Thursday, March 7, 2019

Can we have a future, with capitalism?


I'll come clean. I am a capitalist. I've started two businesses, one not so successful, due to injuries and health issues at an inconvenient stage. Though we did OK in the end. Another which shows all the signs of a healthy infant. I don't expect we will make a fortune, but it will make, enough. Currently I work for a multinational.
It is one of life's irony's that someone like me, an advocate for the mixed economy, Democratic Socialist, model that has proven the most successful economic system, to date, is considered any way, radical.

No one has yet found a better system for allocation of day to day resources, within a community, than a market capitalist system.
You see potential customers for your market garden or building skills, you invest in training as a builder, buy a set of tools, or in a plot of land and seeds. If you do it well, you make a good living, but how much profit you can make is limited, by the fact there are many other small builders and market gardeners, and your potential customers can see who grows the best vegetables, or builds houses that stay up. At this level a "free market" works fine. The economy is pretty much in a steady state, as is the use of natural resources.

As soon as you grow the community larger, than one where everyone knows the skills and honesty of the other members, you need ways of ensuring those with market power do not accumulate too much of the communities wealth. Basically that real contributors to the community don't lose out to cheats, resulting in the breakdown of the system

No capitalist society has succeeded without a healthy dose of co-operation, common infrastructure, goods and services and regulation, "socialism". Countries that are, "successful" by all our normal measures, have an economy balanced between private and State. The most successful have high progressive taxation, and a State share of the economy, around 50 to 60%. Ours is down to 28%, and it shows.

Without the rule of law, healthy and educated  workers, public infrastructure and regulation of the "cheats" if you like, we cannot have a successful business, and wider economy.
Private provision of mass 'public' goods has proven to be incredibly inefficient, and wasteful. like our power companies.

It suits Bill Gates, and others, to attribute human advancement to capitalism, a self justification for having extorted extreme wealth.
Others attribute advances to human co-operation in developing infrastructure and services, laws, and sharing wealth and advancement, which capitalism can never deliver.

Both are correct.

The USA's post war advancement was due  to high taxes, socialist redistribution, a high quality public education system, State sponsored research and innovation, public infrastructure spending, anti trust laws, banking regulation and a large middle class.
All were needed to make capitalism work.
The concentration of wealth and power with late stage, insufficiently regulated, monopoly  capitalism, and the winding back of social infrastructure and redistribution, is causing the USA's decline.

In our example of small community capitalism above, people pretty much get out what they put in. The market limits how much they can take as profit. A "steady state economy, without growth, is possible.
You are buying yourself a job, if you like.

In a truly free market, an impossibility of course, where there is perfect information and competition, there cannot, of course, be any profit. "Free" marketeers/"free traders", don't want a "free market", they simply want one distorted in their favour.
Any business knows, that to make a profit you have to distort the market in some way. Convince people you are better than your competitors, get Government to legislate in your favour, or give you subsidies or public goods, or use monopoly or oligopoly power, to eliminate competition and keep wages low. Your profit is always someone else's loss.

Capitalism requires "growth" to function?
The motivation behind capitalists' is profit. Getting out more than you put in. Why start a business and take that risk, if you are going to make the same amount as you would as an employee.
However most people do make less than they put in, so that others can profit.
Many functioning businesses don't make a real profit. Including most of our essential small businesses. They make enough.  Small builders make a good living. But you could hardly say they take out more than they put in. The degree of competition precludes that. Building material suppliers, however, make huge profits in New Zealand, because they are a duopoly. Big box stores, and banks, are extremely effective, in removing wealth from communities.

In a finite world, the exponential growth required to make increasing  profits, and pay interest, is not possible.

Capitalism is cannibalising, the human and natural environment, it needs to survive.

The concentration of wealth and power insufficiently regulated capitalism, and excessive profit taking, has caused, now works against the survival of human civilisation. With the wealthy opposing any attempts to limit the damage.

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