Not perfect….but good

May 5, 2011

Capitalism is not perfect. But there is no better system under heaven. It is one thing to criticize capitalism it is another to point to another system that works better. Socialism and Communism have not only failed every time they were tried, they have proven to oppress and lead to corruption not seen in capitalist nations.

As Milton Friedman says in the below video, “Yes, but what about the alternative?

HT Justin Taylor

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22 Responses to “Not perfect….but good”

  1. Ben Hoffman Says:

    Free market capitalism fails every time.

    • WVS Says:

      Really? Seems like the most economically free places (US, UK, Hong Kong, ) have done pretty well from an economic standpoint.

      They are not perfect of course (neither in their freedom nor their promoting of the common good) but they certainly beat all other systems that have been tried.

      What do you think works better?

  2. Ben Hoffman Says:

    [Really? Seems like the most economically free places (US, UK, Hong Kong, ) have done pretty well from an economic standpoint.]

    You have got to be kidding! We’re over 14 trillion dollars in debt, unemployment has been 9-10% for three years, the rich get richer while the rest of the country stagnates… Free market capitalism is a miserable failure!

    What works best is well regulated capitalism.

    • WVS Says:

      Well, Ben you have to ask the next question. Are we trillions in debt because of our capitalism? In other words if you put a libertarian in charge who believes in strict free market capitalism, I cannot think of how we would be in debt at all…..can you?

      In terms of the “rich getting richer” that is simply a false idea of what wealth is. Wealth is created. Take Steve Jobs (creator of the iphone, ipad etc). He created something (along with his engineers) that we all want. He didn’t take it from anyone, he created it. We want it. We are happy to give over $150 bucks for a phone or a computer. Steve Jobs got richer (that is true) but so did we!

      • Ben Hoffman Says:

        Free markets are always fraught with abuse. Businesses are in business for one reason: to maximize profits.

        Because of deregulation, speculators are now able to manipulate oil futures and have been driving up the cost of oil. Now there’s a big sell-off. That creates inflation, widespread misery, and instability, and only benefits a few people.

        We’re in the middle of remarkable advances in technology, but where’s the economic prosperity that should be accompanying it like we had in the ’90s? Most of the jobs are being created in China — not the U.S.

        Because of deregulation and lack of regulation enforcement, we had the near total collapse of our economy a few years ago. Deregulation caused the S&L crisis back in the 1980s. Lack of enforcement resulted in the BP oil rig disaster.

        As far as the debt, that’s the result of tax cuts from 2000 and 2003, so that we’re borrowing money to pay for things we want, such as the safety net and funding for defense. Without the safety net, we’d have a lot more people living in poverty. Without the minimum wage, people would have less money to spend, which would further exacerbate our stagnant economy.

      • WVS Says:

        //Free markets are always fraught with abuse.//

        Freedom at its core cannot abuse. In other words, I can’t make you buy my product. I can’t make you work for me. I have to offer a product and a wage that is ‘good enough’ for both of us to enter the transaction. So long as things are truly free, you cannot abuse.

        //Businesses are in business for one reason: to maximize profits.//

        But how do they maximize profits? They can’t steal from customers. They have to offer customers valuable products or services. Now, of course you could supply something dangerous or hazardous and that could be illegal (if it causes harm) and it would also be bad for business. But communist and socialist structures have plenty of people who supply crappy and dangerous products too. At least with capitalism, it encourages the dishonest proprietor to supply good products even if he doesn’t care.

        //Because of deregulation, speculators are now able to manipulate oil futures and have been driving up the cost of oil. //

        Speculators help moderate prices. Sometimes they raise them sometimes they decrease them. Check out this article: http://www.realclearpolitics.com/articles/2011/05/04/gasoline_and_onions_109746.html

        //As far as the debt, that’s the result of tax cuts from 2000 and 2003, so that we’re borrowing money to pay for things we want, such as the safety net and funding for defense.//

        Well, no. The need for taxes was created by non capitalistic activities. Capitalism didn’t create the spending (military, entitlements or social programs) and therefore it didn’t create the need for taxes. Those things are the result of other philosophies that you can argue for or against but that do not speak to the effectiveness of capitalism.

        //Without the minimum wage, people would have less money to spend, which would further exacerbate our stagnant economy.//

        Minimum wage is a bad thing for the economy. Think about it this way:

        1) The employer can afford to pay X.
        2) The employee is willing to accept X.
        3) The government says that X is not enough even though both the worker and the employee are willing to enter the agreement.
        4) Both the employee and the employer have less wealth then they would have had had the government not been involved.

