So, the Communists won the Cold War, didn't they?

[errol43]

What about Japan! Should have been No1 in the world...What did they do wrong..For 40 years after WW2 it seemed like that they would overtake the USA as top dog.

Their mistake was real estate..At one time in the 1980's the land in Japan was valued at more than all the rest of the land of the whole world...$1000 sq inch.. The Australian Government sold a piece of land of 16sq yards for $16m ..The land could only be used as a car park.

The overheated RE market showed up on Japanese balance sheets showing huge asset value for which their own banks lent yen to these companies to buy each others assets.

The bubble burst around 1990 and that was the end of their turn in the sun.

One of the best unwritten rules they has was that the CEO in any company would not be paid more than 30 times that of the lowest paid worker.

Derivatives will be the downfall of the Western World, then it will be the turn of China, India and Brazil etc.

I hope that Australians realize that we ride on the Pandas back and that we spend our wealth wisely or else we too will find ourselves at the bottom of the scrap heap.

Regards Errol 43

 

[Lovey80]

Macro economic planning has proven to be a very effective tool in developing a nation's economic capacity.
If you look at Japan after WW2, the technocrats targeted key industries to develop and heavily directed investment into them and protected them from foreign competitors. The result in autos, steel, chemicals and electronics was that Japan became the world's second largest economic power.

Macro planning on a broad scale for a country that is devastated by war can surely have it's merits. Japan was already a very tightly managed society when WW2 ended. It was not difficult for the Japanese people to continue to do what they are told to rebuild the country. Government had very little to do with Japans most successful enterprises. They were all done in private enterprise. Take Sony and Honda as two of many examples.

On the flip side we have Western Germany being centrally planned by the US/UK overlords and it was in just as big a mess as Eastern Germany copping the same thing from the Russians. That all ended when Ludwig Erhard took control (by releasing control) outside the will of those powers and Western Germany flourished. My bet is that if Eastern Germany had been under his control at this time then they would have put Japan to shame.

They've messed it up now through rampant stock market speculation and government debt, but this doesn't remove the fact that MITI was very effective in the economy that it built. Other successful stories would include Taiwan, South Korea and Singapore.
So it is a lie to say macro economic planning is a bad thing - it depends on how you do it.

The messed it up by bailing out industry and not allowing the losers to fail. The huge debts allowed them to have a two decade stagflation and what do they have to show for it. Under hard/sound money the bubble would never have been created in the first place. When it popped and the government should have let it pop and the malinvestment been liquidated. It would have lasted a year or two at the most and they would have gotten back to real growth.

Take Australia as an example. We have no macro economic planning so we cannot take advantage of any medium to long term opportunities. Governments can only think three years ahead and most corporations only think to the next annual report or deem medium term investment too risky in an unstable market.
When we finally dig out the last of our iron ore and coal, what will we have to show for it? All that wealth will have gone to foreigners to be frittered away who knows where.
We still use coal-fired power stations. If we had some kind of technocratic planning, we might have been able to focus on solar power and become a world leader. We had the technology under development but lack of investment saw it go overseas. Now the Chinese are the world leaders in that field.

No Macro planning in Australia? You have to be kidding. Does the housing bubble courtesy of Howard and Costello ring a bell to you? Billions upon billions thrown into a craze of people buying and selling houses to each other while productive industries starved of capital. Maybe if that hadn't have happened, the big boys would have had to pour more into business lending to gain a profit or even been able to support more of the mining investment instead of offshoring all those profits.

Then talk about coal-power? Maybe if Rudd and Gillard hadn't picked winners and losers we may have had the business investment in a better use of the suns energy and been a world leader. But Labor picked a Loser in solar and made it a short term winner, starving potential millions/billions that could of gone into R&D in a company trying to make that quantum leap that could have made their version of solar a winner. Don't you see? Every time a government manipulates a market through intervention there are unintended consequences and usually the opposite of what they are trying to achieve. Why would someone that is looking to invest a big chunk of capital into a company trying to make solar financially viable when they can stick that money into an already established business that just got a free kick from the government even though the product is inferior to other alternatives? Answer is they don't.

