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Post Does Capitalism Sow the Seeds of Its Own Destruction?
Created by John Eipper on 08/04/12 3:35 AM

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Does Capitalism Sow the Seeds of Its Own Destruction? (Tor Guimaraes, USA, 08/04/12 3:35 am)

Anthony D'Amato (3 August) made some provocative comments:  "It is as if communism and capitalism are the greatest and equally profound religions. However, Marx the economist did not see that the market principle of capitalism reduces to a kind of communism. Under the market principle, firms become increasingly efficient in competing with one another until the price at which they compete gradually reduces their net profit to zero. Thus over time firms self-destruct. Marx of course thought that destruction needed help from workers. He was just impatient. The free market could do just as well on its own without the violence--but grinding slowly."

In practice, under capitalism companies may get destroyed, not because they are increasingly efficient, but for a myriad of other reasons.

As I have posted long ago, Capitalism in practice seems to have in the seeds of its own destruction: stronger companies will eventually merge, buy out, manipulate, dominate and eventually turn themselves into de facto monopolies. Sometimes these "monopolies" get too comfortable and get surprised and even destroyed by new competitors. In more democratic nations, as Anthony pointed out, "... it may be state interference with the market that allows for the otherwise uncanny persistence of capitalist structures." The interesting question is if rampant capitalism is allowed to eventually produce huge monopolies which control government, media, etc., at a global scale, what will happen to this new commodity "people?"

Anthony asked, "Are deceitful capitalism and regulatory capitalism here to stay so that capitalism will retain its tenuous hold on history, or is the market eventually going to grind down these interferences and achieve world communism through the self-destruction of capitalism? How can we characterize the European Union? Is it designed to achieve a free market among its members so that ultimately communism will prevail therein? Or is it just one big state competing in Mandevillian terms with the US, China, India, and maybe Russia?"

Yes, capitalism will thrive, but the essential question for any nation is about effective capital/wealth distribution. Every nation today has political parties akin to our Democratic/Republican ones. For example China, one faction of the Communist leadership leans toward greater wealth distribution while the other is more comfortable with more free capital accumulation by elites. In the case of the EU, obviously the more socialistic approach of the past is being forced into a more oligarchic capitalist system through the implantation of "austerity measures." Ditto in the USA, if Republicans have their way dismantling social/economic safety nets to provide tax cuts for the wealthy and continue corporate welfare programs. Already heavily oligarchic countries like India, Brazil, etc., benefiting from the commodities boom or global outsourcing, are slowly increasing wealth distribution a little. Countries like Sweden and Canada, which up to now have managed to maintain a better balance between socialism and capitalism, will continue to perform relatively well. I agree that only intelligent, flexible, and enforced state regulations can keep markets free and capitalism from self-destructing. Like communism, rampant capitalism may look good on paper as "religions," but they do not work in practice.

From a different perspective, from my many years as a business consultant working personally with top managers at many small and large companies, in 30 December 1999 I posted to WAIS the following: "It is very difficult to balance one's duties as a citizen of the world, a corporate officer responsible for the welfare of the employees, and the growth of shareholder value in an increasingly competitive world. The pressure from conflicts among these different perspectives can be overwhelming, so expediency, survival, and short-term interest dominates the decision making process. Unless there is strong government pressure, executives will tend to avoid social and environmental restrictions. It is more expedient to send forth your PR team, call in a few political chips, etc., than to spend a fortune protecting society and the environment. I believe in the long run everyone would be better off if this short-term philosophy was discarded, but you try selling that to executives under pressure form shareholders, competitors, and their own stupidity." The great Ronald Hilton commented: "Tor Guimaraes describes businessmen as too harried and harassed to concern themselves with much beyond surviving in a competitive world: It was the case of the Total oil company which started this discussion. As a result of the 'Erika' disaster, the French government says it will increase controls. However, no one has explained why the number of government ship inspectors was reduced from nearly eighty to under fifty, which was one cause of this disaster."

Why, indeed.

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  • China and Income Distribution (Istvan Simon, USA 08/05/12 5:30 AM)
    Tor Guimaraes (4 August) says that in China, one faction of the Communist Party wants better distribution of income, while another faction is more comfortable with accumulation of capital. As Tor may know, I am married to Chunhui, who was born in China, and who follows the Chinese political developments very closely. I am unaware of any faction of the Communist Party that defends greater distribution of income in China. If Tor is right, let him please name the names of the Chinese leaders that defend such a position. I claim that they do not exist.

    JE comments: One often reads that 500 million Chinese have emerged from poverty in the last twenty years--isn't this income distribution, or simply the inevitable outcome of a larger economic pie?

    Also, I would imagine that some Chinese authorities believe the stability of their regime can only be ensured by a more equitable distribution of wealth.

    Like Istvan Simon, I look forward to Tor Guimaraes's response.

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    • China and Income Distribution (Tor Guimaraes, USA 08/07/12 5:36 AM)
      Regarding Istvan Simon's post of 5 August, it is rather surprising to me that anyone who claims to have considerable understanding about what is going on in China would say, "I am unaware of any faction of the Communist Party that defends greater distribution of income in China. If Tor is right, let him please name the names of the Chinese leaders that defend such a position. I claim that they do not exist."

      Simple logic alone clearly supports my position. Everyone by now knows that in China for the last several years within and outside the Central Committee there has been a raging debate over policies addressing the need for more/less income distribution. If not, all one has to do is Google it to get a plethora of good sources describing this debate in considerable detail. Normally, any time there is a strong debate on any topic, there are at least two factions, and the debate about the need for increased income distribution within the Chinese Central Committee is no exception.

      I believe it is very nice that Istvan is "married to Chunhui, who was born in China, and who follows the Chinese political developments very closely." I too have numerous friends and colleagues in China since my first work there in the year prior to the Tiananmen massacre. Most of my "students" at Fudan University at the time were university professors and administrators. Some of them have become relatively very well placed, but I will not provide any names. Unfortunately, there is great disagreement even among them (including Communist Party leaders/members) about the need for more income distribution. However, this should come as no surprise, since the debate has been raging throughout the nation (in all nine "sub nations" of China).

      Am I to assume that Istvan thinks there is no debate within the Communist Party about the need for income distribution? Of course there is. To name some names, how about Premier Wen Jiabao stating in his government work report delivered to the annual parliamentary session in Beijing: "Readjusting income distribution in China in a reasonable manner is a long-term task and an urgent issue to address at present." For 2011, he also said the government should implement measures to: increase basic income of low-income people, further adjust income distribution, and "vigorously" overhaul and standardize income distribution. Despite contrary arguments, these objectives have not changed and some progress has been made, though given the widespread controversy, not enough. If he can win this "debate" against the more "capitalistic" faction of the government (including local bureaucracies/capitalists) or just the realities of the marketplace which thus far have promoted a widening income gap, China will quickly become the most powerful nation on Earth.

      JE comments:  The Chinese authorities seem to be walking a tightrope between giving too much economic opportunity to their citizenry, which may endanger the regime, and not providing enough, which will also endanger the regime.  China experts Siegfried Ramler, William Ratliff, and Charles Ridley, among others in WAISdom, have often wrote on the Chinese ideal of order and stability.  China in the last twenty years has changed so markedly, in economic if not political terms, that there must be cause for great concern from within the government.

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