Capitalism: Failed System?

[FlyingJesus]

1) Explain how capitalism has "failed". The system is working exactly as it's always supposed to have, even if you don't like what the results are
2) Socialism can never work because if it was fully implemented that's exactly what everyone would do - never work. It's a system of rewarding the unproductive at the expense of the hardest-working

[GommeInc]

In terms of the best case studies to look at, China v India in the 1970s to today is an interesting one.

As is Chile vs rest of South America in 1980s to today.

In all of these cases, they've all moved towards capitalism and have become wealthier - the one's which have moved towards capitalism the fastest and have become more free market have been the ones which have done better (Chile, China) than those who have been slower (India, South America).

A bit arguable in some areas. Wealth isn't being distributed in some of the cities in India and is being kept to the middle classes, business owners and above.

[Kyle]

When the topic of capitalism is washed up there always seem to be people spouting alternatives left right and centre without any real foundation beneath them. @Dragga; Why is socialism better? Why cooperative business?

The Scandinavian system is one that combines both capitalism and socialism, and it works oh so well. There is no way to remain completely socialist and keep your people happy, so I doubt any shackles will be being thrown off any time soon.

[-:Undertaker:-]

A bit arguable in some areas. Wealth isn't being distributed in some of the cities in India and is being kept to the middle classes, business owners and above.

Well India isn't the best example and next to China it is the lesser example, but in recent years it's done much better because it has moved to a more capitalist system. The example you give for example of conditions of workers in Indian factories etc is awful yes - compared with us in the western world. The same for China. But you have to ask, why is it that workers continue to flock from the countryside in China and India, as they did in Victorian Britain, to these dirty factories? Because it's better than what they left behind in the countryside. Development never falls from the sky, Britain took about a hundred or two hundred years to develop.... India and China are thankfully doing it faster since 1970 (China) and 1990 (India).

India still has many problems too which keep the poor downtrodden which are written into it's socialist constitution: strong union laws, regulations, tariffs and state meddling. That's why - if India doesn't keep up reform - on current trends, China will stay miles ahead of India for the next 50 years.

[GommeInc]

Well India isn't the best example and next to China it is the lesser example, but in recent years it's done much better because it has moved to a more capitalist system. The example you give for example of conditions of workers in Indian factories etc is awful yes - compared with us in the western world. The same for China. But you have to ask, why is it that workers continue to flock from the countryside in China and India, as they did in Victorian Britain, to these dirty factories? Because it's better than what they left behind in the countryside. Development never falls from the sky, Britain took about a hundred or two hundred years to develop.... India and China are thankfully doing it faster since 1970 (China) and 1990 (India).

India still has many problems too which keep the poor downtrodden which are written into it's socialist constitution: strong union laws, regulations, tariffs and state meddling. That's why - if India doesn't keep up reform - on current trends, China will stay miles ahead of India for the next 50 years.

But is the countryside necessarily bad? Wealth isn't being distributed to the countryside - main public amenities are kept to the cities or to towns. Being a farmer does not mean pain and suffering, or a nanny (which is often the case) and so forth. The problem with India is that when it switched to capitalism wealth was kept to the key economic areas such as cities, when from the start townships should have received some wealth to go towards agriculture, small business, schools, facilities and infrastructure like roads etc. If anything, you could argue like I hinted at that it's not capitalism which is to blame for that, but it's application

[-:Undertaker:-]

But is the countryside necessarily bad? Wealth isn't being distributed to the countryside - main public amenities are kept to the cities or to towns. Being a farmer does not mean pain and suffering, or a nanny (which is often the case) and so forth. The problem with India is that when it switched to capitalism wealth was kept to the key economic areas such as cities, when from the start townships should have received some wealth to go towards agriculture, small business, schools, facilities and infrastructure like roads etc. If anything, you could argue like I hinted at that it's not capitalism which is to blame for that, but it's application

Well instead of asking me all you have to do is look at how people have voted with their feet.

But yes, the countryside is bad. Just to get by they have to do gruelling hand work in the fields outdoors in whatever weather for 12 hours+ a day, it's wet and filthy, the meals aren't all that great, there is disease, there is famine, there's a lack of independence.. that's just some of it. Common sense dictates that had the undeveloped countryside lifestyle been better, then Britons/Chinese and Indians wouldn't have left in their hundreds of millions during each of their respective nations' Industrial Revolutions.

As for distributing in India, see I disagree. Often attempting to force the market and business to move to areas they do not want to will simply destroy or greatly decrease any economic gain you'd have got otherwise. It's telling in China for example that at the start it [development] was very focused on the Eastern seaboard whereas now because wages are rising (which is due to development itself, not unions or government legislation) the companies are now moving inwards towards the west along the rivers: a free market process that has swept certain very poor areas and left them as middle class, and is now moving to other poorer areas. In turn, the newly developed middle class areas have now shifted to industries that require higher education levels and better development levels. It's an amazing process that is best when left alone to do it's work.

