Capitalism's Fundamental Flaw • Hacker News Board

Re: Capitalism's Fundamental Flaw

#41

Post by darjen » Fri, Nov 06, 2009, 5:32 PM UTC

kansando wrote: post #37

darjen wrote: post #26

A fundamental flaw in the article: "The banks, however, are another matter altogether, and this is where I think capitalism has hit a roadblock. The government has intervened to save many of them, and now, these bailed out banks want to hand out billions in bonuses to their non-performing employees. Capitalism gave way to welfare economics, and now the government has to intervene further to limit these looters from b…

Right. And allow the economy to go into a long-term depression with 25%+ unemployment. A government "for the people" does not have a choice in this matter. The real problem is that bankers/speculators have so much power on the outcome for people who are not at all related to the industry.

strangely enough, that's not what happened when harding kept his hands off the market during the major crash of 1920-21.

and why did the bankers get so much power in the first place? there is a LONG history of government centralizing, cartelizing, supporting, and regulating the market's major financial players.

Re: Capitalism's Fundamental Flaw

#42

Post by aswanson » Fri, Nov 06, 2009, 5:34 PM UTC

billswift wrote: post #38

AndrewDucker wrote: post #35

Earlier quoted context omitted.

Do you have any idea what the current financial situation would have looked like if the government had just let the banks collapse? Hint: a lot like a jenga tower does just after you take away a vital piece. Letting the entire financial system collapse might _possibly_ have led to better behaving banks in the long term(although I doubt it, people don't learn). But in the short term it would have cascaded through the…

It could have, but I have seen no evidence to support this. In fact, that is why the econo-blogger Megan McArdle at The Atlantic supported the bank bailouts, because she feared that would happen. But despite reading her blog regularly, she has presented evidence only her (and others) fears about what could have happened.

C.f. for what (possibly) happens when banking systems collapse: http://www.livinghistoryfarm.org/farminginthe30s/money_08.ht...

Re: Capitalism's Fundamental Flaw

#43

Post by KirinDave » Fri, Nov 06, 2009, 5:36 PM UTC

darjen wrote: post #26

A fundamental flaw in the article: "The banks, however, are another matter altogether, and this is where I think capitalism has hit a roadblock. The government has intervened to save many of them, and now, these bailed out banks want to hand out billions in bonuses to their non-performing employees. Capitalism gave way to welfare economics, and now the government has to intervene further to limit these looters from b…

I wouldn't say that was the main thrust of the article, by any means. You take one sub-point amongst a set of much larger and more important points and mine it out and claim that yet again, government intervention has proven useless.

Her main points, for those who will tl;dr the article and take your post for granted:

1. People do not always act in ways that are inherently good, either in an ethical sense or in a sense of what is "financially good." Rand does seem to suggest that this will be an inherent property of people who are capable of rising to positions of power.

2. The current system rewards people who can amass capital and take risks with it more than people who actually create that capital in the first place. She points out scientists and engineers who make the world a better place and invent new technology that can revolutionize markets are not proportionally rewarded for this change, while speculators who can take big chances with money are rewarded disproportionately. This creates a strong draw away from the allure math, science, and medicine towards the better paying jobs in the world of finance, thus weakening our ability to innovate and generate new capital for capitalism to draw upon.

Your complaint addresses neither of these, and I can't help but feel like you were being a bit disingenuous and dodging the actual issues she raised by hiding behind a straw man outside the crux of the article. Please address her substantive complaints if you're going to argue with the article.

Re: Capitalism's Fundamental Flaw

#44

Post by KirinDave » Fri, Nov 06, 2009, 5:43 PM UTC

moron4hire wrote: post #34

"The government has intervened to save many of them, and now, these bailed out banks want to hand out billions in bonuses to their non-performing employees" So presumes the author that the people who are ostensibly receiving "billions" in bonuses are the same people who pushed this over-leveraging scam. All bankers are equal, none managed wisely. "And thus, we lose Berkeley Ph.Ds in nuclear physics to hedge funds and…

So you're arguing that an accounting trick to statistically suppress risk and get a few more million people into homes that they ended up having taken away from them is fundamentally the same level of contribution to society as people inventing the Internet, the Telephone, Chemotherapy, Relativity, etc.?

You, sir, have an interesting outlook on life. But hey I guess a few high-risk buyers got to hang out in someone else's house for awhile, and that's good right?

