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Financial crisis ! whats your opinion and why :)

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    (Original post by Cheese_Monster)
    This is totally irrelevant to your debate but I wonder, do you have pictures of John Locke in your bedroom?
    Nah, Bastiat.
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    (Original post by Genius7)
    Really this argument again, the point of regulation is that once the correct regulation is put in the government does not need to constantly intervene the system simply runs itself under those laws and there is a regulating body which just keeps tabs on the system to make sure nothing goes horribly wrong.
    What you need to do is differentiate between the intentions of regulations, which are usually good, and the actual effects of regulations, which are usually bad.

    The thing I am proposing is basically a new law that says banks cannot create money and only the government can. That is a simple law that I think will fix the current and future debt crises to a large extent.

    Rather than what pyOalb is proposing which is a patchwork of regulations to try and keep up a fundamentally unsound system. Tinkering around the edges will not change what the debt machine will produce in the end.

    I have named several systems previously that rely on regulation to exist but you did not comment on getting rid of intellectual property rights did you?
    IP is a very difficult area and I do not want to get side tracked into it right now.

    Banning/ Greatly limiting the sale of complex derivatives.
    Do you know what futures and options are? If you don't then, maybe you should learn what they are before you make such declarations.

    Forcing clear breakdowns on what a financial derivative contains.
    There is an argument for forcing information on to the market. I am usually fairly comfortable with laws that say you must disclose the facts.

    Taking the power from rating agencies which everyone pretty much accept are useless and having breakdowns of which firms can buy exactly what financial products. Such as banks not being able to buy CDS's.
    Rating agencies have as much power as people generally let them have. If everyone agrees rating agencies are useless, then the rating agencies have no power.

    Getting rid of the constant chain of reinsurance that occurs. (Lloyds made large losses just because of this ridiculous cycle.)
    What a dangerous idea, people should be able to insure themselves against bad outcomes.
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    (Original post by Classical Liberal)
    The thing I am proposing is basically a new law that says banks cannot create money and only the government can. That is a simple law that I think will fix the current and future debt crises to a large extent.

    Rather than what pyOalb is proposing which is a patchwork of regulations to try and keep up a fundamentally unsound system. Tinkering around the edges will not change what the debt machine will produce in the end.

    .
    This "fundamentally unsound" system upon which the entirety of Western civilisation is built?

    To abolish it would be as radically communist as abolishing private enterprise itself. Even the British socialist party would think you're too left wing for them.

    What you need to do is differentiate between the intentions of regulations, which are usually good, and the actual effects of regulations, which are usually bad.
    THIS is a prime example of an ideologically driven statement. There is not a shred of evidence in support of this bizarre viewpoint. Its patently nuts yet its one you keep repeating. The effect of regulations are "usually bad"? Unless you define "usually" to mean the same as "very, very, very occasionally" you're having a laugh.

    For someone who openly wants to nationalise the banks, you have a very irrational fear of government regulations.
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    this may seem slightly ignorant but who do governments owe money to
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    (Original post by getoom)
    this may seem slightly ignorant but who do governments owe money to
    Us mainly.

    and China to some extent.
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    (Original post by Classical Liberal)
    Nah, Bastiat.
    And hopefully The Rock?
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    (Original post by py0alb)
    This "fundamentally unsound" system upon which the entirety of Western civilisation is built?
    I find it amazing the whole system has not collapsed yet.

    To abolish it would be as radically communist as abolishing private enterprise itself. Even the British socialist party would think you're too left wing for them.
    No it isn't. The government can already create money. All I propose is to take away the power to create government money from the banks.

    Ideally I would prefer a system of self issued currency. Which would, if it took off, take away a lot of power from government. In fact it would largely destroy the government tax base.

    THIS is a prime example of an ideologically driven statement. There is not a shred of evidence in support of this bizarre viewpoint. Its patently nuts yet its one you keep repeating. The effect of regulations are "usually bad"? Unless you define "usually" to mean the same as "very, very, very occasionally" you're having a laugh.
    If you accept that free exchange is positive sum, then anything that gets in the way of free exchange, is probably going to destroy wealth. And that is what regulations tend to do. Get in the way of free exchange.

    The main exception being that of negative externalities.

