes the inequality").

[http://economix.blogs.nytimes.com/2011/01/31/the-haves-
and-t...](http://economix.blogs.nytimes.com/2011/01/31/the-haves-and-the-have-
nots/)

~~~
zanny
There is tremendous long run psychological and physical harm associated with
living paycheck to paycheck in perpetual debt having to eat subpar foodstuffs
because fruits and vegetables cost way more than dollar menu cheeseburgers per
calorie. And if you don't have a working kitchen you can't cook farmers market
produce.

And that is at best. A lot of us are unemployed, and families are collapsing
in on themselves as you have fewer and fewer breadwinners.

~~~
yummyfajitas
_There is tremendous long run psychological and physical harm associated with
living paycheck to paycheck_

This is entirely in the control of most poor Americans. India's GDP/capita is
$5500 after adjusting for cost of living, yet India has a 20% savings rate.
Poor Americans could reduce consumption and save if they wished.

 _in perpetual debt having to eat subpar foodstuffs because fruits and
vegetables cost way more than dollar menu cheeseburgers per calorie._

Poor Americans tend to be fat. That means they can reduce calories and
increase the quality of food while spending the same amount of money.

 _And if you don 't have a working kitchen you can't cook farmers market
produce._

3% of poor Americans lack a complete kitchen (see table 2-4).

[http://www.census.gov/prod/2008pubs/h150-07.pdf](http://www.census.gov/prod/2008pubs/h150-07.pdf)

tl;dr; Poor Americans have some self inflicted problems. That's not much of an
argument for protectionism against poor Bangladeshi's suffering from
externally inflicted problems.

~~~
rattray
I've been traveling in SE Asia for the past 4 months, including China (not yet
India). I've been in urban slums and poor rural villages. I also went to
university in West Philadelphia, so I've spent a bit of time in an American
"inner city".

I'd take the rural village or even the urban slum over the American inner city
any day.

It might look from the outside that life "is entirely in the control of most
poor Americans". But nothing could be further from the truth. The amount of
forces conspiring against you as a student or young would-be worker in the
ghetto is simply unfathomable to anyone with a middle-class or wealthier
background (like myself). I'd argue you have a much better chance at moving up
in the world as a poor person in Vietnam than America. There, you start a
small business (eg; selling goods on the street) and work hard to grow it.
Here, you can't just do that: people don't buy anything off the street. And
don't tell me "they can just learn to code": I tried to teach them. They don't
have computers. Not in the schools. Not at home.

Also, consider that unhealthy foods are often genuinely addicting and
addictions are really, really hard to break. Especially when you're stretched
then.

I don't want this to turn into a rant, so I'll just say that before you start
blaming the American poor for their problems, spend some time living there,
talking to them, and understanding their problems.

~~~
yummyfajitas
_I 'd argue you have a much better chance at moving up in the world as a poor
person in Vietnam than America._

Your argument would be wrong, at least as of the last time we ran this
experiment. Back in the 80's we took a bunch of Vietnamese and turned them
into poor Americans. Now they are not poor. In contrast, the Vietnamese who
stayed behind are still very poor. That includes the ones who started small
businesses like selling goods on the street.

[http://en.wikipedia.org/wiki/Vietnamese_American#Socioeconom...](http://en.wikipedia.org/wiki/Vietnamese_American#Socioeconomics)

~~~
seanmcdirmid
There are plenty of Vietnamese/Hmong/chinese viet poverty in the states. And
why San Jose gangs are mostly asian.

------
randomsearch
If I were a rich software engineer feeling angry at people who criticised the
capitalist system we had, perhaps whilst failing to acknowledge that people in
America die because they can't pay health insurance, or are homeless because
they can't afford housing, or end up eating what they find in someone's trash
because they can't afford to buy food, I think that I'd do one thing:

I'd consider whether perhaps I might be wrong. Maybe my worldview is a bit
skewed by the situation I find myself in. Maybe my country isn't very fair at
all, and it's not right that I have the privileges I do whilst my fellow
citizens suffer. And maybe it's not the Government's fault, either. Perhaps
those Europeans with their welfare states aren't all socialist nutcases, but
maybe they have something right that America has got wrong.

Often I hear Americans say "this isn't real capitalism! we need more
capitalism! less government!". And I look at the state of homelessness in
their country, or those without health insurance, and I think "really? Do you
really need more of that? Maybe instead you need to spend a little less on
your military and a little more on looking after the least fortunate in your
society, the sick, the vulnerable. Maybe that would make a difference."

The "more capitalism" mantra always makes me think of communists who argue
"well, this wasn't real communism! That's why it failed!" And it's so ironic,
because those most vocally against communism are the same people who are
cheerleading extreme capitalism, failing to notice that they are simply on the
other side of the mirror.

