Monday, September 14, 2009

Capitalism Is Not Evil (in fact it will probably help save the world) - Post 1

First, a little bit about the benefits of capitalism, from Wikipedia:

"Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by Gross Domestic Product (GDP), capacity utilization or standard of living. This argument was central, for example, to Adam Smith's advocacy of letting a free market control production and price, and allocate resources. Many theorists have noted that this increase in global GDP over time coincides with the emergence of the modern world capitalist system.[85][86] While the measurements are not identical, proponents argue that increasing GDP (per capita) is empirically shown to bring about improved standards of living, such as better availability of food, housing, clothing, and health care.[87] The decrease in the number of hours worked per week and the decreased participation of children and the elderly in the workforce have been attributed to capitalism.[88][89][90][91] Proponents also believe that a capitalist economy offers far more opportunities for individuals to raise their income through new professions or business ventures than do other economic forms. To their thinking, this potential is much greater than in either traditional feudal or tribal societies or in socialist societies."

Read the full article on capitalism at Wikipedia.

Since a lot of press is going to be generated from Michael Moore's new doc Capitalism (which seems like a somewhat evil attempt to make some cash by making & selling a product that confirms just the fears of some people who do not understand the value of or for some reason do not like capitalism) I think I'll post a few items about the positive side of capitalism.

One big positive is the existence of the American movie industry. Hollywood, indiewood, and even real independent film would not exist to the same comparatively awesome level that it exists in the US were it not for capitalism. Capitalism is basically people who decide to put money together (capital) in order to organize work, achieve a desired end (including gaining profit). So, at many points in time in the US, investors decided that due to the relatively level (relatively well regulated) playing field (monopolies are not left unchecked for long) putting money into making & distributing movies was a good risk. Thus, the film industry - Hollywood was born & also its weird cousin the independent film world was born. This debate on capitalism reminds me what Steven Soderbergh said at the NYC premiere of his film Che - something to the effect that he could not do what he does - make movies about various subjects - including controversial ones, pretty much however he wants to make them - in Cuba (a non-capitalist country). He could have been referring to just freedom of expression issues, but, any filmmaker who spends millions of $s on creating a movie about a guerrilla fighter could just as well point to an environment where individuals & companies feel comfortable risking millions of $s on a movie - environments that exist generally in countries where a capitalist economic system is in place (fully or partially). So, bottom line: No Capitalism = No Hollywood & Indie Film (probably).

Of course it isn't just capitalism that makes good economic things possible in the US - it is the combination of capitalism, checks & balances, good laws, press freedoms that makes the US a good place to start a business, and a good place to invest in businesses. Nevertheless, capitalism is a key ingredient in both what makes the US one of the most desirable (to live, work in, etc.) places in the world & also capitalism is a key ingredient in making the American film industry possible.

I have not seen Mr. Moore's film yet, so, after I do, will have a thorough breakdown of the movie - where he tells the truth & where he lies. In the meantime, I'll quote some interesting & relevant items here (also I probably need to brush up on capitalism, have not thought about all the parts that make it work well here in the US in a while).

Oh, before I go with today's quote re: Moore's movie, here's why I think capitalism will help save the world:

1. This world is mostly poor, due to lack of well developed economic systems where people are able to generate wealth, start businesses, employ other people, pay taxes & assist governments with further development of nations, etc.

2. Capitalism, well regulated (as it generally is in the US, in spite of the current economic crisis) is a cure for poverty of nations.

3. Openly or without much fanfare many previously economically under developed countries are adopting practices that are traditionally a part of capitalism - private investment & ownership, market competition, etc. Integrating useful aspects of capitalism to existing local systems (government, culture, etc.) could help countries pull themselves out of poverty. Along with, of course, financial & trade aid from wealthy countries (who remain relatively wealthy & are able to help out poorer countries due to capitalism).

And here's today's quote re: Moore's film Capitalism, from Illinois Review (they seem as without nuance & off target on some points as Moore, but, there is some truth to their critique of Moore):

"Moore is almost the perfect demagogue who chooses his targets wisely in order to build on popular prejudice against the "big banks" and any other private sector business that actually does create real-long lasting wealth creating jobs for people instead of fake public sector jobs that only steal money from other people and create no wealth at all over time. Let's see if Moore really believes the drivel he sells. I suggest he donate every last dime of profit on his current movie to charities for the poor. But he will not do that because it is ever so much more fun to call bankers evil and get everyone in America taxed to give money to people that socialists always say they are helping even as they bankrupt the country."

