With the “Global Financial Crisis” raging I’ve more than once commented that the situation is surely proof that free market Capitalism, as practised in the west, is a failed system. This very often gets the response that either

a) it’s worked alright so far

or

b) It’s better than the alternative.

I have a bit of an issue with both of these points of view.

Given that the core of the “Free market Capitalist” philosophy is that the market rules, government keeps it’s nose out and the greed of those acting in their own individual self-interests somehow magically transforms, when combined with all the others acting in their own individual self-interests, into the best outcome for society as a whole, it’s hard to argue that it’s actually ever worked alright.

The world main bastion of Capitalism, the USA, has consistently had government handouts to private industry in the form of tax breaks, incentives and holidays, direct subsidy, trade tariffs resulting in protection of the domestic markets from foreign imports, and, when it comes down to it, governmental support through the USA’s foreign policy decisions (government awarded contracts for infrastructure redevelopment in Iraq, for example).

Despite this consistent and long term record of tax payers subsidising US industry the gurus of modern economics claim the growth of the US Economy as being an example of how Free Market Capitalism is a glowing success. Dig a bit deeper and you can see that that is a sham, a great big lie.

The main measures of the success of a capitalist economy are economic ones, designed from within the system to measure the things that Capitalists think are important, so the fact that they show growth, development and success is hardly surprising. However, these measures don’t even attempt to address such issues as poverty, spread of wealth, or well-being within a society, so are totally missing the big picture which develops around the bare economic facts.

What this means is that while the economic measures may show a consistent period of “Growth” (for Capitalists, read “success”), measures such as poverty, crime, violence, educational attainment, physical and mental well-being, mortality and (how to measure this one?) happiness within a society can slide dramatically. This doesn’t count as a failure for a capitalist, though, provided that the economy is buoyant on their terms.

The perceived “success” of Capitalism over the last 30-odd years, in fact over the whole period that it has been the dominant philosophy in the west stretching back to the days of European Imperialism, is that the benefits of this system tend to be distributed so unevenly.

I watched a documentary the other day called “Black Gold”. It was made a couple of years ago and looks at the way the world market for coffee has an impact on the lives of people in coffee growing areas of the third world (I know the modern term is “developing world” but frankly I don’t see much happening to justify the label “developing”). It was quite an eye opener.

The most basic reading of economic theories would acquaint the reader with the principle of “supply and demand”. When supply is high and demand low the price drops, and vice versa.

In the world of Coffee trading, though, this doesn’t seem to apply. Demand for Coffee is at a high but the buying power of the major buyers of coffee (Nestle, Sarah Lee, Proctor and Gamble and Kraft Foods control the vast majority of the market) means that the growers receive a pitifully small return for their production, in some cases so little that they are choosing to abandon coffee growing in favour of more lucrative, but illegal, crops in order to provide the basics for their family’s subsistence. In Ethiopia a drug called “chat” is being produced, in South America there is a correlation between coffee production reducing and drug crops increasing.

The price is kept low because, despite the demand being high, the vast majority of coffee bought in the west is bought through the New York Board of Trade commodities market, and the competition to purchase coffee is dominated by the big players in the market (Nestle, Sarah Lee, Proctor and Gamble and Kraft Foods).

The negotiation of this price is not a symmetrical relationship. The big western corporations have all the cards. They won’t starve if they can’t buy some coffee. They can decide to freeze a grower, or a growing region, out of the market if they won’t sell at the price they are prepared to pay. The growers, on the other hand, are in a position where any price is better than nothing because if they don’t sell to the big 4 (or, in fairness, on of a small number of smaller but still huge buyers) there isn’t an alternative market. They simply won’t sell their crop, won’t make any money, and therefore won’t be able to feed themselves or their children.

Black Gold focused on the Coffee industry. The same or similar is the case in almost all western dealings with third world suppliers. The western corporations (whether Nestle, Proctor and Gamble, Tescos, Walmart, Shell, Exxon, whoever) is holding all the cards. They are always negotiating from a position of strength relative to their suppliers (and this is extending into the market generally when you look at what the likes of Tesco do in their dealing with the UK farming industry).

What this results in is cheap product reaching the western markets, low production and buying costs for the corporations, big profits being made in the margin between the 2, and poverty and death in the third world for increasing numbers of people.

And all this to keep the free market capitalist machine well lubricated and fuelled to keep showing an economic success. Again, this is not looking to me like a system that is working well, unless you happen to be in the minority of the world’s population that both lives in an affluent western nation and happen to be above the poverty line within that nation (and the numbers of poverty-stricken Europeans and Americans is alarmingly high given the success of our economies in recent years).

The second point that capitalism is better than “the alternative” is a bit of a red herring. It presupposes that there is only one alternative to the Free-Market Capitalist approach, and generally cites the failure of totalitarian Communist states in Eastern Europe as proof of this failure.

I think this point has some pretty big holes in it too. Firstly it ignores Cuba and Venezuela, both Communist/Socialist nations which have survived and, despite great antipathy from some of their more powerful neighbours, maintained a socialist economy which has provided for it’s people in a more effective way than the mainly “capitalist” economies in the rest of Latin America.

