Is capitalism failing?

Great Debates
21

This is largely why I would disagree with the assertion that “capitalism is failing.” However, I do believe that if there are not sufficient safeguards, unfettered capitalism has excessive negative effects.

In many instances, I feel industries are not required to sufficiently bear the costs of their own activities. The ability to externalize those costs inflate the owners’ income/wealth, and impose costs on others.

I also feel that capitalism alone is an insufficient rationale to all aspects of society. Many/most of us want our governments to provide services that do not generate profits. So the question is how do you fund those services? I think taxation on those who most profit under a system is preferable to many user fees. In many instances, taxes can be increased, and activity will still be profitable - just not quite AS profitable.

But - yeah - overall, capitalism has improved a great many lives. The problem facing the West is what to do when Asia/Africa get as good at it as us, and decide to cut us out as middle men as they service their booming populations.

22

I don’t think it’s failing so much as it’s running its cyclical course. Private property, inherited wealth and starting inequalities always seem to compound upon each other over time, sometimes with the help of a skewed political system, sometimes in spite of measures taken to try and curb the proceedings (though these measures I’d say tend to be enacted near the beginning of the cycle, right after big “oooh shit” crises, but over time moneyed interests always find ways to either have them not apply to them, defang them entirely or otherwise corrupt the people in charge of applying them). Back in the day it was homoioi, or kings and their sycophants, or banking families, or coal magnates. Today it’s big corporations, but the buddy-buddies scratching each others’ backs work exactly the same, even the discourse is similar.

In the end you always end up with a completely polarized system with a handful of very very haves and large masses of increasingly pissed off have nots with zero prospect of becoming anything else. So far the European systems seem to hold better and through various social expenditures and regulations have maintained a large enough buffer of have ‘nuff that the have tons can skirt by unmolested, which just goes to show we’re learnin’, but these past 20 years or so the latter have become bolder, more careless and more openly scornful - be it Sarkozy, Macron, Rees-Mogg… I’m afraid they see how it is in the US and try to steer us in that direction of unfettered greed and fuck you got mine. Hell, Macron’s crew is now candidly talking about trickle down economics, which were already know to be self-serving bullshit back in the Reagan days. And it is a bad idea to envy the state of the US, because I fully expect inequalities and open spite to turn bloody there sometime during what’s left of my lifetime. Because that’s how helot revolts, French revolutions or Red Octobres happen. You can only shit on people’s heads for so long before they stop thanking you for the hat.

23

To modify a Churchill quote - Captalism is the worst economic system, except for all the others we’ve tried. No, actually, capitalism is by far the most efficient economic engine and it’s a damn good one. But if capitalism is the engine of a car, then politicians are it’s driver. Unfortunately, a shitty campaign finance and voting system encourages that driver to head towards wherever the rich want to go.

24

When people complain about capitalism they always seem to focus on the ultra rich, or the very top of the financial system, and the worst excesses they can find.

But capitalism in that regard is a victim of its own success, because it actually works so well that we don’t even see it working.

When you go into a grocery store and the food you want is there on the shelf when you want it, that’s capitalism. That food got on the shelf through an intricate supply chain that ultimately had many thousands of people cooperating on thousands of tasks, all of which culminated in a box of cereal landing on a store shelf just when people needed it.

Multiply that by the millions of goods and services we consume every day, the vast majority of which are delivered efficiently at a price just about the marginal cost of production.

The reason other systems fail to do this is that they rely on centralized planning and control, and that is a grossly inefficient way to run an economy. Central planners simply don’t have the information needed to coordinate all the various factors of production. Capitalism succeeds because it pushes decision-making to the bottom layers of the economy, where all the information is about what people really need and and what it takes to build things.

Another reason capitalism works is because the price system abstracts away everything unimportant to a transaction, giving us only the information we need to make sound economic decisions. The process of bidding for goods and services creates information about relative supply and demand, which is then used by producers to determine what and how much to make.

