nadiatims wrote:

Icecream wrote:

However, there's no reason we can't redistribute now. It's not even an absolute that capitalism will in fact result in better living quality for everyone, all we can really say is that it has that tendency in countries that are still developing. In real terms, the trend has been for costs of living to be rising much faster than real wages for those with the lowest paid jobs in developed countries like America.

First of all, why should so called advanced nations stop developing? Why make a fundamental distinction? Why not set rules that put the whole world on an upward trajectory? (Though I guess, if you're for wealth distribution, you really ought to be pro wealth shifting from former powers to the developing world.)

i think, given the right kinds of regulation, they wouldn't stop developing. However, we've seen a lack of financial regulation, education policies that are lagging behind the new markets that have emerged, and lack of retraining options after the outsourcing of manufacturing to developing countries, to name a few things. But it's quite a complex subject, and one which i don't understand all the factors of yet, so i'll concentrate on financial regulation for the rest of the post.

As for redistribution of wealth to the developing world... because of the wide differences in cost of living between different countries, separated fiscal policies and currency, etc. i think it's quite difficult to think of a policy that can work this way. Redistributing within a countries borders is much easier.

nadiatims wrote:

Secondly, what do you think is the major driver of inflation in America (and more broadly the west)? Obviously it's been the unsustainable expansion of credit to fuel to allow all those people who can't afford houses to get houses, government borrowing to fund wars and expanding social programs and so on. Meanwhile the nations that adopted the most hardcore socialism (china and former USSR) tanked their economies economies pretty damn quickly causing poverty and famines, eventually leaving them with no options but to adopt the economic reforms that are now causing them to do better (especially china since the 80s).

Yeah, i'm not suggesting the world goes communist... former soviet countries were the picture of waste and destruction of economy. There are many things that capitalism provides far better than communism could. However, there's also services that i think government can run better... those services that we generally want everyone to have access to when they need them, like hospitals, social services, roads, etcetc.

In general, what we need to take from capitalism is the "competition driving up quality" element, in order to run these systems to a high standard. For instance, one of the changes that was made to the health service in Britain that i thought was a good thing was allowing people to choose which hospital they wanted their treatments to be done at. Assuming there is high quality information that would let patients make an informed decision on where they want to be treated, this is a far better way of both increasing quality of choice for patients, as well as being able to target failing services to improve. It's by no means a perfect system yet, but this is the kind of thing we need to aim for in public services, i think. The good taken from both capitalist and socialist models, and used to create an overall better system for everyone.

I also don't really have a problem with there being some private care alongside public care, but generally only where it allows things like private rooms, not where there would be an extreme difference in the quality of care given.

One interesting point about health systems is that while ridding ourselves of diseases like malaria and various worms has a good effect on the economy (because they impact how well a person is able to work), increasing life expectancy actually tends to decrease GDP per head over 30-60 years after the increase (of life expectancy from 40 to 60). So, it's actually not something that capitalism should value to begin with, necessarily. I doubt there's anyone who individually wouldn't want a higher life expectancy though (assuming such a higher life expectancy gives some quality of life in later years).

I also think that allowing "consumer choice" between schools, and offering more different types of education than they do now would be a good thing.

So yeah, i think retaining most of the beneficial elements of capitalist business models, while still providing the services through the state is a possibility. We don't have to use such wasteful, overly controlling methods anymore.

One other thing that's interesting is the rise of different types of business models within capitalism, such as co-operatives. These models can often provide a lot more social good, and good to their workers than traditional capitalist business models do. One of the problems we're facing now is that for most businesses, those who own the business have no stake in it as a whole, and aren't interested in improving it or the quality of service it provides. They're usually looking for a short term profit before selling their shares and moving onto the next one.

nadiatims wrote:

Icecream wrote:

The thing is, it basically makes no difference to the performance of someone if they're getting paid 1.2million or 1.3million. So even if that's what the "market" thinks someone's worth, it doesn't really make a difference. It's not actually reflecting a real situation in the world. So i see no reason why it isn't fair to tax and redistribute that.

