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Is Capitalism Broken?

Discussion in 'Tilted Philosophy, Politics, and Economics' started by ASU2003, Mar 3, 2013.

  1. ASU2003

    ASU2003 Very Tilted Donor

    Location:
    Where ever I roam
    This article from the WSJ lays out why it is (page #3 is great)...

    Capitalism is so broken it can’t be fixed - MarketWatch

    Innovation has to wade through regulations and lawsuits. Investors want to take large portions of a company to lend then tens of thousands of dollars, instead of investing in a company and making a percentage of the initial investment back up to a certain limit. Innovators and entrepreneurs should be the ones driving the economy not the financial marketplace. The lawyers and patent lawsuits are also a problem.

    Big business is more able to move to a low tax state or country than a small business or individual. If I were going to start an on-line company next month, I would have to spend a lot of time figuring out where I want to move to avoid having to pay hundreds of thousands of dollars in taxes if my business is a success. Let alone if I sell a lot of products to the international market and have millions in foreign currency revenues that I would have to pay the foreign government taxes on, but I would have saved in bank accounts around the world... It would become a problem, not a bad problem, but still...

    Now, the computer/automation revolution has changed a lot of things in the past 30 years, but they are also changing the rules of the game and how things work. And I won't even get into the financial market traders/fund managers who are living in a different world. Even the US government is selling off assets and turning over any way of making money to the private sector.

    For the individual, we have the cheap or poor consumer who doesn't care about the quality of a product as long as it is free or much cheaper than the competition. And I am living proof that you can spend money correctly and then live well being cheap. But, if too many things are free, and people don't need to earn as much money, what happens then? Will people choose to work less, will that ever be socially acceptable? Will low-income cities be created that work (unlike 'the projects' and trailer parks), but more like hippie communes or does that take a certain mindset and is too public/sharing of resources? Will they work the same and use the extra money to improve their lifestyle? Or will they still have to work any job they can find and work over 40 hours a week just to get by because they price of everything has gone up so much? Even having to support a wife and kid on my salary would be a problem.

    The value of the dollar has been tanking because of overspending, tax avoidance by big corporations, and wasteful spending on consumables. The military and healthcare industries don't want to give up anything. The Baby Boomer generation didn't put enough into the SS and medicaid system to offset the life expectancy and expected level of care and retirement income. How could they since they would of needed to have had their investments grow 1000% since 1970 to offset just the inflation rate on certain items. What used to cost 5 cents is now 50 cents, what used to cost $40,000 is now $400,000. And then you get into the whole labor issue and how much should someone get paid. The older generation still remembers when $1 an hour was enough to get by on, now $10/hour wouldn't do much in the bigger cities. However now even with a good average salary it is hard to even be able to afford to buy a new car. New Cars Increasingly Out of Reach for Many Americans - Yahoo! Finance I went to the car show last weekend and they are trying to sell pickup trucks for $34,000. I remember when I first wanted a truck it would cost under $10,000.

    I might be able to save $30,000 in two years, but the extra $2,000/year in insurance payments and fuel payments (or electricity costs) is hard to justify when I don't know if I will be able to work in the same job for 30 years, and have to deal with the dollar falling in value another XX% by the time I retire. I travel enough to have been to some countries where things are 20% more expensive and I had a much harder time keeping my bank account in the black.

    And as we saw this past week with the whole Yahoo! work from home debate, it looks like there is a big disconnect between management and the workers in this country. The politicians want more scientists and engineers, but even if they do something great, they don't see any share of the profits. The investors get all of those. Science and engineering are fun, but not a good career choice at all if you want to make any real money or feel financially stable for life.

    I could probably go on, but what do you guys think? How do you fix the business environment and political environment that we are in? Is there too much corruption and gaming the system, or is it that only a few of the most outrageous companies/people get caught and make the news? Do we need a new model for Capitalism? Do we need a shift in the way the government does business where it can charge people and make money as a monopoly? How much of a role does the individual play in this by not caring where or how power is generated, gasoline is made, waste water is treated when it comes to decisions about what product to use or what the tax rate is somewhere? Is it a problem that can be fixed, or is the boom-bust cycle just something to be expected?
     
  2. Plan9

    Plan9 Standing in the Door Donor

    Location:
    This Island Earth
    Initial thought:

    All of this talk about "unable to afford" tends to make me think that Americans have this crazy entitlement complex.

    They can afford a car. They can even afford a new car. The problem lies in that they don't want that economy model.

