Can we have a civil, thoughtful discussion on this?

Discussion in 'Economics & Trade' started by Kode, Jan 11, 2017.

  1. Kode

    Kode Well-Known Member

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    This is intended to start a conversation. Hence I didn't include links to "prove" anything. But now that the ideas are out there, responses should include links to legitimate evidence when appropriate.

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    THE ECONOMY: WHERE ARE WE AND HOW DID WE GET HERE?

    The economy is the foundation upon which everything else exists. It determines everything from the macro perspective.

    The economic system is by which trade is designed and maintained. It determines the relationships between people in the struggle to live, to have, to obtain, to be. It determines culture. Study art history. The art of the Middle Ages reflected the idea of the nobility being divinely influenced. Religious images were what artists produced. The images were flat, lacking depth created by perspective. That came later. The peasants were supposed to respect religion and by association, the nobility.

    As the idea of private enterprise represented by guilds and manufactories developed, the art changed to support this new economy. The subject matter of art was no longer entirely religious but now became people, individuals, realism.

    Similarly, music changed. The political life changed. Laws changed. Notions of "rights" changed.

    Culture arises to support the economic base. The economy is the foundation upon which everything else is built. The same is true of the design and function of the state.

    And it is always those who are benefitting the most from the existing form of economy who do everything they can to make sure the economic form continues.

    Liberals and conservatives as we know them developed in the context of a market economy characteristic of capitalism. Certainly this division of people was "borrowed" by economies that attempted to transition in a leap from feudalism to socialism, thus skipping the step of capitalism. But those divisions of liberal and conservative existed for them to borrow.

    Whether we shall see "technocracy" or not will be determined by those who have the greatest investment in our current economy and therefore the most power to affect it. But it might serve us to view it from the perspective of an understanding of where we are today in this capitalist economy and that of the world.

    Our economy thrived after the Great Depression as a more fair and more level playing field provided a somewhat equalized opportunity to more people. Technology was to be discovered and exploited. Infrastructure of dams, railroads, roads, was built, providing growth of jobs, incomes, and general expansion. Consumerism exploded. Capitalism thrived on this growth as it continually ramped up to fill the demand.

    Then as the building frenzy moderated, the rate of growth began to shrink starting in the 1970s. Consumerism declined and that fed recessions. But consumerism was essential to a healthy capitalist economy. The answer was determined to be consumer credit. Credit cards were promoted, were spread, and were used to keep feeding the need for increasing consumption. Debt was actually encouraged, and it grew, and eventually crashed, bringing the economy down with it in a new, deeper, more dangerous recession.

    There is no way left to increase consumerism today in the U.S., -at least not with the frenzy and gusto that is needed to keep capitalism advancing. So corporations saved their cash, stashed it away instead of creating additional productive capacity that couldn't be sold, and consolidated to shrink their costs. They moved overseas to save on labor. They moved headquarters overseas to avoid taxes. They merged to consolidate management costs and other operational expenses.

    Now, only robotics remain as a way to cut wages and continue to produce and thereby provide increasing profitability for the biggest corporations. But to whom will they sell if the public is unemployed due to robotics and have no money?

    This is called "the death throes of capitalism". And it cannot continue as it once did with benefits for the public and improving standards of living. Capitalism must collapse and be replaced. But the question of how it will happen, peacefully or violently, and with what political desperation measures, have not yet been determined.
     
  2. Lil Mike

    Lil Mike Well-Known Member

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    In what way are you defining "capitalism" differently from the market? A market economy seems to be a fairly immutable part of human behavior, so I think you will always have that aspect of capitalism, but are you talking about getting rid of corporations or something like that?
     
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  3. Liberalis

    Liberalis Well-Known Member

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    How are you defining consumerism? People buying stuff they want?

    As to the robotics part, that same argument was made when agriculture was automated and has been made time and time again and proven wrong. If not for automation, we would all still be subsistence farmers. When people saw farming jobs going away, they feared that they would be forever out of work. Who would the farmers sell food to if nobody had any money? Turns out that isn't what happened, as we all know today.

