This is an important article, but I doubt there will be a useful discussion of it here.<p>The developed world has incredible productive capacity. With 1% of the workforce in agriculture and 8% in manufacturing, the US produces as much stuff as China. There are no significant shortages of any manufactured good anywhere in the developed world. Quality is pretty good across the board, too. This is unique in history.<p>That's great. But there's less productive work to go around. We're out of buying power. Labor is worth less because there's a labor glut. Our economic system can't cope with that. On top of this, more of what most people can do is being automated, and for less money. Automation used to be expensive. Now, if a computer can do it, it will be far cheaper than a human.<p>The financial system has become primarily self-serving, running on self-generated zero-sum tasks. It's part of the problem, not part of the solution. If we had a capital shortage, that might be a problem. Instead, we have a capital glut, and no place to put it that produces good returns on investment. This is "secular stagnation", as the article puts it.<p>Japan hit this around 1989, when their real estate bubble collapsed. Japan never came back from that. There was hope that the Japanese would figure out something. 25 years later, they haven't. They've built up their safety net and put money into infrastructure projects, so that fewer people are suffering. That's the best they could come up with.<p>We have no successful model for dealing with this. What capitalism gives us by default is a small number of rich people and a large number of poor people competing for a shrinking pool of low-paying jobs. Nobody really knows what to do about this, including the people who say they do.
If I were a rich software engineer feeling angry at people who criticised the capitalist system we had, perhaps whilst failing to acknowledge that people in America die because they can't pay health insurance, or are homeless because they can't afford housing, or end up eating what they find in someone's trash because they can't afford to buy food, I think that I'd do one thing:<p>I'd consider whether perhaps I might be wrong. Maybe my worldview is a bit skewed by the situation I find myself in. Maybe my country isn't very fair at all, and it's not right that I have the privileges I do whilst my fellow citizens suffer. And maybe it's not the Government's fault, either. Perhaps those Europeans with their welfare states aren't all socialist nutcases, but maybe they have something right that America has got wrong.<p>Often I hear Americans say "this isn't real capitalism! we need more capitalism! less government!". And I look at the state of homelessness in their country, or those without health insurance, and I think "really? Do you really need more of that? Maybe instead you need to spend a little less on your military and a little more on looking after the least fortunate in your society, the sick, the vulnerable. Maybe that would make a difference."<p>The "more capitalism" mantra always makes me think of communists who argue "well, this wasn't real communism! That's why it failed!" And it's so ironic, because those most vocally against communism are the same people who are cheerleading extreme capitalism, failing to notice that they are simply on the other side of the mirror.
Well, yes. As more of the money is used to make more money, instead of things, experiences, or people... It losses it's correlation with the things that we actually want out of an economy. Plus, those in power (rightfully) use the power to get more power of the sort they already have. According the history books I read as a kid, this is what caused capitalism in the first place (english barons with more money than power using that money to make more money) and the (serial) French revolutions (aristocrats with more power than money using that power to gain more power).<p>I note these bits in particular:<p>"After a financial and banking crisis, the first order of business is to clean up the banks, and to do it quickly and radically. Institutions that are not viable need to be shut down while the others should be provided with capital."<p>"Their central thesis was that the key to [Western] success was not climate or religion, but the development of social institutions that included as many citizens as possible..."<p>I'm also reminded of a good article on what Iceland did after the collapse - I'm having trouble finding the article, but part of it was that, instead of taking on the debt from their collapsed banks, they issued arrest warrants so Interpol could chase down the executives. (The initial government was going to acquiesce and take on the debt, and that's when the "revolution" happened.)<p>Finally, someone gave me a really good quote a couple months ago: "Death is the way for an older organism to gift it's energy to a younger one." I then note that part of the financial problem is that failing institutions are not actually allowed to die - thus keeping that energy stagnating in the aptly-named "zombie" corporations.
When central banks like Japan's or US print money it is called "Capitalism" or it is called "central planning"?<p>When in places like Spain they create a bubble in real state but then try to support the prices by any means, including the creation of "bad banks" so prices don't sink it is called Capitalism or central planning?<p>When States do not control what they spend and the increase the debt by 10x it is called Capitalism or central planning?<p>This is not capitalism, but capital-comunism: Capitalism when prices go up on the riches, private profit, communism or public sharing of the losses.<p>When I lived in Japan and prices went down, it was very good for the people living there, but in the international news it was a catastrophe, because the markets could not make money in the stocks.<p>People(family and friends) always told me: Are you ok? like I had gone to the war or something, because of what they heard on the news.
