Can Free-Market Capitalism Sustain Itself?

Note: Although, as some of you may be aware, I hold broadly, albeit vaguely, leftists views, this topic is not intended to insult capitalist, or to boast some supposed "fatal flaw" in their beliefs. Rather, it is a genuine question with the intent of gaining a better understanding of capitalist theory, and I ask it to be treated as such.

Free-Market Capitalism, in it's purest form, requires, if I understand it properly, a complete withdrawal of government activity from the economic and personal lives of the populace. The idea is that a society will develop a balance, the mutual self-interest of the populace encouraging cooperation while maintaining what could be called "healthy rivalries" which prevent stagnation.
Fair enough. However, it seems to me that a system which relies on the self-interest of the participants may have problems sustaining itself. Obviously, the majority of the time, the self-interest of the participants will encourage them to sustain the free-market economy, but it seems more than likely that circumstances will arise in which the individual will benefit by rejecting the free-market, the most obvious example being a company building a monopoly in a particular area. This, it seems, could lead to the collapse of a free market system.

Put simply, capitalism, being a system which relies on a balance of self-interests, appears to have no method of sustaining itself. Is this an over-simplification? How do proponents of free-market capitalism reconcile this? As I said, this is a serious question, and any reasonable answers will be appreciated.

Serious answer: No.

EDIT: And I can guarantee there will be some capitalist poster boys claiming it can, will and have done so.

EDIT 2: My prediction was right.

In some ways capitalism resembles Feudalism: a few powerful people with armies of workers. And just like in feudalism, the workers will eventually realize they outnumber the powerful people.

Fair enough. However, it seems to me that a system which relies on the self-interest of the participants may have problems sustaining itself. Obviously, the majority of the time, the self-interest of the participants will encourage them to sustain the free-market economy, but it seems more than likely that circumstances will arise in which the individual will benefit by rejecting the free-market, the most obvious example being a company building a monopoly in a particular area. This, it seems, could lead to the collapse of a free market system.

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The reasons you describe why it would collapse are strange , indeed. A system that does not rely of the self interest of it's powerful participants , could collapse immediately if it is even possible to conseive that such system ever existed.

Now a system where there is an Elite , but the population is also able to yield and seize power individually is better than systems where only the Elite is powerful.

Put simply, capitalism, being a system which relies on a balance of self-interests, appears to have no method of sustaining itself. Is this an over-simplification? How do proponents of free-market capitalism reconcile this? As I said, this is a serious question, and any reasonable answers will be appreciated.

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Circumstances may rise is not really much of a point.

Self evidently not, to anyone aware of either today or history.

Loki130 said:

In some ways capitalism resembles Feudalism: a few powerful people with armies of workers. And just like in feudalism, the workers will eventually realize they outnumber the powerful people.

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You are confusing Capitalism with Corporatism. Corporatism is a form of fascism where corporations are supported by the government through favorable tax laws, bailouts, and fresh money shipments which is what we have in the USA as of late. Capitalism is a system where the government doesn't interfere in the workings of the economy, meaning the most profitable (as opposed to the most powerful) firms succeed. In a capitalist system, everyone benefits because the standard of living is rising on a continuous basis since money stays at the same value, or increases in value, since the government doesn't print money, as we have in the USA. Without government printing money and sending it to wealthy bankers, thereby attributing to a rise in prices before the rise in wages, you would have a system where any increase pay would mean a higher standard of living, not just being able to keep up. Average things are cheaper to produce in a capitalist society as well, because the government doesn't bolster one (or more) companies over others, making it really cheap to produce for some (Companies who produce in China) and really expensive for others (American production companies). A capitalist society would remedy this by making it equally expensive (through fairer taxation laws) to produce in both the USA and China.

No. Markets sometimes fail, it's a simple fact of the system.

Traitorfish said:

Note: Although, as some of you may be aware, I hold broadly, albeit vaguely, leftists views, this topic is not intended to insult capitalist, or to boast some supposed "fatal flaw" in their beliefs. Rather, it is a genuine question with the intent of gaining a better understanding of capitalist theory, and I ask it to be treated as such.

Free-Market Capitalism, in it's purest form, requires, if I understand it properly, a complete withdrawal of government activity from the economic and personal lives of the populace. The idea is that a society will develop a balance, the mutual self-interest of the populace encouraging cooperation while maintaining what could be called "healthy rivalries" which prevent stagnation.
Fair enough. However, it seems to me that a system which relies on the self-interest of the participants may have problems sustaining itself. Obviously, the majority of the time, the self-interest of the participants will encourage them to sustain the free-market economy, but it seems more than likely that circumstances will arise in which the individual will benefit by rejecting the free-market, the most obvious example being a company building a monopoly in a particular area. This, it seems, could lead to the collapse of a free market system.

Put simply, capitalism, being a system which relies on a balance of self-interests, appears to have no method of sustaining itself. Is this an over-simplification? How do proponents of free-market capitalism reconcile this? As I said, this is a serious question, and any reasonable answers will be appreciated.

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You speak of a monopoly. Monopolies are very expensive to produce and even more expensive to maintain without government intervention. Standard Oil, the only real monopoly in US History made without government intervention, was produced at the expense of having net losses until competition came around and booted out of the business entirely. The other monopoly is the USPS and first-class mail, and the laws of economics make monopolies in mail service with government support the only hope of making it affordable for the average person. The organization that is required for first class mail is too expensive to be profitable for a private corporation.

