Interested to know which statistics you based this opinion of the US economy being "quite healthy" on. Anything deeper than top level unemployment rate?
Or because it uses its huge military might to make sure it is so.
Of course. The market only cares for the bottom end.
I'm saying it though for those pretending the market is some victimless activity, that's not about power at all, etc, and "hard working people" (and countries) prevail.
The USD enjoys an unfair competitive advantage over its peers and this distorts the financial markets immensely and more importantly the balance of power in international relations esp. in times of political crises and military conflicts.
The point is that "undesirable wealth distribution" is not what an economic crisis is. If 400 people controlled everything, the world wouldn't be a great place to live, but the economy would probably be more stable.
There's plenty of reason to believe in proletarian revolution [0] as a thing that happens, whether or not one believes in it as a thing which is an ideologically desirable response to certain conditions.
[0] At least, revolution in which the lower classes are actively involved and where their dissatisfaction is a key lever used by the revolutionary leadership, even if the leadership itself is often from disaffected factions of the elites, either in government, military, academia, or private wealth.
Labor force participation is also garbage. Savings rates are a bit moot when tons of people are living paycheck to paycheck, also.
It's not 2007-2008, but it's not quite 1998 either.
What are you going on about? If capitalism is a race to the bottom, we would have reached it a long time ago.
Capitalism isn't new. It's been around for a while.
Modern social democratic states wouldn't exist without it.
You might want to understand what the word means before running down a political system you seem to know nothing about.
As for abject poverty - there's more of that around than ever. Just because you choose to ignore it doesn't mean it's not there.
And after this week, there's more on the way, too.
As for extreme poverty, China has seen a 90% reduction in extreme poverty since 1981, and India has seen a 60% reduction since 1981, and Sub-Saharan Africa has seen a 12%. The Indian and Chinese reductions coincided with a relaxation on state owned industry and introduction of free market economic policies.
Hate the corruption, hate the corporatism, but according to the world bank (and nearly every other NGO), capitalism has reduced human misery on this planet like no other force.
Social ownership != state ownership. That's only one manifestation of it. Socialism has historically been about common ownership, which implies decentralized, democratically structured worker cooperatives. One existing example today is Mondragon.
That would be Communism, a very extreme form of Socialism. Many countries in Europe are very Socialist.
The commons is a very old concept in Europe. In the UK for example common ownership of agricultural land was the norm until the tragedy of the commons in the early/mid 1800's.
Today Europe is largely a social democracy which aims to walk the line between socialism and capitalism. Again social ownership of the means of production does not necessarily mean state ownership. As vezzy-fnord pointed out Mondragon is a cooperative who came about from the anti-Franco socialist movement in Spain in the mid 1900's. This is most definitely a socialist philosophy operating within a capitalist framework.
Socialism has had a major impact on European politics. The Nordic countries have an immensely strong welfare states due to this, the labour party in the UK (the blip of Tony Blair is an anomaly and they are swinging back to the left now), Sinn Fein (IRA political wing) in Ireland, François Hollande's Socialist party etc etc. Sure Europe operates within a capitalist framework but there is not such a fervent religious belief in unbridled capitalism as one would find in the States. All one needs to do is look at all the anti-trust lawsuits we have in the EU, against the likes of Google and Microsoft, to see how Socialist philosophy manifests itself in contemporary times.
Since when is Lenin an authority on communism? He was a thug, same as Stalin.
> cottage industries (local farmers and makers etc) existing and operating in a free market.
To his credit, they did do some very interesting things in the 20s. Then Stalin came to power and that ended.
> Again social ownership of the means of production does not necessarily mean state ownership.
Yes, it does.
The USSR was NEVER communist. United Soviet SOCIALIST Republics.
It was a truly socialist state. All the means of production were state controlled, but private property did exist.
The GOAL was to eventually reach communism.
> Today Europe is largely a social democracy which aims to walk the line between socialism and capitalism.
Ok, but the line between socialism and capitalism isn't socialism. As previously mentioned, a welfare state seems a more apt description.
> Socialism has had a major impact on European politics.
Agreed.
> there is not such a fervent religious belief in unbridled capitalism as one would find in the States
There is no "fervent religious belief in unbridled capitalism" in the US. Zero.
Capitalism is a mixture of free market and government subsidy. The government doesn't manufacture anything, but does get heavily involved in the markets through subsidies, regulations, financial instruments, outright purchases of goods, etc. Generally a 70/30 split is considered the norm, where 30% of all market activity is government controlled.
