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5 reasons capitalism failed


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"The modern world is ruled by multinational corporations and governed by a capitalistic ideology that believes: Corporations are a special breed of people, motivated solely by self-interest. Corporations seek to maximize return on capital by leveraging productivity and paying the least possible amount for taxes and labor. Corporate executives pledge allegiance to their directors and shareholders. The dominant corporate perspective is short term, the current financial quarter, and the dominant corporate ethic is greed, doing whatever it takes to maximize profit.

 

Five factors are responsible for the failure of global corporate capitalism. First, global corporations are too big. We're living in the age of corporate dinosaurs. (The largest multinational is JP Morgan Chase with assets of $2 Trillion, 240,000 employees, and offices in 100 countries.) The original dinosaurs perished because their huge bodies possessed tiny brains. Modern dinosaurs are failing because their massive bureaucracies possess miniscule hearts.

 

Since the Reagan era global corporations have followed the path of least resistance to profit; they've swallowed up their competitors and created monopolies, which have produced humongous bureaucracies. In the short-term, scale helps corporations grow profitable, but in the long-term it makes them inflexible and difficult to manage. Gigantism creates a culture where workers are encouraged to take enormous risks in order to create greater profits; it's based upon the notion that the corporation is "too big to fail."

 

Second, global corporations disdain civil society. They've created a culture of organizational narcissism, where workers pledge allegiance to the enterprise. Corporate employees live in a bubble, where they log obscene hours and then vacation with their co-workers. Multinationals develop their own code of ethics and worldview separate from that of any national state. Corporate executives don't care about the success or failure of any particular country, only the growth and profitability of their global corporation. (Many large corporations pay no U.S. income tax; in 2009 Exxon Mobil actually got a $156 M rebate.)

 

Third, global corporations are modern outlaws, living outside the law. There is no invisible hand that regulates multinationals. In 1759 Philosopher Adam Smith argued that while wealthy individuals and corporations were motivated by self interest, an "invisible hand" was operating in the background ensuring that capitalist activities ultimately benefited society. In modern times this concept became the basis for the pronouncements of the Chicago School of Economics that markets were inherently self regulating. However, the last five years have demonstrated that there is no "invisible hand" -- unregulated markets have spelled disaster for the average person. The "recovery" of 2009-10 ensured that "too big to fail" institutions would survive and the rich would continue to be rich. Meanwhile millions of good jobs were either eliminated or replaced by low-wage jobs with poor or no benefits.

 

Fourth, global corporations are ruining our natural capital. Four of the top 10 multinational corporations are energy companies, with Exxon Mobil leading the list. But there are many indications that our oil reserves are gone. Meanwhile, other forms of natural capital have been depleted -- arable land, water, minerals, forests, fish, and so forth. Multinational corporations have treated the environment as a free resource. When the timberlands of North America began to be depleted, lumber corporations moved to South America and then Asia. Now, the "easy pickings" are gone. Global corporations have ravished the world and citizens of every nation live with the consequences: dirty air, foul water, and pollution of every sort.

 

Fifth, global corporations have angered the world community. The world GDP is $63 Trillion but multinational corporations garner a disproportionate share -- with banks accounting for an estimated $4 trillion (bank assets are $100 trillion). Global black markets make $2 trillion -- illegal drugs account for at least $300 billion. In many parts of the world, a worker is not able to earn a living wage, have a bank account or drive a car, but can always obtain drugs, sex, and weapons. And while the world may not be one big village in terms of lifestyle, it shares an image of "the good life" that's proffered in movies, TV, and the Internet. That's what teenagers in Afghanistan have in common with teenagers in England; they've been fed the same image of success in the global community and they know it's inaccessible. They are angry and, ultimately, their anger has the same target -- multinational corporations (and the governments that support them).

 

We live in interesting times. The good news is we're witnessing the failure of global corporate capitalism."

 

 

http://www.alternet.org/story/152118/5_reasons_capitalism_has_failed

 

One more sign of capitalism's failure? Ummm...the Bush-recession. Look what happens when laissez-faire and "letting the market police itself" happens.

