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Ethics, Money & Corporate Power. Can they co-exist?

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09:31 / 28.03.08

What it does do, however, is allow for things that you, espousing a socialist/mixed-economy/statist/protectionist model, might want privately-run businesses to be compelled to do by legislation - for example, not sell alcohol to children, not sell alcohol to visibly intoxicated people, not sell alcohol below cost price as a loss-leader. Practically, though, the effect is much the same.

... Although I'd argue that there are good reasons why one might be more effective than the other. A state-run off-licence does not have the same narrow profit-driven motive as an off-licence that is not run by the state. So, if you have an owner of an off-licence knowing that the amount of alcohol ze sells will affect how much is in hir pocket at the end of the week, there's a motive to stretch the laws as far as possible - to not check the age of someone who might not be old enough, to pretend not to notice that someone's intoxicated. And then there's the million and one ways in which the law simply can't cover every eventuality, and discretion must be used; to take a slightly ludicrous example, say someone who walks through the door loudly boasting about how ze's "going to get [hir] li'l sister so wasted tonight". If the primary motive of the person running the off-licence is profit, what does ze care about the wider implications of anything ze does? If profit is removed as a motive, and ze's instead working as part of the public good, ze won't have any such motivation to bend the rules, and may have some motive to the opposite - the state will have to face the effects of someone already drunk buying more alcohol, picking a fight and then collapsing in a heap. Which, incidentally, might have some negative impact on the economy.

09:39 / 28.03.08

Ok. Cool. I don't mean to avoid any other questions and will happily have a go at any.

So you, West, believes that the ownership of business is irrelevant and that, for instance, whether coffee shops remain in private hands or the state they would have an equal chance of being good coffee shops. But you have no particular preference.

"Your initial claim was that generating profit increases wealth, and that the freer trade is the more profit is generated and the better-off everyone is - remember where you claimed that obviously what was wrong with Chad, and the reason why it was not as prosperous as the UK, was that it did not have enough access to free markets?"

Fair point. That was wrong. I know little of the problems in Chad but the reason it is not as prosperous as Uk is clearly not that it does not have enough access to free markets. That was clearly a sloppy thing for me to say and not what I believe. Although trade is a crucial part of building wealth and a realistic way to end poverty.

"So, if our measure of good is how much wealth has been generated, which is the only measure of good you have so far identified, and the only arguments against maximising competition are fluffy and nebulous ideas like "environmental damage" and "human rights", how can anyone who does not subscribe to socialism argue for limiting the ability of companies to generate as much wealth as possible? I'm not saying a mixed economy doesn't make sense - I'm saying, specifically, that this formulation doesn't make sense."

I don't believe wealth, as in GDP, is the only measure of how good something is but I believe that we to have a system with good business generating wealth to have healthy societies. If you are bad at generating wealth then you have deal with the problems of poverty.

I am certainly arguing that, while business should be allowed to operate as freely as possible there should be external constraints to prevent business from harming the common good. If that is socialism then cool but the model for that, for me, would be the UK and EU states which I believe work very well. There are differences in social policy and protection and so on between the states but they are all variations on a theme.

ONLY NICE THINGS

09:42 / 28.03.08

OK, thanks - I think I understand your position better. Will go away and have a think about coffee.

09:48 / 28.03.08

So what is your take on the Soviet Union. We have all these pictures of empty aisles in shops, poor service, etc.

Is there truth in that?

10:22 / 28.03.08

What do you mean by truth? If you've seen pictures of empty shops, I'm sure there must have been some empty shops at some point. You don't exactly have to look to Communist party-run countries to find that sort of thing, though.

What is the case is that the economies of Eastern European countries performed substantially better following the war than the capitalist Western countries. They achieved this while maintaining relatively decent levels of equality, and substantially better performance on indices like life expectancy than equivalently poor countries under more capitalist systems, and in spite of a relatively high "murdered by paranoid lunatic" rate, although it's worth emphasising that the capitalist world hasn't exactly been short of its own examples of such people.

You've said time and time again that a capitalist system creates wealth. I've pointed out time and time again that this is empirically not true, yet you keep completely ignoring this and stating that it is. Why?

Closed for Business Time

12:06 / 28.03.08

Pingles, out of curiousity, where do you get your data from when asserting that Comecon/socialist countries (do you include China btw?) did better than WE/NA countries in post-war years?

