On the Need for Laissez-Faire Capitalist Reforms

Great Debates
21

[QUOTE=Renob]
I don’t think your assumption is correct. With less government intervention, you have, as you said, a higher level of wealth creation. That means that more people are making more money. Not only the rich benefit, but so does every class in society. The poor are better off when it is easier to get a job and when jobs are more plentiful. The only way to move out of poverty is to have a job.
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And how much has American “wealth creation” during the current Admin actually done for the poor or for the job market?

22

[QUOTE=Der Trihs]
They tried to impose laissez-faire capitalism on Iraq; this thread is about imposing laissez-faire capitalism. Like it or not, the subject is relevant. It’s not like you are going to find a real world example anywhere else.
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Maybe you can point us to examples of “laissez-faire capitalism” in Iraq? Because I don’t see how awarding large government contracts to companies like Haliburton could be considered laissez-faire capitalism.

Or are you just one of those people who really don’t understand anything about economics and simply use terms like “capitalism”, “free market” or “laissez-faire” as a prejorative to describe anything about the economy you don’t like?

“Perfect” is essentially a meaningless term when describing a society. It’s impossible for everyone to have every need and want met simply because many are mutually exclusive. A simple example being we all can’t live in beach-front condos because there is simply not enough beach front.

Economics is about trade-offs. Would you like to live in your “perfect” society where everyone is equal but there’s little mobility (no cars), rampent disease (no vacines), not a lot to read (no online bookstores, not to mention no way to get the books to you without cars) and everyone smells like crap and lives in unsanitary conditions (no bathing, not to mention the diseases again)? As a society, we decided long ago to live with a little income equality if it would result in a higher standard of living overall.

You don’t want everyone to have the same standard of living as everyone else. Competition helps to encourage those people with drive and ambition to work on the things that society values. People without those qualities don’t get rewarded.

So would most people. That’s why we have things like unemployment insurance. You can’t live off it forever, but if you lose your job, it will keep you alfloat until your find something else.

23

[QUOTE=Martin Hyde]
Right on. A lot of American conservatives like myself might believe that pure-unregulated capitalism creates the most efficiency. But there comes a point where you have to look at what you’re sacrificing for efficiency. Is it worth it to have people starving to death just to have an economy with maximized efficiency? I’ve heard people go so far as to argue that those people are supposed to starve, that them dying off is a result of their not being productive in a competitive market.

Even if that’s the case, I don’t think any American cares that much about perfect laissez-faire capitalism in order to let such things happen.

Plus, we’ve all seen market failures. Monopolies and cartels are market failures, externalities have to likewise be dealt with.
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That’s an interesting post Martin. I know that among the people on this board, you are one the most “right-wing” in economic terms, but you recognize that whatever decision we take in terms of our economic system, there is a benefit and a cost. On this we certainly agree. We may not agree on where to put the bar in order to minimize the negative effects and maximize the positive ones, though. I’ll ask you: do you think that it is possible to find the “optimal” level of government regulation and intervention in an economic system, or rather does it depend on the values of the users of this economic system (that is, the people who live there)? You can tell from my posts that the second option is the one I favour, but not everyone seems to agree, and in fact people whose opinions are all over the place seem to believe they are the objective best.

Okay, I guess that’s not impossible. When you have a large non-working population needing a lot of resources, and a small working population, well, you do tend to run out of resources. Thanks for reminding me of this. But they still remain wealthy countries, so I believe they will still have a rather large margin in order to decide what kind of economy they want.

24

[QUOTE=severus]
That’s an interesting post Martin. I know that among the people on this board, you are one the most “right-wing” in economic terms, but you recognize that whatever decision we take in terms of our economic system, there is a benefit and a cost. On this we certainly agree. We may not agree on where to put the bar in order to minimize the negative effects and maximize the positive ones, though. I’ll ask you: do you think that it is possible to find the “optimal” level of government regulation and intervention in an economic system, or rather does it depend on the values of the users of this economic system (that is, the people who live there)? You can tell from my posts that the second option is the one I favour, but not everyone seems to agree, and in fact people whose opinions are all over the place seem to believe they are the objective best.
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To a degree, looking at history, I think Europe has had to make compromises about what they want as has America. What the people want has had some influence on the compromise, but universal economic truths have had a major impact as well.

In Europe it almost seems (to generalize greatly) the state has had to accept the market system because it recognizes it generates the most wealth, and that true planned economies just simply do not work. If you look at the last 30 years or so in European history, it has been a history of more and more market reforms (most significantly in Eastern Europe, obviously.)