But even beyond arguing that this one alternative is not a proven failure it ignores the other options available, such as a mixed economy where the democratically elected government has a right and a responsibility to be involved in the economic well-being of the country, providing as a public service the major infrastructure and societal support industries (transport, utilities, healthcare, refuse and recycling, security, defence) as part of it’s role, whilst simultaneously regulating and guiding industry in a way that requires private industry to operate for the good of it’s community, not just for the financial enrichment of it’s owners/investors.

And that’s just one of the alternatives, and I’m sure there are as many different systems that could be adopted as there are stars in the sky. It’s just that they are all a leap into the unknown, whereas we’re all used to Capitalism, and we’re mainly used to opposing Communism, so we tend to stick with what we know, which tends to be Capitalism.

Thing is, though, it doesn’t really work because it needs help from government (and therefore from individual taxpayers) to make it a success at the best of times, and it needs wholesale bail-outs at the worst of times.

And all of that is designed to keep the world economy, otherwise known as the failure of western free-market capitalism, from toppling, to keep it propped up and doing what it always does.

I think it was Einstein who said that insanity was doing the same thing over and over again and expecting a different result. He was no fool, that bloke.

 

It took over a year for the present administration to admit that we are in a recession. and it will take even more years for the US to admit we have become a social-democracy and as you point out this has been going on a long time with governments intervention.

So it is Capitalism that has failed or is it a form of socialism that has failed?

 

A failed system? :excited: too funny. You need to lay off of the crack pipe. Go read Ulysses. You might like it.

 

Actually Socialism wouldn't have allowed the subsidy of private industry for individual profit, which is what has been going on here. This is subsidised capitalism with some protectionism thrown in.

 

Very well done Trumpet!! This is an excellent overview, and I agree with your mixed economy model.
I cant wait for Tenguy to arrive on the scene. NOT!

 

YOUR RIGHT ! And I am enlighten (thank You) as I just read up on "socialism" at Wiki for a quick info thing....

So perhaps a new coin phase is in order :

Corporatefedism er something to that effect ?

 

There's no such thing as a pure, free-market capitalist economic system. Nor is there such a thing as a purely socialist economic system. It's really a question of what degree of government intervention is appropriate. I think the U.S. experience strongly suggests that you can't have an unregulated free market capitalist system without some major things going wrong.

We seem to unlearn these lessons periodically, and then we have to learn them all over again.

 

You and I are in total agreement on this Trumpet. The free market/capitalist philosophy is a lie and has never worked for all the reasons you eloquently brought out here. And that is nothing new. In fact it is the very theme of the book The Heart of Darkness. It depends on a system that must rely on oppression on one hand and a constant drive to find new consumers on the other hand. It is mathematically doomed.

I would add there is another practical solution and that is what is called "Steady State Economics" as opposed to "Growth Economics." Kimiko once posted a link to an absolutely amazing economist who clearly defined why growth economics is not sustainable and actually our social doom while steady state economics is the only viable solution.

I will redouble my efforts to find that link again. Its an essential idea at this time in our history. And when I find it I'll post it here.

 

Yes Kimiko, fine points but really it comes down to human nature as ultimately being the problem. You can call it greed if you like. Go to Venezuela Stumbler, you would love their system of government.

 

Talk about great timing. This is like cumming together, Kimiko. Would you be kind enough to remind me of that economist's name so I can search for the link?

 

His name is Herman Daly. There's probably a lot of published stuff out there that can be obtained via Google.

Was it good for you?

 

And one of the problems with capitalism is that it views individual greed not only as inevitable, but as a good thing, rather than something to be controlled, tempered, moderated....in favor of a greater good.

 

Thanks sweetheart.

And the earth moved.:rose:

This is the single most destructive human force on earth in my opinion. Simple greed that is never based on anything rational or reasonable. The only motivation is to have more then everyone else.

 

Greater good for who?

 

All of us. That's kinda what the "Greater good" means, dear Diedre.

 

Kimi, you're not just great. You're so easy.

Here's the link (and I finally bookmarked it this time).

https://dieoff.org/page88.htm

There is some really important information in this link and while it is extensive Daly's dissertation is not as laborious as it might appear. The guy is informative, understandable and sometimes downright funny.

I think its a must read for anyone who really cares about the issues Trumpet has raised and cares about our nation's and perhaps the world's survival.

 

Too bad you're an atheist Trumpet. You have the patience of a Saint.

 

Yes, so I am to support people who choose not to work? uh no. criminals? uh no. illegal immigrants? uh no. sorry. The United States has the best thing going as far as our way of life is concerned. Politically and economically. You should all be happy, your Savior is going to fix everything. mmm, we will see. I would never choose socialism over capitalism, pleaze this forum is oh so liberal, ahhhh.

 

I like how you spell my name

 

This is a perfect example of you inability to think Deidre and your consistent tendency to be absolutely wrong.

Somewhere today you said that your concern was the destruction of the American family. Then here you contend that politically and economically the US is the best thing going.

So here's the question Deidre. Who the fuck do you think are lining up at the homeless shelters and free food kitchens? Who do you think lost 500,000 jobs last month? Who do you think is being destroyed by our failed economic policies? People who won't work? Illegal immigrants? Criminals?

Fuck no, you thoughtless imbecile. Its American families.