Republicans & Conservatives: Archives

I agree. However, the blemishes of this system land solely on the lack of ethics in today’s market. I’m not saying that “greed” is a bad thing necessarily, but the government must intercede on the behalf of the consumer sometimes. The problem with the democratic (the party not the idea) viewpoint is that government is responsible to compensate me for failing. This is what drives the economy in the negative because there is too much government involvement.

One day, I would like to see an ethics class taught to high school kids. That might help alleviate some of the corruption later on.

Interesting article. Indeed, most people want an established framework (rule of law), that they have control over (democracy), that protects their right to do what they want (freedom). To most people, free markets (the right to spend your money where you want to) is a given — until they consider what that means.

You see, the biggest strength of free markets (“a thousand different solutions are working at any one time”) is also their biggest weakness. Of those thousand solutions, most will fail. That’s not a big problem when you’re selling computers or pencil sharpeners, but when you’re selling, for example, a child’s education, most people aren’t willing to accept that high of a level of failure. It’s simple investment logic — how much are you willing to risk?

Capitalism is what keeps an economy stable. The excange of goods is what keeps a society flowing. For example. One of the major reasons of the Great Depression was the excess of goods with no buyers.

The companies had this great surplus of goods, but they had no buyers for them. Therefore, they had to slash prices, operating at a loss, and some of the businesses went bankrupt.

After that the employees of that company also started speding less, forcing other companies to do the same that the previous one did.

This chain reaction started a sudden decerase in the stock values on Wall Street. The major flaw there was that most people bough margin stocks. After they couldn’t repay the stocks they were essentially bankrupt, puting purchasing at a standstill.

This endless negative chain started the great depression and the fall of the US. It was WW2 that got the goverment re employing the population and got the wheels of captitalsim turning.

In communism, the goverment owns everything and everyone shares everything equally. Therfore there is no trading of goods or purchasing of new ones, and since the goverment is in essence a dictatorship with a greedy dictator, you’ve got a failed economy.

Only capitalism can truly recover with its own methodology.

Rob

It depends on what you mean by fail. When I was rereading my own post, I realized that I had chosen my words wrong. Let me clarify (correct) because I meant what I said, but what I said wasn’t what I meant.

Failure is not always catastrophic or even unwanted. How many people have failed at a job only to find one they liked better. It is less about failure than reallocation of resources and talent. The free market allows and sometimes compels that we change our plans and allocations of resources. Sometimes we are happier, sometimes not, but it often results in a better fit of skills.

Christopher

I think you are giving too much credit to communism. It doesn’t require a greedy dictator or any other human imperfection to fail. Communism fails because it has a very bad system of market communications built right into the ideology. It is impossible to know the price (or relative value) of anything without reference to its scarcity.

In a market economy, something is as valuable as it is to whomever will buy it. Communism has a complicated system of the labor theory of value (based on how much work went into it). This sometimes functions more or less like a market price, but only rarely. Even if you could accurately measure the value of labor that goes into a product, the products value almost never is commensurate with the labor that went into it in any systematic fashion. Communists just never know what they are doing, even when they are intelligent, honest and diligent.

Jack,
Good article. “Free market democracies are not better at making decisions, but they are much better at changing their minds.” Well said!

“Rule of law contrasts with anarchy or rule of people. Rule of law provides a consistent framework and minimizes risk and uncertainty. Without that individuals dare not take risks or accumulate fortunes.”

This ‘rule of law’ catch-all should include the government role as regulator. Left to itself, a capitalist free market economy will result in oligopolies and monopolies. I suppose it could be called a ‘clockwork green.’ Using the rule of law, government can reset the clock, if you will, and ensure fair competition continues, and that new business can flourish.

In addition, rule of law includes a distinctly socialist flavor, in that government redistribution of income is necessary. This prevents the economic ‘clockwork green’ scenario from occuring in the sociological arena. Without some degree of income redistribution, class structure would ossify. The poor would live in misery, while inherited wealth would dominate. Inherited wealth would control the government, just as oligopolies and monopolies would, crushing the rule of law, freedom, and free markets.

Government, and only government, can act in this role of regulator.

