Monday, July 28, 2008

Only 1 Economic System Exists: Market Captialism; For Mass of Mankind It's A Source of Hope

The 20th century witnessed a war between two economic systems: state socialism and market capitalism. In the socialist system, property was public, competition forbidden, and production planned. In the market system, property was private, competition encouraged, and production determined by entrepreneurs. Faced with the choice of which system was superior, nations hesitated and economists remained divided.

The state of affairs today is entirely different. When the Soviet Union crumbled, the socialist model that it embodied imploded, too—or, more precisely, the Soviet Union fell because the socialist economic system proved unworkable. Now only one economic system exists: market capitalism.

Virtually everywhere, the public sector has given ground to privatization; currency has escaped state control, to be governed by independent central banks; competition has taken wing, thanks to the deregulation of markets and the opening of borders; taxation has become less progressive, so as to encourage entrepreneurs and create jobs.

The results have been breathtaking. Opening economies and promoting trade have helped reconstruct Eastern Europe after 1990 and lifted 800 million people, many of them in China, Brazil, and a now-license-free India, out of poverty. Even in Africa and the Arab Middle East, nations that have embraced capitalism have begun to escape from the terrible underdevelopment that has long plagued them.

Behind all this unprecedented growth is not only the collapse of state socialism but also a scientific revolution in economics, as yet dimly understood by the public but increasingly embraced by policymakers around the globe. The revolution began during the 1960s and has finally brought economists to a broad, well-founded consensus about what constitutes good policy. For the mass of mankind economics has become a source of hope.

From the City Journal article "Economics Does Not Lie: The Dismal Science is at Last a Science—and the World is the Beneficiary."

HT: Thanks to Wright Truesdell for the pointer.

17 Comments:

At 7/28/2008 9:49 AM, Blogger juandos said...

Hmmm, maybe that's why Donald Luskin noted the following: The Congressional Effect Fund and this also: CAPITAL VOTES WITH ITS FEET

Earlier this week, the Wall Street Journal pointed out that prominent Democrats from New York and Illinois were willing to short their own hometown energy commodity trading industries in order to join the bandwagon against the evil “speculators” in energy markets. (there's more)...

 
At 7/28/2008 10:51 AM, Blogger Marko said...

Perhaps this broad understanding of good policy will eventually penetrate the consciousness of the voting public, and we will get some real change (i.e., no more democrats as we know them).

Well, I can hope, can't I? See? I like Change and Hope. Hope we Change into a more free market system. I won't hold my breath though. I guess what really needs to happen is that a new generation of teachers and "journalists" needs to come up that believes in the free market and our constitutional system. Good luck with that.

 
At 7/28/2008 11:48 AM, Blogger juandos said...

marko says: "Well, I can hope, can't I? See? I like Change and Hope. Hope we Change into a more free market system"...

Me too! Me too!

Meanwhile are we going to see a someone in the Oval Office who is endorsed by terrorists?

I know the possibility of Obama being there terrorizes me...

 
At 7/28/2008 11:53 AM, Anonymous Henry Blanett said...

What exactly constitutes "trade" between the United States and China? One side (the U.S.) has billions of tons of crap dumped on its shores, while the other side (China) allows practically none of the other side's goods on its shelves? That's your economist's definition of "trade"??

"Virtually everywhere...currency has escaped state control"

The key word in that statement is "virtually", because in "reality" the statement is a steaming pile of -- yuan manipulation.

Apparently, the general public understands economics -- and sees through the B.S. -- much better than the free market economists would freely like to admit.

 
At 7/28/2008 12:41 PM, Blogger Marko said...

juandos, I am scared too - althought it might be nice to have the press saying that the economy is doing well and the U.S. is a great nation loved by all again. (not that the reality would change, mind you).

henry, I buy a load of crap from Amazon.com almost every day, and they buy NOTHING from me. So, are you saying we are not engaging in trade? China has a big pile of pieces of paper with dead American presidents on it (or just a virtual representation of same) - and we get a ton of "crap" that is cheaper, that helps our strugling poor. How is that bad? What are they going to do with that money? Oh yeah, I forgot, they lend it to us. Wow, bummer. We get stuff, and they get a pile of i.o.u.s. They are really tricking us good!

 
At 7/28/2008 12:47 PM, Blogger juandos said...

"Oh yeah, I forgot, they lend it to us. Wow, bummer. We get stuff, and they get a pile of i.o.u.s. They are really tricking us good!"...

Cha! Ching!

Excellent marko...

 
At 7/28/2008 4:03 PM, Anonymous Super-D said...

"The revolution began during the 1960s ..."
I never really thought of the 1960s as being the start of a movement toward market capitalism. Other than Woodstock being a private sector event, what do you see as the start? (Not disputing; just asking.)

 
At 7/28/2008 4:32 PM, Anonymous Henry Blankett said...

Marko: "henry, I buy a load of crap from Amazon.com almost every day, and they buy NOTHING from me. So, are you saying we are not engaging in trade?"

