If we look at the historic mega long trends weâll see that the wealth and power distribution tends to go toward more equal societies. Consider the pattern: Egyptian pharaohs, Roman caesars , medieval emperors,French absolutistic kings, English 19th century parliament and US democracy today. At each subsequent stage the elite is wider and less powerful. Each subsequent stage is also shorter, i.e. the velocity of change increases. If we can extrapolate this trend to the future I would say that as long as we have economic growth (i.e. cheap energy) and as long the education is available to everybody,the society will go toward more socialistic society. Naturally there will be setbacks, pullbacks in the meantime.
Perhaps wealth distribution does not affect so much growth as volatility. Concentrated wealth can result in an unstable economy. There were several reasons for the Great Depression; many people had maxed out on credit, the boom years of radio and the automobile had run their course, and traditional industries such as agriculture and manufacturing had suffered for many years of deliberate "laissez-faire" neglect. But another factor was that wealth had become concentrated in the hands of the few. And when they cut sharply back on spending at the first signs of trouble, another major engine of the economy stalled quickly out.
I did some research about 10 years ago (and every couple years do a recheck it for recency) and found that the more capitalistic an economy is, the higher long term standard of living growth rates for the poor. This is true empirically if you look both across various countries (even in poor parts of the world like Africa) as well as within the same country in different time periods. Some governments have been successful at redistribution of wealth.. others have not. What is less intuitive is the vast majority of the time, substantial redistribution of wealth does in fact lower the standard of living growth for the rich, but it *also* lowers the standard of living growth of the poor as the temporary gains in forced redistribution are more than offset (over 10 year periods at least) by lower overall productivity growth leading to lower real wages for the poor. Many (though not all) advocates of redistribution of wealth fail to consider the incredibly significant negative side effect of reducing long term productivity growth, and what impact that has on the poor. In other words, even if you succeed in reducing the top 25% wealthiest citizens from owning 80% of national wealth to say 50%, thus redistributing it to the poor, you have to also factor in the the pot of gold so to speak grows far less quickly. I've only be measuring for periods of 10 years or higher.. it is very possible that in the short term in some cases you can actually help the middle class. But I'm looking at it only from the point of view of long-term (sustainable) policies. I will say the relationship between government and standard of living growth of the poor is not perfectly inverse (though extremely strong); Sweden is a definite outlier the last 20 years. They have a fairly large government with high redistribution of wealth and yet a reasonably decent growth rate of wages for the poor. I have some theories on it but am still investigating the details of that particular case. If anyone here is from Sweden and would be interested in sharing their thoughts that would be helpful. My final thoughts are the United States is not the beacon of Capitalism it used to be (think: zero income tax; zero capital gains tax; zero estate taxes; zero dividend taxes; tiny other taxes including state/local for about 150 years.. compared to what we have now). Many people who argue against Capitalism use the US for comparison, when really we are only somewhat less socialistic than most European countries. In addition, it is helpful to factor in not only absolute levels but also relative change. For example, China is still more socialist than the US, however its delta of change is very high the last 20 years as they have gone from Communism to a Mixed Economy.. that is quite a change in a relatively short period. To answer the question: some amount of socialism may be of use in a sort of "emotional safety blanket" kind of way, but in a purely practical sense, I think it hurts, rather than helps, the poor and middle classes over time. -Taric
Taric, Are Germany and Japan also outliers? Most of the studies that compares socialism/ capitalism boils down to comparing USA and Western Europe. However it is possible that European economy lags are due to other reasons â demography for one. But I do agree with you that the system that provides the biggest incentive for entrepreneurship grows faster. BTW, are you Bosnian by any chance?