The free market is the most efficient use of resources we have.

 

[wrcmad]

I want to work for your company and take my share of your profits.

Ah hah...but they are your profits - you earned them.
Conversely, if we failed in our enterprise, I'd expect you to pay up your share to our creditors - the utility banks.
We would all be joint partners in the enterprise.

Meh, cooperatives don't work in Australia. This has been proven over and again - too many financial restrictions to be able to stay competitive.

 

[Lovey80]

I want to work for your company and take my share of your profits.

Ah hah...but they are your profits - you earned them.
Conversely, if we failed in our enterprise, I'd expect you to pay up your share to our creditors - the utility banks.
We would all be joint partners in the enterprise.

Meh, cooperatives don't work in Australia. This has been proven over and again - too many financial restrictions to be able to stay competitive.

Sure they do. Well run ones that is. Fisheries have had co-ops working for years and have remained successful.

 

[hawkeye]

I want to work for your company and take my share of your profits.

Ah hah...but they are your profits - you earned them.
Conversely, if we failed in our enterprise, I'd expect you to pay up your share to our creditors - the utility banks.
We would all be joint partners in the enterprise.
.

What if someone didn't want to take the risks and just wanted normal risk-free employment? A situation where if the company goes belly- up they are not personally liable? Of course with less risk comes less return. Fair's fair. Or would this model be banned under your system?

As for the rest I think it can be generally boiled down to moral hazard. If a person (or group) is not personally liable for the decisions they make, then don't be surprised if they are irresponsible or corrupt. Moral hazard is common in both communist and capitalist govt systems. You can promote one or the other, whichever you wish, but you can't deny that one fundamental reality.

 

[anonmiss]

mikedm said
'I prefer Stefan Molyneux's solution: just raise your children intensively and without violence and they will be smarter, centred and won't crave material excess. Eventually a society raised like this will outgrow any formal institutions and will want to make its own rules as opposed to being ruled over.'
First time I've heard this philosophers name mentioned on the fourm and want to say a big PLUS ONE.
It stars from the bottom up, too many times we have tryed to change the system from the top down and every time we have tryed this change it has had two common denominators, FORCE and VIOLENCE, be it the violence of military action or forcing people to vote.
The idea of no government inspires panic of what would we deteriorate to without someone controlling us. Perhaps a shift to thinking to what could we inspire the next generation to become without the threat of controll and violence limiting their capacity would lead us to retink our stratergy from a forced top down change to an inspired bottom up growth in freedom.

 

[Guest]

Long interesting posts here, I'll just add that I dislike communism because I like private ownership.

 

[Earthjade]

Don't you see? Every time a government manipulates a market through intervention there are unintended consequences and usually the opposite of what they are trying to achieve.

This is not true.
I have already pointed to the examples of Japan, Singapore, Taiwan and South Korea.
Strategic industry planning is not risk free, but when done properly, it is highly advantageous to a nation in building their economy.

If we rely on the laws of competitive advantage to dictate what industries a nation should pursue, as argued by David Ricardo, that would leave many nations in a state of pre-industrialisation. Portugal and England in the 19th century have always been used as the classic example of this.
I also point to this irrefutable fact - every advanced nation in the world at some stage implemented heavy protectionist policies to ensure the development of their domestic industries.
Britain, Germany, USA, France - all without an exception. Go look up the history of it.
Competitive advantage is not something that circumstance gives a nation, it is something a nation chooses to consciously develop (or lose).

What if someone didn't want to take the risks and just wanted normal risk-free employment? A situation where if the company goes belly- up they are not personally liable? Of course with less risk comes less return. Fair's fair. Or would this model be banned under your system?