In America we’ve had to compromise a desire for free market capitalism with the reality that government regulation and safety nets are needed. America’s markets are a bit less regulated than those of Europe, in many ways there are significant differences between American market regulations and European ones, but ultimately both sides of the Atlantic rely on the underlying mechanisms of a market economy.

The problem as I see it is, looking at social security in the United States, it’s a “pay as you go” system. Social security doesn’t administer a pension system. The money you receive for retiring is “retirement insurance.” The amount you receive is derived from a formula that takes into account the highest earning 35 years of your life. The disbursements come directly from payroll taxes paid by current workers. Most economists agree that within 10-15 years, the annual revenue from payroll taxes will no longer be able to cover the disbursements. At which time we’ll have to start drawing on the Social Security Trust Fund (which is itself funded by treasury bonds, i.e. money “loaned” to the government by the people.)

Private pensions are typically actual accounts, that a worker has invested a small portion of their pay check in throughout their careers. Over their work-lives, the pension has accumulated interest and come retirement time the idea is, your private retirement accounts + your social security benefits gives you economically feasible retirement.

Personally I think both Gore and Bush had good ideas in 2000 for trying to fix the social security system. Gore’s “lock box” would have essentially transformed the system into a government-run pension system, instead of a government run retirement insurance scheme.

I do think eventually if the U.S. is going to continue the system we have to move away from pay-as-you go. Workers today don’t have a genuine trust in the system, many people genuinely expect the system will simply be unable to disburse their money by the time they retire.

25

[QUOTE=severus]
The “no vaccines” and “no frequent baths” do scare me a bit, because of the risk of disease, but this is why I don’t think you could have a perfect social system without them. There would still be people working to try to reduce disease.
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As societies approach full socialism they don’t continue to work on new methods of reducing disease and such. If you ever go to a communist nation, you’ll find them to be falling apart and dirty, with technology that is stuck decades behind. You might not believe it, but it does seem to be that mankind is greedy enough that without any sort of special incentive, people stop making any effort to improve the world. Totalitarian rule comes about as a necessary measure just to keep food and supplies moving through the nation. It’s not an accident that all socialist nations have become totalitarian regimes.

So personally, minus any greater information than we have at this date, I have to believe that innovation and socialism are inversely linked. The more social welfare there is, the less advancement of all technologies there will be in a nation, including medical. So again, history shows that a 100 years of technology has done more for the poorest of the nation than we ever would have achieved with a working socialist state started in 1907, assuming that innovation would have fallen dead.

26

[QUOTE=msmith537]
Maybe you can point us to examples of “laissez-faire capitalism” in Iraq? Because I don’t see how awarding large government contracts to companies like Haliburton could be considered laissez-faire capitalism.
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Perhaps not, but see the following from Armed Madhouse, by Greg Palast, regarding the “Plan B” for Iraq that Pentagon neocons Rumsfeld, Wolfowitz and Abrams drew up in November 2001 following the U.S. victory in Afghanistan:

Rumsfeld fired General Garner (the first American viceroy in Iraq) on 4/21/03 and replaced him with Paul Bremer, who put off elections indefinitely – even municipal elections – while proceeding to implement almost every economic and legal element of Plan B (with the notable exception of privatizing the oil industry) by his own fiat. Order 37: Flat tax on corporations, individual income tax capped at 15%. Order 40: Iraqi banks sold off to three foreign financiers with no bidding process. Order 12: Iraq to become the only country on Earth with no tariff barriers or import quotas at all. Iraqi industry, limping along after 12 years of sanctions, was shattered by this. Agriculture too; Cargill flooded Iraq’s market with wheat, driving Iraqi farmers out of business. And “Order 100 ensures that, “the interim government and all subsequent Iraqi goverments inherit full responsibility for these [Bremer’s] laws, regulations, orders, memoranda, instructions and directives,” which effectively locks in the economic rules of occupation.”

Hussein’s prohibition on public-sector labor union activity, however, remained in place; 12/03, Bremer arrrested the entire board of the Iraqi Workers Federation of Trade Unions.

That’s some laissez-faire capitalism all right.

