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Comment by DonsDiscountGas | Hacker News Reader

The "Ugh, Capitalism"[0] articles always seem to assume that capitalism started in the last 20 years or so. Which is obviously false. If the company lost its culture of safety that's definitely bad, but of course that culture developed under capitalism in the first place. How does a constant factor (capitalism) explain a change?

The finance industry is a much larger part of the US economy than it has been in the past [1], which does seem like a problem and likely the cause of many of these issues. I'm not sure about the right solution, but it's definitely not to end capitalism.

[0] https://www.infinitescroll.us/p/ugh-capitalism

[1] https://equitablegrowth.org/the-rising-financialization-of-t..., Figure 1

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I started tuning out of this article when it referred to the market Boeing is in as a "free market." I assume the article's author is not a moron, so I don't know how he can lie and distort reality with such a straight face.

I mean at this point the story is older than most of the people who read HN, 1) US government "deregulates" an industry, 2) this amounts to allowing the executives of the largest firms in the industry regulate themselves, 3) said individuals float between the top firms and various lobbying or regulator jobs and craft new policy which entrenches said firms.

Witness the decline for example in the number of US defense contractors, there used to be hundreds a few decades ago, and now there are only really five that matter. Boeing is one of them of course.

We know and have known for hundreds of years what happens when a firm becomes a monopoly, they cut costs even as their prices and profit margins go up, because they have no competition to keep them customer focused.

Jesus Christ, Defector.com and David Roth, Boeing's markets are the polar opposite of a free market.

Could this just be a naming issue? I would argue that a totally free market (as opposed to a regulated competitive market) will systematically lead to monopolies and corruption. Maybe your definition of "free" is different from mine (and potentially the author's).

A totally free market will lead to a regulated one in an attempt to create monopolies. Monopolies are created by regulation, not broken up by it.

A truly free market has guardrails to prevent cheating such as monopolies, price fixing etc etc. The current fetishized free market is one of the avenues for monopoly creation. see Standard Oil, IBM, AT&T. In this kind of free market, if there is no outside influence such as government regulation or crowdsourced guillotines, the person with the most Capital will just buy up all the competitors and on the market.

There are regulation-based monopolies are relatively rare. there are examples of natural monopolies such as cable companies using regulation to enhance the power of a natural monopoly. One important regulation-based Monopoly is the one created by patents and copyrights. one fix is to make patents automatically license-able under RAND https://mpeg-g.org/knowledge-base/what-is-a-rand-license-ran.... Inventor is rewarded, everyone gets to use it, pubic licensing terms.

I am using the definition which comes from Adam Smith and is generally accepted in classical economics. A free market is a market which approaches a state of perfect competition, if a monopoly exists within a market, it is by definition not a free market. To my knowledge there is no other generally accepted definition used by economists. I guess Republican politicians may use it differently, or something, but politicians are liars, practically everything politicians say is misinformation to some degree.

Smith agreed with you that some free markets may naturally tend toward monopolization, how they are regulated is definitely one factor but it's a complex subject. Either way I can't imagine any definition of 'free market' which would apply to Boeing's primary markets in 2024, they are not free of regulation, they don't approach perfect competition, they are definitely un-free.

I don't think Adam Smith defined this exactly, can you show me what you're referring to?

I also think your description is very iffy. "A market which approaches a state of perfect competition" depends on what amount of competition you think is perfect. Furthermore, it could be achieved either through regulating or not regulating (depending on what you think "perfect" is), so the term doesn't really say anything about actual policies.

The very intuitive meaning of free market is an unregulated one, IMO. I'm not able to find an ubiquitous or official definition, but most top google results lean in this direction.

I do think that conflating the means (unregulated market) with the end goal (perfect competition market) into the term "free market" is a brilliant marketing move for free market advocates, but it's somewhat dishonest.

My definition of perfect competition is not iffy. It is a well established term in economics. It's not a statement of value or opinion, it's a term that is already defined and its definition isn't up for debate. I appreciate your interest in the discipline of economics and there is a wealth of free knowledge available on the Internet, including the entire text of Wealth of Nations, about economic theory which you may find it interesting to read. https://en.wikipedia.org/wiki/Perfect_competition

Yes. Capitalism has created a lot.