    For someone who openly wants to nationalise the banks, you have a very irrational fear of government regulations.
    It is only because of the patch work regulations that the stupid money system we have is able to keep going. And I do not want to nationalise the banks. I want to nationalise the currency.
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    (Original post by Cheese_Monster)
    And hopefully The Rock?
    :youbetcha:
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    (Original post by getoom)
    this may seem slightly ignorant but who do governments owe money to
    A mix of commercial banks, central banks and institutions like pension funds hold most government debt I believe.
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    (Original post by py0alb)
    The ideal solution is a vertically and horizontally integrated perfectly free market in all sectors, with technological progress driving a gradual increase in living standards, prices and wages reflecting both the marginal product of labour and the social cost of the good. The government has three responsiblities to the economy: enforcement of contract, laws and regulations to ensure that the market remains as free as possible (ie prevent collusion, monopolies, trade description violations etc).
    So basically you are advocating a standard neoliberal solution here? Government involvement = bad. Deregulation = good. Government can only interfere to maintain free markets. Also, I'd add that we are probably already in a state of monopolistic or oligopolistic economies. At least this article convinced me of that.

    (Original post by py0alb)
    Fiscal policy should be used to maximise public utility via providing public goods at a fair price, incentivising socially beneficial behaviour and completing any incomplete markets in order to reduce negative externalities.

    It seems to me that you are equating increased consumption with increased achievement and social welfare. I think this is a bad assumption to make, and a possible large contributor to the recent riots in London. Also, doesn't this contradict your earlier statement? Doesn't an active fiscal policy and actively reducing negative externalities contradict government policy who's main focus is to maintain free markets? Because reducing negative externalities is by definition increased regulation, and the implementation of laws to protect the environment, curb pollution, etc.

    (Original post by py0alb)
    Monetary policy should be used to prevent the system moving too far away from equilibrium by careful adjustments of the money supply and the interest rate to ensure a good business environment.
    I feel like this is a standard response, but still in accordance with mainstream capitalism. Doesn't the US Federal Reserve raise interest rates when unemployment reaches 5%, so as to ensure a 'good business environment' and boost profitability through larger unemployment? Isn't your response exactly what governments have been trying to do?

    I guess what i'm trying to say is, yes, your answer would correct all the problems, but isn't it exactly what governments were trying to achieve when we landed in this mess? Wouldn't these attributes only result in a short period of growth and success and eventually fluctuate into disorder and another crisis some time in the future?



    (Original post by py0alb)
    The economy is the conduit by which human knowledge and endeavour (aka capital and labour) is combined and converted to human health and happiness. For centuries, the wealthy have "boosted" their own health and happiness by exploiting other people's endeavour. First it was through slavery, then it was through exploiting the working class of their own country, and now its by exploiting the poor of the developing world.

    Eventually (hopefully) technological progress will allow us to maintain and eventually improve our current living standards whilst finally stopping the necessity to exploit the vulnerable.
    Agreed. I only wonder if this is possible, and how long it would take to achieve. And in the meantime, who will benefit? Who will suffer? How many will suffer? How much damage will be done to 3rd world nations? How much polluting will we accept? Is it all worth it?



    (Original post by Genius7)
    I agree with a lot of what you say. Capitalism is basically growth through exploitation however we have to admit that it has raised living standards through technological innovation over the many years. Many of us wish for a better system but can't really think of one perhaps someone will but until then we gotta deal with it.

    Also although capitalism works through exploitation that is the point of wealth distribution but that is left up to governments so unless you want to become a politician not much that can be done apart from charity.
    Yes capitalism is definitely incredibly efficient at pushing innovation and growth. But like I said above, these increased living standards aren't guaranteed for very many.

    What most people don't understand is that nearly the entire globe is now capitalist. And while people in the US and Europe argue over regulation/deregulation, they do not question the basic assumption that capitalism is the best solution, they fail to notice that what actually runs the world's economy is a massive army of labour in the 3rd world who live by standards unimaginable to us. Personally, although I agree that capitalism is unique in driving innovation, I question whether the social cost is worth it.
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    (Original post by spaceman spiff)
    I feel like this is a standard response, but still in accordance with mainstream capitalism. Doesn't the US Federal Reserve raise interest rates when unemployment reaches 5%, so as to ensure a 'good business environment' and boost profitability through larger unemployment? Isn't your response exactly what governments have been trying to do?
    Correct.
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    (Original post by spaceman spiff)
    Agreed. I only wonder if this is possible, and how long it would take to achieve. And in the meantime, who will benefit? Who will suffer? How many will suffer? How much damage will be done to 3rd world nations? How much polluting will we accept? Is it all worth it?
    This argument that the West benefits from capitalism whilst the Third world suffers is tosh. Free exchange benefits both parties. The tragedy of many third world nations is that when socialism and state planning was all the rage these nations were used as experiments, such as India, and thus their nations were held back.

