Capitalism is good

Discussion in 'Markets & Economies' started by mmm....shiney!, Jul 21, 2015.

  1. Phransisku

    Phransisku Member

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    My initial question was your first question mirrored in the communist mind. And I did it to show you your own bias (could you see it?), not to avoid answering the question. Note that right after I answered all of your questions.


    Actually I have. I didn't tell you the details of my alternative, just the outline. And I did it on purpose. I want you to think by yourself. Can't you realize that both Communism and Capitalism take from the productive and give to the non-productive?


    I could give you a world of examples. I will choose the very company I work at. It's the 3rd player of the national market. I work there at projects to bring process innovation and continuous improvement. We establish partnerships with consulting companies and universities that bring top-notch knowledge to our organization. We produce technological and operational tools that allow us to be much more efficient than our competition. Moreover, we make a daily effort to control costs and maximize results. I have no doubt we have the best operation of the whole industry (the one that performs best with less resources).
    The 1st and 2nd players of the market have no partnerships with consulting companies and universities, actually no projects department of any kind, not even continuous improvement teams. They just trow in money on every operational struggle. They don't need to control costs as we do. "Let the stocks be high, let the resources be many, and if they're not enough we buy more". They're just big and with deep pockets. Are they less efficient than us? No, they aren't. They manage to get the same (if not better) operating margin as we get. How so? Economies of scale, my friend. If our organization switched resources with one of them, meaning that we would keep our people, know-how and modus operandi and we would get their infrastructure, equipment and money and vice versa, man, we would be kings and they would implode in a couple of months.


    In most cases, no one knew about its existence in the first place. The tiny company doesn't have the projection, the visibility or the marketing budget to get known.
    In other cases, the big corporation just copies the innovation and, even being late, reaps all the rewards.
    Only in a very small percentage of cases, the tiny company succeeds. And, even here, it's common for the big corporation to acquire them and reap part (if not most) of the rewards.
    You assume the market (every market) has perfect competition, perfect knowledge, etc. That's not true at all. It's interesting that it's you who uses economic myths. You see the whole world as a small village where everybody knows each other and the "playing field" is leveled. That's not the world we live in.


    They do not produce wealth, period. If I lend you an oven and you produce bread with it, only you generated wealth, I didn't. At most, you could say that both your work and my oven have produced wealth. My oven, not me. If I died, the bread would be produced anyway. If you died, it wouldn't.
    An efficient socio-economic system needs workers and resources, not owners. Owners do nothing. If we remunerate them, we are giving to the non-productive and, therefore, the system is incentivizing people not to work.


    That's like saying that without workers a communist system cannot operate and wealth cannot be generated. Therefore, the workers are at the center of a communist system.
    That's false. In a communist system, workers are remunerated, but then non-workers are too. Therefore, work is not at the center, the community is.
    In a capitalist system, workers are also remunerated, but then non-workers are too. Therefore, work is not at the center, capital is.
     
  2. Phransisku

    Phransisku Member

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    Exactly. My point: there are communities in capitalist societies and capital in communist societies. Both systems have something at the center (capital in Capitalism and community in Communism) but they're not just about what there is at the center.
     
  3. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    The situation you have described is not efficient, it is a waste of resources and capital. The "economies of scale" you refer to, which is just deep pockets not economies of scale at all, does not incentivise effort nor does it make the most productive use of talent, and as you rightly pointed out, if your organisation were to switch places with the other two, it would most likely flourish - and as a result, resources would be used more effectively and productivity would increase thus creating wealth. Inefficient business practices destroy wealth, so your attempt to prove your point that economies of scale and having access to loads of cash incentivise effort and thus lead to an increase in wealth (which is what capitalism does) is incorrect.


    What's wrong with any of that? The tiny manufacturer has the first opportunity in the market, those that enter the market first always make the most profit as they fulfill a niche, there is a delay between those the time that the new product enters the market and when rivals can begin production.

    Ummm, no.

    The owner of the oven must have produced something in the first place in order to invest in capital goods (the oven), or else, how did the capitalist acquire an oven in the first place? Without an oven the bread maker is incapable of producing anything and therefore is incapable of generating any wealth. This goes back to my previous point that without capitalists, most of humanity - which on the whole possess little remarkable ability - would be solely reliant upon their own meagre capacities, the entrepreneur and the capitalists provide the opportunity for us to lead a better life than if we were forced to rely upon our own capacities.


