Free Market Capitalism?

The United States (and most of the Western world) is a free market economy where production of goods is mostly or completely done privately.  Some may disagree with this statement and there are some valid arguments (especially with our Keynesian-like system).  

I have been reading Alan Greenspan's book and it has been extremely fascinating to see how a 'free market economy' works under the covers.  As a conservative, I do strongly believe that less government is better; however, when it comes to our security abroad and our homeland security I think privatization could do more harm than good (i.e. Blackwater).

That said, I recently decided to phone some of my close liberal friends and ask them a simple question:

Do you prefer a capitalist economy or a socialist economy?

Most of them didn't want to give me a one-phrase answer.  They wanted to explain themselves and that is totally understandable because the question is a big one.  Then, I called them back and asked them to give me a Yes or No answer to the following question:

Would you prefer an economy that is a form of socialism versus our current capitalist economy?

4 of my 6 friends answered 'Yes' and to be honest I was sort of shocked.  So, I decided to take my question to this great forum.  Here goes:

•  Are You Crazy? We Built the American Century

  and helped rebuild Europe and create the only large global wealthy middle class the world ever had, under a capitalist-socialist system.

  As we've been trending back toward freer capitalism, the United States is going bankrupt, businesses have taken their production out of the country, the middle class has been stagnant and losing wealth and opportunity at an increasing rate.

  We've run this experiment both ways.

  There's only one way that works, and free market capitalism is not it.

  It's been a loser for the masses since the dawn of industrialization.

  by Gooserock on Thu Oct 04, 2007 at 06:12:08 PM PDT

  •  Capitalism and Socialism both have....

    ....the same root problem:  neither scales well.  Blending the two moderates this problem quite a bit.

    Myself I favor leaning in the socialist direction.  Fewer people starve.

    by Corwin Weber on Thu Oct 04, 2007 at 07:25:43 PM PDT

•  Changes....

  There are a lot of problems with Globalization and "Free Market Capitalism".  I hate to keep beating a dead horse with this example:  WalMart.  They are pretty much everything that is wrong with multi-national mega-corporations and by proxy globalization/"free market capitalism".  Exploitation of workers in foreign countries which do not have the laws that we have protecting workers from the massive kind of abuses they experience in their country.  Corporations wouldn't pay their workers given that choice in a free market.  That's why the worker ants get paid just enough to shut them up.  Meanwhile, the absence of health care assistance puts a burden on the American Tax Payer.  Subsidies for these large mega-corps are inexcusable.  Not to mention the fact that these huge corporations will wipe out small business given enough time.  These are all points that have been expressed before and they are nothing new.  However, if you don't put some kind of reins on the free markets and globalization these problems will only become more pronounced.  You'll have people like Bush in power doing everything they can to make sure those reins are taken off.  All the while humanity suffers greatly.  

  by TheKost on Thu Oct 04, 2007 at 06:16:05 PM PDT

•  I'm no Communist.

  And I know "Socialism" has become a bad word in our public discourse.  But I would prefer democratic socialism, something more akin to what many Western European societies have.  I want there to be government-run taxpayer funded health care, available to all citizens, regardless of their ability to pay.  I want there to be much more federal money spent on giving good students grants to pay college tuition.  I want a government funded public transportation initiative on the scale of the interstate highways project.  I want a society that takes care of kids, takes care of people who are down on their luck, and puts a high value on the rights and needs of the working class.  I think "Free-market Capitalism" purists are idealists, and that their zealous insistence on the utopian world of pure, unfettered capitalism has lead to disastrous government policies and decisions.  The supply-side cult of the last three decades believe that tax cuts for the rich is the answer to every economic situation.  This crack-pot economic theory has lead to insane deficits and crumbling infrastructure.  So no.  I'm not a capitalist.  I believe in government regulation, because the public interest is often at odds with business interests.  I don't consider greed a virtue.  And I don't think that the ability to make a lot of money should be the sole measure of a person's worth.  Phew.  Hows that?  Great question BTW.

