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Blind faith in capitalism

  1. Just speaking out loud here. It occurs to me that many people are having a blind faith in capitalism. I'm not saying socialism or communism is good either. Capitalism, as the word itself elucidates, is really all about capital. Don't these blind worshippers of capitalism realize that most of them are actually born with little or no capital without rich parents? And the fact that they can only build up their own capital base very slowly by earning only pittance from labor? Adding salt to the wound, don't they realize that the situation has become even worse these days, in the sense that one needs to pay up immensely (education, housing) just to get a lousy chance towards economic participation?

    Have they not realize that capitalism and democracy are two distinct entities that don't actually need to go hand-in-hand (as opposed to the government's propaganda)? Seriously, people need to unlearn propaganda to realize that we can have a democracy without neo-feudalism in the cloths of 'capitalism'.

    True capitalism gives everyone a fair chance in obtaining capital without the burden of accumulating such from labor. This means that one does not need to pledge any non-business collateral in return for the unconditional borrowing of capital. Thinking this as too far fetched? Only if you believe that business failures can unleash unimaginable consequences on economic stability. The truth is, such negative effects are simply bogus. Collectively, the spending of failed businesses is also the profit of successful businesses. There is no net loss in the economy.

    Problem is, true capitalism can't be implemented as long as there is central planning. How can you be rich if there aren't some poor chaps around to boost up your relative wealth?
  2. Gaining capital is not as big of a problem as you may think. The bigger problem with our society is how one uses their capital. Big corporations are the problem we have now: they use whatever means they have to raise barriers for competitors to enter their market. However, this can easily be eliminated if regular people chose to stop handing their money over to these large corporations. For example, if everyone started shopping at a local or regional grocery store, Walmart would no longer find it profitable to have their grocery section. It's really that easy, it's just that America wants an easy lifestyle, not an easy solution.
  3. The idea that you can rise from humble beginnings is just something people like. Whether it's been socialism or communism or what have you, most people still end up (over time) in the position where upward mobility is difficult. The winners always essentially become the house in every system, and this is some unavoidable stochastic process with a definitive drift.

    In our system, the key is that even if you're the most dirt poor, uneducated, disabled, sexually dysfunctional minority, you can still roll the dice -- whether it's by selling dice, buying a lotto ticket, starting a business, or being a successful day trader.

    All I ask of government is that they make it as easy as possible for me to keep rolling the dice.
  4. Capitalism is more than just "big business and large capital". Most people start out life poor. Through a capitalistic system, they have the chance to make it big if they try and are able.. and if lucky... to whatever degree that factors into their equation.
  5. With capitalism at least you have a fighting chance. Thats all most people want in life.
  6. All we were promised was, "Life, Liberty, and the pursuit of happiness". Not free healthcare, free college education, nor a middle-class lifestyle.... free to succeed if you're able (and without the government on your back), free to be lazy if that's what you choose.
  7. Capitalism is NOT zero sum.
    Globalization is zero sum.
  8. Let me repeat again, the above is real capitalism. The current 'trickle down' version is some kind of communism. Under the state controlled economy, capital will only be allocated once you got the top echelon's green light. Similarly, under the trickle down economy, capital will only be allocated once many of the 'too big to fail' corporations get bank lending. It then trickles down to the workers in the form of wages. Unlike big corporations, most small businesses aren't getting much capital allocation, at least not enough in a meaningful magnitude. If you are starting a business, you can pretty much forget about bank borrowing unless you pledge your property as collateral. The artificial control of capital supply makes the system some kind of pseudo-communism, where most capital goes to the financial elite class, just like top communist cadres get to manage top juicy projects. Everyone else has little chance of getting capital other than building it up with his/her meager wages. Now that the middle class has all been tapped to the max, it has practically become neo-feudalism.

    Government should maintain a fair bargain between workers and productivity owners. And it should do that by giving everyone fair chance to access capital, not minimum wage law, not generous welfare, not government sponsored education loan, etc. Such pretense in helping the people is actually attempts at maintaining the status quo of neo-feudalism. The government wanna help? Then give everyone a fair chance to be a capitalist!
  9. Good post and apropos vis a vis some of the recent revelations about the enormous amount of investment capital flushed down the toilet in those "sweetheart" loans given to many of these "Green" projects over the past 2-3 years (Solyndra is just one of many).
  10. HOGWASH! "Access to capital" isn't something "everyone has a fair chance at obtaining"... it's not a RIGHT... (you know, like "free healthcare" and "free college").

