Is Capitalism the Ultimate Aid to Government?

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Capitalism is a subset of local governments and does not pretend to govern in its pure form. Many socialist governments closely control capitalist pyramids for their benefit as did Italy in the 1920s and Germany in the 1930s. What is very clear is that capitalism is admittedly an excluding process and not even remotely inclusive with respect to entire populations or even small groups in a given region of the planet.

 

I maintain that capitalism is the natural default social mechanism of sharing and production by small groups and that when significantly perturbed the elements that were used to generate this capitalist system, however small, are scattered or dismembered for a time, but those elements will spontaneously recombine with new players and new resources and even new places if necessary and is thus regenerated anew. No matter how large a corporation may get it is only an ensemble of smaller departments or divisions that are subdivided and controlled by middle management.

 

The only process that prevents the broad-spectrum rise of capitalism is government or some similar force that directly focuses negatively on the capitalistic progression and these are usually shown to be places of high poverty, oppression and failures like North Korea, Cuba, the USSR and parts of Eastern Europe or just about anywhere in Africa. Those forces must dismantle or prevent commerce from operating in free markets to be successful then they have to provide for their citizens what capitalism could have provided and frequently they cannot do so.

 

Capitalism is self-regulating and continuously improving—two attributes conspicuously absent in many forms of government. The profits from capitalism are viewed as evil and greedy until one realizes that such wealth is useless if not used to form new pyramids or to buy goods and services or build real estate.  Capitalism produces capital as its product and this is usually money at risk for expansion or held to be used later. The theory that capital is used to create new jobs is offensive and mysterious to many in the leftist political camps who believe that government can create jobs, and it cannot. Many liberals cannot bear to think about the fact that 99% of the tax revenues in the US come directly or indirectly from businesses or from taxes on salaries of their employees. Many think the government can ‘create jobs’ but they only create parasitic bureaucratic or other questionable positions that burden the taxpayers. Such arguments, though true, inflame the left who have nothing in their future except what they can drag out of higher taxes and regulations.  California is the best example of how not to run a government outside of Cuba or a few spots in Africa.

 

Capitalism creates efficient jobs by definition and when those jobs become inefficient they are summarily eliminated or the job holders retrained or given new assignments. Marxism is a failed ideological system that originally attempted to capture and redirect profits from the capitalists and return them to the masses with government control and ownership of the means of production, but that was never the case in practice.

 

I suggest that capitalism [in whole or in large parts] is essential to good government and the more resources that are directed by persons who can produce growth allows the best state for the citizens.

 

Comments

Johnny Fever Added Sep 3, 2018 - 3:35pm
Capitalism is not a subset of anything, it’s an economic system.  There is no such thing as a capitalist pyramid.  Kind of hard to keep reading when the opening sentences are illogical.
John Minehan Added Sep 3, 2018 - 3:49pm
Isn't the necessary factor local control?
rycK the JFK Democrat Added Sep 3, 2018 - 4:12pm
"Capitalism is a subset of local governments and does not pretend to govern in its pure form. "
 
This means  that  there is no government run exclusively by capitalism so that most governments have capitalist entities embedded in  their polis. NOKO May have none but PRC has hundreds. 
 
"There is no such thing as a capitalist pyramid."
 
The structure of capitalism can be clearly depicted as a pyramid where the executive officers are at  the apex and other lower levels are where middle and lower management  exist and at the bottom are entry level or menial employees.
 
This same vertical structure can be used to depict the Feudal system  that has four essential categories: top: kings, royals, priests and such, then in the middle: artisans and merchants with the peasants at the bottom. 
 
"Isn't the necessary factor local control?"
 
Governments over the planet deem it necessary to 'control' capitalist entities for many reasons. As such there are corporate laws, tariffs, and other government-protected 'businesses' or such. 
 
I can find no pure example of a social system that is 100% capitalism. 
 
Autumn Cote Added Sep 3, 2018 - 4:18pm
Please note, it’s against the rules to post articles here unless you comment on the work of others.  As always, many thanks for your participation with Writer Beat!
Katharine Otto Added Sep 3, 2018 - 10:23pm
rycK,
I figure governments are inherently socialist, because they don't pay their own way.  As you say, they don't "create" jobs, except for government jobs, and these are funded by taxes, so it's second-hand money.
 