~~~
dionidium
_or are homeless because they can 't afford housing, or end up eating what
they find in someone's trash because they can't afford to buy food_

There's a bit of a straw man or, at least, mischaracterization hidden in here.
It's true that the U.S. does a pretty poor job of dealing with the mentally
ill and those at the very bottom who simply cannot take care of themselves.
And I think if you push people, even those on the far right, they'll
acknowledge that we probably need to do something to help those people.

But, outside of this group, nobody is digging through trash for food. We live
in a society where clothes and food are as cheap as they've ever been. And
there _are_ government programs to fill the gaps. Arguments like yours only
further distance you from the people you're trying to convince, because it's
obvious to just about anyone, including (especially?) those who have actually
been poor, that they're just not true. I've been poor. And it sucks. It sucks
for lots of reasons, all related to access to resources, lack of successful
friends and coworkers, its drain on your motivation, and so on and so on. But
I never feared missing a meal. That's not the experience of most poor folks in
the U.S.

~~~
randomsearch
> But I never feared missing a meal. That's not the experience of most poor
> folks in the U.S.

I'm not an expert on the U.S. However, I have seen people digging through
trash for food in Atlanta. I have also seen the extreme state of homelessness
in Philadelphia, and the problems in San Francisco.

It is certainly true that _many_ people in the UK struggle to afford food [1],
and given that the US has a much greater disparity of wealth, I assume that
the US has this problem on a great scale.

So, no, I don't agree that it is an exaggeration.

[1] [http://www.trusselltrust.org/foodbank-
projects](http://www.trusselltrust.org/foodbank-projects)

~~~
dionidium
Yes, I've seen them, too. And there's a risk here that it will sound like I'm
moving the goal posts around so that I'm right by definition. But that's not
what I'm trying to do. There _are_ of course those at the bottom who are
chronically homeless. Those are the folks I was referring to in my first
paragraph. Yes, you will see them digging in dumpsters.

But this is not the typical experience. Most poor people never end up
homeless. And those who do are typically homeless for a short period of time
(and _do_ get help).

~~~
randomsearch
ok, I see.

It might be surprising to hear, then, that those people using food banks in
the UK by no means consist entirely of the chronically or mentally ill. I'd
say that would be a small minority. Most of them simply use food banks because
they can't afford to buy food - the number one reason being their welfare
payments being ended or delayed. See, in the UK in the process of dismantling
our welfare state and I look across the Atlantic to see our fate. :-s

------
RangerScience
Well, yes. As more of the money is used to make more money, instead of things,
experiences, or people... It losses it's correlation with the things that we
actually want out of an economy. Plus, those in power (rightfully) use the
power to get more power of the sort they already have. According the history
books I read as a kid, this is what caused capitalism in the first place
(english barons with more money than power using that money to make more
money) and the (serial) French revolutions (aristocrats with more power than
money using that power to gain more power).

I note these bits in particular:

"After a financial and banking crisis, the first order of business is to clean
up the banks, and to do it quickly and radically. Institutions that are not
viable need to be shut down while the others should be provided with capital."

"Their central thesis was that the key to [Western] success was not climate or
religion, but the development of social institutions that included as many
citizens as possible..."

I'm also reminded of a good article on what Iceland did after the collapse -
I'm having trouble finding the article, but part of it was that, instead of
taking on the debt from their collapsed banks, they issued arrest warrants so
Interpol could chase down the executives. (The initial government was going to
acquiesce and take on the debt, and that's when the "revolution" happened.)

Finally, someone gave me a really good quote a couple months ago: "Death is
the way for an older organism to gift it's energy to a younger one." I then
note that part of the financial problem is that failing institutions are not
actually allowed to die - thus keeping that energy stagnating in the aptly-
named "zombie" corporations.

~~~
dnautics
Note that what Iceland did and the idea of clearing out bad capital and
malinvestment are actually capitalist ideas, versus, say bailouts and central
bank manipulation, which are not.

~~~
RangerScience
Yeah. I'm, to a decent degree, a fan of calling what we have today
"corporatism" rather than "capitalism".

~~~
curiouscats
Yes. Many of the problems today have nothing to with capitalism but with
government policies that are largely aimed at making those with the gold
happy.

Capitalism is mainly about having markets that have competition. NO
organization is suppose to have market power. This isn't really possible, but
that is the concept. And we are so hugely away from it we can't call what is
going on now capitalism. We have allowed people to convert what is called
capitalism into an extreme political view that believes government is bad and
huge corporations are good. That isn't capitalism, it isn't even an economic
belief, it is a political belief.