Classic case of 'not looking at the bigger picture'. If you look at standard of living in the west, since the industrial revolution, it's increased exponentially, massively. More than anywhere else in the world, and it almost directly correlates to the more economically free parts of the world.<p>Yet every time there's a minor blip in that massive, massive rise in wealth and standards of living, people band together t blame Capitalism, forgetting the massive improvements to quality of life it's given us.<p>Actually what we have now, despite all that is somewhat broken and it's not even Capitalism in its truest sense. We're constantly battling against the feverish symptoms of Corporatism. Big business bail-outs, state monopolies, printing fiat currencies and the inflation it causes.<p>So whilst there are problems, don't blame 'Capitalism', blame those who try to 'improve' or 'skew' the heart of Capitalism. Which is free-trade, entrepuanlerialism and innovation. Not price fixing, inflation or quantitive easing.
I thought this article was a waste of time. It is a grab bag of obvious truths, buzzwords, opinions and contradictions. The author seems to be confused and his prescriptions for more regulation, higher interest rates and more incoherent political revolt are unlikely to improve things and will probably make things worse.<p>Clearly there are many problems in the financial sector and even more in our governments (there many good things too). Unfortunately nobody can - in my opinion - convincingly articulate how to fix them or even exactly what they are and what causes them. And this author is worse than most!
Capitalism works just fine. The problem is throughout Europe and the US we have this weird kind of corporate socialism where governments are more and more involved in their respective economies and then blame "capitalism" when things don't work out. You can't call it capitalism if companies aren't allowed to fail.<p>And banks are so heavily regulated they're <i>de facto</i> agents of the state. The banking crisis isn't an indictment of capitalism at all - quite the opposite.
How can you write an article about Japan Syndrome and stagnating economies without mentioning Bernanke, Krugman, or Keynes?<p>Capitalism isn't itself the problem. It's the way out of our current doldrums. But there's this idea that government institutions have no way to intervene to kick-start capitalism's more virtuous cycles.<p>As Keynes first recognized, and as Bernanke and Krugman both clarified in respect to 1990s Japan: when you hit an economic slump driven by lack of demand and your control over interest rates has hit its natural limit (you can't set an interest rate lower than zero... you wouldn't want to risk deflation in any case), the only way out (besides waiting) is to increase demand.<p>So how do you do that? Well, we have tons of options. Governments can take the opportunity to borrow at essentially zero interest and use the money to build stuff we need and fix stuff that's broken. Build out gigabit Internet to every house in the country; commit to curing diabetes in 20 years; build 200mph+ high speed rail networks between clusters of large cities, and improve airport capacity for longer-distance travel; replace aging water and sewer systems; invest in offshore wind and tidal power sources; build out a national power grid to maximize efficiency; provide research grants to increase battery efficiency x100 by 2025.<p>All of this will create millions of jobs, in addition to providing the cash to soak up all the industrial overcapacity that's out there. But there are more direct routes as well. Raising the minimum wage would stimulate a huge amount of new consumer spending and debt reduction, while <i>increasing</i> payroll and income tax revenues for the federal government and putting upward pressure on wages across the board, which would lead to additional spending, tax revenues, and growth.<p>Or if you want to go full Bernanke, just have the central banks print money and drop it out of helicopters. That, or just mail everyone a check. That money'll get spent, and add jobs, and then we can let capitalism take back over from there.
There seems to be an almost religious belief that capitalism has to work in all circumstances. But you can't just keep pumping credit into an economy with the hope that it will continue to expand. People only have so many needs. After a while there is no real point in building either new factories or houses.<p>Why isn't that fact that interest rates are zero not interpreted to mean that we are simply at capacity? Capitalism isn't broken, it's just full...
The current climate is interesting. I think it's no coincidence that we are about one generation since soviet communism failed as a political movement and it became obvious that other leftist economies would either reform or be overthrown.<p>In any case, the current debate will perhaps be fruitful. Wealth disparity. Acceleration of Automation. Jobs evolving so fast that the paradigm of eduction-qualification-work is getting very clumsy. A resurgence of the old leftist idea that wealth distribution is inevitably political, mores than nationalism, religion or anything else.<p>It's all interesting.<p>Personally, I think the major force at play in our time is technology. Fraking for all its controversial implications has already lowered energy prices. Perhaps all the research and motivation to develop other energy sources will give us the awaited revolutionary 10X increase in energy availability. Computing continues to generate wealth and promises of more wealth.<p>The communication mediums open between most people on earth are developing at a blistering pace. The effects of cultural globalization may dwarf those of economic globalization.<p>It's not surprising that we have an appetite fro radical thought.
