Cafe Hayek - Latest Comments in Capitalism Day

Re: Capitalism Day

Hammer — Wed, 23 Apr 2008 09:26:21 -0000

Pure democracy is just tyranny of the majority, as opposed to some other arbitrary number of people.

Freedom is measured as the absence of coercivce force. That's it. I don't know why so many progressives have issues with that, but it seems almost universally true that they do. For what it is worth, we could have a king and be more free if his only powers were to direct a volunteer army in war and enforce a very small number of laws. Compare to early Athens, where a fellow could be sentanced to death for no real crime, just because the majority voted for it.

Re: Capitalism Day

Sam Grove — Wed, 23 Apr 2008 09:00:10 -0000

What's with the democracy worship?

It seems that for progressives, democracy is the desired end.

As I said on another thread:

"Part of the problem is the belief, promulgated by government and progressives that democracy = freedom.

This leads to the assumption that the slightest fraction of input represented by one's vote is an expression of substantial power over the form of one's serfdom and that THIS is freedom."

Re: Capitalism Day

Sam Grove — Wed, 23 Apr 2008 08:56:19 -0000

What is/are the desired end(s)?

Re: Capitalism Day

Brad Warbiany — Wed, 23 Apr 2008 08:50:00 -0000

Sameer,

and where workplace democracy was taken seriously

What's with the democracy worship? Democracy is a means, not an end. How are you sure that democracy would be the proper means to your desired end?

Re: Capitalism Day

Sam Grove — Wed, 23 Apr 2008 08:47:50 -0000

But hey, Sameer doesn't like corporations.

Corporations, like people can be good or bad. Being managed by actual people, their behaviors spring from the same urges.

Obviously would should not trust corporations with political power for the same reason we should not trust people with political power.

I'm wondering if 'progressives' are a manifestation of having had to give up on communism and now are focussed on social democracy. (Well, corporations are useful, but we have to keep them on a tight leash. By god, we can find some optimum balance between 'unfettered' capitalism and outright communism.)

We can keep up the illusion that capitalism = mercantilism, we'll just never discuss the latter and use the former to cover both. In fact, there's no such thing as capitalism, but the word sure is a handy straw man.

Re: Capitalism Day

Brad Warbiany — Wed, 23 Apr 2008 08:45:39 -0000

Sameer,

In that case, Henry Ford wanted to pay his Model T assembly line workers more than the market rate. His logic was that he needed more customers, and if Ford tried to lift these workers to middle class status, they would be doing the best thing for the long term profitability of the company. His shareholders disagreed and argued that he had a duty to maximize short term profit above all else. The judge agreed, setting a precedent that is still on the books.

Sounds like a property rights case to me. You fail to recognize that when he incorporated, Henry Ford no longer owned the company -- the shareholders owned the company. As the owners, should they not be able to decide how the company sets its priorities?

Re: Capitalism Day

Sam Grove — Wed, 23 Apr 2008 08:38:08 -0000

The thing about science nerds is that they invent things to prove they can, wherever they happen to be working.

So to claim government produced the internet falls short. The internet, and its origins, was created by people for their own purposes and not to fulfill some government mission.

It was the opportunity for profit making that brought computing and the internet to the rest of us.

Re: Capitalism Day

Brad Hutchings — Wed, 23 Apr 2008 08:17:01 -0000

Same here Indiana Jim... I provided specific examples of how corporations are influenced and controlled and directed for what many would see as "public good". Here's another: yesterday, my inbox was filled with what many of the major corporations I do business with were doing in the name of environmental responsibility. Apparently, I'm the one person who doesn't care, but they are falling all over themselves to reduce waste, eliminate their carbon footprints, recycle, and not club baby seals. I also pointed out that capitalism is not the same as corporatism, and there's lots of capitalism going on outside of giant corporations. Grant pointed out that the Internet we know today is a result of fast and cheap computers, plentiful bandwidth, etc. All things that DARPA and Al Gore didn't give us from a central perch. But hey, Sameer doesn't like corporations. OK, we get the point already.

Re: Capitalism Day

Sam Grove — Wed, 23 Apr 2008 07:58:47 -0000

Corporations are accountable to nothing but their own profit, and explicitly so.

Except in the case of 2-b, they do have to account to their customers.