A capitalist country has to be focused on maintaining a fair marketplace where
companies can compete for business and consumers (including companies buying
from each other) have the freedom to buy in a competitive market (not a market
dominated by trusts, monopolies and oligopolies that break the function of
markets to advantage themselves).

[http://investing.curiouscatblog.net/2008/06/10/monopolies-
an...](http://investing.curiouscatblog.net/2008/06/10/monopolies-and-
oligopolies-do-not-a-free-market-make/)

~~~
simonh
I agree with your point that capitalism is about markets, technically markets
for capital, but markets for goods and services are also very important for a
high functioning economy. We have those. To demonstrate this, let's looks at
some alternative models such as those in Russia and the Chinese domestic
markets, and contrats those with the west.

The Chinese and Russian ssytems are very corporatist. In both cases huge
corporations completely dominate the domestic economy. In Russia's case these
are technically privately held, but the oligrachs are so closely tied to the
political ruling elite that this realy is just a technicality. In China the
major corporations are owned by the government and explicity run by government
place-men. In both cases these corporations enjoy economic, financial and
political patronage and privillege that makes it functionally impossible fror
'independent' corporations, companies or individuals to effectively compete
with them.

You might argue we have a similar ssytem in the west, but we realy don't. es
there are instances of political patronage. Yes there are cases of undue
political influence by corporations through lobbying. However the scale of
such cases is absolutely riny and marginal compared to the standard order of
business in Russia and China. There just isn't any reasonable comparrison. The
rule of law, vita to the funcitoning of viable markets, it'sn just weak in
China and Russia, it's functionally nonexistent.

No matter what weaknesses and flaws you can pick at in the rule of law in the
US or Europe, the difference compared to China and Russia is several orders of
magnitude.

Could our system(s) be better? Yes, of course. Is the situation gettign worse?
In some ways yes. Are we in the same boat as Russia and China? No, not by any
reasonable measure.

~~~
curiouscats
I would say it is true in most places in human history, those with power
consolidate their power and use that power to take advantage of those without
power (or very little power). That is the current system in the USA. I would
agree in the USA it is less than in many other countries today.

So I agree the USA is less bad. But it is bad. And it is getting worse the
last 20 years. And it is getting less and less capitalistic with relatively
free markets (not the political extreme, might-make-right-markets, but actual
economic markets that are free of monopolistic pricing power).

The USA has many advantages and does some things well (like having a
marketplace where businesses can indeed grow quickly and prosper - even if it
is far from perfect). This has given us great economic advantages. The huge
amount of wealth we had and built up after world war two is a huge part of why
the USA is where it is today. The USA mainly did well enough not to squander
too much of that wealth advantage - it certainly could have done much worse.
It could also have done much better.

The USA's health system is by far the worst in the rich world (double the cost
and no better results - and this is the most expensive area of economics so
being twice as bad as everyone else - and much more than twice as bad as the
good health care system - is very bad). This problem is very much tied to the
non-capitalist pro cronyist policies that are in general bad for the USA.
Health care is just far worse here than anywhere (maybe some tiny, nearly
insignificant markets are as badly broken relatively in the USA - say sugar
quotas or something but economically it is just giving billions to a few
people and costing everyone very small amounts of money). Health care is
hugely broken and massively costly to the economy.

In most other areas the USA is mediocre or comparatively good but there are
numerous where there are problems (and many are getting worse in the last 15
years).

Other than health care I don't so much see that the USA needs to turn to other
examples of countries doing a better job of using capitalism to improve
results to society (though there are examples such as new Zealand for farm
policy…).

But the USA is creating great loss to our people by not taking advantage of
capitalism (letting markets work - which is not what political talking heads
mean, letting big business distort markets with monopolistic power). I want
the USA to stop throwing away the benefits capitalism would allow us to gain.

There are many individual facets of society we could benefit from improving
(and have lots of examples of countries doing much better - education,
policing, foreign policy…).

But I would agree with your point that most other countries are even worse at
taking advantage of the gains possible with a capitalist economic system.