A large company can have a supply chain of 5000 different suppliers. Each one of those suppliers has its own supply chains. Each one of those connections contains information - information painstakingly extracted through trial and error an innovation. The information was created becuse the people involved in production have a strong incentive to control costs and quality. The complexity of a complete supply chain for even something as simple as a pencil is almost unfathomable, and it’s certainly beyond the ability of central planners to understand and efficiently control.

Imagine you are a central planner, and your statisticians come to you and say, “There is a shortage of hammers. We need to produce more.” So you dutifully sign the order to ramp up hammer production at your nationalized hammer factories. But then the hammer factories need more steel. So your order goes unfulfilled. Once you find out there’s a steel shortage, you order more steel. But that creates a shortage of steel for vehicles, which are also in demand. So you order more steel manufacturing. Oops. We’re short of mining equipment now. So you order more mining equipment. Now more tires are being used, so you are short of tires. You order more, which creates a rubber shortage… And to make matters worse, at every point of decision making the people involved have no skin in the game since it’s not their money and it’s not their hammer.

Capitalist solves this by letting the entire system calculate the relative needs of goods and services. People need more hammers, so the price of hammers goes up. This in turn stimulates the production of hammers. The extra demand for steel increases steel prices, which lowers demand for other goods made of steel and stimulates production of more steel. And so it goes. A shock to the system or a rapid change in demand causes waves of information to pulsate throughout millions of connections, which then modify their own behavior accordingly.

A capitalist economy can be thought of as a massively parallel supercomputer, with money flows being the ‘information bus’. That’s why it’s the best system we have for coordinating the economic activities of a nation.

That doesn’t mean it always works, and we need to be aware of market failures when they happen and correct for them. It also doesn’t mean that everyone will come out ahead, which is why we need a social safety net. But the key to modifying capitalism for social justice purposes is to make sure you provide that safety net and fix those failures with minimal impact on the functioning of the capitalist system overall. Because if you get rid of capitalism, none of the alternatives will result in anything but misery.

25

That’s pretty much my view. Capitalism with redistribution and regulations is by far the best economic system. But even then, you can have varying shades over public and private sector involvement. China has a lot of public sector involvement and their economy is growing fine.

The big issues with modern capitalism are things like pollution, resource depletion, poverty, oligarchy, income inequality, etc are not being addressed.

One thing libertarians do not grasp is that the more unequal and short sighted capitalism becomes, the more appealing leftist economics becomes. If people are suffering under capitalism they’ll vote for socialists. If that doesn’t work they’ll become communists.

I’d you want capitalism to survive, you have to make sure it is well run and everyone benefits. If not, you’ll end up with a communist dictatorship eventually.

26

Maybe we can all agrere that the real problem is not capitalism, and it’s not government - it’s crony capitalism which is the intersection of government and large corporate interests. To the extent that capitalism is ‘failing’, it’s generally in the areas where government and large commercial interests collude to thwart the market and increase profits for the cronies at the expense of everyone else.

What I hope people on the left realize is that the mechanism for crony capitalism is often the very regulations they champion for ‘reigning in’ big business. It should be no surprise when insurance company profits go up after sweeping ‘insurance reform’, or that regulations are captured by large corporate interests at the expense of small businesses.

Large sweeping regulations are usually written by, or in consultation with, the industries they purport to regulate. And those industries are sure to give big donations to the party in power to make sure the scales get tipped in just the right direction. And once the law is signed and the hard work of writing the detailed bureaucratic rules gets underway, the public stops caring, but the regulated industry does not, and it works hard to constantly lobby for changes to its benefit. To them, the cost of the regulation may be more than worth it if it acts as a barrier to entry for competition. For the market as a whole, it’s a bad thing.

A complex financial law is easy to comply with if you’re a huge corporation with a division of lawyers, but it can be absolute hell for a small business. The ‘lead in toys’ act was fine for large toy makers, but drove small ones out of business and resulted in hundreds of millions of dollars of used toys being destroyed because thrift shops and second hand stores couldn’t possibly comply. No wonder Mattel lobbied so hard for it. And so it goes.

27

One other thing I wanted to say about the price system - it allows us to cooperate even if we hate each other. Muslims buy products without knowing, or needing to know, whether Jews helped create it. A liberal can buy a product without caring that one of the people who made it wears a MAGA hat, and vice versa. This is what allows us to cooperate peacefully in making our lives better.