    Farming automation shifted the United States to a manufacturing industrial economy. Manufacturing automation has been and is currently shifting the U.S. to a service-based economy. Keep in mind that these "shifts" do not mean the U.S. is producing any less agriculture or manufacturing output. The U.S. produces more agricultural and manufacturing product than ever before--it is just using far less people to do it.

    The question is what comes after a service-based economy? And how quickly will that transition happen? Are there services that people prefer to get from other people, even if automation would be cheaper and more efficient (I sure think so). Healthcare services, education services, and leisure and hospitality services are likely to be around for a long time. More and more people will likely end up in these careers as other services automate because the human element seems to be very important. The arts also share this in common. Whatever transition happens, people will be displaced in the process in the short term, so we need to be mindful of that and find ways to ensure displaced people find work and are retrained quickly. But I don't see the end of capitalism you do.
     
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  4. Battle3

    Battle3 Well-Known Member

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    The US does not have actual capitalism. Individuals own the businesses and still work for profit, but the government controls so much of the economic process that there is not much freedom.

    This is not the "death throes of capitalism", that's pure BS. This is the people and economy struggling against the heavy controlling hand of government. Return actual capitalism and everything will be fine.
     
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  5. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    QUO VADIS?

    First of all, very good thread header. Thank you.

    Secondly, let's not make the mistake of thinking that Capitalism is a "social theory". It isn't. Capitalism is simply the evolution of the means of exchanging products/services in a market-economy. It is a "mechanism", not a "theory" and considered wrongly a "theory of economic evolution".

    Furthermore, the notional battle reduces quite simply to three economic entities. The sharing of Wealth (derived from Income) amongst those who:
    *Have it all,
    *Have some/enough,
    *Have nothing.

    The above demonstrates the strata amongst any nation's social classes.

    The statistics are very often "carved" in the above notional thinking. My point throughout the dialog on this forum has been that the US replaced a monarchy (well done!) for a political system that still allows the concentration of Wealth at the top and insufficient distribution at the bottom. (Not so well done, and deeply unfair Income Disparity).

    Moreover, far too many people do not have a sufficient historical perspective to understand how we have evolved. Only one aspect of that evolution is the Income Tax, which did not exist before 1913. The history of income tax rates (at the heart of "who gets what for their efforts") is like this:
    [​IMG].

    We can see from the above the very great changes that have occurred in tax rates, and we should understand the socio-economic circumstances that have been caused.

    The above infographic demonstrates the folly that can be triggered when we lessen far too much upper-income taxation. A frenzy overcomes people and they do some very stoopid things. That happened in the StockMarket Crash of 1929 (that triggered the Great Depression) and the SubPrime Mess (that brought us the Great Recession).

    Both historic economic calamities (because they reduced some elements of our society from middle-class to abject poverty) were man-made. Selfishly man-made, because many of us are foolishly attracted to making a "quick-kill" that will bring us "lotsa Muney".

    The consequence is inevitably that "everybody suffers" somewhat and some suffer one helluva lot due to the "trickery". (There is always a scheme somewhere at the very bottom of such economic calamities.)

    MY POINT

    The challenge is therefore to "change mentalities", which is always a significant one in any large economy. People must comprehend the totality of A "market-economy matrix"; meaning what it can do, how it can do it, and who benefits and who does not.

    That "picture" is always complex because it is always changing due to the multiple variables involved - first-and-foremost of which, I suggest, is the fact that we are transitioning ages.

    From the Industrial to the Information Age ...
     
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  6. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    Just a reminder,
    For "economic system", read "market economy" and for "capital goods" read "goods that are used in producing other goods, rather than being bought by consumers".

    Another slant on the definition from Investopedia:
    The part in red above defines those instances in which, for various reasons, pure competition in deciding who gets what and at which price is considered unfair to all due to the inherent nature of the service provided. It is for such a reason that EU-governments are responsible for the provision of national Health Care and Primary/Secondary/Tertiary Education.

    Thus, some nations have decided that, like Defense and Security, both Health Care and Education should be assured by the nation's government to make certain that both are available to all a nation's citizens at reasonable costs and quality of service ...
     