In fact the USA is often responsible for making those other countries worse.
The huge damage done by the copyright cartel (and associated patent messes) is
the worst in the USA and the USA uses its political and military might to
demand that its vassal states in Europe, Japan, Australia, etc. (I know they
don't think of themselves as basal state but they really just bow down to
whatever the USA actually demands only given token resistance where the USA
allows it) allow such pitiful policies to flourish. The constitution of the
USA had an appropriate understanding of the government GRANTING rights to
private citizens/companies that DON"T exist WITHOUT government granting them
(copyrights and patents). The economic theory is to balance the benefit to
society from encouraging innovation through government granted monopolies with
the cost of the GOVERNMENT taking from society to give to the private entity.
The current USA policy is purely about supporting big business and allowing
markets to be broken with extremely bad policy and no evidence they even have
the vaguest understanding of capitalist or any economic theory on how the
government should be acting in taking from society and giving to individuals.

Ah well, I doubt anyone will actually read this far. Obviously I am emotional
on this topic. Which I know is odd. I just have seen how many people across
the globe suffer because we don't get nearly the benefits from capitalism we
could if we didn't allow the idiotic ides that capitalism means those with the
power make the rules to break markets and direct the benefits to their own
pockets.

~~~
simonh
I read it, and +1 because even though I don't agree with everything you say,
at least it makes sense and presents arguments I can engage with. That's
valuable.

I think a problem we have in the west (I'm a Brit) is that our generation has
inherited a capitalist free market system under the rule of law, but we're
treating it like a rich kid that doesn't value or truly understand our
inheritance and doesn't manage it responsibly.

I don't think the situation is as bad as you say. But then my wife is Chinese
and I have a good udnerstanding of how bad things can be. When people talk
about the erosion of the rule of law and corporatist policies in the west I
have a counter-example I can use for comparison and I see a much more nuanced
picture in the west. Yes we do need to recalibrate our social contract,
particularly in the US, but we do have the institutions and mechanisms
available to do that. At least we are capable of having the debate here
without getting censored or thrown in jail.

------
Htsthbjig
When central banks like Japan's or US print money it is called "Capitalism" or
it is called "central planning"?

When in places like Spain they create a bubble in real state but then try to
support the prices by any means, including the creation of "bad banks" so
prices don't sink it is called Capitalism or central planning?

When States do not control what they spend and the increase the debt by 10x it
is called Capitalism or central planning?

This is not capitalism, but capital-comunism: Capitalism when prices go up on
the riches, private profit, communism or public sharing of the losses.

When I lived in Japan and prices went down, it was very good for the people
living there, but in the international news it was a catastrophe, because the
markets could not make money in the stocks.

People(family and friends) always told me: Are you ok? like I had gone to the
war or something, because of what they heard on the news.

~~~
lazyjones
This is the most appropriate reply currently.

We bemoan capitalism, but what we are really seeing is corrupt administrations
with ex-banker moles everywhere supporting the financial industry's black
sheep at all costs, against all rules of capitalism and the free market.

------
vegancap
Classic case of 'not looking at the bigger picture'. If you look at standard
of living in the west, since the industrial revolution, it's increased
exponentially, massively. More than anywhere else in the world, and it almost
directly correlates to the more economically free parts of the world.

Yet every time there's a minor blip in that massive, massive rise in wealth
and standards of living, people band together t blame Capitalism, forgetting
the massive improvements to quality of life it's given us.

Actually what we have now, despite all that is somewhat broken and it's not
even Capitalism in its truest sense. We're constantly battling against the
feverish symptoms of Corporatism. Big business bail-outs, state monopolies,
printing fiat currencies and the inflation it causes.

So whilst there are problems, don't blame 'Capitalism', blame those who try to
'improve' or 'skew' the heart of Capitalism. Which is free-trade,
entrepuanlerialism and innovation. Not price fixing, inflation or quantitive
easing.

------
spikels
I thought this article was a waste of time. It is a grab bag of obvious
truths, buzzwords, opinions and contradictions. The author seems to be
confused and his prescriptions for more regulation, higher interest rates and
more incoherent political revolt are unlikely to improve things and will
probably make things worse.

Clearly there are many problems in the financial sector and even more in our
governments (there many good things too). Unfortunately nobody can - in my
opinion - convincingly articulate how to fix them or even exactly what they
are and what causes them. And this author is worse than most!

------
tsotha
Capitalism works just fine. The problem is throughout Europe and the US we
have this weird kind of corporate socialism where governments are more and
more involved in their respective economies and then blame "capitalism" when
things don't work out. You can't call it capitalism if companies aren't
allowed to fail.

And banks are so heavily regulated they're _de facto_ agents of the state. The
banking crisis isn't an indictment of capitalism at all - quite the opposite.

~~~
MrBuddyCasino
The banking crisis was a result of de-regulation, caused by neo-liberal
government agendas. After the great depression, the banking sector was stable
and only became problematic again when the laws that were introduced after the
great depression started to be dismantled.

Are you saying thats not what happened?