In reality, models are never absolute. They develop and evolve out of circumstance, necessity and a range of economic and societal factors. Sometimes these changes are good and sometimes not, but that's the reality of it. In general. I would say that choosing to work in a corporation should never be risk free and without liability. If you are an employee of the corporation, it means you are a joint partner with everybody else. You reap the benefits and share the risks. Without the risk mechanism, you remove an important natural control to the system

However, here's the radical part of my vision/dream/model/thoughts/concept:

Working in such a corporation would only be one of the jobs that you had.
As a result, your risk could be "hedged".
What do I mean? Well, obviously you couldn't work Mondays and Tuesdays at Corporation 1 and then Wednesdays and Thursdays at a competitor. that would be a conflict of interest.
But you could work in another industry or perform civil service.
Most nations talk about a multi-skilled workforce but this is just empty rhetoric. But what if we really were multi-skilled?
It would definitely make our lives more interesting.
Of course, if you really loved your job, you could stay in it permanently but you wouldn't be hedged.

Or here's another idea I've been thinking about:
What about having to pay for a job? Like a bond when you rent a house.
If you leave the company, you get your "bond" back and can use it to buy your next job.
If the company fails, you lose your bond but that is the extent of your liability.

These are all crazy, out-there ideas, but I think people should be a lot more "out there" in how they think about how society and the economy is run.
We have problems that are unique in human history but all we do is stick to tired old ideological lines that don't offer us much of a way out.
People here will disagree and seem to believe a free market with a gold standard is the ultimate solution but I think this is hopelessly naive.
One of the problems being that a gold standard exacerbates a deflationary spiral and I haven't seen a gold standard proponent convincingly answer how that problem would be solved.
One idea that intrigues me is one by Satyajit Das - you have fiat money but it has a time limit for expenditure.
Crazy idea but worth studying to see how such a proposal would work and how it would help solve our current fiat bubble problems.

But anyway, I believe it is important that we think "blue sky" about these modern monetary and economic problems we have.

 

[Earthjade]

mikedm said
'I prefer Stefan Molyneux's solution: just raise your children intensively and without violence and they will be smarter, centred and won't crave material excess. Eventually a society raised like this will outgrow any formal institutions and will want to make its own rules as opposed to being ruled over.'
[...]
The idea of no government inspires panic of what would we deteriorate to without someone controlling us. Perhaps a shift to thinking to what could we inspire the next generation to become without the threat of controll and violence limiting their capacity would lead us to retink our stratergy from a forced top down change to an inspired bottom up growth in freedom.

I do agree that this is a very good idea.
because it is obvious that no matter what system you develop, it can always be abused.
Therefore, the final line of defence is always the people - and the greatest weapon an individual can have is an educated and reasoning brain.
In other words, ignorance is the greatest weapon of a tyrant.

I would love to see what a society without government would look like - where everything just worked because people knew where their rights and responsibilities lay without having to be told by others or being forced. John Lennon wrote a song about that, I think.

But I don't think we will ever get there in our lifetimes. We just haven't socially evolved that far.
But that doesn't mean we can't start done the path to that goal. How would one start.

You know what encourages me to believe it is possible?
Imagine we were peasants in 12th century Europe and I said to you:
"You know what? One day, everybody is going to be able to read and we will be able to choose people to represent us in the government. If I wanted to start a business or move to another nation, I would be able to do so freely. No one would be able to arrest me without just cause and I would be able to have a trial where I was judged not by my lord, but by my peers."
Given the church controlled education and peasants were bonded to the land, everyone would have called that peasant a lunatic and probably thrown him into a dungeon for plotting to lead some kind of rebellion.

But it happened.

So anything is possible for us in the future, if we want it that way.
Even this "utopia" mikedm mentioned. But utopia is not problem-free: it just has a higher quality of problem!
The danger today though, is we are letting slip some of these developments we have gained.
Take a look at the outrageous abuses of the legal system in teh name of defending us from "terror".
The fact that the internet and smartphones have the potential to be used as tools of monitoring and oppression also greatly concerns me.

 

[hawkeye]

What if someone didn't want to take the risks and just wanted normal risk-free employment? A situation where if the company goes belly- up they are not personally liable? Of course with less risk comes less return. Fair's fair. Or would this model be banned under your system?

