Sunday, 6 December 2015

Alternative purposes for the economic system

In my previous blog I discussed the problems with capitalism. I argued that if you want to make the very strong claim that capitalism is wrong it seems necessary to say that an economic system should have a particular purpose that capitalism cannot meet.

My proposed purpose for an economic system was to effectively provide people with the goods that they need and want, and capitalism seems to do this better than any proposed or attempted alternative.

So those who wish to argue that there is something wrong with capitalism presumably think that there are further purposes for the economic system that capitalism fails to meet. From my understanding, these tend to be sociologically inflected views. One holds that communistic social relations would be much better for people than capitalist ones as this would exalt higher goods.

Along these lines, but with the opposite conclusion, is the Randian view that capitalism engenders the highest goods. This is because capitalism requires people to act economically without direction from outside. This individualism is of course entirely imagined—capitalism is a system in which everyone works together, though it perhaps gives more scope for individuals to create new products than other proposed systems.

So does the presumed advantage of creating the right type of person (and/or economic relationship between persons) something that totally overrides other aims of the economic system? Or is this in addition to the job that most people (including myself) take to be the fundamental one of the system? To exclude the requirements for the creation of goods for the members of society seems perverse to me and I don’t think the economic prospects of either hyper-capitalism or communism are very good. 

Laissez-faire economic policy can be reasonably expected to generate huge inequalities. Libertarian utopians are either blind or indifferent to the terrible consequences of their utopia for those who find themselves without any property or the means to earn a high wage. As well as the patent unfairness involves, the instability and inequality will probably result in a less effective economy overall as well. However, Randian libertarianism is so objectively nonsensical I will focus on the left-wing anti-capitalist utopianisms.

On the other hand, communistic systems do not have a great record of success. The USSR had some economic growth but this tended to come at great expense to some members of society, including the repression (and sometimes deaths) of many. Many leftists of course will claim that the USSR did not live up to socialist let alone communist standards, or claim that the actions of Stalin etc. were necessary to fight against Western imperialism. But it seems that leftist proposals either focus on the massive decentralisation of economic decision-making to the local level or the total centralisation of decision-making.

To judge redistributive capitalism against some proposed utopia you would need to specify it and show that the proposed goods would arrive given the (potentially huge) costs of bringing about and maintaining that utopia. The paths to left-wing utopias seem extremely vague and optimistic to me. Those who propose them seem to ignore or downplay the possibility of all sorts of terrible alternatives to emerge. Who says that “smashing the liberal state” won’t bring about an autocracy or theocracy or fascist dictatorship or whatever else?

As you can tell I am very sceptical of judging economic systems on the basis of their alleged sociological effects. I would want to see a lot more evidence that capitalism really made people much more selfish than rival systems, for the utopia to be one that everyone could agree would be worth achieving and I would want to see a fool-proof plan to get from the current system to this utopia.

For example, I don’t see why a society with my Hourly-averaging proposal would any less lead to a communist utopia than a dictatorship of the proletariat. People wanting to increase their net income would have to work more hours irrespective of their position in society and so after a while people might internalise working longer and harder as being good things. 


Physiocrat said...

The economic system must, first and foremost, embody justice. Institutionalised theft of any kind has no place.

Secondly, the economic system will encourage people to act in particular ways due to the pattern of incentives and disincentives built into it. If these lead to misery or are in other ways undesirable or harmful, then there is something fundamentally wrong with the system.

benj said...

We don't have capitalism, rather an evolved and democratized Feudalism, of which the socialization of private income and capital is wrong solution.

While this taxing of income and capital mitigates part of the inequality neo-Feudalism causes, it does so by distorting incentives and adding costs.

A case were the treatment is almost as bad as the disease.

Best to treat the actual problem, with an LVT, as this aligns incentives, and ends any excessive inequalities in our society.

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