  7. Johnny Brady

    Johnny Brady New Member

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    Sadly, economics are a mystery to me, I've tried learning about it but am still baffled.
    For example most countries have got "National Debts" often running to billions of dollars/pounds etc, even so-called "well off" countries like America and Britain.
    How can that be? I mean, millions of taxpayers pouring their cash into the nations coffers is a LOT of mazooma, so how on earth can those countries get into debt?
    And in debt to who exactly?
     
  8. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    Welcome to the club! And I have degree in the subject!

    The singular problem is that "economics" bifurcated at the beginning of the 20th century towards statistical analytics. People thus thought it was a "science".

    Physics is a science, since with certain formulas you can predict outcomes. That is not the exactly the case in Economics with any great degree of certainty. At best, it is a "quasi-science". Why?

    Because the universe works by means of "physical forces" and economics employs 'human forces". What economics must do, therefore, is explain how different "economic systems" work without the necessity of any great degree of forecasting. Because those economics systems depend upon highly variable "human choice".

    So, there's a powerful force affecting economic outcomes. Us. We humans. We are predictable often in the aggregate, but the aggregate can shift quickly with even the tiniest tremors that many would think are insignificant ... until they become Great Recession2, or 3, or 4.

    The Great Depression was caused by the exaggerated cupidity of people "playing the stock market". The Great Recession was also man-made by the dishonesty and cupidity of local banks that forged bad mortgage-loans and an industry that did nothing to prevent it and sold the packaged loans to the world (thus creating Worthless Debt).

    Don't confuse the rules of Consumer Debt with that of National Debt. Consumers can be taken to court and dispossessed to repay a bad debt. We can't do that with nations, however.

    The US Debt remains there hanging like the Sword of Damocles over our heads. As long as the US can sell T-Notes (meaning other countries want to hold T-Notes) then the Debt can be "maintained". But, within limits it need not be "paid off".

    How countries get into debt is highly variable. Your question is worth a doctorate thesis.

    As for Europe, which is far more indebted than the US, it was "easy". Let's call it "human failure". The southern underbelly of Europe is very different intellectually from the north of Europe. The north is far more serious about its balance sheets.

    From Portugal to France to Spain to Italy and onward to Greece, mistakes were made. Greece is particular because it never should have been allowed into the EU. (Greece, with the help of Goldman Sachs "cooked its books" to get in.)

    These countries had political structures that lived according to one theme "full employment". It was the singular objective to get into and stay in power. So, when the fit-hit-the-shan as a result of the Great Recession, these countries borrowed money to keep people working - thinking that the recession (that started in 2009/10) would quickly go away. It didn't, and government borrowed more and more to keep people employed by spending the money.

    Finally, the "fit-hit-the-shan" and to save the Euro the Central Bank was obliged to intervene to save the Euro - thus putting country budgets into straightjackets. Unemployment skyrocketed but the Euro was more or less "saved".

    Everybody and nobody.

    Perhaps you are thinking once again that some one bank owns your mortgage debt and can cash you out. For as long as "other countries" are willing to hold "national debt" in the form of T-notes or Euro-bonds, the interest on both "debts" will be paid. So, no panic. The only variable that changes is the interest rate.

    If, however, the country is unable to either make payment on its "outstanding debt", or if the interest rate dives, other countries will sell the debt, which further exacerbates the problem - until a country is declared "bankrupt" and the debt is written-off the books of creditor-countries as a loss.

    For the moment, large countries (325M consumers in the US, and 740M in the EU) are able to mount massive debt and pay the interest on it because the economy allows them to do so.

    So, no problemo - (for the moment) ...
     
  9. Ndividual

    Ndividual Well-Known Member

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    Maybe a good start would be to agree on a list of things that have affect on an economy and try to understand how they interact with one another, locally, nationally, and globally?

    Do things like increasing/decreasing money supply, inflation/deflation, raising/lowering interest rates, raising/lowering income/corporate/sales/other taxes, among many other things have a positive/negative effect on an economy as a whole?

    While the economy is often talked about as AN issue, it is the result of the actions/reactions by government/producers/consumers/etc. relative to a great many issues each of them complex in their own ways.
     
  10. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    This is not the first time that the US has been challenged, though it may be the first-time this present generation has been.

