November 9, 2008
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Capitalism and the Modern World
The recent and continuing world economic collapse and Barak Obama's recent election brings to the front questions about Laissez Faire Capitalism and America's economic future.
America's economic history is one where individual enterprise in the economic resources of our land has allowed us to build from a frontier-dominated agrarian society through a fully-developed industrialized country taking full use of our natural resources to become the world's industrial leader and become an industrial, political, and economic superpower.After some struggle we have managed to balance the rights of the individual entrepreneur and those of his workers and society as a whole while still encouraging maximum capital and financial growth - growth unmatched in the rest of the world.
Unfortunately, this has been achieved at the expense of massive resource consumption - so much that our basic industries and infrastructure now demand massive imports of resources (mainly oil) from sources we no longer control.
As industrial growth and manufacturing, the past mainstays of the capitalistic system, have become less competitive with other developing and industrializing nations, America has turned more and more to financial and information control to take the place of our declining industrial manufacturing base.
In the last great world-wide depression (1920s-30s), America was still a solidly industrial/manufacturing economy with an agricultural base. In the past eighty years the farm population has declined from about 38% of our population to less than 5%. Industrial worker population has also shown a significant reduction (from about 35% of the working population to less than 25%) During the same period employment in the Wholesale/retail trade, service,financial, and information areas has soared. The implication of this demographic change is that some of the "New Deal" programs and other economic "fixes" are no longer relevant and won't work.
Apparently the financial experts don't have a very good idea of what is needed to correct this apparent collapse of traditional laissez faire capitalism. How do you rebuild an economy that is focused on the manipulation of the finances and banking systems that have begun to fail? Is their failure because they no longer had a strong growing manufacturing and agricultural base; or is it the result of ever-expanding "patching" of the financial base designed to hide problems and make it seem as if our economy was growing when it really wasn't?
Perhaps we need to re-define what is meant by a "growing economy". Certainly the World economy is expanding but perhaps we need to look more closely at what Thomas Friedman calls the new Flat Earth Economics - an economic landscape where the developed areas - US, Canada, Western Europe, Japan - no longer have much advantage over the newly developing economies of Asia.
Can we, by tightening up our own economic base, maintain our own standards of living or must we resign ourselves to parity with your average Chinese or Korean worker? How?
Any suggestions for our new President?
Comments (14)
You're linked
ORr could find no "anticonsumerism" candidate.......
Hail_ORr! Else.
Is this a collapse of capitalism, or the inevitable result of the government attempting to manipulate it? Why is it that every time the stock market seems to be on the rebound, the fed interferes with interest rates again and... gasp... the market nosedives again?
Wendi RR, in the past the Fed's intervention to control the money supply have generally been welcomed by the capitalists - they after all, pretty much make up the membership of the FRS and those interventions have generally been to soften or prevent wild market fluctuations and nosedives. Capitalism is by no means on the brink of collapse, but I think it is undergoing a reevaluation and redefinition to bring it more into line with modern global reality. The old means of operation seem to no longer be adequate. For example, modern instantaneous communication and recalculation has made the issuing of "Derivative" bonds and the practice of excess leveraging very risky.
One thing I heard recently on a panel discussion was the fact that we (as a country) no longer make "stuff." We have few products to export or to sell to our own consumers, which is one reason our money goes out to other countries. I don't know enough about economics to know if this is a good or bad thing. I do know that Americans have been living on credit for far too long and that we've helped create this mess by living beyond our means. I was no different for a long time and got myself in a load of trouble with credit cards. I realized finally that I was either going to have to stop over-spending or be in bankruptcy court. I went to our state credit counseling service and with their help, got out from under a huge debt. I now have one credit card that I use only occasionally and endeavor to pay off immediately. And I'm just as happy as I was when I was buying "stuff." I see people in my town, which began having a recession several years ago, still building mansions and buying boats and horse trailer rigs that cost more than my house and I wonder where all the money comes from. I don't begrudge them their toys, but their credit buying has to eventually rebound on all of us. Plus, their rampant consumerism is the cause of much of our pollution problems.
I don't know how this administration is going to get us out of this crisis, but I hope people will keep in mind that the democrats and Mr. Obama inherited this mess, they didn't cause it - although they probably didn't do as much as they could have to stop it before it became a crisis - such as getting us out or keeping us out of Iraq.
