Democracy and Economics

[garth]

There isn't some massive conspiracy perpetrated by the dreaded "Western World" that is destroying the cultures of the third-world.  In all of these kinds of discussions I think people lose sight of the fact that individuals make choices, and individuals respond to incentives.  Those cultures are being overhauled simply because they cannot compete in providing happiness to their citizens.  Western Culture is winning because it WORKS.

If gaining the universal right to vote, a job, massive amounts of affordable consumer goods, and a high standard of living (in other words, the rise from third world to first world) mean the elimination of a backwards culture that promotes intolerance, shuns property rights, and lacks law and order so be it.

[Andrew]

I've watched videos of when Western civilization and "progress" is introduced into a society. It has detremental effects. They become greedy for property and goods. It pretty much goes downhill.

Just because they can get a dishwasher or democracy or something else doesn't make life better.

Some agrarian and foraging cultures work 1/3 as much as western civilization does in a week, and they were also happier than western people. You could say they had less worries than a western person would.

Maybe Western civilization is backwards. You cant judge a culture or society until you have lived there for an extensive amount of time. Just because they are different doesn't make it inferior (and doesn't mean western civilization should replace it or forced upon it).

[Wolf]

Save for Iraq, however, Western culture isn't imposing itself upon others; the people in other countries are voluntarily pursuing Western culture; often when their governments and traditional public leaders forbid it. In fact, Iraq, too, chose to adorn the mantle of Western civilization. There were pizzerias, McDonald's, shopping malls and video rentals in pre-war Iraq. Iraq is not a battle of the West vs. Islam, regardless of what other people tell you. Iraq is a completely political war, and the political reasons differ depending on the person. For Bush, maybe he believes he is doing the right thing. For the war department, it's a testing ground for their latest generation of modern weapons. For corporations, it's an opportunity.

[Dude_Doc]

I'm pretty sure we would've invaded Iraq even if there had not been reports of WMDs.

Indeed. But WMDs can have a broader meaning, not necessarily a "direct weapon". It can be applied to any kind of research, should the Bush administration wish it.

I'm all for imperialism, I just wish we were more honest about it, and I probably would've gone about it a different way if I were president.

I wonder what the American people would say if Bush made himself emperor...  ::)

I'm sure it would be more popular if we explained we were going to build a New World Order based on 'Mericun ideals through force if necessary.

I believe this has already been tried in something that was called World War 2.

Those cultures are being overhauled simply because they cannot compete in providing happiness to their citizens.  Western Culture is winning because it WORKS.

Just because we think our system is perfect and working, it doesn't mean that everybody else should have it. But of course we can live happily if we exploit the other 80% of the human population.

[garth]

Allow me to preface the following argument with a bit of background information.  I'm currently working on a degree in economics and political science, so I assume that people are rational, self-interested, and respond to incentives.  Furthermore, I define wealth (prosperity) as anything that people value (it could be cold, hard cash or snail shells).  If you disagree with me on these points, then there is not much point in arguing with me in this topic, so make a new one.  However, if you agree with me on the above, please continue.  :)

Greed for property and goods is a bad thing?

[Andrew]

But cultures are being forced to adapt it. (Mostly the small, now extinct cultures)

Greed for property and goods is a bad thing?

Anything that allows people to no longer have to waste time on menial activities like washing dishes or clothes, riding a horse as transportation, trying to make surgical instruments out of clay, stone, or wood or work less makes life better. If somebody wants to spend all their time doing that, fine, they can.

Greed for property and goods is a bad thing when people who would normally be "friends" (or tribe members) are now fighting each other because one of them cut down a tree that belonged to another. They were cutting down trees because of the deforestation of their homeland, and they worked so that they could buy food and other supplies (mostly cigarettes if I remember correctly, which does not help society in any way other than creating jobs (doctors, researchers, cigarette manufacturers)). They were forced to start working, because the government stole their land that has been inhabitated for many years.

A tribe in Africa spent 1/3 (I know it was a fraction, forget which) the amount of time a North American spent working to support themselves. And they were happier than the average North American at the same time. How does wasting time on menial activities make life worse (and by menial, we are looking at it from a standpoint in Western Civiliation culture)? It just means they don't have to work 50 hours a week to support all the goods and services North Americans want/get.

Also in Northern Canada, a tribe was relocated to a community to be assimilated. They were living a happy life the way they were, but the government forced them to where they are now. And now seems to be alcoholics and drugs. Whereas there wasn't any of that (possible drugs, but were for more religious purposes).

I can not remember the exact name of these instances, as the course I took was a year ago. And it is great watching the videos about them and how western civilization had changed them, mostly for the worse. Sure they got all that industrial stuff, but are they happy? Can they remember what they used to do? Did they lose there history, their heritage?