    If you walk around towns in Massachusetts you will find old mills that once made cloths in the 19th century, and these same plants (built on rivers to profit from the energy obtained) became the offices/factories of hi-tech companies (like DEC) of the computer business in the latter half of the 20th century. Almost the entire computer industry has gone online and changed dramatically. Many, many companies (like DEC) do not even exist any longer.

    Those plants are now closed, some dilapidating from disuse. Others knocked down because they are unsafe.

    Further away in Boston are the most recent generation at universities where they are earning advanced degrees that will allow them jobs at much higher pay than was ever paid in those mills.

    That story can be repeated throughout the US. Life goes on, it advances or changes, and we humans must adapt ...
     
  11. Deckel

    Deckel Well-Known Member Past Donor

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    RObots are tools with a short shelf-life. mazon has retooled itself something like 5 or 7 times in its 25 year history. That requires consumers. If people cannot afford to consume, the robots will be as useful as a post-hole digger in Time Square. These things balance themselves out. Economics are not the path to a destination. They are a measurement of the past.
     
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  12. Econ4Every1

    Econ4Every1 Well-Known Member

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    I'm not going to answer your question directly, because honestly understanding how economies work requires that you unlearn as much as you need to learn.

    Have you ever played the game of Monopoly? Given your age, I'm going to assume you are old enough and hope that you Brits played it as kids....

    Think about how the game works. Imagine that the bank is the government (if the work government is in italics, I'm referring to the game, if it's not I mean real government) and the things that can be bought in the game are the goods and services of the economy.

    [quick side note, my comments apply only to the national government, not to local governments]

    What is the first thing that you do in the game after the board is out and players pick their pieces? If you listen to the accepted economic theories, then your answer should be, "collect taxes"! But how could taxes be collected first? If players don't have any money?

    And indeed, this mirrors the real economy in nations like The US, Japan, Australia, and Canada to name a few, and most notably NOT the nations that share the Euro (we can come back to why this is later). Nations that all use the money they create and in which all of each nation's debt is denominated in. They (the governments of the nations I listed) can't collect taxes before they spend their dollars because, in all of those nations, they do not accept anything in payment of taxes except the dollars they create.

    So the first thing that happens is that the banker in the game hands out money to the players, because, in order for people to have money, it must come from the government (the banker). In the real economy, the government creates money and spends it into the population acquiring the things that it needs in order to provision itself under the authority of some sort of national charter (in the US that would be the Constitution). The Government pays salaries, builds and maintains buildings, raises an army, all done with money it can create from nothing.

    Ok, so back to the game for a sec. If the bank is the government, every dollar it creates is the player's income and wealth. Conversely, every dollar spent is the government's debt. Can you see the dichotomy? In the game, it's easier to "see". The government's debt is equal, dollar for dollar to the player's wealth (in game terms that is properties owned and the improvements they purchase) and savings (savings being money unspent).

    Ok, so, at the beginning of the game players are given $1500, but that isn't enough to buy all of the properties. So as the players play the game the government puts more money into circulation by giving players $200 every time they make it around the board. This puts more money into the economy. This increases the amount of wealth in the game players can acquire and increases player savings.

    Every dollar the government (the game or in real life) goes into debt is earned as income to everyone else.

    That is, without debt, there'd be no dollars.

    Now, as nefarious as that sounds, I promise it's not that bad.

    When you and I are in debt, we must earn the money for repayment. We must work. The government does not work and it does not need an income. This is where you have to unlearn the notion that taxes pay for government spending. We tend to look at our system of economics through our own intuitive experiences. As such, when politicians insist that the government is going broke, it tends to ring true based on our own experiences. However, nothing could be further from the truth.

    Debt is nothing more than an accounting of money that's been created. The important thing is that we're creating enough money so that all the business that a nation can produce (via maximization of human and real resources) is produced but no so much that it leads to shortages and drives inflation.

    Let's go back to Monopoly for a sec. We've already established that in order to begin the game, the banker must hand out money first. The game does not start sending players around the board waiting for them to hit the "income tax" or "luxury tax" spots in the game, or pulling "penalty" cards from Chance or Community Chest in order to fund the bank, it's exactly the opposite. It is the same in our economy (US and UK). Before the government spends (let's say for the very first time), there can be no taxes. The order of taxing and spending has never changed, spending always comes before taxing.

