Re: What's the alternative to capitalism? : Wed Jan 08, 2014 5:56 pm  

Mintball wrote:

That's sophistry.

This country has the Red Cross handing out food parcels, Save the Children spending money here and foodbanks growing at a massive rate.

A thousand years ago, one might have walked outside and got a few sticks to lay a fire to keep warm and to cook. One might have gone hunting for food or picked fruits and nuts and mushrooms etc.

Try doing that these days – not least in the urban environments in which most people live (having been herded, in effect, into them after enclosure and deforestation, in order to work in industry for the benefit of a limited number of people).

I mentioned in one of the comments I copied over at the top of this thread that the likes of Richer Sounds and John Lewis can treat their workforce decently and still be hugely successful, profitable companies. It is, at base, a moral/ethical decision to decide to do otherwise, although (as has been discussed here before) being listed means that the City applies artificial pressures on businesses (constant growth at rates determined by the City to be acceptable) that put increased pressure on companies to 2stop treating employees as an investment and start seeing them simply as a cost to be cut.

If the wealth – no matter how great – is not shared around more equally than it ever was, and takes account of the cost of living, then it is meaningless to talk of whether the world is wealthier, as a whole, than it was a millennia ago.

I think you're being a little harsh on the world to suggest the argument is misleading or fallacious.

Did we not have charitable organisations in the past? I'm sure any lesser charitable capability over most of history was more due to less capacity to give than more requirement for charity.

Would you like to look for sticks for fire and shelter tonight? Or would you prefer to go into a warm home with central heating? Something not available to most of the country just a generation or two ago.

I haven't made reference to levels of capitalism, I'm just pointing out to Smokey that he's being overly pessimistic in his zero sum belief. I recall I started a thread some time back asking if there was a winner and a loser in a transaction. The majority view was that most transactions should be and are beneficial for both parties (the cliched win/win) otherwise they wouldn't happen.

FWIW I work for a major corporation, publicly owned. Despite being publicly owned and aggressively pursuing growth we seem well regarded as an ethical and responsible company by both our employees, clients and shareholders.

Re: What's the alternative to capitalism? : Wed Jan 08, 2014 11:26 pm  

The most obvious flaw in the current capitalist system is pay. Whoever has the ability to do so will generally line their own pockets at others' expense - whether that be senior executives, or in some cases unionised workforces where the power lies with workers.

The whole executive pay issue is a real bugbear for me, and I personally cannot see how anyone can defend the way the system works. Its a crock to talk of senior managers in established firms being paid so much because they return value to shareholders, because they still get paid when they go belly up - even walking away with massive payouyts for complete failure. In economic terms there is virtually no link between risk and return in executive pay.

I've mentioned before the idea of a multiple of salary system - nobody being able to earn more than "X" times the lowest paid full-time equivalent. That doesn't top someone from being able to earn a decent amount at the top, but ensures some degree of fariness to all.

I'd also remove the ability to pay anybody in anything other than wages. I've developed executive pay schemes in the past, and they are generally intended to align managers' interests with shareholders. The problem is that they are always one-way - managers take the upswings but won't countenance losing megabucks when the shareholders suffer, and they almost always morph into tax avoidance schemes rather than incentive schemes.

The whole process of setting executive pay is one of a members' club basically setting their mates pay and their mates doing the same for them. As I say, do away with the lot of it, introduce some very clear rules for the payment across the business as a whole and all of a sudden you'll find CEOs actually being interested in what cleaners earn.

But nobody should pretend that its just executives that do this. It is whoever has the power in bargaining. Sometimes unions do exactly the same.

A recent example of the unions using their power to effectively extort rates way above market is shown in the now soon-to-disappear car industry in Australia, where wage rates are double those in the US. Some of the other Enterprise Bargaining Arrangements were quite simply absurd - workers in the car industry were virtually unsackable, all union reps were allowed 10 days a year for union-related "training", something like one union rep for every 6/7 workers etc. Basically the unions had the power and got their noses in the trough.

We've seen similar boom-bust short-termism from unions in mining and related sectors, which are now feeling the crunch.

At both sides of the spectrum there really needs to be an understanding that eveyone can get paid more if a company is doing well, but not if they aren't.
Sadly it seems to be human nature for some people to solely focus on how much they can get at the expense of everyone else.

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 9:27 am  

Richie wrote:

So it's clearly not "zero sum" when we are wealthier in terms of not being killed by polio for one. If you don't measure wealth in terms of health, lifestyle, enjoyment, longevity, then what's the point of wealth?

We are wealthier in that respect, we are also wealthier in the respect that the black plague and leprosy aren’t here any more. We are less wealthy in the facts that we have less space, less time, less forestry, more things cost money which were previously free, there is less wildlife (a food source), no space for farming, housing is ridiculously more expensive lcoking in a high proportion of a persons wealth.

How do we absolutely value each of those things to discover whether or not we have more or less than we did?

Your sums assume that the values of the products and services are equal to all parties at all times.

My sum assumes the capitalist hypothesis that market efficiencies will value the product correctly.

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 9:41 am  

Richie wrote:

I think you're being a little harsh on the world to suggest the argument is misleading or fallacious.