  by Reepicheep on Thu Oct 04, 2007 at 06:24:14 PM PDT

  •  I tend to agree

    The reality is that you can't have a system without regulations. It's like a society without laws or a school without rules. You need some kind of order, because inequality is one of the greatest threats to a democracy. My thought is that widespread inequality is inevitable in a laissez-faire capitalist economy, so there need to be regulations (inspired by socialism, much to the chagrin of its fervent opponents) to stabilize the system and reduce inequality. I feel that this is where socialism comes in to fix the problems capitalism cannot. It's best to be somewhere in the gray than black or white. I feel our economy is more on the side of black and white rather than gray. The attitudes of the Bush administration reflect this when they toss around ultimatums on a regular basis. You can't have ultimatums guide your every move in life and expect a postive outcome. Economics is no different.

    by rovertheoctopus on Thu Oct 04, 2007 at 06:32:22 PM PDT

    •  inequality

      is not a problem. The problem is the quality of life of those on the lower side of the income distribution curve. If there's universal healthcare, education, welfare, etc., who cares what Bill Gates makes?

      An argument about 'who cares', I suppose, that eventually money will buy power to turn things around... I have to say it is an interesting one.

      by debedb on Thu Oct 04, 2007 at 07:42:40 PM PDT

      •  It isn't inequality....

        ...so much as inequity.

        by Corwin Weber on Thu Oct 04, 2007 at 08:45:20 PM PDT

•  I just retired after working

  for 33 years in a socialist institution, Auburn University.  In truth, we have a mixed economy and the part of the economy most debated now is health care.  And, the evidence is in.  Socialist health care systems do a much better job for much less money.

  by jimG on Thu Oct 04, 2007 at 06:49:02 PM PDT

•  I would suggest the question be reframed

  Because we no longer have free market capitalism in this country; haven't had it in quite a long time, acutally. What we have is mostly unregulated corporatism. Or Corporate capitalism. Or something like that.

  Capitalism, as propounded by Adam Smith, is the activitiy of individuals and groups of individuals to participate in the formation of capital, economic activity and buying and selling in a free market.

  Ours is not a free market. Huge, soulless coporpations inhibit competition, quash innovation, restrict the economic freedom of individuals and undermine the individual freedom that our country was built on. Corporations, rather than being groups of individuals, behave as legal persons, a ficiton that allows them freedom without responsiblity.

  In truth, a third world bazaar is closer to Smith's dreams of capitalism than the price-fixed, unequal playing field we now have.

  btw, after Adam Smith described the 'invisible hand' of the market place, he went on to say that human nature will short-circuit it every time.

  by Foxwizard on Thu Oct 04, 2007 at 06:56:31 PM PDT

  •  right

    I have yet to hear a proponent of 'unfettered free trade' coherently defend the concept of a corporation -- a creation of government (you can't well argue 'property rights' as also a legal construct, because those are sacred to a libertarian). I also add that corp. taxes should be higher, because corporation is paying for its upkeep as a government's creation. No taxes - no corporate protection.

    How can the stock exchange survive without the institution of a corporation? But the stock exchange is sacred.

    by debedb on Thu Oct 04, 2007 at 07:46:30 PM PDT

    •  Creation of Government

      How is a corporation a "creation of government?"

      by ShaunMcDonnell on Thu Oct 04, 2007 at 07:48:16 PM PDT

      •  It's a legal entity, nothing more.

        Without the legal entity status of a corporation, the owners (and potentially the employees) would be legally liable for things they did on behalf of the organization.

        I recommend The Corporation: The Pathological Pursuit of Profit and Power by Joel Bakan

        by toddpw on Thu Oct 04, 2007 at 08:11:16 PM PDT

      •  Because of

        the protections granted by the legal act of incorporation. Once a business is incorporated, the individuals making the decisions are shielded from personal, financial responsibility for the consequences of the decisions they make, with a few exceptions involving criminal, rather than civil law.