    Faulty logic. You haven't provided any evidence that links your premise with your conclusion ie:

    Premise: In a communist system, workers are remunerated, but then non-workers are too.
    Evidence: ?????
    Conclusion: Therefore, work is not at the center, the community is.



    Premise: In a capitalist system, workers are also remunerated, but then non-workers are too.
    Evidence:?????

    Conclusion: Therefore, work is not at the center, capital is.
     
  4. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    A non-worker in a capitalist society does not get paid any near what a non-worker in communist society or do they?
    A worker in a capitalist society gets paid what their peers decide.

    In a ideal communist society everyone get paid the same if you don't want to work you don't, or do the bare minimum and consumer as much as they can.
    There a lot of people in a capitalist society who would love communist life, not work if they didn't have to, so given the opportunity in a communist society there will be lot of people who will become less productive.

    Is the closest communist society you describe Cuba or North Korea, can't be USSR.
     
  5. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    +1

    Phransisku seems to think that capital exists as a thing rather than something that is made by someone first. All capital is made by someone forgoing their personal consumption first. Useful* capital is then effectively rented out to labour (typically via the entrepreneurs) so that the workers can improve their productivity. The increased production resulting from the productivity gains are shared between the parties in mutually agreed shares (which can change month-to-month and depends on the relative opportunity costs).

    Any return on the capital is simply a reward of a portion of the value added by it back to the person who earlier in their life did not consume the full value of their labour (ie savings) and took a risk by converting their savings into capital. The capitalists underconsumed compared to the workers. They took a risk that doing so would generate value to society and enable them to have higher consumption in the future. There is nothing wrong with this.

    Phransisku is probably mostly concerned about the distribution of the value-added by the capital back to the different parties. Well in an egalitarian society without government-created barriers, there is nothing preventing people moving between the classes of worker, capitalist and entrepreneur as they choose. Indeed many people are in multiple roles simultaneously throughout their life.



    * And not all capital is useful or it's usefulness rapidly depreciates because of other people's activities.
     
  6. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    They have people at the centre. That is all.

    (Fallible people who do not have perfect information but all who have limited time and scarce resources and a variety of ends they want to achieve - essentially they want to take the scarce means they have available to them and, using their knowledge, act in a manner that they expect will improve their situation by attaining their most valued ends in some future period.)
     
  7. gingham69

    gingham69 Member

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    zzzzzzzzzzzzzzzzzzzzzz ad naseum! ;)
     
  8. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Yes, there's more entertainment in Pommie bashing. :cool:
     
  9. precious roar

    precious roar Active Member

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    Not really the case if they collaborate.
     
  10. Phransisku

    Phransisku Member

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    You didn't pay attention to what I said. They waste more than us but they are as (if not more) efficient. Their scale makes some of their fixed costs less significant and it also allows them to more easily provide a high service level to the clients (both impact efficiency). Their deep pockets allow them to easily make profitable long term investments. We need creativity, ingenuity and a lot of effort to go around and get something similar (at best).
    I can't go into specifics but I can tell you that both the 1st and 2nd player have made some long term investments that we could not do (we didn't have the money for that), and that is making them to easily get sales (which makes it harder for us to get sales). We are responding with a creative and bold iniciative, which has a lot of potencial but it's far from being as strong as theirs. So, on the one side you have capital being applied on a pretty obvious but lucrative investment (there is no merit on that, they just have the money to do it), and on the other side you have a lot of talent and effort trying to produce some result, which will never be as strong.
    As I'm writing this, I'm remembering a million other similar cases. This is just how Capitalism works. So, I reiterate "Capitalism also does not properly incentivize effort and talent among workers and enterprises, since capital itself and economies of scale can do the trick".


    You said "Clearly the innovative product wasn't so innovative after all because no one wanted it.". I showed that it isn't necessarily true (and in most cases it isn't). Now you're asking me what's wrong? You're "clearly" is wrong. It's rather an "eventually". And, going to the initial point, Capitalism generates forces so strong to keep on the top the same players that we begin seing more talent and innovation from who has little resources and, even so, the former remain on the top. And it's so easy to understand why. The clue is in the title. "Capitalism" - it puts capital at the center of the system, so capital has too much power. It has not only the power to get wealth (goods and services) but also the power to produce wealth. This latter power makes capital equivalent to work. You can work and gain wealth or you can own capital and gain wealth not working all day. That makes Capitalism a system that takes from the productive and gives to the non-productive. Is this so hard to understand?