Nobody is excited over this.
There is a "fervent" belief in the free market and the idea that capitalism isn't ideal and that we should tweak that split and reduce government involvement. That we should move toward a free market. That gets people excited.
Serious question. How is this any different than unbridled capitalism? No government involvement and a laissez-faire approach to the market is exactly what unbridled capitalism looks like in my understanding.
Just because Socialism is in the name USSR doesn't necessarily mean anything. If we are to look at the name Nazi which was the National Socialists Party and their Italian counterpart was a major proponent (even father of) of Corporatism, a rather extreme form of capitalism (though in the case of USSR it might be true, as I said earlier Communism is a form of Socialism).
The Welfare State has it's roots in Socialism. Socialism is an umbrella term. Anarchism is a main branch of Socialism (the other two being reformism and Marxism) and to be fair extreme Anarchists don't want a State at all so Socialism cannot and does not mean State ownership. This is one of the major confusions into what Socialism means and kills any possible meaningful discussion around the topic, especially in the USA where Communism and Socialism are used interchangeably. The spectrum of allowable political ideology in the USA is so narrow that only center-right and far-right exist. This is a very unhealthy situation as there are great ideas to be found from across the political spectrum. Just to be clear I'm not saying this to say Europe is better or anything but I do find it an unfortunate state of affairs.
Also Lenin didn't kill 50m+ people just because he was paranoid. You can't lump them together. Stalin was arguably worse than Hitler. While Lenin was certainly not a saint, he was an intellectual with brilliant ideas, operating in an extremely difficult environment.
If you are so attached to ideology, rather than the results those ideologies bring, we can't have a serious conversation.
> Serious question. How is this any different than unbridled capitalism?
"Unbridled capitalism", no matter how unrestrained, denotes heavy government involvement by virtue of the second word in there.
> No government involvement and a laissez-faire approach to the market is exactly what unbridled capitalism looks like in my understanding.
Your understanding is wrong.
Capitalism requires the accumulation of substantial capital in private hands and its application. And not just any hands, very specific hands, where that capital is magnified.
You can't have that kind of distribution and application of capital without government involvement.
Eminent domain, government contracts, grants, regulations, etc. all direct the flow of capital to the few individuals blessed to wield it.
In short, the government controls and directs the flow of capital. That's capitalism.
> Just because Socialism is in the name USSR doesn't necessarily mean anything.
Yes, it does. It means those who were at the center of the creation of the state saw the enterprise as a socialist one. Even your friend Lenin.
> If we are to look at the name Nazi which was the National Socialists Party and their Italian counterpart was a major proponent (even father of) of Corporatism, a rather extreme form of capitalism
https://en.wikipedia.org/wiki/Nazism#Economics
"Nazis also promised social policies like a national labour service, state-provided health care, guaranteed pensions, and an agrarian settlement program."
"To tie farmers to their land, selling agricultural land was prohibited."
"Farm ownership was nominally private, but business monopoly rights were granted to marketing boards to control production and prices with a quota system."
Sounds like state controlled means of production to me. I can go on, but you get the point. They were clearly socialist.
> The Welfare State has it's roots in Socialism.
Yes.
> Socialism is an umbrella term.
No. We defined it a few posts above.
> Anarchism is a main branch of Socialism > to be fair extreme Anarchists don't want a State at all so Socialism cannot and does not mean State ownership
You're skipping steps there. Socialism -> Communism -> Anarchism.
Communists aren't fans of government either. They believe(d) that once all private property is out of the picture, there would be no need for government, since there would be no disputes over private property to mediate ... which would lead to a state without government. Leading to anarchism.
> his is one of the major confusions into what Socialism means and kills any possible meaningful discussion around the topic, especially in the USA where Communism and Socialism are used interchangeably.
What? The front-runner for the Democratic nomination openly calls himself a socialist ... that's clearly not true.
> Also Lenin didn't kill 50m+ people just because he was paranoid. You can't lump them together.
https://en.wikipedia.org/wiki/Vladimir_Lenin#Red_Terror
Ok, so he didn't kill 50m+, maybe 1m?
How do you differentiate between a thug who was responsible for the murder of 50m and one for who was responsible for 1m?
> While Lenin was certainly not a saint, he was an intellectual with brilliant ideas, operating in an extremely difficult environment.
