# Problems with Capitalism?

1. Feb 22, 2015

### Czcibor

I think that we're discussing wrong subject: "inequality" instead "why the hell the USA experienced quite nice GDP growth but the median income stagnate and whether something can be done about it".
For sure there are:
-some problems with measuring it (smaller households, treating as personal income that what earlier would be classified as corporate income);
-cost of cool electronic toys accessible for masses vs. cost healthcare and education; (cherry pick the one that you prefer and get the answer that you want ;) )
-some dysfunction of US political system where too much money influence system;
-short term calculation (even if everyone would get a few times in his life a huge bonus then the inequality of annual income would go up);
-globalization which makes only some people to face very fierce competition (textile workers hit but not lawyers).

I personally also suspect that inequality to big extend is not the problem to be tackled, but a symptom of underlying problems (like low quality of education for some social groups; or problems with taxing the top incomes).

Maybe we should rather start discussing the other problem? Not as moral issue but as efficiency issue? (Because of my research subject I can say quite a lot about international taxation)

2. Mar 11, 2015

### sgall

Russ_watters says:
"3. We need to stop accepting being lied to about inequality. Inequality isn't poverty. If I give you $1,000 and give the person next to you$2,000, you just got richer, not poorer. If people start recognizing that a rich person getting richer does not mean they are going to have more trouble making ends meet.

Sorta similar to (but backwards from) the politicians who are selling these lies, I think these issues are among the most important issues facing us right now. Much of the reason why our economic mobility isn't as good as it should be and we have perpetually under-achieving classes is that people are belieiving these lies. They believe that no matter how hard they try, they can't get ahead, so they don't try. If, instead, we convince them that they can get ahead (because it is true), more people will try and will succeed."

Poverty has everything to do with inequality. To take an extreme example - a poor person today may have a say live with 2-3 people in a 2-3 room house or flat, have heating, enough food (even too much, they might be fat), entertainment (some sort of TV) etc. This could well more physical comforts than say a nobleman of 1000 years ago but clearly a nobleman would be "rich" and the person of today is still poor. With poorness comes a low status in the social pecking order, a "cant do" mindset, discrimination etc. These all relate to relative wealth not and social discrimination rather than the amount of stuff we own.

Even if the economy grows more than equality it is possible that we are all poorer because relative wealth matters more than actual wealth above a certain level of material welfare.

It is true that being unable to physically survive is fairly rare but this would be a good definition of true extreme poverty. This would in fact be quite common in our society if we did not have social services for the sick, mentally ill and mentally retarded and protections against extreme exploitation, say for illegal immigration without civil rights and protections.

Obviously "poorness" is to do with material assets at a very basic level. Usually we are talking about this level of material deprivation in the advanced world. In this area and poverty and poverty are much more political and social problems.

When people use emotive terms like "the politicians who are selling these lies" one should suspect that the aim is promote a political agenda rather than give an unbiased analysis.

3. Apr 5, 2015

### Greg Bernhardt

For me it's all about power. Money is power. That is the inequality. People with money have the means to influence decisions that effect those on the other end of the spectrum disproportionately. A poor family vs a billionaire radical ideologist is not healthy contest.

4. Apr 6, 2015

### AlephNumbers

A large income inequality could be more palatable if there were tremendous economic mobility. Alas, economic mobility is not all that it could be here in the USA.

5. Apr 6, 2015

### Czcibor

I've got a question to you:
a) is the aim rant against rich, with narrowly selected target with ignoring all other destructive interest groups?
b) is it intended to change a subject concerning political power in democracy and how well organized interest group can hijack it?

Because in case "B" you can select plenty of well organized interest groups that are able to hijack it. Rich in general would be among them, but in the USA you would have to add farmers, elderly (very disciplined voters), Jewish lobby, organized labour groups which power is no longer based on trade unions but on gov granted certification giving them monopoly, moral panic groups which aims are mostly intended to shift gov policy and getting money is a secondary aim (religious groups, ecological groups, pro-gun groups), etc.