In reality, models are never absolute. They develop and evolve out of circumstance, necessity and a range of economic and societal factors. Sometimes these changes are good and sometimes not, but that's the reality of it. In general. I would say that choosing to work in a corporation should never be risk free and without liability. If you are an employee of the corporation, it means you are a joint partner with everybody else. You reap the benefits and share the risks. Without the risk mechanism, you remove an important natural control to the system

However, here's the radical part of my vision/dream/model/thoughts/concept:

If it's a voluntary situation on both sides then what is the problem? If one person wants to take more responsibility for potential higher profits I don't see what is wrong with that. They will face worse consequences if it fails. If people want to share responsibility and profits (including the responsibility to raise the necessary capital), that is fine too.

This is the problem I have with all these big ideas. They tend to be busy-bodying. People thinking they know what's best for others. The government reflects this to the extreme. Why not just have a situation where people can enter into contracts if they so wish and it can be determined by both parties? Which I would call freedom (shock, horror!).

 

[Shaddam IV]

Communism never works because it negates the idea of private property. Many utopians think this is a good idea. They forget something fundamental though - Human nature. In any society, sure as the sun rises each day there are people who are prepared to get up, work hard and build something for themselves and for their community. Just as surely there are those who are lazy, stupid, parasitic, predatory and cunning. These people will always take the path of least resistance and live opportunistic lives.

In a society where the most successful predators (those at the top in positions of power) mandate that "everything is owned by everyone" the family that finds a piece of wilderness, builds a cabin, tills the soil and plants crops will reach a point where they have made something good from scratch - They have taken nothing and created a warm dwelling, food and security. Once they have done this the lazy opportunists who have been living in shacks drinking vodka soon appear saying: "Comrade! Your brothers come to share this home which is the property of us all! "

 

[thatguy]

Guest Post: An Example Of Why This Country Is Headed In The Wrong Direction
http://www.zerohedge.com/news/guest-post-example-why-country-headed-wrong-direction

People these days think it's a great idea when the government sprinkles money around the middle class, and love the idea of politicians 'coming together' to build a better economy.

In reality, when people hear talk about politicians 'building an economy' they should run away like a scalded dog.

Throughout history, a lot of other politicians have also tried building an economy it's called central planning, and it just doesn't work.

From Diocletian's failed 'Edict on Prices' in 301 AD in which the Roman emperor tried to fix wages and prices, to Stalin's Soviet Union, to Mao's China, to Mugabe's Zimbabwe, the verdict is obvious: economic growth is better left to the private sector, not government.

 

[Earthjade]

This is the problem I have with all these big ideas. They tend to be busy-bodying. People thinking they know what's best for others. The government reflects this to the extreme. Why not just have a situation where people can enter into contracts if they so wish and it can be determined by both parties? Which I would call freedom (shock, horror!).

There needs to be limits otherwise the system is self-defeating.
Let me give you a counter-factual:

Say I'm a business that doesn't like the uncertainty of a free floating price mechanism.
It's a real pain for me because I can't properly predict my potential profits from one reporting period to another. I want some more certainty.
I meet with the three other suppliers in my industry and we all decide it's best that we come to an agreement on the price of our goods and that we should co-operate in putting up barriers to entry of any new competitor that may try to undercut us.

This is a freely created contract by voluntary agents, therefore, it should be enforced.
However, it is clearly price fixing and a distortion of the market.
Therefore, it would probably be made illegal.

But isn't making it illegal just the government busy bodying and trying to decide what is best for others?
Why shouldn't these suppliers freely associate, contract and collude? The price-fixing contract should therefore be enforceable.

Or what about a contract where somebody sells themselves into slavery for money?
Maybe this is to pay for a life-saving operation for their child.
Again, the potential slave is a free agent and is voluntarily choosing to give up their liberties for a benefit - money.
By your logic, you would need to allow this contract to go ahead with no interference from anybody else.
Because you don't know what is best for others and they should be free to decide, right?

 

[hawkeye]

That never works in the long run unless you have the government enforcing the cartel. People will see a gap in the market, where something can be produced for less and take it. There are plenty of people out there looking for viable business models to invest in. What stops them is rules, regulations, taxes. These are preferred by big businesses because they are a relatively small cost of doing business but quite expensive for any small business. Ask small business owners who frequent here.

