
Why capitalism fails - robg
http://www.boston.com/bostonglobe/ideas/articles/2009/09/13/why_capitalism_fails/?page=full
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maxharris
It's not capitalism that failed - it's the government's regulatory
interference!

The Federal Reserve, by setting a single interest rate for the entire economy,
destroys local market signals. (What you want is a locally adjusted rates to
reflect natural cycles in decoupled local economies - this is what happens if
you don't regulate centrally.)

The government's monopoly on the issuance of currency is important, too. And
what about the SEC that went after innocent people like Martha Stewart and
ImClone founder Sam Waksal, while blind to actual crooks such as Bernard
Madoff? What about the federally-owned Fannie Mae and Freddie Mac? They were
to a large extent responsible for the housing crisis. They have so much of the
market, and it's government regulation and backing that gave it to them.

On a national scale, private business, if devoid of these corrupting
government influences, would not fail all at once, nor would it fail with such
lasting severity as we've seen in the last century. It's notable that all of
the regulatory bodies (and a great many more that I did not mention) were
created in the last 100 years to "stabilize" the market - but it doesn't take
great genius to see that all they have accomplished is to take little local
pockets of boom/bust (which add up to overall growth and stability on a
national scale), and pack them into huge booms and busts that cause much
longer and deeper cycles that you can't escape from as easily by moving to a
new city.

And don't forget that this sort of centralization is important for marshaling
resources necessary to run an expansionist empire (think about the economic
policies in America during the two world wars, and the American empire that
resulted).

To help differentiate between the "capitalism" the article smears (what should
be called a mixed economy - some capitalism, some regulation), and actual
capitalism, see <http://www.capitalism.org/>.

~~~
ilkhd2
You know what is the problem "efficient market" capitalism? It is logical
enough to make people with IQ 100-110 attracted and interested and even
fascinated by it, but it is completely devoid of theoretic basis - the only
basic premise is Adam Smith's invisible hand; and that is disturbing for
smarter people. Like Stiglits often says - hand is invisible because it is
not.

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

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

~~~
fnid
Aneurysms grow much faster than the surrounding blood vessels, but that
doesn't make them good. It makes them bad. It may be the extreme growth that
capitalism enables and encourages that is the reason it is a failure. It makes
us focus on growth above all else. But why is growth in and of itself a good
thing? Why isn't stability better? Growth is risky. Financial analysts focused
on the long term are looking for slow stable compounding growth. Long term
investors know that rocketing growth is unsustainable and is not the goal.

~~~
DanielBMarkham
I would be very interested in having you explain that further, because it
makes no sense to me at all.

Capitalism is bad because it lets us grow too quickly? I don't understand. Are
you talking about market bubbles? Like that have been going on for four
hundred years or more? If so, that's called a feedback loop: the system
overgrows and then contracts. When you make a mistake and correct it, there's
some adjustment involved. Surely that's better than no adjustment at all,
right? I mean, to have everything perfectly valued would only happen in a
fantasy world.

Or perhaps I misunderstood.

~~~
onreact-com
We have only one planet. We already use up more resources than it has. More
economic growth equals destruction on a planetary level.

~~~
pg
Hardly. One form of economic growth is increased efficiency.

~~~
neva
Which will _hardly_ be able to cope with the looming scarcity of resources,
considering the numbers of population growth rate.

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rw
I believe markets are tools, not rules.

This is one of those times when my background in economics threatens to
overwhelm me with analysis paralysis while writing a comment. Just to be
concise about it: economics is a descriptive science, but we conflate it with
a prescriptive one. Sometimes, that is definitely warranted--as a society,
markets are a way to get things done, and we need to understand them as much
as we can in order to implement them. But the hubris that comes with thinking
that _we basically get it_ , that we comprehend these ridiculously complex
chaotic dynamical systems, leads to mis-allocated resources and anti-humanist
policies.

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yannis
During 1998, two global leaders came from the Americas to South Africa. Bill
Clinton and Fidel Castro. In their speeches before the South African
parliament Clinton described the global economy as a partnership, whereas
according to Fidel Castro “the world, had become an enormous gambling house”.

As a mere observant of the events around me at the time, I considered
Clinton’s response bulshiterian and Castro’s response truthy.