    The reason the West is wealthier than the third world is that we have had capitalism for much longer. They are now starting to catch up. And it is because of global trade.

    The record of history is absolutely crystal clear. The only places where the lot of the ordinary man has improved, is in places where there has been largey free enterprise. Everywhere else the common man has suffered grinding poverty.
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    (Original post by spaceman spiff)
    So basically you are advocating a standard neoliberal solution here? Government involvement = bad. Deregulation = good. Government can only interfere to maintain free markets. Also, I'd add that we are probably already in a state of monopolistic or oligopolistic economies. At least this article convinced me of that.
    By free markets I mean competitive markets, not unregulated markets. They are not only not the same thing but they are virtually polar opposites. An unregulated market will soon become exploited by the dishonest and any fair competition will be destroyed.


    It seems to me that you are equating increased consumption with increased achievement and social welfare. I think this is a bad assumption to make, and a possible large contributor to the recent riots in London. Also, doesn't this contradict your earlier statement? Doesn't an active fiscal policy and actively reducing negative externalities contradict government policy who's main focus is to maintain free markets? Because reducing negative externalities is by definition increased regulation, and the implementation of laws to protect the environment, curb pollution, etc.
    No I don't think I'm making that assumption. I'm using the standard economic definition of the social utility function, the governments responsibility it is to maximise where possible.


    I feel like this is a standard response, but still in accordance with mainstream capitalism. Doesn't the US Federal Reserve raise interest rates when unemployment reaches 5%, so as to ensure a 'good business environment' and boost profitability through larger unemployment? Isn't your response exactly what governments have been trying to do?


    I guess what i'm trying to say is, yes, your answer would correct all the problems, but isn't it exactly what governments were trying to achieve when we landed in this mess? Wouldn't these attributes only result in a short period of growth and success and eventually fluctuate into disorder and another crisis some time in the future?
    The mess we are in was caused 90% by corruption and 10% by an overleveraged and incomplete housing market. Whether you blame the corrupt bastards themselves or the government for failing to recognise the problem and regulate against it. There is no reason why booms and busts should be inevitable.



    Agreed. I only wonder if this is possible, and how long it would take to achieve. And in the meantime, who will benefit? Who will suffer? How many will suffer? How much damage will be done to 3rd world nations? How much polluting will we accept? Is it all worth it?


    Yes capitalism is definitely incredibly efficient at pushing innovation and growth. But like I said above, these increased living standards aren't guaranteed for very many.

    What most people don't understand is that nearly the entire globe is now capitalist. And while people in the US and Europe argue over regulation/deregulation, they do not question the basic assumption that capitalism is the best solution, they fail to notice that what actually runs the world's economy is a massive army of labour in the 3rd world who live by standards unimaginable to us. Personally, although I agree that capitalism is unique in driving innovation, I question whether the social cost is worth it.

    Depends on your definition of capitalism. If you include in it the exploitation of other people's labour, then no it isn't worth the social cost and never has been.

    However, it would be nice if we all agreed to take a cut in living standards in order to stop exploiting the workers around the world but it ain't going to happen.

    Slowing replacing the need for exploitation with superior technology whilst maintain western living standards is the only feasible solution from this point onwards.
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    (Original post by Classical Liberal)
    This argument that the West benefits from capitalism whilst the Third world suffers is tosh. Free exchange benefits both parties. The tragedy of many third world nations is that when socialism and state planning was all the rage these nations were used as experiments, such as India, and thus their nations were held back.

    The reason the West is wealthier than the third world is that we have had capitalism for much longer. They are now starting to catch up. And it is because of global trade.

    The record of history is absolutely crystal clear. The only places where the lot of the ordinary man has improved, is in places where there has been largey free enterprise. Everywhere else the common man has suffered grinding poverty.
    says the man who wants to nationalise the financial sector.

    Yeah, because our only interaction with the developing world is through non-exploitative free trade in which both parties benefit. We never steal all their resources or fund their dictators, or invade for oil do we?

