Why Capitalism is Worth Defending

[IncendiaryGunner]

This is what the author is talking about when he says most people nowadays have no idea what capitalism is. Capitalism is an ecosystem. Government is a bulldozer. To the extent that the bulldozer is employed, the ecosystem is destroyed.

Yes, and I agree with your main point - anti-capitalistic forces being applied is not a strong argument against pure capitalism.... but, at the same time - it would be irrational to ignore them in a world where they exist in every capitalist economy.

It is like arguing that communism is flawed because of human greed - when pure communism is based on everyone sharing - a ginormous flaw still exists in actual application of the system, even if the economic principle calls for that flaw to not exist.

Economic theory does not exist in a bubble compartmentalized from the rest of a society - they have a major effect on one another.

 

[ATOMonkey]

Yes - if someone sees the opportunity, if they can gather the finances, and if their bottom line will be greater by not joining the bunch - but generally to create a start up with that much competitive power, you have to streamline a system of production in order to compete at that level. Creating the product for cheaper will always win, and in that instance capitalism yields great incentive - but if your cost are as on par with your competition - undercutting one another is not always in the interest of your company.

Over a long period of time no market domination can be sustained forever... but it is a manipulation of the system that exists at any given time that works against competitive pricing.

You don't have to compare yourself to your competition in order to make something economically viable for you to produce.

It just needs to competitive compared to your other opportunities.

If I make widets at a lower profit than my competitor, but it's still higher than my other opportunity, which was allowing my money to make money in a savings account, then I still win.

As Fletch pointed out though, the reason many businesses are able to collude is by throwing up restrictions to entry through government regulation, and by getting the government in their pocket since it is Federally illegal to collude or price-fix (which is kind of funny since the government also write laws in direct contradiction, but that's another topic).

Take the 2006 Federal Case against midwest cement comanies that colluded to fix the price of ready-mix. The only way this kind of collusion is possible is through either willful ignorance of government, or outright malevolence. Especially since government is one of the largest consumers of ready-mix cement.

Plainfield Ready-Mix actually went out of business as a result of civil litigation brought against them by the contractors that used them.

In conclusion, the market works, we even have the safe-guards setup to ensure that it does, all it requires is a bit of vigilance on the part of the consumer to keep everyone honest.

 

[orange]

How is abandoning capitalism a natural consequence of capitalism? This is the part that always gets glossed over, as though government involvement is somehow capitalistic. It is not. As soon as government steps in, capitalism is being destroyed and abandoned, not maintained, not enhanced, not participated in... DESTROYED and ABANDONED.

Well, sure it is. The point is to maximize profit, isn't it? If that means buying off a congressman or ten, than that's what will be done. I don't believe this is abandonment or destruction of capitalism, but a merger of corporate and government interests.

These are regulations that need to be made against government, not against corporations. Keep government out of the market, and capitalism protects against all of these abuses.

I disagree. Just from the examples I listed - the government was not present at Ludlow. The National Guard was called in AFTER the company hired mercenaries, complete with armored vehicles and machine guns. The government did not mandate the Triangle Shirtwaist Factory keep its doors bolted shut so the workers burn to death.

United Fruit was as bad as it was because of military support.

Agreed, on this. However I see it as a case of corporation exerting its influence on government, and communist fearmongering, toward its own ends. The main actor and cause of the events was United Fruit, not the United States.

...introducing violence into the peaceful system of trade and cooperation that is the essence of capitalism. In the rare cases you do, you find the government standing by idly while the corporation in question violates property rights with impunity.

The trouble is, those examples of corporations violating property and human rights with impunity make a mockery of that 'peaceful system of trade and cooperation.' There's a role for government there.

 

[IncendiaryGunner]

You don't have to compare yourself to your competition in order to make something economically viable for you to produce.

It just needs to competitive compared to your other opportunities.

If I make widets at a lower profit than my competitor, but it's still higher than my other opportunity, which was allowing my money to make money in a savings account, then I still win.

