What is wrong with capitalism?

[Abu]

passer_by #257
So you equaling Capitalism with Free-enterprise is false. Free-Enterprise is simply PART of Capitalism. So each implementation of Capitalism, while definitely holding Free-Enterprise as a cornerstone, can promote other values as necessary for that implementation.

The ridiculing of Bl John Paul II on free enterprise shows either senselessness or intent to delude as the Pope is clear.

Bl John Paul II, Centesimus Annus, 42, 1991 affirms emphatically – ‘Returning now to the initial question: can it perhaps be said that, after the failure of Communism, capitalism is the victorious social system, and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this the model which ought to be proposed to the countries of the Third World which are searching for the path to true economic and civil progress?
‘If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be **more appropriate to speak of **a “business economy”, “market economy” or simply "free economy".’

Notice that capitalism = free economy,
and reaffirmed by Bl John Paul II is the ‘fundamental human “right to freedom of economic initiative.” ’ (Sollicitudo Rei Socialis (On Human Concerns), Encyclical, 1987, #42).

As initiative = enterprise, it is tilting at windmills to posture that “equaling Capitalism with Free-enterprise is false.”

Notice also that virtues are not included by the Pope because they belong to the individual, to ethics as St Augustine taught – “wickedness is not inherent in commerce, but that with any occupation it was up to the individual to live righteously.” [John W Baldwin, *The Medieval Theories of the Just Price, The American Philosophical Society, 1959, p 15].

No one need be in any doubt that the Church fully affirms democratic free enterprise (also known as capitalism) and calls on everyone to be virtuous.

 

[damian_clarke]

Just checking here but do you consider huge multinationals employing legions of marketing gurus, lobbyists, journalists etc free enterprise?

 

[passer_by]

The ridiculing of Bl John Paul II on free enterprise shows either senselessness or intent to delude as the Pope is clear.

Bl John Paul II, Centesimus Annus, 42, 1991 affirms emphatically – ‘Returning now to the initial question: can it perhaps be said that, after the failure of Communism, capitalism is the victorious social system, and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this the model which ought to be proposed to the countries of the Third World which are searching for the path to true economic and civil progress?
‘If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be **more appropriate to speak of **a “business economy”, “market economy” or simply "free economy".’

Notice that capitalism = free economy,
and reaffirmed by Bl John Paul II is the ‘fundamental human “right to freedom of economic initiative.” ’ (Sollicitudo Rei Socialis (On Human Concerns), Encyclical, 1987, #42).

As initiative = enterprise, it is tilting at windmills to posture that “equaling Capitalism with Free-enterprise is false.”

Notice also that virtues are not included by the Pope because they belong to the individual, to ethics as St Augustine taught – “wickedness is not inherent in commerce, but that with any occupation it was up to the individual to live righteously.” [John W Baldwin, *The Medieval Theories of the Just Price

, The American Philosophical Society, 1959, p 15].

No one need be in any doubt that the Church fully affirms democratic free enterprise (also known as capitalism) and calls on everyone to be virtuous.

Abu, with all due respect, the Pope is not an economist and you are reading more in to the Pope’s statement. As much as the implementation of Capitalism is good, it will be good. There is nothing intrinsically evil with all implementations of Capitalism.

Its just like saying having a leader is good. I would say sure. But not all implementations that have a leader is necessarily good i.e. Dictatorships.

So you are pushing a teaching on faith and morals far beyond what it is saying when you specifically say that Capitalism is necessarily good or not evil. In truth, it just depends on the implementation.

Now if you continue to argue, I hope you realize that you are possibly arguing against a perspective. Neither you nor I have a wrong perspective. In fact, you should only be concerned about me if I held that Free-enterprise was bad. As you can see, I don’t. But instead, you seem to be more concerned on something that can change with perspective and implementation. I think I cannot add much more than that. Thank you for a great discussion.

 

[Abu]

damian Clarke #260
Just checking here but do you consider huge multinationals employing legions of marketing gurus, lobbyists, journalists etc free enterprise?

What teaching condemns employment for improving sales? Why not question the State Capitalism of China which controls its exchange rate to flood the world with their goods and the governments of the democracies which allow those goods to strangle or cripple their manufacturing industries and cause huge unemployment.

What is important is the practices of prudence, justice, fortitude and temperance in free enterprise as in life, and the nefarious practices of governments that hamper free enterprise and cause recessions.