        For a great example, consider Lee Iacocca and the Ford Pinto. The decision to continue using a gas tank design that Ford engineers knew was prone to catastrophic failure in rear-end collisions was made by the Pinto project manager, Lee Iaccoca, and by him alone, in order to save $135 per car. Nobody denied that. Yet, when the families of the victims of that decision sued, Mr. Iaccoca's personal assets could not be subject to damage claims, nor could he be prosecuted for his personal act of negligent homicide (causing death through a wanton disregard for human life). Without the legal protections of incorporation, Lee Iaccoca would be a convicted felon living in a trailer park in West Bumfuck, Idaho, not a "management guru" living in a multi-million-dollar house.

        In the English Common Law tradition, a corporation is a "legal fiction", I.E. it has no existence outside of the law. Since governments make laws, every corporation is a creation of government.

        Hopefully that makes it clear.

        --Shannon

        by Leftie Gunner on Thu Oct 04, 2007 at 08:37:46 PM PDT

        •  Well said.

          Thanks.

          by ShaunMcDonnell on Thu Oct 04, 2007 at 08:44:36 PM PDT

        •  Also...

          The points you make are good.  I think the problem and where you might lose some people is within the definition of a 'Corporation."

          The majority of Americans would assume a corporation is just a business.  The 'legal entity' aspect of it would be lost on them.

          It would be important to point out to people the priviledges provided to corporations within that definition.

          by ShaunMcDonnell on Thu Oct 04, 2007 at 09:08:17 PM PDT

          •  I'm assuming

            a certain level of knowledge on the part of my reader. I'd rather fly over the heads of the uneducated than to insult the knowledgeable by assuming everyone to be an idiot.

            All corporations are businesses. Not all businesses are corporations. It's kind of like squares and rectangles. I figure most people with enough brains to eat spaghetti with a fork and not put an eye can get the distinction.

            --Shannon

            by Leftie Gunner on Thu Oct 04, 2007 at 09:15:44 PM PDT

          •  Yes

            And also to emphasize that corporations are not a natural entity, they are legal construct. The implication here, which you all know, is that the government can change the terms of the construct without violating the natural rights of humans.

            For example, we could go back to the English tradition of corporations being chartered for a number of years, after which they have to liquidate assets to their owners. Or chartered for a single purpose, preventing the multi-national conglomerates who are the most troublesome now.

            We could also begin holding managing owners responsible for the actions of the corporation, forcing CEOs and other officers to know what the hell their underlings are up to.

            We could also deny to corporations the ability to own patents and copyrights; they are rightfully the property of the people who create the work they protect. Corporations could be required to pay a license fee to their employees after they leave the firm.

            by Foxwizard on Fri Oct 05, 2007 at 03:32:53 PM PDT

      •  to put it simply

        http://en.wikipedia.org/...

        by debedb on Thu Oct 04, 2007 at 11:53:54 PM PDT

•  I'll stick with the crowd

  that gave longer answers.

  The idea of a free market economy is better than the reailty.

  The idea of a socialist economy is better than the reality.

  Capitalism is a very good system that generates lots of innovation and growth until the dog eat dog part starts to take over and the greed of human nature takes over and most people get screwed over while a select few get rich as can be.

  Socialism is a very good system that elevates all boats and provides basic necessities for all and works really great until it crushes individual drive and innovation and stifles growth.

  It is my firm belief that we need a balanced system that allows for capitalist growth and innovation while restraining greed and enhancing the well being of all.

  I do not believe it is an either or proposition.

  Peace,

  Andrew

  by Andrew C White on Thu Oct 04, 2007 at 07:19:41 PM PDT

  •  Human Nature

    Wouldn't human nature play a detrimental role in a socialist economy as well?

    by ShaunMcDonnell on Thu Oct 04, 2007 at 07:46:49 PM PDT

    •  Indeed it does...

      Just look at every Communist country that has existed. Oppressive totalitarion police states, every last one of 'em.

      Socialist economics coupled with a democratic/republican political system can work fairly well, as in Western Europe. To what extent the economics work cna certainly be debated, and the answers will depend on the metric used, for example wealth creation vs average standard of living, but nobody would deny that these are free societies.

      Me, I use an answer that you did not allow your liberal friends to give.