For example, I tried graphics tablets from Aiptek but was not satisfied. I am now happy with my Wacom tablet.

When we bought a new car, we did not buy another Saturn but bought a Toyota instead.

Please tell me what control Saturn corp. or Toyota corp. exert over us other than producing what we wanted.

Re: Capitalism Day

Sam Grove — Wed, 23 Apr 2008 07:39:48 -0000

a) Corporations are hierarchical coercive organizations internally. This is almost so much of a truism as to not need evidence. Plans are set by CEOs and boards and implemented by everyone else. The further down to the ladder you are, the less say you have in any decision. This runs counter to many definitions of democracy.

That may be (and note that corporate structure is defined by corporate law), but this may be a problem for you if you work for a corporation.

That's what you agree to put up with for compensation.

If you don't like it there, then find another job.

If you don't like working for corporate structures, then find a small business that has a different structure.

And if that doesn't satisfy you, then start your own business.

If that doesn't work for you, go stake a claim in some remote wilderness and live off the land.

The thing about corporations is that if you don't work for one, then their power over you (except in the case of 2-b) is what?

Re: Capitalism Day

indianajim — Wed, 23 Apr 2008 07:28:59 -0000

Sameer seems to have missed every word I just posted. Inconvenient ideas (too inconvenient) for him/her I suppose?

Re: Capitalism Day

Sameer Dossani — Wed, 23 Apr 2008 07:08:54 -0000

Hmm, there are far too many points here for me to give meaningful replies. I'll try to touch on a couple:

1) Babinich - The point is not "look at Zim" or "look at Stalin" but "look at the U.S." "look at Japan", etc. Yes bad examples of state interventions in development abound, but there are some good (or better) examples as well. The story of Japan nearly giving up its auto manufacturing in the 1960s is telling. When their first experiments failed miserably, the Central Bank argued for abandoning the stupid experiment and focus on Japan's comparative advantage, but the Finance ministry persisted with its subsidies and tariffs until the sector was competitive. Now Japan and cars is like France and wines, right? State intervention. There's no example of development without it.

2) A number of posts seem to be challenging me to actually list means of corporate control, so here goes. a) Corporations are hierarchical coercive organizations internally. This is almost so much of a truism as to not need evidence. Plans are set by CEOs and boards and implemented by everyone else. The further down to the ladder you are, the less say you have in any decision. This runs counter to many definitions of democracy.

b) Throughout the 20th century (and now 21st century), corporations have been able to exert undo influence over political decisions. I don't think many of you disagree with this, you just cite the blame slightly differently. Your counter-argument might be "if government's didn't have the mechanisms of coercion in the first place, corporations couldn't exert that influence". Maybe. It would depend what a society without government coercion would look like. As it stands right now, United Fruit ordered the U.S. invasion of Guatemala in the 1950s, and the oil and defense industrialists in the Bush administration ordered the invasion of Iraq (and they're about the only constituency that has benefitted from it). A handful of corporations underwrite the campaigns for candidates of both major U.S. parties, ensuring that representatives are as accountable (if not more so) to their interests (that's where the money's coming from) than that of their constituents. I suspect you share these critiques, so I'll stop here.

c) Despite their faults, accountability measures for governments at least have some hope of success. Though the democratic systems we have in place are far from perfect (I agree with many of your arguments about state control, though I suspect we mean different things by the term) even the worst of them allows for some accountability by the people. Rousseau and Hume may have overstated their case when they elaborated their theories of "consent of the governed" but I think there's still a basic logic there. What that implies in our particular example is that the votes every few years and the other democratic measures we have count for something. Maybe not much, but something. Corporations are accountable to nothing but their own profit, and explicitly so. Again, in a world without these dysfunctional entities, where free association was the norm, not the exception, and where workplace democracy was taken seriously, I would be the first to say dismantle the state and all its coercive mechanisms. As things stand now, state regulations are about the only thing that stands in the way of the annihilation of the human species, so I'd say we need them.