There's a lot of conflation in this article between distribution and economic growth, which I think arises from the Spiegel's European perspective.<p>Going back to the start of the DAX tracking (mid-2011), we see okay performance in German DAX index, stagnation for the French CAC and British FTSE, and strong performance in the US S&P 500 and Japanese Nikkei. [1] Eurozone unemployment has soared into double digits of late, while in the US and Japan it is converging with the natural rate, <6%.<p>The economic situation in Europe is truly awful, in contrast to the US and Japan where growth has been respectable. But you would never have guessed this from the tone of the article.<p>The article raises a second narrative about inequality. Fair enough! But this is an orthogonal issue to Europe's economic malaise. The US is infamous at not distributing the benefits of growth. In the US, we have one thing that's working (growth) and one thing that's not (inequality). This is due to many institutional problems and governance decisions and it will be a lot of work to improve the situation.<p>The thing I found alarming about this was the way they denigrated stimulus. This is an area of major divergence between Japan/US and Europe. Nominal GDP growth, the measure of the 'easiness' of money (it's the sum of all money trading hands), has stagnated under the European Central Bank (ECB) while the US Fed (FOMC) has used stimulus to keep it growing in the United States [2]. If anyone believes the central banks have "run out of ammunition" as the article suggests, look what happened just last Friday in Japan: The BoJ announced unexpectedly high stimulus and the Nikkei instantly soared 4%, despite the fact that interest rates were already 0. [3]<p>The ECB needs to be <i>more</i> like the FOMC and BoJ. The Spiegel seems to think the opposite. It seems like the ECB's policy reflects this hawkish European perspective. And that's scary for Europe.<p>PS It's true that Japan has been stagnating for decades. That is likely related to the ultratight monetary policy they've pursued since the early 90's (as well as structural issues of course); NGDP actually shrunk there over 2 decades [4]. But they've been moving in a different direction lately, and the shift seems to be paying dividends.<p>[1] Drag the slider here back to mid-2011 to get a long-ish view: <a href="https://www.google.com/finance?chdnp=1&chfdeh=0&chdet=1414991874560&chddm=890&cmpto=INDEXNIKKEI:NI225;INDEXSP:.INX;INDEXDB:DAX;INDEXEURO:PX1;INDEXFTSE:UKX&cmptdms=0;1;1;1;1&q=INDEXNIKKEI:NI225,INDEXSP:.INX,INDEXDB:DAX,INDEXEURO:PX1,INDEXFTSE:UKX&ntsp=0&ei=7Q9XVOjLE8_diQLFlYHwBQ" rel="nofollow">https://www.google.com/finance?chdnp=1&chfdeh=0&chdet=141499...</a><p>[2] <a href="http://static.cdn-seekingalpha.com/uploads/2014/9/11/saupload_ngdp-ez-us.jpg" rel="nofollow">http://static.cdn-seekingalpha.com/uploads/2014/9/11/sauploa...</a><p>[3] <a href="http://www.huffingtonpost.com/2014/10/31/nikkei-japan-stimulus_n_6080146.html" rel="nofollow">http://www.huffingtonpost.com/2014/10/31/nikkei-japan-stimul...</a><p>[4] <a href="http://uneasymoney.com/2012/02/13/japans-2-decade-experiment-with-fiscal-austerity-and-0-7-ngdp-growth/" rel="nofollow">http://uneasymoney.com/2012/02/13/japans-2-decade-experiment...</a>
Capitalism has not gone off the rail. It is just the concept that has worked better than almost every other thing known to humanity.<p>This inequality business is a new modern day scam just like communism of last century. Some anointed people want power for themselves and want to still money from people like us who are working hard in the name of poor people nothing else.<p>When government creates incentives where it steals money from hardworking people like us and gives it to irresponsible people like teenage mothers in the name of "compassion", we are creating incentives for many people to remain poor. This is a perpetual poverty into which we have let the government condemn them. That is the problem.<p>Capitalism is a hope.
