Democracy versus free enterprise

We are the generation that is witnessing democracy defeating free enterprise. The economic lesson being learned appears to be that democracy and capitalism cannot coexist. Either capitalists will control government or democracy will destroy capitalists. The latter has occurred. The government of course blames the economic fall on capitalists and free enterprise for which the solution is further to destroy capitalists and further the government's increasingly share of the national economy, size and power.


Without democracy but with relatively consistent rule of law, it appears free enterprise remains the model for nation economic success as we see has happened in China.

joko104 said:

We are the generation that is witnessing democracy defeating free enterprise. The economic lesson being learned appears to be that democracy and capitalism cannot coexist. Either capitalists will control government or democracy will destroy capitalists. The latter has occurred.

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That seems contrary to reality.

1. Big business created the current economic collapse via unchecked capitalisic behvavior. Rational for short term gain, irrational for market stability/long-term.

2. Big business is getting massive injective of taxpayer dollars to continue doing this.

If you think big business didn't try to destroy itself, and then was saved by government, you're not looking at the same set of facts. I know who benefited in the current crisis.

Mach said:

That seems contrary to reality.

1. Big business created the current economic collapse via unchecked capitalisic behvavior. Rational for short term gain, irrational for market stability/long-term.

2. Big business is getting massive injective of taxpayer dollars to continue doing this.

If you think big business didn't try to destroy itself, and then was saved by government, you're not looking at the same set of facts. I know who benefited in the current crisis.

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Capitalism did not create this current economic collapse. The Federal Reserve inflated the housing and stock market bubbles. The government put the automakers out of business with all of the regulation and taxation of the economy.

A fundamental problem is that corporations have no interest in capitalism. Corporations want profits, and will cheerfully destroy the capitalism to make a profit, thus the problem with monopolies. The role of government is to make rules so that profit cannot be obtained by destroying competition.

Let us look at the current financial crisis. The removal of regulations on ratings for financial products, let the system being corrupted and destroyed. The short term greed made people realize that giving AAA ratings to complete crap would make them a quick buck. As a consequence, they helped crash our entire financial system. The government should not have allowed lying about the value of a commodity product as means to profit.

However, the government can just as easily get more involved than it should. The government should not run industries that can be better run by competitive profit-seeking private industries. The Auto Bailout and then takeover was a serious mistake. Plenty of foreign companies are successful selling their own brands manufactured in the U.S.

Mach said:

That seems contrary to reality.

1. Big business created the current economic collapse via unchecked capitalisic behvavior. Rational for short term gain, irrational for market stability/long-term.

2. Big business is getting massive injective of taxpayer dollars to continue doing this.

If you think big business didn't try to destroy itself, and then was saved by government, you're not looking at the same set of facts. I know who benefited in the current crisis.

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Wait a second, how is it capitalism when a company intends to operated unchecked and destined to fail, yet at the same time they do this because they know the government will bail them out. That doesn't sound like capitalism at all. In a capitalistic system companies try not to become insolvent because if they do then that's it, they fail and close down their doors. If the private sector is operating with a government guarantee then it really is not capitalism to blame at all.

Liz Peeps said:

Wait a second, how is it capitalism when a company intends to operated unchecked and destined to fail, yet at the same time they do this because they know the government will bail them out. That doesn't sound like capitalism at all. In a capitalistic system companies try not to become insolvent because if they do then that's it, they fail and close down their doors. If the private sector is operating with a government guarantee then it really is not capitalism to blame at all.

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Eh, I doubt there was ever a guarantee of a bail-out. It was always a risk the company took. That being said, without trying to save said companies (such as the auto industry), we would be relegating to buying cars from Japan, Korea, Germany, etc.

joko104 said:

We are the generation that is witnessing democracy defeating free enterprise. The economic lesson being learned appears to be that democracy and capitalism cannot coexist. Either capitalists will control government or democracy will destroy capitalists. The latter has occurred. The government of course blames the economic fall on capitalists and free enterprise for which the solution is further to destroy capitalists and further the government's increasingly share of the national economy, size and power.

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Free enterprise in the actual sense does not and cannot exist in the capitalist economy because of the constrictions imposed on legitimately competitive or productive free exchange by market and wealth concentration. But in the broader sense, it's of course a reality that capitalism and democracy cannot co-exist. The internal structure of the capitalist firm is simply flagrantly anti-democratic in both the de jure and the de facto sense, of course, but even aside from the capacities for workers' ownership and management that capitalism eliminates, the means of production as a whole are of course not subject to democratic control by the broader public but are instead controlled by a tiny elite, an arrangement that would be accurately condemned as authoritarian were it exercised directly through the state.

joko104 said:

Without democracy but with relatively consistent rule of law, it appears free enterprise remains the model for nation economic success as we see has happened in China.

