Capitalism works because it’s based upon serving one’s own highest and best interests. Where it begins to fail is in a marketplace that has become so homogenous, consolidated and vertically integrated that the consumer lacks the requisite competitive diversity that keeps competitors honest because it is their own best interests to be honest in order to assure repeat business. Today, our economy is dominated and controlled by a relative few and monolithic banks, retailers, cable and telecommunications giants which have tipped the scales way way way away from behaving responsibly in order to assure their own longer term self interest. (Ever try to move your accounts away from Bank of America? With Autobill pay, auto direct deposit, $35 overdrafts, and the like, it creates an almost insurmountable hurdle that is such a pain that many depositers simply give up and remainin spite of the ongoing rape of fees leveled against their dwindling checking accounts.)

The self-serving, policy setting behemoths have robbed the consumer blind and we have no choice but to sit there and take it. A diverse marketplace without monopolies and oligopolies is a requisite for a free society practicing capitalism. Consumers are not in a position to exert pressure on huge corporations through collective bargaining or mass exodus by voting with their feet. Perhaps large tax incentives (as in NO TAX) for small and very small businesses will revitalize the economy by leveling the playing field slightly in their favor and restore diversity and small businesses to this now monolithic corporate country which acts it what it believes to be its own best short term interests..

Blog blog, bloggity blog:
1. From the Seminal (who I recently added all up on my own slog of the blog-o-blech), George Bush’s Top Ten Choices for the Next President of Cuba:
#10) Jacques Chirac — “he’s got experience running a commi…

If you’re telling me that capitalism is not wrong or immoral, you’re preaching to the choir.

Let me first pull back on the word “perfect.” I overreached. Thanks for pointing that out.

On the other hand, the point I was trying to make still stands, I think. The “market” I was talking about was the one for goods and services. In those cases that the consumer doesn’t have enough information to make a rational buying choice, bad goods and services don’t get driven out of the market by good ones, because the customer doesn’t know the difference.

Regarding the invisible hand of the market. The invisible hand of the market works precisely because the information is not perfect, and is unequally disseminated. Can you imagine a life where everyone had 100% information that was perfect about the market.(When I say market, I’m referring to all capitalistic transactions) For one thing, stocks, bonds, and commodities wouldn’t change price because everyone would know everything. Nobody would be able to retire, because investments wouldn’t move upward because there would be no buying pressure(people buy because they expect to make a profit). Perfect information would reduce profits because all costs would be known by the public. Perfect information would reduce incentive and competition because everyone would have the same set of data. Everything in the world would would turn into a 30 year Treasury bond with a “put at par” option and a 2% yield. Capitalism, with all of it’s quirks, is inherent to man’s nature, despite what some other commenters have put forth. Capitalism thrived underground during then darkest phases of the old Soviet Union and outlasted the USSR. Capitalism was around pre-Roman times, and the renaissance Medici’s turned it into an art form. It’s inherent in man’s nature to try to turn a profit, just as it’s inherent for man to speculate. Capitalism is not wrong, nor is it morally unjust. And, JS, you’re right….Capitalism is not exploitation.

Jeff

Jeff

I appreciate the civility.

Jeff

Yes!

http://www.friesian.com/rand.htm

…as stated previously I thank Ms Rand for her books. She reached an 18 year old girl.

I need my finances simple.

I’m with you, McQuaid. An economy can’t be run on the premise that every citizen will become a financial advisor unto his or herself. Finding one you trust is hard enough.

I remember when Bush was trying to push his private savings account to replace Social Security. Despite being a high-net-worth type, this lawyer spoke for everybody when he said, “Oh no. Not something else to think about.”

Aside to Jeff: thanks again for understanding that. Also this is an amazing metaphor:

Interest rates are kind of like working a horse. If a horse were money, it could work nonstop all day at 3%. At 10%, it would get very tired after a day’s work. At 20%, it would need frequent rest, at least a break every 3 hours or so. At 50%, it probably would break down after an hour of work. At 100%, it would probably lay down and die.

JSO, I agree with you: Best. Thread. Ever. In fact, it’s way over my head. I’ll just watch if it continues.

Also, those books by Ayn Rand were written during a time and in a place that does not even remotely resemble our present moment. The philosophy espoused is simplistic, naive and short-sighted. Limited.

The state is being challenged, as ever, by individuals.

With regard to corporations they are not pulling their weight in the UK with regard to taxation.

http://www.guardian.co.uk/commentisfree/2007/nov/07/comment.ethicalbusiness

A small point:

If people produced offspring that they could afford to keep, educate, clothe etc there would be smaller populations and I suspect less hardship for many families.

Population explosions would be avoided and delivering goods, services, help and work to the population would be less of a headache for all.

