Wednesday, 1 October 2008

Oh dear, oh dear

. Charlotte Gore; our resident crusader against anything that sounds vaguely lefty is worried about a grim future where we;

"During times of boom, embrace Capitalism.

During times of bust, embrace Socialism."

Her economic reasoning is truly dreadful though. Apparently;

"The banking system has failed because the CEOs of the demutalised building societies did not correctly consider the long term interests of their owners."

Well, why didn't they do that Charlotte?? Maybe it was because they were too concerned about maximising profits; something that is always the driving force behind any capitalist enterprise. In a refrain that is going to become increasingly common from people who are desperate to save some kind of credibility for a discredited system she argues that;

"This is not a failure of Capitalism or of Free Markets. This is the failure of management."

So, by an amazing coincidence the board rooms of completely separate banks with different management teams manged to somehow all make the same bad management choices. Truly amazing the level of telepathic understanding in the banking sector. It gets better;

"In banking, a member of staff working behind the counter can face prison time if they fail to report activity that looks like money laundering. Yet a CEO of a bank can pursue a high-risk strategy that, should it fail, would endanger the economy of the country and not have to face any consequences whatsoever.

Forget regulation. Forget controls. That's the problem right there."

Errr isn't the reason counter-staff would face prison time because of regulation and controls?? Am I missing something here?? How can you complain about the 'lack of consequences' for CEO's and then say that we should 'forget regulation'?? Bit of a mystery to me that one to be honest; how else would Charlotte have us hold these CEO's accountable?? Seriously, come on.

24 comments:

Charlotte Gore said...

I agree that last paragraph isn't brilliant. One of the down-sides of firing off posts like that during my lunch breaks.

Capitalism isn't discredited at all. It - through the price mechanism and the profit motive - still acts as the most efficient way of allocating capital and resources where it is needed and wanted, ensuring that there there is demand there is opportunity.

It is an organic and dynamic thing, devolving decision making down to individuals. It is a *good thing*

Profit is not inherently evil. To make money you need to take risks, and that means there's always going to be winners and losers. Without profit, people would not take risks and the result is permanent stagnation and decay. I look at the computer I use to write this and I know that this only exists because of people taking risks, and I only have such a thing because I live in a rich country where even people on modest means are relatively wealthy from an international perspective.

The problem here is that 'capitalism' and the markets in general are valuing as worthless what is worthless. Far from discrediting the system, it is proving that bad business models will always be punished and resources being used will be reallocated. That people do not like or cannot accept that there will sometimes be losers, that the value of investments can go up or down... that's not Capitalism's problem.

I guess the 'problem' is that a lot of people would prefer it if there were no losers. I just do not believe that's possible or desirable.

Charlotte Gore said...

I just read your previous post about what "capitalism is doing for the children?"

One of the more loathsome things that's been happening recently is referring to children as independent economic players, that 'children are struggling to make ends meet' and that 'children are in poverty'.

Children are not in poverty. Their parents are. Children are just unfortunate enough to be born to the wrong parents,

But even then with the welfare state we have they're playing very fast and loose with the definition of 'poverty'.

When they suggest that 'child poverty' should be eliminated they're really saying 'parent poverty' should be eliminated in the hope that, eventually, the benefits will 'trickle down' to the child in the form of clothing, better food, educational resources and so on. It's a fool's hope.

'Yes' is easy. 'No' is hard.

Darrell G said...

Hiya Charlotte,

It maybe true that capitalism isnt totally discredited in the wider consciousness but that would be only because few people argue in the manner that I do and most mainstream politicians would tend to couch it in the terms you do; in terms of bad manangement.

You talk as if capitalism had some grand plan and wasnt in fact a mostly anarchic system; as if it actually sat down and said this is how we will allocate capital today which obviously isnt true.

You really cant have it both ways. You cant say 'yay capitalism devolves decision making down to individuals' then yelp when individuals get it horribly wrong in your eyes.