The reason Capitalism, Communism and any other ‘ism fails is not because of Idealogy but because of Human Nature. Stock Brokers, Executives, Dictators and whatever cheat, steal and abuse because it is Human Nature to push the envelope. To get as much as you can for as little as possible. Why do athletes take steroids? Why do 8 yr. olds cheat tests? There is always a segment of the population who will say “Shooting to Kill is Wrong so I am just going to Cripple Him!!!”.

The Government is there to prevent these abuses. Whether its a Baseball Player with an oversized Head or a Ken Lay, its all the same. Or do you want Baseball Players to take Steriods?

Aldous,
I want Ken Lay to take steroids.

Wow, Jack. All I can say is, “Duh.” No one outside of Cuba or Berkeley is going to find this a revelation. ;)

AP

I am glad we are all free marketers now. I don’t know where all those calls for increased government ownership or regulations come from Cuba or Berkeley.

Aldous and Phx8

Government is part of the mix. It does not stand outside as an impartial arbiter. I don’t like concentration of too much power in the private sector or the public sector. The difference is that the private sector can’t defend its unjust power without the collusion of the public sector. It is the goal of every private monopolist to enlist government power in defending his position because he knows that is where the real power resides.

Proponents of increased government power overlook this. When they think of government, they have in mind some ideal of honesty and selflessness that doesn’t exit. Liberals should recall that if they put powerful tools in the hands of government, the person using them will be someone like George Bush about half the time.

Aldous, you are right about the defects of human nature. People in government suffer as much or more from the need to exercise power. Why do you trust them?

You mention Key Lay. Ken Lay was a political entrepreneur. He leveraged his political savvy much more than his business sense to build his company. The market and the law caught up with him after he wasted billions. Enron’s rise and fall spanned a decade. Think of government supported Amtrack that has been losing billions over the course of nearly forty years and is still dragging along. A private firm couldn’t get away with that.

Phx8 – private monopolies are much more vulnerable than you think. They are constantly begging for government protection and without it they would decline. Can you think of any monopoly in the whole history of the U.S. that endured more than twenty years without government protection?

The persistence of large corporations is an illusion. Of the original thirty firms on the Dow Jones index of the largest U.S. companies, only one – General Electric – remains. A list of the biggest and most feared corporation of the 1960s would include only some familiar names. Back in 1970 Schlitz was the world-beating beer. Other brands complained about its market dominance. A decade later it was gone. Now the younger people among you have never heard of the brand or know it only as a cheap brand in the back of the cooler. The market deals with monopolies quite well.

“Think of government supported Amtrack that has been losing billions over the course of nearly forty years and is still dragging along. A private firm couldn?t get away with that.”

Jack,

A short term alternative would be just as expensive, if not more. I am including lost revenues from the companies that employ those that use the trains. Without Amtrack how many hundreds of thousands of commuters would be stuck? How long would it take to undo the gridlock?

Jack,

BTW, I agree with the idea that Ethics should be a high school course, with the caveat that it be a solid, a passing grade required to graduate.

Jack,

This is so good, I could have wrote it!

Seriously. Good post.

I would add that the inherent virtue of a free market is not the success or failure of any decision per se, but the nearness of the information to the person responsible for making the decision. In other words, I get to decide what my talents are, and therefore what profession I want to persue. I get to decide how much to spend on a purchase. Capitalism is in essence, the democratization of wealth.

The alternatives are steps back into mercantilism and fuedalism under various modern names.

Rob,

That’s not a big problem when you’re selling computers or pencil sharpeners, but when you’re selling, for example, a child’s education, most people aren’t willing to accept that high of a level of failure. It’s simple investment logic — how much are you willing to risk?

I think you’re missing the point. To take your example, if there is only one provider of education services ‘because we can’t afford to fail’, aren’t all your eggs in one basket? If public schools fail to educate, where do you go? Simple investment logic does not say that you bet everything on red and hope for the best.

Public education is a perfect example of the government provision trap. Monopolies are inherently inefficient. Which brings up something I simply can’t understand. Why the left wants to bring down freely competing companies like Microsoft and Walmart because they are ‘monopolies’, yet demand government monopolies in education and health care.

At least you can live without an education. Food is something we can’t afford a high level of failure in either, but I hear very few demanding that the state get into the supermarket business.

phx8,

Rule of law means that we have simple laws which are well defined, clearly demarcated, and absolutely bounded, across which government does not and need not trespass. This would preclude the kind of ever flexible ‘living document’ theory of the constitution that doesn’t apply to economic rights.