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Capitalism didn't fail, we did. When kept in check by the buying power of the people, capitalism is the best system in the world.

 

When government is intorduced, the will of the people wains and hey become dependant on the government to tell them what they should buy or do. That is what fails the system, nanny-state BS.

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I call your dopey OP and Raise you this one:

Why Socialism Failed Collectivism Is Based on Faulty Principles JUNE 01, 1995 by MARK J. PERRY

Socialism is the Big Lie of the twentieth century. While it promised prosperity, equality, and security, it delivered poverty, misery, and tyranny. Equality was achieved only in the sense that everyone was equal in his or her misery.

 

In the same way that a Ponzi scheme or chain letter initially succeeds but eventually collapses, socialism may show early signs of success. But any accomplishments quickly fade as the fundamental deficiencies of central planning emerge. It is the initial illusion of success that gives government intervention its pernicious, seductive appeal. In the long run, socialism has always proven to be a formula for tyranny and misery.

 

A pyramid scheme is ultimately unsustainable because it is based on faulty principles. Likewise, collectivism is unsustainable in the long run because it is a flawed theory. Socialism does not work because it is not consistent with fundamental principles of human behavior. The failure of socialism in countries around the world can be traced to one critical defect: it is a system that ignores incentives.

 

In a capitalist economy, incentives are of the utmost importance. Market prices, the profit-and-loss system of accounting, and private property rights provide an efficient, interrelated system of incentives to guide and direct economic behavior. Capitalism is based on the theory that incentives matter!

 

Under socialism, incentives either play a minimal role or are ignored totally. A centrally planned economy without market prices or profits, where property is owned by the state, is a system without an effective incentive mechanism to direct economic activity. By failing to emphasize incentives, socialism is a theory inconsistent with human nature and is therefore doomed to fail. Socialism is based on the theory that incentives don’t matter!

 

In a radio debate several months ago with a Marxist professor from the University of Minnesota, I pointed out the obvious failures of socialism around the world in Cuba, Eastern Europe, and China. At the time of our debate, Haitian refugees were risking their lives trying to get to Florida in homemade boats. Why was it, I asked him, that people were fleeing Haiti and traveling almost 500 miles by ocean to get to the “evil capitalist empire” when they were only 50 miles from the “workers’ paradise” of Cuba?

The Marxist admitted that many “socialist” countries around the world were failing. However, according to him, the reason for failure is not that socialism is deficient, but that the socialist economies are not practicing “pure” socialism. The perfect version of socialism would work; it is just the imperfect socialism that doesn’t work. Marxists like to compare a theoretically perfect version of socialism with practical, imperfect capitalism which allows them to claim that socialism is superior to capitalism.

 

If perfection really were an available option, the choice of economic and political systems would be irrelevant. In a world with perfect beings and infinite abundance, any economic or political system–socialism, capitalism, fascism, or communism–would work perfectly.

 

However, the choice of economic and political institutions is crucial in an imperfect universe with imperfect beings and limited resources. In a world of scarcity it is essential for an economic system to be based on a clear incentive structure to promote economic efficiency. The real choice we face is between imperfect capitalism and imperfect socialism. Given that choice, the evidence of history overwhelmingly favors capitalism as the greatest wealth-producing economic system available.

The strength of capitalism can be attributed to an incentive structure based upon the three Ps: (1) prices determined by market forces, (2) a profit-and-loss system of accounting and (3) private property rights. The failure of socialism can be traced to its neglect of these three incentive-enhancing components.

 

Prices

 

The price system in a market economy guides economic activity so flawlessly that most people don’t appreciate its importance. Market prices transmit information about relative scarcity and then efficiently coordinate economic activity. The economic content of prices provides incentives that promote economic efficiency.

For example, when the OPEC cartel restricted the supply of oil in the 1970s, oil prices rose dramatically. The higher prices for oil and gasoline transmitted valuable information to both buyers and sellers. Consumers received a strong, clear message about the scarcity of oil by the higher prices at the pump and were forced to change their behavior dramatically. People reacted to the scarcity by driving less, carpooling more, taking public transportation, and buying smaller cars. Producers reacted to the higher price by increasing their efforts at exploration for more oil. In addition, higher oil prices gave producers an incentive to explore and develop alternative fuel and energy sources.