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China is not dependent on "free enterprise," but on authoritarian and government-controlled market exchange, thus rendering it as state capitalist as it was under Mao.

capitalistpig said:

Capitalism did not create this current economic collapse.

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Oh what did then? Greed and overspending had zero to do with the economic collapse? What did then?

The Federal Reserve inflated the housing and stock market bubbles.

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So you are saying that the Federal Reserve forced the sub-prime lenders to break every moral, economic and legal rule in the book to give loans to people who could not afford them? It was the federal reserve that broke down the barriers between banks and investment firms and allowed the creation of highly risky but profitable trading of debt? It was the federal reserve that deregulated and "softened" up the regulation at hand by non enforcement? Do you mean that Bernie Maddoff was the Federal Reserves fault?

The government put the automakers out of business with all of the regulation and taxation of the economy.

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Eh? What regulation? The US fuel efficiency regulation had until a few weeks ago, not been changed since the mid 1970s. That the US Auto manufactures have fought tooth and nail against any form of regulation in their industry and paid billions in "bribes" aka campaign contributions to US politicians to what.. put on more non existent regulations on them?

Me thinks you should stop listening to only Fox News.

capitalistpig said:

Capitalism did not create this current economic collapse. The Federal Reserve inflated the housing and stock market bubbles. The government put the automakers out of business with all of the regulation and taxation of the economy.

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So let me get this straight. It wasn't free market enterprise that took domestic and loads of foreign capital, and shuffled it through all those complex financial instruments, and the not-so-complex AAA-rated, sub-prime instruments, and the private ratings agencies didn't rate them AAA when they were obviously not, and the home buyers were not free to NOT purchase that new home with variable interest at a value far above what is financially sound?

Your response seems more idealogical, and related little, if at all, to reality.

Liz Peeps said:

Wait a second, how is it capitalism when a company intends to operated unchecked and destined to fail, yet at the same time they do this because they know the government will bail them out. That doesn't sound like capitalism at all.

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I disagree, but I know what you mean.

It still IS capitalism/free-market in dazzling action, it's just that it's also a demonstration of the bad people can do with it.

Just like freedom, freedom is great right? But should theives be free to steal? Freedom can be good, or bad. Just like free-market policy, just like "privately owned for-profit policy (capitalism).

In a capitalistic system companies try not to become insolvent because if they do then that's it, they fail and close down their doors. If the private sector is operating with a government guarantee then it really is not capitalism to blame at all.

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So many ways to respond to this.

What you're writing is that if a company engages in bad behavior, it is the fault of the government, not the professional business people who made the obviously unethical, if not factualy bad-business decisions.

Doesn't that ring false? I mean, that sounds like the guy who claimed the girl in the short skirt and the low cut top was "asking for it" so he gave it to her.
Maybe the government does trounce around in booty-shorts sometimes, doesn't change the fact that the bad behavior that occured after, was a choice.

-Mach

Mach said:

So let me get this straight. It wasn't free market enterprise that took domestic and loads of foreign capital, and shuffled it through all those complex financial instruments, and the not-so-complex AAA-rated, sub-prime instruments, and the private ratings agencies didn't rate them AAA when they were obviously not, and the home buyers were not free to NOT purchase that new home with variable interest at a value far above what is financially sound?

Your response seems more idealogical, and related little, if at all, to reality.

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That's like giving someone cocaine and then blaming him for going crazy, partying, and staying up late, then when they crash blaming them because they were free to make the decision to engage in crazy behavior.

The Federal Reserve expanded credit and kept interest rates way too low. That inflated the housing bubble and it caused people to barrow and consume as much as possible. The Business Cycle is not caused by capitalism, it is a consequence of the Federal Reserve. Also, government forced banks to lend money to people who could not pay it back.

PeteEU said:

Oh what did then? Greed and overspending had zero to do with the economic collapse? What did then?



So you are saying that the Federal Reserve forced the sub-prime lenders to break every moral, economic and legal rule in the book to give loans to people who could not afford them? It was the federal reserve that broke down the barriers between banks and investment firms and allowed the creation of highly risky but profitable trading of debt? It was the federal reserve that deregulated and "softened" up the regulation at hand by non enforcement? Do you mean that Bernie Maddoff was the Federal Reserves fault?