 

[damian_clarke]

My dear chap you are consistently twisting the teachings of the Holy Father to try and prove your point. The Holy Father has unequivocally condemmed a system based on greed and dog eat dog type economics. Yes he as we all do value enterprise and private propoerty but the unadulterarted accumulation of wealth at the expense of our fellow man is not the Catholic way. The Holy Ftaher calls for a more equiatble distribution of welath all round not the ongoing accumulation of excess wealth in the hands of teh few whilst the vast majority starve. Please stop trying to twist his words to suit some sort of Friedmanite economic theory.

 

[David_Castlen]

My dear chap you are consistently twisting the teachings of the Holy Father to try and prove your point. The Holy Father has unequivocally condemmed a system based on greed and dog eat dog type economics. Yes he as we all do value enterprise and private propoerty but the unadulterarted accumulation of wealth at the expense of our fellow man is not the Catholic way. The Holy Ftaher calls for a more equiatble distribution of welath all round not the ongoing accumulation of excess wealth in the hands of teh few whilst the vast majority starve. Please stop trying to twist his words to suit some sort of Friedmanite economic theory.

What are the consequences (what are the alternatives) if one were to find himself with a billiion dollars? What can he do with it that will hurt someone, other than buying guns to kill people? What happens if he decides to save it (hord it) what are the consequences? Are these bad consequences?

 

[David_Castlen]

May I suggest to all who have the sure understanding that economics must be “this way”, a reading of the following article:

http://by145w.bay145.mail.live.com/...mid=f03289b8-3868-11e1-9bc2-002264c20888&fv=1

 

[socialcath101]

Although I support a mixed economy I work in human services… There’s much less welfare fraud and abuse than people think…

 

[kama3]

What are the consequences (what are the alternatives) if one were to find himself with a billiion dollars? What can he do with it that will hurt someone, other than buying guns to kill people? What happens if he decides to save it (hord it) what are the consequences? Are these bad consequences?

A FOREX trader with a billion in cash can easily make a trade worth $10 billion, thanks to a mechanism known as leverage. At this point…

On September 16, 1992, Black Wednesday, Soros’ fund sold short more than $10 billion in pounds,[23] profiting from the UK government’s reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency.

Finally, the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound, earning Soros an estimated $1.1 billion. He was dubbed “the man who broke the Bank of England”.[28] In 1997, the UK Treasury estimated the cost of Black Wednesday at £3.4 billion.

en.wikipedia.org/wiki/George_Soros

So, the UK citizens lost GBP 3.4B (roughly 60 GBP per person on average). Of course, the cost was not spread equally: the resulting economic shock forced some people out of job, some into poverty, and consequently forced some women to procure abortions (which seems to be the biggest social problem in existence on this forum). At the same time, no useful result has been produced, except for lining Soros’ pocket with another billion. So such action qualifies as pure evil, even from a strictly utilitarian perspective.

I recommend you read Stiglitz’s Globalization to see the extend of damage an actor with a couple of billions is capable of.

 

[David_Castlen]

A FOREX trader with a billion in cash can easily make a trade worth $10 billion, thanks to a mechanism known as leverage. At this point…

en.wikipedia.org/wiki/George_Soros

So, the UK citizens lost GBP 3.4B (roughly 60 GBP per person on average). Of course, the cost was not spread equally: the resulting economic shock forced some people out of job, some into poverty, and consequently forced some women to procure abortions (which seems to be the biggest social problem in existence on this forum). At the same time, no useful result has been produced, except for lining Soros’ pocket with another billion. So such action qualifies as pure evil, even from a strictly utilitarian perspective.

I recommend you read Stiglitz’s Globalization to see the extend of damage an actor with a couple of billions is capable of.

Could this event (9/16/1992) had happened in a gold (metal) economy?

 

[kama3]

Could this event (9/16/1992) had happened in a gold (metal) economy?

Interesting question. For sure, in a gold-backed economy there is no currency speculation, so the immediate answer is no. However, a closer analysis reveals that such event requires three components:

(a) leverage
(b) a market with high liquidity (FOREX)
(c) a national government intervening to keep price of certain commodity (currency) fixed

So, I believe that the scheme could be repeated with a commodity or commodity-based derivatives. Oil would be a good example. Today, the commodity markets are too liquid; I read somewhere that today there are on average 30 transactions between the oil producer and the final buyer. 1:10 leverage is not a problem. And there are governments determined to intervene should the price of oil move too much either way. So the scheme can be repeated. Not exactly of course, but all the components are there.

