Hasn't the free market failed

Debates
1

Stocks are all way up now, so the people here who thought that the stocks were previously going down because of government intervention alone, now need to explain why more government intervention (govt buying bank stock) has investors enthused.

First of all I’m not an Objectivist at all, I’ve been observing these boards for quite a while though and while I think some of you mean well(and some of what you say is interesting) I think you are overlooking a few things. This record breaking day is clearly proof that the government is needed in the economy. What is happening now is a deep, wrenching financial crisis unlike anything we’ve seen since the 1930s. It’s contributing to a broad slowdown of the American economy. The pain is spreading across the world. It’s ugly. But the history of capitalism is filled with credit crises, panics, financial meltdowns and recessions. Y’alls advocation for deregulation just doesn’t seem right to me. Without some (limited) government oversight over business practices, what’s to stop a business from demanding a 60 hour work week and denying overtime compensation? How can we make sure that lenders don’t take advantage of home buyers again? Child labor? Stock market manipulation by large financial institutions in order to effectively “steal” investor profits by the continuous use of naked short-selling and the elimination of the “up-tick” rule (and the SEC continues to ignore this). Government has a part to play (and must play) in our lives and as it gets more and more complicated and difficult to oversee the insitutions that essentially control our mutual welfare, its glaringly apparent that we need to expand government in some areas in order to protect our economy and the future welfare of every American but we can certainly make sufficient strides in cutting back other areas that contribute little or no benefit to the majority of Americans ([un]Patriot Act, etc.]. I’m not saying their should be an end to capitalism. We just can’t accept the downswings that used to be routine for Western countries in the 19th century, when we saw much less intervention by the government. Can you imagine the political fallout from 20 percent unemployment or 5 percent growth rates?

2

But the history of capitalism…

I had to stop right there. The world has NEVER experienced laissez-faire capitalism. That’s the problem. I suggest you read the essay “What is Capitalism?” by Ayn Rand in Capitalism, The Unknown Ideal. (Of course, if you’ve never read about or understand rational egoism, it will be hard for you to understand much of what we discuss on this forum or Objectivism in general.) America came as close as any nation has ever come to capitalism, but we keep moving farther and farther away with this damned mixed economy. As the years go by, we keep moving closer to the socialist side. As we do, things will continue to get worse. This most recent government intervention/bail out/regulation may solve things short term, but it never solves anything long term. The more socialist a government, the worse off its economy.

If you would also read Atlas Shrugged, you would clearly see that what Rand said was going to happen, is happening all around us, all over the world. Why take our word for it? Go see for yourself.

EDIT: The post I quoted has been moved. Mods, please move this to the debate forum post it belongs with. :lol:

3

All it means is that people want profits, and they know that when the government gets involved in the economy, profits can be made quickly. Will they last, though? Not likely. The market will “drop back down” in one way or another, either by a stock market drop, or devaluing of the dollar, or increased taxes, for example.

Compare it to corn ethanol. When the government propped it up, then it became a good time to invest in corn ethanol. When it proved (again and again) to be bad idea, then it became a bad time to invest in corn ethanol. People who buy early and sell before the inevitable drop will make money.

4

To suggest that the current crisis is the result of too little regulation is comparable to saying that the titanic ran into a little ice.

Objectivists do not say, “give companies favors but don’t regulate” - they say “leave companies to succeed or fail on their own entirely”.

The Government and the Financial markets have been deeply entwined for nearly a century. Moving a regulation here and shifting it there, lending benefit of political power to second hander businessmen who rely on the influence of the former - these things are not free-market capitalism. They are the product of a corrupt system grown bloated on the exploitation of power at the expense of others.

You talk of making sure that this doesn’t happen, of protecting the weak from the strong, but fail to recognize that without the aid of those elected by the weak , those who are strong now would never have been able to be as strong as they are.

5

I’m not saying their should be an end to capitalism. We just can’t accept the downswings that used to be routine for Western countries in the 19th century, when we saw much less intervention by the government. Can you imagine the political fallout from 20 percent unemployment or 5 percent growth rates?

There is no, read NO, panic during the 19th century that equals in scope any of the panics we have had since govt started getting involved in regulating the economy.

The Great Depression was caused by govt intervention. This panic was caused primarily by govt intervention. I sure can imagine the political fall out from 20% unemployment. It’s a wonder govt still wants to be in the picture. The “cure” is the illness.

Great Myths of the Great Depression

http://www.mackinac.org/article.aspx?ID=4013

Govt Did It

http://www.forbes.com/2008/07/18/fannie-fr…_0718brook.html

6

The real question is not of how well does it work, but of weather or not it’s moral. Government regulation - at all - is immoral. How can you possibly defend the government stepping in and telling you what you can and cannot do with YOUR private property? It belongs to you, it’s yours, I can’t just barge in and tell you what to do with it. How come the men in suits calling themselves “The Government” can? The same goes for taxes. It’s your money, you worked hard, you made it, it’s YOURS. Why should the government be able to take it from you with or without your consent? They’d arrest me for barging in your house and taking your money. Why aren’t they considered criminals? Because you don’t call them that? In that case, if I don’t call Hitler a dictator, does that mean he isn’t?