Eric,

The public education system is FAR beyond a monopoly.
You can send your kids to a private school, however you still must pay for the public school without ever getting anything out of it.

Its like saying ; you may shop at walmart, but for every dollar you spend there you must give k-mart a dollar for NOTHING in return!

Rocky

I am not against private-public partnerships if they run on market-based criteria, although partnerships tend toward monopoly and government control. In my metro area we have in recent years ADDED commuter medium distance rail lines. These have enough passengers and make economic sense.

The corridor in the E. U.S. rail is probably viable because it actually has customers. In private hands it would make money. Amtrak loses money because it is poorly managed and government semi-management makes it impossible to do better. For example, some areas don’t have enough customers to justify a rail line, but try to close a station. Anyway, I am not in the Amtrak debate business.

The point is that after 40 years communities could adapt to the change in rail service. Where the service is crucial it will make economic sense to keep them. Where there are not enough customers, they should close. All this makes so much sense that only government bureaucrats could conceive of a situation where something that hardly anybody uses is crucial to those people who aren’t using it.

Ethics

I used to lecture on business ethics. I believe it is good to study, but it is not a panacea. In our bureaucratic world, we substitute ethics training for ethics and dishonest people learn to play by the rules without doing what is right. Ethics instructors also tend to want to make their courses relevant and nuanced.

Ethics should be simple. “Don’t lie, cheat or steal or tolerate those who do” is a good start. Unfortunately we are in the toleration business in our modern exuse society. Most perpetrators are also victims at least in their own minds.

Jack,

I was not advocating that Amtrack be kept as a government subsidy. I was merely remarking that if it went down, or wasn’t there, what a mess the east coast would be.

Eric,

As a former private school student, let me say that while I received a very good education, private school vouchers won’t be the panacea that they have been made out to be. Sure, those that want it will still receive a superior education, but as class sizes rise there will be diminishing returns, as the same problems we have in public schools arise.
Private primary and secondary schools shouldn’t be for profit, or, if they are the profit should be minimal. The children’s educational needs should come first.

Why the left wants to bring down freely competing companies like Microsoft and Walmart because they are ‘monopolies’, yet demand government monopolies in education and health care.

Personally, I have no interest in seeing “government monopolies” in education and healthcare. I’m all for private schools and hospitals competing alongside public ones. But it is in the best interest of society to provide a minimum standard of each (education and healthcare) to its citizens, even if they can’t afford it.

Private schools are more efficent than public schools, primarily because they’re allowed to cut out kids with behavior problems, kids with learning disabilities, kids with deficient moral standards, and other such “inefficiencies”. A “free market” education system would be great at teaching the middle and high ends, but would leave these “inefficiencies” — the people who need education the most — out to dry.

I would hate to see mentally handicapped children kicked out of school because their education wasn’t profitable.

Plus, no matter how efficient the free market is at lowering education costs, there will still be those who cannot afford it. And the last thing we need as a society is to LOWER the education of the poor.

Great post, Jack. The line about free markets being better at changing their minds is one I plan to quote for years.

It is a slap in the face to every person who went through public education and made something of themselves to start talking about public education as a monopoly to be broken. There is no monopoly. Parents who can afford private school often take the opportunity to do so. Those who can’t, have the security of knowing their kids have the chance at a good future.

This is America. America is not about the law of the jungle determining success, America is about talent and merit determining success, rather than birth, class, and income. Here, a person educated in public schools can become a billionaire the same as some private schooled old money scion. Public education merely brings out the talent in those who can’t afford to pay for their own education, so it doesn’t go to waste. Public schools optimize the market for talent, and thereby enrich the market system.

My strain of liberalism is one that believes that the market is an important part of a functional society, but not the only part. Law and public services must supplement the market, or else the market can eat away at its own supports.

Pure capitalism fails everywhere it has ever been tried. Pure socialism has never been put to the test, since it has always been tried in the context of a command economy. But, pure socialism would also fail in a comptetive global marketplace due to the disincentives for risk and entrepreneurial rewards.

That said, what has been most successful, whether it be in Hong Kong, Great Britian, France, Canada, or the U.S., is a combination of capitalism with government insuring capitalists goal of monopoly is never reached, and social programs that insure that the broadest possible cross section of a society’s members have consuming access to capitalist goods and services as well as insuring against insurrection and revolution by insuring no large minorities have cause due to poverty or discrimination.