Did we not have charitable organisations in the past? I'm sure any lesser charitable capability over most of history was more due to less capacity to give than more requirement for charity.

Would you like to look for sticks for fire and shelter tonight? Or would you prefer to go into a warm home with central heating? Something not available to most of the country just a generation or two ago.

I haven't made reference to levels of capitalism, I'm just pointing out to Smokey that he's being overly pessimistic in his zero sum belief. I recall I started a thread some time back asking if there was a winner and a loser in a transaction. The majority view was that most transactions should be and are beneficial for both parties (the cliched win/win) otherwise they wouldn't happen.

FWIW I work for a major corporation, publicly owned. Despite being publicly owned and aggressively pursuing growth we seem well regarded as an ethical and responsible company by both our employees, clients and shareholders.

I actually think you are closer perhaps to what I was saying. Which wasn’t that profit should never be made, but simply that profit shouldn’t be at the expense of one of the parties in the transaction. I could grow my own tomatoes, i can pay more and buy them from a shop. I accept being the ‘loser’ in the transaction when I buy tomatoes from a shop. But if the shop suddenly started charging £200 per tomato, or paying a penny a ton for them from the farmer. Yet the shop declared massive profits. I would have a problem with that. That was my point. That buying as cheap as you can, and selling as high as you can shouldn’t be your over-riding aim. The clichéd win-win should be. So if we all remembered that if we get something ‘cheap’, we are, for whatever reason, talking something from someone for less than its worth we might approach transactions a bit more reasonably and avoid the exploitation and avarice so common in big business.

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 10:10 am  

SmokeyTA wrote:

We are wealthier in that respect, we are also wealthier in the respect that the black plague and leprosy aren’t here any more. We are less wealthy in the facts that we have less space, less time, less forestry, more things cost money which were previously free, there is less wildlife (a food source), no space for farming, housing is ridiculously more expensive lcoking in a high proportion of a persons wealth.

How do we absolutely value each of those things to discover whether or not we have more or less than we did?

My sum assumes the capitalist hypothesis that market efficiencies will value the product correctly.

So significantly wealthier in many respects, glad we agree on some. On those where we don't, I would challenge your negativity towards the modern world. It wasn't that long ago when most factory and farm workers worked a six or a six and a half day week. Did they have more time? Not to mention we live for a longer time too.
You mention cost of housing, but we live in bigger houses than prior generations. Perhaps if we downsized the cost would be less, but we seem to prefer to pay for size.
On food....how often do you eat meat? Compare that to a generation or two ago and I'm sure you will find you are better off.

Your sum is just wrong then. It's a basic fact of economics that different people value products and services differently, and the same people value products and services differently at different times.

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 10:14 am  

SmokeyTA wrote:

I actually think you are closer perhaps to what I was saying. Which wasn’t that profit should never be made, but simply that profit shouldn’t be at the expense of one of the parties in the transaction. I could grow my own tomatoes, i can pay more and buy them from a shop. I accept being the ‘loser’ in the transaction when I buy tomatoes from a shop. But if the shop suddenly started charging £200 per tomato, or paying a penny a ton for them from the farmer. Yet the shop declared massive profits. I would have a problem with that. That was my point. That buying as cheap as you can, and selling as high as you can shouldn’t be your over-riding aim. The clichéd win-win should be. So if we all remembered that if we get something ‘cheap’, we are, for whatever reason, talking something from someone for less than its worth we might approach transactions a bit more reasonably and avoid the exploitation and avarice so common in big business.

There is very rarely a lose/win transaction. You haven't "lost" in the tomato transaction. You could produce your own tomatoes, but it would almost certainly cost you more (in time, money for seeds, space, housing, food and soil) than simply buying them from a shop. If the shop priced tomatoes at £200, you wouldn't buy them. If the shop offered the farmer 1p a ton, he wouldn't sell them to that shop.

Have you ever sold something for less that it was worth to you, or bought something for more than it was worth to you?

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 10:38 am  

Richie wrote:

There is very rarely a lose/win transaction. You haven't "lost" in the tomato transaction. You could produce your own tomatoes, but it would almost certainly cost you more (in time, money for seeds, space, housing, food and soil) than simply buying them from a shop. If the shop priced tomatoes at £200, you wouldn't buy them. If the shop offered the farmer 1p a ton, he wouldn't sell them to that shop.

Im not sure any of that is relevant, it was a hypothetical example. There are many things I would buy simply because it is easier to buy them. I know that the cost of the labour and raw materials and time effort and skill that goes in to that is far more than it would cost me to do so myself. I have no problem with this as long as this difference is reasonable. The free-market economic thinking that the market would set what is reasonable has been proven time and time again to be false, as time and time again large corporations, through things like exploiting their market position to shut out competitors, like using their market position to exploit their suppliers etc etc, create a market where someone is being exploited for their own profits.

Have you ever sold something for less that it was worth to you, or bought something for more than it was worth to you?

Yes. I need to heat and light my house. I don’t have a choice about that. The modern world and modern house doesn’t function without it. The cost of making and supplying me with electricity and gas throughout the energy chain, exploits that need and means I have to pay a far higher price than the cost of the service or what I would value it at.