      • Ben Hoffman Says:

        W, you’re looking at some idealized libertarian view where everyone behaves like they’re supposed to. Communism also works in a perfect world. 🙂

      • WVS Says:

        No. I am saying that capitalism has plenty of warts and lumps. There are no perfect types of anything. But just as no one is perfectly hard working but hard work is good. No country is perfectly capitalist but capitalism is good. But the opposite is true with communism. No country is perfectly communist but the more communist the worse off they are.

        The systems that are closest to capitalism tend to be the most prosperous. The countries that are closest to communism tend to be third world with mass starvation. Compare Hong Kong to the rest of that region. Compare Hong Kong to the rest of China. China is becoming more prosperous now that it is getting away from pure communism but their per capita income is still a fraction.

      • Adam Says:

        “Freedom at its core cannot abuse.”

        But the degrees of freedom in the markets that capitalists advocate lead to the destruction of freedom. The rich form monopolies and buy the government. Their tentacles spread out through the entire infrastructure to try and destroy competition and gain “corporate socialism”.

        “In other words, I can’t make you buy my product.”

        If only this were true: the wealthy buy the government representatives who then return the favour by passing legislation that destroys the pillars of capitalism: freedom of choice and consumer information. We are constantly being bombarded with the message to buy and consume like slaves, it’s everywhere, it’s subliminal. And the government helps them do it. We need government that sets product standards, separates itself from corporation and taxes the rich at 50%.

      • WVS Says:

        “Freedom at its core cannot abuse.”
        //But the degrees of freedom in the markets that capitalists advocate lead to the destruction of freedom. The rich form monopolies and buy the government. Their tentacles spread out through the entire infrastructure to try and destroy competition and gain “corporate socialism”.//

        So you are arguing against socialism and laws advanced that restrict economic freedom? I agree with you.

        //If only this were true: the wealthy buy the government representatives who then return the favour by passing legislation that destroys the pillars of capitalism: freedom of choice and consumer information. We are constantly being bombarded with the message to buy and consume like slaves, it’s everywhere, it’s subliminal. And the government helps them do it.//

        Well, if the government is involved, it is a step away from freedom. If it is just companies “bombarding me with ads”, I am ok with that. I can turn off the TV or radio. I am not forced to buy anything. Sometimes, it should be noted, ads are helpful. They point out products and services that make our lives easier.

        // We need government that sets product standards, separates itself from corporation and taxes the rich at 50%.//

        I would agree that we need a government that does not pass laws that restrict freedom….even if those laws are being pushed by corporations. Corporations are often the greatest enemies of capitalism.

  3. Steven Says:

    //Communism also works in a perfect world.//

    LOL!!!!! Now that is funny. Communism is the State running the economy, and is run by an Oligarchy. The reason we are in so much debt is because of an overexpanded Govt. and entitlements and waste of tax dollar programs.

    As for the Economic crisis a few years ago.

    Capitalism isn’t perfect, but it beats other economic systems in a heartbeat. If you overregulate and over tax the economy, your only going to cause more unemployment and rack up more Govt. debt by enforcing those regulations. The reason gas process are going up is partly because of the Middle East situation, but it is also because of inflation, and inflation here in the US is only going to get worse do to the Govt. printing money without anything to back it up.

    • Ben Hoffman Says:

      [The reason we are in so much debt is because of an overexpanded Govt. and entitlements and waste of tax dollar programs.]

      No, we’re in debt because of the tax cuts. We had budget surpluses before the 2001 and 2003 tax cuts. We also had two wars and added programs financed with borrowed money.

      [The reason gas process are going up is partly because of the Middle East situation]

      Nope, the main reason gas prices have gone up is because speculators are allowed to manipulate the prices, and they’re allowed to do that because of deregulation. High oil prices are causing inflation and people have less money to spend on other things so it’s hurting our economy.

      • WVS Says:

        Ben,

        Taxes are only necessary because of spending. Tax cuts are not the reason we spend too much.

        Speculators do not cause the demand to go up. They actually smooth the rise and fall of any commodity and they do so at their own financial risk. It is a common thing to blame speculators. In the 1950s the rising price of onions was blamed on speculators. They banned speculation on onions….guess what? The price went up higher and fluctuated more. There are two things that cause prices to go up: supply and demand. Demand is going up because of the rise of China and the rest of the BRIC nations. Supply is being hampered (in the US at least) by restrictions on the building of refineries and drilling.

      • Ben Hoffman Says:

        You have no idea what you’re talking about. Just try to find some facts to back up your assertions. Yeah, yeah… we don’t need no stinkin’ facts.