As Fletch pointed out though, the reason many businesses are able to collude is by throwing up restrictions to entry through government regulation, and by getting the government in their pocket since it is Federally illegal to collude or price-fix (which is kind of funny since the government also write laws in direct contradiction, but that's another topic).

Take the 2006 Federal Case against midwest cement comanies that colluded to fix the price of ready-mix. The only way this kind of collusion is possible is through either willful ignorance of government, or outright malevolence. Especially since government is one of the largest consumers of ready-mix cement.

Plainfield Ready-Mix actually went out of business as a result of civil litigation brought against them by the contractors that used them.

In conclusion, the market works, we even have the safe-guards setup to ensure that it does, all it requires is a bit of vigilance on the part of the consumer to keep everyone honest.

But like I said - if you can streamline a process of production that gives you a major advantage over other producers - you can still win. However, the bottom line at a given instance is not always based on the consumer being given the cheapest price - it is based off of the profit you can make taking into considering demand and competition.

While over time manipulation can be dealt with, the elementary idea that producers must undercut one another to make more money is not always the rule. Selling less for a higher price can often yield a stronger bottom line than attempting to constantly undercut competition based solely on your production cost. Since demand is manipulated not only by the cost - but by other market's opportunities based on the cost of using your product - the price you set your goods at will always have an assumed "sweet spot".

When some markets are niche enough that demand is not always increased just by price reduction - those with the lowest production cost can drive others out of business. That is the market working how it should... yielding incentive to create more for less... however, once you eliminate competition - you have no incentive to not maximize your profits by increasing your price (as long as you do not increase it to the point that the demand drops low enough to negatively impact your bottom line, or that you grant incentive to others to produce the same product).

Because prices are set like this, and people always come up with better/cheaper ways to produce, over time you cannot remain on top unless you are able to continue to produce for cheap. However, at any given time the end result price is still based on a company's bottom line, and not necessarily on supplying your product as cheap as possible.

So you see, my criticism is not an attempt to make capitalism out to be evil. I do not believe any economic system that we know of today is better at granting incentive to create products for cheaper... I just feel that most people's idea of competitive pricing is flawed in the sense that providing a product as cheap as you can afford to will not always create the most profit.

Knowing that my competition will likely sell at X does not always make me reduce my price - and if we agree to sell at Y price, finding that sweet spot where we can both compete yet still increase our bottom lines - the consumer will pay more for the product. It is not a bad consumer that then buys that product - because it is still the best price they can get it for, and often times the consumer is another business that has an opportunity to use that product to make profit creating something else. The consumer that gives their money to a corporate oligarchy is still not a bad consumer in the capitalistic sense, because they are fulfilling their demand as cheaply as they can - even if it grants a corporate oligarchy power.

So yes, wielding government legislation etc is definitely a way those that would otherwise fail come out on top - but it is not the only way prices are manipulated - and market competition is not as simple as yielding the best price at any given time to the consumer. What does still always work out in favor of the consumer, is production cost is always part of the bottom line - granting the incentive to produce a product for less.

If your competitor knows that you are making less profit than them per widget, their bottom line is not dictated only by how much they can get out of each widget vs their production cost... it is based on that and how many they can sell. If they can produce them for cheaper, they can sell them at cost if it means increasing their sales next quarter by driving you out of business. If you cannot compete with their production costs, and they understand how well they can manipulate demand by the price they sell their product at - they can win in a fashion that yields them greater profit by undercutting you temporarily. If a company is large enough and is able to master these principles, the chance of a start up being competitive is rare unless you create a means of production that is cheaper than theirs - because businesses generally take time to actually make money once you take into account the investments required to being production. If a financial investor knows the market outlook is not that great in your favor, the chance of you being granted the funding to even begin is decreased.

 

[Fletch]

Well, sure it is. The point is to maximize profit, isn't it? If that means buying off a congressman or ten, than that's what will be done. I don't believe this is abandonment or destruction of capitalism, but a merger of corporate and government interests.