I'm glad to hear he's your hero, but at the end, he's just another murderer. An honest, decent man wouldn't be capable of what he did.
Being intelligent, well spoken, even brilliant ... doesn't excuse you from being a shitty human being.
Stalin was also quite brilliant. That doesn't excuse him either.
Only for a long time it had internal pressure (workers demands) and external pressure (the Cold war etc). Else we'd be still with child labor, 14 hours work day and such...
It's funny that for something supposedly pragmatic and empirical, as capitalism, there are people invoking the "no true capitalism" defense.
I mean when they say that in "true capitalism" the government would not interfere and the market would adjust itself etc, where in real life (and in all know historical cases), the government is in the pockets of powerful moguls and big business lobbys).
This is hugely disingenuous. It's about as fair as crying "no true socialism" if someone were to say "moving towards socialism leads to mass famine! Just look at Mao!".
I think part of what makes conversations like this so frustrating for everyone involved is that people are using vastly different definitions. Those decrying capitalism are usually defining "socialism" as a mixed-market economy and capitalism as an unfettered "pure" Randian market economy. (In conversations critical of socialism, you usually see the opposite dynamic).
The fact of the matter is that mixed-market economies are basically ubiquitous at this point, and for good reason. It's a lot easier to find a common understanding on which to debate when everyone is clear what the actual disagreement is: the market is good at certain things and bad at others, and gov't action is a sensible alternative in the areas it's better at (of which there are quite a few, not least dealing with externalities) or a damaging hindrance in the areas where it's worse than the market mechanism (explicitly setting prices, in most cases). The disagreement is over which things go in which category, which is a far less flame-baity way of thinking of it than "capitalism/socialism is just bad!".
I don't think that's actually true[1]:
>Two German microeconomists tested the “widely accepted” hypothesis that “prices in a planned economy are arbitrarily set exchange ratios without any relation to relative scarcities or economic valuations [whereas] capitalist market prices are close to equilibrium levels.” They employed a technique that analyzes the distribution of an economy’s inputs among industries to measure how far the pattern diverges from that which would be expected to prevail under perfectly optimal neoclassical prices. Examining East German and West German data from 1987, they arrived at an “astonishing result”: the divergence was 16.1% in the West and 16.5% in the East, a trivial difference. The gap in the West’s favor, they wrote, was greatest in the manufacturing sectors, where something like competitive conditions may have existed. But in the bulk of the West German economy — which was then being hailed globally as Modell Deutschland — monopolies, taxes, subsidies, and so on actually left its price structure further from the “efficient” optimum than in the moribund Communist system behind the Berlin Wall.
Or in other words, mixed economies can easily operate just as far from the Efficient Market Hypothesis as centrally-planned economies. The Efficient Market Hypothesis should probably be considered more like a Carnot engine than like a real internal combustion engine: some substantial degree of inefficiency is probably an inevitable result of operating in the real world.
[1] -- https://www.jacobinmag.com/2012/12/the-red-and-the-black/
That's a specious conclusion; the paper explicitly says that the inefficiency is due to the degree of management present in West Germany, which was significant.
It's not like the EMH says the market prices are theoretically perfect; it only says they're better than whatever individual or group can calculate. And the paper you cite provides evidence for that.
"To sum up, the unexpected similarity of overall deviance between actual prices and eigenprices in East and West does not warrant the conclusion that East German pricing behaviour was not so bad after all and more or less guided by relative scarcities. In those sectors where market forces prevail in the West, East German actual prices deviate significantly more from eigenprices. However, the similarity of the overall indicator testifies to the fact that a sizeable part of West German GNP is not produced under competitive market conditions. It obviously is the case in sectors with predominant public ownership rights and strong government influence."
(Emphasis mine)
https://www.europa-uni.de/de/forschung/institut/institut_fit...
This isn't really contradicting what I said. As they say, the gap in the West's favor was greatest in the places where the market was relied upon in contrast to a system full of "monopolies, taxes, and subsidies". Neither West Germany nor East Germany had particularly market-oriented economies.
To wit, the market mechanism efficiently provides a price level but that doesn't mean you can't mess it up by poorly planned gov't intervention in the economy (and to be clear, I mean "gov't intervention that is poorly planned", not that gov't intervention is per se ill-advised).
I don't mean to be snarky or sarcastic, I'm just generally uninformed and would like to develop a more nuanced opinion.
