Frankenstein Capitalism (Yahoo Finance article)

[woolfe9998]

The best defense against this is a freer market. When the government becomes an active economic player, you can bet their monopoly on the use of force will be an attractive commodity on which to bid.

It's a sure recipe for corruption.

Or there's a third alternative besides an unregulated "free market" or a government bought and paid for by the wealthy. A reformed government which actually works. We can start with publicly financed campaigns, supplemented only by private contributions from individual donors with a low cap.

When the wealthy pay off politicians it is mostly to keep government off their backs, to keep their taxes low and regulations minimal. While it's great for them that they can influence government to this degree, they'd be just as happy - happier in fact - if there were a lot less government to begin with.

I find it amusing that when liberals complain of unequal wealth, conservatives say that is because of government and that if we just let the wealthy and big business do whatever the hell they want all our problems will be solved. Funny that, since the rest of the developed world has more non-military government per capita than we do but less wealth inequality. The empirical evidence of the real world doesn't support your theory.

 

[Brian Stirling]

What's your point about two earners? Opening up the economy to women naturally is going to cut into the ability for men to find work. Of course individual wages are going to drop, but if household wages stay steady or rise to compensate, your beef should be with feminism.

Not sure if trolling, but very clearly the individual income has fallen in constant dollars for at least 80% and likely closer to 90%.

This isn't about feminism, it's about devaluation of labor -- period!


Brian

 

[HamburgerBoy]

What do you think happens when suddenly half of your adult population, previously expected not to work at all aside from a few select jobs, begins entering the workforce? Labor becomes worth less and laborers become easier to find.

 

[Brian Stirling]

What do you think happens when suddenly half of your adult population, previously expected not to work at all aside from a few select jobs, begins entering the workforce? Labor becomes worth less and laborers become easier to find.

First off, the change in the workforce didn't happen overnight and the effect of adding more workers was to increase the demand for things like cars etc and this increased the total economic output.

But, you are correct in that the reduction in individual income was the result of more workers, but it was the pool of workers around the globe that really made the difference. Adding 100M women to the workforce no doubt had an effect, but adding a couple billion around the globe was far more important particularly when the average wage level in China etc is much less than here in the USA.

Ultimately, when a company closes a US factory and contracts the production in China the unit cost goes down owing to lower wages, much lower cost for workplace safety controls, and vastly lower costs for nonexistent pollution controls. This also allows the company to lower the unit price to gain market share and still provide greater unit profit margins. In essence, this gives a higher percentage of the sale price to the shareholders, ie, the wealthy, while giving less or nothing to the middle class in the USA.


Brian

 

[realibrad]

From 1967 to 2014 the lowest 5th median HOUSEHOLD income increased by a factor of 7.3. Inflation over that time reduced the value of money by a factor of 6.09. The net effect is that in that time period the HOUSEHOLD income rose less than 20%. At the beginning of this period very few moms worked outside the home and at the end most moms did work outside the home. Also, during this period the number of hours moms worked outside the home increased enormously. So, the number of workers nearly doubled but the income only rose by 20%.

The effect on the second 5th was even worse as the net increase was just over 15%, but once again that's with the benefit of two earners not one.

The effect on the third 5th was better, but at 25% increase the effect is still negative owing to the shift from one to two breadwinners.

The effect on the fourth 5th was better still, but at 46% it's still negative given the shift from one to two workers.

The effect on the top fifth was best of all at 79% and it's at this point where we may actually be about break even when taking into account the one versus two workers.


So, your claim that folks are better off is flat horseshit!


CORRECTION:

My calculations using the inflation was off. I'd used the increase in inflation and not the relative cost. My calculations above were based on an increase of 608.8 percent, but the effect was to increase the cost of something that was $100 in 1967 to $708.8 in 2014. So, adjusting to correct that error we see the following:

Bottom 5th saw a net increase in that period of not 20% but just 3%.

The fourth 5th was -1%

Third 5th = 7.7%

Fourth 5th = 25%

Fifth 5th = 54%

The top 5% = 67%

And again, that's household income not individual income which had to decline for at least the bottom 80% and likely the bottom 90%.


Brian

So now your argument is that families earn more in the middle, but more work is done to get it because moms used to now work, but now they do?

Also, wages could fall, and the standard of living still rise.

Support how the net outcome of the middle has gone down instead of up.

 

[Atreus21]

Or there's a third alternative besides an unregulated "free market" or a government bought and paid for by the wealthy. A reformed government which actually works. We can start with publicly financed campaigns, supplemented only by private contributions from individual donors with a low cap.

Worth a shot, but I think it's naive to assume that there wouldn't be some way to circumvent those limits, just like there are now.

