Socialism implies a lot more centralization than capitalism. The answer is, like always, included in the question. While socialism is to be ‘implemented’ – by a ‘central figure’, capitalism is an environment. A place where the deciding agents – the entrepreneurs, ‘make it happen’.
Hence socialism – which is a ‘thing’, to be implemented, not an environment for entrepreneurs to roam ‘free’ – will eventually fail. No matter how well intended the implementor, nor how hard it tries to make it happen.
In capitalism, only the entrepreneurs might fail. When the market is no longer free – oligo or mono poly, the situation closely resembles a socialist one. Things go south. Because the decision making agents are too few and far apart – no longer able to cover all corners, just as their socialist counterparts.
Comparing socialism with capitalism is like pitting an apple against agriculture.
An apple, all apples, will eventually become rotten. No matter how hard one might try to preserve it. Agriculture, on the other hand, will yield according to the available resources and the effort put in by those involved in it.
The way I see it, capitalism is an environment. A ‘place’. A ‘way’ for people to do ‘economy’. What people do in that place depends on the place itself but also on how they choose to do things. This being the reason for which the American capitalism is different from the European one. And both completely different from the Chinese version. In this sense, capitalism doesn’t actually work. Not by itself! If those dwelling in this ‘place’ act freely – as in ‘free market’ – then the whole ‘thing’ remains ‘sustainable’. Not ‘good for everybody’, not always ‘nice’ but nevertheless ‘fair’. As in ‘you have a fair chance of reaching the other end’. Not to get necessarily rich but to make the ends meet!
The alternative to capitalism… if you take your ideological blinders off, you notice that there’s none! Socialist/communist countries are/were also capitalist. The difference being that their economies are/were centrally planned. Their markets are/were anything but free! This being the reason for which communism had crumbled under its own weight. And for which in all places where the market is not free enough the ‘thing’ is not sustainable!
The common sense definition for an inflationary situation is ‘when too much money chase an inherently limited amount of goods and services’.
The ‘limited amount of goods and services’ part is easy. We live on a finite planet, we have a limited capacity to transform whatever resources we are able to identify into usable goods and services … so… OK, we can always identify new resources and build new capacity but we cannot do any of this ‘on the spot’. We need time. And, even more importantly, we need to put ourselves to it!
Then ‘who does the chasing’? After all, money is ‘inert’. It doesn’t do anything if let alone in a drawer. On under the mattress… In reality, we – buyers and investors, are the true ‘inflationary agents’. ‘But it would be completely stupid to sit on a pile of money when inflation rages! You have to buy something otherwise you’ll loose a lot of value! At least, you need to invest that money…’ This is one of the best examples of a self-fulfilling prophecy! Indeed. Buying or investing during an inflationary bout is the reasonable thing to do! Yet we need to understand that our actions will, temporarily, exacerbate the very inflation we are trying to ‘tame’.
After a while, economy had become ‘complicated’ enough to demand ‘paper money’. The amount of goods and services produced had become so large – and insufficient bullion was added to the money pool, that prices would have had to shrink if the balance was to be maintained. Unsustainable! Nobody would have bought anything and everybody would have jealously guarded their precious money while waiting for the prices to fall further. This process is known as ‘deflation’ and is considered even more malign than a decent amount of inflation. We have to note at this point that ‘paper money’ had been made possible by the advent of the ‘nation’. This is a rather complicated discussion, for the present purpose it’s enough for me to mention that ‘paper money’ being accepted as ‘tender’ means that the general population has enough trust in the issuer of the bills. That the individual user of the paper money trusts/believes he is part of ‘something bigger’. In those times, it was the issuer of paper money who practically controlled the amount of money which existed on the market.
Wrong! For banks to be able to ‘create’ new money, they have to extent credit! For new money to be created in this way, somebody must walk into a bank with a business proposition. That somebody might want to buy a house, a car or whatever else. Or that somebody might want to start a business. If that somebody convinces the bank that they is solvent or that their idea is worthy enough, then and only then new money is created! Money doesn’t appear out of the blue! It is born out of trust. That somebody not only trusts themselves but they are convincing enough to determine the banker to extend that much needed credit!