In its "purest" form, capitalism is self-sustaining, but we don't have "pure" forms because of government contracts and subsidies, and because of the stock market.  Then there are tariffs, other taxes, and regulations.  I still say the "means of production" is the individual who does the actual work.  To presume the employer, who may own machines, land, and building, "owns" the means of production is like saying the employees are slaves.  I believe the ideal capitalist enterprise would be one owned by those who work for the organization, as in a co-op.
Utpal Patel Added Sep 3, 2018 - 10:25pm
Not once do you define what an ultimate aid to government is yet it’s a phrase used in your title.  Capitalism has been proven to work better than any other economic system.  Because of that, governments that embrace capitalism are generally more stable than ones that don’t.  I have no idea what that means in terms of aid or ultimate aid. 
Dino Manalis Added Sep 4, 2018 - 9:28am
 Not necessarily, but government ultimately gets involved with capitalism and makes cronies out of certain businesses and industries.  It's important for government to maintain competition and low prices long term to please consumers.
Ken Added Sep 4, 2018 - 12:29pm
This is why capitalism is an economic system and socialism is a political ideology.  One system creates wealth, the other simply redistributes existing wealth and gives no incentive to create new wealth.
 
The problem with capitalism is when the government gets involved and starts picking winners and losers.  tax breaks, grants, etc. to one company/industry, fines and charges to those they disapprove of.  Many of the classical "robber barons" got to where they got due to government pushing them that way most often in partnership.  By and large, capitalism is self regulating, leads to innovation and can be attributed to making this most prosperous, educated time in the history of mankind.  Most of those living in poverty today still live better than some of the best did a century ago, and most parts of the world that have heavy poverty are the areas that have rejected capitalism.  The further they reject it, the worse off they are, for the most part.
rycK the JFK Democrat Added Sep 4, 2018 - 12:50pm
Katherine Otto
 
"I still say the "means of production" is the individual who does the actual work.  To presume the employer, who may own machines, land, and building, "owns" the means of production is like saying the employees are slaves. "
 
I see your point but in economics the Marxian notion of "means of production"
 
But according to Marx: 
noun

(in Marxist theory) the raw materials and means of labour (tools, machines, etc) employed in the production process

noun
 
(especially in a political context) the facilities and resources for producing goods.
 
These definitions seem to exclude labor from the hardware as capital starts off as money put to risk to buy machines, goods, services, tools and such. But, you are right in that they figure in as cost elements in production estimates. 
 
The employees are not slaves because they are not held and must accept the remunerations offered by the company. This may not be fair [as in children rolling cigarettes in India] because the wages are insufficient to make a decent living. [many children bring most of the revenues in certain places.]
 
Labor unions solved this problem, partly and for a while, until union demands became unreasonable [GM $74/hr with 6-8 week vacations and sometimes a mandatory helper].
 
Labor is in a market just like potatoes and oil so the employers must select where the labor is obtained. That is why you cannot make toasters in the US at $35/hr, with 1 hr of test and ship, when you can get the same skilled worker in Viet Nam or Indonesia for $4-5/hr. 
 
Markets are controlled by supply and demand schedules. 
 
George N Romey Added Sep 4, 2018 - 1:35pm
Big government is a side effect of big business. 90% of what government attempts to do is either aimed at promoting capitalism or on the other hand mitigating the negative effects of capitalism. There’s a reason our founding fathers were wary of corporate power. They placed power of control on the state level but could have never imagined the size and scope of today’s big corporations.
rycK the JFK Democrat Added Sep 4, 2018 - 2:19pm
George N Romey
 
"Big government is a side effect of big business. 90% of what government attempts to do is either aimed at promoting capitalism or on the other hand mitigating the negative effects of capitalism. "
 
Big government not striving for strict socialism you must mean. Clement Attlee and his types [Lenin, Castro, Mao, Chavez, Ortega] always tend to confiscate private property for some elitist cause and that argues against capitalism. Trump and Thatcher and Reagan reversed much of this and at least blunted the attempt. 
 
I would agree with you that the Trump administration is pro capitalism and attempts to negate socialism, a proven failure [Obama, Attlee, Mao, etc. ] 
 
""Big government " of the Obama type was the recipient of a lot of campaign contributions so only parts of the big business system was controlled according to your context
 
Capitalism in some degree or more must be present in a society lest the system crash in economic terms like PRC, Venezuela, USSR, Cuba, etc. 
 
Thus, I think capitalism is essential to any stable economic system and the more the merrier. The only two bright 'stars' in the socialist camp appear to be Sweden and Switzerland, both heavy in capitalism. 
 
From above, I did find a nation that might have been 100% or so capitalist and that is the Mayan city of Teotihuacan apparently made famous and rich from obsidian tool sales. They have not found evidence of rulers there as yet and merchants appear to have run the city for decades. 
Ken Added Sep 4, 2018 - 2:56pm
Ryck - Under Marxist definitions, labor is not included because labor IS enslaved.  They produce everything for the collective not for their own personal consumption or gain.
 
George - big government is NOT a side effect of big business.  It is a side effect of fabian socialism/marxism when introduced.  We had small livited government for 130 years before Teddy Roosefelt then Willson, then FDR imposed socialist entitlements and programs that exploded the size of our government.  Big Business isn't responsible for half of the federal budget going to entitlement programs.  Big Business isn't responsible for more entitlements added by LBJ and Obama - notice how (other than Teddy)  it is the anti-capitalist democrats that are most responsible for expanding the government?
 
