The Lie of Capitalism and Globalization - Page 2

It's a provocative title I know. But it's exactly what I want to debate. FIERCELY.

To start things off I'd like to open with the latest address by President Sarkozy of France:
Globalization Got Out of Control

Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.

I want to go ahead and say that's crap.

First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.

The problem with this theory is it doesn't account for the destructiveness of monopolies. In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to.

Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.

In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.

This creates an effect where giants are constantly forced to grow bigger to compete, even though in the long run it leads to a net loss in efficiency. This is what the free market creates.

The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.

The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.

What use are lower prices when you don't have a job?

That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.

Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?

There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."

This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.

This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market, whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production.

AKA, the American factory worker must compete with the Chinese sweat shop worker.

The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.

Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.

Do you guys see now why the free market is not helping the vast majority of America?

And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?

This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.

It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.

This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.

Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.

So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.

The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.

The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government. Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.

What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.

This is how Main Street gets shafted.

On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?

Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.

In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.

The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.

Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.

In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.

It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.