When a company chooses to "compete" based on the violence it can bring to bear on its customers, workers, or competitors, it is abandoning capitalism. Maximization of profit is not the One Rule of capitalism.

I disagree. Just from the examples I listed - the government was not present at Ludlow. The National Guard was called in AFTER the company hired mercenaries, complete with armored vehicles and machine guns. The government did not mandate the Triangle Shirtwaist Factory keep its doors bolted shut so the workers burn to death.

Once again, violence is involved, property rights are not respected, and government stands idly by. It is not a fault of capitalism that it is being abandoned in these cases.

Agreed, on this. However I see it as a case of corporation exerting its influence on government, and communist fearmongering, toward its own ends. The main actor and cause of the events was United Fruit, not the United States.

But had the United States protected the property rights in question, and not joined in the propagation of violence, nothing would have come of the situation.

The trouble is, those examples of corporations violating property and human rights with impunity make a mockery of that 'peaceful system of trade and cooperation.' There's a role for government there.

There is a role for the protection of property rights. Whether that role is fulfilled by what we colloquially know as "government" or by a regulatory mechanism of another kind, it is a necessary part of the system.

What I'm at pains to explain, and what you seem to be studiously trying to ignore, is the fact that the introduction of violence or fraud into the equation, by any party, is necessarily the abandonment of capitalism.

 

[beararms1776]

"They begrudge the worker who dissents from the labor establishment."

That is a super article. Thanks for posting.

 

[IncendiaryGunner]

The line referring to Engels position granting him the free time to concoct his philosophies made me physically laugh - it paints a picture in my mind of Engels with his giant beard eating donuts at his desk.

 

[orange]

Once again, violence is involved, property rights are not respected, and government stands idly by. It is not a fault of capitalism that it is being abandoned in these cases.
But had the United States protected the property rights in question, and not joined in the propagation of violence, nothing would have come of the situation.
There is a role for the protection of property rights. Whether that role is fulfilled by what we colloquially know as "government" or by a regulatory mechanism of another kind, it is a necessary part of the system.

Errr...hm. Look. If we agree involvement by a government or some regulatory agency indeed is necessary, then we're arguing the same thing from different perspectives.

What I'm at pains to explain, and what you seem to be studiously trying to ignore, is the fact that the introduction of violence or fraud into the equation, by any party, is necessarily the abandonment of capitalism.

This is a semantics issue. If such corruption means the system is not capitalist, then the United States can hardly be considered a capitalist nation at all. Same argument could be leveled against the USSR - oh that wasn't socialism, it was a corrupted bastardization; socialism is really great and lovely! which would ignore the fact socialism created the conditions for the eventual totalitarian nightmare.
Entirely too often maximizing profit is the One Rule. Here I should emphasize again that I don't see the drive to profit as a bad thing. Quite the opposite. When it is used as justification for various corruption and abuse, then we have a problem - and we have seen corporations engage in various abuses, maltreatment of workers, bribery of public officials, whatever else. I simply think such things are part of the capitalist system, to be acknowledged, recognized, minimized as possible.

 

[Expat]

Corporations should maximize profits. Too many people seem to think profit is a dirty word. In true capitalism they are prompted by enlightened self interest. They are not going to engage in most of the behavior people seem to fear because of the enlightened portion. Corporations do not want to offend their customer base. By doing so they are not maximizing profits, maybe in the short term but not long term.

 

[dross]

I love that he is at pains to differentiate capitalism from that which the modern Right calls "capitalism", and his statement that the anti-capitalist Left preaches its message from atop a soapbox built by the very system they deplore.

This is the huge flaw of the left. They ASSUME that production will occur unhindered by their policies. When that doesn't happen, they assume they just haven't taken enough, or that the sheep are hiding the fleece, not that they have ruined the production.

On the other side that coin, people don't understand what true communism is either.

.

Not sure what you're saying here, but to make the point - true communism is an unworkable, corrupt, and tyrannical system in it's pure form as well as its diluted forms.