No, actually Germany and Japan fit in pretty nicely, especially when you do the measurement of intra-country time periods (as opposed to same time period, different countries). Germany and Japan had awesome growth in standard of living for the poor.. when their government was tiny. Now, they have a big government, and they almost have negative growth in standard of living for the poor. So these are not outliers at all. I'm born and raised American, with a Pakistani-American father and American (Caucasian, English-ancestry) mother. I have a slightly Californian accent and I'm currently living in Austin, TEXAS. I mostly look at real GDP per person change (by quintile, etc.) by year, so demography doesn't have a big impact. The more serious effect is when you do it by hour, not year. This brings Europe much closer to the US (since they work less hours per week than the US). This doesn't surprise me though.. as really the US has a much closer government structure to (most) European countries than people would think. For example, here are some government benefits in the US: mostly socialized K-12 education; partially socialized colleges/student loans; mostly socialized medicine: (medicaid, medicare, hospitals, insurance regulations), farm subsidies, corporate subsidies, welfare, unemployment benefits, larger army than Europe, massive socialized retirement benefits, etc. These are pretty large areas of the economy. So again.. I don't think just comparing the US to Europe is nearly that revealing. It is far more conclusive when you for example compare US/Europe to countries with substantially smaller, or larger governments, or substantially smaller or larger changes in government levels.. if that makes sense. Or even comparing the countries within Europe, such as look at Ireland's astronomical growth in standard of living for the poor the last 10 years (that is a "positive" outlier). Next time I recalculate the data, I'll post the raw data and graphs here. That might be a while though since I'm busy with other things for awhile :/ -Taric
More like feudalism & monarchy which of course does not end up well as the history of Europe has shown over years. It should be noted that 1600-1700s imperialist Europe was almost pure capitalist. The rich need the poor, the poor are only brainwashed into thinking that they need the rich. I've never thought about it this way, great view point. I totally agree and this is why US government recognized early on that raw capitalism has bad consequences. US after all, is a welfare state. It was not only a 100 years ago. Now the trick is to use the power of money, debt & media to control the masses.
Taric, If you are looking at the productivity level, than you probably know that countries like France, Germany, Canada and Japan for nearly 50 years were steadily narrowed the labor productivity gap with the United States. Here is a table with their productivity: Percent of U.S. individual worker productivity (U.S. = 100%) . So based on that there is hardly evidence that "capitalismâ is superior than âsocialismâ . Country-----------1950s 1960s 1970s 1980s 1990 -------------------------------------------------------- United States------100% 100 100 100 100 Canada------------77.1 80.1 84.2 92.8 95.5 Italy---------------30.8 43.9 66.4 80.9 85.5 France-------------36.8 46.0 61.7 80.1 85.3 Germany-----------32.4 49.1 61.8 77.4 81.1 United Kingdom-----53.9 54.3 58.0 65.9 71.9 Japan--------------15.2 23.2 45.7 62.6 70.7 As of mid 1990s the trend reversed itself. Productivity in the U.S. has since grown at a faster rate than in France or Germany. IT's role was most important for productivity . I asked you if you were Bosnian because Taric is common Bosnian name, and Tunic common last name there.
Keep in mind during most of this period, the US had just been creating and expanding government (eg the New Deal / Social Security etc), and Europe had a small government. It wasn't until the last few decades where Europe has expanded government much faster. The US was representative of Capitalism from roughly 1776 to 1910 or so, since then we have moved from a private sector of about 96% to a private sector of 65% or so. Also our education system has taken a huge hit. We used to be ranked 1st in the world, now we are 10th - 20th (although as of now I am not measuring that in my studies as a possible input). For all these reasons.. the main one being the US has been increasing government rapidly, I don't particular see inconsistencies. Especially when you do the same analysis but with 50 countries decade by decade (either different studies per each decade.. or different studies per each country.. or all studies mixed together), there are some pretty clear patterns. Yeah, Taric is pretty common in Egypt, Syria, Pakistan, Bosnia, and a few other countries (although it is more often spelled Tariq). I was not aware of Tunic though.. very interesting That is a long story, basically it is a reference to some clothing I bought with some friends at a Renaissance festival, and is a nickname (the p is short for purple) . -Taric
stewardship of capital doesn't require anything except rule of law and its twin, moral fiber. socialism is the detritis of civilization. It should be swept away as often as it begins to accumulate.
How about the nature of capitalistic society to monopolize itself. I wrote a paper in college on how the game Monopoly was a great exaple of the capitalistic process if left to it's own devices. More than the protection of initellectual property protection of public infrastructure is an exaple of capitalisms dependence on public ownership. Sure highways could be paid for based on user fees, but what is the equilibrium on a superhighway, what's the trade off between maintenance and economic accessibility - why would the rich have to pay more? Capitalism requires socialism (in the sense of some public control) to provide a social net to ensure fair competiion, protect the populace (could the US outsource it's airforce to a private entity - i.e. Lockheed who also sells planes to 'enemies'), and to protect the populace economically as well through unemployment insurance, welfare, etc. Of course such economic saftey nets are hardly 'required' in any bare bones economic theory, but do have considerable value, as i would say (as a canadian) is health care - mind you i can quite easily see that become increasingly privatized here.