Why Did Capitalism Fail?

[Donnachaidh]

http://smirkingchimp.com/thread/bob-burnett/38002/why-did-capitalism-fail

We live in interesting times. The global economy is splintering. U.S. voters hate all politicians and there's political unrest throughout the world. The root cause of this turmoil is the failure of the dominant economic paradigm -- global corporate capitalism.

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."

More at the link --

[PDJane]

1. All of those things are true,

But corruption of the political system and the inability of capitalism to live within the finite systems of the world and its ecosystem are the biggest failures.

[xchrom]

2. recommend

[TreasonousBastard]

3. Fail at what? Once again someone whines about what's wrong, but never bothers...

to tell us what the goals of the may be. What would "success" be? Nor does he bother to come up with competing systems.

Economic systems are simply means to satisfy the wants of the population. Capitalism has been the means evolved in most societies as bringing more stuff to more people, and by that measure it's been a resounding success.

Now, if your goals include cleaning up the planet, equalizing wealth and political power, or anything else that doesn't fit into the fulfilling of wants thing, you have to go somewhere else and get out of economics as we know it. A coal mine is worth more than a clean river not because the mining company makes a profit, but because millions of people end up happily using whatever the coal ends up producing, like electricity. If you want clean rivers, no competing economic system has found a way to clean up the rivers and give you affordable electricity-- only regulation demanded by enough people has done it.

A regulated mixed economy is as good as it gets. Too many people on all sides of economic questions treat the whole thing like religion-- I'm right and the rest of you are dragging us all into hell. First decide what society you want and then decide how to get there. We've never been able to do that, so we end up in the mess we're in.

[slackmaster]

8. I suspect that Mr. Burnett is lamenting the fact that he has to work to make a living

Even the weakest commentary can find an audience, if only it has enough buzz words to catch their attention.

[phantom power]

4. In a sentence: the negative feedback loops were deliberatedly dismantled.

Completely unregulated economies develop positive feedback loops: the rich get richer. Wealth concentrates. We used to have compensating negative feedback loops, for example a progressive tax rate where the top bracket was as high as 90%. We used to have healthy regulations and healthy regulative bodies like the FDA and SEC, to keep corporation behaviors in some kind of bounds.

Well, all of those homeostatic systems have been systematically removed over the last 30 years. So now we have an unhealthy system that is going off the rails.

:woohoo:

[TexasProgresive]

9. Thank you

I am a electronic technician and know what positive feedback always leads to runaway oscillation. It doesn't matter if you are talking about a electronic circuit or an economic system.

One of the things that the FDR administration did was to put into place negative feedback that would smooth out the wild oscillations of the markets. The wackos under Raygun began to dismantle all those controls putting us back in the boom/panic/boom/panic/boom/panic mode.

[Recursion]

12. It was a PID controller with the D term removed

When that happens, you divide by zero. And dividing by zero is a Bad Thing.

[socialist_n_TN]

5. It's inherent. At some point capitalism becomes

counterproductive for the masses. It's a step up from feudalism and good for creating wealth in a resource rich enviroment. When resources are squeezed it becomes OBVIOUSLY predatory and the lower classes are the prey.

That's when it needs to be smashed and the wealth already created needs to be distributed more fairly to the rest of us.

[TexasProgresive]

6. My understanding is that this is what Marx predicted

He did not envision Communism coming to 3 world places like Russia and China which were peasant based societies (people tied to the land) but that Capitalism would ultimately fail and the next economic system to move in would be Communism.

Now whether that will come to pass is anyone's guess.

[hifiguy]

35. Marx and Engels thought that the Revolution

would first come to highly industrialized countries like Germany and France.

It took Lenin and later Mao to stand Marx's sound logic on its head and justify the imposition of revolution on what were basically "backward" countries. A true Marxist would have fought for the development in those countries, ironically enough.