Debt to Income- yes everyone and their dog walker is not out there buying condos hoping to flip them in 3 years, so we are less leveraged than we were. Hard to tell how much of this is because people have more money coming in or are more responsible having just gotten burned 7 years ago.
Capitalization of Companies-- well we've had significant monetary inflation, have you accounted for that? Ok, now have you accounted for that using the real money supply?
Productiivty- this is the result of technology, should continue to increase.
Oil Prices- Oil prices are shockingly low, especially when you account for inflation. This is good as energy drives the economy... but it hasn't been this way long enough to see real economic effects that are lasting, yet.
Savings Rates-- well, compared to 2006 when everyone was leveraged to the hilt to buy just one more condo, sure they are better. But are they actually good?
Housing Prices-- "healthy" is also what they said in 2006. The monetary inflation that drove the housing bubble in 2000-2008 was only amped up after 2008. The spigot is open even wider now, and while we're clearly not in the mania we were in 2006, it's not obvious that these prices aren't also.... quite artificial.
I'd like a stat that was EBIDTA of the S&P 500, inflation adjusted against the real money supply, over the past 30 years. I think that would be a good indicator.
Do you honestly think you're expressing a different opinion by stating that everything is mostly bad? I'd say you're comfortably in the internet majority.
>I'd like a stat that was EBIDTA of the S&P 500, inflation adjusted against the real money supply, over the past 30 years.
Okay:
I think the background idea is that "real inflation" = "change in the real money supply". But that's wrong, because the economy changes size, too. That is, if I start a company and make some stuff, the economy is now bigger than it was. If the number of dollars doesn't increase, then the value of each dollar has to increase, so prices go down - deflation. What the Fed is trying to do is keep the value of the dollar (relatively) constant, rather than keep the number of dollars constant.
So I think MCRed's request (to the degree that it differed from your answer) is based on a mistaken idea...
Well they're higher now than they were 15 years ago:
https://research.stlouisfed.org/fred2/series/PSAVERT
and just slightly off the average over the last two contractions (highlighted in gray).
The unemployment rate is a juked stat; check out the labor force participation rates if you want the full story. A primer: labor force participation got smashed in the Great Financial Crisis, and still hasn't recovered.
[1] http://data.bls.gov/timeseries/LNS11300000
[2] Lost of baby boomers retiring and Gen X being such a small demo compared to the boomers and the millennials.
Millenials are a far larger generation than the boomers, and are rapidly leaving college and attempting to enter the workforce-- 100% of them are trying to enter the workforce at the same time, immediately after graduation day. The fact that labor participation rates haven't stabilized or even increased in response to their population level attempts to enter the workforce shows that there really are not enough jobs to go around.
Jobs lost in the early depression haven't returned, and there are many more people out and about looking for them now than there were before. Boomers are retiring, but their children are desperate to take their place, which isn't actually possible.
I'm not sure the data bears this out. If they're looking they're in the labor force, and we'd see a commensurate rise in unemployment for age groups 20-24. That's clearly not the case, as unemployment is down ~1.5% for that demo since mid-2014:
http://www.bls.gov/web/empsit/cpseea10.htm
I don't have demo-level participation data available but that would clarify whether rates are lower bc of millenial LF dropout or millenial employment success.
Depends on your definition of "far larger".
- The Millennial cohort is 83.1 million
- The Boomer cohort is 75.4 million, 90% the size of the Millennials.
Source: https://www.census.gov/newsroom/press-releases/2015/cb15-113...
There are actually more jobs now then there were in 2005:
- January 2005: 132,752,000
- January 2015: 140,793,000
Source: http://data.bls.gov/pdq/SurveyOutputServlet?request_action=w...
Obviously the _type_ of jobs have changed, and this doesn't factor in population growth directly, but I don't think the statement "jobs lost in the early depression haven't returned" isn't grounded in the data.
To be more accurate, when you look at the propaganda spewed by the mainstream media, everything seems to be fine, because they keep spinning everything in a positive light.
In the US, for starters, there's a huge bubble in stocks, and an echo bubble in housing. There's a massive property bubble in Canada and Australia, and so on.
With interest rates already at roughly zero, they don't have room for lowering them to "stimulate" the economy (to avoid the inevitable crash that's coming).
Of course, getting people to spend money they don't have and businesses to start projects they shouldn't, isn't exactly good for the economy but hey.. whatever keeps the show going for a while longer.