It's exactly what happened to native americans. Except maybe not as gruesome.

The natives were savage so Europe had to tame them, right? They were different than the explorers, and thus deemed savage/inferior.

Genocide can be represented by the movement of hunting and gathering peoples from their jungle environment to land which they are expected to farm.

I just threw that last sentence in to show that genocide does not have to do with the killing of individuals specifically. Cultural change is not for the rich or powerful to decide, even if they think it will benefit the culture (and most likely themselves).

Maybe I'm getting off topic, by not talking about countries like Iraq and other countries, but still the same concept applies as to forcing them to adapt because western civilization demands it.

[garth]

The situation you're describing is most fundamentally a problem of property rights not being respected and not an issue of human self-interest.

Unless you value activities such as washing clothes by hand or riding a horse as your primary form of transportation, they are menial, and if you don't value said activities then anything that would alleviate you of them would be a "good" thing.

Please see the first paragraph of my previous argument, I edited the post before you responded.  :)

[Andrew]

I'm majoring in Business and minoring in economics. We have some simliarities! :)

I do immensely enjoy economics, and do quite well in it. If I was forced to drop business, I would switch to EC.

I do agree with:

Furthermore, I define wealth (prosperity) as anything that people value (it could be cold, hard cash or snail shells).

It would be nice if the entire world were industrialized and as prosperous as say USA and had a democracy (although a much better system than the world currently has). But this doesn't mean that the industrialized and democratic countries should force or pressure other countries or cultures to change.

Although at the present rate, I believe the world will eventually become one homogenous society/culture. But the world shouldn't jump into a country or culture and try to drastically change it in a short amount of time or force anyone to do anything.

[Wolf]

I agree almost completely with Shaddam Corrino, however I would like to provide a sense of balance to the issue of what we commonly term "Western exploitation." You could argue, that since corporations go overseas and pay thousands of underage workers low wages to produce products that aren't exactly healthy for them, that this is a form of exploitation. And perhaps it is; however, it is exploitation that would not be possible if these workers were not willing to put themselves in that position en masse. It could be counter-argued that they have no other choice. I have yet to hear satisfactory conclusions.

Now, back to this democracy stuff. It's popular to think that we're just another cycle in the great wheel of history; that we'll find something better than democracy in the future and that democracy isn't the end of human political development. Well, I should hope not! But, to use this as an argument against the expansion of democracy has a key flaw; it alludes to the belief that democracy is better than everything else that has been tried in the past as justification for saying that we will find something "better" in the future. It assumes history as progressive. Well, if that's so, why should we tolerate non-democratic institutions? If history is progressive and we'll find something better, that means what we have now is the best we've got and we should institute it across the world until the better alternative is discovered! That argument works both ways, you see.

And history isn't progressive. The Roman Empire began as a monarchy, changed to a republic, then changed to a despotism, and eventually the whole system itself collapsed into feudalism. Economics is cyclical; history is not. We've got this wonderful institution of democracy -- the very institution that makes it possible for us to debate this in the first place -- and there's no guarantee that we'll even keep it for very long.

The real irony is that the very source of the higher, idealistic arguments against the war in Iraq have to do with the preservation of democracy, the preservation of freedom of expression and choice -- the key elements for a functional democracy. By instituting a democracy through war, you say, we deprive the people of their choice.

(pause)

How do you do that, exactly? War was fought to, actual combat was engaged, to destroy the military elements of an undemocratic regime. This was followed by a military-scale occupation of the nation in an effort to preserve order and to gradually eliminate the threat of militants loyal either to this past undemocratic regime, or loyal to a religion which has labled Western civilization in general -- the very thing that the Iraqi people chose to take part in -- as demonic and uncivilized.

In any case, to say that a war can "impose" any form of democratic government on another nation is ludicrous. There's a critical step missing that warfare cannot accomplish; the establishment of a democratic government. When Iraqis hold elections, which I believe is next month, Iraqis will choose an Iraqi leader to lead Iraq. That's democratic, yes. And while the United States made it possible for this to even occur, surely you cannot hope to mislabel that as "imposing our will upon them." No, if a select, American-approved group of Iraqis selected from among a select, American-approved group of leaders, then, yes, that would be imposing our will upon them. If Iraq is to be made a democracy, then even the insurgency must be able to vote.

Of course, that means the insurgency has the potential to win the election, but I doubt that. The mere fact that Iraq was Westernized in the 1980s proves it. So, next month, when a democratic leader wins the election, don't cry out foul play and immediately assume that the United States has set up its puppet government. It's likely that the Iraqis made that decision for themselves -- a decision that's surely more likely than their reelection of the Ba'ath party.