12:56 / 28.03.08

"You've said time and time again that a capitalist system creates wealth. I've pointed out time and time again that this is empirically not true, yet you keep completely ignoring this and stating that it is. Why?"

Don't mean to ignore it. I think I have covered it in various fashions in various posts. I am hugely sceptical about your claim that a system in where private enterprise is banned and all enterprise is run by the state is better at creating wealth, measured by GDP, than a system in which private enterprise is allowed and encouraged.

I think this because competition, free trade and the incentive nature of profit naturally encourages wealth creation.

In contrast I believe that lack of competition, protectionism and a lack of incentive is a poor environment for wealth creation.

That is pretty my only argument to keep things simple. So you either agree or disagree with that.

Examples of this would be the move by China and India from state enterprise to private enterprise and the corresponding rise in wealth and the collapse, or survival but with utterly wrecked economies and stringent control on human freedoms, of all socialist states.

Examples such as East and West Germany and North and South Korea are striking example of the failure of the socialized means of production with one half of a country prospering and the other failing dramatically.

13:01 / 28.03.08

Although having said all that I have always just kind of assumed this stuff wihtout thinking it through too much.

13:07 / 28.03.08

Nolte, this article which I linked to earlier has been my comparison for the East/West Europe comparison. It doesn't include China, no; I don't know much about it, but the first thing I can find on levels of growth in China, here, states that Chinese economy in the 20th century experienced high growth rates and modernization in spite of war and political instability.

13:19 / 28.03.08

Buk - well, there's kind of my problem. You've assumed a lot of stuff about free markets creating growth, and then asserted and reasserted that it is a fundamental truth, even though it's based only on assumptions, and even though what evidence there is suggests that it's flatly wrong.

You've just restated East and West Germany as an example, even though you already know that it's such an exceptional case as to be completely worthless. You suggested comparing the economic performance of East and West Europe as a basis by which to judge capitalist and non-capitalist systems, and then when I pointed out that East Europe did comparatively much better, you ignored it and again reasserted that free markets create wealth. And have now just reasserted that being run by Communist parties wrecked these countries' economies, which takes ignoring the evidence presented to you to an utterly bizarre level.

Similarly, I've pointed out that liberalising reforms such as those pushed by the IMF actually hinder growth, and you've then still gone on to say that trade liberalisation --> wealth.

I'd like to be qualified enough to comment on the specific examples of India and China more, but I'd think that the extent to which stating I believe that lack of competition, protectionism and a lack of incentive is a poor environment for wealth creation and then giving the examples of India and China is problematic should be pretty obvious. Again, for reasons already outlined.

I mean, you say you're hugely skeptical about my claims, but you're basing that on assumptions as to what works, whereas I'm pointing out what has actually, empirically, worked better. And I've given multiple reasons why this may be the case, none of which you have addressed.

Closed for Business Time

13:36 / 28.03.08

Thanks for that Pingles. I actually found some stats (note: Excel file) myself in the meantime and did some calculations on post-WW2 growth rates. Seems you were mostly right. According to my numbers, in the period 1945-50, USSR GDP growth was 53% while US growth was -19%, with the 12 major Western European countries seeing growth of 25%.

Corresponding figures for 1950-60
USSR: 65%
W.E.: 61%
US: 40%

1960-70:
USSR: 60%
W.E.: 55%
US: 50%.

Per capita GDP figures are roughly comparable, although with less of a lead for USSR over W.E.

Pinch of salt as for accuracy of course. Also notable is that I suspect (but haven't checked) that the situation for the other Comecon countries might vary considerably (ie lesser growth) from USSR figures. Soviet was clearly rigging the Comecon deal in order to, amongst other things, provide themselves with better tech gratis from East Germany and Czechoslovakia, this probably happening even before the establishment of Comecon in 1949.

A bigger issue in this debate of the relative merits of capitalism (vs Socialism) is the fact that all three economies (USSR, W.E. & US) had mixed economies with elements of both command and free market systems. Which makes any clear cut statements on the matter of which is the best rather more complicated.

And getting back to the issue of ethics: Can the massive deprivation of human rights and civil liberties and the stifling of artistic and scientific creativity in the Eastern Bloc not be counted as a negative variable in the overall wealth equation? That is, assuming we can treat social and cultural capital as parts of the bottom line.