I’m getting a little off point. The point is that the Government has no right to tell you what to do with your private property. If you want to demand 20 hours of work each day, and pay 2 cents an hour, and hire 2 year olds, fine. It’s your business. It’s going to collapse, but it’s your business. Why can the government tell you what to do with it? Why?

And even more - if the government represents the people, by extension, YOU are telling people what they can and can’t do in their businesses. Why do you have that right? It’s not your business, you aren’t creating the value, you aren’t making the money or making the product - why do you have the right to boss him around?

7

If you want to demand 20 hours of work each day, and pay 2 cents an hour, and hire 2 year olds, fine.

And to add - YOU, the consumer, employee, etc have the right to tell such a businessman to go to hell if he demands such things that you don’t agree with.

what’s to stop a business from demanding a 60 hour work week and denying overtime compensation?

The employees telling the owner to go to hell and quitting and getting a job with a businessman who doesn’t. Just as stores compete for consumers to buy their products, employers compete to get employees to apply to work for them–by offering better benefits, perks, etc.

8

How can we make sure that lenders don’t take advantage of home buyers again?

Did any “lender” ever not provide a mortgage contract detailing exactly what the terms of the mortgage in question were? Did the buyers lawyers collude with the banks to keep this information from the purchaser?

The fact that banks refused (as was their right) to allow borrowers to renegotiate the terms of their 0% down, 100%, below prime, split term mortgage is NOT, I repeat NOT taking advantage.

9

The Free Market, or rather the people who run and operate private business, have failed to stand up to Statism. That’s the real and significant failure of the Free Market.

10

You guys are sharp. Y’all didn’t address all of my points but that is what I expected. It’s nice to get a different point of view every once in awhile, but I personally don’t think things are as simple as Rand made them out to be. I didn’t attend to debate this topic however as I posted this in the Financial Crisis thread.

I have read Capitalism the Unknown Ideal btw, I even have the book right here beside me. You don’t believe me? Ask me what page any particular essay starts on.

Also I must add that the wealthiest aren’t always the “most productive” as I hear Rand say over and over again. Most of them were just hooked up and some were born into it. I don’t see anything wrong with taxing more from the wealthy because they can afford it. McCain has 3+ houses for goodness sake while others who aren’t so lucky(Didn’t get hookups or weren’t born into it) have to worry about keeping there “one” house. Plus President Bush is wealthy and he isn’t that smart.

11

I have read Capitalism the Unknown Ideal btw, I even have the book right here beside me. You don’t believe me? Ask me what page any particular essay starts on.

Isn’t that sweet, you know how to read.

Also I must add that the wealthiest aren’t always the “most productive” as I hear Rand say over and over again.

Apparently reading comprehension isn’t your strong suit. Rand separates producers from non-producers , not the wealthy from the poor.

12

others who aren’t so lucky have to worry about keeping there “one” house.

By what right are those people entitled to my worry, much less the money I was smart enough to earn via my own productivity?

13

but I personally don’t think things are as simple as Rand made them out to be.

Why is ‘simple’ even an element in this equation? Life isn’t simple. The essential part of the equation that Rand emphasized is that while men have a right to pursue their lives, they don’t have a right to have their lives provided for them at the expense of other men. And when you use terms like ‘lucky’ or ‘fortunate’, you undermine (unjustly) the hard work of productive men who earned their lives rather than expecting other people to carry their load. ‘Lucky’ men make opportunities happen while ‘unfortunate’ men wait for opportunities to come to them.

That a man would be satisfied with his life being supported by the sweat off another man’s brow is what is ‘unfortunate’. You cannot have that in a free market based on voluntary trade. Each man must take responsibility for his life.

14

Isn’t that sweet, you know how to read.

Apparently reading comprehension isn’t your strong suit. Rand separates producers from non-producers , not the wealthy from the poor.

If I had a nickel for every time someone told me “yeah, I read such and such by Ayn Rand, and she’s wrong and here’s why…” I’d be…well…you know.

…and then of course, they go on to either misquote Rand, or they embarrass themselves by exposing their poor comprehension skills.

15

Also I must add that the wealthiest aren’t always the “most productive” as I hear Rand say over and over again. Most of them were just hooked up and some were born into it. I don’t see anything wrong with taxing more from the wealthy because they can afford it…

“Just hooked up?” “Born into it?” Where, exactly, do you suppose it comes from?

Value is created by the productive. Wealth is the difference between the value created and the value consumed by a person, family or company.

A person who is born into wealth (or “just hooked up”), but is not productive, will consume the value created by others until his accumulated wealth is exhausted.

The motor of wealth creation, a company, is the concrete embodiment of a productive idea. A man who has an idea that enhances the efficient use of society’s precious resources, will put that idea into being as a process to create value. To do so, he needs equipment, skilled humans, raw materials, and motive power, but most importantly, a good idea. If he is successful, the value of his output will exceed the value of his input, and the result is profit: the measure in wealth of the net value of his idea. A portion of that profit will find its way into the creative man’s pocket and if he consumes less than he creates, he will accumulate wealth.