Plus in case "b" you risk that I would start to draw cases from Poland where "rich" is smaller problem than "trade unions and similar groups". Where there were cases of big business was even once trying to shield public interest against interest groups. (yes, crazy, but it happened)

6. Apr 7, 2015

### Siv

I know I am coming in very late into the discussion ...

In developing countries which are "globalised" - the inequality has risen tremendously.
And thats resulted in a whole host of problems, especially crime ....

The "trickle down" theory doesn't work too well, and the gap only widens.

7. Apr 7, 2015

### Staff: Mentor

That sounds like a campaign finance law issue to me. In any case, I agree with Czcibor that there are a lot of powerful special interest groups that probably should be reigned-in. I'd be very much in favor of limiting the influence of the very rich (or, perhaps more specifically, financial institutions?: rich people are not a unified group and have different special interests) if it also meant limiting the influence of labor unions. Both create big problems. Ultimately though, I think the most destructive group is the collective "old people" of the last 80 years.

But political influence is only one - and, IMO, a minor of the impacts of wealth/poverty.

Last edited: Apr 7, 2015
8. Apr 7, 2015

### Staff: Mentor

While I'm aware that that's true, I'd really like to see research (I've looked but haven't had much luck) discussing whether mobility isn't great because of some external barrier or whether it is mostly a matter of personal choice.

9. Apr 7, 2015

### Staff: Mentor

10. Apr 7, 2015

### Siv

I don't quite understand. Are you saying that China's crime rate is not really going down because its not globalised ?

I was talking especially of India (obviously ).
Here, globalisation has resulted in much more rampant corruption, the scale of which has increased ten fold, and the rising inequality has resulted in a lot of social malcontent and crime.

I am not a big fan of capitalism and globalisation - as you probably know already

Human nature being what it is, its wrong to encourage some of its bad aspects with the so-called free market. And the profit motive as a prime motivator can be downright harmful to the human species in so many ways. Corporations run the world today. They own the media and shape public attitudes and policy.

11. Apr 8, 2015

### AlephNumbers

Considering that citizens of the US have a stronger belief in meritocracy and their own relative economic mobility, I would argue that it is probably more because of external barriers than personal choice. Check out the Pew Economic Mobility Project for a good, unbiased analysis of the issue.

Last edited: Apr 8, 2015
12. Apr 8, 2015

### AlephNumbers

I think that this could very well not be a good thing. The United States, for example, is a society in which one's ability to affect political and social change increases with one's wealth. Those in the bottom half have disproportionately less political and social power. What you suggest would make it even more unfair for those in the bottom half. However, I think that the root of the problem is that money equates to power.

Unfortunately, I think that this issue is too complicated not to be opened to the entire field of socio-economics. If that means that we should leave some parts of the discussion to those with greater knowledge of socio-economics (definitely not me), then so be it.

13. Apr 8, 2015

### Czcibor

How are you showing the increase of corruption and blaming it on globalisation? No, seriously I mean no mythical "good old days", but some measurable statistics. As fair as I know India has long, outstanding history of bureaucracy and corruption at least for many decades (I'd guess earlier, but that what I've read did not bother with analysing further). With protection against globalisation - gov intervention, protectionism and gov micromanagement being at that period additional source of corruption.

I'm curious about you having any hard data. (or at least good anecdotes :D )

EDIT: Concerning crime (like not gov sanctioned murder), I thought that the general idea was the following:
1) totalitarian/authoritarian (yes, Polish Peoples Republic was by this metric better than Republic of Poland)
2) stable democracies
3) countries in transition
4) failed states
(plus there is a necessary adjustment for development level, which often moves some more developed democracies to top rankings)

Last edited: Apr 8, 2015
14. Apr 8, 2015

Staff Emeritus
What measure of mobility are you using, where is the US on this metric, and where do you think it should be?

I think "mobility" as an overall good suffers from the same issue as "inequality" - if it is a good in and of itself, how does this balance against other goods: in short, how much are you willing to hurt the poor in order to achieve it? With mobility, we have an example - there was a huge, and probably unprecedented, increase in social mobility in modern times: Cambodia between 1975 and 1979. I would argue that this is a counter-example to any claim that mobility in and of itself should be a goal.