In fact, we already see this happening. When the food prices started rapidly rising about two years ago, some people pointed out that it was because of the hedge funds, massively buying food (rice, wheat, corn, etc.) futures in order to diversify investments. Hedge funds have no use for food – they can’t eat it – but they are interested in buying a commodity low and selling it high. Problem is, if they sell these food futures high, somebody at the end buys it high – and that somebody buys it to eat it. So when rice futures for next year go from $1 to $3 the hedge funds will make money today. But next year, when this rice will be delivered for $3, the people who live for a dollar a day will starve to death. If hedge funds take the opposite strategy, short rice, and next year’s futures go from $1 to $0.3, then the next year everyone will have cheap rice, but rice farmers (who are usually poor people in the first place) will go out of business.

Of course government can move to counter the speculators (support the impoverished consumers or impoverished farmers), but it must get money somewhere, which means raising taxes. So either your food gets more expensive to benefit the speculators, or your taxes go up to benefit the speculators. And again, no benefit is produced, except for giving people who already have a lot of money – more money. That’s evil.

In short, the issue is much more complicated than returning to the gold standard. Not that I am against the gold standard, but the elephant in the room is uncontrolled speculation destroying everything it touches.

Consider Tobin tax. It is negligible for the end consumer (you won’t feel 0.1% increase in price), but it does curb leverage based speculation. Yet everytime it is proposed, some people jump at it crying “Socialism!”.

 

[David_Castlen]

Interesting question. For sure, in a gold-backed economy there is no currency speculation, so the immediate answer is no. However, a closer analysis reveals that such event requires three components:

(a) leverage
(b) a market with high liquidity (FOREX)
(c) a national government intervening to keep price of certain commodity (currency) fixed

So, I believe that the scheme could be repeated with a commodity or commodity-based derivatives.

**I do not. I believe there is ample evidence for my opinion. One source “Money Sound and Unsound,” Joseph Salerno.

When a commodity is used as a medium of exchange and that commodity becomes “scarce” another commodity will rise to the occasion; in fact, often when there were “gold standards” there was more than one commodity used as a medium of exchange; e.g., silver, shells, cigarets, “the yard stick” nickle etc. Amazingly, those economies adapted quickly and naturally when THE commodity became scare, just like after a natural catastrophy quickly life sprots up everywhere.

Back to my original question: Can hording hurt an economy or rather can hording hurt an economy that is free?**

 

[Abu]

damian Clarke #263
you are consistently twisting the teachings of the Holy Father to try and prove your point

.
Bl JPII is very clear, as quoted, so the above shows a failure to understand Bl JPII’s teaching on free enterprise and a persistent prejudice without foundation.

The Holy Ftaher calls for a more equiatble distribution of welath all round not the ongoing accumulation of excess wealth in the hands of teh few whilst the vast majority starve.

Fr Sirico sums up the theme and direction of *Caritas in Veritate *perfectly:
“Several commentators have worried about his frequent calls for wealth redistribution. Benedict does see a role for the state here, but much of the needed redistribution is the result of every voluntary and mutually beneficial exchange. To understand such passages fully and accurately, we do well to put our political biases on the shelf.

“The encyclical doesn’t attack capitalism or offer models for nations to adopt. ‘The Church does not have technical solutions to offer,’ the pope firmly states, and does not claim ‘to interfere in any way in the politics of States.’

“This encyclical is a theological version of his predecessor’s more philosophical effort to anchor the free economy’s ethical foundation. Much of it stands squarely with a long tradition of writings of a certain “classical liberal” tradition, one centered on the moral foundation of economics, from St. Thomas Aquinas and his disciples, Frederic Bastiat in the 19th century, Wilhelm Roepke, and even the secular F.A. Hayek in the 20th century. It also clearly resonates with some European Christian democratic thought.

“Simply put, to this pope’s mind, there is no just or moral system without just and moral people.”
See: tinyurl.com/3fg4sq6

Please stop trying to twist his words to suit some sort of Friedmanite economic theory.

It is the faulty theories of many economists, which governments too often follow, that throttle free enterprise, a consequence of which this poster seems blissfully unaware.

See post #249: “Real Catholics can understand that government finagling disrupts the cause and effect results of the free enterprise principles discovered and developed by the Catholic Late Scholastics hence the depression of the 1930’s and the numerous recessions, which result from various economic theories such as those of Keynes and Friedman.”

See tinyurl.com/84u7kc7 for one of Friedman’s costly mistakes:
“Given the monetary system, the loss of budget discipline causes price instability. Though Friedman was correct to say that “money matters,” he was mistaken in ignoring the fact that foreign official dollar reserves have the same ultimate impact on the price level in dollars as the high-powered dollars created by the Federal Reserve. The World Dollar Base is the sum of U.S. currency and commercial bank reserves plus foreign official dollar reserves. Reconstructed back to 1830, its variation relative to the real growth of U.S. productive capacity has preceded each major episode of consumer price inflation or deflation.”

