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Last week I made an argument on here that while capitalism was excellent at generating wealth, I agreed with @DBR that it was horribly unfair in many ways, and that negative externalities abounded which made the rich less than a shining standard of moral virtue. Unfortunately I felt I wasn't able to give the argument the weight it deserved, and many people made strong points against it. I'd like to quote Brink Lindsey here, who has a more nuanced take on the matter:
Essentially I'm arguing against the standard sort of lazy defense of capitalism I see on here. I am not a redistributivist, or a Marxist, but I'm also not a full throated defender of capitalism and markets. I certainly don't buy that without government and regulation, in a sort of anarcho-capitalist state, we would all be better off. Mainly because I don't think we're anywhere near having efficient markets that actually track negative externalities, or have close to perfect information.
It seems clear to me that while Marxism failed as a revolt against Capitalism, there do need to be major changes. However I'm quite unhappy with the proposed systems, as Socialism, the best contender, has quite easily fallen to social virtue signaling as opposed to actual economic change. I briefly flirted with Georgism, but the total disregard for the history of land and people's lives being tied into their property and houses going back generations ultimately turned me off of a land value tax as an optimal way to distribute wealth.
What are some more off the beaten path solutions that have been put forward to the negatives of Capitalism? Ideally we would use markets as a tool within a greater value structure, and keep some things sacred and safely away from money. But in reality, at least in a pluralistic society, that greater value structure seems to be a pipe dream. Capital will find its way into the cracks and mercilessly drive differences in the name of profit.
Does anyone know of inventive, big ideas as to how to plug some of the gaps our rampant focus on wealth has created in our society? To keep the benefits of capitalism while sanding off the rougher edges?
I feel like capitalism with a strong UBI paid for with progressive taxes to keep wealth inequality flatter could solve a lot of problems. Not enough to permanently solve the contradictions of capitalism, but enough to push the reckoning down the line another century.
I also like the idea of having the government allow people to vote on which post-scarcity good it should buy out and publicize. Enough people need a specific expensive medication, the government buys the patent and produces it for pennies a pill. Enough people love a new video game, the government licenses it and makes it free to every citizen. Etc. Obviously a lot of details to work out but I think it's one possible solution to artificial scarcity, which I think is one of the biggest problems with capitalism as we move towards an increasingly post-scarcity and information-based economy.
The only way I see UBI solving problems, is if you see the vast majority of humanity as a problem, and are looking for ways to depopulate the Earth.
I always wanted to know this one, can you name one or two contradictions within capitalism?
Sure!
A classic contradiction is that strong bargaining power by the capitalist class over the working class tends to lead to increased production and corporate profits at the same time it leads to decreased wages for consumers and a drop in demand for goods and services, creating a cyclical crisis that tends to drives productive capability away from consumer goods and services and into things like financialization and speculation, which leads to bubble bursts and depressions.
One of the contradictions I was trying to point out here is that capitalism is great at increasing productivity so that valuable goods and services become less scarce, but also relies on scarcity to set prices and cannot natively incentivize the production and distribution of post-need goods. This contradiction becomes more and more relevant to our everyday lives as capitaisms's successes drive more and more things into the post-scarcity category, with effects such as a marginal additional pill that costs 3 cents to make costing hundreds of dollars to buy, or governments being pressured into making and rabidly enforcing IP laws.
Aside from living through a few recessions at this point and usually seeing people's wages drop after one starts, rather than before, that strikes me as a very unusual usage of the word "contradiction". If that's a contradiction, then a recovery from a recessions is another one.
Isn't the cyclical crisis the part that clears out finacialization and speculation?
That's an even worse example. Yes, capitalism will help me figure out whether the vest way to produce more grain under current conditions is with a horse plow or a tractor, and thus make grain less scarce. Yes, it will stop being useful once we reach post-scarcity of factors of production. That is not a contradiction in any way.
Cases were something costs 3 cents to make, and 100 dollars to buy, usually aren't separate from external interventions like IP laws, but stem directly from them. Seems like the solution is stop trying to fix what's not broken.