 

The information transmitted by higher oil prices provided the appropriate incentive structure to both buyers and sellers. Buyers increased their effort to conserve a now more precious resource and sellers increased their effort to find more of this now scarcer resource.

The only alternative to a market price is a controlled or fixed price which always transmits misleading information about relative scarcity. Inappropriate behavior results from a controlled price because false information has been transmitted by an artificial, non-market price.

 

Look at what happened during the 1970s when U.S. gas prices were controlled. Long lines developed at service stations all over the country because the price for gasoline was kept artificially low by government fiat. The full impact of scarcity was not accurately conveyed. As Milton Friedman pointed out at the time, we could have eliminated the lines at the pump in one day by allowing the price to rise to clear the market.

 

From our experience with price controls on gasoline and the long lines at the pump and general inconvenience, we get an insight into what happens under socialism where every price in the economy is controlled. The collapse of socialism is due in part to the chaos and inefficiency that result from artificial prices. The information content of a controlled price is always distorted. This in turn distorts the incentives mechanism of prices under socialism. Administered prices are always either too high or too low, which then creates constant shortages and surpluses. Market prices are the only way to transmit information that will create the incentives to ensure economic efficiency.

 

Profits and Losses

 

Socialism also collapsed because of its failure to operate under a competitive, profit-and-loss system of accounting. A profit system is an effective monitoring mechanism which continually evaluates the economic performance of every business enterprise. The firms that are the most efficient and most successful at serving the public interest are rewarded with profits. Firms that operate inefficiently and fail to serve the public interest are penalized with losses.

 

By rewarding success and penalizing failure, the profit system provides a strong disciplinary mechanism which continually redirects resources away from weak, failing, and inefficient firms toward those firms which are the most efficient and successful at serving the public. A competitive profit system ensures a constant reoptimization of resources and moves the economy toward greater levels of efficiency. Unsuccessful firms cannot escape the strong discipline of the marketplace under a profit/loss system. Competition forces companies to serve the public interest or suffer the consequences.

 

Under central planning, there is no profit-and-loss system of accounting to accurately measure the success or failure of various programs. Without profits, there is no way to discipline firms that fail to serve the public interest and no way to reward firms that do. There is no efficient way to determine which programs should be expanded and which ones should be contracted or terminated.

 

Without competition, centrally planned economies do not have an effective incentive structure to coordinate economic activity. Without incentives the results are a spiraling cycle of poverty and misery. Instead of continually reallocating resources towards greater efficiency, socialism falls into a vortex of inefficiency and failure.

 

Private Property Rights

 

A third fatal defect of socialism is its blatant disregard for the role of private property rights in creating incentives that foster economic growth and development. The failure of socialism around the world is a “tragedy of commons” on a global scale.

 

The “tragedy of the commons” refers to the British experience of the sixteenth century when certain grazing lands were communally owned by villages and were made available for public use. The land was quickly overgrazed and eventually became worthless as villagers exploited the communally owned resource.

 

When assets are publicly owned, there are no incentives in place to encourage wise stewardship. While private property creates incentives for conservation and the responsible use of property, public property encourages irresponsibility and waste. If everyone owns an asset, people act as if no one owns it. And when no one owns it, no one really takes care of it. Public ownership encourages neglect and mismanagement.

 

Since socialism, by definition, is a system marked by the “common ownership of the means of production,” the failure of socialism is a “tragedy of the commons” on a national scale. Much of the economic stagnation of socialism can be traced to the failure to establish and promote private property rights.

 

As Peruvian economist Hernando de Soto remarked, you can travel in rural communities around the world and you will hear dogs barking, because even dogs understand property rights. It is only statist governments that have failed to understand property rights. Socialist countries are just now starting to recognize the importance of private property as they privatize assets and property in Eastern Europe.

 

Incentives Matter

 

Without the incentives of market prices, profit-and-loss accounting, and well-defined property rights, socialist economies stagnate and wither. The economic atrophy that occurs under socialism is a direct consequence of its neglect of economic incentives.

