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Comment by eftpotrm | Hacker News Reader

It's also worth noting, though, that the fall-out of this cost Porsche dearly:

In its efforts to acquire a majority holding in Volkswagen AG, Porsche built up a large debt burden, aggravated by taxes due on very large paper profits from Volkswagen AG options. By July 2009, Porsche was faced with debts exceeding 10 billion euros. The supervisory board of Porsche finally agreed to a number of arrangements whereby the Qatar Investment Authority would inject a large amount of capital, and Porsche would be merged with Volkswagen Group. On 23 July 2009, Michael Macht was appointed CEO, to replace Wendelin Wiedeking, who is expected to receive a compensation package of 50 million euros.

http://en.wikipedia.org/wiki/Porsche#Corporate_restructuring

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Everybody loses! A paragon of free-market efficiency!

Except the Qatari royal family. Remember, capitalism leads to freedom!

No, freedom is a requirement for capitalism.

That must be why the Qatari royal family is so good at it.

I thought Friedman argued they were intertwined, and that capitalism created freedom in many cases, but I haven't actually read his book.

He may be partially correct, however I suspect that Friedman doesn't really care all that much about the rights most reasonable people appreciate.

I can reasonably see it producing some limited sorts of freedom, but (as an example) how would it produce equal rights for homosexuals?

sentence that china holds very near its heart.

Another counter example is Singapore.

Capitalism without the presence of (a set of) freedoms is not really capitalism, no matter who calls it that.

Now mind, you don't need several of the freedoms people in the civilized world generally like to enjoy for capitalism to exist. Freedom of religion is largely irrelevant to capitalism (so far as the state religion doesn't become a dominate market force...). Basically all you need is some form of property rights, the right to enter and exit markets, and some subset of freedom of expression (basically the right to say "[Product] sucks.")

Not many True Scotsmen around here either, dang.

It's not a true Scotsmen fallacy to have a tight definition. 'Capitalism' proper may very well be the thing of fairy tales, similar to Socialism proper. It's a philosophical concept, it need not be obtainable.

I think there are a number countries that defy what you are saying here.

Sounds like a True Scotsman.

I don't know of a single jurisdiction that I would call a capitalism. Even the US has socialism mixed in. And for the record, I consider this to be a good thing.don't think I would want to live in a purely capitalist area. I

I've heard Hong Kong was or is a pure capitalist society, but I don't know enough about Hong Kong to evaluate that.

"Pure Capitalism"... Does it need to be cited? (again!?)

http://en.wikipedia.org/wiki/No_true_Scotsman

Just because you cannot construct a perfect circle in the real world does not mean that mathmeticians are guilty of a logical fallacy. I am suggesting that capitalism is something the world has never seen outside of approximations, and that anything more is likely impossible.

Unicorns don't exist either but that doesn't mean that you can go cry logical fallacy if somebody says a horse with a horn pasted to it's head isn't one.

Scotsmem of course do actually exist...

You don't seem to have read my comments for comprehension though, so it's not surprising that you're getting hung up here...

If (pure) capitalism has never existed then Marx/Engels would have never written Capitol nor come up with The Communist Manifesto. It was a direct response to what they saw as the failings of capitalism (as in the real thing happening in the world around them, not the concept of it).

To try and argue it is not "True Capitalism" is just BS, and lets you get out of justifying anything you say. "oh I only meant Pure Capitalism, so whatever you say doesn't apply to that" --- It is complete True Scotsman, regardless how much you don't like it.

Freedoms have very little to do with capitalism. It is about private ownership vs government ownership. The right/privilege of ownership doesn't have to apply to everyone either (and thus isn't really a 'freedom'), it can simply apply to a select few (non-government) and you are still practicing capitalism.

> You don't seem to have read my comments for comprehension though, so it's not surprising that you're getting hung up here...

Would you like me to also point out it's a rhetorical fallacy to attack the person making the argument rather than the the argument.

You seem to be under the delusion that I approve of capitalism. On the contrary, I think it is a steaming pile of shit. It's a damn good thing it doesn't seem to appear in a pure form.

As I said, not reading for comprehension. If you read my other comments my viewpoint should become adequately clear. When I say capitalism involves an assumption of rights I'm talking about rights that are only applied to the participant parties (like for example, slave owners). For example, without the right to enter and exit a market, what you have cannot be described as capitalism. Any economist will tell you that. These are rights that should never satisfy reasonable people, such as myself and clearly yourself.

Or China

Having lived there for a couple of years, I'd say the problem in Singapore is a having a muzzled press. However, this is balanced by Singapore having relatively clean politicians.

But how do you know that the politicians are clean if the press is muzzled ?

By the results.