Eh? What regulation? The US fuel efficiency regulation had until a few weeks ago, not been changed since the mid 1970s. That the US Auto manufactures have fought tooth and nail against any form of regulation in their industry and paid billions in "bribes" aka campaign contributions to US politicians to what.. put on more non existent regulations on them?

Me thinks you should stop listening to only Fox News.

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1. The Federal Reserve and the Government did

2. Bawney Fwank and his buddies in Congress forced them to do that through numerous pieces of ridiculous legislation. Banks wouldn't normally do that because of what you call "greed". They want to get their money back! By the way, Bernie Madoff has nothing to do with this economic collapse, he lied and scammed people.

3. Any fuel economy standards are too much regulation, but what is worse is all of the power the government has given to unions (creating tons of unemployment).

Mach said:

I disagree, but I know what you mean.

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I see that you disagree, but I don't think you see what I mean at all.

It still IS capitalism/free-market in dazzling action, it's just that it's also a demonstration of the bad people can do with it.

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It's not capitalism because capitalism requires risk and when the government removes the risk factor and the possibility for a company to fail because of error then free market forces do not operate efficiently.

Just like freedom, freedom is great right? But should theives be free to steal? Freedom can be good, or bad. Just like free-market policy, just like "privately owned for-profit policy (capitalism).

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Could you please clarify what you're trying to say here.

So many ways to respond to this.

What you're writing is that if a company engages in bad behavior, it is the fault of the government, not the professional business people who made the obviously unethical, if not factualy bad-business decisions.

Doesn't that ring false? I mean, that sounds like the guy who claimed the girl in the short skirt and the low cut top was "asking for it" so he gave it to her.
Maybe the government does trounce around in booty-shorts sometimes, doesn't change the fact that the bad behavior that occured after, was a choice.

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It is the fault of the government for putting an entire economic/financial system in jeopardy by letting these companies operate with a government guarantee. When a government guarantee is put into place the dynamics of market forces change because the risk factor has been removed. This creates distortions and imbalances in the economic system which culminates into the kind of crisis just like we're seeing now.

Bad business decisions are not weighted appropriately because they know that if their bad decisions put the system into jeopardy that the government will prevent that from collapsing by keeping those unprofitable, wealth destroying firms in business.

By the way, don't be discouraged, but to let you know I'm a little burned out right now on economics and everything connected to money so I'm probably going to be back in a few days. Make your arguments, I'll be back later with a reply.

capitalistpig said:

That's like giving someone cocaine and then blaming him for going crazy, partying, and staying up late, then when they crash blaming them because they were free to make the decision to engage in crazy behavior.

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As much as it may surprise you, I have no idea what your cocaine story has to do with the topic at hand, certainly not analogy.

The Federal Reserve expanded credit and kept interest rates way too low.

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according to who? The Fed put it right where they wanted, neither too high, nor too low. You disagree, but then, you aren't on the fed are you?

That inflated the housing bubble and it caused people to barrow and consume as much as possible.

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I see. In your free market, people are forced to borrow beyond their means, and consume beyond their means. That's bunk.

The Business Cycle is not caused by capitalism, it is a consequence of the Federal Reserve. Also, government forced banks to lend money to people who could not pay it back.

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What? Capitalistic cycles are a result of capitalistic policy. It's really not up for debate. Forced banks? You are off your rocker.

Banks:
Circumvented known good regulation by creating new debt instruments
Had an enormous influx of capital from FOREIGN markets in addition to domestic markets.
Were motivated by, and enjoyed, enormous profits from their endeavors

Ratings agencies
Rated high-risk bundles as AAA rating, and had continued income from the banks they rated, presumably in part due to their stellar ratings.

Loan originators:
Made really good money based on the volume of loans, so they sold more loans, sometimes, with no restrictions whatsoever, despite their being well established guidelines on secure lending.


Looks like old fashioned profit motive coupled with circumventing laws and regulation. Surprising, I know.

Mach said:

Banks:
Circumvented known good regulation by creating new debt instruments
Had an enormous influx of capital from FOREIGN markets in addition to domestic markets.
Were motivated by, and enjoyed, enormous profits from their endeavors

Ratings agencies
Rated high-risk bundles as AAA rating, and had continued income from the banks they rated, presumably in part due to their stellar ratings.

Loan originators:
Made really good money based on the volume of loans, so they sold more loans, sometimes, with no restrictions whatsoever, despite their being well established guidelines on secure lending.


Looks like old fashioned profit motive coupled with circumventing laws and regulation. Surprising, I know.

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Not really a "free market" activity. IMHO, a **** ton of fraud. Ratings agencies should have.... dare i say.... FAILED for their actions!

Mach;

You're version of events is highly biased.

