RGacky3
18th October 2010, 17:48
I tend to say a lot Capitalism is'nt sustainable, then the response I get is "well nothing is sustainable" or "socialism is'nt either." Which is wrong, but let me clarify why.
Capitalism is based on profit based competition, your competing for 2 things, income from consumers and investment from investors.
Consumers will naturally want a cheaper and better product, no there is only so much you can make one better so your gonna have to go with cheaper eventually (keep in mind I'm talking about the macro picture), which means that whats gonna have to give is labor costs, thats the one variable that will generally always be pushed down, that will be in cutting pay, or in letting people go.
From that you have a demand side problem, and you'll have a crash, or what you'll have is a bunch of angry unemployed people, and you'll have a revolution :).
Investors want a return, which means purpetual growth, quarter by quarter, most investors are speculators, meaning they want to buy low and sell high, to keep investors happy its gotta keep going up, then you get bubbles, because actual market value cannot keep going up, but speculative value can, then the bubble will burst and you'll have a crash, or investment will grind to a halt and you'll have a recession.
You need new markets, once labor demands go down in certain industries when they become more efficient once real growth stops happening to satisfy investors, you need new marketst to keep the money flowing, but there is only a finite amount of markets, so what do people do? THey make them up, like the derivatives market, which works until people want some tangeble value for their investments, which there is'nt.
Then you have externalities, the enviroment being the most noticable, the enviroment can only take so much, and due to the profit driven competition if a company can make more money polluting THEY MUST pollute.
Now the answer to all of this that certain people will say is Regulation, Social Democracy, a Public Sector, now those things definately make Capitalism more sustainable, (because of the impact of socialism), but ultimately those measures won't hold up. Because most of the time capitalists generate enough economic power to influence government to maximize profits, and because of the international market, it takes only one country to make a sweet deal and companies will pounce on it.
One example of a successfull Social-Democracy is Norway, ut that has less to do with their system and more with their situation, You can't outsource oil, and since the oil industry is completely public theres very little corporate influence on the state, the second biggest industry is fishing, which is also heavily publicly controlled, also much of the banking industry is public.
Other countries which were more relyand on more mobil industries that tried social democracy had to strip it down over time. Also in countries like the US where capitalist power is unimaginably powerful and dominent, socializing a major industry like oil or banking would take a revolution.
Socialism is non-profit, does not need growth, and is cooperative, all things that get rid of the problems of unsustainability.
I'm not saying btw that social-democracy is bad, what I'm saying is its not enough.
Capitalism is based on profit based competition, your competing for 2 things, income from consumers and investment from investors.
Consumers will naturally want a cheaper and better product, no there is only so much you can make one better so your gonna have to go with cheaper eventually (keep in mind I'm talking about the macro picture), which means that whats gonna have to give is labor costs, thats the one variable that will generally always be pushed down, that will be in cutting pay, or in letting people go.
From that you have a demand side problem, and you'll have a crash, or what you'll have is a bunch of angry unemployed people, and you'll have a revolution :).
Investors want a return, which means purpetual growth, quarter by quarter, most investors are speculators, meaning they want to buy low and sell high, to keep investors happy its gotta keep going up, then you get bubbles, because actual market value cannot keep going up, but speculative value can, then the bubble will burst and you'll have a crash, or investment will grind to a halt and you'll have a recession.
You need new markets, once labor demands go down in certain industries when they become more efficient once real growth stops happening to satisfy investors, you need new marketst to keep the money flowing, but there is only a finite amount of markets, so what do people do? THey make them up, like the derivatives market, which works until people want some tangeble value for their investments, which there is'nt.
Then you have externalities, the enviroment being the most noticable, the enviroment can only take so much, and due to the profit driven competition if a company can make more money polluting THEY MUST pollute.
Now the answer to all of this that certain people will say is Regulation, Social Democracy, a Public Sector, now those things definately make Capitalism more sustainable, (because of the impact of socialism), but ultimately those measures won't hold up. Because most of the time capitalists generate enough economic power to influence government to maximize profits, and because of the international market, it takes only one country to make a sweet deal and companies will pounce on it.
One example of a successfull Social-Democracy is Norway, ut that has less to do with their system and more with their situation, You can't outsource oil, and since the oil industry is completely public theres very little corporate influence on the state, the second biggest industry is fishing, which is also heavily publicly controlled, also much of the banking industry is public.
Other countries which were more relyand on more mobil industries that tried social democracy had to strip it down over time. Also in countries like the US where capitalist power is unimaginably powerful and dominent, socializing a major industry like oil or banking would take a revolution.
Socialism is non-profit, does not need growth, and is cooperative, all things that get rid of the problems of unsustainability.
I'm not saying btw that social-democracy is bad, what I'm saying is its not enough.