Read the rest here.

And, of course, if you are an expert on the positive & negative sides of American capitalism, please enlighten us/share your wisdom through comments.

- Sujewa

9 comments:

Chuck said...

Moore isn't a serious thinker. He paints in broad strokes to make an entertaining political point. I don't think he' suggesting that capitalism is evil--that's too reductive even for him--but modern corporate capitalism is designed to generate as much wealth as possible for owners of corporations.

Often there will be side benefits that will fall out to the larger population, but capitalism and the modern corporation, where most wealth is concentrated, are designed to focus solely on wealth generation, often at the expense of the safety and health of customers and employees, as we've witnessed in our disastrous health care system that privileges profit over care.

I'm not sure your citation of Wikipedia does much to depict capitalism in a positive light.

The Sujewa said...

I am not so sure Chuck, capitalism does bring me iPhone's & macs & minidv cameras for cheap (not just me, but also people who are able to use the same tools to fight hunger, poverty, human rights violations, - even to help get the current president elected - a very good thing). I think some people (& some ways of seeing the world) automatically equate capitalism with corruption & greed. But, if you look at human history, capitalism is a fairly recent invention - but incidents of horrible destruction caused by humans under whatever reason/excuse - are many. Also famine & lack of medicine - stuff that has been virtually wiped out of the lives of people who live in countries with healthy economies. If anything, I think capitalism + checks & balances helps to curb or direct human greed in some useful, positive directions (quite often, at least in the US). If nothing else, it got me this laptop that I am typing on for under $400 from Best Buy :).

Anyway, in a country with a healthy body of laws & regulations, what's wrong with pursuing profit within those boundaries? Also, lot of these corporations are publicly held - meaning you or I can buy stock in them & profit (or lose) from their successes or failiures - which will allow for economic class mobility - something that is not present in pre-capitalist societies to the same degree.

The health care issue is a separate issue. We should definitely have health care for everyone in the US. Certain things like food, health care, defense should be (and I think largely are) outside the domain of pure capitalism (meaning, I believe food prices are regulared by the gov to ensure that people can eat, also gas prices, plus I am sure in other essential fields such as military, etc.).

- S

The Sujewa said...

Hey Chuck,

The Wikipedia article is, on the whole, positive about capitalism. Here's another quote:

"Political freedom
Milton Friedman has argued that the economic freedom of competitive capitalism is a requisite of political freedom. Friedman argued that centralized control of economic activity is always accompanied by political repression. In his view, transactions in a market economy are voluntary, and the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish power to coerce. Friedman's view was also shared by Friedrich Hayek and John Maynard Keynes, both of whom believed that capitalism is vital for freedom to survive and thrive.[92][93]"

- S

The Sujewa said...

And yes, Moore is suggesting, in this movie - whether he seriously believes it or not - that capitalism is evil. Here's a quote from Screen's review of the flick:

"He ropes in priests and pastors to pronounce capitalism as an “evil”,"

Full review at:
http://www.screendaily.com/festivals/venice/capitalism-a-love-story/5005301.article

- S

Chuck said...

I would argue that it was the failure of unbridbled, unregulated capitalism that got Obama elected. Capitalism is inherently designed to produce more wealth for the wealthy, hence the mortgage and financial crises.

I'd also point out that an economic system doesn't determine alone what gets produced. If we had a more balanced economy, it's possible that more people could afford the luxury of making films and buying theatrical-grade motion picture cameras.

I am essentially a socialist, but to address your point about a "healthy body of laws," I would argue that regulation of the financial industry hasn't been healthy for at least a generation. And I don't think health care can be separated here. It's a perfect illustration of why a purely capitalist model won't work. If the ultimate goal of a corporation is pleasing its stockholders, that's going to come at a cost in terms of what gets offered.

In terms of Moore's approach, we can also ask what is meant to be taken satirically and what is meant as "serious." I'd have to see the scene in context to make that call.

The Sujewa said...