I didnt say profit was evil but I do believe profit is socially not individually produced. Interestingly so does David Cameron who has often talked about how 'hard-working families' create Britain's wealth'.

You are right in the sense that capitalism wouldnt work if there were no losers but put simply I put a higher price on people than i do on pieces of paper so I guess our priorities are different.

You are right it is parents and families that are in poverty and not children as independant economic units (though that becomes untrue from about 16) however the questions still remains; how has the system provided for those families through its amazing allocation of capital and resources??

thomas said...

Capitalists are full of grand plans, even if they aren't centrally coordinated.

And capitalists do sit down every day to allocate spending in all sorts of different areas.

The difference is that there is space for huge amounts of variety within capitalist society which gives it the appearance of an unstructured and anarchic mess, which is to some extent also true.

Capitalism isn't an ideology providing a vision of utopia, rather it's a methodology for improving what we have.

So you can have it both ways, and in fact it doesn't function unless you do. How else do we raise standards beyond the level of our own petty imaginings?

Darrell G said...

Yes but they do so withing the narrow remit of maximising profit and that is why I have defended the people Charlotte is attacking because they are acting perfectly within the remit and logic of the capitalist system.

I disagree with you totally when you say 'capitalism is not an ideology'. Of course it is. Are we not constantly told that the market is the only way; the only way that society can be provided for. Sounds ideological to me.

No you can't actually have it both ways and this is precisely what this crisis actually proves beyond reasonable doubt.

thomas said...

"Of course [capitalism is an ideology]. Are we not constantly told that the market is the only way; the only way that society can be provided for. Sounds ideological to me."

I repeat, the 'market' is not an idea, it is a functioning space - the term was appropriated by theorists from the reality, not the other way round.

We may be told that markets are the 'only way' (I tend to disagree, this is a gross simplification which misrepresents the complex state of public debate), but this ignores the different ways they spring up and the different forms they take, so there isn't any one theory of what markets are let alone of the best form they take.

The best I can do to explain is that markets are where buyers and sellers meet to undertake trade exchanges. These spaces enable the creation of free agreements within the terms of the market charter.

Either you can vary the terms of the charter or you can set universally fixed exchange rates between all goods. However as the supply and demand of any good or produce cannot be managed with perfect efficiency there are fluctuations within the natural value of everything.

So unless you have perfect information and perfect control some form of market mechanism will be adopted to account for the fluctuations.

I accept the complaint of 'maximising profits' has negative connotations, but these are more related to power imbalances felt within the operation of the mechanism than to the mechanism itself.

The market is a tool, and all tools have their uses and applications. They can also be imperfectly designed as well as abused, misused and misapplied.

Charlotte Gore said...

Hi Darrell,

I could be wrong but I think you're colouring what I'm saying a bit here.

Do I value money over people? No, I do not. I don't believe this is an either/or equation anyway. People are important and incalculably valuable, which money is a tool that makes things happen.

Capitalism has helped 'these families' because it has made consumer goods, food and clothing historically affordable so that people no longer have to make their own clothes or grow their own food. It has reduced the burden of domestic labour through washing machines are are easily affordable. It's also improved the quality of their housing: They have housing, with roofs, that they do not have to share with other families. These houses often have multiple rooms and indoor bathrooms. Capitalism created the materials and created the technologies (and reduced the cost of) all these things.

Capitalism has made the national wealthy enough to afford a generous safety net and a universal healthcare system... and capitalism has driven the technological advances in medicines and treatments that have increased the life expectancies of all of us.

Capitalism has no plan. It has no utopian vision. What it does is generate wealth and it causes the quantum leaps in technological advancement that we've witnessed.

We take so much of what is around us and what we've achieved for granted, but the truth is that people at the very bottom of today's Britain would seem wealthy beyond the dreams of those at the bottom 100 years ago. Today's "workers" - people who depend on a wage to survive - enjoy conditions and luxury that, frankly, boggle the mind.

It may be there's a better solution out there, but I don't know what it is.