Another man, without any good ideas, can come to the creative man’s company, and offer to exchange his time and skills for money. The value of the wage offered to that man will be greater than the value of his time in any other available endeavor. Simultaneously, the value of the work offered to the company will be greater than the value of that wage if invested in any other resource. This is free, voluntary exchange of value for value, in which both the worker and the company gain from the transaction.

The successful creative man accumulates wealth and is able to put more good ideas into practice, either in the same company, or in a new venture. Each time, his requirement for inputs increases, that is, he purchases more equipment, contracts for more raw materials, and hires more labor, to support his company. He creates value, wealth, and jobs in a continuing cycle until he reaches the maximum level over which he can successfully turn his ideas into profit.

What drives this mechanism that creates jobs, value and wealth in a successful economy? The desire for wealth, i.e., greed.

Now enter the government, which taxes the productive man and rewards the unproductive. This accomplishes two congruent results, first, it decreases the incentive for putting productive ideas into practice, second it increases the incentive for being non-productive. The less you produce, the more “they” give you. The result is that fewer jobs are created, higher wages are required for those jobs that are, and the overall productivity of society falls. What happens then is instead of living off wages for work that contributes to productivity, the non-productive live off the accumulated wealth of the rich, taken by force in the form of taxes. Sure, you say, the rich “can afford” to have their wealth taken from them by force, but what you won’t consider is whether the rest of us can afford to have our jobs destroyed by your irrational economic ideology.

16

Hasn’t the free market failed

We are not in a free market. The financial industry is one of the most heavily regulated sectors of the economy. We have socialism - central planning - in banking by way of the Fed. We have draconian rules on investments and trading, thanks to the SEC. We have the DOJ blocking the way every time two companies talk about cooperating. We have Congress demanding that corporate executives put their entire careers on the line every time they sign financial documents - documents which make no sense, but which Congress nevertheless forced on them.

The Fed, the SEC, the DOJ, and congress have failed. Not the free market.

17

We have Congress demanding that corporate executives put their entire careers on the line every time they sign financial documents - documents which make no sense, but which Congress nevertheless forced on them.

The Fed, the SEC, the DOJ, and congress have failed. Not the free market.

Perhaps you could expand on that a bit?

18

Perhaps you could expand on that a bit?

Sarbanes-Oxley holds CFOs personally accountable to the police state for a traded company’s accounting and financial documents, which the other government agencies prescribe. These documents are extraordinarily difficult and extremely expensive to write, and serve only one purpose: to force traded companies, presumed guilty under Sarbanes-Oxley, to attempt to prove their innocence under punitive conditions.

19

This record breaking day is clearly proof that the government is needed in the economy.

How is that? Give me an argument to work with here I don’t see your logical connection:

Premise 1: “Our current market situation is heavily regulated”.

Premise 2: “Our current market system is breaking down”.

Argument: “Therefore We shall impose more regulations”.

Without some (limited) government oversight over business practices, what’s to stop a business from demanding a 60 hour work week and denying overtime compensation?

Here is a little preview of how the mechanics of the free market works:

You sell shoes and demand 60 hour work week from your workers. This signals other entrepreneurs that there is a high demand in the shoe-manufacturing workforce, which means that its easy to hire people. Entrepreneurs flock to the shoe-manufacturing industries —> labor becomes more scarce —> wages and working conditions go up as a natural result.

I’m not saying their should be an end to capitalism. We just can’t accept the downswings that used to be routine for Western countries in the 19th century, when we saw much less intervention by the government.

I see so therefore we must substitute with a system that prolongs the recessions 10 years as in the Depression?

20

You make 2 common mistakes:

  1. You believe that without regulations employers will make their employees work under extreme conditions.

  2. You believe that a large part of those who are rich are rich by either inheritance, cheating, or otherwise manipulating rules in their favour, therefor are unintitled to their wealth.

I’ll address these 2:

  1. Supply and demand of workforce. I can make a long example to describe this, but suffice to say if you offer your workers 5 cents an hour, I will open up a competing company and pay my workers 10 cents an hour, and you will be left without workers. Then of course someone else will steal all my workers and so on and so forth until workers will finally get paid what their time is worth to the employer.

  2. There’s a large amount of hate towards the rich in today’s society. The way things are, if you have a lot of money, then you are guilty. This is a sad state of affairs.

About inheritance:

Suppose you started out your life at an average family with an average amount of wealth. You then proceed to work your butt off all your life, not so much for your sake, but for your children’s sake. You want your children to have the best life possible.

You’ve sent your kids to the best schools, they have a degree from college or a university. At the end of your life you’ve accumulated a significant amount of wealth, which your want to leave behind you for your children. Is that wrong? Are you not entitled to give the fruits of your work to that which is most important to you?

It may be obvious in this example that you are entitled to leave behind a better future for your children (I hope it’s obvious to you), but many people in today’s society claim it is unjust for one kid to have a better starting point than another. That the kid of the bum who spent his life on welfare is entitled to exactly the same start as the kid of the person I described above. I actually had a conversation once with someone who believed it’s not fair for a person to leave behind his wealth for his children. If you have a similar belief, then you are too far off for me.