That being said, if all of those requirements can be fulfilled, what then is the problem? If all those things occured, it would mean that the United States, in waging warfare, made it possible for the Iraqi people to elect a leader through freedom of choice and expression. And if one pays any attention as to the targets of the most recent wave of terrorist attacks -- election leaders, public officials, Iraqi police, all of them Iraqis -- its clear that someone wants to limit the freedom of expression and choice of someone else. And I doubt that those people are Americans.

The problem, obviously, has nothing to do with Iraq but with the United States. Establishing democracy was but one reason the United States went to war; the foremost was weapons of mass destruction. And they were wrong, but I think that's something Americans should settle for themselves, don't you? Or do you think that multilateral action should be taken against the USA?

[garth]

About the workers being "exploited," I would argue that they always have a choice no matter what.  They can choose not to work, starve, and then die.  This isn't a desirable outcome for any party concerned, but we must always be careful that a solution isn't worse than the problem it was designed to fix.  Banning international trade, multinational corporations, the collectivization of property, tariffs, etc. that could be possible solutions are far, far worse than the problem, in my opinion, in that they would usher in a Depression that would make 1929 look like a rainy day in the park. 

"If history is progressive and we'll find something better, that means what we have now is the best we've got and we should institute it across the world until the better alternative is discovered!"

Personally, I think history has generally been progressive, but the possibility exists for backsliding. Further complicating matters, things that would be called horrible in the present day could prove to be beneficial hundreds of years down the road (I suggest the Black Death and British Imperialism are good examples).

Honestly, I think we've reached the end of the line as far as "perfecting" (I use the term loosely, people are not perfect and therefore nothing man ever creates will be perfect) governments goes.  Unless something happens that makes all resources infinitely abundant, which is highly unlikely.  Capitalism, with liberal, democratic republican government seems to me to be the best if you look at all the current alternatives.  If anyone can eliminate the scarcity problem, please inform me how to do it.  ;)

[Andrew]

Eventually, and hopefully, the underpaid 3rd world workers working for big corporations will go through what North America went through during the early 1900's. They may form unions and demand better wages and safer work environments. You can expect the government and corporations to try to suppress this movement, just like North America did, but if every worker in those countries worked together on it, the companies can not stop them.

The companies will not move back to industrialized countries, because the wages in 3rd world countries will still be much lower (even if they increase wages, etc).

I'm taking a course called Industrial Relations (Relationship between management and unions). We watched some movies Wednesday about the whole union movement in Canada. But of course it will take time before the entire world become homogenous and such.

I'm just waiting until the corporations move the jobs from Asia to Africa. Where labour will be cheaper once Asia becomes an industrial superpower like the rest of industrial countries.

One reason why the economy has gone from a product or goods to a service industry, is likely due to mechanisation (less need for workers at a plant) and also because labour jobs are being moved to Asia. Services can not be provided in North America from people in Asia, therefor North Americans must fill these jobs. Consumers are also demanding more services. They are doing less of these services themselves, partly because of convenience, and alss because they do not have the "time". They work 40+ hours a week to pay for these services.

Just a thought. Kinda makes me think "slavery" is being brought back in, as people use more and more services that eventually they will be working so that other people can do all the work for them. This would be the average person, not necessarily Super rich people who are already like this. Kind of an oxymoron.

I will be working 40 hours a week so I can get my meals cooked for me (restaurants), my car fixed and tuned (automotive), my house built, everything I have will be done by someone else.

Ramble Ramble...

[garth]

I would call the situation you describe as the division of labor, not slavery.  You can cook your own meals, make your own clothes, etc. if you want.  You don't have to have a car, fancy meals at restaurants, or any of that if you so choose.  Don't want to work 40+ hours a week? Don't do it.  The reason people don't do everything themselves anymore is because the marginal cost of doing so is too high.

As cynical as it may sound, a choice between death and life at subsistence level is still a choice.

I'm all for outsourcing; I think it's a great service to the nation.  By shipping our manufacturing jobs overseas we allow for lower prices (labor costs lowered) which means everybody else's wages are worth more, which means we get more value for less cost.  I don't think its right to discriminate based on occupation by saying "You're a textile worker, so you deserve a subsidy."  People who argue for that are really trying to buy votes.  That said, the government should not promote it with subsidies and/or tariffs.

[Wolf]

I would very much like to continue the discussion of democracy, and the economic relationships, implications, and drives, thereof, but I think that would be going beyond the scope of the topic, I'm not a moderator, but I would be very pleased if one would move all relevant posts to a new topic, or if one of us started one... just to keep the debate going and not interfere with the people who want to talk about WMDs in Iraq.

[Andrew]

That would be the softwood lumber dispute between Canada (although it is tariffs). The WTO has pretty much called it illegal, and yet USA sends it lawyers to waste more time.

I think American farms are heavily subsidized compared to Canadian. Hope the border gets open soon.