Re: Capitalism's Fundamental Flaw

#45

Post by megamark16 » Fri, Nov 06, 2009, 5:43 PM UTC

kansando wrote: post #37

darjen wrote: post #26

A fundamental flaw in the article: "The banks, however, are another matter altogether, and this is where I think capitalism has hit a roadblock. The government has intervened to save many of them, and now, these bailed out banks want to hand out billions in bonuses to their non-performing employees. Capitalism gave way to welfare economics, and now the government has to intervene further to limit these looters from b…

Right. And allow the economy to go into a long-term depression with 25%+ unemployment. A government "for the people" does not have a choice in this matter. The real problem is that bankers/speculators have so much power on the outcome for people who are not at all related to the industry.

The point isn't whether or not the government should have intervened, the point is that because they did we can't blame Capitalism for the outcome of that specific action. A purely capitalist market would have let the financial crisis run is course, right or wrong. At least, that's how I see it.

Re: Capitalism's Fundamental Flaw

#46

Post by jriddycuz » Fri, Nov 06, 2009, 5:45 PM UTC

larryfreeman wrote: post #25

jriddycuz wrote: post #12

There's a fundamental flaw in the logic that concludes that "government must intervene to stop the shameless looting of taxpayer money." Taxation itself is government intervention. Abuse of money received from a government that shamelessly loots its people for the "common good" and through manipulation of a highly regulated system is no more an indictment of Capitalism than failure to run is an indictment of a man ti…

There's a fundamental flaw in your reasoning too. You can't have capitalism without some form of government and you can't have government without some form of taxation.

Maybe the term capitalism has a different meaning to you than it does to me, but I use almost synonymously with "free markets." And I would actually make the case that you can only have "pure" free-markets without government.

What I was suggesting in my comment above is that the failures of a bound and adulterated form of free markets do not indicate that free market principles are themselves flawed. The notion that banks' or other firms' abuse of bailout money is a problem with capitalism neglects that an extremely important (and often ignored) freedom in capitalism is the freedom to fail.

Re: Capitalism's Fundamental Flaw

#47

Post by steveplace » Fri, Nov 06, 2009, 5:45 PM UTC

The banks, however, are another matter altogether, and this is where I think capitalism has hit a roadblock. The government has intervened to save many of them, [...]

That's not capitalism.

Re: Capitalism's Fundamental Flaw

#48

Post by steveplace » Fri, Nov 06, 2009, 5:48 PM UTC

KirinDave wrote: post #43

darjen wrote: post #26

A fundamental flaw in the article: "The banks, however, are another matter altogether, and this is where I think capitalism has hit a roadblock. The government has intervened to save many of them, and now, these bailed out banks want to hand out billions in bonuses to their non-performing employees. Capitalism gave way to welfare economics, and now the government has to intervene further to limit these looters from b…

I wouldn't say that was the main thrust of the article, by any means. You take one sub-point amongst a set of much larger and more important points and mine it out and claim that yet again, government intervention has proven useless. Her main points, for those who will tl;dr the article and take your post for granted: 1. People do not always act in ways that are inherently good, either in an ethical sense or in a sen…

The current system rewards people who can amass capital and take risks with it more than people who actually create that capital in the first place.

The origin of this system was not created through free-market-capitalist methods.

scientists and engineers who make the world a better place and invent new technology that can revolutionize markets are not proportionally rewarded for this change,

But the men and women who take on risk to pay them are rewarded.

Re: Capitalism's Fundamental Flaw

#49

Post by megamark16 » Fri, Nov 06, 2009, 5:49 PM UTC

viggity wrote: post #23

richcollins wrote: post #21

"Integrity, justice, fairness, work-ethic, excellence--all have fallen prey to greed." Greed is tempered by risk when the government can't save you.

Greed would be tempered a lot more by risk if the government didn't save anyone.

I think that is what richcollins is saying. What I took away from that article, although I don't think it is quite what the author had in mind, is that Capitalism is flaw by the fact that our government does not allow/force us be purely capitalistic. The safety nets open the doors for greater risk, which require bigger safety nets.

Re: Capitalism's Fundamental Flaw

#50

Post by [deleted] » Fri, Nov 06, 2009, 5:52 PM UTC

kansando wrote: post #37

darjen wrote: post #26

A fundamental flaw in the article: "The banks, however, are another matter altogether, and this is where I think capitalism has hit a roadblock. The government has intervened to save many of them, and now, these bailed out banks want to hand out billions in bonuses to their non-performing employees. Capitalism gave way to welfare economics, and now the government has to intervene further to limit these looters from b…

Right. And allow the economy to go into a long-term depression with 25%+ unemployment. A government "for the people" does not have a choice in this matter. The real problem is that bankers/speculators have so much power on the outcome for people who are not at all related to the industry.

[deleted]