Who is to say in this world of different mixes of capital-social democracies is best? Each has a different cultural, geographic, historical, and set of value differences which contribute to somewhat different mixes of the capital-social mix. The test is does it last, does it negate revolution and insurrection, and does it compete adequately in the global economy to insure a reasonable measure of existence for most of its citizens? By these measures, all capitalist-social-democracies are so far, very successful.

Stephen,

I agree that public schools are needed, I just can’t agree that someone should be forced to pay twice to send their kids to a private school.

If public schools were the standard of exellence that all others were to try to achieve, it would be different, they aren’t, they are pathitic,dismal, and failing.

Why make someone pay twice to send their kids to a better school ?

Please don’t give me the “class warfare” poop about only rich people sending their kids to private schools, I know many “joe lunch buckets” that send their kids to private schools to try to get them the best they can.

Jack,
Pure monopolies today are rare precisely because of government intervention. For example, the government broke up AT&T. It limits Microsoft, at least somewhat, from expanding its monopoly. Monopolies still exist in the US Postal Service and in professional sports. Finally, there are a number of cases where monopolies existed for more than 20 years, the most famous historical example being Standard Oil. Standard Oil enjoyed this status from 1875 to 1911, when the government intervened with a little trust-busting.

Oligopolies, however, are common. The entertainment industry, the communications industry, Visa & MasterCard, and so on. It is not the market, but government regulation and intervention, which prevents monopolies from being more common. Unfortunately, the current administration seems remarkably sympathetic to oligopolies.

Eric,
“Rule of law means that we have simple laws which are well defined, clearly demarcated, and absolutely bounded, across which government does not and need not trespass. This would preclude the kind of ever flexible ‘living document’ theory of the constitution that doesn’t apply to economic rights.”

It’s difficult to see a way to apply the constitution to today’s situation. Who, in the late 1700’s, could have imagined a need for the Sherman Antitrust Act?

Capitalism. Opponents of the free market invented that term. They needed to have a system they could oppose. Capitalism’s definition and connotations tends to reflect the left of center individuals who talk about it most. Capitalism looks back to Adam Smith, but not in any way similar to the way communism looks to Marx. Smith never used the word in reference to the system he described.

So I don’t think anyone seeks pure capitalism. I don’t use the word except in very specialized circumstances.

I prefer FREE ENTERPRISE, which allows people and firms to come to whatever solutions they want as long as they are not coercive, respect contracts and are subject to change when conditions warrant. Take away coercion, and you come up with some form of market. The free market features government, but its laws are limited and employ as little coercion as possible.

Monopoly

Microsoft looks strong today, but its dominance is only a decade old. The Postal Service is a monopoly only because the government defends it. That was true of ATT. As soon as the government ALLOWED competition, the monopoly declines. Sports leagues almost have to be monopolies. Who is going to play. The operative word is play. They are in the games business with artificial rules by nature.

The oligopolies you mention (entertainment, communications) are fiercely competitive. Leadership is constantly changing. Communications oligopolies such as they exist are also bolstered by government regulation.

Beagle said, “If public schools were the standard of exellence that all others were to try to achieve, it would be different, they aren’t, they are pathitic,dismal, and failing.”

This comment reflects ignorance. The majority of public schools in America are excellent schools performing as well as private schools were private schools required to take all students in the district.

You are trying to throw out the baby with the bath water. The idea of exempting those who send their children to private school from property taxes is ludicrous. Why? Because then you would have to exempt those who have no children in schools anywhere, the majority of Americans, from property taxes. And that would spell collapse of the public school system financially, leaving private education for those who can afford it and no education to those who can’t.

Why make someone pay twice to send their kids to a better school ?

Should people who drive on toll roads be exempt have to pay for other roads? Should people who own their own firearms have to pay for military and law enforcement?

Nobody pays per-child fees to go to public school. Instead, all taxpayers share the burden, regardless of the number of children they have. Why? Because educating other people’s children in your community benefits you. When your community is well-educated, better jobs come to it. Better jobs lead to higher salaries. Even if you don’t get that higher salary, your neighbors do, and that increases the amount of tax dollars coming into the community. Ultimately, that allows the community to either (a) lower your taxes or (b) provide you with other services — better roads, better police protection, better fire protection.