But if all of the manufacturing jobs are sent overseas, Americans are out of jobs and then can not afford to buy any products from Asia. Unless the entire working economy transforms completely to a service industry. Like personal mechanics/repair personnel to fix products that break from Asia. ;)

If unemployment increases, there would be a larger amount of people looking for work and so companies in USA would not have to compete for hard working educated workers in America. Wages would stagnate.

Subsidies are probably not a great way to increase competitiveness from the company. They are probably a way for it to get lazy and be inneficient.

EDIT - Splitting thread sounds good.

[Wolf]

Alright, I'm not sure where we were in the other thread, but we can pretty much pick up where we've left off.

I want to address Shaddam's point about democracy being the most perfect system of government given the current economic constraints. Technology, as I think you mentioned, is the only way to change the constraints such that democracy gives way to, communism, I suppose is one example, but not the only one. But, even then, I doubt that. I think that currently the technology and resources exist to meet the needs of all human beings, but certainly not the wants, and certainly not at the standards any Western or even emerging economic power is used to. As a result, I think that despite any innovation in production or resource management, we will still have the accumulation of wealth in the hands of some as opposed to the distrubtion of it amongst all. This is not to say that people will always starve; technology might improve to the point where everyone, at some level, has their basic needs met, or that the economic costs of feeding the third world are significant compared to the benefit of a new labor market. But, I think that capitalism will persist past the point where we get magical technology that eliminates scarcity. Isn't another economic assumption that people are always happier with more as opposed to less? As long as that holds, scarcity really doesn't seem to be an issue. Then, we get back to democracy. Would it change as a result of this technology when capitalism didn't? It may. In fact, economics might dictate whether or not we "regress" in terms of political systems. Feudalism may become the optimum government, or dictatorship, even. I will bet that there are conditions at which a different system becomes the optimum one. Democracy might just have the widest range of use.

[Andrew]

Isn't another economic assumption that people are always happier with more as opposed to less?

Well that is mostly true, but up to a point when people do not want any more. It would depend on the engel curve, and whether the product is inferior, normal or superior (or a combination).

But it is true that most people want more of an item.

[Caid Ivik]

You are opening an interesting topic. Technology surely has an influence on society, but not an ultimate. Inside society are more factors, which cause some tendencies towards a specific political system. Sometimes we can say there is not only tendency, but a true determination (tough I don't use this term voluntarily). In case of threat people call for effectivity in handling material resources and with special use, for example. Democracy lasts only if the nation is composed by democratically thinking people, communism if people are feeling as one with the system and so on. With economics same, it isn't the effect of the political system, but (by same way) of this inner situation of the society.

[Edric O]

Democracy is the most perfect system of government regardless of technology or economics. If we hold happiness as the standard for what is good and suffering as the standard for what is bad, then democracy will always be the best form of government. Allow me to explain: Democracy is based on the principle that government decisions are taken by, or in accordance with, the wishes of the majority of people. Let's say you have a society of 100 people arguing about... for example, the main colour in their new national flag. And let's say 70 people want it to be green, 20 want it to be blue and 10 want it to be white. In a democracy, the decision will be taken by the majority and the flag will be green. As a result, 70 people will be happy and 30 will be unhappy. This is the optimal decision, given the circumstances. A blue flag would have made 20 people happy and 80 unhappy, and a white flag would have made 10 people happy and 90 unhappy.

Basically, any non-democratic system would make less people happy and more people unhappy than in a democracy, and it would therefore be a worse system. Since decisions in a democracy are taken by the largest majority, a democracy will ensure that the largest majority of people are happy. It will keep overall happiness as high as possible and overall suffering as low as possible. It is the utilitarian optimum.

[Edric O]

Well, well, well, this looks interesting!

I'm currently working on a degree in economics and political science...

We have a lot more in common than I would have thought. :) Except, of course, for the fact that you seem to be a Francis Fukuyama-type neoliberal (correct me if I'm wrong, but that's how it seems), whereas I'm a communist.

You made a lot of arguments and claims in this topic that I wish to answer to, but I'm afraid I won't have the time for a larger post until tomorrow. For the moment, I'll start with a small one:

There isn't some massive conspiracy perpetrated by the dreaded "Western World" that is destroying the cultures of the third-world.  In all of these kinds of discussions I think people lose sight of the fact that individuals make choices, and individuals respond to incentives.  Those cultures are being overhauled simply because they cannot compete in providing happiness to their citizens.

Actually, they're being overhauled because those with wealth and power decided to overhaul them, and those without wealth and power don't have too much of a say in the matter. "Happiness", or the welfare of third-world citizens, doesn't have much to do with it at all.