But wait! We’ve developed yet another mechanism which churns out money. The stock market. After developing the business started with the loaned money, the somebody we’ve been talking about above decides to make an IPO. To sell part of his business to investors. To monetize his initial investment. Depending on the moment chosen for the IPO – and the economic data in the prospect, the IPO can be a huge success. For ‘somebody’ and for the early buyers. You see, each time the price of the stock goes higher, new money is created. Based more on the ‘market’s expectations’ than anything else…
‘But people who put their money on the financial markets are rational agents! They are experts in their field…’
Yeah, right… You’re talking about the experts who had put together the collateralized debt obligations debacle… And many others. Too many others… Also, you’re talking about the experts who had bought those papers! Who had trusted the expertise of the first batch of ‘specialists’!
Thinkers, from Freud to Kahneman and Ariely, have proven than humans are very good at rationalizing and less so at being truly rational. That for a market to behave in a reasonable manner, it must preserve its freedom. That it must be free from ‘bullies’ – individual agents who muster a lot of ‘clout’, and free from any mania.
The 1637 Dutch Tulip Mania is a very good example of what might happen when a market gets obsessed with something. When too many people – not even a majority, forget about the fact that economy (oikonomia) is about making ends meet and that getting rich may be a nice consequence but is a terrible goal.
‘OK, nice try. But what about inflation?’
We have an inherently limited amount of goods and services. A relentless mechanism which churns out money. Meanwhile, some of us obsess about their need to conserve the money denominated portion of their stashed away fortunes.
Inflation is nothing but another mechanism. Which re-balances the market. Piece-meal – adjusting for daily changes, in normal times. When things evolve ‘freely’. Suddenly when the market – the people who ‘man’ the market, find out about ‘the dark side of the moon’.
And, if you pay enough attention, the cartoon capitalists represent nothing but the reprehensible side of real life capitalism.
The ‘fat man smoking a cigar in a greasy suit while counting $$$ peeled of the sweated back of his workers’ checks on all counts. On all counts defining ‘real-life capitalism’…
Besides all which have already been said about them, they is also an entrepreneur, risking their money, working crazy hours to build their version of a business, providing work for others – at a price, helping their team – whichever that might be…
Read what brittanica.com has to say about each of them. Just click their names.
Then tell me why are we, any of the democratic countries in the world, still making business with any of the dictatorial regimes still plaguing the Earth? Why do we continue to harbor any of the yachts owned by corrupt oligarchs? Or their money?
The fact that too many self styled liberals hold on to their ill begotten wealth while distributing a lot of quilt doesn’t obliterate the fact that very few of the ‘self believed’ conservatives share much of their wealth… while seldom admitting any responsibility for what had happened in the past. And continues to this day, in very insidious ways.
As for any attempt at a radical transformation of both economy and society – as in making them actually free for all us – white, black and all the other hues… forget it.
NB. All of us will eventually lose. Everything. Things are becoming too lopsided.
Using as little resources/effort as possible to get what you’ve set your mind to accomplish versus making as much profit as possible (in the given conditions)
In the sense that for that person, ratings – a.k.a. ‘money’ – are far more important than presenting an as accurate as possible version of reality…
Hence the public belief that ‘media are not to be trusted’.
A reality created by the greed with which we, as a cultured species, attempt to transform everything into money…., power…, or any other kind of ‘influence’/relevance we happen to covet….
The whole thing raises a poignant question. We have a business here. The sporting tournaments live by selling advertising space. To do that, they need to grab our attention. Given the insistence with which the organizers insist that the athletes have to attend the press conferences, which is the main attention grabber? The ‘athletic prowess’ itself or the ‘big talk’ that follows the actual ‘sports meeting’?
Not because I’ve noticed how easy it is to be successfull as a con-artist. If you have what it takes, of course. Far easier than it is to be successful as a bone fide entrepreneur, for example. No, this wasn’t exactly news.
I’ve got the blues when I realized how many people are OK with this! Without even beeing aware of it…
The post continues after this message:
One-Time
Monthly
Yearly
Make a one-time donation
Make a monthly donation
Make a yearly donation
Choose an amount
$5.00
$15.00
$100.00
$5.00
$15.00
$100.00
$5.00
$15.00
$100.00
Or enter a custom amount
$
As much as I love writing, I do have to eat. And to provide for my family. Earning money takes time. If you’d like me to write more, and on a more regular basis, hit the button. Your contribution will be appreciated! Another very efficient way to help would be to share my posts.
As much as I love writing, I do have to eat. And to provide for my family. Earning money takes time. If you’d like me to write more, and on a more regular basis, hit the button. Your contribution will be appreciated!
As much as I love writing, I do have to eat. And to provide for my family. Earning money takes time. If you’d like me to write more, and on a more regular basis, hit the button. Your contribution will be appreciated!
nicichiarasa 