Does capitalism require resets?

[Terxpahseyton]

Free-market-capitalism is fairly straight-forward. The strong shall flourish and the weak perish. Relatively speaking.
So who are the strong? Many things can make you stronger. Education, but more essentially, approved and accepted qualification. Skills of various kinds. Networking.
But what has you really on the strong side is money. Money can get you anything. Most of all - more money.
But oh no who would have thought that - the gap between rich and poor is growing. S-h-o-c-k-i-n-g.
After all, the market is free, so it is fair, so it is just, so everyone can succeed or fail and that means social mobility and that means a just distribution of wealth.
O wait, this is all BS.

A growing gap between the rich and poor seems to be wired directly into what the free capitalistic market is - or not?
So what do we do about it? We can soften the trend, but we don't seem to be able to actually stop it. And while in relative terms the majority has less and the minority more, debt is pilling up and debt creating money demands to be served.

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

 

[Kozmos]

Considering they just keep shuffling debt and increasing the ceiling I'd say yes.

 

[Terxpahseyton]

Oh well you can just default on the debt. Public debt is probably the least convincing reason for a reset to tell you the truth.

 

[bathsheba666]

'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.

 

[Terxpahseyton]

Perhaps, but that has no bearing on the intrinsic inclination to make the strong stronger. If it was just about making strong personalities stronger - well I suppose that is really tricky to challenge and perhaps not even desirable. But money - oh money boy. It changes everything.

 

[gozpel]

Go bankrupt as poor and you're safe for 5 years, but will own very little.

Go bankrupt as a big banker, they might take his poolboy away and he still gets his 19mil a year, while you pay for it with fees.

Free market is only applied between markets without debt to each other, then you trade.

Buying oil from a small country cheaply, with further concessions is not free market. It's abuse.

 

[Terxpahseyton]

In practical terms, what you label "abuse" seems to be what the free market is - in contrast to a theoretic model where abuse is really a too fuzzy factor to be considered.

 

[ComradeDavo]

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. Not necessarily over everything, but certainally in whatever that company focused on.

Hence the need for regulation. Use laws and taxation to keep companies at reasonable levels, and all is well. Of course this is harder than it soudns as you must also get a good deal for the customer.

In terms of rich and poor, well I always favour a strong wealfare state, the rich paying a higher share of the taxes and companies paying high wages to all workers. Obviously some workers will be paid more than others, so sue different taxation levels. Not saying tax the rich to oblivion, but saying tax amounts which whilst still letting them have their rich lifestyles also enables good wealfare programmes aimed at helping the poor move up in the world and so forth. And of course great education, healthcare and policing for all.

 

[luiz]

Globally speaking, the "free market" is actually narrowing the gap between rich and poor. It's only within individual nations that it is getting bigger (for most nations anyway, especially the rich ones). And it's noteworthy that even the most "welfarist" of nations are experiencing a surge in inequality, so I suppose the recent trend has less to do with the free market and more to do with other factors.

 

[rugbyLEAGUEfan]

Considering that equality is not an intended result of capitalism, it's inability to provide it can hardly be considered one of it's failures.

 

[Kozmos]

Oh well you can just default on the debt. Public debt is probably the least convincing reason for a reset to tell you the truth.

This also concerns private debt because citizens always end up paying more taxes and are the ones who are supposed to spend to stimulate growth and are thus approved even more credit to spend. It seems mad to me, but I know extremely little of economics besides some general principles so ignore me.

 

[Cutlass]

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

 

[Terxpahseyton]

This also concerns private debt because citizens always end up paying more taxes and are the ones who are supposed to spend to stimulate growth and are thus approved even more credit to spend. It seems mad to me, but I know extremely little of economics besides some general principles so ignore me.

Knowing about economics is as much blinding you as it can help you to see. So don't feel bad. Don't let it hinder you, as long you keep an open mind*.

*A closed mind may easily tend to be even more blinding than economic education though.

Stuff we most likely all knew before reading this post - even without economic education.*

Okay.
So when did you want to actually address the op? I already recognized that the trend can be softened. And I say that ignoring your "all is well"-conclusion, jumping with seemingly light speed from abstract premises to practical absolutes.

*Distortion

Globally speaking, the "free market" is actually narrowing the gap between rich and poor. It's only within individual nations that it is getting bigger (for most nations anyway, especially the rich ones). And it's noteworthy that even the most "welfarist" of nations are experiencing a surge in inequality, so I suppose the recent trend has less to do with the free market and more to do with other factors.

"Welfarism" was never designed to actually stop ongoing forces of inequality. And it might very well not be able to in any reasonable way under current conditions.

That
is the the whole point.