Pure Capitalism works best in a moral and self-disciplined society. Unfortunately this, for the most part, no longer exists.

When did it ever exist?

Errr...hm. Look. If we agree involvement by a government or some regulatory agency indeed is necessary, then we're arguing the same thing from different perspectives.
This is a semantics issue. If such corruption means the system is not capitalist, then the United States can hardly be considered a capitalist nation at all. Same argument could be leveled against the USSR - oh that wasn't socialism, it was a corrupted bastardization; socialism is really great and lovely! which would ignore the fact socialism created the conditions for the eventual totalitarian nightmare.
Entirely too often maximizing profit is the One Rule. Here I should emphasize again that I don't see the drive to profit as a bad thing. Quite the opposite. When it is used as justification for various corruption and abuse, then we have a problem - and we have seen corporations engage in various abuses, maltreatment of workers, bribery of public officials, whatever else. I simply think such things are part of the capitalist system, to be acknowledged, recognized, minimized as possible.

Regulating the use of force and regulating free and voluntary exchange aren't just degrees of difference in regulation, they are fundamentally different actions.

Capitalism can and will exist without ANY government involvement. So will the use of force. The fact that some will use force to make money isn't an indictment of capitalism. Making and enforcing laws against the use of force isn't regulating capitalism, either.

Making laws that restrict free exchange between people in order to benefit a company isn't capitalism, either.

Again, socialism cannot exist without using tyranny and force. That's built into the system. Capitalism is harmed by tyranny and the use of force.

 

[orange]

Regulating the use of force and regulating free and voluntary exchange aren't just degrees of difference in regulation, they are fundamentally different actions.

Agreed! However. The system seems inclined to naturally curtail that free and voluntary exchange.
Say a business mistreats its employees. Workers then leave to work elsewhere, customers leave to shop elsewhere because public opinion is now negative, and that business changes its evil ways or shuts its doors. Victory for the invisible hand, so the theory goes.
Problems arise when that business is the biggest or only employer in town, offering the option to work or freely and voluntarily starve. Or possesses a monopoly on essentials. Or expands into media, changes public opinion through propaganda. Or, when the employees band together and demand a living wage, responds with armored cars and machine guns. All of which have happened in this country.

Capitalism can and will exist without ANY government involvement. So will the use of force. The fact that some will use force to make money isn't an indictment of capitalism. Making and enforcing laws against the use of force isn't regulating capitalism, either.

Making laws that restrict free exchange between people in order to benefit a company isn't capitalism, either.

Seems like you're arguing we're not really living in a capitalist nation. If not capitalist, what is it then?

Again, socialism cannot exist without using tyranny and force. That's built into the system. Capitalism is harmed by tyranny and the use of force.

Sure it can. Example, the reclaimed factory movement across South America. As for capitalism, it seems to be doing well enough under heavy regulation, for instance in the Scandinavian nations. That sacred cow can take a few punches.

 

[Fletch]

Errr...hm. Look. If we agree involvement by a government or some regulatory agency indeed is necessary, then we're arguing the same thing from different perspectives.

I sense that some of that is going on, but there is also a fundamental disagreement in terms and their definitions.

This is a semantics issue. If such corruption means the system is not capitalist, then the United States can hardly be considered a capitalist nation at all.

It's not. Who gave you the impression that it was?

Capitalism exists in the USA, to the extent that it does, either in spite of the USA (meaning the government), or because it's in a space that the government cannot move quickly enough to regulate. There are a few sectors which are largely capitalistic/free market, because regulation is minimal, but they are few and far between. Off the top of my head, the two best examples are software and pornography. They are markets forever in flux, with fortunes being made and lost every day due to intense competition, and very little government involvement relative to other sectors.

 

[rambone]

Seems like you're arguing we're not really living in a capitalist nation. If not capitalist, what is it then?