Charlotte Gore said...

apologies for the complete lack of proof reading on that comment, by the way. what a mess!!

Darrell G said...

Hiya :),

No need to apologise for typos. However, lets look at some of this...

"Capitalism has helped 'these families' because it has made consumer goods, food and clothing historically affordable so that people no longer have to make their own clothes or grow their own food."

Errr hang on arent food prices going up?? Yes they are and this brings me around to my core point. Nobody, not even Marxists have denied capitalism has played a historically progressive role. Great, wonderful but there comes a point where it stops being progressive.

"Capitalism has made the national wealthy enough to afford a generous safety net and a universal healthcare system... and capitalism has driven the technological advances in medicines and treatments that have increased the life expectancies of all of us."

Errr again. The welfare state was delivered by a social democratic government despite capitalism not because of it. Read todays Indy front page incidentally...about how private firms are openly attacking the NHS...but all this goes back to what i said above.


"Capitalism has no plan. It has no utopian vision. What it does is generate wealth and it causes the quantum leaps in technological advancement that we've witnessed."

Again....and you should say create wealth and also destroys it as we can see so clearly in current events. It's also worth noting that it actually holds back advances in areas that are not profitable...for example is it not true that more effort is put into a new ipod than is the cure for deadly diseases. So, it can also act as a barrier to the very progress that you seek.

There always has to be something better or else society stagnates. I think those people who view capitalism's dominion as unending as the Romans who thought Rome would rule for eternity and the monarchs who thought feudalism would endure for the same length of time...change is constant, it is necessary...

Darrell G said...

Thomas,

The market itself may not be an idea but there is definatly ideology that surrounds it; myhtology and all.

You might as well say nation states are non-ideological. In and of themselves they are not but there is an ideology around them called nationalism.

Charlotte Gore said...

Capitalism does not have to be progressive. It is a system for allocation of resources and nothing more.

Can I ask: What is your alternative?

thomas said...

"You might as well say nation states are non-ideological."

I'm suspecting you haven't noticed the linguistic contradiction in that clause - states, yes, but not 'nation' states.

By introducing 'nation' as the qualifying parameter of what the state is you create the assumption of a logical definition according to this idea.

Regards markets, I accept there is a mythology which surrounds the concept, but this is based on linked assumptions and can be deconstructed.

Like I said, there are different types of markets, just like there are different types of states.

Darrell G said...

Thomas,

Not really. The nation state is still the primary organ of power because trans-national formations like the European Union, the UN, etc are very much still the sum of their parts

Charlotte,

I think that is a question worthy of a seperate post...i will be more than happy to answer after ive had my brekkie :)

thomas said...

Darrell, not all states are national.

There are geographic states, ethno-linguistic and cultural or theocratic states too.

Even within these definitions there are states which are multi-national confederations (Russia, China, Brazil, India...), there are states which are multi-cultural federations (USA, Canada, Australia...). In fact the more you look at it the fewer states conform to any singular definition of a nation you could care to identify.

In just the same way no two markets are the same and no two individuals are the same.

When you use additional terms like 'primary' you actively ignore everything subsidiary and restrict a more accurate and inclusive understanding.

Getting back to markets (note: plural), it is important to recognise their variety of form, function and purpose (note: pluralist). Criticism of one market can be highly valid without undermining the wider system at all.

Similarly Hitler made a raft of bad decisions, but does that make all humans/Germans/Nazis intrinsically bad people? And even if so, should we send them all to the gas chambers (even if that includes ourselves)?

Obviously not. No, we need to be more refined in our criticisms and point out how and where different forms can be misapplied to the detriment of desired purpose, what modifications in form we should seek for those different circumstances and how we go about deciding which is most suitable in that instance.

Darrell G said...

Thomas,

Frankly, your argument on nation states is reducto ad absurdem in the extreme. All the places you mention have an overarching polity; a central government that ties itself to the idea of being a nation. Are you seriously here saying that the government of the USA is not a national state?? Maybe somebody should tell Americans they have no nation...that the central government in Washington; the Stars and Stripes are a figment of their overactive imagination??