The state can have a role sometimes though, say if an area is fed by a river that is very unreliable then it would make sense for the state to maybe step in and see whether building a damn to stabilise the water flow would attract business to areas which wouldn't have been profitable. But even with examples like that I am sceptical - most of the canals/railways in Britain during the Industrial Revolution for example were funded and built by the companies and producers that needed them.

[GommeInc]

Well instead of asking me all you have to do is look at how people have voted with their feet.

But yes, the countryside is bad. Just to get by they have to do gruelling hand work in the fields outdoors in whatever weather for 12 hours+ a day, it's wet and filthy, the meals aren't all that great, there is disease, there is famine, there's a lack of independence.. that's just some of it. Common sense dictates that had the undeveloped countryside lifestyle been better, then Britons/Chinese and Indians wouldn't have left in their hundreds of millions during each of their respective nations' Industrial Revolutions.

Then surely if capitalism was successful wealth would have been distributed to combat countryside failings such as disease, which is my point? Look at farmers in our country who have a better standard and quality of life except abuse is happening by over-commercialisation where supermarkets aim to get the best deal at the detriment of the quality of life and quality of product), which immediately becomes a failing. Loans could be offered or some sort of incentive to buy machinery which would improve the quality of life in rural India. Even sewer systems, fresh water etc to support these areas so quality of life is greatly improved. When taking on the system India did the wrong thing by getting people to move to the cities to generate wealth when other industries exist Capitalism fails when it focuses immediately on the economic areas of a country, when proportionality is key and a portion of the wealth goes back into industries which cannot exist in cities such as farming.

As for distributing in India, see I disagree. Often attempting to force the market and business to move to areas they do not want to will simply destroy or greatly decrease any economic gain you'd have got otherwise. It's telling in China for example that at the start it [development] was very focused on the Eastern seaboard whereas now because wages are rising (which is due to development itself, not unions or government legislation) the companies are now moving inwards towards the west along the rivers: a free market process that has swept certain very poor areas and left them as middle class, and is now moving to other poorer areas. In turn, the newly developed middle class areas have now shifted to industries that require higher education levels and better development levels. It's an amazing process that is best when left alone to do it's work.

But what about industries that cannot work in cities? Farming cannot for obvious reasons such as space, and not in the central areas. Capitalism is only of benefit to all people in a society, and some do not want to work in a city and once a city becomes full to capacity it starts to destroy itself with high crime and poorer quality of life including overworked hospitals, factories, infrastructure such as fresh water, sewage, gas, electricity etc.

The state can have a role sometimes though, say if an area is fed by a river that is very unreliable then it would make sense for the state to maybe step in and see whether building a damn to stabilise the water flow would attract business to areas which wouldn't have been profitable. But even with examples like that I am sceptical - most of the canals/railways in Britain during the Industrial Revolution for example were funded and built by the companies and producers that needed them.

Indeed, it's a huge difference to what it is now and may never exist again in our life time as the public sector has arguably made the private sector selfish - or the rich, even. Philanthropy was the back bone of English culture with the rich paying to school entire towns and villages, or parts of cities. Heck, the cotton factories in this country pushed for better regulations and that's where our modern day health and safety laws came about, although the "safe" period when it wasn't so strict or ridiculous was decades ago and the Government went a bit far in some respects so you can't blame those factory owners now (mainly because they're dead, but they didn't foresee that later Governments/parliaments would make it cost so much and be so restrictive). My point is looking at ways to improve growth outside of cities and promote wealth in the countryside. A better workforce on the fields can only be a good thing. I still find it bizarre we ship off old tractors despite the cities in these countries not wanting to pay to boost the countryside/farmers themselves.

[Inseriousity.]

I would like an alternative that was fairer and yet still stable but there isn't one that's convincing. It hasn't failed though, it does exactly what it's intended to do: capitalism thrives on inequality and it just sucks to be you if you're at the bottom.

[-:Undertaker:-]

Then surely if capitalism was successful wealth would have been distributed to combat countryside failings such as disease, which is my point? Look at farmers in our country who have a better standard and quality of life except abuse is happening by over-commercialisation where supermarkets aim to get the best deal at the detriment of the quality of life and quality of product), which immediately becomes a failing. Loans could be offered or some sort of incentive to buy machinery which would improve the quality of life in rural India. Even sewer systems, fresh water etc to support these areas so quality of life is greatly improved. When taking on the system India did the wrong thing by getting people to move to the cities to generate wealth when other industries exist Capitalism fails when it focuses immediately on the economic areas of a country, when proportionality is key and a portion of the wealth goes back into industries which cannot exist in cities such as farming.