One of the most disheartening things about the current political climate is the need to politicize economic activity. If we start basing our economic decisions on tribal notions of the ‘right’ people making our products, it will damage all of us. We should cease and desist with the public shaming and boycotting of companies based on the politics of the people involved, whether left or right.

28

To misquote Thomas Jefferson: The tree of capitalism must be refreshed from time to time with the blood of plutocrats.

The difficulty that unfettered capitalism has is that the ability to acquire money and power is strongly related to the amount of money and power one already has. So that left on its own inequality naturally increases over time. However, the haves are invariably heavily out numbered by the have nots. So if things go too far there is a (hopefully non-violent) populist revolution and the plutocrats are taken down a notch or two (or in the case of France 1798 about 9 inches off the top) things are evened out a bit and the gradual concentration of wealth starts up again.

Right now I think we are on the edge of such a tipping point. The key is to let out some of the pressure in a controlled way before the whole thing blows up. But until we reach a Post-Scarcity economy, capitalism is here to stay.

29

Hey I’m a free market guy too, but that sounds like a reg worth taking an economic hit for. I’m not familiar with the details, but if those toys had dangerous levels of lead then it doesn’t matter how the little guy fared vs the big guy. I’d rather create some kind of economic impact compensation scheme for those affected rather than see kids poisoned.

On another note, virtually all of Trump’s deregs were also worth taking the hit for.

30

However, when you are talking about lead in toys and the impact of lead poisoning on the development in children - no one should be allowed to poison children - even if that means that their business falls apart and ends. That is part of small business risk - and if that is unacceptable, then the solution is to put in “too small to fail” legislation that allows transition dollars to be spent when regulation would put small family firms out of business that will allow them to either change to meet the regulatory standard, or transition into a new line of business (or close shop and transition into other employment).

31

I think the suggestion is that there was no reason to suspect that those toys had lead. The massive toy conglomerate created lead regulations that only a massive toy conglomerate could navigate, with the intent of protecting, not children, but their market position.

It’s one of the big problems with corporate money going to politicians. Yes, corporations should be included in the process of regulating their industry, they are the most likely to know what would impact their industry, but they shouldn’t be in charge of it.

32

Out of curiosity since this has been brought up in the thread and in other threads repeatedly, who do you say actually has ‘unfettered capitalism’ anywhere on the planet? Can you give an example of a country that has something close to whatever your ideal is of this?

As to your assertion that the haves are out numbered by the have nots, I suppose that comes down to your definition of both. I don’t think that the data backs that up in any meaningful way, unless you are torturing the definition somehow. Increasingly, the majority of the earths population is moving towards having more than survival necessities except in very vertical situations that have more to do with warfare than economics, but I assume you mean by ‘haves’ something like folks who are stupidly rich, and ‘have nots’ being everyone who isn’t stupidly rich. It’s this ridiculously narrow and, frankly, parochial view that I think folks use to say capitalism is ‘failing’.

33

Lead in toys might not be an example that impresses you, but don’t get too hung up on one example. The general point of large corporations using laws to smother small competitors absolutely is a problem, and it’s as much a political problem as a “Capitalist” one. Rent-seeking is a real thing.

34

On the left it is well known that regulatory capture is the problem. However you seem to be implying that across the board deregulation is the solution. The solution is smart, transparent regulation written by a government where corporate lobbying is illegal.

We don’t have a true free market party in the us. The conservatives give lip service to it but they love big business and just want to cut all regulations.

Democrats make sure their regulations protect the rich and powerful. Like they did in the ACA when all rules that would’ve actually reduced medical costs were left out. A public option, Medicare negotiations for Pharmaceuticals, importation of drugs from overseas. Those laws were left out of the ACA because they actually work to lower medical costs. They called it the affordable care act and then eliminated anything that would actually make health care more affordable.

I don’t know what the solution to regulatory capture is.

