Thread: An explanation for the failure of capitalism

My mistake, it was JMS that started it. Sorry

To be totally honest, I think capitilism in it's truest sense would be an even worse disaster. Unrestricted by the government capitalism would make wealth even more power and that power would decide who's right and wrong. Now, I'm going to make up an example here, this isn't really based of any specific actual events but more a generalization about monopoly.

Okay, take Nintendo and say, Sega. Nintendo was a company that had it's fingers in a lot of pies even before getting in to video gaming. So, say they come out with the NES, it's a big advancement and they've beat other companies to the punch. It's wildly popular and has made the company a fortune. Now Sega is coming out with it's Genesis machine, once again a huge advancement that's beating other companies to the punch. However, Nintendo is also working on a next generation console. So now you've got two companies working on a next generation console, the poorer actually has the edge on the wealthier. The poorer company is working on something that given to the consumer, is going to be wildly popular. In a unrestricted market, however, Nintendo could use it's superior wealth to muscle parts suppliers, game programming companies. It's entirely possible they could use their vast wealth to halt the project before it's even off the ground, or at least delay it until they have the edge on the market. Thus a product the consumer would be pleased with never gets off the ground. Advancement has been slowed.

(The actual reasons Sega failed are much more complex and had nothing to do with Nintendo actively working against them.)

A better example would be Microsoft, who is probably the closest thing to a monopoly I could currently point to. Although they have their fingers in a lot of pies, if you just take the OS wars, look around. For a PC there is, IIRC, three choices for an operating system. FreeBSD, which no one at all uses, Linux which a few real computer nerds and leftists use and Windows. Windows and Microsoft software in general is something that the actual majority of users complain about frequently, but with their massive resources to keep others down, but up smaller software companies and advertise, they manage to stay on top with an inferior product. This is another example of how true capitalism would fail us. The wealth and the power would decide what we get, not the product or the desire of the consumers.

All I am interested in is provoking a bit of thought. I see no reason why, as gentlemen, we can't tell each other what we believe and the reasons for why we believe them. For the most part, I try to refrain from characterizing those beliefs, or those who hold them, unless it is in response to characterizations by others.

The games I present, both the simple version and the more complex one, are meant to be models of an entirely free market economy on the large scale. They are presented to show that even in a deregulated and unrestricted state, free exchange where there is a social division between producers and consumers is unsustainable in the long run. It also makes sense of two phenomena that seem to occur in free market economies with some regularity, inflation and growing inequality in wealth. These phenomena haven't killed off the free market economy entirely because, when they get bad enough, they result in great wars for resources, capital and territory, and a war-time economy is the ultimate in a command economy. They also result in the destruction of wealth, which in our game, would amount to everybody putting some of their pebbles back in the pot. War wrings inflation out of a free market by destroying capital. In effect, war nearly resets the game. The other reason these phenomena have not defeated the free market economy is because no one has though of a better way of organizing an economy.

If we admit that this last statement is true, that a system of fundamentally free exchange is the best organization of economic activity, and we admit that other features of free exchange cannot be changed, namely, that there will always be a differential benefit in a free exchange between producers and consumers and that there is an upper physical limit on productivity, and we are interested in avoiding war, and in making this system sustainable in the long run, then we must engage in periodic redistribution of wealth.

Hm, I can't help but wonder what would've happened if the US government had prevented a laissez-faire economy from occurring in the lat 19th, early 20th century.

There's no way to know, unless someone's got a time machine. In which case, can I borrow it? I just want to go back to last Wednesday with the winning lotto numbers.

The truth is that laissez-faire capitalism is a genuine improvement over what came before. It spurs greater productivity and accelerates the creation and capture of wealth. All that extra wealth makes more things possible, things like landing on the moon. But simply because it is better than the previous mercantilism, that does not mean it's perfect, or any more sustainable. In fact, one could argue that the more primitive feudalism is more sustainable than capitalism, as it sustained itself without serious economic collapse far longer than laissez-faire capitalism managed to. It took less than 50 years before the Great Depression hit, and while Americans like to think it was a uniquely American phenomenon, it hit Europe, and in particular Germany, much much harder. In my opinion, it was one of the primary causes of WWII. And it took less than 50 years before inflation and inequality threatened to take down the economy again, in the 70's. What redistribution mechanisms that existed were insufficient to alleviate the problem, and the Republican solution was to expand the money supply. In our game, this would be analogous to letting consumers take two pebbles from the pot for every trade and letting producers take four. This can provide a short-term fix, but in the end, merely accelerated inflation and inequality.

Originally Posted by Kantian Pragmatist

In fact, one could argue that the more primitive feudalism is more sustainable than capitalism, as it sustained itself without serious economic collapse far longer than laissez-faire capitalism managed to.