'Red', meet 'herring'. The issue is the degree of exchange of goods and services between two nations, not the medium of exchange which simply serves as an intermediary. Not even laissez-faire apologists like Milton Friedman were dumb enough to attempt to redefine international trade as the amount of currency obtained compared to the amount of goods and services received.

You do know how trade deficits are calculated, don't you?

"China has a big pile of pieces of paper with dead American presidents on it..and we get a ton of "crap" that is cheaper, that helps our strugling poor. How is that bad?"

It's kind of hard to make a rational argument that losing a solid manufacturing job is made up by the purchase of slightly-less expensive Wal-Mart junk. And when millions of formerly middle-class blue-collar workers are automatically placed into the ranks of the "struggling poor" thanks to asanine "trade" policies, the argument becomes even more surreal (and outrageous).

"What are they going to do with that money? Oh yeah, I forgot, they lend it to us. Wow, bummer. We get stuff, and they get a pile of i.o.u.s. They are really tricking us good!"

Don't look now, but China's is steadily locking itself -- and the global economy -- into a hyperinflation spiral, all because it's buying up U.S. dollars and printing up yuan to maintain its undervalued currency. This is good??

I'll let a responsible economist have the last word:

Peter Morici: "Rising fuel prices and surging imports are drying up demand for U.S.-made goods and services, destroying jobs and plunging the economy into an even deeper downturn...

Debt to foreigners now exceeds $6.5 trillion, and this flood of greenbacks abroad is driving down the dollar, heightening concerns about the solvency of U.S. financial institutions and pushing up the price of gold."


http://www.forbes.com/home/2008/07/09/trade-deficit-growth-oped-cx_pm_0710morici.html

 
At 7/28/2008 5:48 PM, OpenID sethstorm said...


Meanwhile are we going to see a someone in the Oval Office who is endorsed by terrorists?

Not surprised to hear that from that source. That twist of logic is what fingerprints that group. They can safely be disregarded for saner voices on the matter.


Bottom line: The orthodoxy against the free market moves too slowly and noisily to trap smart money.

That can be changed quite easily (much to the chagrin of people surprised to see the taxman waiting at their tax haven). Swing and a miss for Luskin.


...the collapse of state socialism...

To paraphrase Samuel Clemens:
The reports of socialism's death are greatly exaggerated. See the Nordic model(a hybrid of both) and the survival of French socialism despite threats from Sarko. Socialism is not going to die, it is only going to change. It will serve to contain the damages of markets.

 
At 7/28/2008 10:28 PM, Blogger bobble said...

i have no problem with this. but do you think some limits capitalism might work well?

so do we guarantee bank deposits?

if we do, then should we have something like glass-steagall?

if we don't guarantee bank deposits, then are we subject to bank runs and failures?

is no regulation the best way to go?

comments please?

 
At 7/29/2008 7:26 AM, Blogger OBloodyHell said...

> What exactly constitutes "trade" between the United States and China? One side (the U.S.) has billions of tons of crap dumped on its shores, while the other side (China) allows practically none of the other side's goods on its shelves? That's your economist's definition of "trade"??

We give them pieces of colored paper, they give us the products of their citizens' hard work.

You seeing some problem with that that I'm not?

I think Dr. Perry already covered the pretty much abysmal ignorance of your comment in a posting in the last month or two. You might want to look for that.

 
At 7/29/2008 7:43 AM, Blogger OBloodyHell said...

> You do know how trade deficits are calculated, don't you?

Yeah, do you know the correlation with the strength of a nation's economy and well-being with a trade deficit?

No?

Once more, I suggest you go back and review earlier postings in the last month or so, newbie.

> It's kind of hard to make a rational argument that losing a solid manufacturing job is made up by the purchase of slightly-less expensive Wal-Mart junk.

Ah, yes, the "solid manufacturing job".

Look, numbnuts. The US economy is well on its way to making industrial activity into an activity performed by 2-5% of its citizenry. Eventually, this 2-5% will tell robots what to do and check to make sure that they are doing them properly. Right now, however, it's cheaper (and better, all around) to have other nations do the work robots will do, eventually (when the standard of living in those places rises to the point where they require too much money).

You might have noticed this exact same process occurred in the past with agriculture and mechanization -- a century and a quarter ago, 90% of the population of the USA was involved in producing food. Now that figure is 2-3%... but somehow, the economy is a hell of a lot better off, without those "solid farming jobs". It's also allowed those ag goods to go into the toilet as far as prices go -- these days, a person need work only 1-2 hours a WEEK to put food for their family on their table, as opposed to 60 hours EACH WEEK.

As I'm sure you did not notice, the median individual income in this nation has gone up by a factor of 40% and more just in the last 10 years, all while we were sloughing off all those "solid manufacturing jobs" you want so desperately for us to return to.

You know, the ones that, the only way anyone made jack at them was if there was a union forcing the companies to jack them up, which kept prices ridiculously high, because that extra expense was paid for by the consumers (what, you thought the *stockholders* were paying the higher salary? you really ARE abysmally ignorant of how economics and businesses work, aren't you?)

I think that's enough holes in your hot air balloon.

Go do some reading.