But across the board regulation isn’t a solution either. When Haiti had a 7.0 earthquake it destroyed their entire society. When Chile had an 8.8 earthquake a few months later it did far less damage. This is because Chile has building code regulations and Haiti does not. Same with Japan’s 9.1 earthquake on 2011. Due to building codes the damage was much less.

Universal deregulation is not the answer. But I don’t know how to ensure regulations are always done in the publics best interest.

35

The law in question made retailers liable for selling things with lead in them.

Which is fine if you’re a traditional retailer. You just pass those costs on to your suppliers and force them to indemnify you. And the suppliers in turn do some more strict testing so they don’t sell things with lead. That part is all good.

But if you’re a used clothing or toys seller, it basically means you stop selling childrens clothes or toys entirely. Because there’s no feasible way for them to do the testing.

Note that the harm here isn’t necessarily to the used-toy sellers. The harm is to all the poor kids who have worse and fewer toys and clothes because used ones are harder to buy and sell.

Yes, preventing lead in things is clearly a laudable goal. But was this the best way to accomplish it? Are there actually significant lead poisoning cases caused by used toy sales? If you were designing a legislative solution to the problem of lead poisoning, would you start with “well, clearly, we have to stop people from selling used toys…” All of those are legitimate questions. Regulations have costs, and they are not equally distributed.

36

Not just toys. One of the unintended consequences of the law is that a lot of old children’s books were destroyed, because some books had lead in their ink and some didn’t, but there is no way for a used bookstore to know. So a lot of classic children’s books went into landfills. Good for Amazon, not so good for used bookstores - or poor children.

The original version of the law even targeted garage sales. I’m not sure if that provision remained in the law, but if so that choked off yet another avenue for poor people to get cheap toys and books for their kids.

37

But its a trade off. Lead exposure leads to lower IQ, higher crime rates, probably lower worker productivity and various other kinds of dysfunction. The cost to society over the next 60 years of lead exposure is likely much higher than the cost of lost children’s toys during a one time purge.

38

Utter nonsense. If there are safe toys and clothes to sell they will be sold by someone. Businesses should go under if they are dependent on poisoning children to make a profit. If it’s impractical to test used toys for lead, too fucking bad. You want to be in business then take the risk and if it doesn’t work out you lose in a capitalist system. Of course all the capitalists become socialists as soon as they start losing money. They descry regulations until they have to compete and then they’ll back every anti-competitive regulation there is. And there’s not the least indication consumers are suffering as a result, it’s the same wailing about widows and orphans every time a stock goes under because it’s managed by incompetent crooks.

39

You (and other commenters) seem to assume that the existing regulation is the only way to solve the problem, or that I’m arguing that we shouldn’t try to. It’s not, and I’m not.

Pointing out that regulations have downsides isn’t the same as being pro-lead poisoning.

Do the downsides mean that we should do nothing? Probably not. Are there other solutions to the the problem that might be better overall? Maybe.

40

You know, there’s this thing called risk/benefit analysis. If one book in a hundred has miniscule levels of lead in the ink, and these are books aimed at teenagers, do you really think they’re going to eat the pages?

Just where is the line? Is it worth destroying a million dollars of toys to prevent a tiny risk of lead poisoning? How about a hundred million? A billion? How do you calculate the trade off between a tiny chance of some lead being in the ink of books and the need for poor children to have access to books?

This is one of the problems with government regulation - it’s done by fiat, for political reasons and not necessarily sound science or good health practices.

But maybe lets move off that particular regulation, since it’s kind of a hot button issue. Here’s one maybe we can all agree on - the government passes a mandate to use X% of ethanol in cars, because it also subsidizes corn ethanol and needs to guarantee a market for it. All of this done under heavy lobbying pressure from the corn industry.

As it turns out, corn ethanol looks to be at best no better than gasoline in terms of global warming, and at worst it may create more GHG gases than gas. But now we’ve build an entire, subsidized industry around corn ethanol. The infrastructure has adapted to it, making it expensive to go back. So everyone pays a little more in tax, corn is diverted from food to fuel making it more expensive, costs go up for gas stations and other services, and money that could be used for other, more important things is sunk into an endless industry for a useless product.

But man, the corn industry loves it.