Hey Chuck,

Socialism failed in the last century, leaving behind millions of corpses & the living trying to come up with new combinations of economic & government models that would incorporate capitalism into the existing, failed systems. For info on failure of socialism, check out this doc - http://www.fff.org/freedom/0393b.asp

Here's a quote:

"The world is watching the spectacle of Russia and the other captive nations of the former Soviet Union trying to free themselves from their seventy-five-year experiment in socialism. The bankruptcy of the system is accepted by practically everyone. The economies of the former Soviet republics are in shambles. Civil wars and ethnic violence have broken out in an increasing number of territories of the former U.S.S.R. And the quality of medical care, educational facilities and residential housing has been and is continuing to deteriorate.

The disarray, destruction and decay are the logical legacy of the application of the collectivist ideal. This ideal included three ideas: the theory of a planned economy, the belief in collective or group rights, and the notion of socialized or state-provided social services."

And, re: a socialist government or planners knowing what's best for consumers, from the same doc:

"The arguments of the Austrian economists against socialism have been proven correct in every country in which central planning has been instituted. Whether it has been in Russia, Cuba, Vietnam, Ethiopia, Poland, or Mongolia, wherever the planning model has been imposed and has supplanted the market economy, economic disaster has occurred. The types and varieties of goods and services produced by the state have borne no relationship to the types and varieties of goods and services actually demanded by "the masses" in these people's republics. Store shelves have been empty of the things people wanted; and they have been stocked with what no one desired. Resources and labor have been misallocated and wasted. And the customers, who are "always right" under capitalism, have been reduced to a life of long lines at state-retail stores and to a daily hunting for the essentials of everyday life in these socialist paradises."

So, if you think you are essentially a socialist, visit one of these socialist countries & see how it compares to quality of life here in the US. I am thinking that you will probably prefer the individual freedoms, opportunities & being able to buy what you need that come with living in the capitalist US.

Having somewhat directly (i was there, but young, thus protected from the lack of essential goods that resulted in Sri Lanka switching to a socialist economic model in the 70's, but I did hear the stories from the parents about there not being enough food available in the stores - milk for children, etc. - after the switch to the socialist econmic model, which was a factor in us leaving the SL) experienced the "glories" of socialism, I am glad I live in a mixed capitalist economy (i don't think what we have here in the us is pure capitalism, since individuals are protected by numerous gov't agencies & laws from greed & avarice of entrepenuers). However, there is no complete barrier against human evil & greed, thus, from time to time, failures occur - even here - such as the banking & mortgage crisis that we are dealing with now.

One area that does need work is health care availability for all in the US. Most likely a part-government & part-private sector solution will ultimately rise up from the current debate.

- S

The Sujewa said...

Also, Chuck, re: your statement:

"Capitalism is inherently designed to produce more wealth for the wealthy"

I don't think that's the case. Capitalism seems to be designed so that a large number of investors can pool their money/resources together in order to accomplish projects that cannot be accomplished by a single person or investor (even if that person is very wealthy, having multiple investors in a company spreads or lowers the risk for any one individual) & share in the rewards, if any.

Also, participating in making money or attempting to make money through American capitalism is not a fringe activity reserved for an elite, according to this article:
http://www.businessweek.com/the_thread/wellspent/archives/2005/11/stock_ownership.html - in Business Week over 56 million households in America owned stock in 2005 (directly or indirectly through 401Ks). That's apparently half of all US households.

So, participating in capitalism in america, actively participating in it by owning stock, etc. is a mainstream activity at this point. Meaning, when companies do well, their stock holders do well (unless there is corruption, etc. which is something the stock holders should keep an eye out for, in order to protect their investments).

Here's the quote from the Business Week article mentioned above:

" “Despite experiencing a market contraction that was one of the worst bear markets since the Great Depression, the number of individuals in the U.S. owning equities is up 5.2 percent since 2002, and up 14.4 percent since 1999," says Frank Fernandez, Senior Vice President of the Securities Industry Association.

That's 56.9 million households, up from 54.1 million in 2002 and 40 million in 1995."