    You have "access to capital" only when you've convinced capitalists that granting you capital is a favorable risk-reward proposition.
  11. Most "laziness" is a myth fed by the ignorant and stupid.
  12. Don't mislead others with things I didn't say. Fair access to capital does not mean everyone can get capital.

    Your second point is a flawed argument used by the current system that I have yet to explain more thoroughly. I have no qualms about capitalists lending their OWN capital subject to whatever requirements they want to impose. But I have a problem with capitalists controlling the creation of NEW capital. The problem with private control of capital creation, is just that there is no need to lend it out. These capitalists can do it all on their own. In fact this is precisely what happens. They lend the new capital out to their cronies, usually 'too big to fail' corporations. The private control of capital creation ensures that cronies and insiders always have a more favorable risk-reward proposition, unless your business invented something totally novel and even then that needs cronies' private capital guarantee. This is anti-competitive, and so anti-capitalism. The control of new capital creation should be a public utility. And as I had mentioned before, the spendings of failed businesses are the earnings of successful businesses collectively. As a result, the public institution will not get under due to underwater loans to failed businesses. Private capitalists can still participate in the lending business by competing against that public utility and among themselves. Now this is capitalism!
  13. Indeed, but you're going off on a tangent again. We have alot more "crony capitalism" than actual capitalism at the present. As mentioned above, look no further than the huge dollars sunk into "green" investments under this administration. Many of the loans done at around 1-2% interest rates with quite a few going into default within just a few years.
  14. Precisely. As I have mentioned, crony capitalism always ensure the cronies have a favorable risk-reward proposition compared to everyone else. How can you not perform better than the others when your loan is cheaper? Well, that is at least true in a national level. Internationally, not so much. China has totally slaughtered the US solar industry with cheap polysilicon. You never believe in a 90% fall in price, until you see it one day.
  15. Capitalism and democracy existing in the West, excluding northern Europe are not really as claimed. The system is rather rigged by bankers controlling central banks, banks, most assets, news media, bought politicians. It is worst than any form of government, wealth and power are slowly but surely concentrated to a center.
  16. Me.. "off on a tangent"? No. You didn't even address the topic.

    Suggest... (1) Read, (2) reflect, (3) only THEN, open yap.
  17. 1. Why shouldn't you be required to put a personal guarantee for a loan?
    2. How would the government maintain a fair bargain between workers and productivity owners? Would that be that the government decides wages (so workers can save and accumulate capital) or would the government disperse capital by it's own whim (via taxing the rich)?

    There has never been a time where a middle class or poor person can become rich than now. It's not easy. It's insanely competitive. But it can happen. The growth opportunities and the low barriers to entry (created largely by technology) have allowed for this. Plus capital is far easier to attain now than ever before. If this were 1900 who would be your angel investor or venture capitalist? What about 1800? What about 1200? What about 100BC (in any civilization)?
  18. 1. That is because a good idea plus a reasonable good business model is more than enough. When you borrow money to launch your project, you are essentially spending it, and that money becomes the profits of other businesses and the wages of your staff. These other businesses and your staff get richer. But what happen if your venture fails and you can't pay back the loan? Remember that your spending is someone else's earnings? The net effect is zero. This is achievable when there is a public lending vehicle. When the lending are done by private capitalists, they can't lend without collateral because they are putting their own capital on the line. As a result, there is always a scarcity of capital for those who have the aptitude to manage it well and be productive.