As the pure simple form of transactions of value. I build x, you build y, barter is inefficient, so we use money to smooth it out. Adam Smith, yada, yada, yada.

The problem is that Capitalism is not static. It is an evolving system.

Many people that are Capitalism cheer leaders are proponents of a very simplified version, that they want to 'get back to' even thought it generated Robber Barons.

As it evolves, it warps society. It forces people into constraints of decision making, across all layers. Management wants a bonus, so they push for 'cheaper at all costs', short term quarterly goals, and it warps government by buying off politicians, lobbying, and middle managers or line workers, they have kids to feed, bills to pay, they aren't fighting back/rocking the boat.

So this whole situation continues to evolve, until it reaches a breaking point.

Marx was not the only one that called this out. He is just the one everyone hates on. Even thought his work defined the word 'capitalism', and most of the more 'academic' side of his work is just doing what economist do today. What he pointed to was the end-state of the system as it grows, it's inevitable crash.

Many others besides Marx have pointed out the trend.

Nietzsche was expressly not-Marx, and also identified the same trends and end state of Capitalism.

You can find examples going back to Plato.

When wealth generation is the only drive, the society eventually collapses.

In many ways Marx works are continuation of Adam Smith's, who is explicitly calling against "rent extraction" and that landlords are curse on society and economy - which in mostly agrarian economies meant landlords held the means of value of production.

It's very ironic to later see fervent defense of rent seeking under the banner of "Adam Smith Institute" (at least an org named so locally) :/

Have to agree.

The Right, worship Adam Smith, and Hate Marx.

But when I read Adam Smith, it sounds kind of what would be called socialist from the right.

Marx was doing economic theory. He was paid to write the 'C Manifesto'.

Not that he didn't also believe, but he did do actual economic work, it wasn't just all propaganda calling for a revolution. There was theory behind it.

A lot of it is slow realisation that this was always the "end game" of capitalism. Beware Marxist terms, but then he kinda coined the "capitalism" term too! Big simplifications ahead.

Capitalist is an entity who makes money because they own capital. Any actually productive activity (like investments into products/factories/people/etc) are secondary to extracting rent from owning the capital.

Now, for various reasons, few different things dominated over economy in the past:

1) Rate of return on investment for actual production, investment, etc was bigger than for rent extraction. Some of this was due to wars shaking things up, some of it was due to non-availability of (2)

2) Ability to grow capital purely by speculation was limited by physical & legal issues. This is where financial industry/engineering comes in - you can spend all your efforts on pure speculation, do corporate raiding etc. and be shielded from consequences. Same with earning money just by moving money around exploiting sub-second price differences.

3) (2) was less acceptable in the past - but became very much so in the present, even if there's constant grumbling about Wall Street - hell, the amount of people who claim that "maximizing shareholder value" is an actual law you're obligated to follow should be good point about it.

4) Corporate entities are a lot like paperclip optimizers - individuals in them can be individually moral and the corporate entity can still be an amoral profit chaser, especially in face of external stockholders. However, in the past, they faced different limits (legal & physical), different stockholders (less volatility and short-term juggling), and different social pressures.

All of the above combines with increased disconnect in many countries between different social groups and people starting to think that maybe, maybe, there's something weird. Then they look into how some people have been pointing that this is the "pure capitalism", maybe started calling it "late stage capitalism" to compare with more encumbered earlier forms, etc.

Exactly -> " Corporate entities are a lot like paperclip optimizers "

We are so scared of AI paperclip optimizers, but don't see that humans are machine s that optimize to have as much sex and food as possible.

Our society is optimizing for producing Doritos and Taco Bells and McDonalds and Porn.

Wasn't there a George Carlin bit about men only went to the moon so they could brag and get laid? All our better 'accomplishment' can be reduced to sex. Art, Music, Writing, is sex.

And, Capitalism just smooths the way to the lowest common denominator.

Unless people wake up and put limits on it, like a regulator on an engine so it doesn't blow up.

> Beware Marxist terms, but then he kinda coined the "capitalism" term too!

The term "capitalism" (kapitalismus) does not appear even once in the entire corpus of Marx's writings.