 

[Earthjade]

In a society where the most successful predators (those at the top in positions of power) mandate that "everything is owned by everyone" the family that finds a piece of wilderness, builds a cabin, tills the soil and plants crops will reach a point where they have made something good from scratch - They have taken nothing and created a warm dwelling, food and security. Once they have done this the lazy opportunists who have been living in shacks drinking vodka soon appear saying: "Comrade! Your brothers come to share this home which is the property of us all! "

This belief is incorrect.
Communism was not about all property being communal.
It was about all productive capital being owned by the people.
Everything made by that productive capital would be private property.
When we talk about productive capital, we talk about factories, offices, industrial equipment etc.

But having said that, please don't distort my argument into one that is pro-communist.
What I am suggesting is economic democracy, which is one step further than we already are on the path of liberty.

In the political sphere, we have fought for the freedom of expression and representation (still LOTS of work to do).
In the civil sphere, we have fought for the right to live our lives as we choose without others telling us how we should live (the main battle here was against the Church).
But in the economic sphere, we accept that businesses should be run be not as democracies, but as dictatorships of those that "take the risks".

It would be irrational to want to improve freedom in all aspects of our lives but not want it for or working lives.
We already see when the economy is run by dictators what happens - fiat currency, derivatives, mountains of debt, algorithmic trading and manipulated commodity markets.

The answer to abuse is to diffuse power among an educated populace, make sure that a small group never gains too much power.
And I believe that to do this, we need to import democratic principles into the economy and remove its authoritarian tendencies.
A radical and dangerous idea - economic democracy.

People will scoff at me, but that is OK.
History always shows us that it is the radicals that push the course of human history forward.
People who argued for democracy when the monarchies asserted their "Divine Right" where also seen in the same way in their age.

 

[Earthjade]

That never works in the long run unless you have the government enforcing the cartel. People will see a gap in the market, where something can be produced for less and take it. There are plenty of people out there looking for viable business models to invest in. What stops them is rules, regulations, taxes. These are preferred by big businesses because they are a relatively small cost of doing business but quite expensive for any small business. Ask small business owners who frequent here.

It is nice in theory, but reality has shown us differently.
Cartels can prevent smaller people from entering by raising the barriers to entry meaning even if you can produce it for less, there are additional costs incurred that will no longer make it a profitable venture. this is even before you add additional costs that the government may put on top of that.
Vertical integration is a popular strategy used to do this in the real economy.
In your world, a government will enforce the cartel simply by enforcing the contract.

And what about the slavery contract?
Do you agree that people should be able to freely contract themselves into slavery?

 

[Shaddam IV]

In a society where the most successful predators (those at the top in positions of power) mandate that "everything is owned by everyone" the family that finds a piece of wilderness, builds a cabin, tills the soil and plants crops will reach a point where they have made something good from scratch - They have taken nothing and created a warm dwelling, food and security. Once they have done this the lazy opportunists who have been living in shacks drinking vodka soon appear saying: "Comrade! Your brothers come to share this home which is the property of us all! "

This belief is incorrect.
Communism was not about all property being communal.
It was about all productive capital being owned by the people.
Everything made by that productive capital would be private property.
When we talk about productive capital, we talk about factories, offices, industrial equipment etc.

But having said that, please don't distort my argument into one that is pro-communist.
What I am suggesting is economic democracy, which is one step further than we already are on the path of liberty.

In the political sphere, we have fought for the freedom of expression and representation (still LOTS of work to do).
In the civil sphere, we have fought for the right to live our lives as we choose without others telling us how we should live (the main battle here was against the Church).
But in the economic sphere, we accept that businesses should be run be not as democracies, but as dictatorships of those that "take the risks".

It would be irrational to want to improve freedom in all aspects of our lives but not want it for or working lives.
We already see when the economy is run by dictators what happens - fiat currency, derivatives, mountains of debt, algorithmic trading and manipulated commodity markets.

The answer to abuse is to diffuse power among an educated populace, make sure that a small group never gains too much power.
And I believe that to do this, we need to import democratic principles into the economy and remove its authoritarian tendencies.
A radical and dangerous idea - economic democracy.