How do you logically blame big business for that?
Thomas Sutrina Added Sep 4, 2018 - 5:19pm
Great discussion.  I fall on the side that the author has no idea what he is talking about.  First of all 'capitalism' is the gathering of wealth usually in the form of money.  It only happens when a society can produces, store, or process more then it immediately needs.  Once humans started to plant and domesticate animals they had the capacity to constantly have more then they needed.  Form of government is irreverent.
 
What you are actually discussing is free trade and lesser free trade,  that is someone else makes decisions for the trade of those that have something wanted and those that want that something.    There is no such thing as absolute free enterprise because we need a system of exchange that has rules and enforcement capacity. 
 
The freest trade is one where there lots of producers, the item has become a commodity and no one can distinguish one producers product from another.  And a market with lots of traders wanting the product.  Spontaneous order develops where the market determines the trade that on average occurs.  It is dependent on a lot of factors so will not be uniform. 
 
The next level of free trade is where the producer's product are unique in some way and there are lots of choices and product.  The traders evaluate the differences and the market through spontaneous order determines the average trade value.
 
The next level of free trade is where there are few producers and many traders. This is what created many of the 'Robber Barons' and in most cases they bought out or ran competitors out of business to be in this situation.  The producer not spontaneous order determined the average trade value.  
 
Government has become a third party in the free market by two means.  Regulations that can favor producers, force changes in what can be produced, and be a major trader in the market to the point that they are a 'robber baron trader.'  
 
When you have a class society where the government places barriers to people moving between classes those barriers restrict the transfer of wealth also.  To do that the rules are different for different classes.  Suppressing the advancement and retardation of people creates resentment so the government is totalitarian.  Socialism is one such totalitarian government.   The government as a third party has overwhelmed the capacity of spontaneous order to reach even a skewed balance.  This is most visible in Venezuela. 
Ken Added Sep 4, 2018 - 5:30pm
Good synopsis Thomas, except I would disagree with your comment about the Robber Barons.  They were generally created by the government.  the railroad, oil, banking, even the phone were deemed so important by the government that the government funded much of their expansions.  The government was then forced to break apart the monopolies which they themselves created.
George N Romey Added Sep 4, 2018 - 6:18pm
You really don’t understand history. By the early 20th century Americans were screaming something be done about corporate abuse. TR felt the only entity big enough to counteract big business was the Federal Government. By the way, and again if you bothered to read you would know both TR and FDR were anything but socialists. Both were thought to be in bed with big business by liberals. Some of the legislation passed was more business friendly than labor friendly. Did you know that FDR was under extreme pressure by labor to declare a 30 hour workweek but sided more with business that wanted a 44 hour work week.
 
Unfortunately over the years we’ve allowed these mega companies that have the ability to wield considerable power and do lots of damage. I guess your for companies putting whatever they like into local waters and paying people near nothing for a 12 hour day.
 
The problem with WB. People spouting off opinions not knowing a damn thing. 
Ken Added Sep 4, 2018 - 6:28pm
TR was the first American progressive president.  He started stealing lands for the government making national parks and monuments
 
Bull Moose Party Platform - of course not all are socialist, but many should sound very much so
 

A National Health Service
Social insurance, to provide for the elderly, the unemployed, and the disabled
Limited injunctions in strikes
A minimum wage law for women
An eight hour workday
A federal securities commission
Farm relief
Workers’ compensation for work-related injuries
An inheritance tax and a constitutional amendment to allow a Federal income tax
Voting rights for Women
Direct election of Senators
Primary elections for state and federal nominations
Strict limits and disclosure requirements on political campaign contributions
Registration of lobbyists
Recording and publication of Congressional committee proceedings

 
As far as FDR - a president that expanded the federal government like no other and had the arrogance to try and pack the supreme court with progressives and create the "new bill of rights"?
 
https://patriotpost.us/alexander/2959-fdr-socialism-and-useful-idiots
 
Don't tell me I know nothing about history when you are clearly the uninformed pseudo-historian.
George N Romey Added Sep 4, 2018 - 6:41pm
No you’ve never read anything unbiased. Your too dumb to understand how bad this country was in 1932. Real unemployment was in actuality around 40%. Hoover for 4 years had claimed the free market would rebound. By 1933 FDR or any President had to act. It was so bad FDR was being pressured to declare a national curfew to quell rioting. This country was in meltdown.
 
But again you know nothing about history just the crap you get from your other equally ill informed ilk.
 
Im done arguing with the uninformed on WB.
Ken Added Sep 4, 2018 - 7:13pm
You make an ad hominem attack then you rewrite history, and you know NOTHING about what I have or have not read.  I actually majored in economics, yourself? Hoover had terrible protectionist policies including pushing and getting Smoot-Hawley passed, he was the original "republican businessman protectionist".  He taxed the hell out of the free market making it impossible to rebound.  FDR came right in and what did he do?  Higher taxes and tightened money supply.
 
