Does capitalism require resets?

[Kaitzilla]

It doesn't require resets. It requires the policies that make resets unnecessary. That's what has been lost.

Mathematically, the cold hard fact is that in a debt-based monetary society requires the worst performing economic actors to declare bankruptcy every year to keep things in balance.

This is a result of interest or "ursury" as the ancients called it. Ursury was illegal because some societies considered it immoral to have a game of musical chairs where there was never enough chairs. Other leaders allowed it but had periodic debt "jubilees" when all debts were forgiven.

It is possible to have a year without bankruptcies if productivity increases quickly enough, but that rarely happens year after year.


If you start bailing out the weakest actors who should have gone bankrupt and reduced the debt back to normal levels, then debt starts building upon itself and multiplying. Eventually, all money becomes sucked up in interest payments to the owners of the debt.

The pressure to print money and inflate out of the problem is the modern day version of "jubilee" People in debt are saved and everyone else who isn't suffers.

Although in modern times that seems a simplistic explanation, it makes sense to me

 

[Kaitzilla]

Such as what worked between the 1940s and 1970s before being dismantled at the end of the 70s and early 80s. The worst aspects have to be controlled through regulations. Banks and finance in particular cannot be allowed to do what they want. Labor must have constantly rising real wages. The rate at which labor's real income goes up should be about the same as the rate at which the economy as a whole grows. And that's everyone, top to bottom.

I agree with this. The smartest and richest left to themselves will scam people out of their money in ways they couldn't even imagine is possible. (Mortage backed securities anyone?)

Regulation for Wall Street is essential.

They invariably complicate the income streams and profit/losses to the point where no one understands any of it and then profit off the information imbalance. Fraud should always be punished. Nowadays it is rarely punished, too profitable.

As to rising incomes for the worker class, that is a stickier issue. Income for the average American worker has been declining since the 70's, but has been covered up by debt spending. Need 2 incomes just to barely survive now, right?

 

[Cutlass]

1940s-1970s:
A clear divide between America and every other industrial power, technologically, and income per capita. A gold standard. Market conditions and technology levels that favored economies of scale at the expense to ease of entry. Closed or semi closed markets worldwide.

There's a lot we can do much better, but there's a lot that allowed how we did things that make it different to do today.

I don't really buy that it is structurally all that different. Certainly there have been changes. But many of the basics still apply. The main thing that has changed is the offshoring of so many semiskilled jobs. And that was mainly done for strategic reasons rather than economic ones. The gold standard certainly wasn't a contributor to our success in that era.

 

[EnglishEdward]

Capitalism requires resets because otherwise a hyperwealthy class and a
permanently impoverished class emerge and the economy degenerates into
a low performing quasi neo-feudalism.

When a new Roman emperor was appointed they often announced they
were cancelling all debts which functioned as a necessary reset.

There should have been a reset in 2007/2008 but the central banks and
the governments chickened out and adopted quantitative easing etc. instead

 

[Tahuti]

Mathematically, the cold hard fact is that in a debt-based monetary society requires the worst performing economic actors to declare bankruptcy every year to keep things in balance.

This is a result of interest or "ursury" as the ancients called it. Ursury was illegal because some societies considered it immoral to have a game of musical chairs where there was never enough chairs. Other leaders allowed it but had periodic debt "jubilees" when all debts were forgiven.

It is possible to have a year without bankruptcies if productivity increases quickly enough, but that rarely happens year after year.


If you start bailing out the weakest actors who should have gone bankrupt and reduced the debt back to normal levels, then debt starts building upon itself and multiplying. Eventually, all money becomes sucked up in interest payments to the owners of the debt.

The pressure to print money and inflate out of the problem is the modern day version of "jubilee" People in debt are saved and everyone else who isn't suffers.

Although in modern times that seems a simplistic explanation, it makes sense to me

We could try what Irving Fisher and Milton Friedman proposed and just monopolize all creation of legal tender within the government, ending fractional reserve banking.

 

[Hygro]

Wasn't oil considerably cheaper in that period as well? If that's the case, than that certainly has something to do with it as well.

Oh yeah, the price of oil had always been dropping by that point, that's pretty key.

I don't really buy that it is structurally all that different. Certainly there have been changes. But many of the basics still apply. The main thing that has changed is the offshoring of so many semiskilled jobs. And that was mainly done for strategic reasons rather than economic ones. The gold standard certainly wasn't a contributor to our success in that era.

It was just another example of structural difference. Many of the basics of course do still apply but if we are talking basics, basically things still are the same.

It doesn't mean the gist of your premise is wrong, but I don't think we can remotely "go back" to old policies. We can however go forward to ones informed by the past.

 

[ace99]

I think you can make a reasonable argument that there are some countries and societies in the world where the capitalist system has exhausted it's utility in producing material wealth.

 

[Traitorfish]

It requires regulation.

Without regulation, capitalism defeats itself as 1 company dominates market share, making it impossiable for others to compete. As capitalism is supposed to be competetion, this means it's no longer actually capitalism. Essentially if you let capitalism continue unregulated it stops being capitalism because 1 company has become a Monopoly.

"Supposed" by who? Capitalism isn't a tool, it's a form of social organisation; to the extent that it has any function, it's simply to perpetuate itself, and monopoly is as able to do that as much as a competitive market is.

 

[Souron]

I don't think capitalism needs resets, just good regulation and taxation.

 

[innonimatu]

we need capitalism for growth

1) what is growth?

2) once you define it, are you sure that both it is desirable and we need capitalism for it?

We could try what Irving Fisher and Milton Friedman proposed and just monopolize all creation of legal tender within the government, ending fractional reserve banking.

