George Gilder: Capitalism is based on information and knowledge, not greed
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No matter what system you think we have (or should), what system they tell us we have, or what system people actually try to enact, human-nature morphs it towards greed.
And if you're irrationally alienated by the word "greed", feel free to replace it with the comfortable alternatives we've rationalized; "saving money", "efficiency", "winning", "being successful". They and others are all rooted in "getting the most for me" aka greed.
Trying to frame _every_ human goal as a form of greed/self-interest/winning is tautological. There are substantial differences in the way humans experience altruistic, compassionate self-interest and individualistic, combative self-interest.
Certainly we can experience varied social arraignments emphasizing different negotiations between every individual's self-interest. When one's argument considers the vast history of human societies and reduces them to all to self-interest enablers, is it saying anything at all?
Greed, under control, can be valuable. Greed uber alles, leads to parasites like Romney getting filthily richer by doing things like bankrupting KP Toys.
If you're a major league batter, sometimes you strike out, but at the end of the day you still get paid.
If you're a Senator, sometimes your bill gets defeated because your party simply doesn't have the votes, but at the end of the day you still get credit for fighting for it.
Beating up on Romney for not being able to bat 1000 as a consultant has always seemed a little harsh to me. Sometimes in life, you're simply dealt a losing hand, and nothing you can do will lead to the outcome you wish for. Without knowing more details of the circumstances, I'm willing to give Romney the benefit of the doubt on this one.
I have no problem whatsoever with people making a lot of money.
But think about the Church-Turing thesis a bit, and universal computation, and it becomes obvious that there are infinitely many ways of solving any arbitrary problem. They aren't all created equal, but there are also paths between them. Evolution works by discovering one answer and then following pathways through the fitness landscape to converge on better and better answers. Sometimes it actually does discover global optimums, or sometimes it just settles on something that works well enough given all the trade-offs. (In some problem spaces there is no clear global optimum.)
But I see something more here. His opinions on gender are just batty. There is evidence for gender dimorphism in humans, but he takes that evidence and does a Forrest Gump run with it all the way off the field and into the bleachers. He also ignores huge numbers of counter-examples to his thesis and mistakes statistical means for universal laws.
NASA can also use piss poor technology. Remember that Challenger disaster?
Plus, wasn't NASA that did the BS publicity stunt of the supposed discovery of "life based on arsenic"?
If you do want an argument in favor of the information-aggregation view of markets, and what is required for them to work in practice, F.A. Hayek provides a better analysis.
The Use of Knowledge in Society: http://www.econlib.org/library/Essays/hykKnw1.html
Economics and Knowledge: http://www.econlib.org/library/NPDBooks/Thirlby/bcthLS3.html
In what manner does F.A. Hayek incorporate our contemporary social, physical, ecological, engineering, and systems science and technologies into his theories?
Any field which purports to scientifically guide the operation of the planet must integrate these sciences and technologies.
Economics is more philosophy, speculation and faith than it is science.
> it's only fair in areas which are new and not saturated by established players.
What is your definition of "fairness," and why should we care whether it is a property of capitalism?
I think you're saying something like "capitalism encourages incumbents to build fences to keep newcomers out."
That's true. Antitrust law exists to discourage certain types of fences that we find undesirable.
But other types of fences are perfectly OK -- for example, AMD and Intel spend hundreds of millions, if not billions, every year on R&D to keep raising their technology head-start fence, to keep competing chip vendors out of their markets. The result from the consumer's point of view is a virtuous cycle of continually improving products at the same price point from these industry leaders, with a "long tail" starting with successively older generations of obsolete processors on the secondary market, down to much cheaper ARM's which have much lower performance but are perfectly adequate for many applications.
If incumbents can always build fences so strong that they are invulnerable:
How did Google win against Yahoo?
How did cable providers win against over-the-air TV networks?
How did Netflix kill Blockbuster?
How did Microsoft triumph over IBM?
When incumbents fence themselves in, times are good for them for a little while -- but usually the incumbents end up as slow, fat targets for fast-moving, lean startups.
This is especially true once the management team that established the incumbents has moved on or retired, and their replacements listen when the accountants tell them how much money they can make if they raise prices, cut costs, or reduce their investment in fences.
> But greed, in fact, prompts capitalists to seek government guarantees and subsidies that denature and stultify the works of entrepreneurs.
Yes, that is how real, as opposed to theoretical, capitalism works. And communism is all about selfless cooperation in theory, but in practice works out to something quite different.
Speaking of communism and information, I can't recommend too highly the book Red Plenty by Francis Spufford, which is about the efforts by very early cyberneticians in the USSR to create an economy which was managed by information without greed.
It's all about the CONTROL of information, making use of it to enrich oneself at the expense of others.
Let's not kid ourselves, it's not about sharing sh*t. It's about doling it out piecemeal and selectively, or obsessively, to control opinion and/or maximize profit.
Perhaps not zero-sum, but there are lots of bags held by the partially informed and the less-informed.
This certainly casts patents in an anti-capitalist light...