When the wealthy pay off politicians it is mostly to keep government off their backs, to keep their taxes low and regulations minimal. While it's great for them that they can influence government to this degree, they'd be just as happy - happier in fact - if there were a lot less government to begin with.

Disagree. Businesses first and foremost dislike competition. Government they can purchase (if government is for sale). They like regulations that elevate barriers to entry and otherwise ensure them a protected market. They've no problem at all with regulations provided they've got the regulators in their pocket.

Competition will generally keep companies better in check than any regulations. The knowledge that they will not, under any circumstances, be bailed out or subsidized will keep them on their toes.

I find it amusing that when liberals complain of unequal wealth, conservatives say that is because of government and that if we just let the wealthy and big business do whatever the hell they want all our problems will be solved. Funny that, since the rest of the developed world has more non-military government per capita than we do but less wealth inequality. The empirical evidence of the real world doesn't support your theory.

The empirical evidence of the real world is that no economic model ever devised holds a candle to the poverty-reducing power of free markets.

I'm not in favor of letting the wealthy or big business do whatever the hell they want. I'm in favor of economic freedom. I'm not surprised that societies with larger governments have less wealth inequality. How do those countries' GDP per capita stack up?

I wish we lived in a world with perfect wealth distribution. But you can choose freedom or equality. I'd prefer freedom to a government-enforced equality.

 

[Jhhnn]

Worth a shot, but I think it's naive to assume that there wouldn't be some way to circumvent those limits, just like there are now.



Disagree. Businesses first and foremost dislike competition. Government they can purchase (if government is for sale). They like regulations that elevate barriers to entry and otherwise ensure them a protected market. They've no problem at all with regulations provided they've got the regulators in their pocket.

Competition will generally keep companies better in check than any regulations. The knowledge that they will not, under any circumstances, be bailed out or subsidized will keep them on their toes.



The empirical evidence of the real world is that no economic model ever devised holds a candle to the poverty-reducing power of free markets.

I'm not in favor of letting the wealthy or big business do whatever the hell they want. I'm in favor of economic freedom. I'm not surprised that societies with larger governments have less wealth inequality. How do those countries' GDP per capita stack up?

I wish we lived in a world with perfect wealth distribution. But you can choose freedom or equality. I'd prefer freedom to a government-enforced equality.

Please. Markets have been regulated (more or less) by governments since ancient times. The reasons have always been about fairness & honesty & about protecting the unwary, about limiting strong arm tactics against the competition.

The best interests of the people are served by honest markets & "Free Markets" are incapable of providing that w/o supervision. The ideology of "Free Markets" fails to account for that.

The situation is not as black & white as you paint it, never has been. As a society, we've leveled the playing field in the past w/o eliminating inequality but rather by reducing it.

At some point or another we need to admit to ourselves that we've been letting the very few at the very top hog the pie for a very long time, decades. The more pie they get the better they're able to hog it. It's the very nature of financialized capitalism. It's inherently unstable.

Back in the 50's, a period that conservatives glorify, we had ways of preventing that. We learned them in the Great Depression which was brought on by the same sort of credit enabled financial flimflammery that brought us to the near miss of financial collapse we experienced in 2008.

We can't roll back the clock- those days are gone. We need new ways & new ideas to reverse that trend, simply as an act of economic self defense.

More of the same, harder & deeper isn't it.

 

[Jeff7]

I myself have wondered what happens if (when) the quality of life drops too low for too large a percentage of the population. I fear that unless controls are put in place that strictly prevent disproportionate influence on our lawmakers by the rich and powerful, America may reach a state where revolution becomes a reality.

They'll sooner turn on each other. So much of the blame is laid on other people in the lower or middle class, while those at the very top are held on a shining pedestal, free of culpability for anything, up to and including corruption of the government.

Instead of "let them eat cake," the statement would be "Your fellow countrymen are taking your cake. Go after them instead," and everyone would carry out that instruction without hesitation.

 

[realibrad]

Please. Markets have been regulated (more or less) by governments since ancient times. The reasons have always been about fairness & honesty & about protecting the unwary, about limiting strong arm tactics against the competition.

The best interests of the people are served by honest markets & "Free Markets" are incapable of providing that w/o supervision. The ideology of "Free Markets" fails to account for that.

The situation is not as black & white as you paint it, never has been. As a society, we've leveled the playing field in the past w/o eliminating inequality but rather by reducing it.

At some point or another we need to admit to ourselves that we've been letting the very few at the very top hog the pie for a very long time, decades. The more pie they get the better they're able to hog it. It's the very nature of financialized capitalism. It's inherently unstable.