Mach said:

"Banks:
Circumvented known good regulation by creating new debt instruments"

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MBS and CDS were not new, nor did banks need to circumvent any regulation in using them. IN fact it was federal regulation that provided the incentive to use these debt instruments. Basel set weighted capital requirements, federal regulation weighted MBS instruments lower than "traditional" bank held mortgages. Did the government "tell or force" banks to do this? Of course not. However it was clearly the logical course of action given the profit motive and incentives. The same way the government won't "force" you to use X amount of energy, they'll just raise the price as an incentive to use less along with the profit motive. You can't blame the profit motive while ignoring skewed incentives.

I have no problem with the other bank motivations you listed. As long as you keep in mind that due to regulations the banks followed (NOT circumvented) the most profitable way to deal with the influx of capital was via the "new debt instruments".

Was this good for society? Apparently not. Is it the banks job to do what is good for society? Absolutely not. Is it the government's job to make sure incentives align the profit motive with societal well being? Yes (a separate debate), and they failed.

Mach said:

"Ratings agencies
Rated high-risk bundles as AAA rating, and had continued income from the banks they rated, presumably in part due to their stellar ratings."

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Ratings agencies were clearly incorrect in rating the bundles AAA. To claim they did so knowingly quid-pro-quo fashion is ludicrous for two reasons. 1) No one else with authority knew any better. There were plenty of experts in both the rating agencies and the banks that knew better, but the people in charge didn't listen on both the government side and the private side. Do not assign to malice what can easily be explained by stupidity. 2) If rating agencies knowingly inflated ratings, then why did they collapse the house of cards by then lowering ratings? AIG imploded because it's rating got lowered and thus had to post capital per its CDS contracts (if CDSs were exchange traded this would be akin to a margin call). If the rating agencies were "in on the scam" then they could have easily kept the ratings artificially high while everyone involved covered their tracks.

The rating agency arrangement is clearly flawed, and their mis-rating did contribute heavily to the problem. However, there was no mal-intent nor greed in their actions. They just got it wrong, like a vast majority of authorities did.

Mach said:

"Loan originators:
Made really good money based on the volume of loans, so they sold more loans, sometimes, with no restrictions whatsoever, despite their being well established guidelines on secure lending."

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There was undeniably pressure to alter the guidelines for lending, this was not purely a result of greed. Many non-market players exerted pressure to relax the guidelines on lending, including the Federal Reserve.

Mach said:

"Looks like old fashioned profit motive coupled with circumventing laws and regulation. Surprising, I know."

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Try old fashioned profit motive coupled with old fashioned skewed incentives by non-market actors. Surprising, I know.

J

So what I am getting from all of the above is that it had nothing to do with the fact that the price of a staple commodity artificially increased sharply in an economic system that had little margin for error as other silly things had been going on for a long time and nothing to do with the fact that America has had a terrible import/export ratio for a few decades.

What really happened was either...

Blame the Gov for too much regulation (bad Donkey-head!)

or

Blame the Gov for too little regulation (bad Elephant-head!)

or maybe

Blame individuals running Corporations for not caring about anything but personnel profit (which is silly by the way cause we chose em for that trait)

... depending on your political affiliation.

If it is not too much trouble, I would propose an alternative explanation (this is a short and ugly version):

After WWII, when the rest of the industrialized world had some loses due to war on their soil and such, we had a period of prosperity. For a while, we did a pretty good job of making the most of it.

The world changed.

Collectively, we (by which I mean America as a whole) failed to participate and to adapt. Collectively, we failed to pay attention and failed to make pro-active efforts. Collectively, we let deciding things be done by interests that did not care about the collective.

Now, we are 1) assigning blame rather then focusing on understanding what changed and when with the intention of using this perspective to adapt and 2) printing money and passing it out to failing interest groups in hopes that this will somehow fix things.

I would go on to say that Democracy, Free Enterprise, and words like that are labels that we apply to things; not things themselves. That someone has to live in less so others can live better then is not just an idea. The rest of the world has grown, yet there are no new colonies to pay for it. Maybe, we paid for it. Maybe Capitalism is based on someone losing and if you are the big winner and then get lazy, it is you.

This is just a theory, mind you. Seeing as this is a debate site, I am hoping someone can help me find some holes, cause I am not sure I like this view of our world.

Thanks for your time, and Hi.

Mach said:

That seems contrary to reality.

1. Big business created the current economic collapse via unchecked capitalisic behvavior. Rational for short term gain, irrational for market stability/long-term.