People will scoff at me, but that is OK.
History always shows us that it is the radicals that push the course of human history forward.
People who argued for democracy when the monarchies asserted their "Divine Right" where also seen in the same way in their age.

Sorry Earthjade, didn't mean to derail your point, you are bringing up discussion of big concepts, and to your credit you are proposing big, well presented answers which is admirable indeed.

 

[hawkeye]

And what about the slavery contract?
Do you agree that people should be able to freely contract themselves into slavery?

Yes, you can do that if you want. Some people want to be in slave like situations. As long as it's a free choice to do so, I'm fine with it.

I can't imagine it happening much. And I can't imagine it happening in the case that you describe because there are always alternatives. If something is expensive, then yes, a high price will have to be paid, but I find it hard to believe that selling yourself into lifelong slavery would be the only option.

 

[hawkeye]

In a society where the most successful predators (those at the top in positions of power) mandate that "everything is owned by everyone" the family that finds a piece of wilderness, builds a cabin, tills the soil and plants crops will reach a point where they have made something good from scratch - They have taken nothing and created a warm dwelling, food and security. Once they have done this the lazy opportunists who have been living in shacks drinking vodka soon appear saying: "Comrade! Your brothers come to share this home which is the property of us all! "

This belief is incorrect.
Communism was not about all property being communal.
It was about all productive capital being owned by the people.
Everything made by that productive capital would be private property.
When we talk about productive capital, we talk about factories, offices, industrial equipment etc.

But having said that, please don't distort my argument into one that is pro-communist.
What I am suggesting is economic democracy, which is one step further than we already are on the path of liberty.

In the political sphere, we have fought for the freedom of expression and representation (still LOTS of work to do).
In the civil sphere, we have fought for the right to live our lives as we choose without others telling us how we should live (the main battle here was against the Church).
But in the economic sphere, we accept that businesses should be run be not as democracies, but as dictatorships of those that "take the risks".

It would be irrational to want to improve freedom in all aspects of our lives but not want it for or working lives.
We already see when the economy is run by dictators what happens - fiat currency, derivatives, mountains of debt, algorithmic trading and manipulated commodity markets.

The answer to abuse is to diffuse power among an educated populace, make sure that a small group never gains too much power.
And I believe that to do this, we need to import democratic principles into the economy and remove its authoritarian tendencies.
A radical and dangerous idea - economic democracy.

People will scoff at me, but that is OK.
History always shows us that it is the radicals that push the course of human history forward.
People who argued for democracy when the monarchies asserted their "Divine Right" where also seen in the same way in their age.

Don't you need a powerful govt to enforce these kinds of ideas? You talk about diffusing power, except you think it is OK for govt to have power?

If you take away much of the govt's power and diffuse it amongst the populace, you are saying that people have the right to run their lives and their businesses as they see fit.

Or am I reading that wrong?

 

[Lovey80]

EJ, if you don't want to work for a "dictatorship" you are already FREE to start your own. If you don't like the level of the profits your "dictator" determines are fair for your labour you are FREE to work somewhere else. If the "dictators" determined offer of those wages are unfair then all of his productive personnel will leave and so will his business to his competitor who values that labour higher.

But you still haven't answered the question of how "economic democracy" gives a fair return to the entrepreneur who without him would have no business at all?

Let's put a hypothetical. I'm savy and have intimite knoweledge of PV solar systems because i have sacrificed my time to educate myself on the subject. I have an idea that involves getting 20% plus efficiency out of a solar cell using cheap renewable materials. I work in my own time using my own capital sacrificing my lifestyle for over a decade to make my idea work and I pull it off.

I decide that rather than selling my idea for a big upfront profit I am going to start a factory to produce these for the market at a $/kwh rate far less than is currently available.

Are you telling me that the people I employ will be mandated by law to have a say in how my company is run? Are you telling me that if I begin to make a profit in year five (after I have paid back my start up costs and recouped a decade of my own spent capital) that my workers will have a right to vote to increase their remuneration packages as their "fair" share of the profits? Are you telling me that they will have the right to decide who their supervisors are and "vote" out the people I have put in those positions? Are you telling me that they have an equal right to decide on what my year 5 salary will be?