That's what I would call the collapse, with the crisis being the part where capitalists realize they can't make enough money trying to sell real things to actual people and have to dump everything into financialization instead.
Yes, the collapse is what then clears all that out, restarting the cycle.
We could argue about what to call each part of the cycle, but that's just semantics. My point is that the cycle itself is a contradiction of capitalism, where having it succeed in its natural processes leaves it unable to function properly, until it goes nuts for awhile and suffers a collapse and loses much of those gains.
A non-contradictory process would be one that doesn't suffer from its own success in this way, and has a virtuous cycle that simply turns success into more success instead.
What you are missing is the part where grain becomes so plentiful that its price at market drops below the cost to bring it to market, farmers are forced to leave it rotting in fields, and everyone starves. Again, that's why it's a contradiction, the success of the system leaves the world in a new state which the system was not built for and can't accommodate, and the whole thing collapses briefly until the problems it was good at solving exists again.
And that's what happens if you 'don't fix what's not broken': when an excess of abundance drives the price of something too low, no one is incentivized to produce or sell it anymore, and it paradoxically becomes more difficult to find.
That's why we use things like IP laws and price fixing and paying farmers to not grow crops and etc. etc. etc., to prevent that type of collapse and dysfunction when capitalism succeeds in creating a situation it cannot itself function in.
But that type of artificial scarcity and restrictive regulation is, again, it's own type of contradiction: the success of capitalism necessitates and inevitably produces imposed limiters that evaporate much of the potential gain from capitalist innovations.
My point is that it's a very unusual usage of "contradiction". What you're describing is a self-correcting mechanism.
No, I'm not. If that happens, but there are other scarce good, the capitalist system directs investment into those goods instead, stopping short of pushing a particular good to post scarcity before it makes sense. Goods going to waste was more often a feature of centrally planned systems, rather than capitalism.
When all factors of production, and therefore all consumer goods are no longer scarce, capitalism stops making sense. That's not a contradiction, that's the system's explicitly acknowledged limit.
I don't think you established that it cannot function in those situations. Calling a corrective phase something dramatic like "the collapse" doesn't prove that the system ceased to function. Further, your own logic clearly showed that these "preventive" measures caused the very things that are supposed to be "contradictions" of capitalism.
Regarding semantics, I don't know what to tell you, this is a standard academic example for 'the contradictions of capitalism.' Maybe whoever translated Marx originally should have used a different word, I don't know, I don't think that's very important.
But importantly, I do think 'self-correcting mechanism' is way too charitable, and has connotations that miss the point here.
In the case where marginally lower employment leads to marginally lower resource prices leads to marginally higher investment in manufacturing leads back to marginally higher employment again, that's a self-correcting mechanism.
In the case where marginally lower employment leads to disinvestment in manufacturing and investment in financialization and speculation instead, and this process creates a feedback loop that drives more and more of the economy into those sectors until the bubble bursts and there's a large-scale recession, that's not really describing minor course corrections anymore. It's describing a cyclical failure where capitalism cannot function under it's own success, which I think is reasonably described as a contradiction.
It feels like we agree on the mechanisms here, and disagree about what to call them or how society reacts to them, or something?
Like, yeah, Marx acknowledged that capitalism inherently produces conditions under which it can no longer function successfully, and needs to be replaced with new systems which can successfully manage the abundance it produced. That's the cliff notes version of one section of his historical materialism.
Capitalists don't explicitly acknowledge that! Standard capitalist rhetoric is, as far as I can tell, that capitalism is just permanently and forever the best way to run an economy, under any circumstances, and any attempts to interfere with or subvert or replace it will only cause suffering and dysfunction.
It's not the case that capitalists are keeping a list of sectors of teh economy where capitalism has succeeded in creating post-scarcity and is no longer needed in that sector and that sector can be handed off to central planning or w/e because capitalism can't handle it anymore. They think capitalism can and should handle everything, and the cases where they insist on that even though they're wrong create the contradiction.