~~~
ad_hominem
The US financial crisis happened in large part due to the monopoly of the "big
three"[1] credit ratings agencies mislabeling bad debt as good. These agencies
had a corner on the credit ratings market thanks to the US federal gov't (SEC)
bestowing them with the coveted "Nationally Recognized Statistical Rating
Organization" (NRSRO)[2] status, a status which only those three companies
held between the mid-1990s until early 2003, firmly cementing them in the
financial industry as the chosen ones for credit ratings. The US gov't also
gave some extra protection to NRSRO-rated debt, e.g. by recognizing it as
legal investments.[3]

So in this case, over-regulation and the monopoly it bred had quite a large
hand in the financial crisis.

[1]:
[http://en.wikipedia.org/wiki/Big_Three_(credit_rating_agenci...](http://en.wikipedia.org/wiki/Big_Three_\(credit_rating_agencies\)#2007-2010_financial_crisis)

[2]:
[http://en.wikipedia.org/wiki/Nationally_recognized_statistic...](http://en.wikipedia.org/wiki/Nationally_recognized_statistical_rating_organization)

[3]:
[http://en.wikipedia.org/wiki/Nationally_recognized_statistic...](http://en.wikipedia.org/wiki/Nationally_recognized_statistical_rating_organization#Subprime_mortgages.2C_CDOs.2C_and_the_financial_crisis)

------
skywhopper
How can you write an article about Japan Syndrome and stagnating economies
without mentioning Bernanke, Krugman, or Keynes?

Capitalism isn't itself the problem. It's the way out of our current doldrums.
But there's this idea that government institutions have no way to intervene to
kick-start capitalism's more virtuous cycles.

As Keynes first recognized, and as Bernanke and Krugman both clarified in
respect to 1990s Japan: when you hit an economic slump driven by lack of
demand and your control over interest rates has hit its natural limit (you
can't set an interest rate lower than zero... you wouldn't want to risk
deflation in any case), the only way out (besides waiting) is to increase
demand.

So how do you do that? Well, we have tons of options. Governments can take the
opportunity to borrow at essentially zero interest and use the money to build
stuff we need and fix stuff that's broken. Build out gigabit Internet to every
house in the country; commit to curing diabetes in 20 years; build 200mph+
high speed rail networks between clusters of large cities, and improve airport
capacity for longer-distance travel; replace aging water and sewer systems;
invest in offshore wind and tidal power sources; build out a national power
grid to maximize efficiency; provide research grants to increase battery
efficiency x100 by 2025.

All of this will create millions of jobs, in addition to providing the cash to
soak up all the industrial overcapacity that's out there. But there are more
direct routes as well. Raising the minimum wage would stimulate a huge amount
of new consumer spending and debt reduction, while _increasing_ payroll and
income tax revenues for the federal government and putting upward pressure on
wages across the board, which would lead to additional spending, tax revenues,
and growth.

Or if you want to go full Bernanke, just have the central banks print money
and drop it out of helicopters. That, or just mail everyone a check. That
money'll get spent, and add jobs, and then we can let capitalism take back
over from there.

~~~
_yosefk
So do you think it worked for Bernanke after he went full Bernanke and the
article misses this point? Or do you think it didn't work - if so, why didn't
it?

------
upofadown
There seems to be an almost religious belief that capitalism has to work in
all circumstances. But you can't just keep pumping credit into an economy with
the hope that it will continue to expand. People only have so many needs.
After a while there is no real point in building either new factories or
houses.

Why isn't that fact that interest rates are zero not interpreted to mean that
we are simply at capacity? Capitalism isn't broken, it's just full...

~~~
deong
Because a simple walk down an average street nearly anywhere in the country
strongly indicates otherwise. In science, we like to imagine that we'll
begrudgingly discard our theories in the face of a single contradictory fact.
Economists don't even seem to pretend that's a thing they'd ever do.

There are some 50-60 million people living in poverty in the US. Schools don't
have books or desks. People are quite literally fighting insurance companies
for their lives on a daily basis. That's quite a lot of demand out there for
pretty basic things. There are staggering numbers of unemployed and
underemployed people out there as well, so we're not hurting for supply-side
capacity either.

