AthenaAwakened writes:
Here we go
At its core, the economic system we have here in the United States is based on two basic things: 1) the right of any person or group of people to run and operate a business and 2) the right of any person or group of people to buy goods or services from the business of their choice.
This system is called the free enterprise system and is designed to give people the broadest choice of goods and services possible and reward those people (we call them entrepreneurs) who provide the best goods and services.
If you ask someone like Rand Paul, he'd say somebody participating in this sort of system is a "capitalist." But the cleanest definition of a capitalist is someone who uses their money – their capital – to make more money. Some capitalists do this by investing their capital in the stock market; others do it by investing in other people's start-up businesses: they are called venture capitalists.
These kinds of capitalists do play their part in our society. Sometimes, they help small businesses get off their feet. But here's what you won't hear on Fox Business or CNBC: capitalists aren't that productive and they aren't actually necessary. Many are just like Paris Hilton: they sit around on their butts by the pool all day waiting for their dividend checks to come in. They make money while contributing absolutely nothing to the rest of society.
And here's the thing: free enterprise works just as well without capitalists, capitalism, or even venture capitalists. Worker-owned cooperatives are just as successful as any business backed by a massive Wall Street loan. The Mondragon Cooperative in Spain, for example, employs more than 90,000 people, includes more than 250 companies, and generates a yearly revenue of around $25 billion. There are NO capitalists involved; it's entirely owned by its workers.
As long as the people running a business are committed and customers like what that business sells, it will succeed. Again, free enterprise works whether capitalists make money or not.
Too much capitalism is actually dangerous. All the major economic crises of the past 200 years were caused by capitalists on Wall Street trying to use their money to make more money.
Here in America, we've forgotten this fact and we've forgotten the difference between capitalism and free enterprise.
http://www.truth-out.org/opinion/item/19592-stop-treating-capitalists-like-theyre-gods
If this is the case, why the trembling fear of capital and what it might or might not do if it doesn't get its way? Why not tax capital gains at the same rate as income? Capitalists, they toil not, neither do they spin, so why should they have a disproportionate to their numbers say in the running of our economy?
Two paragraphs in this passage stand out:
If you ask someone like Rand Paul, he'd say somebody participating in this sort of system is a "capitalist." But the cleanest definition of a capitalist is someone who uses their money – their capital – to make more money. Some capitalists do this by investing their capital in the stock market; others do it by investing in other people's start-up businesses: they are called venture capitalists.
and
Too much capitalism is actually dangerous. All the major economic crises of the past 200 years were caused by capitalists on Wall Street trying to use their money to make more money.
In all probability Rand Paul would agree with this second statement, and Ron Paul certainly would. He many even have made such statements and some point in his campaigns, and he certainly has through the course of his career. (Although not quite with the exaggerations included here. 200 years ago there was actually a wall on Wall Street, and the center of banking in the US was in Philadelphia, and we know that there were economic crises that were caused by state banks).
But what is standard Austrian theory, indeed probably the distinguishing feature of Austrian theory, is that it claims that recessions and depressions are caused largely by central banking. But those central banks have been chartered by governments. Without their government charter, such banks would never have existed, and it is government authority that maintains the power of those banks.
Businesses go under. That is part of the system. So do banks. But the collapse of a business or a bank does not bring the economy down with it. It is routine. So what it is that causes lots of banks and lots of businesses to go under all at once? That is the question Hayek raised in essay "Prices and Production" concerning the theory of the trade cycle (which we would call the business cycle). It this essay that won Hayek a Nobel Prize.
Roughly, the central bank creates money. This new money causes prices to rise. We call this consumer price inflation if it takes place across the economy but, in fact, it is often more pronounced in certain industries which we call asset price inflation rather than consumer price inflation, and we call this a "bubble." The assets have gone up in price but it is not due to actual productivity, it is due to new money that was not created in any response to increased "stuff" out there. But investors cannot tell the difference between this "artificial" money creation and a real demand by people who have more money because they actually produced more. Consequently, investors rush in to produce more of the item that is demanded, but this demand cannot be sustained. We saw this in the real estate bubble. Sooner or later these prices have to reach a point where no one can afford a very ordinary, average house. Then the bubble bursts, and all the resources that went into building those houses is wasted.
But the bursting of the bubble also means that many people go bankrupt and the creditors lose out. Then banks go bust and so do other "counter-parties" who do business with the banks and related companies, such as insurance companies, an also go under. The money supply now collapses. People lose their jobs and have no money to buy things. So more businesses go under, etc. And all of this happens because of the central bank policy of inflating the money supply in the first place and that explains why it all happens at once and we get depression.
With regard to the rest of the post, there is nothing stopping workers from entering the economic sphere to start their own companies and do the same thing the Spanish workers did. Why don't they? Presumably because they do not want to take on the risk. Remember, eight out of ten new businesses fail very quickly. Most businesses also require some start-up capital so you need the workers to save up enough money to get the business started and to qualify for a loan or investment from a venture capitalist. Few workers are willing to do this for a collective enterprise. Those few who are ambitious enough and disciplined enough to save up for such an investment typically want to control how their money is spent so they start up the new businesses as their own personal business rather than a collective enterprise involving other workers whose judgment they may not trust.
So there's nothing stopping workers for working collectively on some new enterprise except the workers themselves.