I appreciate your analysis, as I think you understand these problems better than I do.
My wife and I are children of the Great Depression and remember pretty well what it was like to grow up in an era when abundance and excess were not even considered as ever possible for most folks. Our parents were so suspicious of credit that they thought long and hard before taking on even small debts - and they passed the idea of deferred gratification on to us. The idea of "Have it now pay later" appalled them. Even a house mortgage was to be paid off as quickly as possible.
Any investing was done very carefully and was the subject of much anxiety. We presently have credit cards - three or four of them - but have not paid any credit card interest in decades - if ever. We are what the companies call "Free loaders". They both like us (we use the cards and they can depend on our paying all our debt every month) and loath us (they don't make nearly as much profit from us as they do from most card-holders; just what they can charge the merchants who take our cards - 4-5% instead of 20-30%).
What we are seeing today, I believe, is a massive "Correction" of almost universal over-pricing of most stocks, bonds, and consumer goods as well as a "credit correction" where credit habits are being/going to be painfully changed. So far there has been no direct consideration of the massive over borrowing world-wide. Letting us (you, actually) down easy is a verry difficult task.
Actually, we expect to make - not lose- money on this new trend.
Thanks
I think there is a question to answer, before taking care to this last you suggest ("Can we, by tightening up our own economic base, maintain our own standards of living or must we resign ourselves to parity with your average Chinese or Korean worker?").
The question is "is it moral for the westernian world to be priviledged with respect to asian emergent nations?"
I know of no moral code that requires me to lower myself to another's level- lots of moral codes allow or encourage me to do that - sort of like the idea that you should "Suffer a little - it's good for you"
Remember, the Western World did not spring full grown from the brow of Zeus in a position superior to the rest of the world - it was a long hard struggle against nature and neighbors.
I think you make the mistake Marx made about capitalism. He thought that Capitalism was a finite system that had within itself the seeds of its own decay. He saw only the possibility of a synthesis of capitalism and its opponents and did not see the possibilities inherent in the very nature of capitalism - it's ability to create endless new capital based on endless new concepts and resources. Right now the leading edge of capitalism isn't even in the physical world - it is in the world of ideas - which itself has endless possibilities. We are not even locked to the resources available on Earth any more.
Uhm... Dick... I hope you believe that the good of capitalism is not to produce wealth for who has the power, but to produce wealth for everybody, isn't it?
Why should i ever support a system that makes me tired at work to produce money that are to be used by somebody that has already the power and it is not even so moral to help poor people?
We can discuss about if capitalism is useful to give food to everybody or not, but please, let's help humanity!
The economic system we call capitalism is basically conscienceless. What gives it its major drive is just that - the production of wealth for those who participate in it.
Why should i ever support a system that makes me tired at work to produce money that are to be used by somebody that has already the power and it is not even so moral to help poor people?
The answer is: You Don't. You support the system because you hope to make yourself more wealthy, or at least live a satisfactory life. You, as does your capitalist boss, help the poor for other reasons - mostly altruism. Depending on your attitude you may or may not use your capitalistic generated wealth or part of it to help the poor. The rational for the morality of capitalism is that "The rising tide (of wealth) raises all boats"
Dick, i think that the last century people thought that the tide was going up and down in our world. Then they discovered that when the tide rises, there is elsewhere a tide that goes down, because the total amount of water in the world is always the same.
Now we know it, and we cannot enjoy the rising tide knowing that somewhere else in the world are dying of hunger. Can we?
Capitalism doesn't deal about morality, i agree. But people that work and live in a capitalist system do deal about it. It's not capitalism that has to decide if people in the third world can die of hunger or not, but people can decide that they don't like them dying of hunger.
Where is the contraddiction?
Strict Capitalism denys that the "total amount of water in the world is always the same"- that disregards the value of labor and effort. there is no doubt that the entire world is - Capitalistically speaking - better off. There is considerably less starvation and disease in the entire world (on a per-capita base, anyhow) The problems caused by over-population may be laid at capitalism's door - but only so far as capitalism-driven standard of living increase has led to a dramatic decrease in infant mortality and other historic population growth inhibiters.
A philosophic question might be: How responsible should the Developed Nations of the world for the problems of the undeveloped nations? Should we encourage or discourage their development? Why?
It's a little late but I wanted to wish you and your wife a happy thanksgiving!
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