Considering that equality is not an intended result of capitalism, it's inability to provide it can hardly be considered one of it's failures.

That is kind of hilarious. What in your mind IS the purpose of capitalism? You know, me being me and all that naivety and stuff, I always thought it was a silly concepts like the common good. Ha! Silly me

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

Such as?

 

[rugbyLEAGUEfan]

That is kind of hilarious. What in your mind IS the purpose of capitalism? You know, me being me and all that naivety and stuff, I always thought it was a silly concepts like the common good. Ha! Silly me

Jeez man don't get so worked up. It would appear that you have firstly assumed my post to be a defense of capitalism, secondly a criticism of equality and by implication, a lack of appreciation for the common good, and thirdly suggested you are naive. None of the above can be read into what I said.

I was merely pointing out that in terms of what outcomes the various economic systems profess to offer, equality would not be one of the defining tennents of capitalism. Capitalism portends instead to offer the most efficient allocation of resources allowing the total wealth to increase better than other systems.

Of course many might reasonably argue that it fails miserably at this.

But since, and I'm just really repeating my first post, equality is not what capitalism even pretends to offer, to criticize it for not providing it seems strange. Instead, an argument against capitalism centered around it's major failing being no attempt to address inequality seems far more reasonable.

 

[luiz]

"Welfarism" was never designed to actually stop ongoing forces of inequality. And it might very well not be able to in any reasonable way under current conditions.

That
is the the whole point.

Well, lets say for the sake of the argument that under a certain arrangement everybody has their basic necessities met; that there is reasonable social mobility (note that social mobility does not prevent inequality) and that everyone get richer over time. And yet, at least during some periods, the rich get richer faster than the poor, so inequality increases. Do you see a big problem? I don't.

As a side note, the forces that drove up inequality in most of the world since the 80's won't keep increasing inequality for ever. As more and more people have college education, the wage differential between college educated people and non college educated people tends to fall. As less people take on labor-intensive jobs, the wages there tend to rise. In the rich countries, the poor were exposed to the competition of low wage immigrants while the middle and upper income people were pretty much sheltered by numerous barriers (an engineering or medicine diploma from a third world country is frequently invalid at a rich country, you frequently need some social networking to get a and better of people from poor countries are less likely to immigrate anyway). Now as wages rise in former mass exporters of labor such as China and India there will be a smaller supply of unskilled immigrants, and rich countries are making it easier for skilled immigrants to get visas, thus placing a downward pressure on the wages of college educated folks.

 

[Cutlass]

Such as?

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.

 

[~Corsair#01~]

I think that capitalism is innately polarising for a huge variety of reasons, some of which the OP has mentioned, but in addition to this there are new labour trends affecting the sytem:
-globalisation is allowing labour to be paid less wages, even educated workers
-technological progress is allowing labour to be replaced by machines

These trends increase the power of capital owners relative to workers, which acts as a multiplier increasing the rate of polarisation. Under the current conditions, the market is redistributing wealth upwards very rapidly and at an accelerating rate.

So in order to maintain equality at present levels, there has to be both an opposing redistributory system (taxes and welfare spending) and policies to slow the effects of the market redistributory system (regulation).

The only other to way to contain inequality would be a replacement of captialism with a whole new economic system, which would badly hurt our potential for growth.

tldr; we need capitalism for growth and government intervention to counteract polarisation caused by capitalism.

 

[Hygro]

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.

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.

 

[Tahuti]

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.

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.

 

[Murky]

Free-market-capitalism is fairly straight-forward. The strong shall flourish and the weak perish. Relatively speaking.
So who are the strong? Many things can make you stronger. Education, but more essentially, approved and accepted qualification. Skills of various kinds. Networking.
But what has you really on the strong side is money. Money can get you anything. Most of all - more money.
But oh no who would have thought that - the gap between rich and poor is growing. S-h-o-c-k-i-n-g.
After all, the market is free, so it is fair, so it is just, so everyone can succeed or fail and that means social mobility and that means a just distribution of wealth.
O wait, this is all BS.

A growing gap between the rich and poor seems to be wired directly into what the free capitalistic market is - or not?
So what do we do about it? We can soften the trend, but we don't seem to be able to actually stop it. And while in relative terms the majority has less and the minority more, debt is pilling up and debt creating money demands to be served.

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

There has to be a reset at some point. The way the system works now is that if you reach a critical mass of wealth you are much more likely to increase in wealth. If you fall below a certain poverty level you are more likely to stay at that level and your children are more likely to live in poverty when they become adults. Such a trend is inevitably due for a reset when you have too few people with wealth and too many people in poverty.

Things like a rolling jubilee might stave off the inevitable for a while.