    I mean, who can stomach driving a 2012 Elantra ($18k) when a brand new Camaro SS is only $500 a month for 5 years?

    A lot of this kind of stuff is covered in all that Rich Dad, Poor Dad zen that has been floating out there lately.

    Does the economy suck? Sure. How many of us are living beyond our means anyway? Probably too many.
     
    Last edited: Mar 3, 2013
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  3. ASU2003

    ASU2003 Very Tilted Donor

    Location:
    Where ever I roam
    A 2012 Elantra is $17,000 + tax and title though. Plus $1,000 in insurance every year for the next 5-7 years.

    A 1990's Dodge Neon was $8,000-$9,000. That new model doesn't exist now (in the USA), and the used car market has high fuel costs or maintenance costs with a lot of the cars there.

    But, yes, part of it is entitlement, part of it is that in the mating game, you are at a disadvantage if you look cheap or poor. However, the workers who are doing the work aren't seeing the benefit from their hard work, while the managers and financial people controlling the money are. It is also a problem where they have to save for years and then are still barely able to save after buying it or getting a loan. As a single guy, I can make some sacrifices that I couldn't if I had a family to make it work better money-wise. But if I had to save for kid's college fund, my and a wife's retirement, pay the mortgage, buy two cars, buy health insurance for everyone, food, vacations, etc... I don't think it is possible with how much I make today and I am well above the average around here.

    And there is a population issue too, since there are lots of people who are looking for work and would be willing to do your job, there is no pressure to pay more, even as the value of money decreases.
     
    Last edited: Mar 3, 2013
  4. Plan9

    Plan9 Standing in the Door Donor

    Location:
    This Island Earth
    The Dodge Neon was reborn in the Dodge Dart.
     
  5. ASU2003

    ASU2003 Very Tilted Donor

    Location:
    Where ever I roam
    But, let's say the trend continues and in 2025 a new simple car will cost $30,000. GM and Ford still have to pay their workers and retirees expenses... In 2040 when I can 'retire' in the government's opinion, econoboxes might cost $40,000, and the dollar menu might be the $10 menu.

    A very nice Corvette cost $5,000 in 1970, yet was a large percentage of what people made back then. (Corvettes for Sale - Used Corvette Classifieds - Corvette Appraisals - Buy Sell Corvettes) But, still I think there is a sizable population that remembers when products cost a lot less than today and want to find 'a deal'. And $17,000 for a basic Elantra or $16,000 for a Dodge Dart is not a deal. Not when your first car shopping experience had cars at a drastically different price point (1995 Elantra was $10,000).

    It also seems like there are certain industries that are necessities that are either monopoly or cartel controlled that can raise prices to whatever and demand will still be there. They are squeezing out the other businesses and jobs from things people could live without.
     
  6. Borla

    Borla Moderator Staff Member Donor

    I don't know whether to laugh, cry, or be angry that the argument is being made that affording a new car is the threshold for happiness/success/fairness in the world.

    Let's ignore the fact that buying a brand new car (even the cheap ones) is generally a very, very stupid decision for someone who doesn't have money to burn in the first place. If you ask me, dismissing the user car market as irrelevant or insufficient says more about the person claiming it than it does the user car market. Every vehicle I've purchased in the last 18+ years, save one, has been used. I make decent money and have decent credit, so I could definitely get some bank to loan me the funds if I decided a new car was the end all be all. Instead, the last 3-4 cars I've bought have been of the 'year old, low mileage' variety. My wife's current ride still had the $39k sticker in the glove box when I bought it a year later, with 11k miles on the clock, for $18k. Clean Carfax, never wrecked, no major issues, and over 5 years later not a dime of unwarrantied maintenance or repair work other than one set of new tires and oil changes. The car before that sold for $26k new, and I bought it 18 months later, 16k miles, for $16k. We kept it for 6 years, and put 140k more miles on it in that time, with one repair that I would consider major (maybe $500-600). Both were cars I found within days of starting to look, and purchased from car dealers, not some special deal from a friend or family member. Get the rich idiot to pay the stupidly high sticker price, and snatch it up when he gets bored. Quality used cars, that are cheap to maintain and drive, are definitely out there.