But agriculture won't power an economy. And that's not to mention the fact that if you do manage to introduce modern farming methods to the countryside, then what happens to the people displaced? As an economy industrialises, the labor force of the agricultural sector decreases whilst food output grows: simply because a smaller number of people can now feed a larger number of people working in other sectors, usually in the cities. It's like in a undeveloped country, you'll usually find that over 50% to 90% of the people will need to work on the farms in order to feed the country... when development occurs - as it has in Britain - the figure needed to work on the farms is something like 1% or 2% of the population. The fact is that if a country attempted to keep people in the countryside then it would be condemning them to be forced out of work. In any case, governments cannot stop the influx of people to the cities in which there is work - the shanty towns of Brazil being a prime example of this.

In terms of introducing modern farming methods instantly via the state, that is again something that can end in disaster. The Soviet state was notorious for micro managing it's farming yet caused countless famines as well as crop failures. There's also the other example we did in Economics a few months ago which I think was Bangladesh whereby the western nations introduced tractors and combine harvestors into rural Bangladesh yet it was a total failure and the tractors were left rusting at the side of the road. Why? Because they couldn't afford to run them and didn't have the replacement parts nor anybody with the know-how on how to operate or fix them properly.

But what about industries that cannot work in cities? Farming cannot for obvious reasons such as space, and not in the central areas. Capitalism is only of benefit to all people in a society, and some do not want to work in a city and once a city becomes full to capacity it starts to destroy itself with high crime and poorer quality of life including overworked hospitals, factories, infrastructure such as fresh water, sewage, gas, electricity etc.

Well you naturally get the shift back to the countryside as the middle class in the city grows. You only have to look at British towns and cities to see this pattern: millions moved from the countryside into the small slums and terraces which surrounded the dirty factories in which they worked. As people became wealthier, bigger terraces and eventually semi-detatched houses began to get built around neighbouring towns or in the countryside. That's why such an emphasis was placed after the Edwardian era on 'garden cities' - the middle class had became big enough and wealthy enough to demand their own green space and the market provided that.

Indeed, it's a huge difference to what it is now and may never exist again in our life time as the public sector has arguably made the private sector selfish - or the rich, even. Philanthropy was the back bone of English culture with the rich paying to school entire towns and villages, or parts of cities. Heck, the cotton factories in this country pushed for better regulations and that's where our modern day health and safety laws came about, although the "safe" period when it wasn't so strict or ridiculous was decades ago and the Government went a bit far in some respects so you can't blame those factory owners now (mainly because they're dead, but they didn't foresee that later Governments/parliaments would make it cost so much and be so restrictive).

Oh I agree completely with all of that.

My point is looking at ways to improve growth outside of cities and promote wealth in the countryside. A better workforce on the fields can only be a good thing. I still find it bizarre we ship off old tractors despite the cities in these countries not wanting to pay to boost the countryside/farmers themselves.

And there's nothing wrong with that in a developed economy - indeed many rural areas are richer per capita than urban areas in a developed economy like ours because of the wealthy leaving the cities and moving to the countryside. But it simply isn't the case in rural areas in undeveloped or developing nations and they need to focus on generating wealth which happens in the cities.

I would like an alternative that was fairer and yet still stable but there isn't one that's convincing. It hasn't failed though, it does exactly what it's intended to do: capitalism thrives on inequality and it just sucks to be you if you're at the bottom.

But that is also a myth regarding capitalism. Most if not all people move upwards over their lifetimes.

Dr. Sowell touches on this in this video, there's a better video on this but I can't seem to find it at the moment. He explains in it though that virtually everybody starts on the bottom, and end up near the top (not the VERY top) at the end of their lifetime.

"A study was done some years ago showing that at the end of eight years, more of the people who were at the bottom 20% at the beginning were now in the top 20% than remained in the bottom 20% - so you have this enormous turnover of people in these brackets [...]"

I would agree with you though that there's increasing inequality. But that isn't down to capitalism itself, that's down to what the Austrian School of Economics calls fiat currency - where by government and the central banks manipulate the money supply and debase it meaning that the resulting inflation wipes out the savings of those on the bottom but leaves those with more savings on the top in better shape, ie corporations & banks. But that's another whole subject.

[Inseriousity.]

Well I can only go from experience really.

my great nana worked in a shop, my nana worked in a shop, my mum works in a shop.
my granddad's a painter and decorator (and I think his dad was one too but I'm not sure), my dad's a painter and decorator, my brother was going to be a painter and decorator until oops recession so now he's a 'groundsperson' apprentice.

There are whole cycles of poverty and while there is the opportunity to progress, it is easier for those who were born into a more middle class background. Despite that, I do think that'll be the case for every system: it's not about the money (money money), it's the power that creates that inequality and the powerful and the powerless will occur in every structure.