The biggest problem with public schools is that they are usually funded by local property taxes. That means that wealthier communities have better schools than poorer ones. Public schools in the suburbs aren’t usually the ones failing — the schools in the inner city are. If taxes paying for schools were collected on a state level (or even a county level), and reapportioned to schools on a per-student basis, much of this could be alleviated.

I’m talking about inner city kids with working class parents.

Some can’t afford to move, but they still want their kids to get an education.

In my state most of the school funding comes from sales taxes, and the inner city schools get a higher per-student amount than the suburban schools, they still are failing.

There are some good public schools if the parents can afford to live in those districts.

I don’t think its about how much funding a school gets, its more about kids being unable to learn if they are forced to go to school in a combat zone.

I don’t know if anyone here has ever attended a school where zip-guns and switchblades were the order of the day, but I have!

I swore I’d never send my child to schools like that.
I think we should give the parents a voucher and let the poor kids get out of that trap!

Beagle said: ” I swore I’d never send my child to schools like that.
I think we should give the parents a voucher and let the poor kids get out of that trap!”

But, Beagle, that still leaves a poor combat zone population, and any demographics person will tell you poor people have more kids than middle class and rich people do. Your solution is no solution at all.

David,

I understand what you’re saying, I just think that the poor kids in inner city schools should have a way to get out of that trap.

Not everyone in those areas would opt to send their kids somewhere else, you can’t force someone to learn, you can’t force some parents to care, but we could level the playing field so that poor people could afford to get their kids out of those types of schools if they wanted to.

Any voucher system should require that the school meets all state and federal standards, and accept any student that public schools have to accept now.

I agree that some public schools will likely fold for lack of funding/students, but if the kids are worried more about if they will be alive tommorrow, than they are about if they forgot their homework, shouldn’t they close anyway?

You are correct, I am “Ignorant”, it shows in my spelling and writeing form.

The fact that I recieved a “less than wonderfull” education in schools like I discribed might be the reason I care about inner city kids stuck in those schools.

I also think that if some of the minority students in inner city schools could afford to attend schools in the “burbs”, all of society would be better off in the long run.

I think it is pretty clear that free enterprise is a good idea.

Nowadays, even Russia and China (former hardcore communists countries) think free enterprise is a good idea.

In fact, just about everyone thinks free enterprise is a good idea except the extreme far left and that idiotic professor at the University of Colorado (Ward Churchill).

The far left complains that capitalism is bad because not everyone benefits. They also whine and complain about the fact that some people make much more money than others (class warfare).

However, the problem with communism is that everyone is poor. Class warfare isn’t an issue because nobody has any money. Everyone is equally poor. Nobody drives around in BMWs, nobody has fancy swimming pools in their backyard, and nobody lives in 2500 sq feet 4 bedroom colonials.

Silvercts05,

Your post morfed from Communism, to the “far left”, to BMW’S, what is your point?

You’ll never change anyones mind, on any issue, by telling any group they are stupid if they don’t agree with your view or position on that issue.
(I know you didn’t call anyone stupid), but many will read that between the lines.

I agree that everyone should have the opertunity to work towards getting a 2500 sq. home, a pool, and a “beemer”, if thats what they want, I don’t agree with chastizing those on the left side of the isle for having a different opinion of how to get there.

Just FYI.

State your views/position on an issue, Ask for input from all sides, then try to sort it out in your own mind.

I did say Ward Churchill is an idiot, but I didn’t call an entire group stupid.

Dinner is ready, and it smells very good so I am going to be very brief.

My point is simple.

Free enterprise is a good idea. People prosper in the US.

Communism is a bad idea. Nobody prospers. Everyone is equally poor.

Communism cannot sustain itself. The Soviet Union imploded.

Russia is now in the infant stages of becoming a free enterprise society. Although Putin is a bit scary at times…

China is now a free enterprise society (though not necessarily a democracy) and their economy is now booming.

North Korea can’t feed it’s own people. They haven’t figured it out yet.

That is my point of view.

Rocky,

Private primary and secondary schools shouldn’t be for profit, or, if they are the profit should be minimal. The children’s educational needs should come first.

I would take issue with this. Public education is essentially a for-profit enterprise. A very wealthy on at that.