    Let's also ignore the fact that what is required of a brand new car (both by stricter government regulation and by the consumer) today versus a brand new car 20-30 years ago is orders of magnitude higher. You know, stuff like the fact that the CAFE standards used to say manufacturers paid a penalty for cars that got worse than 18 miles per gallon, and that standard is currently at over 30 miles per gallon. The fact that things like ABS, air conditioning, power door/locks, tire pressure sensors, remote keyless entry are now standard on almost every car model, and weren't back then. Let's back out the fact that most cars now also come with a host of other gadgets that the customer expects, like satellite radio, bluetooth, navigation, and minivan entertainment systems for the kids. Let's pretend that your basic V6 4-door family sedan doesn't have more power (it does), better handling (it does), quicker acceleration (it does), and better ability to stop (it does) than a Corvette or other basic sports car of 25 years ago. Let's also forget that most of today's cars will last for 150-200k+ miles if taken care of, instead of 80-100k miles, and lets forget that they also go longer between oil changes, brake pad swaps, and tire rotations than cars did 20-30 years ago. Let's also neglect to mention the infinite safety improvements in vehicles today, and the reduced maintenance for all those who are too busy to check their oil or air pressure.

    After we've ignored those two huge lumps of reality, let's also forget that people today spend a much larger percentage of their incomes on pseudo-necessities of conveniance and technology than they did 20-30 years ago. Smart phones, tablets, laptops, satellite/cable TV, high-speed internet, wi-fi/data plans, eating out for lunch instead of packing, getting carry out for dinner instead of cooking, and $4 lattes instead of a thermos of coffee in the morning. Forget that the average family (smaller than it was 30 years ago) lives in a bigger house than they did 30 years ago.


    There, if I can get all that incredibly relevant information out of my head, maybe I can get sufficiently worked up to feel sorry for people who can't afford to buy new cars. Especially since I consider myself to be one of them, and I generally think life is pretty good otherwise, especially if you consider there are about 7Billion people on the planet who can't afford ANY car at all.
     
    Last edited: Mar 3, 2013
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  7. Plan9

    Plan9 Standing in the Door Donor

    Location:
    This Island Earth
    Jesus, I think I have a fiscal mancrush on Borla.
     
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  8. Baraka_Guru

    Baraka_Guru Möderätor Staff Member Donor

    Location:
    Toronto
    I think looking at whether buying a new car is an option is splitting hairs.

    The fact remains that times have changed. Back in the day, homeownership was practically automatic, even on a single income. Today, graduates can't even get a car loan because their student debt loads are too big.

    What has happened is that, in America at least, productivity has skyrocketed but real incomes have remained flat.

    Guess who benefits?

    That's why we have these arguments about class warfare, the 1%, the 47%, etc.

    America isn't broke as a whole, just certain classes of people who continue to fail at being active participants as holders of capital.

    What else do you expect to happen in a de facto plutocracy?

    Capitalism isn't broken. American capitalism is broken.

    "Big Government" is a scapegoat. A red herring. A fatal distraction.

    You have to be careful with lists like these. Eliminating certain items will make you virtually unemployable in today's information-based job market. They can, as well, make it difficult to keep on top of things and stay employed.

    Also, when you look at the actual difference between food and beverage costs, we're likely looking at a few thousand dollars a year maybe. At most among the average, I'd say. Certainly less than the cost of a new economy car.

    People aren't struggling because they all too often stop off at a grocery store and grab a roast chicken and potato wedges at the deli counter. People aren't broke because they spend $4 on a latte now and again. Even those who don't spend much on takeout and Starbucks are struggling.

    It goes deeper than that.
     
    Last edited: Mar 3, 2013
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  9. ASU2003

    ASU2003 Very Tilted Donor

    Location:
    Where ever I roam
    This isn't supposed to be just about cars. It could be the price of strawberries, meat, gasoline, shipping, guns, airfare, vacations, surgery, rent, houses... Everything outside of computers and TVs has seemed to have gone up in price. Well, Wal-Mart has been able to force some prices to be lower, and if they ever started to produce a car/truck that would be half the price, I bet a large percentage of people would look at it.

    But it is the bigger economy in general and how everything is setup, and as a little player in it, it is getting harder to keep up. Or how many people will come to the conclusion that if there is no way to win the game, why bother even playing? I really don't get the reasons some people do what they do for the wage they earn. Or work two min wage jobs to live paycheck to paycheck... Why can't you find a $20,000 container house that generates it's own power and has 16" thick walls to take care of heating and cooling year round? But I can find thousands of $300k homes that look really nice, but will cost you 30 years of your life working to afford them, if you don't lose your job.
     