There's simply more profit to be made by "investing" capital in playing
financial games than there is in meeting actual demand. We can quibble about
whether this is a failure of capitalist theory or a failure caused by too much
regulation, or probably a dozen other claims. But whatever the case, it's a
pretty cut and dried case of the bleeding obvious that we're not at capacity
in our economic system.

~~~
upofadown
I think you misunderstood my point. I am claiming that credit driven
capitalism is incapable of providing any particular benefit under current
conditions. In other words; capitalism is entirely ineffective...

From my perspective "playing financial games" is caused by the simple
desperation of people who have large amounts of money and are having trouble
coming to terms with the current reality. They face the horror of actually
having to spend their capital...

------
netcan
The current climate is interesting. I think it's no coincidence that we are
about one generation since soviet communism failed as a political movement and
it became obvious that other leftist economies would either reform or be
overthrown.

In any case, the current debate will perhaps be fruitful. Wealth disparity.
Acceleration of Automation. Jobs evolving so fast that the paradigm of
eduction-qualification-work is getting very clumsy. A resurgence of the old
leftist idea that wealth distribution is inevitably political, mores than
nationalism, religion or anything else.

It's all interesting.

Personally, I think the major force at play in our time is technology. Fraking
for all its controversial implications has already lowered energy prices.
Perhaps all the research and motivation to develop other energy sources will
give us the awaited revolutionary 10X increase in energy availability.
Computing continues to generate wealth and promises of more wealth.

The communication mediums open between most people on earth are developing at
a blistering pace. The effects of cultural globalization may dwarf those of
economic globalization.

It's not surprising that we have an appetite fro radical thought.

------
jvm
There's a lot of conflation in this article between distribution and economic
growth, which I think arises from the Spiegel's European perspective.

Going back to the start of the DAX tracking (mid-2011), we see okay
performance in German DAX index, stagnation for the French CAC and British
FTSE, and strong performance in the US S&P 500 and Japanese Nikkei. [1]
Eurozone unemployment has soared into double digits of late, while in the US
and Japan it is converging with the natural rate, <6%.

The economic situation in Europe is truly awful, in contrast to the US and
Japan where growth has been respectable. But you would never have guessed this
from the tone of the article.

The article raises a second narrative about inequality. Fair enough! But this
is an orthogonal issue to Europe's economic malaise. The US is infamous at not
distributing the benefits of growth. In the US, we have one thing that's
working (growth) and one thing that's not (inequality). This is due to many
institutional problems and governance decisions and it will be a lot of work
to improve the situation.

The thing I found alarming about this was the way they denigrated stimulus.
This is an area of major divergence between Japan/US and Europe. Nominal GDP
growth, the measure of the 'easiness' of money (it's the sum of all money
trading hands), has stagnated under the European Central Bank (ECB) while the
US Fed (FOMC) has used stimulus to keep it growing in the United States [2].
If anyone believes the central banks have "run out of ammunition" as the
article suggests, look what happened just last Friday in Japan: The BoJ
announced unexpectedly high stimulus and the Nikkei instantly soared 4%,
despite the fact that interest rates were already 0. [3]

The ECB needs to be _more_ like the FOMC and BoJ. The Spiegel seems to think
the opposite. It seems like the ECB's policy reflects this hawkish European
perspective. And that's scary for Europe.

PS It's true that Japan has been stagnating for decades. That is likely
related to the ultratight monetary policy they've pursued since the early 90's
(as well as structural issues of course); NGDP actually shrunk there over 2
decades [4]. But they've been moving in a different direction lately, and the
shift seems to be paying dividends.

[1] Drag the slider here back to mid-2011 to get a long-ish view:
[https://www.google.com/finance?chdnp=1&chfdeh=0&chdet=141499...](https://www.google.com/finance?chdnp=1&chfdeh=0&chdet=1414991874560&chddm=890&cmpto=INDEXNIKKEI:NI225;INDEXSP:.INX;INDEXDB:DAX;INDEXEURO:PX1;INDEXFTSE:UKX&cmptdms=0;1;1;1;1&q=INDEXNIKKEI:NI225,INDEXSP:.INX,INDEXDB:DAX,INDEXEURO:PX1,INDEXFTSE:UKX&ntsp=0&ei=7Q9XVOjLE8_diQLFlYHwBQ)

[2] [http://static.cdn-
seekingalpha.com/uploads/2014/9/11/sauploa...](http://static.cdn-
seekingalpha.com/uploads/2014/9/11/saupload_ngdp-ez-us.jpg)

[3] [http://www.huffingtonpost.com/2014/10/31/nikkei-japan-
stimul...](http://www.huffingtonpost.com/2014/10/31/nikkei-japan-
stimulus_n_6080146.html)

[4] [http://uneasymoney.com/2012/02/13/japans-2-decade-
experiment...](http://uneasymoney.com/2012/02/13/japans-2-decade-experiment-
with-fiscal-austerity-and-0-7-ngdp-growth/)

~~~
mqsiuser
A German here, I probably read Spiegel for >10 years (from ~2000 to beginning
of 2014):

They are kind of "left" which reflects in their articles "raises a second
narrative about inequality". They'd support basic income any time.