Rob,

A “free market” education system would be great at teaching the middle and high ends, but would leave these “inefficiencies” — the people who need education the most — out to dry.

I would hate to see mentally handicapped children kicked out of school because their education wasn’t profitable.

Plus, no matter how efficient the free market is at lowering education costs, there will still be those who cannot afford it. And the last thing we need as a society is to LOWER the education of the poor.

What we have now is a one size fits all educational system that requires the same methods, the same costs, and the philosophy across the board.

What we’ve done is to say that everyone must have a Mercedes education. In practice, this means we pay for Mercedes educations but get Yugo’s. We need more diversity than that.

In a free market there are a variety of choices, and there are more opportunities for innovation. This is the whole point. Public education is currently allocating an immense amount of resources for the promise of a Mercedes for every child, yet there is a wide disparity in the education they actually receive. And it is precisely the poor who get the shaft in the system as it is. In a free market system, they would have more choice than they have now.

David,

Pure capitalism fails everywhere it has ever been tried. Pure socialism has never been put to the test, since it has always been tried in the context of a command economy. But, pure socialism would also fail in a comptetive global marketplace due to the disincentives for risk and entrepreneurial rewards.

First of all Dave, pure capitalism requires the rule of law in order to function. I think perhaps your socialist influenced definition of capitalism is actually more akin to anarchy than what free market capitalism really is.

phx8,

Pure monopolies today are rare precisely because of government intervention. For example, the government broke up AT&T.

Again, the reality is that the exact opposite is true. Government intervention almost always creates monopolies. I’d make an exception for geographic monopolies etc.

If I’m not mistaken, AT&T was a legal monopoly. A government created monopoly. ‘Evil capitalist monopolies’ have never existed without government collusion. Check it out and you will see.

DeBeers has a near monopoly status. Again, they collude with governments in order to make this happen.

The solution is not that we need to government to keep monopolies from forming, it’s that we need governments to recognize that it is not their job to help create them, and sanction them. A free market is one in which, even though there is a competitor like Microsoft with a large marketshare, that government ensures that arbitrary barriers are not erected by that competitor or by government itself.

Anyone heard of Mondragon in Spain?
This is an excellent example of a democrative multi-national corporation. This corporation competes in a free-market, but is much more democratic not just in the distribution of wealth, but also in its constitution and the rules defined by the founders to protect the employees from the greed of a few. Check it out! It gets very little press.

Eric, I have never seen you make such a glaring contradiction before. You must be slipping.

First you state: “First of all Dave, pure capitalism requires the rule of law in order to function.”

Then you immediately follow with : “Government intervention almost always creates monopolies.”

Since all government can do is pass laws, which is it Eric? Does pure capitalism require rule of laws passed by government, or is pure capitalism flawed at the outset because laws (the fruit of government) creates monopolies. Can’t have it both ways my friend.

Of course we all know from history that unrestrained capitalism leads to monopolies which hurt society and even free enterprise by stifling competetition. The only answer is government regulation that prevents monopolies from occuring. Of course, under the GOP and Bush, oligopolies (cousing to monopolies) seem to be getting free passes right and left. Guess the Republicans don’t really understand what capitalism is or how to manage it.

Oh, yes, and while I am at it Eric, please, point me to any official definition of capitalism which states that rule of law in inherent in the definition. You can’t! You like so many extremists love to make up your own definitions to suit your arguments and sway the gullible who won’t bother to look it up.

David

Something as complicated as capitalism doesn’t have a general accepted definition. The simple one you would find in dictionaries doesn’t describe the system.

The word is charged ideologically and tends to be tainted by its use as a pejorative. Human practice doesn’t produce pure systems that academics so like to describe.

Those who say don’t know and those who know don’t say. The people writing about capitalism are rarely people who make money in the system or take part at all. They don’t have the time or inclination. Besides many practitioners don’t actually understand what they are doing in intellectual terms. They just know how to do it. Markets look a lot more rational from the banks of the Charles than the banks of the Hudson, and government intervention looks a lot less harmful from the high ivory towers.

jack, that is pure BS. For all your words, all you said is no one should discuss capitalism because it doesn’t have a definition, and anyone who attempts to define it is not trustworthy.

PURE Pure pure BS.

Capitalism DOES NOT by any widely recognized definition include rule of law in its definition as Eric claims. Knock of the spin designed to deflect critique, especially rational critique that says a capitalists wet dream is a monopoly.