Fortunately for all of us Castro’s preferred economic system has proven more
unstable than capitalism and totally collapsed, but unfortunately the current
prevailing economic system of capitalism has also failed to evolve in the
right direction.

Capitalism has still two inherent disadvantages:

(01) It is a highly unstable system

(02) It has a propensity to make the richer richer and the poorer poorer.

My solution? Code happily and wait for the storm to pass :)

~~~
dgordon
"(02) It has a propensity to make the richer richer and the poorer poorer."

The poor in the first world are richer than the rich were for most of history.
The poor in the third world are no poorer than in the past.

So no.

~~~
pbhjpbhj
Or if you're a person in the third world (and assuming everything else about
your statement is true, which I have doubts on) - we're still poor and the
rich in the developed world are richer.

So yes.

~~~
dgordon
So the poor haven't gotten poorer after all?

If you want, pick a standard of absolute wealth and try to argue that the rest
of my statement isn't true.

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

~~~
maxharris
That's the fad right now - but I doubt that this is much more than tweaking.

~~~
fnid
this is why capitalism has failed. It has enabled the propagation of negative
human traits. Traits we all agree are detrimental to our survival. Greed is
not good. We all know it. It promotes overconsumption and hoarding of
resources.

We need a system that propagates benevolence and vision.

~~~
maxharris
But greed, when coupled with reason, is good! What is in your rational long-
term self-interest is what is good for you. To want that, to be greedy for it
- to desire it above all else - is what you should always strive to do.

Please, pick apart the phrase "rational long-term self-interest" - and note
that "long-term" means on the timescale of your lifetime.

I disagree with your implicit Malthusian assumption that resources can be
overconsumed/hoarded in a meaningful way. The universe is chock-full of atoms
and energy, and the key to unlocking more is always just a little more
technology (which we have a pretty good track record at doing!)

~~~
fnid
Those bankers on wall street destroyed the world economy and in doing so,
secured way more than enough for themselves to satisfy an entire lifetime of
living and several more generations to boot.

Greed is not good.

To quote MGMT, "Take only what you _need_ from it."

~~~
maxharris
I said long-term rational-self interest.

How were the bankers doing that? The bigger the fraud, the harder they fell.
How is Bernie Madoff doing?

Is former Merill-Lynch CEO Thain a fraud? Not exactly. But he didn't fight a
principled battle against _all_ regulations. What I'm saying is that it's much
better to be like John Allison, the former CEO of BB&T (one of the few that
didn't get into subprime as a matter of principle) than it is to be like
anyone else. Allison is great, and he did great, and he's free of any and all
guilt! Everyone (CEOs included) that fall short of that ideal pay a price
(remember, there's no such thing as a free lunch, ever, in anything)
proportional to their deviation from the moral ideal (set by Objectivism).

You should not assume that Thain and other bankers are happy just because they
have "a lot" of money. Nor should you assume that they have the skills to keep
their money "in the family" for several generations. That implies a level of
familiarity with their individual philosophies that you simply do not have!
(And to be honest, I don't know either, apart from what you can tell about
them from reading the paper.)

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onreact-com
Capitalism worked to some extent and for some people, mainly capitalists,
during a short period of time, something like 100 - 150 years.

Capitalism replaced feudalism, a system that didn't work anymore at all, it
did of course only for a few people as well while it lasted. Now capitalism
does not work anymore either. It's the information age and the situation has
changed to such an extent that a new system will be born out of the current
demise of capitalism. Those who will adopt the new system first, the most
progressive parts of the world, will succeed first.

Some parts of the world still stick to feudalism. In Nepal a monarch just has
been ousted. So progress won't happen everywhere at once this time either.

We don't exactly know what will follow, maybe Perecon or a similar system but
we can't stick to capitalism as if nothing has changed since the steam engine
has been invented.

The digital economy has it's own rules (see open source, music industry
failure, successful companies making no profits like Twitter) and will most
probably pave the way.

Nobody would suggest that we have to keep using the steam engine when there
are better ways to solve the problems we face. Nonetheless most people treat
the steam engine capitalism as the end of history. Those people will soon
become history themselves.

~~~
dgordon
It remains to be seen whether Twitter will actually succeed.