27

[QUOTE=severus]
That I’m not so sure of though. As I said, what scares me are the health concerns, but if you take a very wealthy and very healthy person of 100 years ago, I think they were better off than a poor person in the US today.
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Not really. The greatest medical advance of the last 100 years is soap and regular bathing. People didn’t really start with that until after WWII with indoor plumbing and water heaters. 100 years ago medical care was still probably even with being prayed over in terms of how likely you were to survive an illness. 150 years ago, Western medical knowledge was probably worse than letting the disease wind its own course. You were more likely to be killed by the cure than the ailment.

28

[QUOTE=BrainGlutton]
That’s some laissez-faire capitalism all right.
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About as much as the governments of Europe resembles Communism…

-XT

29

[QUOTE=xtisme]
About as much as the governments of Europe resembles Communism…

-XT
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Minimal taxes, no tariffs, no import quotas or controls, practically no regs on business, state industries/utilities privatized and sold off, labor unions banned – it’s laissez-faire capitalism. (Except for the oil industry – the oil companies wouldn’t allow the privatization to go forward.)

30

Of course, things are frar less than peacy keen in the US. Right now there are 45 million Americans without health insurance. Many of them employed (such as myself) by employers who don’t offer health insurance and don’t pay enough to make it possible to buy it. There are also employed Americans who can’t even afford a place to live. (I am fortunate enough not to be in that category at present, but things can always change.)

Don’t let the American conservatives fool you. They are social Darwinists all. They’re willing to sacrifice me and my family and many other people’s families on the altar of the free market, even if we are employed. It’ll happen in France, too, if they have their way.

31

[QUOTE=Evil Captor]
Don’t let the American conservatives fool you. They are social Darwinists all. They’re willing to sacrifice me and my family and many other people’s families on the altar of the free market, even if we are employed. It’ll happen in France, too, if they have their way.
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I’m a socialist and everything, but maybe it should happen in France. I mean, it’s not an either-or thing. Maybe France has gone too far in its welfare state, etc., and needs a (limited) correction in the direction of free-market efficiency. Discussed at length in this thread.

By the same token, America has gone way too far the other way and needs a correction in a socialist direction.

32

[QUOTE=Der Trihs]
They tried to impose laissez-faire capitalism on Iraq
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You misspelled “post-Soviet crony ‘capitalism’”.

33

[QUOTE=Steve MB]
You misspelled “post-Soviet crony ‘capitalism’”.
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Tomayto, tomahto.

34

You appear to believe socialism and communism are the same thing, which they aren’t. There are plenty of socialist countries which are not totalitarian.

35

[QUOTE=Little Nemo]
There are plenty of socialist countries which are not totalitarian.
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Which?

I hope you don’t mean Sweden. I meant big S socialism, not just socialised capitalism. And Sweden appears to be being somewhat dishonest when recounting the number of people who are unemployed. The government covering up official numbers is one of the tells of a country that’s starting to go wrong.

36

[QUOTE=BrainGlutton]

That’s some laissez-faire capitalism all right.
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Doesn’t sound laissez-faire. In fact, sounds like the complete opposite. Once again, people are making up definitions for words that have a negative connotation. Laissez-faire by definition means no government intervention. What you describe in Iraq is LOTS of intervention.
Some level of socialism is not necessarily a bad thing. The free market is the most efficient way to allocate resources but it doesn’t necessesarily allocate them to everyone. I don’t think anyone would advocate the police or Federal highways be subject to free market forces. Education, on the other hand is a combination of both. The government provides a certain standard of education for everyone, however there are private schools for those who want and can afford a higher standard.

37

[QUOTE=Sage Rat]
Which?

I hope you don’t mean Sweden. I meant big S socialism, not just socialised capitalism. And Sweden appears to be being somewhat dishonest when recounting the number of people who are unemployed. The government covering up official numbers is one of the tells of a country that’s starting to go wrong.
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I think you are abusing the definition of socialism as much as other are abusing the definition of laissez-faire. Sweden has been governed by the Social Democrats for most of the past hundred years, and who are full members of the Socialist International. If I had to point to any government being truly socialist - that all members of society should have control over the means of production and its profits, and especially those means and profits that they directly contribute to, then Sweden and its trade unions are at the top of the list.

And could you give a cite that the Swedish government is covering up its official numbers? Or are you referring to the lack of counting people on sick leave and other government programs as unemployed? Neither does the US. Disabled, injured workers and other welfare recipients are not classified as such here either. Regardless, I dont know of any government that provides ‘perfect’ numbers for all of its statistics, and that is due as much to the nature of statistics as to the nature of government.
In regards to laissez-faire, it has always been a rather disingenous policy since the beginning. “Give us protection for our property rights, but don’t tell us to respect the rights of others, especially our employees,” cry the capitalists and other rentiers. And I’ve never understood the propensity for American conservatives who espouse the values of work, responsibility and productivity to favor the rentier class over the labor class.