What other goal or outcome could their be for all that competitiion in the free market arena, but the ultimate gold belt of capitalism, monopoly: which means no competition, no pressures on prices, no impediments to charging the maximum profit for the least cost product or service which the consumer will tolerate before reducing demand below the equalibrium of max. demand at maximum profit?

Silvercts05 -

Actually, members of the Kremlin and the upper echelons of the Communist party did rather well for themselves. Not everyone is poor under communism - just the people without power, which is almost everyone. And yes, I know that even those people were rarely rich by our standards, so your point is still valid.

Stephen -

capitalism
n : an economic system based on private ownership of capital
syn: capitalist economy ant: socialism
“WordNet (r) 2.0”

At least, so my handy dictionary says. I agree, at least partially, with Jack that captialism is hard to completely define, but then again, so are most things. I doubt you’d consider this definition for socialism complete, either:

Socialism So”cial*ism, n. Cf. F. socialisme.
A theory or system of social reform which contemplates a complete reconstruction of society, with a more just and equitable distribution of property and labor.
“Webster’s Revised Unabridged Dictionary (1913)”

To say that the goal of a capitalist is a monopoly is quite accurate, even though monopolies harm people. However, I wish to point out that it is not capitalism that gives a person this desire - it is greed and lust for power. Money is power, and all humans desire power, and no one has quite as much as they want of it.

Forgive me for pointing out the obvious: I do it for this reason. Much rhetoric goes into proclaiming the dangers of capitalism and the corruption of the rich that would be better employed towards the dangers of power and the universal corruption of mankind. I find that focus more useful because then it removes the delusion that a non-capitalist society will not have the same problems. In my post just above, I noted that even in socialistic, communist countries, the powerful enriched themselves at the expense of the powerless - to some degree even more so.

Capitalism harnesses an individual’s desire for profit and uses it to produce goods for society. However, the individual’s desire for profit leads to monopolies, which is not in the best interest of society. Some would hold that capitalism is self-correcting - monopolies will be replaced if they are inefficient. Others point out that monopolists can use their considerable power to make it very difficult to start any competition against them.

Since I’m rather lazy and since this is a forum with some incredibly knowledgeable people, I’ll just ask someone to summarize for me how government prevents monopolies and how it defines monopolies. I have no problem, in the abstract, with the government ensuring that a private corporation does not bend the rules to destroy its competition or corner the market; it is (to me) a reasonable function of government, since it preserves the freedom of the market. I do not, however, believe that the government should destroy a monopoly just because it is a monopoly. If the monopoly begins to go bad (as it always will) and the fairness of the market is ensured, a competitor will step up and contest the monopoly.

Let me paint a couple of scenarios - Let’s say competitors A, B, and C control a market, and they all agree to raise prices. This is clearly bad for the market, and something should be done about it. Supposedly, in a pure capitalist system with no government intervention, competitor D would enter the market and provide a lower price than competitors A, B, and C. It is more complicated than this - it is difficult to enter most markets, requiring a fairly serious investment, but I see no reason why it would not be done, if there was money to be made in doing it.

I suppose the trouble would come if A, B, and C collectively bribed D to stay out of the market. Could they do this ad infinitum and so preserve an unhealthy state of the market? I will assume that it is possible. Therefore, I conclude that pure capitalism is inefficient, and that government intervention is required to ensure that companies cannot collude in the way I just outlined.

Now, is there any problem anyone can see with my “proof” that capitalism will inevitably produce monopolies which will collude to either make it impossible to enter the market or will bribe or buy out their competitors?

Capitalism by the definition given above has no reference to monopoly. The definition is not complete because so many people redefine it for themselves. Marx described capitalism in great detail and got it wrong, but many people still implicitly use his definition.

I believe that most business people would like to have a monopoly. Other business people trying to have the same thing keep them in check. The free market doesn’t require everyone to be virtuous. That is its main advantage over the others.

To the hypothetical about bribing competitors, you could keep on doing this only as long as it was profitable to do that. The monopolist would have to pay an amount similar to the money the competitor would make if he entered. You might be able to pay off this guy, but what stops another guy from threatening to do the same thing?

It is also impossible for a monopolist to control all aspects of a business. You might control all the railroads, but you face competition from trucks. Unless you can get the government to regulate trucks, you can’t control the market completely.