    No, the tiny manufacturer doesn't start ahead of the major corporation. It has the same opportunities, if not less.
    Those that enter the market first, if they're tiny, they almost never make the most profit, as I just told you.


    Not necessarily (somebody could have just given me the oven) but that's not the point. If I worked in the past, I got the oven in return (and that should be it). But now I'm not working, I'm gaining wealth, and the oven continues to be mine. I'm not being productive, you are. And part of your production is going to me. I'm not discussing if this is fair or unfair (that would be another although interesting conversation). I'm just affirming that wealth is flowing from the productive to the non-productive. And, so far, you haven't shown I'm wrong.


    Communism: Evidence: The community is so relevant that its issues regarding people that do not work but have needs are enough reason to remunerate them.
    Capitalism: Evidence: Capital is so relevant that its use is enough reason to remunerate its owners, even if they do not work.
     
  11. Phransisku

    Phransisku Member

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    If I have 100 flats and rent each at 25% the average salary of my country, I earn 25 average salaries without working. Do you see anyone in a communist society earning that much without working?
     
  12. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    @Phransisku, I'm not sure where you get your ideas from but they have precious little to do with capitalism and are just plain wrong.
     
  13. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    If that's all there is to it then you should go buy 100 flats.
     
  14. CriticalSilver

    CriticalSilver New Member Silver Stacker

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    Who manages community? ... This is the failure of socialism right there, feeling that some uber-powerful entity MUST manage community. Community is what develops when freedom is protected. The real question should be, "who manages freedom?"

    Likewise with capitalism actually. What good is capitalism without protection for the freedoms of a people?

    Liberty is good. Control is bad. Coercion is worst. Violence is worse still. Ideas of Control, through whatever "-ism" you choose, breed desires for conformity, which breed rules of coercion to achieve conformance, which breed violence to discipline the non-conformants.

    Control is the opposite of Freedom. Enshrine Freedom and Liberty as societal virtues and the rest will take care of itself without the need to control.
     
  15. Phransisku

    Phransisku Member

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    I said:
    "They waste more than us but they are as (if not more) efficient." - it's a fact
    "Their scale makes some of their fixed costs less significant and it also allows them to more easily provide a high service level to the clients (both impact efficiency)." - this is also a fact
    "Their deep pockets allow them to easily make profitable long term investments." - fact
    "We need creativity, ingenuity and a lot of effort to go around and get something similar (at best)." - fact

    Against facts there are no arguments. Capital itself and economies of scale can produce the same results (sometimes better results) than talent and effort.

    You can ignore my sentences, you can pretend you understood something different, you can write long narratives about points that weren't raised (in hopes that I forget about the point being discussed), but you can't disprove facts. Facts are facts, live with them.



    I also said:
    "If I worked in the past, I got the oven in return (and that should be it). But now I'm not working, I'm gaining wealth, and the oven continues to be mine. I'm not being productive, you are. And part of your production is going to me. I'm not discussing if this is fair or unfair (that would be another although interesting conversation). I'm just affirming that wealth is flowing from the productive to the non-productive."

    Although you repeatedly tried to dodge this point, I've managed to put it so simple, so logic, that now you couldn't even quote it (let alone respond to it). Are you afraid to see that your beloved Capitalism takes from the productive and gives to the non-productive? Are you afraid to realize that the system you regard as so perfect actually suffers from the same problem as the "evil" Communism?
     
  16. Phransisku

    Phransisku Member

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    Maybe I should. If a rich person doesn't do it and opts to work 8 hours per day, 5 days per week, either that person loves working or he/she is being plain stupid.
    Just like in Communism, if a person can earn wealth without working and opts to work, either that person loves working or he/she is being stupid.
    The only difference is that the rich person in Capitalism can earn 25 average salaries without working. I'm not seeing any communist system allowing that.
    In comparison to Communism, what Capitalism wins in efficiency, it loses in morality.

    Anyway, that was not the point. Ipv6Ready asked whether a non-worker in a capitalist society would get paid as much as a non-worker in a communist society. And the answer is yes, if not more (far more).
     
  17. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    And you label that "efficiency"?

    Capitalism is not a precondition to economies of scale, neither are economies of scale an indicator of a capitalist system. Economies of scale can exist under any economic system, therefore to cite it in a debate about the merits or not of capitalism is a red herring.

    Only as far as their skills in administering and choosing those long-term investments allow. Many a vast fortune has been lost with poor decisions. But again, that has absolutely nothing to do with a debate on the merits or not of capitalism, another red herring.