Well when these CEOs invest that money, they are more likely to invest it in projects and businesses create wealth by benefitting society, after all that's one of the ways they become rich in the first place, being better at managing their money. Otherwise when the CEO's deposit their money in the banks, they are increasing the potential lending power of the banks, in effect saving money on behalf of society.

Except, this isn't what we've seen, at all, especially in areas of traditional greed, like banking. They aren't better at managing their money, they're better at scamming people. To think otherwise is naive, i think, given recent history. Other forms of business, like tech business (i.e. ones that actually create value) is far better in this respect... but we definately need fairly heavy financial regulation to stop bankers creating bubbles and running off with the money.

So, lets go back to the inflation thing you were talking about above... the recent housing crisis. This has occurred twice since deregulation of financial instruments under Clinton, once in the east, and once in the west. In both cases, the bankers took all the money and ran, leaving ordinary citizens to bear the weight of the consequences.

It's not possible to blame the extent of systemic corruption we saw entirely on the retarded policies of Bush (though he is certainly partially responsible as well). The extent of the problem was mainly due to a lack of financial regulation.

So, previously, mortgage lenders were responsible if their loans failed, meaning they didn't lend to subprime customers. Supposing you had a retarded policy forcing these lenders to loan to subprime customers, AND had financial regulation, this would have been a relatively small problem, and the bubble would have burst pretty quickly.

However, what happened because of lack of financial regulation was that these lenders sold on those loans to investment banks. The loaners now don't have to worry about whether they are subprime, or whether they foreclose, because the investment bank has already paid for them. The investment banks, on the other hand, regrouped these loans, paid rating agencies to rate them as non subprime, and then sold them on. Now they have the best of both worlds, because they are in a situation where they can sell subprime mortgages in large groups, at high prices. Because it creates more profit for them, they now actually want the subprime mortgages rather than good mortgages. They then manage to convince the government to allow further deregulation, so they can have higher leverage, and buy more of these subprime mortgages.

Only, they know they're subprime, so now they start actively betting that these mortgages will fail. Basically, at the same time as they're selling them on to investors with an AAA rating, they're betting that they fail, so they again make money when those loans do in fact foreclose. However, they are worried that the extent of the problem is now so large that the businesses that are allowing these bets are going to go bust, so they buy insurance to cover that.

In the meantime, all of these investment banks are paying out billions and billions of dollars on the short term profits they're making on these crooked deals to their CEO's and high level employees.

Now, if you, personally, were making hundreds of millions of dollars per year... enough to secure your future for the rest of your life, many times over, would you particularly care if your company ended up going bust? You will not be liable for any financial responsibility to those you've scammed when it does, of course. Well, somewhat unsurprisingly, bankers don't care.

Note that they wouldn't be held personally financially responsible, even if the government didn't bail the companies out.

Yes, this money goes somewhere... it can now be reinvested by banks, again using high level financial instruments to create yet another bubble somewhere or other in the world, to make more profit at the expense of others. Or it goes on private jets, mansions, and to shadow economies like prositution and drugs. There's no guarantee that it stays in the society that they've stolen the money from, indeed, a lot of it won't. And very little of it will end up back in the hands of your normal working citizen, or doing anything for the good of society.

In the meantime, basically nothing has been done to secure higher regulation of the industry, because those same guys are very closely linked to, or actually have, high positions in the US government, and top level academic universities. There are huge conflicts of interest in economics writing, leading to indoctrination to their cause, and spreading of the message that "deregulation is good" and government is bad for the economy, etc.

^^This is basically a short writeup of "Inside Job" http://vimeo.com/32828077 but i've been throwing a lot of links to documentarys at you lately and it's quite long, so i thought i'd write it in case you don't have time to watch.
While pretty one sided against bankers, and doesn't mention bad government policy, it still gives you a fairly good overview of just how corrupt financial institutions are and how many pies they have their grubby fingers in.

Last edited by IceCream (2012 January 30, 10:49 am)