Re: Capitalism Day

indianajim — Wed, 23 Apr 2008 06:14:40 -0000

Sameer wrote:

"On the line "capitalism is good for the earth", I just can't. We can agree to disagree on all kinds of things, but silly statements like that should at least be backed up by more evidence. . . "

There is certainly "more evidence" about the earth-friendliness of capitalistic vs. less capitalistic governance. Just consider the environmental mess the former USSR created (What did the waterways in East Germany look like compared to those in West Germany when Reagan challenged "Mr. Gorbachev, tear down this wall"? Or as I posted above consider the contrast between the deforestation of Haiti in comparison to the dense forests of the Dominican Republic. One of the points you are missing here is that earth-friendliness (a relatively clean environment) is what economists call a "normal good." So one of the by-products of the increase in wealth that accompanies free-market capitalism (and yes the existence of corporations, yes large ones that accomplish economies of scale and scope) is a rising demand for a cleaner environment. Corporate sensitivity to this is palpable; after all, As John Stossel so effectively keeps explaining to the masses: they have to PERSUADE us to buy their products.

Re: Capitalism Day

Hammer — Wed, 23 Apr 2008 05:11:34 -0000

I am a tad surprised that no one has pointed out the highly questionable statement that the economy is significantly driven by "the Pentagon and (to a much lesser extent) the National Institutes of Health."

Really? Let's think about this for a second. If both these entities are wholly government funded, it means they are only funded by taxes. As taxes are aquired by taking a percentage of the wealth generated by the economy, and both the Pentagon and the NIoH get but a percentage of those, is it not odd to say they "drive" the economy?

Even under the very optimisic (well, pessimistic from where I am standing) assumption that the NIoH gets 50% of all tax revenue, and taxes account for 50% of all economic wealth created, that still puts the NIoH at merely 25% of the economy's total wealth. I know for a fact that the Pentagon gets far less than 50% of tax revenue, so that isn't even worth considering.

So perhaps you can explain why you think the government is such a large driver, particularly those two organizations.

Re: Capitalism Day

LowcountryJoe — Wed, 23 Apr 2008 03:23:01 -0000

I just happen to think corporate coercion as it stands right now is worse than state coercion. If I had lived in the 19th century I would be writing about nation states; if I had lived in the 17th, I'd be writing about religious coercion. All forms of coercion are bad, or at least need to be justified. Corporate control over resources is the most potent form of coercion IMHO today.

- The people here are trying to inform you that some large corporations use the state to maintain or increase their profits by currying favor from congress (via political contributions for favorable laws to the corporation).

- Was there a definitive separation between church and state during the time you would have written about it? My guess is that you would have missed the boat back then as well.

- All businesses have to persuade, not coerce, their customers to remain customers. Some busineses may have more leverage in persuasion because of the nature of their business (a natural monopoly) or because it operates under favorable legislation -- legislation it may have paid for (a state problem).

- A corporation has to purchase the resources that it converts into goods/services. The state just takes through imminent domain and/or agencies designed to seize one's earnings.

Still think that the state is the least dangerous?

Also, 19th century = 1801 through 1900; 17th century = 1601 through 1700. These are the time periods you were refeing to?

Re: Capitalism Day

babinich — Wed, 23 Apr 2008 01:55:56 -0000

"The way economies go from being underdeveloped, anemic, and uncompetitive to becoming developed, strong, and aggressively competitive is simple and straightforward: government steps in." - from 'Bad Samaritans'

Government steps in; yep, it sure does...

Ask the people of Zimbabwe about government intervention.

These types of assertions, with all their implicit pollyanna, are nothing more than shades of 'Gigantisism'.

You know, that rush to modernity at any cost. Ask yourself what the cost is.

This also reminds me of the implementation of the Five Year Plan series by none other than Josef Stalin.

Industrialization ('Gigantisism') at any cost. We now know the cost in terms of lives and the ecosystem.

The free exchange of ideas must be able to flow globally in order to nurture young economies and help them mature into strong and stable economies.

Yes, markets must evolve; there is a maturation process.

Re: Capitalism Day

Grant — Tue, 22 Apr 2008 23:21:31 -0000

Some people here are pointing to government-funded or sponsored research as support of the claim that government can do useful things with its money. I think it sometimes can, but I don't believe the examples they point to often show the results they are after. I think academics in universities rarely contribute very much in the way of critical advances. They may come up with "big ideas" (since they are paid to sit around and think of "big ideas" all day), but so do other people. The problem is that "big ideas" are rarely the bottleneck of progress; that title generally falls to small details which can be seemingly trivial to the layman.