    You would do, as all small players in a market have to when up against larger players. Business owners are essentially "lazy", they will exert as little effort/expenditure as required in order to maintain a market advantage. A smaller player must exert more effort or creativity in order to break into the larger businesses's consumer base, particularly as you attempt to argue, if the larger players are more efficient. I would argue differently though, the smaller players in being more creative and innovative are actually attempting to meet consumer demand more efficiently ie improving productivity. However if you can't undercut the opposition on price, or you can't offer a superior product then you are going to lose. So on the one hand you may have capital, wealth and market advantage and on the other you have creativity and innovation but neither is a sure-fire recipe for success in the marketplace if they don't capture consumer demand. And capturing consumer demand can only be best met under a capitalist system.

    You need to re-read bordsilver's post regarding consumers delaying their current gratification in the hope of reaping greater future rewards: http://forums.silverstackers.com/message-953238.html#p953238
     
  18. SilverSanchez

    SilverSanchez Active Member

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    I haven't read the entire thread so forgive me if this is irrelevant.

    When a country's government protects life, liberty and private ownership of property, this provides the unique environment for advancement on the basis of merit.

    For example:
    The most basic investment is the accumulation of cash - we call it savings, but it is known as Capital.

    This capital is valuable and therefore banks offer interest on your cash if you store it with them - this is the most basic return on equity or yield.

    This capital when re-invested into a more risky venture also attracts the potential for greater return. So someone may re-invest their capital to building a business, as that business grows other people can benefit from its success via cash wages.

    This expansion of the availability of cash starts to drive yield on cash lower. But because of business creation there are now private companies who can trade shares on a market (this happens as a function of small bussiness success not failure).

    So people who have capital may invest some of their capital into the stock market and earn a return via growth or dividends.

    This then increases the variety of income giving people a little more courage to take the risk from being an employee to being a small business owner, or a franchise owner or such things.

    Capitalism is not a bad word, it is how economies are created and grow. Socialism can only exist when an established mature Capital structure exists, because socialism cannibalises growth and steals useful things like capital from productive hands and gives it to people who did not earn it.

    Capitalism is protected by a government, socialism is enforced by a government. One represents liberty and freedom for people, the other represents control and increasing oppression of people.

    That's a basic simplified explination. possibly over simplified but in any case...
     
  19. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    Talent and effort are actually less relevant than people like to think they are to an economy. The most important thing is creating value for the people you serve. Often there is a high correlation between people with talent and effort creating the most value but definitely not always.

    I think however that you are too caught up with this concept of "economies of scale" channelling wealth to people. It's not as easy as you think it is. If that's all that it takes then, as I said, go buy a 100 flats. Go scale up your small enterprise and drive the incumbents out of business. You'll soon find that there is a lot of effort maintaining your economies of scale for long periods of time, that there are a lot of risks, and that it requires continual reinvestment back into your depreciating capital.
     
  20. CriticalSilver

    CriticalSilver New Member Silver Stacker

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    That last bit leaves quiet a lot unstated, as there are a few factors that drive the demand to re-invest with the most notable being the state of competition:
    1) Monopoly - If the corporation has a monopoly, sponsored by the state or otherwise, the rate at which re-investment occurs will be low, as assets are sweated for as long as possible to minimise operational expenses. In the case of a public company, it is very likely that the State will be extracting operating profit in the forms of dividends, the level of which are defined for political expediency, leaving the company less able to efficiently perform its function the older it gets. Invariably this will lead to some form of crisis where the entity is sold (to cronies for lower than replacement value) with the promise of continued monopoly (trading government dividends for taxes) in socialist/progressive/fascist states such as in Europe and Australia, or where Politicians refuse to accept responsibility and terminate (often with lethal force or imprisonment) the unfortunate management to "save face" with the public and continue to repeat the farce over and over; or
    2) Free Market Competition - With multiple competitors breathing down your neck or a competitive desire to increase market share, investment in innovation is critical. This activity has to be undertaken WHILE current operations continue and are maintained, leading to a whole lot of organisational focus (read JOBS) needed to innovate and then integrate those innovations back into the business.

    Socialists live in a fictitious utopian dream of sharing wealth for the benefit of all, refusing to understand that such sharing means forced wealth redistribution from people who earned it (theft) to people who didn't, by people who rule. While laying bear their fake morality, they willfully ignore such contradictions to protect their delusion of the benevolence of their intentions, rationalising that the ends justify the means.
     

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