      I am in favor of regulated capitalism. Pure socialism leads to totalitarianism and stagnant economies that cannot sustain societies. Pure capitalism leads to oligarchy, an oppressed working class, and ultimately to destructive, bloody revolution. That's the part that Adam Smith missed, because when he was writing, it hadn't really happened yet. Those that are bitch-slapped by Smith's "Invisible Hand" don't simply sit down and take it. They get pissed off, and if enough of them get bitch-slapped hard enough for long enough, the bitch-slappers usually get killed.

      The extremes in either direction have both been tried, and neither has succeeded in producing a stable society. By that ultimate test, the test of survival, they both fail.

      In any contest between ideology and reality, reality wins.

      --Shannon

      by Leftie Gunner on Thu Oct 04, 2007 at 08:47:16 PM PDT

      •  Exactly

        it is not an either/or proposition. We need to find the proper balance point between a capitalist and socialist approach. Regulated capitalism is a good way to put it. Not over-regulated... but not under-regulated either.

        by Andrew C White on Fri Oct 05, 2007 at 07:26:25 AM PDT

    •  Sure

      One of the problems with social safety nets is that it often brings out that part of human nature that is inherently lazy therefore stifling hard work and innovation.

      Yet at the same time there are very good and necessary reasons for having a social safety net.

      Hence my belief that these things need to be balanced and that it is not an either/or proposition.

      Peace,

      Andrew

      by Andrew C White on Fri Oct 05, 2007 at 07:22:01 AM PDT

•  Funny how the socialist / capitalism thing is -

  backwards from what most people believe and rant about. In this country what we have is "socialism" for the rich and "free market" for the rest of us "rent-a-slaves.

  Socialism for the rich in the way us "rent-a-slaves" pay taxes to subsidize research for the rich so they can make huge profits. Tax breaks, investment incentives, etc.

  Free Market for the "rent-a-slaves" so we can try to compete our wages with the next country that the "rich" get to exploit at our expense. Chained to debt, afraid to loose a job, afraid to get sick, etc. After all, we are told that we are the "pampered western workers leading luxurious lifestyles" - believable less and less every day.

  And for all this trouble we "rent-a-slaves" go through to make a buck the only things we get to vote for are the "wedge issues" that don't really matter to the "rich" - the issues that won't affect their profits. They get theirs continually through administration after administration Dem or Rep.

  And when we nice "rent-a-slaves" decide to be magnanomous and increase benefits for society as a whole - guess where the money come from? the rich? no, guess again, the "rent-a-slaves"? Yep you got it! We subsidize the lower tier of society which relieves the rich from having to spend some of their profit to accomplish the same task.

  The hidden taxes are tucked away in things so benign as an increase in "transit fares", so now that you have to pay more to ride the local trolley someone gets to save a buck and someone gets to spend a buck. And this makes the roads less congested for the "rich's" limos.

  We're in a vicious spiral (not upwards either) and the only way to de-fragment the "rent-a-slaves" is a general "union" or "movement" of some sorts. How to do this through the cloak of what passes as "news" is anyone's guess.  The working masses are soon going to experience tough times at the higher levels as well as the "billable hours"  mentality takes hold.

  No, capitalism in this form is going nowhere for us "rent-a-slaves" and the strangle hold is going to get worse before it gets better.

  We all need some serious help...

  by FakeNews on Thu Oct 04, 2007 at 07:37:56 PM PDT

•  You been snookered by right wing BS

  The definition of capitalism by the ultra-conservatives is really the theory of economic neoliberalism. It rest on the assumption that capitalism is equatable with free markets, free trade and free capital flows. They justify this assumption on the grounds that supposedly free markets, free trade and free capital flows foster competitiveness that promotes  the economic virtues of creativity, industry, efficiency and comparative  advantage, which spontaneously results in the greatest good for the greatest number (except for the lazy, who opt themselves out). Security, protection of private and low tax rates preserve and promote these economic virtues with incentive, whereas governmental interference in the form of regulation, oversight and social legislation, decrease incentive and disrupt the self-regulating and self-correcting function inherent in free merkets, free trade and free calital flows.