Come back and comment when you actually have an answer which a retarded 10yo could not refute simply by reading other recent blog entries, eh?

If you have questions, by all means, ask. But do the reading, because when you ignore it, you are wasting peoples' time answering stuff that everyone here already knows the correct answers to... because they had sufficient respect for everyone else and tried to learn something about the subject.

 
At 7/29/2008 4:29 PM, Blogger juandos said...

Funny how it seems that Morici's commentary is at odds with this Market Watch item: Trade gap narrows as exports chug higher...

So is Morici for or against drilling and pumping more domestic crude? Can't tell by this commentary though he does note: "With gasoline selling for $4.15 a gallon, Americans spend too much getting to work, and they visit shopping malls less. Most of the extra cash they fork over for fuel ends up in the hands of wealthy Middle Eastern and Latin American oil exporters, who don't spend comparable amounts on U.S. goods and services. When Americans do go to the malls, the television sets and T-shirts they buy too often come from factories in China, not America"...

I do note that Morici does offer excuses though: "Factoring in all the adults that have been discouraged from even looking for work in recent years, the actual unemployment rate is about 7%, not the Labor Department's stated 5.5%, which only takes into account adults who are seeking jobs and haven't secured them"...

Then again I do have my own doubts about what has been described as a: "liberal economist"...

I mean who else would CBS for instance get other than someone like Morici for their Early Show?

 
At 7/29/2008 4:51 PM, Anonymous Henry Blankett said...

obloodyhell said: "As I'm sure you did not notice, the median individual income in this nation has gone up by a factor of 40% and more just in the last 10 years"

As soon as I got to that little gem, I realized that a comprehensive response to the rest of your post would be pointless:
..............................
http://www.census.gov/hhes/www/income/histinc/p01ar.html

1996 per capita income in 2006 dollars: $23,207
2006 per capita income in 2006 dollars: $26,352
..................................

$26,352 - $23,207 = $3,145

(3,145/23,207)*100 = 13.6%

And with that, the words "Do not put pearls before swine" again show their wisdom.

 
At 7/30/2008 6:24 AM, Blogger OBloodyHell said...

> As soon as I got to that little gem, I realized that a comprehensive response to the rest of your post would be pointless

Yes, pick one entry which you can find fault with and blow off the entire comment.

Very good -- a conveniently nice evasion, socialist boy.

I grant I cannot identify the source of my information for comparison or argument at the moment -- I temporarily concede my error unless and until I can identify it -- it wasn't made up but I cannot find it again at the moment, which means I can't argue either validity issues or apples-to-oranges comparisons. So you win -- sort of (see below) on this one point.



This does NOT absolve you of the need to deal with the rest of the challenges to your position, not the least of which is the obvious fact -- identified by you, yourself -- that a 13% increase in median, individual, real wages over a less than 12 year span is hardly trivial, if we are busy sloughing off all these "highly paid manufacturing jobs" you're so enamored of.

Wages should be going **down** if all that is left to replace those wonderful jobs are low-paid clerical and stockboy type work at Wal-Mart...

I guess stockboy work at Wal-Mart must be paying pretty damned good for people to be making just as much as at your wonderful lost manufacturing jobs, huh?

...Or it could be that people are getting equal or higher-paid IP & Service jobs to replace a lot of those "lost" manufacturing jobs.

Nawwwwwwwww.

That doesn't fit the predefined template, does it?

 
At 7/30/2008 6:47 AM, Blogger OBloodyHell said...

> Rising fuel prices and surging imports are drying up demand for U.S.-made goods

That's crap. The cheaper dollar has US exports rising, not falling -- from an earlier CD post:

According to the BEA's report today, the U.S. trade deficit in goods and services declined to $59.8 billion in May from $60.5 billion in April. Highlights include:

• Exports increased $1.4 billion in May and are up 17.8% versus last year. The gain in exports in May was led by fuel oil, chemical fertilizers, and other petroleum products.

• Imports increased $0.6 billion in May, a small rise after a large upward spike in April. Imports are up 12.5% versus a year ago. Imports were held down in May by a decline in autos and energy (petroleum products and natural gas).

• Adjusted for inflation, the trade deficit in goods is $11.6 billion smaller than last May and the smallest since 2002. Without adjusting for inflation, the trade deficit is $0.4 billion larger than last year.


In short, there is certainly a downside to a lower dollar, but "decreasing" exports is rather obviously not likely to be one of them. That means that US goods are cheaper overseas, and, gawrsh -- that means more people will buy more of them.

 
At 7/30/2008 6:55 AM, Blogger OBloodyHell said...

> so do we guarantee bank deposits?

if we do, then should we have something like glass-steagall?

if we don't guarantee bank deposits, then are we subject to bank runs and failures?


bobbie, as I mentioned elsewhere on this general topic, it is not a bad idea to HAVE something akin to FDIC, it's just that it should be something which is done by private industry (the I in FDIC== "Insurance") with some lesser oversight by the government... and with strong policies in place to make failures not just civil but criminal, and to apply to supervisors, not just low-level employees. No bailout plans for any failed companies *or* banks, only for the depositors.

 

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