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Free Enterprise vs. Capitalism

AthenaAwakened

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Right behind you so ... BOO!
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non-theist, anarcho-socialist
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?
 
Whoa, stop trying to pull the curtain away from Oz!
 
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.
 
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.

I wonder what caused all those recessions and depressions before the development of central banking?
 
A free enterprise system without capitalism would require that banks to be prohibited. Banks, when they lend, are being capitalists.
 
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?

Taxing capital gains as income would be acceptable if you taxed the true gain--adjust your basis for inflation.

You wouldn't like that, though--that would lower the amount of tax on capital gains.
 
A free enterprise system without capitalism would require that banks to be prohibited. Banks, when they lend, are being capitalists.

why would you prohibit the superfluous?

The argument is you don't need capitalism for free enterprise, which you don't.
Too much capitalism is bad and it is.
And he does state that capitalism can be helpful with regards to free enterprise but it isn't the same thing as free enterprise and not necessary even if it can be convient and helpful.

So what's your point?
 
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?

Taxing capital gains as income would be acceptable if you taxed the true gain--adjust your basis for inflation.

You wouldn't like that, though--that would lower the amount of tax on capital gains.

I have a feeling that your idea of what is true gain and the what the most people think is true gains, including most financial experts, probably isn't the same.
 
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?

Taxing capital gains as income would be acceptable if you taxed the true gain--adjust your basis for inflation.

You wouldn't like that, though--that would lower the amount of tax on capital gains.

I have a feeling that your idea of what is true gain and the what the most people think is true gains, including most financial experts, probably isn't the same.

Accountants are going to report gains how the law sees them.

Economic numbers are routinely reported with inflation correction and financial experts discussing investing also take this into consideration.
 
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.

I wonder what caused all those recessions and depressions before the development of central banking?

Inflation of the money supply causes resource mis-allocation and recessions restore the balance. So inflation causes the recession which is the cure for the inflation. Anything that increases the money supply can do this, but even large gold discoveries don't create a great deal of inflation. The theft of that gold and silver held by the Incas and the Aztecs did create significant inflation in Europe, however.

But normally, inflations are caused by governments. Before they had central banks, they found other ways to do it.
 
Does evil government want central banking or does evil government's corporate masters?

I wonder...

Kind of a chicken and egg question. However, banks tend to want central banking because it gives them some security. Central banking isn't necessarily the crucial issue, however. How much power the central bank has is also an important part of the picture. Alexander Hamilton's central bank did not have nearly as much power as the Federal Reserve had when it was created, and the Fed's power has also expanded quite considerably since its creation. Austrians oppose central banking altogether as well the policy of fractional reserve lending, but I'm not sure I agree with Austrian theory on those points.

- - - Updated - - -

A free enterprise system without capitalism would require that banks to be prohibited. Banks, when they lend, are being capitalists.

If banks were prohibited, would it be a free enterprise system?
 
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?

Taxing capital gains as income would be acceptable if you taxed the true gain--adjust your basis for inflation.

You wouldn't like that, though--that would lower the amount of tax on capital gains.

You would also need to allow taxpayers to average their gain over the time period that it was earned. After all, if you had a $100,000 gain over 20 years, that's only $5,000 per year. But $100,000 could throw you into a very high tax bracket.

- - - Updated - - -

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?

Taxing capital gains as income would be acceptable if you taxed the true gain--adjust your basis for inflation.

You wouldn't like that, though--that would lower the amount of tax on capital gains.

I have a feeling that your idea of what is true gain and the what the most people think is true gains, including most financial experts, probably isn't the same.

Accountants are going to report gains how the law sees them.

Economic numbers are routinely reported with inflation correction and financial experts discussing investing also take this into consideration.

Yes, this is a fourth-grade math problem.
 
It would be difficult, if not impossible to start such a co-operative without getting loans form banks (capitalists). Maybe you could do it, get all the workers to pay money upfront and gather together and buy the machines, etc. Would be easier in some industries than others. Loans from banks certainly may it a lot easier though.
 
A free enterprise system without capitalism would require that banks to be prohibited. Banks, when they lend, are being capitalists.

The premise of this thread is silly.

The idea that a free enterprise system wouldn't have enterprises freely engaging in capital markets is absurd on its face.
 