  This is specious reasoning on several grounds. First, it runs counter to economic experience. There is a boatload of research to this effect. This theory presupposes everyone is acting in good faith, which history shows is not the case. Given a chance, many people will attempt to manipulate markets that are unregulated and where there is insufficient oversight. In laissez-faire systems, wealth flows to the top, giving rise to social problems that disrupt the general welfare and eventually the economic system itself.

  Secondly, the government must intervene in the markets in an economic system in which the government creates the money, thereby giving it control over fiscal policy and over the monetary system via the central bank. Moreover, free markets are not self-regulating and self-correcting as asset inflation and subsequent bubble, booms and bust, go to show. In addition, at a certain point, the government decides that certain players are too big to fail and bails them out, creating moral hazard.  

  One of the most important reasons that the argument is false is that the ultra-conservative position is that the private sector is more efficient than the public. This is an assumption that has not been borne out universally. And are we going to have competing armies? Even with so-called contractors (mercenaries) "helping out," is it a good idea to create private armies in a democracy? History would resounding respond that it is not.

  The idea that any regulation, oversight, social program, or responsible monetary fiscal policy, is "socialism" is just a canard not worth responding to. You are being taken for a fool. This is just the current wingnut talking point. Call everything that is not economic neoliberalism "socialism." I'll start believing the "free market" doctrine with the ulta-right starts condemning financial market bail-outs as socialism for the rich that defeats the self-regulating and self-correcting behavior of free markets and induces moral hazard into the economic system, promoting irresponsibility if not shady dealing and even fraud.

  by tjfxh on Thu Oct 04, 2007 at 07:39:36 PM PDT

•  I've heard this one before.

  At Yearlykos, the idiot from Pajamas media demanded of a Kossack, in front of my eyes, "are you in favor of capitalism? I think it's pretty important." I thought it was the silliest thing I'd heard in years.  This reminds me very much of that.

  by decembersue on Thu Oct 04, 2007 at 07:58:58 PM PDT

  •  It could be...

    However, I am mostly interested in hearing 'why' more than anything else.  

    I didn't post this so that I could send the link to my conservative friends and say "seeee... they're all communists!"

    FWIW

    by ShaunMcDonnell on Thu Oct 04, 2007 at 08:00:55 PM PDT

•  Our 'capitalist economy' went the way of the dodo

  quite some time ago.  Perhaps you missed the memo.

  What we actually have now (or, more properly, it has us) is a Corporatist economy.  Our government/economic system is sometimes snarkily referred to as "socialism for corporations" but it's really noting but a form of economic fascism that has no relationship to "free market capitalism" or socialism.

  Our Founding Fathers would be revolted and revolting again since the Boston Tea Party was not merely a protest against "taxation without representation", as it's so congenially put, but a protest against two forms of Authoritarianism - the absolute political control of a monarchy, AND the absolute economic control of a monopoly corporation that was bleeding the colonists dry (a Bush-Conservative's wet dream, currently under reincarnation in Iraq).

  So, you present a false choice between an ambiguous grand concept, socialism, and something we don't really have, "free market capitalism" and you present this choice as if the two were as mutually exclusive as oil and water.

  by sxwarren on Thu Oct 04, 2007 at 08:02:53 PM PDT

•  I would prefer un-hijacked Capitalism, thanks.

  I disagree with Marx/Engels when they claim that Capitalism leads "inevitably" to the paradox of overproduction. Local overproduction occurs at the end of natural booms resulting from genuine events such as discovering natural resources, opening new trade routes, revolutionary technological advances, etc. You don't need factories for this, but they certainly make it more obvious and memorable.

  Local booms and busts are absorbed into the economy as a whole (unless that economy is fragile), so history remembers few of them. Large-scale booms and busts, that lead to general overproduction, are far more often a downstream effect of monetary inflation used by governments (with central bank cooperation) to pay for war expenses or reparations.

  Our capitalist economy worked pretty well until the last century or so when the rich finally got serious about taking it over from the inside. Most of the 20th century was the slow growth process of the cancer and we are now watching it explode to consume its host.