For example, people often credit DARPA for inventing the Internet. Its true that DARPA employees were intelligent, and we certainly owe them some gratitude. However, the technology they invented (packet-switched networks) was utterly trivial to implement in comparison to the other, supporting technology which the Internet needs to function at a useful level of performance. It needs fast, small transistors (CPUs, memory, etc), and advanced software languages and libraries. Transistors are private goods, and not financed by government at all. Comparing the development of TCP/IP to the development of the hardware needing to power the Internet is like comparing a tribal burial mound to an Egyptian pyramid.

The funny thing is that the R&D which largely drives progress in software on the Internet is generally all free, and not directly financed by government at all. An even funnier thing is that much of the progress in hardware is driven by games and porn.

IMO, the primary drive of innovation is not monetary incentives, but the incentives scientists and engineers have to do groundbreaking work and receive credit for it. Politicians have extremely weak incentives to fund any sort of useful R&D; fortunately the informal institution that is science and engineering produces better results.

Re: Capitalism Day

Gil — Tue, 22 Apr 2008 22:58:44 -0000

I can't help but likewise ask 'what is the magical power of the corporation that separates it from ordinary businesses and make some people want to disband the corporation structure'? There aren't that any benefits I can think of that would make an unprofitable business 'profitable' just because the owner(s) incorporated it.

But still what is it called when a private person hires an assassin to bump off someone they don't like in a world devoid of government? (And don't use the lamo argument of the private person loses business and goes broke because if that were true then violence would be a rare random occurence due to quick reciprocal negative feedback, but it isn't.)

Re: Capitalism Day

Raker Tooth — Tue, 22 Apr 2008 22:05:17 -0000

"I should know better than to continue this discussion"

You've made for a great discussion. This is really good stuff. Thanks for the contribution.

Re: Capitalism Day

Sam Grove — Tue, 22 Apr 2008 20:52:23 -0000

Sam, why is one either in favour of the status quo or a defender of the soviet union?

Did I suggest that?

Was not my intent.

If folks think that this system is the best we can do,...

I certainly don't.

Just because I hold that opinion does not make me a defender of state coercion

Remains to be seen.

and it certainly doesn't make me a defender of the soviet union.

Didn't mean to imply that you did. I just get the idea from my experience with progressives that they don't apprehend the nature of political power as I do. I attempted to illustrate that by citing the communist experiments in eliminating private corporate power.

So, questions.

How do corporations exert this control?

What is the lynch pin of corporate power?

If the government is to be used to eliminate this corporate power, how much power must the government retain to accomplish it?

How are 'the people' to keep political power from getting out of control...assuming that they are able to get it under control?

Who are 'the people'?

Re: Capitalism Day

Brad Hutchings — Tue, 22 Apr 2008 20:47:53 -0000

Sameer,

Clearly, we have a mixed economy, with some sectors more driven by government control and agenda and some sectors driven by entrepreneurs. I'm fortunate enough to work in the latter type of sector. Your biggest confusion seems to be "capitalism" with "corporatism". They are no more the same than "capitalism" and "industrialization". It is strange to me that liberal minded people fear the corporation, as it's the most directly controllable tool for whatever social change agenda is in vogue. Government can push off the costs of immigration control, health care, the war on drugs, reserve armed forces, racial integration, tax collection, you name it -- all on corporations. Shareholders can demand "green" behavior, or women on the BOD, labor standards in foreign markets, you name it. And corporations typically just cave in on both fronts rather than fight for underlying principles of flexibility.

But before a US corporation gets terribly big, it's very free within the confines of the capital it can raise and revenue it can ramp up to try radical new ideas and develop radical new products, to find a niche of business that nobody else is doing or doing well. It can do so outside the purview of national industrial policy, state agencies, and local planners so long as it's not doing anything too dangerous or potentially harmful. Look at Tesla Motors, bringing an electric hot rod to market (belatedly) or Google, providing valuable web applications, or SunPower, whose chairman is all business, zero ecology. Or look at the business I'm involved with (see my link), promoting literacy by selling a software product and web service to schools. Even with "No Child Left Behind", we're very free to take the product and pricing wherever we've wanted, to really understand our market and really make a difference. That's capitalism, my friend... Not to be confused with ADM pushing bogus biofuels mandate that jacks up the price of food for everyone and ensure profits for its shareholders. The latter is corporate politics of the worst kind.