The Spiegel has turned into yellow press lately, I am surprised to see a
(english) article on HN.

Thank you HN for unveiling that there are some spots in Europe that are doing
fine and that there are structural problems (I can see them, the borders are
open and ppl come to Germany from other European countries).

~~~
kokey
One of the problems with the open borders is that the younger people are
moving, leaving countries with an already stagnant economy with an even
greater aging population issue.

~~~
lispm
The same problem exists within Germany.

------
badname
I'd say that it's well on its rails. It's us, the 99%, that we are in it's
way.

------
tn13
Capitalism has not gone off the rail. It is just the concept that has worked
better than almost every other thing known to humanity.

This inequality business is a new modern day scam just like communism of last
century. Some anointed people want power for themselves and want to still
money from people like us who are working hard in the name of poor people
nothing else.

When government creates incentives where it steals money from hardworking
people like us and gives it to irresponsible people like teenage mothers in
the name of "compassion", we are creating incentives for many people to remain
poor. This is a perpetual poverty into which we have let the government
condemn them. That is the problem.

Capitalism is a hope.

~~~
eropple
The need to see an _untermenschen_ to rail against always puzzles me; these
tirades about "stealing from us" are just a good way to give one's eye-rolling
some exercise. It's like you think, with your labor, you're not poor, too--
while some folks (hi) recognize that a couple years of illness are enough to
destroy a laborer's career. Even a tech worker.

If you don't own capital to sustain your lifestyle, you're almost certainly
part of the poor you want to spit on. Nobody has serious designs on your
slightly bigger slice of the scraps that the middle and lower classes have,
and I have this sneaking feeling that you know that. But Steinbeck predicted
you most of a hundred years ago.

~~~
tn13
Yes. Something might destroy all I have earned but that is fine. I am
individually responsible for that and I dont think someone else owes me
anything.

~~~
eropple
The idea that one is individually responsible for getting cancer at the age of
twenty-five is at best hilarious and at worst monstrous.

------
dalek_cannes
A damning indictment from Stockman's _The Great Deformation_ (referenced in
the article):

    
    
      The paper trail uncovered by congressional investigators shows that the
      $400 billion (notational value) of busted CDS insurance issued by the AIG
      holding company was held by a very small number of the world’s largest fi-
      nancial institutions, and virtually none of it was held by the banks of Main
      Street America which were allegedly being shielded from AIG’s imminent
      collapse. Moreover, the worst-case loss faced by the dozen or so giant in-
      stitutions actually exposed to an AIG bankruptcy would have amounted to
      no more than a few months’ bonus accrual.

------
known
More at [http://news.slashdot.org/story/14/10/16/149247/bill-gates-
pi...](http://news.slashdot.org/story/14/10/16/149247/bill-gates-pikettys-
attack-on-income-inequality-is-right)

------
facepalm
I don't think the healthiness of any specific industries (like banking and
finance) has anything to do with capitalism. Just like, say, manufacturing
CPUs has nothing to do with capitalism. If you have a bug in your
manufacturing process then your company might go broke. Likewise, if there is
a bug in your financial rules, financial institutions might break down. That
has no bearing on the validity or invalidity of capitalism as a whole.

~~~
lkozma
This is a good insight, with the remark that CPU manufacturers are rarely
bailed out by the taxpayers, after designing a faulty processor and getting
close to bankruptcy.

------
BenoitEssiambre
The main purpose of money is to provide a transaction medium. So that we can
negotiate contracts and trade things without barter. This function requires
money to act as an artificial store of value. However money doesn't have
intrinsic value in itself so if people start to put too much faith into this
paper, it can replace more tangible market based stores of value such as
stocks, bonds commodities etc., those that are backed by real economic
activity. When real economic activity is replaced by a government "paper"
store of value, you get unemployment and sub potential production.

Right now in many places, Europe in particular, interest rates are
artificially high, yes they are near zero but zero is high when the
alternative private investments would be in the negative in risk adjusted,
inflation adjusted term. That is why corporation and banks tend to hoard cash.
Cash is kept artificially more valuable than market investments.

It is critical in these situations to have slightly higher than normal
inflation to allow central bank real rates to be more negative and closer to
market rates for stores of value. When central banks don't cause enough
inflation, they are subsidizing holders of money and money like instruments to
the detriment of those who invest in things that are tied to economic
activity. They are subsidizing economic idleness, they are keeping an
artificial store of value worth more than free market investments and this
creates gridlock in the economy.