 

No bounty of natural resources can ever compensate a country for its lack of an efficient system of incentives. Russia, for example, is one of the world’s wealthiest countries in terms of natural resources; it has some of the world’s largest reserves of oil, natural gas, diamonds, and gold. Its valuable farm land, lakes, rivers, and streams stretch across a land area that encompasses 11 time zones. Yet Russia remains poor. Natural resources are helpful, but the ultimate resources of any country are the unlimited resources of its people–human resources.

 

By their failure to foster, promote, and nurture the potential of their people through incentive-enhancing institutions, centrally planned economies deprive the human spirit of full development. Socialism fails because it kills and destroys the human spirit–just ask the people leaving Cuba in homemade rafts and boats.

 

As the former centrally planned economies move toward free markets, capitalism, and democracy, they look to the United States for guidance and support during the transition. With an unparalleled 250-year tradition of open markets and limited government, the United States is uniquely qualified to be the guiding light in the worldwide transition to freedom and liberty.

 

We have an obligation to continue to provide a framework of free markets and democracy for the global transition to freedom. Our responsibility to the rest of the world is to continue to fight the seductiveness of statism around the world and here at home. The seductive nature of statism continues to tempt and lure us into the Barmecidal illusion that the government can create wealth.

 

The temptress of socialism is constantly luring us with the offer: “give up a little of your freedom and I will give you a little more security.” As the experience of this century has demonstrated, the bargain is tempting but never pays off. We end up losing both our freedom and our security.

 

Programs like socialized medicine, welfare, Social Security, and minimum wage laws will continue to entice us because on the surface they appear to be expedient and beneficial. Those programs, like all socialist programs, will fail in the long run regardless of initial appearances. These programs are part of the Big Lie of socialism because they ignore the important role of incentives.

 

Socialism will remain a constant temptation. We must be vigilant in our fight against socialism not only around the globe but also here in the United States.

The failure of socialism inspired a worldwide renaissance of freedom and liberty. For the first time in the history of the world, the day is coming very soon when a majority of the people in the world will live in free societies or societies rapidly moving toward freedom.

 

Capitalism will play a major role in the global revival of liberty and prosperity because it nurtures the human spirit, inspires human creativity, and promotes the spirit of enterprise. By providing a powerful system of incentives that promote thrift, hard work, and efficiency, capitalism creates wealth.

The main difference between capitalism and socialism is this: Capitalism works.

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More of that old get government out of the way claptrap. Lame.

 

The elite are destroying Capitalism. They want it all, power, money, control.

did government ever build a car or did they invent the color tv why i should think not?
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Capitalism didn't fail, we did. When kept in check by the buying power of the people, capitalism is the best system in the world.

 

When government is intorduced, the will of the people wains and hey become dependant on the government to tell them what they should buy or do. That is what fails the system, nanny-state BS.

How can you expect to be taken as a student of politics when your short post has 14 spelling errors?

 

Sorry rayj, but rote cut&pasting of irrelevant, unfocused crap you troll up from the net in a desperate fit of surfing and which you don't even read is not debate, nor does it refute my OP.

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How can you expect to be taken as a student of politics when your short post has 14 spelling errors?

 

Sorry rayj, but rote cut&pasting of irrelevant, unfocused crap you troll up from the net in a desperate fit of surfing and which you don't even read is not debate, nor does it refute my OP.

i cannot see you refuting his claims all i see is a spelling nazi because that is the best you can do and be honest?

.

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i cannot see you refuting his claims all i see is a spelling nazi because that is the best you can do and be honest?

.

a spelling Nazi is when someone calls attention to a small, single spelling error that can be a typo, you're apparently too stupid to realize that multiple spelling errors in a short post indicate someone who has no education and no interest in attaining one.

I guess in your little retard-world that kind of ignorance is "cool", but normal peeps consider it a sign of having no cred.

he made no claims, and neither have you.

Your strawman/sarcasm about what govt has done falls flat too. all the businesses like RR's, car companies, computers, telecommunications..all of them, wouldn't exist without being funded by, and propped up by, government.