The only thing that got us out of the lost decade was WW2.
 
From UCLA - a bastion of conservatism, right?
http://newsroom.ucla.edu/releases/FDR-s-Policies-Prolonged-Depression-5409
 
https://mises.org/library/how-fdr-made-depression-worse
 
You are entitled to your own opinions but not your own facts.
 
Im done arguing with the uninformed on WB.
your evenings must be very quiet.....
Thomas Sutrina Added Sep 4, 2018 - 8:30pm
George as usual you half correct <<By the early 20th century Americans were screaming something be done about corporate abuse. TR felt the only entity big enough to counteract big business was the Federal Government. By the way, and again if you bothered to read you would know both TR and FDR were anything but socialists. >>  
 
Your have changed nothing that I said with your comment on Robber Barons.  I clearly said that government regulations, I implied bills passed by congress since in 1800 congress had to lay a foundation for any regulation by the bureaucracy and Congress as you said funded by gifts of land the rail roads.   Thank you for getting deeper into the formation of some of the Barons.
 
George, history is written by the WINNERS.  As Paul Harvey use to say here is the rest of the story (by the losers), Whittaker Chambers (Time magazine senior editor, and autobiography, Witness) worked in the American Communist underground for most of the 1930s.  In 1939, with the outbreak of WWII, Chambers decided he needed to inform the FDR administration of what he knew about those currently working in the underground.  He obtained an interview with Adolf Berle, the Assistant Secretary of State in charge of security. Yet when Berle took this information to FDR, he was rudely dismissed—FDR didn’t care.  "All the New Dealers I had known were Communists or near-Communists. None of them took the New Deal seriously as an end in itself. They regarded it as an instrument for gaining their own revolutionary ends."  They were following Fabian Socialist tactics, "(I)it was a revolution by bookkeeping and lawmaking. In so far as it was successful, the power of politics had replaced the power of business. . . . Thus men who sincerely abhorred the word Communism, in the pursuit of common ends found that they were unable to distinguish Communists from themselves, except that it was just the Communists who were likely to be most forthright and most dedicated in the common cause."   http://www.breitbart.com/big-government/2010/05/22/whittaker-chambers-the-new-deal-as-revolution/
Ken Added Sep 4, 2018 - 9:46pm
Thomas, when you post a link, click the chain at the top of the post box and post your link in the pop up box and it becomes a link like those I post rather than a cut and paste from your article
rycK the JFK Democrat Added Sep 5, 2018 - 10:59am
Thomas Sutrina
 
"Great discussion.  I fall on the side that the author has no idea what he is talking about.  First of all 'capitalism' is the gathering of wealth usually in the form of money.  It only happens when a society can produces, store, or process more then it immediately needs.  Once humans started to plant and domesticate animals they had the capacity to constantly have more then they needed.  Form of government is irreverent."
 
Your argument seems to pivot upon a case where "a society can produces, store, or process more then it immediately needs." and then the unreasonable statement: " Form of government is irreverent."
 
History shows us in many venues that when the far left gets control of government they suppress capitalism to their general distress. The two brilliant 'exceptions' to this are Sweden and Switzerland, both with dirty operations by selling guns while preaching peace and hiding the dirty money of despots and worse at zero interest. 
 
To test  your point that the " Form of government is irreverent" why not tell us in economic terms why the USSR, PRC, Cuba, Venezuela, Hungary, NOKO and other Marxist governments did not do well?
 
I have put this question to Opher a few dozen times and he always cites socialism as the best choice for government and cannot seem to explain the economic failures of socialism and systems to the left of that. 
 
It should be clear: governments that suppress capitalism do so at their peril.
Ken Added Sep 5, 2018 - 1:26pm
Sweden and Switzerland are 2 very small, very homogeneous cultures which help a lot.  Also, Sweden's economic system used to be more free market than the US currently.  The myth of socialism in Sweden being successful is just that.  The incredibly high tax rate and nationalization of industries has been disastrous to its economy.
 
"Sweden has managed to live comfortably for decades despite its many heavy-handed socialist policies only because so much capital stock was created in the decades prior "
https://mises.org/library/how-modern-sweden-profits-success-its-free-market-history
Thomas Sutrina Added Sep 5, 2018 - 3:28pm
Ken, actually in the 80 Sweden put in a lot of government control.  The economy stagnated and they had to step back from government control of the economy.  Today on the freedom list of countries both Sweden and Switzerland are more free then America.  Both have government health care and I know Sweden has a larger welfare program that has reduced its growth.  I believe the same can be said for Switzerland.    
 