Tarnation! It just gets better and better! Now we have an anthropologist. I have just died and gone to heaven.

I’ve taken some grad-level cultural anthropology courses, and you and I agree that humans haven’t changed a bit, but I think we would also agree that societal behavioral norms can change over time.

And I have greatly enjoyed learning about chimpanzees and their behavior toward outsiders. Freakin’ frightening stuff.

I’d like to address what everyone has had to say, but that would take too long, so let me just address a few and summarize the rest.

Jeff: Corner-cutting happens in areas other than product safety. For instance, mining companies that use arsenic to leach gold out of low-quality ore have been known to dump that arsenic into the water table. Not good. But I think we agree that we need regulation to keep companies from cutting corners and engaging in anti-social behavior for the sake of short-term profts.

We’ll have to disagree about the invisible hand of the market. I strongly believe it works only when there is perfect and widespread dissemination of information. Absent information, the consumer has little way to make a rational choice when making even semi-complex transactions. And, of course, companies do their best to deny such information to consumers except when it’s in their best interests (positive information, for instance). For instance, the recent beef recall happened only because the Humane Society employed hidden cameras. I think it would be naive of me to believe that all such instances are being exposed, which means that I can’t make a rational, informed decision when buying a hamburger. And if I develop mad cow disease, how would we track the batch of meat that gave it to me?

J Gruszynski: THANK YOU for bringing up game theory. My understanding from an economist I know is that there is currently a backlash in the field against GT, led by a guy out of Stanford whose name I can’t recall, and for both the reasons you cite and because a very few economists are finally beginning to look at findings in mass and personal pscychology and realizing that “economic man” is only a part of the total picture.

Still, we have a number of economists who are, sadly, idealogues and will never admit, even in the face of overwhelming evidence, that there can be any other explanation for behavior other than that origiinating in the neo-cortex.

Elaine: I don’t think what you’re describing is what Rand had in mind. Instead it’s ad parenting that tends to drive adults into narcissistic disorders. Let me suggest a book by Alice Miller entitled “The Drama of the Gifted Child.” You’ll find that she relates other instances like yours, the effects of same, and gives some form and substance to the issue.

General to think about:

I don’t believe the word “captialism” means “exploitation.” Adam Smith used the word to designate that part of wealth that is used to generate more wealth, and went on to say that this generally includes production of products of some kind (and, today, we would add “services”).

The modern corporation is an absolute marvel of human ingenuity. I cannot think, off the top of my head, of any other institution that provides such a win/win/win/win/win to so many constituencies.

1. Owners win if the organization produces profits, and their risk is only their initial investment, as the modern corporation insulates them from debts the corporation incurs
2. Employees win by having jobs that pay them for their services
3. Vendors win because they can sell or lend to the organization
4. Customers win because the organization must produce useful goods and/or services if it is to be profitable, thereby producing something customers want to buy
5. Society wins because such organizations pay taxes, their employees pay taxes, the vendors pay taxes, and these taxes can be used for the common good.

This is the proverbial goose that laid the golden eggs. As long as no one gets too greedy, it works extremely well. But ANY of these consituencies can pull out of the “deal” and kill a corporation, and I have seen each of these consituencies kill a corporation in my lifetime.

Where we get trouble, though, is when “society as a whole,” through its representative the “gummint,” bands together with the one or more of the consituencies to alter the mutually beneficial relationship too radically. In communism, the gummint bands together with workers. In some versions of fascism, the gummint bands together with owners. In overregulated societies, the gummint is siding with consumers and, potentially, vendors.

I think what the US is facing now is a case where gummint is confused about its role. On the one hand, it’s reducing oversight in critical areas, including product inspection. On the other hand, it has passed Sarbanes-Oxley, which increases reporting and paperwork prodigiously for, in some cases, no discernible benefit.

Personally, I think the gummint’s role is to regulate corporations in such a way that no constituency gains the upper hand and goes on to produce short-term gains by anti-social means.

Laissez-faire does not exist. The corporations have purchased a gov’t that is eager to take their sides in almost every case. This 2-on-1 gangup is not “hands off.”

“Let the buyer beware” might have worked when people traded one on one, direct with the “company owner,” and for natural items such as livestock and timber (of which everyone was somewhat knowledgable). But today, the concept is merely another one-sided principal that favors the corporation. Why no “let the SELLER beware”? Why does ALL the responsibility of a fair and just transaction lay at the feet of the powerless?

We cannot “choose” to participate in capitalism. It’s established and sanctioned by the gov’t. Since we cannot choose an alternative, it is forced upon us. And that alone is justification enough for regulations.

I do not exist to serve ‘capitalism.’ Capitalism exists to serve me. And when it falters, I have the right to adjust it.