    You really do live on cloud cuckoo land.
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    (Original post by py0alb)
    says the man who wants to nationalise the financial sector Sterling currency.

    Yeah, because our only interaction with the developing world is through non-exploitative free trade in which both parties benefit. We never steal all their resources or fund their dictators, or invade for oil do we?

    You really do live on cloud cuckoo land.
    Those last three are not free trade.
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    (Original post by Classical Liberal)
    This argument that the West benefits from capitalism whilst the Third world suffers is tosh. Free exchange benefits both parties. The tragedy of many third world nations is that when socialism and state planning was all the rage these nations were used as experiments, such as India, and thus their nations were held back.
    Apologies but I have to respectfully disagree. I think this is a paradigm that you've accepted unquestioningly at some point.
    I agree with you that capitalism is the best system to spur growth and innovation. However, capitalism is definitely not some kind of miracle pill that all 3rd world nations can pop to better themselves. Back in the day I had to write a paper for an IPE class examining the development of a few developing countries. I wrote a final paper concluding that the nations that subsidized and protected their infant industries faired much better than the ones that opened up their markets due to IMF pressure. I think you're assumption in the next sentence is what underlies this belief:

    The reason the West is wealthier than the third world is that we have had capitalism for much longer. They are now starting to catch up. And it is because of global trade.
    This is false. The West isn't wealthier because of capitalism. The West was already far wealthier before capitalism took root. I highly recommend Guns, Germs, and Steel, by Jared Diamond. He won a Pulitzer for it. The name of the book is quite self-explanatory. To make an incredibly long story short, European nations found themselves ahead of the rest of the world militarily, and were able to leverage that into wealth. At the dawn of international capitalism in Europe they exploited slaves. They then moved into colonialism and used their military strength to exploit the natural resources of other nations. Capitalism had nothing to do with it. The early period of European capitalism is defined by slavery, and the cruel exploitation of other peoples.

    Your argument is like saying "Ancient Egypt and Ancient Mesopotamia prospered over other civilizations due to Capitalism". No, they prospered because of geographical advantages that led to innovations in technology (farming). In the same manner, Europeans were able to take advantage of military innovations (guns), and weak neighbours (the Mongol invasions, diseases in the colonies), etc. to amass great wealth. This won't last forever. The Ancient Egyptian civilization lasted thousands of years. The British Empire 100 or so.


    The record of history is absolutely crystal clear. The only places where the lot of the ordinary man has improved, is in places where there has been largey free enterprise. Everywhere else the common man has suffered grinding poverty.

    So the common man is not suffering grinding poverty now in China? In India? In Vietnam? I would say that man has suffered grinding poverty under all the economic systems. Look at the English worker during the dawn of the industrial age. That was horrifying.

    Anyway having said all this, I'm not trying to advocate a communist revolution in India or something. My point was actually that without regulation and top down enforcement, free market capitalism would destroy all labour laws and human rights in the 3rd world, as they are currently doing. Unlike the Economist, I don't think we should happily collude in the exploitation of Chinese workers because it means more growth and cheaper ipads at home.
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    (Original post by spaceman spiff)
    Apologies but I have to respectfully disagree. I think this is a paradigm that you've accepted unquestioningly at some point.
    Nope - I have questioned it. Still think trade benefits both parties.

    I agree with you that capitalism is the best system to spur growth and innovation.
    I don't care about growth. I care about human happiness. Capitalism is not great because it creates growth. It is great because it allows men to achieve their values freely and in doing so benefiting others.

    The only reason growth matters is because we have debt financed money system. And we need to keep growing to keep up with the interest. It is like a treadmill that keeps getting faster and faster and faster.


    However, capitalism is definitely not some kind of miracle pill that all 3rd world nations can pop to better themselves. Back in the day I had to write a paper for an IPE class examining the development of a few developing countries. I wrote a final paper concluding that the nations that subsidized and protected their infant industries faired much better than the ones that opened up their markets due to IMF pressure. I think you're assumption in the next sentence is what underlies this belief:
    If the IMF had to step into your economy, then most likely you had already done serious damaged it which would take decades to recover from. Some parts of what the IMF essentially forced nations to do were good ideas and others were not.

    It is important to remember that very often when doing economics, particularly Austrians and Neo Classical economists, start from first principles and derive out that free markets are great. However the real problems develop when you do not have a free market in the first place, and then you apply free market principles.