Adam Smith's words, "the uniform, constant, and uninterrupted effort of every man to better his conditions, the principle from which public and national, as well as private opulence is originally derived," has been, "powerful enough to maintain the natural progress of things towards improvement, in spite both of the extravagance of governments and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigor to the constitution, in spite, no only of the disease, but of the absurd prescription of the doctor."   Wealth of Nations Vol 1, page 325 book II chapter III   1776 edition edited by Edwin Cannan 5th edition London Methuen & Co Ltd 1930  (from Milton Friedman's book 'Free to Choose')
Thomas Sutrina Added Sep 5, 2018 - 3:31pm
Ken in most cases I have created a pdf file of the article that I am citing so I do not have the web page to use the link feature.  I collect good articles.
Katharine Otto Added Sep 5, 2018 - 3:59pm
rycK,
In response to your response, don't you think that for Karl Marx--the spokesperson for Communism--to provide the working definition of "capitalism" is strange?  My point is to redefine the terms, because whether workers are enslaved or not, they feel like slaves and give up their autonomy for that steady check.  Marx, who called for a "dictatorship of the proletariat" really wanted the state to control everything, which is communism or socialism.  
 
Under Marx' definition, we may have a capitalist society in the US, but that is deceptive.  The Federal government has a monopoly on the "means of production," no matter how you slice it.  It exerts its power through the economic system, the tax structure, regulation, and Wall Street, as well as hiring everybody or otherwise making them (believe they are) dependent on the nanny state Federal government to provide.
Thomas Sutrina Added Sep 5, 2018 - 4:23pm
Katharine O. that is why Mark Levin wrote the book Ameritopia.  America is closer to a socialist state then ever before.  The completion to a socialist state was the 'Transformation of America' that Obama said he would do, actually complete the transformation the FDR started.  
Ken Added Sep 5, 2018 - 4:36pm
Ken in most cases I have created a pdf file of the article that I am citing so I do not have the web page to use the link feature.  I collect good articles.
 
I was just referring to the link you pasted into your article, if you use the link button at the top you can embed the link into your text rather than pasting it in and it shows as a clickable link
Ken Added Sep 5, 2018 - 4:38pm
Thomas - It is also why he wrote rediscovering Americanism - which shows why Marxism cannot coexist with liberty.  He also goes through how destructive Marx, Hagel, etc have been to the civil society where Cicero, Locke, Montesque - who the founders looked to to found our principles were the foundation of the civil society
David Montaigne Added Sep 5, 2018 - 6:32pm
Ryck the JFK Democrat may not always use the right terminology but his main point seems valid to me - capitalism produces the economic wealth and allows the diversification of labor that makes for a society that needs to be governed.  Without capitalism we would all be hunter gathers and subsistence farmers.  Capital in the form of surplus material things like extra food and tools is what allows the progress into society and civilization.  I argue for the smallest government and least intervention possible, but of course, government evolves to compete with capitalists and politicians want more power and control. 
Ward Tipton Added Sep 6, 2018 - 8:59am
Government is the ultimate aid to government. Remember ... 
 
The government has what it takes, to takes what you has!
rycK the JFK Democrat Added Sep 6, 2018 - 9:35am
David Montaigne
 
"Ryck the JFK Democrat may not always use the right terminology but his main point seems valid to me - capitalism produces the economic wealth and allows the diversification of labor that makes for a society that needs to be governed.  Without capitalism we would all be hunter gathers and subsistence farmers.  Capital in the form of surplus material things like extra food and tools is what allows the progress into society and civilization.  I argue for the smallest government and least intervention possible, but of course, government evolves to compete with capitalists and politicians want more power and control."
 
Thanx, my description of capitalism was framed due to the stale and uninteresting views of the theory of the subject. Forgive me if I took a few liberties with the literary side of the matter. 
 
I have to agree with your summary above and thank you for rephrasing some points. 
rycK the JFK Democrat Added Sep 6, 2018 - 10:04am
Katherine Otto
 
"rycK,
In response to your response, don't you think that for Karl Marx--the spokesperson for Communism--to provide the working definition of "capitalism" is strange?  My point is to redefine the terms, because whether workers are enslaved or not, they feel like slaves and give up their autonomy for that steady check.  Marx, who called for a "dictatorship of the proletariat" really wanted the state to control everything, which is communism or socialism. 
 
It seems unusual to closely follow Marx , but we did that for J. J. Rousseau, Aristotle and Plato as well. Certain terms stuck to the various theories and some did not. Capitalism is 5000  years old, at least, but we  never hear that "Say's law, or the law of markets, states that aggregate production necessarily creates an equal quantity of aggregate demand.  https://en.wikipedia.org/wiki/Say%27s_law"
 
Part of the problem starts with the notion that economics is a political football where capitalism is deemed evil and the primary reason that poverty reigns across the globe. 
 