(I'm assuming by "Western Culture" you mean consumer society; the word could have multiple other meanings - for example, if you were talking about democracy, then I agree with you)

If gaining the universal right to vote, a job, massive amounts of affordable consumer goods, and a high standard of living (in other words, the rise from third world to first world) mean the elimination of a backwards culture that promotes intolerance, shuns property rights, and lacks law and order so be it.

For the record, a lot of those backwards cultures are bad precisely because they have too much law and order (being police states and all that), and because they have too many property rights and property-like relations (in the way a husband tends to "own" his wife, for example, or various other types of quasi-slavery).

[Caid Ivik]

Really? And what if people democratically choose a tyranny? And don't argue like "it's against nature", as we have empirical examples here.

[garth]

"Actually, they're being overhauled because those with wealth and power decided to overhaul them, and those without wealth and power don't have too much of a say in the matter. "Happiness", or the welfare of third-world citizens, doesn't have much to do with it at all."

Only individuals make choices, not organizations, countries, or cultures.  Societies fail and are overhauled because they rot from within.  They fail to address the problem of scarcity and the allocation of resources in a free market way.  Individuals always have a say in the matter, they can refuse to buy consumer goods etc. etc.  Decisions are never made by individuals solely for the interest of other individuals, it's contrary to human nature.

"For the record, a lot of those backwards cultures are bad precisely because they have too much law and order (being police states and all that), and because they have too many property rights and property-like relations (in the way a husband tends to "own" his wife, for example, or various other types of quasi-slavery)."

I'm not arguing against law and order, I'm arguing against command and control economies that attempt to control prices through ceilings and floors, tariffs, and subsidies.

"That would be the softwood lumber dispute between Canada (although it is tariffs). The WTO has pretty much called it illegal, and yet USA sends it lawyers to waste more time.

I think American farms are heavily subsidized compared to Canadian. Hope the border gets open soon."

I hope you're right, I'm sick and tired of this mealy-mouthed Bush administration that preaches the virtues of globalization and free trade and then enacts obstructionist policies to defeat them.  :-

"But if all of the manufacturing jobs are sent overseas, Americans are out of jobs and then can not afford to buy any products from Asia. Unless the entire working economy transforms completely to a service industry. Like personal mechanics/repair personnel to fix products that break from Asia."

There are always going to be casualties for an economy in transition, and the short term growing pains will undoubtedly hurt a lot of people.  However, the fall in wages would be followed by a decline in prices so the two would reach equilibrium.  What America needs to do is allow the transition away from labor intensive industries to continue, so incentives will be created for people to seek less strenuous jobs that pay more.

"If unemployment increases, there would be a larger amount of people looking for work and so companies in USA would not have to compete for hard working educated workers in America. Wages would stagnate.

Subsidies are probably not a great way to increase competitiveness from the company. They are probably a way for it to get lazy and be inneficient."

It doesn't matter if wages stagnate so long as prices fall or remain the same.  I agree with you on subsidies though, they create incentives for corporations not to innovate.

[Edric O]

Only individuals make choices, not organizations, countries, or cultures.

Organizations, countries and cultures are made up of individuals. They can make choices just like any group of individuals can make choices. And if the decision-making system of the group in question is democratic, the choices it makes are the aggregate of the individual choices made by its individual members.

Societies fail and are overhauled because they rot from within.

Uh, no. Societies can die and be overhauled for a million reasons, including aggression from outside.

They fail to address the problem of scarcity and the allocation of resources in a free market way.

Hahahahaha - leaving aside the issue of whether the "free market way" is actually desirable or not (it isn't), you seem to be forgetting the history of the past 150 years or so. Democratic countries have moved away from the free-marketeering of the 19th century, and this was done by popular demand.

Individuals always have a say in the matter, they can refuse to buy consumer goods etc. etc.

Yes, they can "choose" to die.

Decisions are never made by individuals solely for the interest of other individuals, it's contrary to human nature.

Bullshit. Individuals make decisions solely for the benefit of other individuals every day. They donate to charity, do volunteer community work, help out a neighbor or a friend, etc. Some people even dedicate their entire lives to helping others - and these people number in the millions worldwide.

"Human nature", in the sense you're talking about it, is a ridiculous myth with no basis in reality. It is proved wrong by historical and social evidence (people help each other without seeking personal gain every day), as well as by scientific evidence (the human genome does not contain any "selfish gene").

I'm not arguing against law and order, I'm arguing against command and control economies that attempt to control prices through ceilings and floors, tariffs, and subsidies.

Just when I thought we could get along after your return to the forum and put those ancient Dune debates behind us, you have to bring up your ultra-capitalist political views and support for neoliberalism... Ah well, so be it. You will find me to be a most ardent defender of planned economics. En garde!