    For example. Most economists agree that many small firms and largely un-unionised labour is ideal. However if you are in a system where you have monopolistic firms and powerful trade unions, getting rid of one (by free market principles) leaves you in a much worse state than if you had left the system alone or not followed free market principles.


    This is false. The West isn't wealthier because of capitalism. The West was already far wealthier before capitalism took root. I highly recommend Guns, Germs, and Steel, by Jared Diamond. He won a Pulitzer for it. The name of the book is quite self-explanatory. To make an incredibly long story short, European nations found themselves ahead of the rest of the world militarily, and were able to leverage that into wealth. At the dawn of international capitalism in Europe they exploited slaves. They then moved into colonialism and used their military strength to exploit the natural resources of other nations. Capitalism had nothing to do with it. The early period of European capitalism is defined by slavery, and the cruel exploitation of other peoples.
    I think slaverly held the West back. It stopped capital investment because labour was so cheap (essentially not having to pay labour). And it stopped labour from allocating in the most efficient places by following where they would get the highest wages.

    If you are slave you are not free to choose where you work, and therefore you can easily end up in labour that is not very productive compared to what you could have done. And you would have done the more productive job had you been free to persue higher wages.

    ''We will benefit our fellow man most if we are guided solely by the pursuit of profit (the highest wages)''

    The fallacy is to see X forcing Y to work. And deducing that X has maximised his wealth at the expense of Y. When in practice X would have been better off to have allowed Y to be free, and both parties would have gained.

    In the market economy we are taken away from the zero sum brutal competition of nature, whereby one gains at the expense of another, to catallatic competition whereby all parties involved in free competition ultimately gain.

    Your argument is like saying "Ancient Egypt and Ancient Mesopotamia prospered over other civilizations due to Capitalism". No, they prospered because of geographical advantages that led to innovations in technology (farming). In the same manner, Europeans were able to take advantage of military innovations (guns), and weak neighbours (the Mongol invasions, diseases in the colonies), etc. to amass great wealth. This won't last forever. The Ancient Egyptian civilization lasted thousands of years. The British Empire 100 or so.
    The greatest empire mankind has ever seen was the Roman empire. It was absolutely huge considering the fastest mode of land based transport they had was horses and the only way messages could be sent was by scribe.

    The Roman empire was in reality not controlled by the emperor for the most part. It was controlled by the price mechanism. It was controlled by the impersonal and automatic forces of the market. It was this mechanism that made the Romans very practical. When the Romans used labour and capital they put it to go use. They made roads. And Aquaducts. And heated floors

    Compare this to the Eygptians (who had a much smaller empire) who had a more centrally controlled economy, they ended up building loads of Pyramids that used huge amounts of labour and capital (guess what they used for such pointless endeavour? Slaves, and you could only make such useless things using slaves).


    So the common man is not suffering grinding poverty now in China? In India? In Vietnam? I would say that man has suffered grinding poverty under all the economic systems. Look at the English worker during the dawn of the industrial age. That was horrifying.
    In all these cases the common man is improving his state. All we hear about now is the growing Chinese middle class for example. Or how Indians are taking all the well paid jobs in software development.
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    (Original post by py0alb)
    By free markets I mean competitive markets, not unregulated markets.
    Ah, apologies. My mistake.


    They are not only not the same thing but they are virtually polar opposites. An unregulated market will soon become exploited by the dishonest and any fair competition will be destroyed.
    Yes agreed.



    The mess we are in was caused 90% by corruption and 10% by an overleveraged and incomplete housing market. Whether you blame the corrupt bastards themselves or the government for failing to recognise the problem and regulate against it. There is no reason why booms and busts should be inevitable.
    I have to disagree here. I think that the mess we're in is caused by a myriad of things, but corruption isn't the main cause. I think the mess can be traced back 150 years at least, but especially to the 70s, where the post-WW2 boom cycle began to fade as Japan and Western Europe caught up with US industrial dominance thanks to protectionist policies.

    In my opinion, to keep consumption high, Reagan and Thatcher and others reduced social programs that were draining money from capital accumulation. Labour unions and all kinds of social programs like health and benefits took cuts, and corporate taxes lowered - all in the name of deregulating markets to 'remove obstacles to trade'. I also read somewhere that real wages stopped rising in the 70s, and have stagnated since.