13:50 / 28.03.08

Yeah but those figures are for GDP growth. So it would be incorrect to compare them side by side and say that a growth of 40% is worse than a growth of 65%.

As the GDP of a country grows the growth rate naturally falls so those figures tell us nothing at all.

13:51 / 28.03.08

Certainly you can, when judging the performance of the Communist parties in Eastern Europe; I think barely anyone on the left or right is likely to argue that Stalin was a lovely bloke. On the other hand, you're going to have a pretty impossible task ahead of you if you then wish to proceed to show that such abuses are unique or intrinsic to (relatively) socialist systems.

13:52 / 28.03.08

What do you mean, Buk? Are you now arguing that you can't say more wealth is better than less wealth?

14:27 / 28.03.08

"What do you mean, Buk? Are you now arguing that you can't say more wealth is better than less wealth?"

Are you being serious Moomin? Those figures are for GDP growth.

14:53 / 28.03.08

With comparable GDP per capita figures, yes. What's wrong with these as a basic measure of economic growth?

15:04 / 28.03.08

Ah - is your contention basically that richer countries will not get richer as fast as poorer countries because they're already rich? If so, would you like to provide some evidence for that?

ONLY NICE THINGS

15:09 / 28.03.08

I am hugely sceptical about your claim that a system in where private enterprise is banned and all enterprise is run by the state is better at creating wealth, measured by GDP, than a system in which private enterprise is allowed and encouraged.

I think the problem is, Buk, that you have failed to demonstrate that your sceptism is anything other than faith-based. I don't really have a position on that, but you have produced no figures, and repeatedly admit that, essentially, you don't know anything very much about what you are talking about, but you still expect us to behave as if your sceptism was in itself a functional refutation. It isn't.

Closed for Business Time

15:10 / 28.03.08

One thing I should have added (which is said in the article Pingles linked to earlier) is that Russia/USSR started from a much much lower GDP in the early 1900s. So, in that sense, these numbers mask the fact that WE/US* was still vastly richer, in terms of GDP, than USSR (and likely the other Comecon countries + China).

Numbers:
USSR 1930 GDP 252,333 million dollars (Geary-Khamis dollars)
USSR 1970 GDP 1,351,818 million dollars, for a growth of 535%.

US 1930 GDP 768,314 million dollars
US 1970 GDP 3,081,900 million dollars, for a growth of 401%.

So yes, growth in the USSR was higher. But if you look at GDP disparity it was about 300% in favour of the US in 1930 and about 228% in 1970. Would you call that a resounding victory for Soviet Communism, resigning capitalism to the dustbin of failed experiments? I wouldn't.

*Oh the acronyms! We/us vs ...

PS: Pingles - wot bout my point on socio-cultural capital?

15:11 / 28.03.08

Because every economy has a different trend level of growth. The more developed the country the lower the trend.

So it is utterly meaningless to compare GDP growth side by side as a measure of the health of an economy.

Do you follow?

Closed for Business Time

15:15 / 28.03.08

Well, propose some better metric then. Any metric will do at this stage frankly. Any argument, as opposed to faith-based exclamation, in fact.

15:30 / 28.03.08

What about survival? We could meaure how long socialist states last versus capitalist states.

15:33 / 28.03.08

Nolte, this was addressed to you in response to your question about social capital:

Certainly you can, when judging the performance of the Communist parties in Eastern Europe; I think barely anyone on the left or right is likely to argue that Stalin was a lovely bloke. On the other hand, you're going to have a pretty impossible task ahead of you if you then wish to proceed to show that such abuses are unique or intrinsic to (relatively) socialist systems.

Does that not address your question, and if not, why not?

(Although it's worth noting that while I'd say that social/cultural capital are more important overall than simple wealth, Buk has stated the latter as being what we should be measuring. To which I've responded that capitalism doesn't even appear to be very god at that.)

Closed for Business Time

15:34 / 28.03.08

I don't see that that would be a good way of doing things, simply because regimes fail due to a number of factors, not all of which are determined by economical structures.

15:35 / 28.03.08

Or maybe immigration figures. That would be a fairly wide ranging metric on how "good" a country is, including the economy. I wonder if there exists metrics on many people emigrate and where to.