Humans are corrupt. So no.

To put things another way, the current American system is like a fire: it goes fine while the fuel keeps rolling in, but once that input slows down, the fire burns its self out.

Can Free-Market Capitalism Sustain Itself?

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Until pigs fly, it should be ok.




























Oh sheet!

Monopolies are very expensive to produce and even more expensive to maintain without government intervention.

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Of course it isn't. Cartelization and monopolies would be the inevitable result of laissez faire. competition is very unprofitable.

Princeps said:

Of course it isn't. Cartelization and monopolies would be the inevitable result of laissez faire. competition is very unprofitable.

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Read a book on economics (especially Austrian economics, Keynes is a statist) and get back to me. You will find out that if you want to make a profit, there is always someone out there who is able to beat you in price or quality. Competition is unprofitable in the short run, but impossible to live without, you just have to deal with it if you want to be in business. In order to make a true monopoly, you must lower your prices to below the ability to make a profit. If you make a cartel, either some companies betray the cartel, or new firms open up and do not participate.

Define your terms better. "Free market" does not mean "no government intervention". "Liaises Faire" means no government involvement at all. Under "Liaises Faire", markets are not free; they are coercive. People are compelled to do what they are told or suffer the consequences. Very few people are permitted freedom of choice. "Liaises Faire" will push a people who can vote to get rid of it. And will push a people who can't vote to get rid of it to revolution.

"Free market" requires some government regulation to equalize the power relationship. It is the most stable and highest wealth producing form of economic organization and there's no reason it can't last forever. It offers more freedom to more people than any other type of organization in the world. Free markets has delivered the Jeffersonian ideal of the yeoman farmer to the cities. So now the working class, and craftsmen and tradespeople can live the yeoman life.

People, given the right to choose, would chose communism over liaises faire, but they would not choose communism over free markets.

Cutlass said:

Define your terms better. "Free market" does not mean "no government intervention". "Liaises Faire" means no government involvement at all. Under "Liaises Faire", markets are not free; they are coercive. People are compelled to do what they are told or suffer the consequences. Very few people are permitted freedom of choice. "Liaises Faire" will push a people who can vote to get rid of it. And will push a people who can't vote to get rid of it to revolution.

"Free market" requires some government regulation to equalize the power relationship. It is the most stable and highest wealth producing form of economic organization and there's no reason it can't last forever. It offers more freedom to more people than any other type of organization in the world. Free markets has delivered the Jeffersonian ideal of the yeoman farmer to the cities. So now the working class, and craftsmen and tradespeople can live the yeoman life.

People, given the right to choose, would chose communism over liaises faire, but they would not choose communism over free markets.

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How is Laissez-Faire coercive?

Oh, and the reason we have our current situation in the housing market in the USA is because the Federal Reserve (a quasi-government agency) made new money really cheap to get, and almost all that money went straight into real estate loans.

nate895 said:

Read a book on economics (especially Austrian economics, Keynes is a statist) and get back to me.

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I have. Austrian school is a crank fringe group that houses some of the most obscure, absurd and sinister "economists" like Hoppe, people who are just so stupid that they actually manage to write entire books, wherein every argument, and each step in them, is a logical fallacy.

You will find out that if you want to make a profit, there is always someone out there who is able to beat you in price or quality.

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Not in every business. I've been to business collage, I know the ways large companies can remove their competitors by manipulating prices in the short term, for example.

Also, not everyone can start assembling cars in their carage and start competing with GM.

Competition is unprofitable in the short run, but impossible to live without, you just have to deal with it if you want to be in business.

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Or you may, as Adam Smith noted, meet with people of your trade and conspire against the public to raise prices.

In order to make a true monopoly, you must lower your prices to below the ability to make a profit.

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You can do that in the short term, remove competition and then return to hiked up prices. Or you can ally with the others to a general agreement on price level (which might be, actually, a very profitable and easy way out for the competing business!)

If you make a cartel, either some companies betray the cartel

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Again, long term competition is not profitable. Business has no incentive to secede from the cartel.

How is Laissez-Faire coercive?

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A violently imposed system of material control that privileges the few and is unalterable by the majority, is an inherently tyrannical system. I'm speaking about the "natural property rights" that the austrian loonytarians advocate. In Laissez-faire, the property regime would be outside of democratic oversight and regulation.

nate895 said:

Oh, and the reason we have our current situation in the housing market in the USA is because the Federal Reserve (a quasi-government agency) made new money really cheap to get, and almost all that money went straight into real estate loans.

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What?!

EDIT: Sorry for the smiley, I just almost fell out of my chair laughing (literally).

C~G said:

What?!

EDIT: Sorry for the smiley, I just almost fell out of my chair laughing (literally).

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Laugh all you want, it is what happened.

nate895 said:

How is Laissez-Faire coercive?

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Because wealth is power, and there is no check on that power. Under Laissez-Faire, if the boss says to bring in your wife so the boss can use her, or you'll never work again, you deliver your wife or starve to death.

Oh, and the reason we have our current situation in the housing market in the USA is because the Federal Reserve (a quasi-government agency) made new money really cheap to get, and almost all that money went straight into real estate loans.

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Not really, no. The market provided all the money. Not the government. The housing crisis happened because the government did not act to regulate. It's a failure of omission not commission.

nate895 said:

Laugh all you want, it is what happened.

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No, it isn't.

It is exactly the contrary where the "capitalism-gone-wrong-without-rules"-scenario happened.