    Now, the effect of capitalism on the populace was several-fold:

    Due to western culture, where consumption is seen as a marker of social success and personal achievement, families began to send more family members to work. Instead of the dreams of the 30's and 50's, that technology and automation would one day alleviate the working man and make our lives easier, family dynamics changed. A father could no longer support an entire family alone, the mother had to work, and soon parents in the US had to take on multiple jobs. Teenagers and housewives began to take jobs when they hadn't before. It became a part of American culture for the whole family to enter the labour market. This put downward pressure on wages and benefits, resulting in the current situation in the US - the least vacation time in the developed world.


    The social toll of the family unit in the labour market and in debt was obvious. Drastically increased divorce rates, as well as increased drug abuse amongst youth and increased household violence.

    Meanwhile, to keep consumption high, household debt exploded. If I recall correctly, it increased ten-fold in 30 years after the 70s. If you look at national saving, you'll notice that the US began to have negative national saving.

    The mortgage sector exploded, and people scampered to make money off of it. "Collateralized debt packages", "credit default swaps" etc. etc. Soon the mortgages, and the securities made up of them began to flounder.

    Now - to blame the bankers and the creditors as being corrupt or greedy is missing the point. They were making money off of a growing sector, but why was this sector growing? Why was the population so thirsty for credit? Because real wages were not increasing. Why were real wages no longer increasing? Because of immigrant labour ready to take on lower wages, and because of increased global competition. The living conditions are starting to finally level out, the middle class in China is growing, and the working classes in the west are suffering. This is at least, how I analyze the crisis. It's an ongoing project though.





    However, it would be nice if we all agreed to take a cut in living standards in order to stop exploiting the workers around the world but it ain't going to happen.

    Slowing replacing the need for exploitation with superior technology whilst maintain western living standards is the only feasible solution from this point onwards.
    That's just it. You can't. If you remove exploitation in the 3rd world, the western companies will stop being as profitable, and western living standards will plummet as people are no longer able to pay for these more expensive goods. If people are no longer able to purchase products because they are fair trade and made in non-exploitative factories, demand decreases, the economy slows down, people are let off to compensate the slowed economy, demand suffers more. If I've said anything wrong feel free to point it out....I'm exhausted from work and rambling.
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    (Original post by Classical Liberal)
    I don't care about growth. I care about human happiness. Capitalism is not great because it creates growth. It is great because it allows men to achieve their values freely and in doing so benefiting others.

    The only reason growth matters is because we have debt financed money system. And we need to keep growing to keep up with the interest. It is like a treadmill that keeps getting faster and faster and faster.
    Have to agree with this. I'm fuzzy on the implications though, what are your thoughts?



    For example. Most economists agree that many small firms and largely un-unionised labour is ideal. However if you are in a system where you have monopolistic firms and powerful trade unions...
    I know that union theory is quite complicated these days, and many argue that large unions are a hindrance rather than a help, but I'm curious, why do they view them as bad from a trade perspective? Is it just because unions place upward pressure on wages and benefits, which decreases profitability?



    I think slaverly held the West back. It stopped capital investment because labour was so cheap (essentially not having to pay labour). And it stopped labour from allocating in the most efficient places by following where they would get the highest wages.
    Oh come on, I really have to disagree with this. Slavery as a hindrance?...I'm having a rough time buying this argument. Do you have any sources? Citations? Perhaps it did hinder capital investment, but come on, there is absolutely no way these industries could have grown at the rate in which they did if it wasn't for an army of slave labour.

    Your argument can be taken forward to modern times. Are you saying that the exploitation of workers in Africa and Asia is hindering capital investment because of how cheap the labour is? If so, someone hasn't told Nike, Apple, H&M, Gap, Microsoft, Adidas, etc. etc. ad infinitum.



    The greatest empire mankind has ever seen was the Roman empire....

    Compare this to the Eygptians (who had a much smaller empire) who had a more centrally controlled economy, they ended up building loads of Pyramids that used huge amounts of labour and capital (guess what they used for such pointless endeavour? Slaves, and you could only make such useless things using slaves).
    Actually, this has been debunked. The Egyptians did not use slave labour for their infrastructure projects (they did have personal slaves captured in war though). If you pick up any textbook written in the past decade or so you'll find this theory debunked. The pyramids were built by free citizens and they were paid or received tax benefits.