>During World War I, farmers worked hard to produce record crops and livestock. When prices fell they tried to produce even more to pay their debts, taxes and living expenses. In the early 1930s prices dropped so low that many farmers went bankrupt and lost their farms. In some cases, the price of a bushel of corn fell to just eight or ten cents. Some farm families began burning corn rather than coal in their stoves because corn was cheaper. Sometimes the countryside smelled like popcorn from all the corn burning in the kitchen stoves.
Sadly, no, goods do go to waste or cease being produced under unregulated capitalism; that's one of the reasons we have so many regulations today, which avoid the worst of these tragedies while also capping the amount of benefit capitalism can accrue to society.
Again, this is a contradiction: capitalism is so good at making goods cheap that we need laws to make them more expensive, or else capitalism can't properly distribute them anymore and no one can get enough of them.
Typically the most productive way to push these kind of conversations forward is to go back to definitions, to make sure if the difference of opinion stems from people merely using different definitions.
The reference to academia is a bit troubling, you make it sound like you don't really believe these arguments yourself, just relaying someone else's thoughts.
Why? By your own logic, the failure is cyclical, which means it is followed by a recovery. The general trajectory of capitalism, even taking these periodic crashes into account, is clearly that of growth. If you compare it to the results of systems that were supposed to be an alternative to capitalism, the contrast is even more stark. So I just don't see anything contradictory in it, and it does indeed look like a self-correcting system.
Then it looks like you're just completely unfamiliar with capitalist theory. They go to great lengths to point out that the entire purpose of the system is "rational allocation of scarce resources". That statement alone is at least double-redundant by my count, which shows how much they wanted to hammer the point home.
3 times cheaper than nowadays is indeed a good deal, but hardly post-scarcity. The fact that they were burning it instead of coal, is just a statement about the relative availability of coal, and we do it too nowadays (never heard of bio-fuels)? In fact, if anything this is probably an example of the rationality of capitalism relative to other systems. A central planner insisting "corn is for eating, not for heating" would be wasting coal, while letting an abundant resource go to waste. Also, the 1930's cannot be in any reasonable way be described as an example of unregulated capitalism.
The WWI example is even worse. War, especially in the past, has always been a time of great uncertainty, so it's not surprising people ended up producing too much or too little of something, because they were expecting the war to go a certain way, that didn't come to pass. None of this is an example of capitalism making goods so cheap that we need laws to make them more expensive. To show that, you'd need to show that the producers refused to correct production afterwards. Otherwise, it's not a contradiction at all.
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I think the problem I'm trying to point at is that without a greater system of agreed upon values, this system will never work under capitalism. The drive of capital to grow profit will continue to shred values in a multipolar trap unless a clear line is drawn in the sand.
I tend to agree with you though!
True enough, something significant has to happen before any of these solutions will be allowed to be implemented.
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True post-scarcity is likely impossible in a dying universe with a fixed and ever diminishing negentropy budget. Even then, it's likely possible to meet all the requirements that humans usuay aspire to, with an infinitesimal fraction of it. If my needs for resources, energy and computation are all met till Heat Death, I don't really care how the economy is organized, even if I expect some degree of capitalism.
Capitalism is clearly the least bad of all current economic systems, or so it seems to me, even if you skim a lot off the top and redistribute it, you'd have far less to skim if you opted for communism. Even if, when looking at the most relevant organism, a company or corporation, the internal organization isn't itself capitalist.
Price signals as pure as what a seller wishes to make and a buyer wishes to buy are incredibly valuable for lubricating the exchange of goods and services, and while I expect a monolithic superintelligence to do better, in part because it has far better internal alignment and can avoid Principal Agent problems, existing attempts at a command economy with prices explicitly computed in advance seem currently infeasible, at least when the Soviets tried it.
But the whole problem with capitalism in a post-scarcity environment is that it relies on price signals set by supply and demand.
If we invent the Mr. Fusion and Replicators such that we can produce everything anyone wants for basically free forever, capitalism has no mechanism to give those things to people, because the supply is infinite so the price is zero so no one can make money distributing it.
Capitalism is great for deciding how best to spend scarce resources, which is the type of economy we've been in for all of human history so far, and may continue to be the best way to distribute eg real estate and prostitutes and other inherently scarce goods into the far future.