Simple monetary manipulation cannot solve the problem of gradual concentration of wealth. Because even ownership of other assets gets concentrated too. All desirable property gets concentrated. The fix must be through constant income control/redistribution; or through changes in the concepts upon which property is built. But the only recent change has been the invention of "intellectual (imaginary) property", another set of privileges designed to further concentrate power and income...

 

[NedimNapoleon]

Is this system in dire need of periodic resets? Is it bound to spiral out of control? Am I a dirty communist?

You are a dirty atheist communist who wants to contaminate my precious bodily fluids with fluoridation

 

[GinandTonic]

Capitalism requires resets because otherwise a hyperwealthy class and a
permanently impoverished class emerge and the economy degenerates into
a low performing quasi neo-feudalism.

When a new Roman emperor was appointed they often announced they
were cancelling all debts which functioned as a necessary reset.

There should have been a reset in 2007/2008 but the central banks and
the governments chickened out and adopted quantitative easing etc. instead

Basically this. Heavy death duties somewhat mitigate the accumulation of wealth into a neo-feudal structure, but people game the system and even 50% over 325k is a pittance compared to how much access to capital and the accumulation of capital will amount to over a lifetime.

 

[GhostWriter16]

'Free' market is a bit of a misnomer, considering how many millions the corporations have to pay the politicians to keep the market rigged in their favour.

A true free market wouldn't be rigged.

 

[Traitorfish]

Why not? It's "free market", not "fair market".

 

[bathsheba666]

A true free market wouldn't be rigged.

I will take that observation as being both religious and philosophical, but also of zero practical consequence.

 

[GhostWriter16]

Why not? It's "free market", not "fair market".

We need to define "Free", "Fair" and "Rigged."

I say that because fairly recently my economics teacher was trying to argue that unions can't exist in a free market because they distort the market, and I contradicted him by saying that therefore businesses also can't exist in a free market

I need to know what you mean by your terms before we proceed. Here's how I'm defining:

"Free", Government enforces property rights and does little else, or at least, little else related to the economy. They don't help the rich, they don't help the poor, they don't bail out failed companies or provide unemployment, they simply allow the market to operate on its own.

"Fair", on the other hand, is a meaningless term to me, since its undefinable. I would consider "Free" and "Fair" to be equivalent since there is no better definition, in my view, of fairness than what the market itself provides. Communism perhaps has an equally valid claim on "Fairness" but it wouldn't be a market in that case. I think, however, that the typical social democratic definition of "Fairness" for things like "Fair wages" and whatnot is untenable because once government starts defining what is fair arbitrarily, that logically leads to total equality, which is anti-capitalsitic. In other words, if government mandates that a fair wage is at least $10 an hour, why? Why not 20? Why not exactly that of the CEO? Why isn't 10 dollars too high of a minimum? Unless a social democrat can explain to me WHY their particular redistributive scheme, and no more or less, makes things "Fair", I would argue that intervention to make things "Fair" (Undefined term that that is) is simply pointless.

To me, "Fair" is what the free market provides, its as simple as that.

"Rigged" is when special rules are used by government and big companies to keep smaller companies out. In other words, when government specifically prevents competetors from entering the market, or other such cases where government specifically favors business.

 

[Traitorfish]

"Free", Government enforces property rights and does little else, or at least, little else related to the economy.
...
They don't help the rich[.]

These are two contradictory claims.

 

[Cutlass]

A true free market wouldn't be rigged.

A true "free market" would be as centrally planned as any commissar could dream of.

 

[Goodfella]

"Free", Government enforces property rights and does little else, or at least, little else related to the economy.

Do you know anything of market failures?

 

[Hygro]

We need to define "Free", "Fair" and "Rigged."

I say that because fairly recently my economics teacher was trying to argue that unions can't exist in a free market because they distort the market, and I contradicted him by saying that therefore businesses also can't exist in a free market

I need to know what you mean by your terms before we proceed. Here's how I'm defining:

"Free", Government enforces property rights and does little else, or at least, little else related to the economy. They don't help the rich, they don't help the poor, they don't bail out failed companies or provide unemployment, they simply allow the market to operate on its own.


To me, "Fair" is what the free market provides, its as simple as that.

That's a might-makes-right argument that is entirely meaningless. What is "fair" is "what happens" which means that if I get everyone I know to spit on you where ever you go, that's fair because I convinced them. Or that I could go around and kick little kids with impunity, but because I was unrestrained in the choice to do so, that would be "fair".

The world is finite. Everything we do imposes on someone else. We are social animals. Everything we do impacts someone else. Any time we pick a winner, we impact everyone. Anytime we stay "neutral", we are decidedly choosing the upcoming winner to win. Action and inaction is the same--they both lead to results and there's nothing inherently better about results that come from allowing the bigger guy to always win every fight.

Terms like "fair" have to be governed by real-world morality, not by some circular logic based on anti-enlightenment ideals. In our case, base level human morality and your preferred version of a "free" market are at odds until the subject is sufficiently brainwashed into believe they are congruent. Here's a reasonable starting point: everyone has a right to live with dignity and well-being alongside others in community. Systems that trade those values for something else are probably bad systems. Using healthy markets as a pillar for society serves this end a lot better than subjecting all of society to markets defined by dollar amounts that buyers will pay. The market does not care if you live or die, if you are healthy or sick, happy or sad, cherished or abused. Only people can do that. This is why we set up systems to work for us, rather than working for the system.

Also you were correct to correct your economics teacher. It is worth noting that unions are a quasi economic, more-so political unit whereas a business is far more in the realm of economy than the political. So they aren't best treated as two sides of the same coin. But yes, businesses are market "distortions" as much as unions are.