I hope you're right, I'm sick and tired of this mealy-mouthed Bush administration that preaches the virtues of globalization and free trade and then enacts obstructionist policies to defeat them. :-

Yeah, we need Bush's far-right government to be even more right-wing! Let's have more free trade - bring back child labour! ::)

There are always going to be casualties for an economy in transition, and the short term growing pains will undoubtedly hurt a lot of people. However, the fall in wages would be followed by a decline in prices so the two would reach equilibrium. What America needs to do is allow the transition away from labor intensive industries to continue, so incentives will be created for people to seek less strenuous jobs that pay more.

People already have plenty of incentives to seek less strenuous jobs that pay more - the very fact that those jobs are less strenuous and pay more makes them more desirable than jobs that are more strenuous and pay less. The best jobs are always taken first. As a result, if you fire people from the worst jobs, they won't have any better jobs to take (because those were already taken), and they will fall into unemployment.

As for the fall in wages being compensated by the fall in prices, this only holds true as long as prices fall by an amount that is equal to (or greater than) the fall in wages. So far, that hasn't been the case. The buying-power of the average American citizen has been declining for the past 30 years. What has been increasing are corporate profits.

I agree with you on subsidies though, they create incentives for corporations not to innovate.

Ah, if only things were that simple... but they aren't. Subsidies may help keep afloat a company that is making a loss due to some temporary condition (like a bad harvest in the case of agricultural companies), for example. They may also help innovation in the long run by supporting a small company that tries to make inroads into a market dominated by a monopolistic corporation (subsidies for Linux, for example, would stimulate competition in the OS market and thus encourage innovation). And so on and so forth.

[garth]

"Organizations, countries and cultures are made up of individuals. They can make choices just like any group of individuals can make choices. And if the decision-making system of the group in question is democratic, the choices it makes are the aggregate of the individual choices made by its individual members."

Whether it is a government, community, or corporation there is ONLY an individual making a choice somewhere.  Whether it is a board of directors, a Senate, a House, whatever, theyre all made up of people who make choices.  To say that a "country" is making a decision is wholly inaccurate, only PEOPLE make decisions.

"Hahahahaha - leaving aside the issue of whether the "free market way" is actually desirable or not (it isn't), you seem to be forgetting the history of the past 150 years or so. Democratic countries have moved away from the free-marketeering of the 19th century, and this was done by popular demand."

The free market way is desirable because it allows for individual liberty which then allows for the maximum generation of wealth for the most people possible.  Democratic countries have become more socialized in Europe since the 19th century and it was down on popular demand, but the right thing is not always popular and the popular thing is not always right.  Those same European economies are still stagnating to this day, and America is moving towards a more free-market approach to societies problems.  It is not for the government to decide what is or is not a "fair" price, there is NO WAY to empirically do so, whether its a wage or a head of cabbage.  Creating price floors creates surpluses (such as unemployment in the case of the minimum wage).  Price ceilings create shortages by preventing consumers from bidding up the price of a good.  Protectionist tariffs transfer the cost of inefficient industry to the consumers which decreases their purchasing power, decreasing demand, and creating recession.

"Bullshit. Individuals make decisions solely for the benefit of other individuals every day. They donate to charity, do volunteer community work, help out a neighbor or a friend, etc. Some people even dedicate their entire lives to helping others - and these people number in the millions worldwide.

"Human nature", in the sense you're talking about it, is a ridiculous myth with no basis in reality. It is proved wrong by historical and social evidence (people help each other without seeking personal gain every day), as well as by scientific evidence (the human genome does not contain any "selfish gene")."

Absolutely incorrect, you are falling into the trap of thinking that "wealth" means merely money or some other medium of exchange.  Rather, wealth is defined as absolutely anything that people value.  Therefore, when people such as Mother Theresa gave up everything for others she was generating utility/wealth/whatever she valued for HERSELF, thus she was acting in her self-interest.  If I value charity, and I give charity to somebody, then I am acting in my self-interest because the act is generating utility for me.

"Yeah, we need Bush's far-right government to be even more right-wing! Let's have more free trade - bring back child labour!"

Free trade is a liberal idea.  Free Market economics is a liberal idea.  Adam Smith was a product of the Enlightenment, the birth of liberalism.

"As for the fall in wages being compensated by the fall in prices, this only holds true as long as prices fall by an amount that is equal to (or greater than) the fall in wages. So far, that hasn't been the case. The buying-power of the average American citizen has been declining for the past 30 years. What has been increasing are corporate profits."

Incorrect.  The net wealth of Americans has increased exponentially over the past 30 years.  The movement of the DJIA from 3-4,000 to over 11,000 during that time is indicative of this.  Show me numbers that prove what you're talking about (and their source) and I'll dig up my numbers.