  10. Plan9

    Plan9 Standing in the Door Donor

    Location:
    This Island Earth
    The cool part about life is that if you don't like the impractical cookie-cutter crap The Man is trying to sell you, you can always build your own.
     
    Last edited: Mar 3, 2013
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  11. ASU2003

    ASU2003 Very Tilted Donor

    Location:
    Where ever I roam
    I should note that I am doing pretty well, but it just doesn't feel like I thought it would. I have money scattered across many different accounts and I don't have the time or skill to manage it all. I used to know exactly how much money I had, now I haven't even looked at my 401k account, paycheck, IRA, or company stock account in years... Mint.com doesn't work as good as it should for me. And it's not like I need to take the money out. Compared to other people my age, I am in the top 20% for sure I would bet in terms of savings and investments that they had to earn themselves. Yet, without a big payday, it doesn't seem like I can deviate at all from having a steady paycheck and living the perfect 'millionaire next door' lifestyle.

    I have the buy and hold mentality, yet that isn't what it used to be. And yes, if you compare my first world problems to what people in third world countries are facing, it is no contest that they have bigger problems. But, I would know how to solve those problems. This worldwide economic problem that we have now is decades in the making and has way too many big players who all want to win by getting the most money as possible. And getting into the game now in any meaningful way is close to impossible to capitalize on growth or expansion.
     
  12. rogue49

    rogue49 Tech Kung Fu Artist Staff Member Donor

    Location:
    Baltimore/DC
    No.

    But the idea of Laissez Faire can be taken too far.

    Any good professional sport needs refs to make sure play is fair.

    Right now, we have bad refs. (and not just in the US)

    Of course the players and owners are going to try to take advantage,
    but these are the same who scream "foul" when it happens to them.

    Ignore those who scream, "regulations". It's really not that bad.
    If it was, then we'd not have the abuse and imbalance we've seen.

    I'm all for people making money, I'm not for people taking excessive advantage.

    Make the game fair, but still playable and lucrative.
     
  13. ASU2003

    ASU2003 Very Tilted Donor

    Location:
    Where ever I roam


    Now, I don't know what the dollar amount breakdown would be as to what people would end up in which 20% percentiles, or where I stand. I know I was -$5,000 in 2003 for sure. I am doing much better financially now, and I feel like I am at the 50% mark or so on that chart. So, capitalism isn't totally broken, but it isn't to say that it couldn't be improved a lot. And I don't mean that I should be at a higher percentage, I think millions of other people who have worked their entire lives should have more savings and equity than I do.
     
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  14. rogue49

    rogue49 Tech Kung Fu Artist Staff Member Donor

    Location:
    Baltimore/DC
    Well, if you read the book The Rational Optimist and articles of the like, in relative terms we are better off than we were before.

    It's just that we have currently experienced one of the down-swings of the Stock-Market of Life.

    It is painful now...there is much to repair and fix....and balance.

    I think there is a three-fold difficulty going on...
    First, our funds are divided in more ways than ever before...and each item costs. Everything Counts to the total.
    Second, we are being fee'd to death by thousand cuts. Government fees and penalties. Corporate fees for every little thing.

    Last, we are weary...not only from working so hard. Which due to the down-turn, is currently more for not as much.
    But now the onus of responsibility is constantly on people...to keep track of ALL the different items we account for, this is exhausting and confusing.

    We need to figure out how to streamline and simplify.
    Do what we need, not what others want.

    We are part of the problem...not all of it, but part of it.
    I don't think either the government or the corporation are going to stop being hundreds of leaches...they are too used to feeding on us.

    So it is up to us to pull them off, make it easier for control.
    Get out of the trap of too much going on.
    At least save ourselves, until or if the cycle turns again.
     
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  15. Levite

    Levite Levitical Yet Funky

    Location:
    The Windy City
    The issue is not that capitalism is irreparably broken, the issue is that what we increasingly have in the United States (the effects of which resound in the global economy) is laissez faire capitalism, and that is not good capitalism.

    Capitalism is like a muscular system. It is of good design, and capable of great strength, flexibility, and healthy growth, but in order to do all these things properly, it requires pairing with a skeletal system and a circulatory system. The skeletal system for capitalism is regulation of banking and businesses, including vigorous anti-monopoly regulation and consumer protection laws. The circulatory system for capitalism has to be a strong infrastructure of social service and public welfare services, such as high quality public education, universal health care, quality unemployment/underemployment assistance designed to help people get back to work and get on their feet, quality social work for families in crisis, and other similar programs designed to promote the expansion of the middle class by mobilizing the lower class upward.