'Kapitalismus' first appeared as a term arrayed against socialism in Werner Sombart's 1902 book Der moderne Kapitalismus. It was only after this book that the term capitalism was incorporated bit-by-bit into Marxist theorizing.

'Capitalism' didn't appear in political science dictionaries/glossaries until after World War I, and didn't appear in the Encyclopedia Britannica until 1926.

The first use in English is from 1854, nine years before Sombart's birth, with use (as "private capitalism") in teaching and disputing about economy in USA since 1863 by Carl Adolph Douai.

"Capitalism" in the modern sense is apparently attributed to Louis Blanc (1850) and Pierre-Joseph Proudhon (1861, explicitly calls out owners of capital being dissociated from actually working it). As a word with way less scientific rigour than some of the stricter mathematical sciences, the exact way of using it also has considerable variation due to differences in languages.

Marx used "capital" and "capitalist", which are older terms. "Capitalism" as a term evolved from the same use that Marx learnt from, with earliest uses of "capitalists" being associated with 1633.

> How does a constant factor (capitalism) explain a change?

You show me the incentives and I'll show you the outcome.

A simple answer may be that capitalism used to be more regulated than before. Not in all areas/industries, but overall - and if not in theory, at least in practice. Maybe the art of lobbyism, legal work, and public relations has gotten more advanced, for example, or company profits have become large enough that they can blatantly break laws and just pay the fine.

I’d extend that to say “regulated” in both the legal and broader social senses - not just comparing government regulation before and after the Reagan/Thatcher era but also things like connection to places: smaller businesses are more likely to be run by someone who feels some responsibility to look after their community and workers, which certainly wasn’t perfect but still better than what happens with huge multinationals whose senior leadership probably isn’t even in the same time zone and certainly aren’t worried about going to church/the country club with people who will ask them why they’re polluting so much or decided to lay off a bunch of people right before Christmas.

I don’t want to oversell that kind of thing as a factor but I really think there’s a cost to scale when a business reaches the point of impersonality where you don’t even know or have much concept of the existence of the people affected by your decisions.

I agree with you, but it's also worth noting that Boeing is one of the "too big to fail" industries tightly coupled to the government. It's too valuable to the DoD to let fail.

There are several industries (microchips have recently become one) where finance has figured out the normal rules around competition don't matter. Boeing can capture the upside and there is virtually zero risk of bankruptcy or being nationalized from mistakes.

The federal register (sum of all US federal regulations) is orders of magnitudes larger than it was 40 years ago.

I don't think a quantity argument is interesting (there is definitely more regulations). Possibly there is a quality argument to made: Due to the regulator capture process (large corporations have seized control of the federal government), the effectiveness of regulations have decreased a lot while the volume has increased. This also serves as a barrier to entry for competition, while also profits for compliance.

This is not what I meant to imply either. More laws can lead to less regulation, if the added laws are full of loopholes that can be abused. Definitely agree with you on the quality/quantity argument: Simplifying laws and regulations should be more on the political agenda IMO.

I think it is pretty clear that regulation or at least effectiveness of such must have peaked in relatively recent past. Going back century or two certainly had capitalistic practises, but also much lesser regulations in many places like food or safety of products.

Now interesting question is when did the effectiveness or regulation peak?

Compared to other economic systems, capitalism hasn't been around for very long. How fast do you want things to happen before evaluating the economic incentives?

My point here is that incentives can work over time and interact with environmental factors. You're making essentially the same argument Larry Summers made against greedflation, "I don't think corporations suddenly became more greedy, so this can't be a phenomenon". Sure, greediness didn't change, but the economic and political environment did, giving the actors cover to collectively raise prices. It's the same as an algal bloom, the initial amount of algae was constant, but at some point the amount of fertilizer in the water increased and it multiplied at greater rates.

Or, empirically, you're making an argument against evaluating any economic system. The fall of the USSR couldn't have been due to communism, because communism was in effect the whole time. The fall of Empire X couldn't have been due to feudalism/mercantilism, because feudalism/mercantilism was there the whole time.

> How does a constant factor (capitalism) explain a change?

Regulations.

Short-term-itis mostly got rolling with people like Icahn in the 1980s and asset stripping. All that got rolling due to changes in regulations around finance.

And then tech and VCs poured accelerant on the flames.