Well of course it is more sustainable. Feudalism was a very rigid and a significant way of life. It didn't depend on capital the way a mercantile system would, so there's literally nothing that would cause its collapse unless the kings stopped providing protection for serfs (which would result in the king no longer having a kingdom) or the serfs overthrowing their rule (which would be put down by force by the king).

There's no trading of goods, no development of technology to improve trade or dominate the market. As a result, most of Europe didn't economically change all that much in the Medieval Ages. Just because it's more sustainable doesn't equate with it being a better economy.

its very hard for me to wrap my head around the 1st posts game. its just to simplistic to give an accurate or even workable represenation. the assumptions are unrealistic.

it states the simple assumption that you want candy. what if you don't want the type of candy the producer is making..or candy at all. then that candy producer's offerings will devalue and in his need of other things, something else will start to increase in value. maybe he'll have to give you 2 pieces of candy for 1 rock if you are the only wanter of candy. the producer has needs also and will be paying out for something.

it also states that producers gain more, well we all produce something that is how we make $ or means to live. more and more people produce similar products, competition increases, purchases diversify between producers or concentrates to 1. if 4 people make the same candy then people will buy from more then 1 until the price drops from the highest charging person then they will buy from all. those producers may fight for more market share and drop costs further making it easier to get candy. cost will drop till some producers go out of business due to the low price. great, low price of candy, if the remaining producers start raising prices at some point more people will start producing candy again for the profit - yeilding once again lower prices. if candy was the only way to make money, everyone would make candy yet not everyone would still succeed. oversupply devalues the item. we all need/want a million different types of items. candy makers need items to make the candy etc etc.

while some inflation is to be expected, i'd not want to see large amounts of it. even if i have to be so simplistic to say i don't want my wallet to be 3x the size it is just so i can buy the same goods, even if overall wealth stayed the same! we don't want situations that have occurred in other areas of the world where a loaf of bread goes for 1$ this week, 5$ next week, 100$ the 3rd week etc etc. thats why we have the FOMC which tries to stabilize inflation and growth via one of its many ways such as adjusting M2 and rate changes. while i think they have one of the hardest jobs around, everyone likes to be a backseat driver saying they should have done this or that. i think the FOMC is very much needed becuase the masses of people, as a whole, are panicy.

~J

Originally Posted by Howard Newell

Well of course it is more sustainable. Feudalism was a very rigid and a significant way of life. It didn't depend on capital the way a mercantile system would, so there's literally nothing that would cause it's collapse unless the kings stopped providing protection for serfs (which would result in the king no longer having a kingdom) or the serfs overthrowing their rule (which would be put down by force by the king).

There's no trading of goods, no development of technology to improve trade or dominate the market. As a result, most of Europe didn't economically change all that much in the Medieval Ages. Just because it's more sustainable doesn't equate with it being a better economy.

I think we're in agreement here. Sustainability is only one aspect of a good economy. Progress in the standard of living and in productivity are two others. I would argue that at least meeting every individual's basic human needs is a fourth. Feudalism rocks at the first one, but sucks on the latter three, and capitalism rocks on the middle two, sucks at the first one, and is only marginally better than feudalism on the last. I think a modest "fix" to a system of free exchange can make capitalism better at sustainability without significantly effecting it's ability to be progressive and productive, and at the same time improving its ability to meet basic human needs. I think this "fix" is simply modest and periodic wealth redistribution.

Sorry you totally lost me with the game. But your last post here is interesting. It assumes a divorce between the economic system and the cultural bonds of society that just doesn't exist. I agree that on its own this economic system lacks in the area you mentioned and excels as you illustrate. But if you add in a cultural propensity that encourages charity to members of the same society as all religions do you add in a stabilizing element that also helps the bottom tier with their basic human needs.

Given the above the best society would be a capitalistic economy with a strong religious base. The moral compass provided by religion acts as a break on the greed of the economy, if you have the regulatory power in a third branch you have a balance that can last forever and provide the best for all. If you look at this country at its founding this is what you will find. That is why we have as a country progressed so fast and come so far. We are only suffering the current ills because this balance has been upset by, in many ways the combination of economic and regulatory power in the same package while the moral compass of many has been completely discarded.

Originally Posted by Wildtim

Sorry you totally lost me with the game. But your last post here is interesting. It assumes a divorce between the economic system and the cultural bonds of society that just doesn't exist. I agree that on its own this economic system lacks in the area you mentioned and excels as you illustrate. But if you add in a cultural propensity that encourages charity to members of the same society as all religions do you add in a stabilizing element that also helps the bottom tier with their basic human needs.

Given the above the best society would be a capitalistic economy with a strong religious base. The moral compass provided by religion acts as a break on the greed of the economy, if you have the regulatory power in a third branch you have a balance that can last forever and provide the best for all. If you look at this country at its founding this is what you will find. That is why we have as a country progressed so fast and come so far. We are only suffering the current ills because this balance has been upset by, in many ways the combination of economic and regulatory power in the same package while the moral compass of many has been completely discarded.

Have you been reading my mind?