I think that's a central point in this debate. Capitalism has been traded for something much worse; A system where companies spend more time pleasing the bureaucrats than they do pleasing customers. Where some industries are subsidized and others are taxed. Where the biggest campaign contributors get exemptions from new legislation. Where companies labeled 'Too big to fail' are given bailouts using tax dollars. Where individuals' bad decisions and irresponsibility are rewarded with tax credits and welfare. Where entrepreneurs have to worry about licenses, legal forms, and restrictive ordinances before they can enter the "Free" market.

The government shuts down lemonade stands sitting on private property in America. Capitalism? No... I think its more accurate to say that our economic system is governed by a hybrid beast of Fascism, Socialism, and Corporatism.

 

[Fletch]

Agreed! However. The system seems inclined to naturally curtail that free and voluntary exchange.
Say a business mistreats its employees. Workers then leave to work elsewhere, customers leave to shop elsewhere because public opinion is now negative, and that business changes its evil ways or shuts its doors. Victory for the invisible hand, so the theory goes.

And the theory is correct. It also provides the answer to the next bit:

Problems arise when that business is the biggest or only employer in town, offering the option to work or freely and voluntarily starve. Or possesses a monopoly on essentials.

Monopolies cannot persist without force.

Or expands into media, changes public opinion through propaganda.

Public opinion is meaningless until you add force to the equation, which is usually expressed via agitation for government to "do something", even if it's improper for government to do anything. Again, the problem is government.

Or, when the employees band together and demand a living wage, responds with armored cars and machine guns.

Employees are free to demand living wages, but they are not entitled to them.

And I'm sure you already know my response to the armored cars and machine guns.

Seems like you're arguing we're not really living in a capitalist nation. If not capitalist, what is it then?

Largely socialist. In the words of LvM, "socialism on the German model", as differentiated from "socialism on the Soviet model". Or if you like, my favorite way to describe it: neo-mercantilist.

What would be necessary to have a capitalist country? Government seeing as its prime responsibility the protection of property rights in tangible property, the freedom of association and trade, and little else.

Sure it can. Example, the reclaimed factory movement across South America.

I have not researched it, but I'm fairly confident I'd find some things that undermine its "success" on voluntary grounds as compared to the alternatives.

As for capitalism, it seems to be doing well enough under heavy regulation, for instance in the Scandinavian nations.

Scandinavian socialism isn't what it's made out to be. Somewhere, if I can find it, is an excellent video by a Swede that discusses and summarizes the misconceptions.

ETA: here it is...

[ame]http://www.youtube.com/watch?v=vG51uCrYxVM[/ame]

 

[dross]

Agreed! However. The system seems inclined to naturally curtail that free and voluntary exchange.
Say a business mistreats its employees. Workers then leave to work elsewhere, customers leave to shop elsewhere because public opinion is now negative, and that business changes its evil ways or shuts its doors. Victory for the invisible hand, so the theory goes.
Problems arise when that business is the biggest or only employer in town, offering the option to work or freely and voluntarily starve.

The biggest or only employer in town? Is there a boundary around the town preventing people from leaving to work elsewhere? If it's the biggest employer in town, the town most likely exists because it is there. If people came there to work at that employer, why can't they leave?

Or possesses a monopoly on essentials. Or expands into media, changes public opinion through propaganda.

An example please, of a monopoly on essentials. Changing public opinion through propaganda is a function of freedom. There's a sucker born every minute. As long as it's not fraud, let the buyer beware. I've seen ads for products that claim to enlarge my manhood. I don't believe them. I'm sure some people do. A fool and his money soon part. None of the government's business unless it rises to the level of fraud.

Or, when the employees band together and demand a living wage, responds with armored cars and machine guns. All of which have happened in this country.

Employees can "demand" whatever wage they want. That's fine as long as no one is obligated by law to give it to them. As to armored cars and machine guns, can you give me the last time that happened in this country in a labor dispute?

Now, if strikers are physically preventing people from getting into a business to work, that's a different matter and it's they who intitiated force and if armored cars and machine guns are needed to enforce freedom, so be it.

Seems like you're arguing we're not really living in a capitalist nation. If not capitalist, what is it then?