    2. By providing fair access to capital, as I have mentioned. Not everyone can get that capital. Those who can, need to have a good idea and a sound business plan. When capital becomes abundant, there will be more employments. If you don't like the market rate of wages, then you can come out with a good idea and a sound business plan, and become a productivity owner. An equilibrium will be reached where there will not be depressed wages, as when that happens, people will start businesses and get entrepreneurial. Fair access to capital ensures everyone has a fair try at entrepreneurship. You don't need anything too fancy. You can start something simple like a restaurant, retail etc. These are all simple yet workable business models. There is no need to tax the rich. All new capital is created out of thin air anyway as accounting entries, so let it be productive by lending them to those who deserve and need it, not mostly to cronies and big businesses.
  19. From what I am gathering, you are suggesting the government lend money to good business ideas. Yeah. That's capitalism comrade. So instead of a bank lending you money because you are smart and have a good idea. The government will lend money to you because you are friends with the prime minister.
  20. Think clearly first before you try to be sarcastic. You forgot that the Fed is also part of government. All new capital originates there. Public lending does not make communism. That is because market demand set the cost of capital. Just because there is public lending doesn't mean lending will be done uncontrollably. Cost of lending can get high to the extent that it will be more favorable to just be an employee instead of a business owner. Any disarray will re-adjust itself into equilibrium. Plus, the private lenders are also encouraged to compete against public lending. Private lenders will just need to be more careful, as bad loans will not be netted out. In reality, the bad loans in the book of public lending will not be netted out to be zero in exact, due to the participation of private lenders. The shortfall will need to be covered by adjusting corporate tax rate, which is another factor that controls public lending.
  21. Of course I addressed the topic. You did see the word "capitalism" in my post didn't you? I responded to your post to point out the fact that while this ideal of "pure" capitalism is a noble cause, what we currently have is largely crony capitalism. I even suggested a few recent examples from this Administrations support for "green" projects which receive well below market rates for funding (no matter the likelihood of profitability).
  22. I don't understand the system that you are proposing. But from what I gather:
    1. The government makes loans through the fed. There is no profit motive so the Fed will lend money to anyone who can vote (politicians strong arming the fed).
    2. When the loans go sour the government will RAISE corporate taxes to pay for the loans.
    3. private lenders are welcome to compete with the government, but the government has no profit motive and can lend at zero. There is no incentive for the government to lend at a higher rate because if there is a shortfall they can raise taxes. But at a lower rate, they can get more votes now.

    How will your system work any other way?
  23. Public lending is criteria based. If you fulfilled the criteria of sound business plan, then you will get funding. Lending is made at market rate, just like private lending, and is only applicable for certain entities/people. It is for the little guys who want to be entrepreneurial but do not have the collateral to back up a traditional loan. The rest of the folks who can qualified for traditional loans from private lending will not be eligible for public lending. The key point is that public lending is not made to quash the private lenders.

    As I have repeatedly said, failed ventures with the help from public lending would have contributed to the earnings of businesses that are funded from both public or private lending. The money didn't gone missing. Any increase in corporate taxation rate will have the most minimal effect on the health of corporations in general. In addition, since most public lending will be done to service the little guys, the amount of bad loans will be minimal compared to the healthy loans of the economy as a whole.

    Public lending is not competing with private lending, but competition can happen the other way round. There's such thing as unsecured loans from private lending. As for government meddling with the criteria for public lending to get votes, I happen to think that this is still better than welfare and whatever nonsense that can equally bankrupt the country. At least government funded entrepreneurship is more productive than generous welfare and student loans that benefit educational institutions more than the students.

    If public lending is implemented, it will beat unemployment to the pulp.

    Update: Public lending will generally have a market rate that is about the rate you can get from secured private lending. The rate for public lending starts off by mirroring the market rate. If demand for public lending gets too high, the cost of public borrowing will get higher than the market rate in the private lending sector. I am also suggesting a different and dynamic corporate taxation rate for public funded companies.
  24. I don't understand the comment about how wealth isn't destroyed. It absolutely is. It is also created when businesses succeed. I also don't understand the whole corporate tax rate thing.

    The government already has programs in place to provide small business lending. They do this to further a social agenda (minorities and women) or a politcal one (environmental or energy). In these, just like in private lending, unfortunately a lot more is required than just a sound business plan. Solyndra is a good example.

    I agree with you that the government should be encouraging small business development. This is where real growth and employment can be generated.

    But the reality is that no matter what system is set up, the best business plan (if there is such a thing) will not always get funding. There are many other factors that are always at play - often the confidence that YOU are able to do the plan.

    The system isn't as broken as everyone thinks it is. If you have a sound internet idea, and you have a reasonable background (making you qualified to execute your idea) I bet you could get 500k of funding relatively easily. You would have to give up equity, but nothing comes for free.