    Capitalism is a good system in many respects: no one has yet come up with anything else that so readily harnesses human innovation and competitiveness to create wealth and jobs, fuelling a national economy. But it cannot stand alone, without a framework of moderating social and legal restraints and supports, or the whole thing sags into a morass of corporate oligarchy by proxy and plutocracy, which is essentially what we have or are heading toward now.
     
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  16. rogue49

    rogue49 Tech Kung Fu Artist Staff Member Donor

    Location:
    Baltimore/DC
    Correct, the reason Capitalism works because is that it harnesses most people's natures of competitiveness, ambition and some selfishness.

    People work to better themselves, to gain influence and power, if not create.
    People and entities harness others to assist them in this, workers and otherwise.

    However, with everyone trying to get somewhere, this can create some chaos and conflict...the key is to get something out of this.

    The reason that Communism didn't really work well, because it assumed that the State and it's representatives would be efficient and altruistic.
    Nothing could be further than the truth over time, as those certain powers gained authority, they leveraged power and influence, centralizing it in themselves...not for all.

    Socialism can work to a certain extent, but it is fairly limited due to the nature and dynamic of government and bureaucrats.
    They are slow, political and cumbersome...it does not move on a pace necessary, even if done with intent and good will at that.
    Government is not an engine, it is a support mechanism.

    Capitalism just needs to get it's head on straight, stop cowering, become productive without abusing...either it's environ, workers or clients.
    Because in the end, for the fatty taste of short-term gain, it is choking it's veins and heart in the long-term.

    Government may not be a good athlete or driver, but it can be good ref, doctor, track builder or otherwise.
    It can't win the game, but it can assist in making the play better.
    Cooperation is the key.
     
  17. Baraka_Guru

    Baraka_Guru Möderätor Staff Member Donor

    Location:
    Toronto
    This is a poignant demonstration of how effective trickle-up economics has been in the United States. People don't even realize the magnitude of what the fuck going on.

    And simply pointing out the problem puts you at risk of being labelled a radical progressive, a socialist, and anti-American.

    I can't think of anything more anti-American than sucking the very life out of the average hard-working American.
     
  18. Plan9

    Plan9 Standing in the Door Donor

    Location:
    This Island Earth
    Who exactly is his guy, anyway?

    I am one? Are my neighbors?
     
  19. Baraka_Guru

    Baraka_Guru Möderätor Staff Member Donor

    Location:
    Toronto
    Basically anyone who holds down a regular job (probably in the sub-$100,000/year range) and satisfies the requirements of their employers.

    I assume that means you. Or maybe not. Someone with your talent and ambition probably makes six figures.
     
  20. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    I appreciate that you qualified your statement by saying generally..., however, it depends on a number of factors. Depreciation is a big cost but dividing that cost over a long period of time and the relative difference between new and used gets smaller, in some cases trivial.

    The real consideration is what is the total ownership cost and how new v. used compares.

    Not to mention the ability of the buyer to buy and sell at the best price - the retail profit margins on new vehicles is usually smaller than on used vehicles. I routinely look at Kelly Blue book to monitor the values of my vehicles and compare that to advertised prices on vehicles for sale from various sources. I have a full-size luxury vehicle that I recently took to a dealer for an offer price, he came in at $7,000, I saw a similarly equipped vehicle with similar miles listed for sale for $15,000. KBB wholesale showed $9,000, retail showed $12,000. If a person buying used pays $15,000 for a car worth $7,000 to $9,000 they could easily have been better off financially buying a new Honda Civic. Considering a vehicle like a Civic, if you compare used retail prices of vehicles less than 3 years old and compare it to buying new - I would buy new - you get full warranty, a lower interest rate if you finance, new tires and the knowledge of exactly how the car has been driven and maintained. On the other-hand I bought a used Porsche once, had it for about a year (with a after-market warranty) and sold it for more than what I paid for it (and got a pro-rated refund of my warranty) - that was a fun deal. My only cost was gas, insurance and an oil service.
    --- merged: Mar 4, 2013 at 1:55 PM ---
    I think the opposite - our current forms of capitalism are overly regulated. Perhaps regulated to the point where market participants have become lazy and engage in market activities they should avoid because they don't understand them. Mortgage back derivatives comes to mind - brokers were selling these to 80 year-old widows claiming they were virtually risk free.
     
    Last edited by a moderator: Mar 11, 2013