What if we replaced capitalism with a focus on consumer choice, competition, and free markets?

I'm being a bit flippant with that question, because supposedly capitalism is all about consumer choice, competition between companies, and free markets. But I often feel that people who defend "capitalism" vigorously will turn around and say "meh" when shown a market with little consumer choice and little competition. Their blood pressure will go up 20 points while defending capitalism, but they barely blink an eye at a market without competition.

How often do consumers have only 2, or fewer, choices? So much for customer choice, so much for competition. I want to see a political cartoon that shows 2 panels, the first is "the free market ideal" with a bustling market filled carts selling food and goods, the next panel is "the free market reality" showing a bunch of tired people waiting in line for one of two computer terminals, and both computer terminals are operated by the same guy and one of the is broken.

We need to stop talking about capitalism vs Marxism and instead talk about consumer choice and competition between companies. Are we happy with the amount of consumer choice we have? Are companies competing by trying to offer the best goods and services they can, or are they exploiting consumers and making profits by moving money around and rent seeking? We need to talk about IP laws and what makes a free market "free". We need more talk about the underlying principles and less talk about politically charged buzzwords.

I've tried to capture all this before in a question I ask: What does it mean when the things that (supposedly) happen in a healthy capitalist society aren't happening?

This might be because lawmakers equate 'capitalism' with 'big business', and thus are in favor of large mergers.

If you try to discuss splitting a company, or denying a merger, you are called a communist for standing in the way of business.

The concept of 'competition' in capitalism is somewhat lost now.

Getting rid of government is the solution. They sell it to you as a protection against big business, but in reality it's the tool big business uses to stave off free markets and consumer choice.

That is the typical Libertarian Fantasy/Fallacy.

Markets don't exist in a vacuum. They are created and regulated. They need contract law, and enforcement.

The argument to get rid of government is really an argument for anarchy, to go back to having war-lords.

Do you really want Amazon coming around with enforcers asking for payment. And since there is no Money (since gov is gone) they take your goat and give you a chicken back for change.

Lol, there was commerce without government regulation for the longest time and international commerce is still largely regulated by private arbitration courts (e.g. https://fee.org/articles/the-law-merchant-and-international-...). There was money well before there was centralized government in nearly all moderately developed places. You should really try to know the first thing before you pull such claims out of wherever. If you think government is anything but a ploy to get to your money, you got duped.

"You should really try to know the first thing before you pull such claims out of wherever."

Sigh. Another armchair economist trying to extrapolate history.

You are re-defining all societies in terms of our modern idea of government to push some libertarian view. Yes, you are correct, societies had money before there was a modern elected government with 3 branches. That doesn't mean there weren't rules, there weren't concepts like enforcement of contracts, like debt and how to 'sue' over recovering debt'.

You can't go back in history to when we were tribal, say 'look we didn't need a government', and then extrapolate that to todays world and promote anarchy.

Money before 'central government'? Central to what? My tribe? You are just re-defining what a government is. You are going back to when we were exchanging shiny bits of shell.

Something for your birthday https://www.amazon.com/Debt-First-5-000-Years/dp/1612191290

You don't need a coercive territorial monopolist with ultimate decision-making power over all conflicts within its territory to have rules.

And a lack of rules is called anomy, not anarchy.

I think 'anomy' is implying that we would trust social norms, or that people would behave as expected by force of society's norms. You would behave so others would continue to do business with you.

I think we've seen a lot in recent years how this doesn't work when people are free to break away from social norms.

Other point, I think this is missing that in large global economies, we have both very little recourse on our own without laws. If we trust purely market forces (if you sell me junk I just wont buy from you), then bad-actors can just move on to next mark, or change names. We have started making purchases in anonymously online from other anonymous sellers. There is no longer any social norms to prevent cheating.

really good illustration of trust. which is needed for market pressures you describe, but don't scale well. hence needing laws to track down bad-actors. https://ncase.me/trust/

Argument for central Authority to enforce common laws : Skip to section 3. https://slatestarcodex.com/2014/07/30/meditations-on-moloch/

Did you read that article?

You are simply replacing laws and courts from a government to some other body. That is how society progress on many fronts. Society grows, and those rules become 'laws', and those courts become 'the courts'.