Back in the 50's, a period that conservatives glorify, we had ways of preventing that. We learned them in the Great Depression which was brought on by the same sort of credit enabled financial flimflammery that brought us to the near miss of financial collapse we experienced in 2008.

We can't roll back the clock- those days are gone. We need new ways & new ideas to reverse that trend, simply as an act of economic self defense.

More of the same, harder & deeper isn't it.

After everything you have said, I think I now know what it is you do not understand. Free Markets are not the same as unregulated markets. You seem to think that free markets means anarchy and that is wrong. Free markets means you are allowed to to decide what you want to buy or sell and the other people get to decide what they want to buy or sell. It does not mean that you are free to steal, lie, or cheat in the market.

 

[Jhhnn]

After everything you have said, I think I now know what it is you do not understand. Free Markets are not the same as unregulated markets. You seem to think that free markets means anarchy and that is wrong. Free markets means you are allowed to to decide what you want to buy or sell and the other people get to decide what they want to buy or sell. It does not mean that you are free to steal, lie, or cheat in the market.

As I pointed out, the situation isn't black & white. Lying, cheating & stealing will always be part of it. Given the intelligence, persistence & resources in play, the best we can hope to do is limit it as much as we reasonably can. I think it's clear that the financial elite had more freedom than was healthy leading up to the denouement of the Ownership Society. Given the results, it can be no other way.

In order to thwart the corruption you & others emphasize I think it's important for the rules of it to be structural & redundant. We've moved in that direction with Dodd-Frank & the consumer protection agency but there's always room for improvement.

That's why Repubs & bankers have been squealing about it all along. I'm sure they squealed when New Deal financial regulations were brought in creating nearly 80 years of depression free economic stability.

 

[realibrad]

As I pointed out, the situation isn't black & white. Lying, cheating & stealing will always be part of it. Given the intelligence, persistence & resources in play, the best we can hope to do is limit it as much as we reasonably can. I think it's clear that the financial elite had more freedom than was healthy leading up to the denouement of the Ownership Society. Given the results, it can be no other way.

What freedom did the financial elite have that others did not. The things they did was not because of freedoms, it was due to them doing stupid things with other peoples money that they would not have done if they did not think they would get bailed out.

I'm not defending what the banks did. They knew they were taking huge risks and did not care. They made massive sums of money and when things fell apart, we paid to clean out their mess. This was not due to capitalism, it was because we bailed out people in the S&L crisis and they knew we would again.

In order to thwart the corruption you & others emphasize I think it's important for the rules of it to be structural & redundant. We've moved in that direction with Dodd-Frank & the consumer protection agency but there's always room for improvement.

There comes a point when regulation costs more then collapses. I'm not going to say if we are or not at that yet but its an important thing to remember. Dodd-Frank is only needed because of how we regulate the market in the first place. Because we meddle in the finance world, it creates incentives for mega banks that become too large to fail. Dodd-Frank was supposed to help solve a problem that was created by the regulation. If D-F had any teeth, I could at least say its better then nothing, but as you probably know it was gutted and we still have too big to fail.

That's why Repubs & bankers have been squealing about it all along. I'm sure they squealed when New Deal financial regulations were brought in creating nearly 80 years of depression free economic stability.

Republicans and Democrats are both equal friends to the finance world. I know people like to say both parties are even on this or that, but in terms of banking they are both just as shitty. Currently, the Rs have been getting more funding, but before that it was the Ds.

As for 80 years of depression free stability, well you are out of your mind if you think its been stable.

 

[alcoholbob]

I wouldn't call defaulting on bonds and issuing US debt in Swiss francs a sign of a stable system. Reagan certainly didn't fix anything besides kicking the can down the road but he didn't cause the mess--the liberals "god" LBJ accelerated the collapse with his guns and butter administration, fighting a war in Vietnam, A War on Poverty, and sending men to the moon at the same time which culminated in the inflation of the 70s and forced Nixon to replace the gold standard with the petrodollar, and now we are stuck perpetually bleeding the lives of our young in the Middle East to maintain a semblance of a standard of living.

 

[Jhhnn]

What freedom did the financial elite have that others did not. The things they did was not because of freedoms, it was due to them doing stupid things with other peoples money that they would not have done if they did not think they would get bailed out.

I'm not defending what the banks did. They knew they were taking huge risks and did not care. They made massive sums of money and when things fell apart, we paid to clean out their mess. This was not due to capitalism, it was because we bailed out people in the S&L crisis and they knew we would again.

Please. Bankers did the same stuff in 1873 & 1929 when the chances of bailout were zero.

There comes a point when regulation costs more then collapses. I'm not going to say if we are or not at that yet but its an important thing to remember. Dodd-Frank is only needed because of how we regulate the market in the first place. Because we meddle in the finance world, it creates incentives for mega banks that become too large to fail. Dodd-Frank was supposed to help solve a problem that was created by the regulation. If D-F had any teeth, I could at least say its better then nothing, but as you probably know it was gutted and we still have too big to fail.