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 11:22 am  

rumpelstiltskin wrote:

That's not how I read your original post, in which you postulated the theory that all large business was inherently amoral due to the need to maximise profit. I don't agree with you, and offered up a small business for comparison, and am still waiting to hear from you if think a small business, following the same business plan of maximising their profits, was also amoral...

All businesses have the potential to be moral/immoral depending on how they are run, there is nothing inherently or automatically moral or immoral in business unless steps are taken to make it so.
Richie mentions one company which has put morality into the way it conducts its business (with which I concur) but many others have not.
Hence we cannot assume that any one company, large or small, will conduct itself morally and we must assume a baseline of amoral ... which is why regulation is necessary and why constant re-examination of that regulation is also necessary.

rumpelstiltskin wrote:

And as there have been Rules and Regulations governing commerce from the year dot, and accepted, sometimes grudgingly by most as a fact of life, (apart from the criminal element),..

Quite so.
Do you accept that regulation is necessary?

rumpelstiltskin wrote:

I'm not sure that more of the same is really going to improve everyone's lot.

So, you don't think that, for example, the banks were under-regulated?
If so, we disagree.

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 12:44 pm  

SmokeyTA wrote:

Im not sure any of that is relevant, it was a hypothetical example. There are many things I would buy simply because it is easier to buy them. I know that the cost of the labour and raw materials and time effort and skill that goes in to that is far more than it would cost me to do so myself. I have no problem with this as long as this difference is reasonable. The free-market economic thinking that the market would set what is reasonable has been proven time and time again to be false, as time and time again large corporations, through things like exploiting their market position to shut out competitors, like using their market position to exploit their suppliers etc etc, create a market where someone is being exploited for their own profits.

Has it been proved false? What has been priced at a price point it doesn't work to transact at that price point?

SmokeyTA wrote:

Yes. I need to heat and light my house. I don’t have a choice about that. The modern world and modern house doesn’t function without it. The cost of making and supplying me with electricity and gas throughout the energy chain, exploits that need and means I have to pay a far higher price than the cost of the service or what I would value it at.

So you are voluntarily paying a price you think is wrong? Why are you paying that? It's not like there aren't alternatives. Alternatives from different energy suppliers, different fuel types you can use in your house (gas, electric, coal, wood, your own solar panels etc) or ways you can use less energy whether that means insulating your home more or insulating yourself (I'm wearing a single layer sweathshirt but could choose to wear more for example)
Considering all those options you seem to have declined to use and instead continue to pay a price you say is higher that you value it at shows that it actually is a price you value it at or even lower.

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 12:51 pm  

There are some great posts on this thread.

In debates about capitalism I usually find myself at odds with the lefties because I am a defender of capitalism and the market system. However, I think supporters of capitalism have to be honest, and not disingenuous about the financial crisis, the root causes, and address it so it doesn't happen again - and not use it as an opportunity to further their own political position which I saw summed up wonderfully on Twitter once as: "the poor have too much and should have less; the rich don't have enough and should have more".

A lot of the voices of the right defend capitalism and criticise government and want the size of the state to be reduced: this is fair enough there is an ideological position here from the likes of Milton Friedman. The Friedman style intellectual argument, that was basically people act more responsibly when they face the consequences of their actions, so the state shouldn't provide a 'safety net' as it will be abused. However the modern day right wing position has moved to one where the state should provide a safety net, not for the poor but to cover the exposure to losses of those that want to get rich by excessive risk taking. They want a one-way bet: they profit from the rewards when risks come off, but the taxpayer absorbs the losses if risks go wrong.

Where the hypocrisy really gets my goat, is the financial services industry and its advocates like to bite the hand that feeds them: they strongly resist any attempt to regulate their practices, and say government should "get out of the way", they allow governments to spend huge sums bailing them out when they collapse, and then they point to government debt and change the argument to "the problem is one of government debt, so governments should reduce their expenditure on welfare and public services"....notably not that they should stop covering losses in the private sector!

The reason they can do this is because especially in the USA, the banking sector has a lot of patronage to give away to those in government or in the academic field of economics. If you are influential in either of those sectors, and hold a position thats friendly to the banking sector, you can expect to be rewarded with a very high paying position in the banking sector as your next career move.

The real cause behind the financial crisis was the creation of financial products that disguised the underlying risk of an asset: eg if you make multiple subprime loans (to families that are never going to be in a position to pay them back) but can package them together in a way that allows you to sell on those loans without the buyer of the loans knowing how high the risk of default was, then you can make money by making a loan to someone that can't pay back, then selling on the loan at a profit, and when the default comes in its the party you sold it on to that loses out. When lenders worked out how to do this it was easy money and they deliberately made loans to people on low or no incomes, in the knowledge they would likely default, but in the knowledge that it would be someone else's problem.

Now of course they like to turn the blame on the poor: "well people shouldn't have taken out the loans then if they can't afford to repay them". Yes thats true, but if you ask me to look after £1000 for you, and when you come to ask for it back I say actually I loaned it to a homeless person at 10% interest but I haven't seen him since, your anger is going to be focused on me not the homeless person....