Business requires both capital and labor, and I do not see why the rewards should be not equal. I have no problem with social policies that try to establish that equality.

[QUOTE=msmith537]
The free market is the most efficient way to allocate resources but it doesn’t necessesarily allocate them to everyone.
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Isn’t that a bit contradictory? How is the free market efficient if it does not allocate resources to those that require them? I think the free market is more efficient than arbitrary centralized planning, but I doubt that it is the most efficient.

I see a fundamental difference between capitalist and socialist economics is that capitalism is based on competition (warped by Social Darwinism, and increasingly belied by the actual practice of business) and socialism is based on cooperation (warped by Marxist revolutionist theory which did nothing to help the cause, and belied by human ambition).

Socialism promotes a equal share of necessities which increase as technology and the state are able to provide them and uses the tools of government to allocate those resources. One hundred years ago, it was food, shelter, basic literacy and similar items. Now it includes health care, a basic income, a clean environment and similar items. And the state can be more efficient than the free market to allocate those resources (ironically when it uses market-based mechanisms, such as pollution credits.)

After those basics are met, I do not see anything in socialism that requires everything else must be distributed and/or controlled by the state. If people wish to work harder to buy a bigger house, let them, and the market will dictate how hard they need to work to afford that house.

When socialism is corrupted into communism with total ownership of production and distribution of its output, then the platform fails. Sweden learned what the balance was and has had a fairly successful economy. Russia and other communist nations did not and did become totalitarian in their attempts to succeed.

Finally, the more I read up on the New Institutionalists, I agree with their stance that institutions - the artificial rules, customs and conventions of society - create and shape the market more than vice versa. The free market does not follow any ‘natural’ laws, and very few economic principles do either. As such it is society that can determine what economic policies they desire, not some ‘invisible hand’. France decided they want to tweak those policies a bit in a different direction, so they elected leaders that will attempt to do so. I do think those leaders are following a soon-to-be outdated methodology though.

38

[QUOTE=Sage Rat]
Which?

I hope you don’t mean Sweden. I meant big S socialism, not just socialised capitalism. And Sweden appears to be being somewhat dishonest when recounting the number of people who are unemployed. The government covering up official numbers is one of the tells of a country that’s starting to go wrong.
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I saw a half hour program on German Economy. The economist said we have 9 million unemployed. However if we counted like they do in the US we would have 3 million. So our economy is not so bad. We invented miscounting the unemployed.

39

[QUOTE=Agnostic Pagan]

Isn’t that a bit contradictory? How is the free market efficient if it does not allocate resources to those that require them? I think the free market is more efficient than arbitrary centralized planning, but I doubt that it is the most efficient.

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No, it is not contradictory. The USA has the highest GNP of any country meaning that we produce the greatest amount of wealth. That does not mean that wealth is distributed equally to everyone. In many cases it may be advantageous to produce more of a particular good than the market might require in order that it reaches more people. It’s less efficient overall since those resources would have been spent on meeting other wants and needs. Unfortunately, people often want things that aren’t that important.

40

The free market does not ensure a fair distribution of wealth. View this Wiki page for a quick breakdown on the efficiency of a free market and the division of equity in one. In practice, however, it has been observed that, on the whole, the poor do benefit from the overall wealth creation of a free market, despite the lack of a governmental guaranteed of this.

[QUOTE=severus]
I don’t know. I’m of the opinion that a market economy, without intervention, is unstable. It doesn’t work as the theory would have it. I get this impression from seeing the fact that monopolies seem to develop naturally and need outside intervention to break them. So, instead of remaining fluid, I believe that unsufficiently regulated economies will eventually go a fixed state with a number of “haves” and “have-nots”, and minimal opportunity for moving from a class to the other. A kind of neo-feudal state, say.
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In a truly free market, a monopoly can arise out of two conditions:

  1. It provides a service so high in quality that no competition can beat it
  2. Control of a limited natural resource.

Walmart is an example of the first. Many people may hate WalMart, but they deliver goods and services at low price, and their success over other, less efficient businesses through voluntary exchange is proof that they provide an unparalleled service for the market they operate in. Being a large corporation is not in itself bad.

The second situation is one in which the government must interfere. Luckily, it is also extremely rare. Public drinking water falls into this category.