"Ah, if only things were that simple... but they aren't. Subsidies may help keep afloat a company that is making a loss due to some temporary condition (like a bad harvest in the case of agricultural companies), for example. They may also help innovation in the long run by supporting a small company that tries to make inroads into a market dominated by a monopolistic corporation (subsidies for Linux, for example, would stimulate competition in the OS market and thus encourage innovation). And so on and so forth."

Subsidies create incentives not to innovate.  If a person or corporation are failing in the free market then they must innovate in order to survive.  Whether a product is superior to another is not something that the government is able to do, self-interested people will make decisions that benefit them first and foremost. The only way to do it freely and fairly to all parties involved is to unleash the forces of markets.  Again, nobody is forced to buy Windows or Linux or any other product, so the idea that there is a big bad corporation (that *GASP* provides thousands of jobs and millions in revenues!) is nothing more than a straw-man.

[garth]

Allow me to correct a misconception...

"Isn't another economic assumption that people are always happier with more as opposed to less? As long as that holds, scarcity really doesn't seem to be an issue."

Nope, people want more of what they value.  That may take the form of a material or it may not.  For instance, some people value banging their heads into the wall, when they do this they are generating utility for themselves (wealth).  That said, scarcity of material will always be a problem with which to contend.

Btw, having two threads on this is really confusing.

[Edric O]

The two topics have been merged. And now for my massive reply to Shaddam's capitalist fundamentalism. (come on, read it all - I promise it's worth it ;) )

Whether it is a government, community, or corporation there is ONLY an individual making a choice somewhere.  Whether it is a board of directors, a Senate, a House, whatever, theyre all made up of people who make choices. To say that a "country" is making a decision is wholly inaccurate, only PEOPLE make decisions.

I hope you realize that you are only arguing semantics here: When someone says that "country X made a decision", OF COURSE he is talking about the government of country X - or, if you want to be even more pedantic, about the PEOPLE in the government of country X.

The free market way is desirable because it allows for individual liberty which then allows for the maximum generation of wealth for the most people possible.

It does neither of those things. Historically, free market countries have always tended to be more tyrannical than the socialist-leaning ones. I give you such examples as present-day Hong Kong (the freest market in the world, according to the Wall Street Journal), Pinochet's Chile, and the whole world in the 19th century. The drive towards democracy and human rights has coincided with a drive towards economic socialization everywhere in the world for the past 150 years, with the only exception being Eastern Europe in the 1990's (although it should be noted that no Eastern European government has ever managed to win a second term in the past 15 years, which shows how "popular" their policies are). As for the maximum generation of wealth for the most people possible, that is only achieved through economic democracy - or in other words, socialism. See my explanation below.

Democratic countries have become more socialized in Europe since the 19th century and it was down on popular demand, but the right thing is not always popular and the popular thing is not always right.

I thought you said that "wealth is defined as absolutely anything that people value". Therefore, by definition, the popular thing IS always the right thing (in economics at least). Whatever the people value - in other words, whatever is popular - counts as a good thing according to your own economic theory. If people value increased socialization and economic democracy (which they do), then THAT is what maximizes their utility, so THAT is what should be implemented as economic policy.

Notice that I have defeated your free market theory using this point alone: Since wealth is defined as anything the people value, economic decisions should be taken according to the wishes of the people. A democratic system should be used to solve the fundamental problem of economics - in other words, to determine what to produce, how to produce, and how to distribute what is produced. And such a system of economic democracy is the essence of socialism.

Those same European economies are still stagnating to this day, and America is moving towards a more free-market approach to societies problems.

As it just so happens, the European Union is the largest economy in the world. And although it is growing slower than the economy of the United States, nearly all indicators of living standards are better in Europe than in the United States (including income equality, percentage of families owning their own home, average debts and savings, size of the middle class, the poverty level, the crime rate, etc. - see the source I cite further down). You see, as you so eloquently pointed out somewhere else, simply having "more stuff" is not enough to make people happy. Not only that, but it can be very misleading to look at a global economic statistic, because it doesn't show how wealth is distributed among the population and how people are doing in terms of concrete, everyday life. That's where the more detailed statistics come in.

It is not for the government to decide what is or is not a "fair" price, there is NO WAY to empirically do so, whether its a wage or a head of cabbage.  Creating price floors creates surpluses (such as unemployment in the case of the minimum wage).  Price ceilings create shortages by preventing consumers from bidding up the price of a good.  Protectionist tariffs transfer the cost of inefficient industry to the consumers which decreases their purchasing power, decreasing demand, and creating recession.

It is for the people to decide what kind of government they wish to have, and it is for that government to decide economic policy, including prices. If the people are dissatisfied with a government's economic policy, they can change it. If the people are satisfied with it, then a "fair price" has been achieved.