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How can you expect to be taken as a student of politics when your short post has 14 spelling errors?

I am posting from a kindle and I have big fingers. Cut me some slack. I don't see you getting on Sole Result's case when he manufactures run-on sentences which are in desperate need of punctuation.

 

I didn't know we were talking politics, I thought you wanted to talk economics. Do you not know the difference?

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We haven't had capitalism in 100 years. We've had socialism mixed with political correctness. A deadly combination.

 

You can't say FDR was a great president and a successful one in one breath and then tell us we've had capitalism in anudder.

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I am posting from a kindle and I have big fingers. Cut me some slack. I don't see you getting on Sole Result's case when he manufactures run-on sentences which are in desperate need of punctuation.

 

I didn't know we were talking politics, I thought you wanted to talk economics. Do you not know the difference?

You are absolutely full of sht. 100%. I post regularly from a Ipod, and have hands like the HULK, and never make the kind of mistakes you did. They are not typos, they are spelling errors.

I don't respond to sole result anymore because he's a nut. His posts don't make any sense.

Since you can't figure out that economics and politics are the same thing, I suggest you stay out of debates here.

 

The progressive machine is grinding to a halt. Thus we get these ridiculous threads talking about how everything else fail.

This is an idiotic, empty statement. Stop spamming.

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Milton Friedman on Capitalism and Greed

Posted Wed, 31/07/2013 - 12:34 by Jadranko Brkic

Milton Friedman and Phil Donahue discuss greed, the perception that capitalism is greedy, and how capitalism is no more greedy than any other system yet its people are better off. An excerpt from an interview with Phil Donahue in 1979.

 

Transcript:

 

Phil Donahue:

 

When you see around the globe the maldistribution of wealth, the desperate plight of millions of people in underdeveloped countries, when you see so few haves and so many have-nots, when you see the greed and the concentration of power, did you ever have a moment of doubt about capitalism and whether greed's a good idea to run on?

 

Milton Friedman:

 

Well, first of all, tell me, is there some society you know that doesn't run on greed? You think Russia doesn't run on greed? You think China doesn't run on greed? What is greed? Of course none of us are greedy. It's only the other fellow who's greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn't construct his theory under order from a bureaucrat. Henry Ford didn't revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you're talking about, the only cases in recorded history are where they have had capitalism and largely free trade. If you want to know where the masses are worst off, it's exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear that there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.

 

Phil Donahue:

 

But it seems to reward not virtue as much as ability to manipulate the system.

 

Milton Friedman:

 

And what does reward virtue? Do you think the communist commissar rewards virtue? Do you think Hitler rewards virtue? Do you think American presidents reward virtue? Do they choose their appointees on the basis of the virtue of the people appointed or on the basis of their political clout? Is it really true that political self-interest is nobler somehow than economic self-interest? You know, I think you're taking a lot of things for granted. Just tell me where in the world you find these angels who are going to organize society for us.

 

Phil Donahue:

 

Well --

 

Milton Friedman:

 

I don't even trust you to do that.

 

Video:

 

http://www.slobodaiprosperitet.tv/en/node/847

 

There is also a video at the link if that is too much reading for you.

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1456080_10151972352739255_1383922059_n.p

 

Yep...out of all of those the only thing that makes sense is defense. Both the GOP and the Demcorats all played leading roles in the rest of the crap on the list.

 

Are you sure you are pissed off at the right people? There is no such thing as an economic bill of rights

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Capitalism didn't fail, we did. When kept in check by the buying power of the people, capitalism is the best system in the world.

 

When government is intorduced, the will of the people wains and hey become dependant on the government to tell them what they should buy or do. That is what fails the system, nanny-state BS.

 

There are two misspellings here. "intorduced" and "dependant".

"Intorduced is a simple character juxtaposition issue. Quite common.

"dependant" is another common mistake. If you spell defendant correctly, the mistake

spelling "dependant" instead of "dependent" is understandable.

 

 

"hey" is not a misspelling. He simple did not press "t" hard enough. Another common thing.

 

So draino, if you found 14 spelling errors, you are the one who needs to revisit elementary school!

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