Gutted how, exactly? Be specific. I know Repubs are trying to do just that but have been thwarted repeatedly.

Republicans and Democrats are both equal friends to the finance world. I know people like to say both parties are even on this or that, but in terms of banking they are both just as shitty. Currently, the Rs have been getting more funding, but before that it was the Ds.

As for 80 years of depression free stability, well you are out of your mind if you think its been stable.

And the re-run of the false meme "They're just as bad" followed by deflection. There has been no depression (different from a recession) in the period of time I referenced. Mere fact.

 

[glenn1]

Back in the 50's, a period that conservatives glorify

HAHAHAHAH. Conservatives glorify it? Hell, the entire fantasy world of the progressive left revolves on the pivot of the 1950s just with more diversity and looser sexual morality. Which is ironic because the actual standard of living of everyone is massively better than back then even if the relative prosperity of Americans has come down compared with China, Africa, etc. Evidently progressives would rather everyone be living in 800sq ft houses with no air conditioning and working crappy manufacturing jobs in textiles so long as the third world was still living in mud huts and owned nothing beyond their Chairman Mao poster.

Who knew that "progressives" would be the conservatives of our age, trying to preserve the glory days of the post WW2 New Deal Era in amber like a real world version of Mad Men?

 

[realibrad]

Please. Bankers did the same stuff in 1873 & 1929 when the chances of bailout were zero.

Not the same as what we saw in 2008. Yes, it did involve the banks, but the other two you listed had a bunch more crap going on at the time that made everything much worse. The two times you listed had issues over many markets and activities. 2008 was almost all about mortgages.

Gutted how, exactly? Be specific. I know Repubs are trying to do just that but have been thwarted repeatedly.

It has no actual power. It can observe and report, but it can't actually do anything to stop anything. It has goals, but even if it were to find anything, it can't do jack shit to stop it. If I am wrong, show me. So far as I know, the Rs made sure that if the bill passed it would have no teeth.

And the re-run of the false meme "They're just as bad" followed by deflection. There has been no depression (different from a recession) in the period of time I referenced. Mere fact.

Jesus man. How am I deflecting? What question did you pose that I did not answer?

Rs and Ds have been getting millions every damn year from the banking world. Both parties are great friends of the banks.

Glass Steagall was disliked by both sides and its why Clinton said it was not needed anymore. Both parties did not want to keep it. Both parties get huge sums of money from the banking world. That is a fact.

 

[senseamp]

The rot of Republican policies is now causing structural damage to the United States. It's only going to get worse.

 

[Jhhnn]

Not the same as what we saw in 2008. Yes, it did involve the banks, but the other two you listed had a bunch more crap going on at the time that made everything much worse. The two times you listed had issues over many markets and activities. 2008 was almost all about mortgages.

Please. All 3 events were the result of over extension of credit in contrived financial bubbles. It was railroads in 1873, the stock market in 1929 & housing in 2008. Different horse, same rider.

If Dodd-Frank is ineffective, why do Repubs keep trying to roll it back?

 

[Moonbeam]

Meanwhile, outsourcing and international trade have drastically improved the income and quality of life for many in Asia. I'm curious how the author of that article proposes to help the billion people living on less than $2 a day. If we tax our rich more, prevent off-shoring, and raise tariffs, I guess Africa will suddenly become wealthy?

Maybe the people there would fix their dictatorships and set up government that works for them and not elites.

 

[realibrad]

Please. All 3 events were the result of over extension of credit in contrived financial bubbles. It was railroads in 1873, the stock market in 1929 & housing in 2008. Different horse, same rider.

If Dodd-Frank is ineffective, why do Repubs keep trying to roll it back?

1873 was not just about over extension of private credit. You had countries changing currency, money supply going up and down and government trying to stimulate the rail market.

The big triggering issue was Germany though. Its policy away from silver made the US a Gold Standard country.

Again, in 1929 you had a few countries start to decline and the US implemented policies that reduced the real money supply.

The 2 big things you talked about were mainly a currency problem and not a credit problem.

As for Dodd-Frank, the Rs for the past few years have been getting more money out of the banks and as such do not want to bite the hand that feeds. The first bill was supposed to do a lot more then what got passed. Then, even after it was passed, they are pushing to reduce the ability of the bill further.

I get the sense you think I am defending the republicans and please keep in mind I am not. The 2008 collapse and the response to bail out the banks was pushed by the Rs. The Rs were in power for a long time and did nothing to fix the situation because far too much money comes in from that industry.