Behind every successful business is a paradigm shift. When the established business thinks it has every thing controlled, somebody changes the rules. Remember in the 1980s when the Justice Department felt it had to protect Microsoft from monopolist IBM? Nobody ever managed to overcome IBMs predominant position in mainframe computing, but the paradigm shift made it irrelevant.

Jack, your naivete’ about how capitalism works is really showing here. You said: “I believe that most business people would like to have a monopoly. Other business people trying to have the same thing keep them in check.”

That is simply NOT how it works. The bigger companies make a bid for the smaller companies. The shareholders of the smaller company resist until the offer is sweet enough, then they sell. Voila! That is how monopolies are created. And NO! Competition by other companies only provide a temporary resistance factor to monopolization. Eventually, the biggest comes into a sweet spot economically, where their economy of scale, combined with growing market share, reaches critical mass, sometimes called a cash cow situation, which permits them to make the bid that causes competitor’s shareholders to cave and sell out to the monopoly bound biggie. We see this same dynamic occuring all the time in the formation of ever more and more oligopolies here in America as well as overseas.

In my own lifetime, I have seen several prospective monopolies come and go. The indestructible firms of the past are the losers of today. I have seen how you can make money by betting against the monopolist. I don’t know where the firms are that are buying up all the competition. Often those who are doing the buying are losing out. Think of when HP bought Compaq. It was a sign that both these juggernauts had run out of steam. Remember in 1990 when Microsoft broke with IBM and everybody expected the monopolist to crush the upstart (the monopolist, by the way was not Microsoft in those days). My personal favorite is the AOL-Time Warner. How well are they doing these days?

Most predictions of mega firms is ex-post-facto. Take a look at a Business Week or a Fortune from 20 years ago and see how many of the big guys are still big. The U.S. economy is fiercely competitive. I might be naive about these things, but this I know. If you bought into the big firms in “monopolist” positions thirty years ago and kept them, you would be poorer today. You would have GM, Sears and U.S. Steel, but you wouldn’t have Wal-Mart, Microsoft or Dell. I guess these monopolists weren’t so powerful.

You are in good tradition. John Kenneth Galbraith predicted the GM had become so powerful that it could control the car market forever. I think his book re came out in 1972. Firms always look powerful just before they start to decline.

I recall the cash cow concept from marketing. I also learned subsequently that those who try to live by just milking their cash cows end up losing the farm.

Jack, once again you completely leave out whole segments of the story. In your reply above you completely ignore the Anti-trust legislation that worked then, and continues to work today to insure monopolies do not occur.

Of course, that legislation is now becoming outdated by the rise of oligopolies, which take indirect communication from their small constituent members to act in unison effecting monopolistic behavior without running directly into anti-trust laws.

This phenomena is made even tougher to regulate by the complexity of internationalization of oligopolies. The greatest oligopoly on earth of course is OPEC. Current price of oil, about $54 a barrel, who would have guessed two years ago? I would, and did. This is not supply and demand driven. This is price fixing without direct communication which would raise anti-trust suits. But, we all go merrily along with it without question, a little pissed off, but we take that out on our bosses, subordinates, spouses or other drivers on the road, rather that addressing the real problem: internationalization of the oligopoly model.

Well, not all of us. The anti-globalization protest groups continue to make public demonstration each year, but who listens to protestors anymore? Just a bunch of kooks, right? That is what societies call anyone who sees dangerous trends before others and try to warn.

Yeah, I dislike OPEC too. It works contrary to U.S. interests in many cases. It is, by the way, completely government controlled. They fix the prices with direct consultations. They meet in Vienna to do just that and they don’t make a secret of it. In fact, they publicize their quotas and target prices. Unfortunately, OPEC is beyond the reach of our anti-trust laws. It is an alliance of foreign powers.

But the market affects even OPEC. They can push the prices now only because of increased demand.

I wish the anti-globalists would protest OPEC.

Jack said: But the market affects even OPEC. They can push the prices now only because of increased demand.

No. They can push the prices because they can. It has little to do with demand. It may have something to do with supply though. If the Saudi’s know there wells are to be depleted in the next 10 to 20 years, it makes perfect sense for them to set this new bottom for crude oil at $40 a barrel, to maximize their profit before the goose that laid the black slimy egg dies.