I agree that certain terms might be redefined but there is substantial  political baggage that maintains those words in their pejorative mood. There has never been a successful Marxist regime for long [as soon as the last assets are consumed it crashes] but the far left clings to the notion that such a system is near perfection as noted by the praise for Castro , Ortega and Mandela in the NYT. They have inexhaustible hate for capitalism because the left seems not to be able to compete in this arena.
 
Of course, socialism purports to be a satisfactory intermediate "solution" that incorporates limited amounts of capitalism with high taxes as a controlling and limiting feature. This is not working. 
 
But, a close look at the EU with their strong authoritative  leadership: [read : The New Road to Serfdom: A Warning to America by Daniel Hannan.], Hannan shows how the EU was formed by very few votes where Ireland first voted no with France and Germany and was forced to vote yes to save their economy. A simple case of extortion in my view. Nobody voted for their EU leaders [read masters] in Belgium.
 
The EU is currently stagnant with most members broke and Italy is about to go down in the current Greek mode. Their tax rates are sufficient to sink this ship even in calm waters. 
 
Trump may revitalize America and by association other nations by emphasizing capitalism.
 
Let us hope so. 
 
 
rycK the JFK Democrat Added Sep 6, 2018 - 10:06am
Thomas Sutrina
 
"The completion to a socialist state was the 'Transformation of America' that Obama said he would do, actually complete the transformation the FDR started.  "
 
That is in the loo now. 
Tip_off Added Sep 6, 2018 - 11:10am
Try reading “The Problems with Completely Free Markets”. Ref: http://www.thefiscaltimes.com/Columns/2015/06/30/Problem-Completely-Free-Markets
 
It discusses the problems of a completely free market. Some of which occur when…
 

All participants do not have perfect information about the market. Such as composition of rare metals, whether object d’art is real or fake, their mortgage will outgrow their income since the fall of the Truth in Lending Act and the growth of ARMs, etc.

 

Someone expects the market to self-police in weights, measures, content, and safety, and it fails to do so. Corporate types seem to close ranks ever more like the AMA.

 

Competitive markets are NOT free of externalities. E.g. a manufacturer fails to properly eliminate production waste, excessive pollution, causing locality quality of life issues.

 

Principle agent problems, which happen when one person is making economic choices on behalf of another, can also cause non-competitive outcomes. E.g. a physician who gets a kickback from Big Pharma when they prescribe more expensive name brand prescriptions only.

 

A competitive market isn’t free of moral hazards and adverse selection problems such as healthcare fostering bad life styles.

 
Ref: http://www.thefiscaltimes.com/Columns/2015/06/30/Problem-Completely-Free-Markets
 
Progressive governments have given Americans safer working conditions (OSHA), a minimum retirement supplement (Social Security), some medical coverage in Medicare and Medicaid, 40-hour weeks (standard), overtime, vacations, college and vocational training, and done away with sweatshops, child labor, etc. in most occupations. Purely competitive and/or free markets failed to provide such.
 
Concerning the depiction of Capitalism as a pyramid with CEO’s at the top and workers at the bottom. This is the perfect analogy for the oligarchy / plutocracy that our version of the Free Market has become; with income disparity being proportional.
 
In our heyday, it was the unique size of our HUGE middle class that drove our nation’s unmatched economic engine. Brought on by the growth of unions, the G.I. Bill benefits, and the Great Society benefits grew that same middle class. But the advent of Golden Parachutes, the decline (near-death) of unions, and the Great Recession have stripped our middle class of its impact. It would seem the top 25 -10% of today equates to the middle economic quintet of yesteryear in the economic curve. Today, it’s only the top 2% that draws the income curve to rare heights.
 
big government is NOT a side effect of big business.” True, but it IS the only entity that can balance the scales for Americans against the abuse of Big Pharma; The World According to Monsanto; and the military, industrial, congressional America. While I do not believe all regions of American need a $15 minimum wage, that such would be too small a minimum wage and too large elsewhere, I do believe America needs a minimum wage increase. Try “Editorial: Increase the minimum wage, but not to $15” Ref: https://madison.com/wsj/opinion/editorial/editorial-increase-the-minimum-wage-but-not-to/article_086d5cdd-8957-53f8-8222-c466040af086.html
 
I KNOW that healthcare and medical expenses are the primary, number one cause of personal bankruptcies in America. Ref: http://fortune.com/video/2016/11/02/leading-cause-personal-bankruptcy/
 
Socialism is one such totalitarian government. ” Socialism may lead to totalitarianism, but doesn’t have to. We’ve had socialistic programs in our society since the thirties. We don’t have to go to one extreme or another. The pendulum may go from extreme to extreme, but it only rests in the middle.
rycK the JFK Democrat Added Sep 6, 2018 - 1:11pm
Tip_off
 
Impressive list of complaints about capitalism!
 
"Concerning the depiction of Capitalism as a pyramid with CEO’s at the top and workers at the bottom. This is the perfect analogy for the oligarchy / plutocracy that our version of the Free Market has become; with income disparity being proportional."
 