In a market economy, price floors and ceilings have their negative side effects, of course, just like all economic decisions. Everything is a trade-off - or, in other words, everything has an opportunity cost. But the benefits of the minimum wage, for example, far outweigh its side effects. When wages are down to a level where a worker needs to toil for 12 hours a day, 7 days a week just to stay alive - as was the case with most workers in the 19th century - then creating a minimum wage is an immensely good thing. The idea is to force employers to drive up wages by cutting down on their own outrageous profits. Some of them might try to keep the same profits by hiring a lower number of more productive workers rather than the previous higher number of less productive workers - and thus cause the unemployment you were talking about - but this would be almost impossible for the employer to achieve in any reasonable amount of time, since productive workers don't just grow like mushrooms overnight. If there were no better workers on the labour market before the minimum wage was implemented, they won't just magically appear after the minimum wage kicks in. Therefore, employers won't be able to ensure higher wages by cutting down on their numbers of workers. They'll have to ensure higher wages by cutting down on their profits, and unemployment will not grow.

Regarding your other points, price ceilings may be used to keep a vital good available to the poor, and protectionist tariffs, as their name implies, may be used to prevent foreign companies from taking over a local market and creating a monopoly or oligopoly (in more general terms, supporting inefficient industry is sometimes necessary in order to keep the efficient industry efficient by providing it with competition).

Absolutely incorrect, you are falling into the trap of thinking that "wealth" means merely money or some other medium of exchange.  Rather, wealth is defined as absolutely anything that people value.

First of all, notice how that very point - the fact that wealth is defined as absolutely anything that people value - can be used to smash free market theory and prove that economic democracy (socialism) is the optimum economic system. Second of all, regarding human nature, see below:

Therefore, when people such as Mother Theresa gave up everything for others she was generating utility/wealth/whatever she valued for HERSELF, thus she was acting in her self-interest.  If I value charity, and I give charity to somebody, then I am acting in my self-interest because the act is generating utility for me.

Ah, I was expecting you to fall into that fallacy. For your information, that definition of "self-interest" is unscientific, because it is non-falsifiable (you define "self-interest" in such a way as to cover every possible human action, making the concept itself worthless), and because the "good feeling" you get from charity can't be measured in any objective way.

Furthermore, your argument is circular: "When people take an action, that means they value that action. Therefore, people only take an action if they value it".

Free trade is a liberal idea.  Free Market economics is a liberal idea.  Adam Smith was a product of the Enlightenment, the birth of liberalism.

And your point is...? You should be aware that the United States is the only country in the world where left-wingers mistakingly call themselves "liberals". The Left stands for the values of Equality, Democracy, and Social Justice. Neither of these was supported much by the classical liberals. It is true, however, that the present-day Left grew from the 19th century socialist movement, which in turn grew from the liberalism embodied by the French Revolution. So liberalism can be considered an ancestor of the Left, but this ancestor has remained far behind the present-day Left and now stands squarely on the Right.

Classical conservatism - the ideology of the feudal aristocracy and of traditional monarchy - now stands discredited and utterly defeated. I look forward to the day when classical liberalism will join it in the museum of political dinosaurs. Here's a toast to the victory of socialism!

I have a soft spot for Adam Smith, though. After all, along with David Ricardo, he was the one who created the Labour Theory of Value, which Karl Marx later expanded. And Smith makes a huge number of excellent points, such as:

"All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind."

-- Adam Smith, The Wealth of Nations

"The rate of profit... is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin."

-- Adam Smith, The Wealth Of Nations

Incorrect.  The net wealth of Americans has increased exponentially over the past 30 years.  The movement of the DJIA from 3-4,000 to over 11,000 during that time is indicative of this.  Show me numbers that prove what you're talking about (and their source) and I'll dig up my numbers.

You should be measuring the net wealth of Americans in real wages (purchasing power) and standards of living, not in the Dow Jones. As for my sources, click here for a flood of economic statistics comparing the US with other industrialized countries.

Subsidies create incentives not to innovate.  If a person or corporation are failing in the free market then they must innovate in order to survive.  Whether a product is superior to another is not something that the government is able to do, self-interested people will make decisions that benefit them first and foremost. The only way to do it freely and fairly to all parties involved is to unleash the forces of markets.  Again, nobody is forced to buy Windows or Linux or any other product, so the idea that there is a big bad corporation (that *GASP* provides thousands of jobs and millions in revenues!) is nothing more than a straw-man.

Your free market fundamentalism seems to get in the way of your common sense. You are aware of the fact that a monopoly or a quasi-monopoly (such as a single company owning 90% of the market for a certain type of product) will lead to inefficiency because the company in question will have no incentive to innovate or even keep its services above a bare minimum, yes? This is one of the many types of MARKET FAILURE. Now, if the government helps a smaller company to get a foothold in that monopolistic market by subsidizing it, that will force the larger company to start innovating again by providing it with some real competition.