15:39 / 28.03.08

Buk, you've just moved the goalposts about a million miles, so that you can argue that socialism has failed because of one massive collapse of most of the CP-run world - and one, quite obviously, which happened under overwhelming pressure from (already) extremely powerful Western countries.

First it was wealth creation which shows that capitalism, in a broad sense, works better than socialism, and this was demonstrated by the excellent growth seen in Western Europe compared to the utter stagnation and inefficiency in Eastern Europe. Now that it's been pointed out that you're flat out wrong on that point, you're ignoring the fact that you've pinned your entire argument up to this point on the idea of wealth creation and are stating that socialism has failed because of the collapse of the Soviet Union.

Why, I would like to know, have you done this?

Closed for Business Time

15:39 / 28.03.08

Damned, sorry Pingles, I totally missed that! No, I agree that there's nothing inherent in socialist ideologies that would make them more likely to devalue sociocultural capital. However, I feel reasonably confident in stating that it was the case that free speech etc was not top of the agenda in Communist Europe. Does that not weaken your case, even a bit? Or restated, if you were to compare the evolution of civil liberties and human rights in the UK and USSR 1920-1990, who would you say provided the superstructure most conducive to growth in such capital?

15:42 / 28.03.08

And now immigration! That's utterly brilliant, Buk. To go a long way back in the discussion, how many people do you think would love to emigrate to Chad or Burkina Faso?

Anna de Logardiere

15:46 / 28.03.08

I think the point you are making is about inequality rather than an explanation of why socialism is better at generating wealth than capitalism

This is a little late and my position has been outlined in this thread I think if you stretch just a little. I think you recognise wealth in terms of choice aka 'the people in this society have the money to buy a variety of products in the retail market'. I don't think that's indicative of wealth across the population, I think it's indicative of a society with a large retail sector. Capitalism promotes huge wealth for some, a vaguely comfortable lifestyle for others and poverty for others (ie. people who have trouble making money because they are in unusual circumstances). In different types of societies the focus may not be on the retail sector or the ability to attain money but that does not necessarily mean that there is less wealth, it may mean there is a better spread of wealth across the population. For me wealth in society equates to the entire society and not necessarily the appearance of a culture.

15:48 / 28.03.08

First it was wealth creation which shows that capitalism, in a broad sense, works better than socialism, and this was demonstrated by the excellent growth seen in Western Europe compared to the utter stagnation and inefficiency in Eastern Europe. Now that it's been pointed out that you're flat out wrong on that point.

I don't see where you pointed that out.

15:52 / 28.03.08

"Capitalism promotes huge wealth for some, a vaguely comfortable lifestyle for others and poverty for others (ie. people who have trouble making money because they are in unusual circumstances). In different types of societies the focus may not be on the retail sector or the ability to attain money but that does not necessarily mean that there is less wealth, it may mean there is a better spread of wealth across the population. "

I'd agree with that. I think in countries like the UK and EU states there is a good balance. Private business with shared wealth through taxes and social policies to help the those who struggle. I don't think poverty in Western Europe really exists anymore.

Closed for Business Time

15:52 / 28.03.08

I think I did, even though you seemed loath to concede the point. Before this debate goes any further we need to agree on some common metric for what constitutes good performance. Buk, you don't like GDP for some reason or other, but you're not doing brilliantly in suggesting alternatives. Must do better.

15:53 / 28.03.08

I'm not sure why you think it would weaken my argument, Nolte? I'm not arguing "yay USSR!"; more or less, I'm arguing "yay socialism!", and specifically, because it was the metric put forwardby Buk before ze started moving onto the collapse of states and immigration just now, that all the evidence we actually have on the subject suggests that capitalism hinders economic growth. As to the superstructure conducive to improvements in human rights, I'm sure it's clear that (within their own borders at least; abroad is a slightly different matter) Western Europe and the US didn't perform as poorly as the USSR, but I'm not seeing any link between that and their capitalist nature.

ONLY NICE THINGS

15:53 / 28.03.08

No, he _does_ like GDP:

I am hugely sceptical about your claim that a system in where private enterprise is banned and all enterprise is run by the state is better at creating wealth, measured by GDP, than a system in which private enterprise is allowed and encouraged.

Just not GDP growth.

Closed for Business Time

15:57 / 28.03.08

"...capitalism hinders economic growth."

Oi. 400% growth rate for the US economy 1930-70. How does capitalism hinder growth?

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