    The reason this is hard if not impossible to see clearly today is that we "see" the economy as cyclical in nature and indeed that is what we are taught, something that looks like this:

    [​IMG]

    In reality, it's more like this:

    [​IMG]

    The difference between +money and -money is the deficit and that's the money the government has left in the economy for us to use. Think about it, in the linear model, if +money was equal to -money then the result would always be zero. There would be no dollars.

    So what are taxes for?

    Simple, look at the linear diagram above. Remove taxes and what you get is +money--> +money--> +money--> +money.

    In fact, if you go back to 1980, the US government has spent (+money) $73 trillion dollars. It's taxed (-money) $61 trillion. The difference is the money it's added. When you consider that the population of the US has grown by over 100 million people, the per capita income has increased by 271% in that time and output per person has also risen, it's understandable that the nation needs more money in its economy to get business done.

    Taxes are simply a way for the government to make room for next years spending. Look at the linear image above. In the US government spending is 1 out of every 4 in the economy. If it didn't take money out of the economy, it would cause inflation. Taxes don't pay for spending as the circular model seems to indicate, they make room for it, but as I said. This claim is very counter-intuitive and requires that you unlearn what you thought you already knew to such an extent that you've always just taken it for granted.

    In conclusion, I think I would finish by saying that it's easy for people in the private sector like you and me to look at one side of the equation. Spending and costs, but it's easy to miss the fact that one person's spending is another person income. Eliminate one and you eliminate the other. Every transaction has two sides and you have to look and understand both.

    With that, I will leave you to ponder my response. You may write me off as (insert clever Britsh slight here), or perhaps what I've said might get you to thinking, even if you don't believe, that there is some sense in what I've said.

    -Cheers
     
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  13. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    Life in a market-economy is not about throwing the dice.

    We are sensate, intelligent creatures and luck (or the lack of it) is only one aspect of what we do and how we do it ...
     
  14. Econ4Every1

    Econ4Every1 Well-Known Member

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    Not sure what I said that would illicit that response, but, ok.

    Some of us anyway :wink:.

    Again, please forgive me, but I'm not really sure how this applies to my last post.
     
  15. bringiton

    bringiton Well-Known Member

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    What a sad commentary. Judging by how misinformed you are on the subject, you must have a PhD.
     
  16. Ndividual

    Ndividual Well-Known Member

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    It would be more correct to claim that robotics cuts 'costs' rather than wages. Federal government assistance programs which redistribute tax revenue/debt to the un/underemployed assures that all the population remain directly/indirectly involved in consuming and maintaining the appearance of GDP growth.

    Benefits are generally somewhat relative to participation.

    I disagree, but why would you feel that way and more importantly what would you recommend replacing it with?

    And who, would you suggest, be empowered to make such a determination?

    Is the intent of this thread to discuss the economy? Your OP was quite broad and would take many pages to thoroughly respond to.
     
  17. Johnny Brady

    Johnny Brady New Member

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    Thanks mate, I've saved your long post #12 explaining economics to my PC for posterity, and will have another crack at digesting it as soon as my minders release me from my straitjacket..:)
     
  18. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    Nothing has to "apply to your last post". I often make remarks just to move the debate onward.

    This is a debate forum, not a court trial.

    Stay loose - or you might get like some others here, reduced to sarcasm in order to have the "last word". (Aka, misplaced "male penis envy" syndrome ... ;^)
     
  19. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    HINT

    The world has capitalism. Some parts of darkest Africa or up the Amazon River might revert to "barter", which capitalism displaced. It's definition:
    A Social Democracy employs mixed-capitalism. Why? Because there are some key aspects of our well-being that a market-economy cannot supply at either the fair quantity or a fair price, yet they remain essential to our existence.

    Like Health Care and a Proper Education.

    And the "heavy controlling hand of government"? That's pure mendacity if you are trying to apply it either to the US or any other major economy in existence. There are often some very good reasons why government's preferential action is necessary because Pure Capitalism without safeguards very easily gets "out of control" and devastates economic fairness of the nation.

    You are putting far too much faith in the Competition of a Free Market-economy.

    One of them exists in the US today. Called Income Disparity brought about by unfair upper-income taxation, for which the Gini Index indicates the US is at the same level as Russia.
    [​IMG]

    Maybe that's why Putin and Donald Dork are warming up to one another ... ?