[slackmaster]

7. What does the author believe capitalism was supposed to do, and how was it to be measured?

I've been reading contemporary accounts of the "failure" of capitalism since the late 1960s, but nobody has ever been able to provide a satisfactory explanation of just what it has failed to do.

Capitalism, more accurately a market-based economy, provides a shared framework for the exchange of goods and services. It's been doing that for a very long time, and it's outlasted many failed experiments in command-based authoritarian economic systems.

Unrec for the sound of the bong gurgling in my head whenever I read such a silly subject line.

[rhett o rick]

15. So you think things are going good? You think unregulated capitalism is good?

You think the poor should just die? Are you Ayn Rand?

[slackmaster]

16. Things are tough but I don't know anyone who is homeless or starving

Do you have a better idea?

Are you a commie?

[rhett o rick]

18. Well you must have your eyes closed. I call strawman on your commie comment.

Regulation doesnt equal communism. Regulations brought us the greatest middle class in the world. Deregulation is killing us. Just because YOU dont see starvation doesnt mean it isnt happening. Maybe you should visit your local soup kitchen and talk to the citizens there.

Are you a capitalist fascist?

[slackmaster]

22. I call strawman back on your silly Ayn Rand comment.

Are you a capitalist fascist?

If I knew a person who was hungry or homeless, I'd offer him or her food or shelter.

Are you an asshole?

[rhett o rick]

23. Are you telling me you dont follow Ayn Rand? You espouse unregulated

capitalism dont you?

[slackmaster]

24. That's a flat-out lie

I've never said any such thing.

[rhett o rick]

27. I appologize if I misunderstood your earlier posts. Please clear it up for me as to what you do

believe in. Your posts make it sound like you espouse capitalism.

It's not a lie that your posts sound like you are supporting unregulated capitalism and call anyone that doesnt a commie. Please clarify if I misunderstood.

[slackmaster]

29. I've never in my entire life said or written anything to the effect that I oppose regulation

:crazy:

[rhett o rick]

31. Good grief. So your mocking of the OP, what was that? nm

[slackmaster]

33. The author said that capitalism had failed, but didn't explain what success would have meant.

It's really very simple.

[seabeyond]

10. regulation failed. allowed greed to take precedence. nt

[rhett o rick]

17. Regulation worked. But citizens got lazy and stopped paying attention and the greedy

bought deregulation. Regulation helped build the greatest middle class the world has known. Deregulation will push us back to feudalism and/or slavery.

[seabeyond]

20. right on. i agree. nt

[blindpig]

11. Because of inherent internal contradictions.

Capitalist competition always leads to overproduction, overproduction alway leads to crisis as goods are not sold, employment is cut and these factors feed back on each other producing recession and depression. The financialization of the capitalist economy exasperates this masses of money sloshes around uninvested looking for investment with a 'suitable' return, withholding that money from productive investment. So we get bubbles as capital runs from one hot investment to the next, all of which are built on sand.

And don't even get me started on Capitalism's incompatibility with life on Earth.

[hifiguy]

36. I wish I could rec that post, blindpig. nt

[lindysalsagal]

13. It's no wonder our beautiful 300 year experiment in representative democracy is floundering

(On edit: It didn't fail for everyone: Some have done quite well.)

It's an absurd idea to begin with, that all people are smart enough and disciplined enough to make decisions for their mutual futures.

There has to be a middle ground between dictators and tea baggers, between fascism and feudalism. But it's going to require intelligence, attention spans longer than a commercial, and the determined intention to get everyone on board. We cannot expect to get the masses committed to a plan when they already know they're going to get hosed. Capitalism requires that many get hosed for the benefit of the few.

Like the Roman Empire, it was fun while it lasted. As our global resources start to get absorbed, we need to change to mutual cooperation, rather than competition.

The zero-sum paradigm (there's not enough, so, I'm getting mine, screw you) cannot be sustained.

The species needs to evolve into a higher order of critical thinking, morality and compassion, or it will perish.