If you were to magically break up and get rid of government. It would just re-form as a new government. Every revolution just forms a new central authority. A new government.

Because who are you going to call when some company says "you know what, I don't agree with this informal court set up by the local tradesman, I'm not paying".

""In its early days the Law Merchant relied entirely on private adjudication and enforcement. Merchants conducted much of early international trade at fairs throughout Europe. At these fairs local authorities performed regular activities, such as preventing violence, but they didn’t normally adjudicate disputes between international traders.

Nor did authorities enforce the terms of private commercial contracts. International merchants formed their own courts for this purpose and applied their own law to these cases. Merchants’ courts came to be called “dusty feet courts” because of the condition of merchants’ shoes as they busily traveled between commercial fairs. In these courts merchants acted as judges, deciding the disputes of fellow traders on the basis of shared customs. Merchant courts enforced their decisions privately by threatening noncompliant traders with a loss of reputation and merchant-community ostracism""

""Since 1958 compliance with many arbitration decisions occurs under potential threat of State enforcement. In that year a handful of countries signed a multinational treaty called the United Nations New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC). Over the last half-century many other countries have also joined the NYC. According to the convention, signatories agree to enforce international arbitral awards brought to their courts.""

Yeah rules are important. I was making the point that rules and enforcement mechanisms do not require the kind of exploitative constructs that are ruling over you right now, and for whom you are little more than lifestock.

Don't get me wrong. I agree. I'm being ruled by an exploitive construct.

It's just, it always comes about. It's made of people, and whatever mechanism you are contemplating, it too will be subverted.

I haven't come up with any alternative. Just think reducing regulations would mean more pollution, more stealing. We've done less laws, less regulations, and the world was pretty awful. It's a balancing act. You need people to drive on the right side of the road, and obey traffic signs, but you also don't want government telling you how to set the dinner table. How much control do you give up?

It's because capitalism isn't about competition or free market? It's about extracting rent on capital, hence the name?

Guess, are we talking about capitalism as some strict academic definition? or the gestalt in the minds of the right?

Think most people do include markets and competition as core to capitalism.

But, other core features are, private ownership, and that labor doesn't own the production.

And not spelled out, but it does often lead to rent extraction.

https://www.imf.org/en/Publications/fandd/issues/Series/Back...

• competition, through firms’ freedom to enter and exit markets, maximizes social welfare, that is, the joint welfare of both producers and consumers;

• a market mechanism that determines prices in a decentralized manner through interactions between buyers and sellers—prices, in return, allocate resources, which naturally seek the highest reward, not only for goods and services but for wages as well;

> Think most people do include markets and competition as core to capitalism.

I would argue that this is liberalism, and a smidge older than capitalism. I think you can have multiple kind of capitalism, the old-school, robber-baron that you get in Mexico, Brasil, Russia; the liberal capitalism you get on the west (mixed with more or less socialism), and the weird semi-authoritarian capitalism that you get in China, Vietnam (mixed with more or less socialism too). Probably other exists. Only the liberal one in my mind has free market and competition as a core, its always a secondary effect of participating in the global economy for the others. At least it's my opinion at the moment, i'm not knowledgeable enough, so if you disgree, please do and explain, i want to learn.

I agree with all that you are saying.

If we started digging into details of each possible shade of 'capitalisms', we find a sliding scale of what features are most dominant.

There are some that aren't as focused on 'competition' and 'markets'. I'd say that in all of your examples, they are there, just not as dominant, or somehow 'narrowly managed'. So we'd be arguing over the scale of each feature in each example. Not really right or wrong.

I agree, it is mostly the global market that forces this on some countries with less competition.

I'd argue that part of what enables the current issues is exactly the "hack" of making the gestalt believe that capitalism, free market/enterprise, the ideas of Adam Smith, etc. are all part of capitalism instead of things that at best partially overlap.

This means that people who want to grow richer just by virtue of being rich can easily defend their actions by making any who complain into common enemy for everyone else.

Because penalizing pure financial speculation and other rent-seeking behaviours, or predatory private equity, can be conflated this way with attack on ability of everyone to start their own enterprises, maybe walk away from a job and create their own, etc.

Would you mind quoting the passage in the present article where the assumption that capitalism started in the last 20 years or so is made?

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