    Hint: Truly "developed countries" are not in the red or in the pink. If you are looking for it in the New World, then move to Canada ...
     
  20. Battle3

    Battle3 Well-Known Member

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    You don't know what capitalism is, you need to do more than google little tidbits.

    Private property does not mean individuals own property, it means individuals own property and have the freedom to use that property as they see fit. Having your name on a deed means nothing if the govt tells you what to do with your property.

    And that's the US and most of the Western world - a person can own a private business and work for profit, but the govt tells that person how to run the business, puts restrictions on the product, defines what profit is. That's not capitalism.
     
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  21. Econ4Every1

    Econ4Every1 Well-Known Member

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    I need to stay loose? I was genuinely interested in the reason for your response and asked you to forgive me in my response (lest you take it as sarcasm) because frankly, I didn't understand it. I've been very polite to everyone, sounds like you might want to take a little of your own advice my friend :)

    -Cheers
     
  22. Econ4Every1

    Econ4Every1 Well-Known Member

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    Few thoughts if I may....

    First, the term "Free Market" as you're using it is little more than a euphemism for "lawless market". You say "that's not capitalism" as if that revelation should cause everyone to rethink the restrictions we place on capitalism as if capitalism is a virtue.

    Society imposes costs like regulations to avert other costs like human suffering and environmental costs and indeed this is exactly what we see today. We know that pure capitalism has little motivation to care about these things which are precisely why all nations that practice capitalism have regulation. The kind of capitalism you are advocating has little incentive to promote the welfare of people and the places they live. Now I have no problem with the competitive system that capitalism promotes or the results of that system, but I'm not nieve enough to believe that capitalism is the best system for promoting human well-being or environmental stewardship and to the contrary, capitalism allowed to operate with fewer restrictions has demonstrated over and over again, that profits come at other costs, not always easily measured in dollars.

    Now it may be the case that there are some regulations that are unnecessary, I can agree with that. Many rules are made on emotional rather than pragmatic grounds. I have no problem supporting taking a hard look at the regs we have and tossing the ones that don't achieve the goals they were created to reach or have unintended consequences.
     
  23. Kode

    Kode Well-Known Member

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    I'm talking about the need for a different relationship for corporations and corporate life.
     
  24. Kode

    Kode Well-Known Member

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    Yes and why didn't it happen? It didn't happen because farm workers shifted to manufacturing jobs and this kept income in the hands of workers so they could buy products and keep business profitable.


    And capitalism didn't crash. And why didn't it crash? It didn't crash because factory workers shifted to service jobs and this kept income in the hands of workers so they could buy products and keep business profitable.


    Or we could ride the horse in the direction it's going. Consumerism is needed to keep capitalism running. And consumerism was once fueled by a zeal for production which, in time, fulfilled the bulk of the need we had for "things" and new technology. We will always have a need for "things" and new technology but history shows it will be at a declining rate that can no longer fuel consumerism adequately for capitalism to be healthy. So in its declining health, capitalism turned to tricks like consumer debt. This way big business got money out of people that the people didn't yet have. And now the game is up. People are realizing that debt doesn't fund life and future very well. So they are cutting back and we are back to a level of consumerism that cannot support a healthy capitalism. And so we are now facing another near-term economic crash that is building. But how will we get out of it? We didn't get out of the 2008 crash. Consumerism isn't able to bail out capitalism any longer. Incomes have not kept up with the need. We need to rethink the economy. We need a new economic system.


    As I said, there will always be need and there will always be work to do, but the level of consumption needed to keep capitalism going is no longer possible. Technology constantly makes things we buy less and less expensive to produce, plus it makes it possible to produce more and more goods with less and less labor. So we have a proliferation of goods that need to be consumed, but we have less and less worker income to buy those goods. The gains are going to the top. But inventories build because consumption cannot keep up. To make it work we need the gains to go to the workers so they can consume. But capitalism won't allow it. Only a system that puts the workers in charge of business decision-making will be able to resolve this.
     
  25. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    Yes, you are obviously right. Or Right.

    Take your pick, cuz ya caint be both ... :wink:
     

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