But as more and more goods fall into post-scarcity (including the push to a digital/information economy), we increasingly need a new system that functions well under those conditions.
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The issue is that money serves as both input and output in the system. The reward for providing goods and services to others is money to demand goods and services from others - those that get ahead in the market gain the power to distort the market in favor of their own preferences. It mostly works, but sometimes it doesn't. In the end, capitalists don't want to be capitalists, because it's hard - they want to be feudal lords, collecting rents from others.
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This is a feature, not a bug. This is what money is for. Imagine that we have a semi-capitalist system, where you're paid based on the marginal product of your labor and investments, but everybody's preferences are weighted equally when it comes to production and distribution of goods and services. Under such a system, money would be worth about as much as Reddit karma, and there would be no reason to work.
The weighting of preferences according to how much money you have and are willing to spend is not a drawback of capitalism—it's the main reason capitalism works better than socialism.
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One of the standard critiques of anarcho-capitalism, and one I endorse, is that markets and capitalism require coercive state authority because they require enforcement of property rights and contracts. The supposition that reputational harm would serve as a sufficient deterrent is a bit laughable, and people enforcing their own property rights is liable to spiral out of control (and even when it stabilizes you're likely to be spending a lot of money and effort on security instead of quality of life).
Nordic capitalism isn't exactly off the beaten path, but it does leap to mind. It's not likely to appeal to libertarians, but the Nordic states generally have high income/personal taxes, an extensive welfare state, lower corporate tax rates than the US, fairly business-friendly regulatory environments, etc...
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I think one slightly underexplored argument is that the attacks the capitalist system provokes, and the labour necessary for its defense, are themselves a major externality: Bill Gates being able to sit peacefully in his mansion and make things happen by pressing a button and changing some numbers in the database rests on the work of states that work across the world to disrupt the formation of raiding parties that would come to plunder his compound, will chase down hackers that would change his database numbers, keep the pipeline of jealous and desperate people to try either narrow by a combination of indoctrination (telling little kids how it is just that Bill Gates has more things than they do) and bribery (social programs, taxation, redistribution), and work to quash any generalised attempts to overthrow the system (which are themselves more pronounced in more unequal countries, suggesting that the existence of large wealth gaps empowers those attempts).
Sure, as anarcho-capitalists will never stop fantasizing, in the ancap world he would just buy his own personal army and gun down the raiding parties with Azure-backed drone swarms instead, but surely doing that would itself cost some nontrivial amount of wealth - and then he'd need to either have his own secret service for chasing down hackers and keeping the banks honest, or lose just a bit of trust and peace of mind about any database numbers he keeps over physical gold bars, would have to get his own military police to prevent his personal army from rebelling, and so on. In the end, it's not at all clear that he would actually be better off that way than if he just paid taxes (possibly more than he pays right now).
From this perspective, the arguments against redistribution amount to saying that you (generic citizen) ought to pay for this externality on Bill's behalf. This is either based on some argument that it's for your own good because capitalism works well (which I've never seen actually argued to the required conclusion that capitalism works the best when there is zero redistribution), or quite often simply on ideology (it's your moral duty to pay for it, something about property being the most basic human right).
Keeping the peace is a fairly small part of most modern governments' budgets. Subsidizing private consumption of the lower and middle classes accounts for the lion's share.
If we were to say that Bill Gates' tax bill should be equal to a share of military and police expenditures proportional to his share of the nation's aggregate wealth, he'd get a tax cut. If we value a statistical life at a mere $1 million ($10 million is more typical), then the US has a total wealth of around $500 trillion. Gates has a net worth of about $100 billion, or 0.02%. Military plus police spending is around $1 trillion per year, so he'd have to pay around $200 million per year, which I believe is less than he's actually averaged over the past few decades; he claims to have paid over $10 billion in taxes. And that's with an extremely conservative valuation of a statistical life; a more reasonable valuation would put his annual tax bill well under $100 million.
That IS keeping the peace. If you don't subsidise people's consumption they might not be peaceful for long.