      • WVS Says:

        I have a MBA from a top 10 business school. I have done a lot of research. I can provide facts for any statement you would like. Which one do you question?

      • Ben Hoffman Says:

        If you don’t think speculators can manipulate prices, you wasted your parents money on grad school.

      • WVS Says:

        They affect prices (“manipulate” assumes evil intent) just like you and I do when we buy products (they affect the demand side of the curve). But they don’t have the power to affect the prices over the long term because they are not consumers. Keep in mind that there are times when speculators keep the price low (by going short on commodities). They do all this at their own risk and speculators lose lots of money some times. Also keep in mind that there are speculators for almost every commodity you can think of (eg corn, cattle, rice, natural gas, potatoes) but people rarely complain about those speculators “manipulating the price”.

        Speculators actually provide a service to the market. They smooth the rising and falling of prices. Banning speculation will do as much good for the oil prices as it did for the onion prices in 1958…..that is it will do nothing but create unnecessary additional volatility.

      • Ben Hoffman Says:

        [Banning speculation will do as much good for the oil prices as it did for the onion prices in 1958…..that is it will do nothing but create unnecessary additional volatility.]

        Speculating on commodities wasn’t legal until 2000, ya know, before prices skyrocketed.

      • WVS Says:

        Ben, the futures market (speculation) has been legal and a part of the market for as long as there has been a market. I am not sure what you are talking about. There were some rule changes in the early part of this century but the general practice of commodity future trading was legal before that. The only commodity that was and is illegal to speculate on is onions. Onions have banned speculation since 1958 but other than that speculation has been quite legal for almost all commodities.

        Here is an article (on CNN MONEY) that you might find helpful.

        http://money.cnn.com/2008/06/27/news/economy/The_onion_conundrum_Birger.fortune/

      • Ben Hoffman Says:

        At the same time that oil and gas traders have been spending billions of dollars on energy commodities, those traders are increasingly able to trade without any oversight by the Commodity Futures Trading Commission (CFTC). The CFTC is the federal agency charged with preventing fraud, manipulation, and excessive speculation in U.S. commodity markets. Under the Commodity Futures Modernization Act of 2000, large oil and gas traders may trade energy commodities in “over-the-counter” (OTC) electronic markets without any ongoing oversight by the CFTC. Additionally, oil and gas traders in these markets do not have to file any large trader reports with the CFTC. Large trader reports are the cornerstone of CFTC oversight of commodity markets to detect, prevent, and prosecute manipulation and to analyze the effects of speculation. Traders in these electronic markets are also currently exempt from the limits imposed by the CFTC on speculative trading that are designed to prevent excessive speculation.
        Source

      • Ben Hoffman Says:

        “Optiver traders amassed large trading positions, then conducted trades in such a way to bully and hammer the markets,” CFTC Acting Chairman Walt Lukken said at a press conference. “These charges go to the heart of the CFTC’s core mission of detecting and rooting out illegal manipulation of the markets.”

        In May, under the backdrop of record oil prices and calls from legislators to crack down on speculative oil trading and market manipulation, the CFTC announced a wide-ranging probe into oil price manipulation. The agency says it has dozens of investigations ongoing.

        Source

      • WVS Says:

        Ben, perhaps it would be helpful for me to explain what “speculation” on commodities is. When you speculate that the price of oil is going to go down, you would go short on oil. Going short is selling commodities at a price that is below market value for a future date. Today oil is at $103/barrel. If I said, “Ben, in 1 week I will sell you a barrel for $99” you might be interested right? If you agreed and oil dropped to $95/barrel next week, I would make $4 for every barrel you agreed to buy. If oil went up, I would lose money. Alternatively, I could speculate the price is going up and sell above market value. Either way, it is a free agreement between adults. If I am manipulating the markets by offering crazy trades right before closing, I am also risking my rear end doing so and if you recognize that you could take me for millions. There is not really any regulation needed. All of this only affects prices in the very short term and none of it is forced upon anyone. All the traders know that there is a certain level of gamesmanship involved and if they felt there were shenanigans going on could sit out.

        The problem is that politicians don’t like to deal with the real problems that cause prices to go up (in the case of oil) or down (in the case of onions). The supply and demand is usually out of politicians’ hands to control but they can’t tell voters that. So speculation is an easy target for them to go after. They regulate it, threaten to ban it, and sometimes (in the case of onions) actually do ban it. But this is foolishness performed by people who either don’t understand economics or cynically don’t care. Banning speculation does one thing – it causes more volatility in prices. If you want more volatility, ban speculation. But don’t expect prices to go down as a result.


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