Their are subtle differences between markets but it is possible to be general as well as specific....the current crisis is a product of the profit motive. Of the anarchic nature of capitalist planning when it does happen. Of the lack of democratic accountability of the leaders of companies....these are general faults that apply across all markets.

No of course it doesnt just as all individual Americans are not responsible for the policies of their deeply misguided President but their is a relationship since they did elect him in the first place which means at a given time enough people supported his general view to put him in power...

Things change of course but what we are really discussing here is the relationship between the general and specific, I dont see them as the same things but I do see their being a connection and that is where we differ I feel.....

thomas said...

Someone should then tell each of the 50 states that they don't exist either.

It's interesting that you shifted immediately from talking about nations as promoting an ideology to being merely a polity as the representative means by which ideologies can be promoted.

This seems to indicate a complete reversal of your previous position.

Your last paragraph gives you away completely as arguing ad hominem against the fact that I pointed out your own contradictions, rather than sticking to the subject matter.

Reading back I am happy to contradict your final conclusion and state that because you have shifted position we are now in agreement.

Returning to markets: you say "the current crisis is a product of the profit motive".

The truth is that the motive you identify has lead some people to act in an exaggerated manner, but contrary to your claim that this disproves the worth of the profit motive, it merely proves that people can be inconsistent, just as your claim exaggerates how this provides evidence against it's worth.

I have to question your definition of liberalism at this point and ask how far you'd go to artificially restrict bad behaviour?

Darrell G said...

Thomas,

Nobody said the 50 states dont exist. Of course they do but there is a nation called the United States of America is there not?? I'm prepared to concede polity was maybe a bad choice of word but am happy to confirm I have not changed my position at all.

People can be inconsistent especially when replying to blog posts first thing after they have just woken-up which is a mistake I wont make again....

But again I say that the CEO's acted perfectly naturally and even correctly following the profit motive and that is part of the problem...

Define bad behaviour for me....do you mean with regard to the markets?? If so then I believe I spell out a solution for this above....

thomas said...

Nope, I think polity was an excellent choice of word.

The idea that there is a nation called the USA is ridiculous, but the idea that there is a federated polity of 50 united states within North America makes perfect sense. But media shorthand is famed for its preference for snappiness over accuract, just look at any headline.

When you consider 'capitalism' you fall into the same basic error - you extrapolate what you already know and understand into some form of eternal universal doctrine which is incapable of any adjustment, and therefore if it isn't perfect it must be smashed.

May I ask when the last time you travelled to France, or somewhere else in the non-english speaking world? I think if you did an analysis of 'capitalism' from such a foreign perspective you may easily come up with a VERY different understanding.

Darrell G said...

Who all happen to have the same central government, the same currency, the same language, a shared past....it doesnt matter if their state form happens to be federal the USA is still a NATION.

Last time I travelled outside this country was when I lived in New Zealand 3 years ago and funnily enough capitalism still looked pretty much the same there.....before that been various places in Europe....just because something has a different form doesnt change the content....

thomas said...

Well NZ is notoriously libertarian, perhaps I could point you in the direction of France or Germany where credit cards are essentially debit cards and borrowing is extremely difficult.

http://news.bbc.co.uk/1/hi/world/europe/7635327.stm

Darrell G said...

You mean this France??

http://news.bbc.co.uk/1/hi/business/7650231.stm

thomas said...

Isn't that the same France?

Tell me how do those Frances compare with the UK?

Darrell G said...

I was trying to be ironic...you provided a link which said how well France was coping and I provided one which showed in fact it is going into recession like the rest of the Western world...

thomas said...

The two aren't incompatible.

France's financial sector isn't as large as the British or American, so they aren't as exposed to the same level of risk. This means that, yes, they will suffer, but also that they won't suffer as much as we will, hein?