Then, show us a Marxist state where there was no "income disparity."
 
You cannot. 
 
Every Marxist state has been a disaster with murder and starvation for the masses [read about the USSR, PRC, Cambodia, Cuba, etc.]
 
My notion of the pyramid was chosen as a structural version of business, or government  if you wish, where the vertical height refers to  income or living standards. 
 
Here is a nonsense statement: " The pendulum may go from extreme to extreme, but it only rests in the middle." This offers us the  phony process where socialism is self-correcting and we know that it is not. Capitalism is the only self-correcting system I know about outside of the Mafia. 
 
There are no perfect markets and never has been so the essay is misdirected and only of limited political value and useless in economics. All known markets have such wrinkles as you cite. 
 
Show us where your pendulum swang to in the PRC, Cambodia, Venezuela...........all so-called 'socialist' states in some warped degree. 
 
You cannot. 
opher goodwin Added Sep 6, 2018 - 6:53pm
FUNDAMENTALIST ALERT!!! FUNDAMENTALIST ALERT!!! FUNDAMENTALIST ALERT!!!
WE HAVE A SITUATION!!!
THE CHILD IS TAKING OVER THE SITE!!!
Tip_off Added Sep 6, 2018 - 8:46pm
Wow, rage much dyckie?
 
“… complaints about capitalism!” Just statin’ the facts, Ma’am. When I was in the military, the order of precedence was squad, platoon, unit, service, nation. We in the squad could complain about other squads and the platoon. We in the platoon could complain about other platoons and the unit. We in the Army could complain about the other services, but wouldn’t tolerate dissing the Army. Do you kinda get my drift? And, since we’re all Americans here… I thought we could talk honestly. Perhaps I was wrong. Can you?
 
First off, let me dispel your delusion. I think capitalism beats the snot out of Marxism in motivation, responsiveness, AND shortsightedness. It’s got its points, but CAN be improved. Honest, I’m NOT trying to tear down capitalism. Merely pointing to the problems we have and, hopefully, put forth some solutions for the public’s contemplation.
 
I’m new to this venue so, please allow me the opportunity to introduce myself. My time in the military allowed me to get my MBA on the G.I. Bill. In our working years, my household was in the top 10% although still in the middle class. We live modestly in a rural area, using rural electric service (only), no water bill (well), no sewer (septic tank and drain field), no gas (until I get that propane tank! 8^), etc. And, my 6+ acre 3-bedroom 2-bath home of 1500 square feet (no garage), is paid for. Cars? Paid for. Three income streams in retirement, a rental property (paid in full), 401(k) in indexed stock funds (looking REAL good these days), no bills but that electricity and the cable by which I entertain you.
 
I know what I write of, because I’ve lived it. My forte is research, although my mind does slip sometimes; particularly when low on caffeine. I try to provide references for others to research my contentions. As I’ve depicted in my other-first article, I consider myself a mudder. I not only do not object to getting down in the mud, sometimes I relish it. Now, on to my response.
 
Then, show us a Marxist state where there was no "income disparity.” I know of NO state wherein there isn’t SOME “income disparity”. And since I’m NOT about holding up Communism over Capitalism, I’m not interested in fighting that battle. However, I will continue on for a bit since you seem so upset.
 
Please note that the facts show few, other than monarchies, wherein there is such a HUGE disparity as our nation is growing. And, trust me, it IS growing. To such an extent that our middle class I spoke of is rapidly disappearing. THAT is the catastrophe I worry about!
 
The decline in union membership and reduction of marginal tax rates roughly coincides with increases in income inequality which has come to called the Great Divergence. In 1976, the richest 1% possessed just under 8% of total income but has increased since, reaching a peak of just over 18%—about 23.5% when capital gains are included—in 2007, on the eve of the onset of the Great Recession. These numbers are eerily close to those reached in 1928 that lead to the crash that would usher in the Great Depression.”
 
And, the reason why I’m so concerned? “With the last thirty-five years being disproportionately favorable to the wealthy, and the fact that greater income inequality has been correlated with higher levels of crime, stress, mental illness, and some other social ills, it's about time to start leveling the playing field once again.” Ref: A Brief History of Income Inequality in the United States | Investopedia, https://www.investopedia.com/articles/investing/110215/brief-history-income-inequality-united-states.asp#ixzz5QN55bWJd

If you’re interested in more information on income and the power it brings over us all… Please consider perusing, “Wealth, Income, and Power” by G. William Domhoff at: https://whorulesamerica.ucsc.edu/power/wealth.html
 
Spoiler alert: As of 2013 the top quintile (20%) income bracket hold 88.9% of the total net worth
Tip_off Added Sep 6, 2018 - 8:51pm
Comment continuation...
 