This wide participation in capitalism is what has made people in the US have one of the highest amount of yearly earnings per person in the world. Of course there are problems from time to time (such as the one we are dealing with now), but generally - over the last 200+ years (& specially since WWII) the US economy has been one of the most reliable & productive/profitable - this is one of the reasons that the US dollar is highly valued in the world - as opposed to money from most socialist countries. I believe the US economy is one of the oldest - as far as unbroken continuity since its inception (at this point, since many national economies had to be rebuilt after WWII, & other major political changes such as de-colonization, etc.) & reliable - a very significant capitalist & political achievement.

- Sujewa

Chuck said...

I'm not quite sure you can look at specific "booms" in the US consumer and speculative cultures without considering their wider implications: sweatshops throughout southeast Asia, significant job losses in the US manufacturing sector, and a dramatic increase in the divide between rich and poor in the US.

It's not quite fair to suggest that all socialism will lead to the abuses of the Soviet Union, but I would point out that the article you've cited is full of sweeping generalizations that could equally be applied to capitalism.

I haven't seen Moore's film, so I'm not prepared to judge it. Based on his past history, I'm guessing it will have many of the same strengths and limitations seen in his past work and that we aren't meant to take all of his arguments completely seriously. Note his use of insinuation and rhetorical questions throughout many of his films.

In terms of "pooling resources," it's worth noting that CEOs and a small number of prominent shareholders retain a much larger share of stock in major corporations than other small investors. I don't know if your use of "Business Week" is an effective example. It's a magazine whose sole purpose is to promote capitalism; they're not likely going to criticize the practice of investment and may want to tell rosy stories about how everyone is a participant in the investor class, when that is far from true.

The Sujewa said...

Re: "I'm not quite sure you can look at specific "booms" in the US consumer and speculative cultures without considering their wider implications: sweatshops throughout southeast Asia, significant job losses in the US manufacturing sector, and a dramatic increase in the divide between rich and poor in the US."

True, sweatshops, US job losses & gap between rich & poor are all problems - 3 problems currently related to the american economy. But on the plus side there are like a 1000 good things that are provided by the american version of capitalism - including being one of the richest countries on the planet for a very long time - with high quality of life for millions of people (compared to other countries) or at least the chance for many to make $s & help their poor families in other countries. Also the US is one of the biggest donors to poor nations - in terms of aid.

Re: "It's not quite fair to suggest that all socialism will lead to the abuses of the Soviet Union,"

Where are the socialism success stories that can compare with capitalist success stories? People are dying to get out of Cuba.

Re: "...but I would point out that the article you've cited is full of sweeping generalizations that could equally be applied to capitalism."

Except for the key difference - lack of goods. Under capitalism people have plenty to eat, & lots of choices when they need to buy something. Also individual wealth - individuals are able to work for others or start their own businesses & are able to try to get rich - difficult to do in most socialist countries.

Re: "I haven't seen Moore's film, so I'm not prepared to judge it. Based on his past history, I'm guessing it will have many of the same strengths and limitations seen in his past work and that we aren't meant to take all of his arguments completely seriously. Note his use of insinuation and rhetorical questions throughout many of his films."

I haven't seen it either. Should be interesting.

Re: "In terms of "pooling resources," it's worth noting that CEOs and a small number of prominent shareholders retain a much larger share of stock in major corporations than other small investors. I don't know if your use of "Business Week" is an effective example. It's a magazine whose sole purpose is to promote capitalism; they're not likely going to criticize the practice of investment and may want to tell rosy stories about how everyone is a participant in the investor class, when that is far from true."

Sure, the more money you have more stocks you can buy & thus greater power you would have within a corporation. However, the playing field is fairly open - or it is possible to start owning parts of companies - stocks - for relatively little money - whereas in socialist economies - back in the day (now China & Russia are probably getting close to semi-capitalist) - ordinary people (people without a lot of wealth) could not try to gain more by buying stocks in companies (as far as I know).

There are some elements of modern economies that are still a mystery to me - such as the exact mechanisms that give value to the paper money (probably has something to do with people's trust - in the US, based on past performance, that the US government - being stable - will be around for a while to make good on the notes). So, since currency in the US no longer represents the amount of gold owned by the government, what exactly does it represent (production capability? consumption capability?). Something to explore - sweet mysteries of the modern economies :). One of the most intriguing being that if the dollar does not represent a valuable thing such as gold, but gains its value from more society related things - productivity of the population, etc. - new methods to get poor countries out of poverty could be invented. Anyway, need to look into economies & how they work more.

- S

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