A damning indictment from Stockman's <i>The Great Deformation</i> (referenced in the article):<p><pre><code> The paper trail uncovered by congressional investigators shows that the
$400 billion (notational value) of busted CDS insurance issued by the AIG
holding company was held by a very small number of the world’s largest fi-
nancial institutions, and virtually none of it was held by the banks of Main
Street America which were allegedly being shielded from AIG’s imminent
collapse. Moreover, the worst-case loss faced by the dozen or so giant in-
stitutions actually exposed to an AIG bankruptcy would have amounted to
no more than a few months’ bonus accrual.</code></pre>
More at <a href="http://news.slashdot.org/story/14/10/16/149247/bill-gates-pikettys-attack-on-income-inequality-is-right" rel="nofollow">http://news.slashdot.org/story/14/10/16/149247/bill-gates-pi...</a>
I don't think the healthiness of any specific industries (like banking and finance) has anything to do with capitalism. Just like, say, manufacturing CPUs has nothing to do with capitalism. If you have a bug in your manufacturing process then your company might go broke. Likewise, if there is a bug in your financial rules, financial institutions might break down. That has no bearing on the validity or invalidity of capitalism as a whole.
The main purpose of money is to provide a transaction medium. So that we can negotiate contracts and trade things without barter. This function requires money to act as an artificial store of value. However money doesn't have intrinsic value in itself so if people start to put too much faith into this paper, it can replace more tangible market based stores of value such as stocks, bonds commodities etc., those that are backed by real economic activity. When real economic activity is replaced by a government "paper" store of value, you get unemployment and sub potential production.<p>Right now in many places, Europe in particular, interest rates are artificially high, yes they are near zero but zero is high when the alternative private investments would be in the negative in risk adjusted, inflation adjusted term. That is why corporation and banks tend to hoard cash. Cash is kept artificially more valuable than market investments.<p>It is critical in these situations to have slightly higher than normal inflation to allow central bank real rates to be more negative and closer to market rates for stores of value. When central banks don't cause enough inflation, they are subsidizing holders of money and money like instruments to the detriment of those who invest in things that are tied to economic activity. They are subsidizing economic idleness, they are keeping an artificial store of value worth more than free market investments and this creates gridlock in the economy.
What is interesting about the article is that it clearly points out how destructive the Central Banks are in trying to manipulate the economy, but ends with blaming the private bankers. It is abundantly clear from economic history that Keynesian policies of money printing and interest rate manipulation don't work and in fact have never worked - they are the problem.
What's really interesting about the labor glut is that the conventional wisdom about demographics hasn't been adjusted.<p>The CW is that the US has a great future because US population is going to climb to about 400M by about 2050. If economic growth is decoupled from labor, is that an advantage?
Capitalism requires growth, finite resources/demand can't always live up to it. I have always believed that the virtual economy / digital goods is really where most of the growth needs to be.<p>We are seeing lots of this but maybe not enough. The only limited resource in virtual worlds is imagination, storage, network and power (energy), but it takes fractions of what physical goods take. If we can pull something off like in Ready Player One OASIS or even just more participating in buying digital goods I think this is part of the solution.<p>Another area I think can help is loans/investments but of digital currencies. The world of funding could be revolutionized by bitcoin like systems where they are primarily for hoarding, but they are also perfect for supplying capital. Capital could be made available to the 99% out there in new interesting ways, shaking up baked in wealth of the 1% that is immovable at times of need. If there ever is a basic income, I believe it will be some sort of digital currency, a new currency might even start out that way.
Another absurd anti-capitalism diatribe from left oriented journalists.<p>Capitalism is not the problem. We have too little capitalism, not too much. Central banking and the banking industry in general are the problem, since it exerts monopoly control over interest rates and currencies. Free markets are resilent distributed networks and therefore self-regulate and self-repair. Concentration of wealth is a valid concern, but only because many normal mechanisms of exchange have been co-opted by central entities. Because of this, people have to go through intermediaries to facilitate exchange. These intermediaries often do not have the interests of those parties at heart.
Very very very simple.<p>The natural end state of unregulated markets is cartel/monopoly.<p>Which is what practically every sector is right now.<p>Break them up with existing antitrust laws.
It's not capitalism that's gone off the rails ... it's socialism. All of the countries with slow growth and growing inequality have heavy-handed socialist policies in place.