It would be difficult, if not impossible to start such a co-operative without getting loans form banks (capitalists). Maybe you could do it, get all the workers to pay money upfront and gather together and buy the machines, etc. Would be easier in some industries than others. Loans from banks certainly may it a lot easier though.

It may very well have happened. I think there are a few worker owned companies around the country. But imagine what would happen if, say, 20 workers got together, saved their money, got a loan from a bank, formed a worker controlled corporation, and ran it successfully.

When they incorporate or form a partnership or whatever, they will have to decide the nature of the ownership, including survivorship rights. So they could make the ownership "tenets in common." That means that when one died, the others would inherit his share. The could make it "joint ownership with rights of survivorship." That means their share would belong to whomever they designated in their will or according to state law when someone dies intestate. Or they could decide that those shares go collectively to the workers in their company regardless of any role that they played in forming the enterprise. What type do you think they would choose? I think the overwhelming majority would say, "I want my wife to inherit my share and if she dies, I want it to go to my children." So they would likely choose joint ownership with rights of survivorship.

So then what do you have? You simply have a privately owned company started by a group of workers who, however, feel no sense of solidarity with the workers they hire or who will replace them as the company grows. Their personal connections to family, friends, and business associates are almost certainly going to weigh more heavily on their minds than any closeness they feel toward their employees.
 
It would be difficult, if not impossible to start such a co-operative without getting loans form banks (capitalists). Maybe you could do it, get all the workers to pay money upfront and gather together and buy the machines, etc. Would be easier in some industries than others. Loans from banks certainly may it a lot easier though.

It may very well have happened. I think there are a few worker owned companies around the country. But imagine what would happen if, say, 20 workers got together, saved their money, got a loan from a bank, formed a worker controlled corporation, and ran it successfully.

When they incorporate or form a partnership or whatever, they will have to decide the nature of the ownership, including survivorship rights. So they could make the ownership "tenets in common." That means that when one died, the others would inherit his share. The could make it "joint ownership with rights of survivorship." That means their share would belong to whomever they designated in their will or according to state law when someone dies intestate. Or they could decide that those shares go collectively to the workers in their company regardless of any role that they played in forming the enterprise. What type do you think they would choose? I think the overwhelming majority would say, "I want my wife to inherit my share and if she dies, I want it to go to my children." So they would likely choose joint ownership with rights of survivorship.

So then what do you have? You simply have a privately owned company started by a group of workers who, however, feel no sense of solidarity with the workers they hire or who will replace them as the company grows. Their personal connections to family, friends, and business associates are almost certainly going to weigh more heavily on their minds than any closeness they feel toward their employees.

i dont buy your premise, your first principles.

Convince me I should.

HINT. "It is only logical," won't sell me. I need stats and facts since I live in the 21st century, not the 17th century.
 
A free enterprise system without capitalism would require that banks to be prohibited. Banks, when they lend, are being capitalists.

why would you prohibit the superfluous?

The argument is you don't need capitalism for free enterprise, which you don't.
Too much capitalism is bad and it is.
And he does state that capitalism can be helpful with regards to free enterprise but it isn't the same thing as free enterprise and not necessary even if it can be convient and helpful.

So what's your point?

(You're asking for the agenda behind my intervention? I just seek to know and discuss reality. I do not intend to defend capitalism, but to state [what I perceive as] the obvious, knowing I can be wrong in my observations--but heck, that's why conversation was invented, to share, suggest and correct perceptions.)

Financing would be extremely hard without lending. Lending requires risk because you cannot lend to any crazy project and you cannot know beforehand which project will work, and this is, in essence speculative. Ergo, capitalism.
 
i dont buy your premise, your first principles.

Convince me I should.

HINT. "It is only logical," won't sell me. I need stats and facts since I live in the 21st century, not the 17th century.

In a "free enterprise" system why wouldn't some people who had extra money attempt to lend it out or invest it for some positive return?
 
Prohibiting capitalism won't work. What you need is a sane society that will want to regulate the market. Those countries do happen to exist.

Another option I've been thinking of for a few months, is tax capitalist corporations in the sweetest social-democratic fashion (i.e. heavily, as in 60s UK or in today's France) while taxing co-operatives lightly. Co-operatives are non-exploitative free-market enterprises, owned by the workers (not by the State, pretending to stand in for the workers).

Make the workers successful, and capitalists will be a small sorry sector of the economy. At the same time, people will love this and will be less prone to be fooled by cunning foxes into voting for the crony capitalists' interests.
 
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