15. Apr 8, 2015

### Staff: Mentor

The article may have been critical on stats that China's crime rate is going down, but what it isn't doing is going up. And China is the biggest (literally and figuratively) example of a developing country developing and globalizing. So it directly contradicts your thesis.

Do you have any examples with data you can point to?
It wasn't obvious to me, but in any case, do you have any data on increasing crime rates in India?

This says that over the past few decades, some crimes have risen and others have fallen:
http://en.wikipedia.org/wiki/Crime_in_India
Well, this thread isn't about globalizationa and crime, per se, it is more about equality and therefore poverty. India's poverty rate is dropping -- so you have to weigh the good effects against the bad.
The profit motive in and of itself should not be a harmful thing. Profit is making money to support yourself. It's self-reliance. Crime and corruption can exist on all levels, so people can commit crimes in search of profit whether they are rich or poor.

16. Apr 8, 2015

### Staff: Mentor

Do they? I'm not sure that's true. I've known poor families who actively crushed the dreams of their children. And I know people on the other side: poor families who outright demanded their children succeed and they did (stories of immigrants' children being typical).

To me, the saddest aspect of this issue is that the US government provides a relatively sure pathway out of poverty to kids and so many fail to take it. The high school graduation rate is only 81%, which means 19% fail to get a high school diploma: that's higher than the poverty rate. But getting that diploma means a 50% increase (!) in average salary.

Last edited: Apr 8, 2015
17. Apr 8, 2015

### Staff: Mentor

To be Captain Obvious, when people say they want "equality", they mean they want everyone equally rich and when people say they want "mobility", they only want upwards mobility. The reality that both of those could go in either direction tends to be ignored.

18. Apr 8, 2015

### Siv

The scale of corruption has certainly gone up, and no, it cannot be explained by inflation
Earlier it used to be a few crores, (A crore is 10000000 Rs.), but now, after all these multinational corporations have come in, a few thousand crores has become kind of the average rate of corruption.

Re: inequality, yes there are some statistics. The wages of skilled labourers are said to have gone up 20-40% in the last several decades, while those of unskilled labourers has remained the same (in some cases, not even adjusting for inflation).
And we're no longer in the "early" stages of globalisation either. Its been several decades.

But more anecdotally ... a lot of the new jobs that have come up, the semi-skilled variety, in the last few decades, are those of the household help. People who are closely associated with those whose lifestyle has gone up, thanks to globalisation - the maids, nannies, nursing attendants, chauffeurs etc.. These people are daily looking at and working for these affluent homes, while not having anywhere near that spending power themselves. These folks are certainly above the poverty line but thats about it. A lot of the recent urban crimes can be directly or indirectly attributed to this. Its extremely unhealthy to have this kind of inequality in society.

19. Apr 8, 2015

### Siv

Thats a very simplistic way of looking at it, and its also very wrong.

The profit motive totally nullifies any long term progress. Human nature is extremely short sighted. And capitalism glorifies in that.
Getting profits today is far more important than any benefits to humanity several years from now.
And these corporations, who glorify the profit motive, are funding most, if not all, research.
So all research suffers and is never really accurate. The scientific method is used erroneously and imperfectly.
No one cares for how things affect our health, our environment nothing. Today's profit is more important than anything else. Technology is growing by leaps and bounds and corporations are freaking out, everything else be damned !

Any social benefit is a trickle down, incidental sort of thing, and most always a question of too little too late.

I know we are digressing but could not leave that unanswered

20. Apr 8, 2015

### Staff: Mentor

Those last two sentences appear to me to directly contradict each other. If the most profitable and profit-hungry companies (tech companies, pharma companies, oil companies) are also those who spend the most on research, that tells me that the research doesn't suffer because of the profit motive. Indeed: those companies recongize that research creates profit.

I'll certainly grant you that in some cases companies will choose short term profit over long term profit, but both of those are profit motives and you seem to be focusing only on one. Beyond that, every poor person who works a menail job is also doing so for a profit motive. You seem to be thinking "profit" is something only companies or rich people are after. You couln't be more wrong.
You couldn't be more wrong here either. The air/environment in the US has gotten cleaner over the past few decades because people do care.