    The Romans actually did use slave labour. To build the roads, aqueducts - all of it. The expansion of the empires were due to various reasons, the most important being culture and neighbors. The Egyptians were surrounded by desert and nomadic tribes. They conquered up until Syria and south into Sudan, but that's it. The Roman culture was militant and they had lucrative neighbours to exploit. Also, this is a bit subjective, but I'd argue that the Egyptians outweighed the Romans in scientific and cultural contributions. The first military forts, large scale building, mathematics, it was all transported to Greece over time from Egypt. Anyway this is side-tracking the main discussion
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    (Original post by spaceman spiff)
    Have to agree with this. I'm fuzzy on the implications though, what are your thoughts?
    It is a bad money system and if you read my posts in this thread I actually want some sweeping reform.

    I know that union theory is quite complicated these days, and many argue that large unions are a hindrance rather than a help, but I'm curious, why do they view them as bad from a trade perspective? Is it just because unions place upward pressure on wages and benefits, which decreases profitability?
    Unions usually benefit their own members at the expense of people who are not members. If you are not a member of a union and there are large powerful unions you are going to struggle to get a job.

    Take for example the rascists South African trade unions. They did everything to try and make sure black people could not compete with them. And you will find they lobbied for strange things, like equal pay for equal work. This law was intended to make sure that black people could not undercut the white union members.

    Unions can also end up screwing themselves over. For example Unions in the UK, in the past, used to hate capital investment. They saw capital as substituting their labour and putting them out of a job. However this resistance to capital meant that the productivity of labour did not improve, thus the members got lower wages, and thus no increase in their living standards. This could be compared to American trade unions who on the whole were a lot more capital friendly.

    A real problem arises with unions when they lobby government to operate in favour of the unions. The best example being the minimum wage law. A law that is about as regressive as they come in practice, but is lobbied for by trade unions because it protects the members against competition.

    Oh come on, I really have to disagree with this. Slavery as a hindrance?...I'm having a rough time buying this argument. Do you have any sources? Citations? Perhaps it did hinder capital investment, but come on, there is absolutely no way these industries could have grown at the rate in which they did if it wasn't for an army of slave labour.
    The wrong industries grew is my point. If people are free to choose their own jobs they will automatically be guided into the jobs where they are most productive. That is because people will normally take the job that gives them the highest wages. The job where you get the highest wages is usually the one where you are most productive.

    This automatic mechanism of allocating labour efficiently is destroyed when labour becomes slave labour. Then labour is just forced into places that it might not be very productive in.

    It is counter intuitive at first but when you think about it more carefully it makes a lot of sense. Infact most of our developed society is based around the principle of labour being free to choose.

    Your argument can be taken forward to modern times. Are you saying that the exploitation of workers in Africa and Asia is hindering capital investment because of how cheap the labour is? If so, someone hasn't told Nike, Apple, H&M, Gap, Microsoft, Adidas, etc. etc. ad infinitum.
    Careful here, many of these firms that go abroad and use third world labour are actually helping the workers. The workers are being allowed to use more capital. Which makes them more productive. Which means they get higher wages.

    As long as the workers in these nations are able to freely choose their form of employment, MNCs do a lot of good.

    If the MNCs were to leave these nations the workers would not gain. Suddenly they would be out of a job and have to take a lower quality form of employment, by their judgement, instead. They might be forced back into a subsistence farming existence.

    For example I remember a story a clothes brand from a celebrity that it turned out used child labour in the third world. There was a popular hippy revolt in America, because they thought child labour was abhorrent, and the clothes brand was shut down. This meant the factory with the child labour in it was closed down.

    Now many of the child labourers were young girls. And guess what happened after they lost their jobs? Many of them turned to prostitution. An absolute tragedy caused by do gooders who do harm. It is well intended people who do the most harm.

    Actually, this has been debunked. The Egyptians did not use slave labour for their infrastructure projects (they did have personal slaves captured in war though). If you pick up any textbook written in the past decade or so you'll find this theory debunked. The pyramids were built by free citizens and they were paid or received tax benefits.
    Well it was a government spending project then. Same difference


    Obviously the Romans did have slaves but my point was they had a more capitalist economy than other empires, which meant they were very practical (served their fellow man) and were able to have a huge empire that organised itself in a largely automatic fashion.

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Updated: April 30, 2012
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