It's a well run dictatorship. Probably the best environment for capitalism but hard to maintain over a long time.

capitalism and freedom both arise from an egalitarian cultural mindset.

when people believe in the notion of a hierarchy, that some people are better, more deserving, more noble, or more worthy than others, neither capitalism nor freedom can exist for long.

when people believe that all men are equals, that we all have hopes and fears, needs and wants, strengths and weaknesses, authoritarian institutions of all forms will crumble.

Capitalism (in the purist laissez faire sense) functions just fine when people believe that capital is controlled by those who are more deserving (or better at managing it), even if the people controlling the capital happen to be a monarchical dynasty whose inherited land happened to sit on an oil well.

When people start to believe in others' needs and wants you get all the products of an egalitarian mindset allegedly incompatible with capitalism, like taxes and government borrowing.

capitalism "in the purist laissez faire sense" becomes meaningless - you can't have a market without some mechanism of enforcing private contracts and securing property.

believing in others' needs and wants only needs to oppressive governments IF those beliefs come from a place of condescension (i.e. that poor bastard is too dumb to take care of himself, we should try to run his life for him) rather than compassion and understanding (i.e. he doesn't save money because he sees no point in planning for a future he has little hope of enjoying, let's give him the support he needs to function better).

condescension is not egalitarianism.

Would you prefer a system where stupid decisions and bad risks are instead rewarded?

Free markets are about giving feedback like that. They aren't magical ways of making people never make bad decisions. And neither is your preferred $ECONOMIC_SYSTEM, whatever it may. If it's claiming to be one, it's lying.

The people who made the stupid decisions were rewarded pretty well. Weideking still sits on a few hundred million euros. This seems to be the new "free market".

Why is are these debates run only on terms of envy and retribution? The company made a bad decision, and they were absolutely not rewarded, they lost big. Weideking was hugely influential, but his contract with the company was already agreed at that point. You could say it was reward for his negotiating skills and existing reputation. Misaligned incentives is the fault of the company who, as we said, suffered for it. If the next guy to hire him makes the same mistake, maybe they will lose too.

The company authorised Weideking to take the ultimately unsuccessful strategy of turning Porsche primarily into a stock trading fund investing in VW shares, yes, and paid off his contract as agreed when it failed and brought the company to its knees.

The problem is that oversight and accountability is too weak. As CEO he was authorised to take actions which should've set alarm bells ringing with others, without apparent limit, and his contract (much like many others; Fred Goodwin would be a prime UK example) was poorly drafted so as to provide him with limited personal accountability for failure. UBS 'rogue trader' Kweku Adoboli is currently in custody awaiting trial for inflicting a serious loss on his company; Wendling Weideking was paid off handsomely for far worse. Boards need to take their role of executive oversight more seriously.

And like his contract, oversight and accountability is the responsibility of the board/shareholders/owners. Not any of us. He didnt "get away with it". It is nothing like rogue trading whatsoever, let alone "far worse". One is ill-advised but sanctioned, one is unsanctioned (well, that's another argument) and illegal.

This has nothing to do with envy and retribution. It's about an economic system that pretends to be a free market but is increasingly skewed to giving a certain class of people guaranteed rewards no matter how they perform. Not a healthy thing for an economy.

It is not a question of economic system. I don't even know what that means. His employer signed a contract saying if he messed up he still gets paid, AND failed to be sufficiently critical of his risk taking. As a result, they suffered. The only thing it has to do with the economic system is the existence of private contracts. I may disagree with their hiring policy, but it's none of my business. Would you feel any better if the golden parachute was simply paid on top of his salary?

Are we playing downvote-disagree?

Stupid decisions and bad risks are frequently what provide the greatest rewards in the current system, at least in the short term. The mountains of cash investment banks where minting off of tranches is what fucked up the economy in the first place.

The system is that stupid decisions and bad risks are rewarded, so long as the chickens don't come home to roost too early.

The "best" bets are bets that are on average loss-making but over the short to medium term seem to make a profit (if they weren't on average loss-making, yields would probably be too low). What you do is look until you seem to have a reliable money maker, lever up and bet big. If it all pans out - as it usually does - you pocket a big chunk of the profit. If it fails (which it will once every few years or decades), you get the government to bail you out, or at worst the company goes bust.

Heads you win (most of the time), tails you don't lose much. It's a money-making (or rather, money-diverting) ratchet.

The feedback mechanisms don't work properly, particularly in finance. Humans don't live long enough and don't defer compensation long enough for the averages to work out properly. When a large proportion of the economy is devoted to this stuff (20+% in some countries), it's almost certainly highly inefficient, but the market won't fix it because the market can't fix it: again, the feedback mechanisms aren't strong enough.

Also, this is less of a clever hack of the financial system and more of an example of plain market manipulation.

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