Spoiler alert: As of 2013 the top quintile (20%) income bracket hold 88.9% of the total net worth in the United States. That leaves the bottom 80% with only 11.1% on which to live to scrabble another day. And, guess who got the lion’s share of the recent tax break, now contributing to an ever higher national debt? And, guess whose tax break is permanent and who’s is temporary?
 
My finance background and life choices have helped my household to have annuities almost double the working mean income. And, we exceed all but the average top 2% in retirement savings, with no real bills. All on below average incomes for our careers and training. Dude, my family and I flourish in a capitalistic environment.  No problemo!  I'm a CAN DO, G.I.
 
The pendulum analogy evident didn’t work for you. Its intent was to show that like our political polarization today, the extremes of capitalism and communism are BOTH nonfunctional. There in lies the tipping range. We ALL do better in the center, with a hybrid SMART system.  I suppose I’ll have to work on that.
 
Again, I prefer capitalism. That doesn’t mean it can’t be better.
 
rycK the JFK Democrat Added Sep 7, 2018 - 1:52pm
Rip Off
 
"And, the reason why I’m so concerned? “With the last thirty-five years being disproportionately favorable to the wealthy, and the fact that greater income inequality has been target="_blank">correlated with higher levels of crime, stress, mental illness, and some other social ills, it's about time to start leveling the playing field once again.”"
 
After wading thru the sticky rants above, I wonder how crime relates to the increased drug infestation in our country, the levels of black-on-black murders in Chicago and other toilets. Then there is the abysmal standardized test cores in inner cities across the nation.
 
You seem to blame the 'rich' for what happens in the gutters of Oakland and other pits. No blame for the mayors in these places?
 
You seem to skirt around what is probably your biggest desire: Redistribiution of Weath!!
 
Deny that? I expect  you to. 
 
"Again, I prefer capitalism. That doesn’t mean it can’t be better."
 
Now, I am sure I do not believe  you. You might prefer capitalism under leftist conditions. That makes sense from your rant. 
 
Oblique arguments around the snake pit do not affect the snakes. 
 
 
Ward Tipton Added Sep 7, 2018 - 5:23pm
Remember boys and girls ... all those overpaid actors and athletes are justly compensated for their invaluable contributions to society!
 
All those greedy CEOs that provide oversight for the creation of jobs, pay individual and business taxes, pay taxes on numerous employees ... why those people are just EVIL!
Tip_off Added Sep 7, 2018 - 7:28pm
Ward, did you forget your {/sarcasm} switch?
On greedy CEO's, if that's what you wish to call them, so be it.  That works for me.
 
Bottom line up front (BLUF), the last two times the Republicans gave those rich  folks huge tax breaks, supposedly to have sufficient funds to create more jobs...  BOTH times they chose instead to conduct stock buy ba ks, which raised the stock price, and their performance score cards.  Thus earning them more bonuses, stock options, etc.
 
Pools of wealth DO have a place in society.  It allows investment capital above and beyond operational costs.  But that occurs ONLY if the board sees opportunity in growth.
 
Evidently the corporate raiders would rather grow by merging instead.  Mergers are at an all time high.  Almost like they've recinded the Sherman Anti-Trust Act, and all those oversight committes.
Tip_off Added Sep 7, 2018 - 7:44pm
@ Tricky dyck,
 
I don't blame the rich for so many problems in cities like insufficient personnel, shrunken budgets, crumbling infrastructure, low wages and high rents, there are MANY reasons for that, most stemming from funding issues due to Republican revenue cuts. 
 
On your Redistribution of wealth...  
Tip_off Added Sep 7, 2018 - 7:48pm
Comment continuation...
 
The biggest are the last two tax breaks and the Mortgage Interest Deduction (MID).
 
While that's been trimmed a bit, it still overwhelmingly benefits the rich.
Ward Tipton Added Sep 8, 2018 - 7:02am
If you are spending a thousand dollars a month for rent and get a ten percent subsidy, and I am spending a hundred dollars per month and getting a ten percent subsidy, obviously you would enjoy the larger benefit, but at the end of the day, it is still proportional to our contribution. 
 
If you want to talk tax breaks, I do not see the discrepancies ... perhaps a return to Section 83 of the tax code to begin with? Mind you, this would effectively negate ninety percent of the income tax paid by the lower and middle classes, though I do have hopes that the current case going to the SCOTUS will address this criminal "oversight" by the IRS. 
 
If you want to talk corporate welfare where "farmers" like John Deere and Caterpillar and the Rockefellers on their horse farms are raking in millions for not growing crops, sign me up! I will stand side by side with you and fight them any day ... just do not expect me to attend movies or sporting events as I will not subsidize these ... in my opinion ... highly over paid children playing games and living in a land of make believe. 
rycK the JFK Democrat Added Sep 11, 2018 - 12:19pm
As the economy grows and the Democrats become more frantic. 
 
Will the voters choose leftist ideology or mind to their own pocket books??