Suppose you could create a system to compete with capitalism. What would it be like?
At least in America, many of the wealthy are able to make money due to inherited resources that they did not earn. For example, their ancestors claimed a tract of land or access to a natural resource. Therefore, Capitalism could be brought more in line with the meritocracy that it claims to be if we taxed on the unimproved value of these resources and potentially on profit gained by rent seeking
Capitalism claims the revolve around people freely exchanging their labor for pay. However, since most people do not have access to the resources or capital to support themselves (often due to the resources already having been claimed by someone else's ancestors) they aren't really entering into the exchange freely. Therefore, Capitalism could be brought more in line with its stated libertarian principles by using the proceeds of the previously mentioned taxes to provide people without those resources with the ability to support themselves independently. This could potentially take the form of capital grants, education, farm land. If it weren't possible to actually give people a reasonable opportunity to support themselves, then a guaranteed minimum income could also address the issue (although I don't think its as good of a solution).
The american dream is alive and well. I work with many many immigrants and their children all of whom put themselves on the path to success. The fact is most 'americans' whose families have been here for many generations are completely lazy and entitled. They want privileges they have not yet earned that they enjoyed while living with mom and dad.
The monopolies generally aren't obvious. For example, we have three major car companies, but they all get their parts from the same suppliers. In 2009 Ford asked Congress to bail out Chrysler and GM, because if either of them went down, so would Ford's suppliers.
So the new system doesn't have to actually be better overall than capitalism, it just needs to provide some competition to light a fire under policy makers.
The countries that have hit stagnation, other than the US, tend to build good public infrastructure. This pumps money into the economy, but not through the banks.
Exactly. This led to much government regulation to keep big business from getting too heavy-handed. See the previous price discussion on insulin pricing for a modern example. Although drug prices have not been regulated, until recently there was an assumption that blatant overcharging would lead to government action. It didn't.
Unions used to have much more power in the US. They had money and votes. Business only had money, and couldn't use it directly without being accused of bribery.
Many little, and not so little, restrictions that used to keep businesses from getting too greedy have been removed in recent decades. Glass-Stegall, which kept banks and brokerages separate. Far fewer restrictions on banks. The removal of the restriction on "gambling" in stock markets, which limited derivatives. Allowing interstate branch banking. Repeal of the Utility Company Holding Act. The NYSE allowing multiple classes of stock (like Facebook, Google, etc.). Weakened telecom regulation. Weakened labor law enforcement. Unregistered hedge funds. Pension funds being allowed to invest in hedge funds. The Interstate Commerce Commission. The Civil Aeronautics Board. The list goes on.
Until you run into a hard wall trying to integrate new features that customers request which break the entire system and before you know it, you're still running on C# 3 while all of the other APIs and companies have long upgraded to C# 8 (or switched languages altogether). Then your wildfire turns into a firestorm and your customers start calling in.
And they're pissed.
The EU has a study which I cited in a previous posting indicating that price competition requires four substantial sellers. One is a monopoly, two tend to implicitly cooperate as a duopoly, sometimes there's competition with three but often two of those dominate as a duopoly, but with four, price competition usually appears. It takes at least four players to have a free market.
So, less than four players in a market, and Government constraints kick in. Breakups, blocks on mergers, restrictions on expansion, higher taxes and closer scrutiny for the top 3. The US used to do stuff like that. The EU now does.
Now that's a free market.
Capitalism is fine but this is not capitalism.
If anything, less so than the 19th Century form for which the word “capitalism” was coined. Capitalism has never been anything but deeply corrupted.
The economic system that causes people to work harder will win. To be a challenger to capitalism you need to be serious about getting people to work, and not dream about a society where 90% of people are in the leisure class. Such a society would be defeated by capitalism again.
So how do you get people to work? Such a system must respect private property rights. You're DOA if you don't.
The main flaw in capitalism is in the name: it's a legal system that favors capital. Given that the holders of capital are few, this is a massive market distortion. What is an "undistorted" market? If your cost function is getting more people to work so that your society is more efficacious, and we know that most people are in the middle along whatever dimension you measure, then a system that favors the middle - because that's where the people are - rather than the right tail is better. The US briefly had such a system in the postwar era.
Some may argue that because the right tail individuals are more talented, we should just keep rewarding them as they are more efficient. That ignores that these people's time is limited, and at some point you get diminishing returns. We are way past that point.
How do you favor the middle? The middle plays by the rules, so you need to enforce those rules and prevent elites from changing those rules. This means first and foremost campaign finance reform, up to and including public funding of political campaigns and a ban on political donations.
This is the hard part. The middle will never be as politically savvy and engaged as the elites. For the middle, the political system is exogenous. Thus making it as exogenous as possible for the elites is necessary.
A middle class society can defeat an elitist society because it mobilizes more people. Parliament defeated the king.
We need to stop obsessing about the modern right-left divide that has been in place since Marx first appeared. Marx got it wrong by focusing on exploitation of one class extreme by its opposite class extreme. He should have been thinking about maximum middle class mobilization if he wanted to replace capitalism.
Instead use our knowledge of the normal distribution of human ability to empower the middle where most people are. This may be a tough pill to swallow, but we need to accept that political engagement is not the middle class's strength. Therefore the more intrusive politics becomes, the more the middle gets sidelined by those who are adept at politics, whatever their alignment.
Democracy is a fabulous way to empower the middle class, since the middle class is numerous. We need more democracy, not less, and that democracy should be more expansive and not "guided" by bureaucracy. This is a huge blind spot among a certain set nowadays.
A market economy and a political system that favors the middle class over both the first and fourth quartiles could defeat our current system. Maybe you still call that capitalism... that's just a label to me.
That's pretty much been proven by Ch1na.