So, call me a socialist, but I don't see another way.

Canada's been right, all along. It's not perfect, and they have high taxes and costs, but everyone is working together, and it's sustainable.

I'll be back there next week. Can't wait. "Oh, Canada!"

[elleng]

14. Professional analysis here:

Marx Was Right. Capitalism May Be Destroying Itself.

http://www.alternet.org/newsandviews/article/649635/mainstream_economist%3A_marx_was_right._capitalism_may_be_destroying_itself

[woo me with science]

19. K&R

[ThomWV]

21. You confuse failure of capitalism with the capitalist system having been robbed.

Our Capitalist system did not fail. It was robbed. If a person opens a retail store and sinks all of their money into inventory and then is robbed and the business folds can you say the retail system failed? No you can not, it was robbed. Same thing without our economic system. It was robbed, it collapsed.

[rhett o rick]

28. I disagree. Capitalism abhors regulation and relishes monopolies. nm

[The2ndWheel]

38. Humanity wouldn't be where we are if didn't follow those exact paths

We don't like the regulations of the environment we exist in, and just look at agriculture if you want to talk about monopolies. We privatize the profits of the planet, and socialize the costs to the rest of life. Capitalism isn't some other.

[white_wolf]

25. Capitalism failed because of over production.

This leads to cutting back of workers, which in turns leads to even less people buying the large amount of goods being sold. I'll quote from the Communist Manifesto on this issue:

Text For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule. It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them. And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented."

[GliderGuider]

26. Capitalism contains so many inherent flaws it could hardly NOT fail.

Capitalism's primary flaw is that it concentrates wealth and power in the corporate structure itself. It does that by gradually disempowering and impoverishing its workers in the pursuit of profit, without realizing that they are the source of its profits - its lifeblood. The sole mandate of a corporation is to make a profit. This causes corporations to work tirelessly to eliminate impediments to profitmaking. The drive to eliminate restrictions, regulations and negative feedbacks causes them to suborn entire political systems, to socialize their costs, to reject accountability for damages, and to minimize the costs of input, whether that be for labour or raw materials. The end result is what we have today - global environmental devastation, increasing social disparity, outsourcing, jobless recoveries, corrupt politicians, and creeping fascism.

Corporations are the individual embodiments of capitalism, as people are individual embodiments of humanity. We can control the actions of individuals and corporations with laws, but we can't fix the system unless capitalism itself changes. Since the mandate of corporations and capitalism itself (making profits) is unlikely to change, we will have to wait until it collapses of its own accord and replace it with something more humane. What that replacement might be I have no idea, but I'm pretty sure capitalism itself is a self-correcting problem.

[gulliver]

30. Would that it were so simple.

Capitalism hasn't failed, but it is failing. The reason it is failing is primarily due to the secondary effects of human nature and the Tragedy of the Commons, IMO. It has nothing to do with the inherent nature of capitalism.

The fact is that most corporations function a lot like villages or economic regions used to. Corporations have internal cultures, friendships, cliques, teams, clubs, neighbors, rivalries etc. For those who work in corporations, the corporation is a lot like their hometown. Think of "The Office" or any other work-related TV show you watch. The corporations and offices where people work are today's Mayberry.

Are corporations sinister? Sure. Just like villages, countries, and individual human beings are.

[Starry Messenger]

32. k&r

[hifiguy]

34. Two words: Milton Friedman

who, like all other "free-market" economists ignored a basic truth of human nature that any bright ten-year-old understands: Greed is not and never has been self-regulating.

[yella_dawg]

37. Capitalism failed because capitalism rewards greedy sociopaths.

The problem with capitalism is that I, as an ethical, caring businessman will be overwhelmed by anyone willing to indulge in deceit, unfair practices, even outright illegal activity. If I pay a living wage, a competitor who doesn't will put me out of business during the next economic downturn.

Capitalism may work with tight controls, but as we can see, business success provides the means for disabling those controls.