Re: Capitalism Day

Jason — Tue, 22 Apr 2008 20:01:14 -0000

I hadn't heard of Dodge v. Ford before, but a quick search seems to show that it was merely an issue of maintaining special dividends to minority shareholders while Ford wanted to expand market share. If you believe it is about corporations being "socially responsible", you bought into 90 year old spin.

Any organization can be a charity -- simply don't go public and sell the business to investors because almost all the shareholders are going to expect a profit. To issue shares and then turn around and squander their profits is possibly fraud and certainly a failure of fiduciary responsibility.

As LowcountryJoe wrote, is that old case stopping you or anyone from starting a charity? Does it prevent you from supporting your pet causes? If there was a new case that said corporations had to donate their profits "back to the community," I and probably everyone else would liquidate their holdings in those companies.

Re: Capitalism Day

Lee Kelly — Tue, 22 Apr 2008 19:55:51 -0000

Sameer Dossani,

The only problem with what you have written is the following sentence.

I just happen to think corporate coercion as it stands right now is worse than state coercion.

There is no corporate coercion. There is only state coercion, at least for now. There are no corporations amassing armies to enforce their own laws or consficate wealth, and why would they bother? The state has granted itself those powers and politicians are pliable creatures, always ready to flip and flop any which way they think might help them achieve fame, wealth and power.

The greatest public good which a government can provide for a polity is a battery of tight controls and constraits on its own power, and this is the one public good which politicians have the least incentive to provide, since the less power which they can exert the weaker position they are in to broker deals with voting blocs, corporate lobbies, special interests, etc.

If the state did not have such power, then corporations would have no such cheap and easy avenue by which to enforce favourable legislation, or to consficate wealth from the polity. The only option available to be successful, would be to provide consumers with products or services at a compromise of price and quality which is preferred to competitors. If that is corporate coercion, then corporate coercion is something I can live with.

Re: Capitalism Day

John V — Tue, 22 Apr 2008 19:45:29 -0000

Sameer,

I haven't read Bad Samaritans but I've read quite a bit on it and have watched the author interviewed about it.

He makes some interesting points. He's big on nurturing protecting infant industries in developing countries and points out, as you say, that most of western society, came into prosperity via this route. I get it. It's interesting and I've been mulling it over. However, that's not the whole story.

He also can't show that a more open economy would NOT have prospered just the same and I remain unconvinced that they would not have.

I find Rodrik's points in his book, One Economics, Many Recipes about needing to prod and bolster basic institutions in developing nations on a case by case basis more convincing...though he doesn't and cannot really explain how to do that.

Either way, little of "Bad Samaritans", as far as I can see, really applies much to us today. We have the fundamentals in place to prosper even more greatly under freer conditions. Whether we would be at this point without an interventionist history in the 19th century is another story.

Re: Capitalism Day

Sameer Dossani — Tue, 22 Apr 2008 19:27:30 -0000

Sam, why is one either in favour of the status quo or a defender of the soviet union? My views on stalinism and the failure of the bolsheviks may be harsher than yours. I say "may be" as I try not to jump to conclusions about your views, as you have about mine.

If folks think that this system is the best we can do, that's a cynical condemnation of humanity. Just because I hold that opinion does not make me a defender of state coercion and it certainly doesn't make me a defender of the soviet union. I just happen to think corporate coercion as it stands right now is worse than state coercion. If I had lived in the 19th century I would be writing about nation states; if I had lived in the 17th, I'd be writing about religious coercion. All forms of coercion are bad, or at least need to be justified. Corporate control over resources is the most potent form of coercion IMHO today.

And if everyone understands the history (and the present) why are we talking about capitalism at all? The U.S. economy is significantly driven by two state-owned entities, the Pentagon and (to a much lesser extent) the National Institutes of Health. Those entities take taxpayer money and hand it over (in sometimes the most corrupt, no-bid contract ways) to private sector entities, who are often not held accountable when they don't do the job they've been paid to do. U.S. farm subsidies given to huge companies like ADM, Monsanto, and Cargill have all but derailed the latest round of WTO negotiations. Is this a free market system or a peculiar kind of corrupt socialism?