 

[kama3]

Back to my original question: Can hording hurt an economy or rather can hording hurt an economy that is free?

This question is meaningless, because free economy is a theoretical construct which does not exist in reality and is practically unachievable.

One should focus on discussing the really existing economy as of 2012.

 

[Abu]

kama3
free economy is a theoretical construct which does not exist in reality and is practically unachievable.

The free economy is a set of principles developed by the Catholic Late Scholastics which may be easily followed and well summed up by Bl John Paul II as “an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector”, while government finagling has very often distorted the free market.

If there is a problem with how the market operates, the first place to look is the government – that’s why there was no prolonged meltdown in the 1920’s in the U.S.A.

 

[damian_clarke]

I do not really wish to discuss economics on this forum just the faith but how do you come to the conclusion that 1929 was due to government interference. It was due to an unregulated banking system and stock market and it is generally accepted that it was the Keynsian approach to the problem that finally resolved it and supported three decades 1945-1970 of sustained growth and well being.
The Holy Father does not call for the government to be kept out or for a particular brand of economic theory. He calls for justice and a system that allows human flourishing. Communism in the east did not allow human flourishing. The system that currently exists in the west is not alllowing human flourishing either. The Gini co-efficient gets worse, inequality deepens. You will probably say that is because of government intervention I doubt if you are correct but that is a topic for an economics forum. The point is we all need to examine our consciences and look to see how we can create a more just system. Yes we accept inequality but we are not asked to accept the life denying ineqaulities we see today. The Ancient Israelites had a Jubilee year we need something similar.

 

[damian_clarke]

You really are playing with words. The Pope wants the economy to run without interferencse from government and we (all teh palyers) must be moral and then it will work. The Pope also condems murder but he does not object to the state interfering in this and enforcing this rule either by preventing murder (police forces) or by investigating and punishing murder. Who is going to prevent abuses of the free market system?

 

[socialcath101]

Pure capitalism is condemned by the Church… But so is socialism, liberalism, libertarianism, communism in their pure forms…

I’d say with analysis of Catholic social teaching a mixed economy is best…

 

[Abu]

damian Clarke #274
how do you come to the conclusion that 1929 was due to government interference. It was due to an unregulated banking system and stock market and it is generally accepted that it was the Keynsian approach to the problem that finally resolved it and supported three decades 1945-1970 of sustained growth and well being.

Such statements without justification continue to plague reality, and show why relatively few try to solve the problems created.
The economies of the West, led by the U.S.A., are widely considered to be “market” economies, but they are not the free enterprise economies arising from the Late Scholastics and the Austrian school of economics because these Western markets are deluged and deluded by interventionism.

The start was in 1929, and when FDR took office in March 1933 consolidated it by even worse policies – he institutionalized the Great Depression.

If Coolidge made 1929 inevitable, it was President Hoover who prolonged and deepened the depression, transforming it from a typically sharp but swiftly-disappearing depression into a lingering and near-fatal malady, a malady “cured” only by the holocaust of World War II. Hoover, not Franklin Roosevelt, was the founder of the policy of the “New Deal”: essentially the massive use of the State to do exactly what Misesian theory would most warn against — to prop up wage rates above their free-market levels, prop up prices, inflate credit, and lend money to shaky business positions. Roosevelt only advanced, to a greater degree, what Hoover had pioneered. The result for the first time in American history, was a nearly perpetual depression and nearly permanent mass unemployment. The Coolidge crisis had become the unprecedentedly prolonged Hoover-Roosevelt depression.
dailycapitalist.com/2009/06/24/the-great-depression-a-short-history/

The Holy Father does not call for the government to be kept out or for a particular brand of economic theory.

Bl Pope John Paul II has condemned not only Communism and Socialism but also the Welfare State, and does not deal in theories but promotes the free market.

Dr William Luckey: “Pope John Paul II’s…reservations are not about the free market but the social context in which that market, or, quite frankly, anything else, operates. Everything in society functions in an environment of ethical/religious, political/juridical and economic reality. For the free market to work, there needs to be a moral society, backed up by revealed religion, and a system of just law, respected by the people and enforced justly by the courts. Economists have created a whole body of literature on the effect of institutions on economic life. If there is a problem with how the market operates, the first place to look is the society and the government. Obviously Pope John Paul II realized this. Now if only other Catholics would be as informed.”

The system that currently exists in the west is not alllowing human flourishing either.

Because of government finagling which has caused so much trouble.

 

[Abu]

socialcath101 #276
Pure capitalism is condemned by the Church…

What is “pure” Capitalism? Where is “pure” capitalism condemned – your reference?