(Downvoters? It's at the very least possible that you just don't know that I'm right.. :) Do your homework, but not from mainstream media sources)
So when you point out that the king has no clothes, naturally you get downvoted.
The current mess of the US economy is due to the choices of many politicians, in congress and the presidency, from both parties. Neither party should get a passing grade in this regard.
This is why we need the government out of the economy, and let it work. Hell if it weren't for government the bad banks would have failed in 2008-- and we would have had a real recovery afterwards.
Don't pay much attention to the political circus though, the false choice between "Demopublicans". That's all smoke and mirrors to make you think you have a say in how you're "governed" (i.e. coerced).
> The current mess of the US economy is due to the choices of many politicians, in congress and the presidency, from both parties.
It's much deeper than that. The dollar was detached from the gold standard in 1971, and that was the beginning of "the real end". Before that, the establishment of the Federal Reserve in 1913 set the scene for all the economic trouble to come, and so on. Check out: https://www.youtube.com/watch?v=5IJeemTQ7Vk
> This is why we need the government out of the economy, and let it work.
You're on the right track, but take it further. We need the government out of existence: https://www.youtube.com/watch?v=ngpsJKQR_ZE .. it is based on extortion, after all.
What maintains governments is the belief in political authority: http://spot.colorado.edu/~huemer/Contents.pdf
> Hell if it weren't for government the bad banks would have failed in 2008-- and we would have had a real recovery afterwards.
That's certainly true.
We would - but at the price of a much worse crash. (Which doesn't mean that the result, today, would have been any better - the further down the bottom was, the better the recovery has to be to reach the same point.)
It's because of our system of government. This talk about the government being the problem, causing harm to the economy, really irritates me - the American economy owes its very existence to the American government and the private property protections it offers in the forms of regulations, legal system, social welfare programs, public education, military, etc etc etc.
If you can't stomach the sausage making in the US without losing respect for all the greatness it permits, just stop paying attention and vote for whoever says what feels right, that's the American way.
Your italicized real recovery sounds like another adrenaline boost in the arm, rather than the robust, sustainable recovery that is actually occurring.
I'm not taking any position against your overall point, and I do think there are many (relatively) uniquely American policies that historically have paid wonderful dividends; but you're vastly underestimating the exogenous geographic advantages of America (and I'm not sure if you're doing this, but most people tend to overestimate how long global American hegemony has existed).
We're sitting on 50% of the world's navigable internal waterways, overlaid over by the world's largest piece of contiguous farmland[1]. We've got ports that allow easy direct shipping access to most of the rest of the world's economy (Western Europe and China/Japan/India; We also have easy direct shipping access to South America and Africa, but those have naturally been less important). We've got enormous natural borders with the rest of the powers that were most recently useful in the fact that we've had the luxury of staying out of the incredibly catastrophic wars of the rest of the world more or less until we decided to enter[2] (and to the degree that we decide to enter). Those also enabled us to escape essentially 100% of the physical destruction of those wars.
[1] https://www.stratfor.com/analysis/geopolitics-united-states-... This is an excellent article with a lot more depth than the couple of stats I referenced; there's also a part 2 that I recommend reading.
[2] Obviously less true for Pearl Harbor, but still true to an extent: consider the impact of a surprise attack for Germany -> France as opposed to for Japan -> US. Crossing the Pacific is infinitely harder than crossing Belgium.
> It's because of our system of government.
No, it's because of the relative freedom you enjoyed in the past. Strangely enough, the less of the fruits of people's labour you forcefully take away from them, the more motivated they are to produce.
The easier it is to do business, the more business will be done. Go figure.
There's a reason people were flocking to America from all over the world, and it wasn't to get horribly oppressed by filthy capitalist "Robber Barons".
I mean, if you at least supplied some links to the data that you think support your view, that would make for a much more worthwhile post.
The median PE ratio of S&P 500 stocks at the moment is $14. That's certainly not "bubble" territory. The current market correction is surprising nobody, but I don't think many people consider this a bubble (at least for the US markets).
Now there are certainly subsectors within the US that could be in bubble territory and could get hit really hard... unrealistically valued tech stocks being one of them. But again, across the whole US economy things are alright.
S&P 500 P/E ratio was (until last week) around 19. The more accurate Shiller P/E was closer to 27.
Way above the historical median.
http://www.bloomberg.com/news/articles/2015-06-26/the-s-p-50...