------
gibsonf1
What is interesting about the article is that it clearly points out how
destructive the Central Banks are in trying to manipulate the economy, but
ends with blaming the private bankers. It is abundantly clear from economic
history that Keynesian policies of money printing and interest rate
manipulation don't work and in fact have never worked - they are the problem.

------
Zigurd
What's really interesting about the labor glut is that the conventional wisdom
about demographics hasn't been adjusted.

The CW is that the US has a great future because US population is going to
climb to about 400M by about 2050. If economic growth is decoupled from labor,
is that an advantage?

------
drawkbox
Capitalism requires growth, finite resources/demand can't always live up to
it. I have always believed that the virtual economy / digital goods is really
where most of the growth needs to be.

We are seeing lots of this but maybe not enough. The only limited resource in
virtual worlds is imagination, storage, network and power (energy), but it
takes fractions of what physical goods take. If we can pull something off like
in Ready Player One OASIS or even just more participating in buying digital
goods I think this is part of the solution.

Another area I think can help is loans/investments but of digital currencies.
The world of funding could be revolutionized by bitcoin like systems where
they are primarily for hoarding, but they are also perfect for supplying
capital. Capital could be made available to the 99% out there in new
interesting ways, shaking up baked in wealth of the 1% that is immovable at
times of need. If there ever is a basic income, I believe it will be some sort
of digital currency, a new currency might even start out that way.

------
known
Unlike Capitalism, Globalization is Zero-Sum.

------
kuni-toko-tachi
Another absurd anti-capitalism diatribe from left oriented journalists.

Capitalism is not the problem. We have too little capitalism, not too much.
Central banking and the banking industry in general are the problem, since it
exerts monopoly control over interest rates and currencies. Free markets are
resilent distributed networks and therefore self-regulate and self-repair.
Concentration of wealth is a valid concern, but only because many normal
mechanisms of exchange have been co-opted by central entities. Because of
this, people have to go through intermediaries to facilitate exchange. These
intermediaries often do not have the interests of those parties at heart.

------
hmans
So will it scale now?

------
cowardlydragon
Very very very simple.

The natural end state of unregulated markets is cartel/monopoly.

Which is what practically every sector is right now.

Break them up with existing antitrust laws.

------
maratd
It's not capitalism that's gone off the rails ... it's socialism. All of the
countries with slow growth and growing inequality have heavy-handed socialist
policies in place.

~~~
erkose
So you're saying the US isn't experiencing slow growth and growing inequality?

~~~
maratd
I'm saying the US has some of those very same policies in place.

~~~
RangerScience
So who doesn't?

~~~
adventured
Hong Kong and Singapore are the two freest economies. They have very minimal
welfare states, with relatively light regulation and taxation. Their wealth
creation and economic growth have been astounding over the last ten years.

Meanwhile, most of Europe has seen zero GDP growth in real terms since
2004/05\. France has seen an average of sub 1% nominal GDP growth for a
decade; negative in real terms. Japan, which is a massive welfare state, has
seen zero GDP growth for 20 years; their State spending dug such a deep hole,
a quarter of their revenues go to just paying interest on debt, and they've
taken to debasing their currency as the last step available to them to hold
off further collapse. Spain, Italy, Portugal, Greece, et al. are welfare state
disasters, rapidly imploding. The US has seen zero standard of living
improvement for 40 years, and that's before accounting for the massive
increase in debt that has yet to exact its full toll.

You can count the number of welfare states in the world that are doing well on
one hand, with one of them being a temporary oil empire named Norway.

~~~
bildung
_Hong Kong and Singapore are the two freest economies. They have very minimal
welfare states, with relatively light regulation and taxation. Their wealth
creation and economic growth have been astounding over the last ten years._

Hong Kong and Singapore had an _astounding_ growth of 2.9% and 3.9%, while
socialist China had a miserable 7.7%? I don't get the impression you looked at
the numbers at all, or did you?

~~~
maratd
In what way is China socialist? It's a kleptocracy and an aggressively
capitalist one at that.

~~~
bildung
Whether or not China is socialist or capitalist doesn't really matter: GP said
"freer" economies have higher growth. Is China freer than Hong Kong or
Singapore?

(BTW: China sure has a market economy, but OTOH it lacks multiple specifics of
contemporary Western capitalist economies, e.g. it's not primarily driven by
the financial markets, a significant portion of the workforce still works at
state owned enterprises, much deeper planned macro economical development than
in the West, ...)