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So the bribery part, right? If you have large classes of people locked out of consumption that's waved in their face, you eventually get scenarios like the London riots in 2011 unless you are willing to spend much more on policing (and even then long-term stability is not clear: Bill Gates also seems to indirectly benefit from other things that the lower and middle classes do that are not seething and plotting an overthrow).
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That argument would count for more if ‘not having raider Gangs like a mad max style anarchy and leaving crime to go unpunished’ wasn’t a good in itself. Yes, bill gates and Jeff bezos might well use more of the state’s resources than the average citizen, but airports and cops and schools and defense and the like are public goods and they also pay more in taxes than the average citizen.
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I don't want to be nitpicky, but lately I found that word "capitalism" really means a lot of different things to different people. Even the origin of the word is laden with preconception, as according to Marx the Capitalism was the overall system, the overarching ideology, the whole system of accumulating capital connected to bourgeoisie, class struggle, alienation and oppression of workers an all the rest. Socialism was not "just" some alternative, it was supposed to transcend and transform the society towards utopia. In that sense socialism is not an actual economic system, it is defined by negative of capitalism, it is a hypothesis. To use an analogy it would be as if I express my frustration that so far we only use very primitive modes of transportation (capitalism) that are very slow, and that there may be some way to achieve Faster Than Light travel (communism). And how it would be good to rethink modes of transportation so FTL drive can be achieved, maybe by starting with rethinking wheels or whatever.
To me it is hard to have any reasonable discussion around that as it is hard to define what are your objections to whatever economic system you think you criticize - be it China, Sweden, USA or South Africa or whatever else. Do you object environmental issues or maybe you object that there is some sort of alienation of labor, or maybe you object that we have some monopolies and the system should not have it or maybe you have a beef with corporate structure and corporate governance where small shareholders may be fucked, or what is the issue again and what do you think capitalism is?
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I’d say the issue isn’t with the economic system it’s with the religious system. Or you could say tribe, family unit, or whatever links people together. If you have strength in your family, tribe, regligion then the rough edges of capitalism can be sanded down. Plus a bit of regulation that very specifically deals with externalities.
If something bad happens to you and your business fails then you have your family. If the family is struggling the hopefully you have something like the Mormon church and 10% tithes to lean back on. Jews also seem to have these support systems. Catholics at one point did.
I'd generally agree with this point, but it seems to me that capitalism was a massive factor in the decline of Western Christianity. It was probably declining before the birth of markets, although I'd have to research that more to feel confident. Good rebuttal.
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Liberal democracy is meant to smooth the rough edges of capitalism. When it fails to do so (like in the bloated medical system of the United States) it is often from too much government interaction rather than too little.
Put another way, capitalism doesn't work, man, because it's never been tried.
We see the huge differences between capitalism and socialism when we look at the obvious disparities between North Korea and South Korea. But what this comparison doesn't show is that South Korea is also quite socialist. What we need is a South South Korea with even more market freedoms to demonstrate what is possible on the high end. (I didn't invent this formulation by the way)
I believe that's Singapore.
Somalia is surely a better example?
As well as significantly higher taxes than Somalia, Singapore has compulsory retirement savings managed by a State-owned asset manager, a majority of the citizen population living in public housing, extensive prohibition of industries deemed to have negative externalities (as well as the usual suspects like narcotics and unlicensed housebuilding, this includes unlicensed newspapers and chewing gum), restrictions on private car ownership that The_Nybbler would consider totalitarian oppression, military conscription, and State ownership (through Temasek) of strategic stakes in Singapore's largest companies.
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I'm not clear which of these objections fail to be solved by the standard neoliberal toolkit:
Maybe those aren't done in appropriate quantities presently, but why shouldn't they work to volve the problems outlined there?
As we've very clearly demonstrated in the last couple of decades, negative externalities are almost impossible to determine before the fact. Like the issues with the Internet and the iPhone, the general destruction of community and the sacred, the Sexual Revolution via birth control, etc etc.
If we do start to hamstring new inventions because of theoretical negative externalities though, we will cease innovation. It's a difficult problem.
Also, people on welfare lose motivation to work. I mean the list of social problems created by capitalism just goes on and on. Simply adding new taxes won't cut it.
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