It's a mixed economy. Realistically, it will always be mixed. The less socialism, the better, however.

Sure it can. Example, the reclaimed factory movement across South America. As for capitalism, it seems to be doing well enough under heavy regulation, for instance in the Scandinavian nations. That sacred cow can take a few punches.

The fact that free markets can still produce something under heavy regulation isn't an argument for regulation.

Socialism is immoral from the get go. It's based on collectivism which says you're born owing someone else a portion of the fruits of your labor. That's a degree of slavery, and it's wrong, no matter how benevolent the implementation.

 

[buford t justice]

The jungle By Upton Sinclair would be a good read for anyone posting on this thread.

I know old Upton was a socialist,but he gives a pretty good description of pure capitaisim
in the early 20th century.

 

[RockofStrength]

The jungle By Upton Sinclair would be a good read for anyone posting on this thread.

I know old Upton was a socialist,but he gives a pretty good description of pure capitaisim
in the early 20th century.

Pure capitalism can work hand-in-hand with a government that works to protect the rights of the people. The issue that Sinclair was trying to address regarding the dangerous conditions the workers were forced to endure can be properly addressed by the government in order to protect their rights without violating capitalism at all. When the government goes from ensuring that essential rights (life, liberty etc) are protected to protecting us from our own willing and well informed choices is when capitalism starts to crumble.

 

[Fletch]

Pure capitalism can work hand-in-hand with a government that works to protect the rights of the people. The issue that Sinclair was trying to address regarding the dangerous conditions the workers were forced to endure can be properly addressed by the government in order to protect their rights without violating capitalism at all. When the government goes from ensuring that essential rights (life, liberty etc) are protected to protecting us from our own willing and well informed choices is when capitalism starts to crumble.

There is also the fact that some jobs are just inherently dangerous and cannot be made safer in any reasonable way, or in which relatively small increases in safety are possible but prohibitively expensive. Safety comes at a price, as does loss of productivity due to worker injury or death. Balancing those risks is the job of the employer, determining whether the relative level of safety is acceptable or not is the job of the worker who wants to sign on.

The Free Market and Job Safety - George Reisman - Mises Daily

 

[ATOMonkey]

There is also the fact that some jobs are just inherently dangerous and cannot be made safer in any reasonable way, or in which relatively small increases in safety are possible but prohibitively expensive. Safety comes at a price, as does loss of productivity due to worker injury or death. Balancing those risks is the job of the employer, determining whether the relative level of safety is acceptable or not is the job of the worker who wants to sign on.

The Free Market and Job Safety - George Reisman - Mises Daily

Bingo! If you have such low skills that you can only get a job that will most likely kill you and the employer doesn't care, because there is no shortage of unskilled people, then who's fault is that?

Also, why should the government deny a low skilled person from earning a wage simply because the work is dangerous?

I say phooey on all government safety regulations.

The only place I'll make an exemption is when a company begins to spew toxic (actually toxic, not CO2 toxic) material into the air, like hexavalent chromium, lead, mercury, etc.

 

[dross]

I'm not sure some job safety issues aren't a reasonable use of government.

Suppose I work in a place I believe is safe, but the employer knows it is not, and doesn't tell me. Unless I have specialized knowledge, I won't know it isn't safe. What is my recourse if I am harmed?

Government's role in this case may be the court system and punitive damages, but there needs to be some check on behavior that might not be provided by the free market.

My classic example of a free market "gap" is the use of rivers. If I'm upstream from you, it might make perfect economic sense for me to to use the river for my waste, disregarding that I'm spoiling the drinking water for thousands of people downstream. There must be some recourse for these kinds of gaps.

Now, if I knowingly and willingly take a job, and I understand the dangers, there should be no recourse.

I would, however, like to see certain regulatory practices taken over by private companies. For instance, the FDA. A private regulatory agency, or multiple agencies, could inspect food and give it a seal. If the food didn't have that seal, perhaps there would be a market consequence.