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The current economic collapse would not of been possible withoug:

1) The Fed

2) Fanny

3) Liberals wishing to create an ownership society


So spare me your talking point bull****, because that is all it is. We don't practice capitalism, we practice corporate cronyism.

ARealConservative said:

So spare me your talking point bull****, because that is all it is. We don't practice capitalism, we practice corporate cronyism.

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The existence of capitalism is dependent only upon the private ownership of the means of production, market exchange as the primary means of resource allocation, and wage labor. All three of those conditions exist in this country.

Agnapostate said:

The existence of capitalism is dependent only upon the private ownership of the means of production, market exchange as the primary means of resource allocation, and wage labor. All three of those conditions exist in this country.

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Production, market exchange, and wage labor are tightly controlled by mob rule (democracy).

The fact is that a real estate bubble exists because of government regulation. that's a fact no matter how deep the sand is around your neck.

ARealConservative said:

Production, market exchange, and wage labor are tightly controlled by mob rule (democracy).

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No, they aren't. They're controlled by the financial and coordinator classes through consolidation of private ownership of the means of production and market and wealth concentration.

ARealConservative said:

The fact is that a real estate bubble exists because of government regulation. that's a fact no matter how deep the sand is around your neck.

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Government regulation (and indeed, intervention) is a necessary condition of capitalism, inasmuch as it provides macroeconomic stability and maintains the physical efficiency of the working class.

Agnapostate said:

No, they aren't.

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Yes, they are.

Government regulation (and indeed, intervention) is a necessary condition of capitalism, inasmuch as it provides macroeconomic stability and maintains the physical efficiency of the working class.

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the only thing you are missing is words like proletariat, which is why I don't bother wasting too much time with you.

Capitalism needs more then private ownership, it also required voluntary association, which doesn't exist when you ram intervention and government regulation down the throats of people.

ARealConservative said:

Yes, they are.

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Try providing a relevant counter. Odd tactic, I know, but what the hell, maybe it'll be fun! :shock:

ARealConservative said:

the only thing you are missing is words like proletariat, which is why I don't bother wasting too much time with you.

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Do you think I support government intervention in economic matters? I'm a libertarian socialist, and for that matter, I'm an anarchist. I favor the eventual elimination of government. The only problem is that that isn't consistent with the continuation of capitalism, since the state is an integral stabilizing and protecting agent in the capitalist economy. For example, consider trade policy. The neoliberal will argue that a laissez-faire approach is optimal, but this is inconsistent with the very nature of American development itself. Indeed, the utilization of state protection of infant industries, for instance, permits such industries to develop further and facilitates greater long-term competitive enterprise, thus maximizing dynamic comparative advantage.

ARealConservative said:

Capitalism needs more then private ownership, it also required voluntary association, which doesn't exist when you ram intervention and government regulation down the throats of people.

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Legitimate voluntary association cannot exist in the capitalist economy because laborers are compelled to subordinate themselves in hierarchical conditions because of the threat of economic impoverishment if they do not, thus providing them with a limited range of options and effectively creating conditions of negative power and coercion, if not outright physical force. As noted by David Ellerman:

When a robber denies another person's right to make an infinite number of other choices besides losing his money or his life and the denial is backed up by a gun, then this is clearly robbery even though it might be said that the victim making a 'voluntary choice' between his remaining options. When the legal system itself denies the natural rights of working people in the name of the prerogatives of capital, and this denial is sanctioned by the legal violence of the state, then the theorists of 'libertarian' capitalism do not proclaim institutional robbery, but rather they celebrate the 'natural liberty' of working people to choose between the remaining options of selling their labor as a commodity and being unemployed.

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Furthermore, that authoritarianism also ties into a chief form of inefficiency in the capitalist economy: involuntary unemployment, which is a form of static inefficiency. Full employment cannot exist in the capitalist economy since a sufficiently high rate of equilibrium unemployment is necessary in the labor market to provide fear of job loss and thus serve as an negative incentive for workers not to shirk.

Agnapostate said:

Try providing a relevant counter. Odd tactic, I know, but what the hell, maybe it'll be fun! :shock:

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You provide a relevant counter

Production, market exchange, and wage labor are tightly controlled by mob rule (democracy).

Do you think I support government intervention in economic matters? I'm a libertarian socialist, and for that matter, I'm an anarchist. I favor the eventual elimination of government.

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Exactly. Marx also called for the elimination of government

Legitimate voluntary association cannot exist in the capitalist economy because laborers are compelled to subordinate themselves in hierarchical conditions because of the threat of economic impoverishment if they do not

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exploitation of the proletariat by the bourgeoisie


A rose by any other name......................