  Everyone who saves money and doesn't stuff it under a mattress is, in some sense, a mini-capitalist. The real problem with modern American "Capitalism" is that it perverts our laws and regulations to give most advantages to mega-capitalists and most penalties to mini-capitalists. Thus the growing inequality of wealth.

  by toddpw on Thu Oct 04, 2007 at 08:03:22 PM PDT

  •  Mini-Capitalists

    I guess I would consider myself a mini-capitalist in your terms.  However, I have the ability to decide where I put my invesments and then what I do with the gains.

    For example, I could put $10,000 into Haliburton stock and then spend the proceeds building a website that attempts to expose the people behind the company.  I could do the same with a tobacco company like Altria.

    Do you see what I am trying to say in this muddied example?

    by ShaunMcDonnell on Thu Oct 04, 2007 at 08:08:36 PM PDT

    •  Right...

      But that's not really germane to your argument, since you'd have a hard time finding anyone who thinks that you shouldn't be allowed to do that. Well, except some Halliburton executives, but they're unlikely to post here.

      No successful quasi-socialist system exists in which you would not be allowed to make that choice. Even the French can buy Haliburton stock.

      You might see some folks here who think that the harm that J. Random Corporation (eg, Haliburton or Altria, but it doesn't really matter) causes to society is so great that their government-granted existence should be revoked, like a corporate "death penalty."

      Hell, I'm one of those people, although I'd limit it to the most egregious violations of law, and it'd have to be spelled out in the statutes, just like it is for people. In my version of a corporate "death penalty," it would include stripping the protections of incorporation from anyone involved in the crime that resulted in the "execution." Investors like you, who would have suffered losses (you own stock in a company that no longer exists) could then seek claims against the personal assets of the people who made the decisions that caused your losses.

      I may diary this idea, once I've developed it a bit more.

      --Shannon

      by Leftie Gunner on Thu Oct 04, 2007 at 08:59:50 PM PDT

      •  Ok, I understand..

        But, how do you handle the potential of frivolous lawsuits?  This sort of takes us back to the human nature side of things.  

        I, the employee of large company, see a CEO who has a ton of money.  His assets are available to be taken if I sue.  

        It can go both ways, right?

        by ShaunMcDonnell on Thu Oct 04, 2007 at 09:05:03 PM PDT

        •  In order to get any money,

          You first have to win, or convince your opponent to settle out of court. In which case they're deciding to pay you off to make you go away, and I have no sympathy for them.

          In this specific case, the only people who would lose the protections of incorporation would be those who made the decisions that lead to the company's "execution." And the loss of that protection would go along with that legal penalty.

          The corporate "death penalty" that I'm describing is a criminal, not a civil law penalty. Prosecution, jury, the whole bit. Only after that process ends in a conviction could the decision-makers be held civilly liable for the losses their decisions caused investors to incur.

          Frivolous lawsuit potential seems pretty well zero. I'd argue with your basic premise about "frivolous lawsuits", but that's a whole 'nother thread...

          --Shannon

          by Leftie Gunner on Thu Oct 04, 2007 at 09:21:34 PM PDT

          •  Actually..

            That makes pretty good sense to me.  

            by ShaunMcDonnell on Thu Oct 04, 2007 at 09:27:26 PM PDT

          •  Frivilous....

            lawsuits would absolutely be zero.  When a company goes under because of some bonehead executives decision to effectively "execute" the company while profiting from it (or not), while it's employees retirement funds become nill, they need to be held accountable.  If not, you may as well not prosecute any more murderers, rapists or violent criminals in general.  In my eyes, corporate criminals such as those we have seen go down in this new century, might as well be murdering their employees.  Hell, they've already raped them for everything they've worked half their lives for.

            by TheKost on Thu Oct 04, 2007 at 11:55:14 PM PDT

•  Nothing is Free

  We pay; they play

  by barbybuddy on Thu Oct 04, 2007 at 09:05:05 PM PDT

•  It's what We the People want; The Goverment is us

  by army193 on Thu Oct 04, 2007 at 10:08:40 PM PDT

•  I don't care what we call it

  We have problems, let's fix them in whatever ways will work the best. Let's evaluate policies based on their own merits and drawbacks and not on bugaboo labels.

  by denise b on Thu Oct 04, 2007 at 10:09:15 PM PDT