The problem with capitalism is that it's not stable. People who become rich and powerful (and their generally useless heirs, friends, and hired-gun managers) don't actually want to live in a capitalist world, so they use their social connections to build a private safety net, which hampers innovation. Corporate bureaucracies have more in common with the Kremlin than a Silicon Valley startup, and even Silicon Valley isn't that innovative, because it's increasingly controlled by a well-connected VC/media social elite. Most people wouldn't want to live in pure capitalism, and the corporate elite especially doesn't want it. They want to keep what they've got.
The problem with the problem with capitalism (or the problem with not-capitalism) is that every alternative to an at least mostly capitalistic economy is terrible. Command economies are not desirable.
Most thinking people are essentially (small-l) libertarian. My use of this word has nothing to do with the current usage (conservative who likes pot). By libertarian, I mean the opposite of authoritarian: belief that people should, all else being equal, be free to do as they wish rather than controlled by a governmental or corporate authority. (Authoritarians believe it's intrinsically impossible for most people to do anything good unless told to do so by a central authority.) The problem is that libertarianism begets capitalism begets conglomeration begets corporatism. It's the Iron Law of Oligarchy. The only solution I can see is the Western European social democracy (i.e. a socialist infrastructure to provide a safety net, but a capitalist engine for innovation and to maintain individual freedom). You need enough of a welfare state to keep people from being exploited by emergent corporate power, but enough capitalism (economic freedom) to keep innovation alive.
Not if the state actually does it's job. For a free-market to exist the state must necessarily prevent anti-competitive practices.
In the U.S., unfortunately, the notion that social democracy is necessary arose during the great depression (because capitalism clearly failed /s) and resulted in the New Deal, which was, of course, socialist policy. It was that which started our slow and steady path towards heavy government involvement into the economy and, as a result, corporatism.
Yes, it did arise then.
> (because capitalism clearly failed /s)
Not so fast. The interesting question until recently was "why did the great depression last so long?". Remember, all previous depressions and panics ended fairly quickly.
The current answer is FDR's policies, specifically industry and production controls. (To be fair, FDRs policies were actually a continuation of Hoover's, but everyone "forgets" that Hoover was a progressive, so let's credit FDR.) The great depression didn't really end until those policies did, which happened when it became obvious that an "arsenal of democracy" had to produce lots of stuff.
Yes, Hoover started huge stimulus spending, aid progorams and the like, borrowing money, doing the whole Keynes thing. FDR actually campaigned (somewhat) against the resulting deficits. (He also campaigned against Prohibition.)
Hoover was a huge fan of aid programs. One of his big pre-presidency accomplishments was an aid program to Russia after WWI.
Also, the vast majority of congressional Republicans voted for Social Security.
BTW I was just poking fun at people who think that the Great Depression was a result of unbridled capitalism instead of bad government policy.
Envy and covetousness aren't "good" reasons, but they are certainly reasons humans have used to hate each other throughout history.
> France made it so easy to get welfare and taxes so high (40-50%) that it's better to collect welfare then actually do any work
Romney's ad criticizing Obama's rollback of the requirement established under President Clinton, that welfare recipients must actively look for work, speaks to exactly this point.
I wonder if technology will ever make this model sustainable -- if we have most of our farms, factories and mines run by robots and computers with minimal human intervention, could we produce enough food, clothing, shelter, and basic necessities for everyone if the only people who work are those who wish to do so?
The reason Republicans have produced mediocre candidates for a while is that the party has too many constituencies: You have the religious right (mainly concerned about moral decay and social issues, think Huckabee), the neocon faction (pro-big-government and foreign policy hawks, think GWB), and the libertarians (Tea Party, Ron Paul -- mainly in favor of smaller government and lower taxes).
Their traditional base is dwindling; a near-majority of people don't pay any federal taxes, so can't be bribed by tax cuts and are very uncomfortable with social-program cuts. Religion is on the decline. We haven't suffered any major terrorist attacks lately, and GWB's wars have left many interventionists with a sour taste in their mouths. So they're trying to reach out to new constituencies; in this election cycle, it's immigrants and women, judging by the convention speeches.
We need a strong candidate who can fix the mess before we become locked circling the drain that France has gone down. It's hard to see this candidate coming from either party.
The top-0.2% or so (and the distinction has more to do with social topology than income; many of them are not earning top-0.2% incomes) are a well-connected set of parasites who produce little innovation, hamper society by pushing the status quo, and generally produce no value. Yes, we have an upper-class problem in this society but it's not only about money. Income inequality is a symptom, but it's about connections.
So... when competition puts your company out of business, that's a good thing?
It was beneficial to local grocers when their businesses were bankrupted after being undercut by Walmart?
It also did help people who buy groceries, including poor people.
With globalization this becomes an even more serious problem, because the entities that control the capital are extra-national. So from the joyful history of the East Inda Company to the merry state of British Petroleum today -- you have entities that cannot on the whole be held accountable to one set of laws, because no (functional) jurisdiction exist that cover their entire area of operations.
Even when regulation seemingly works, as with Microsoft, Netscape and the browser wars -- they fail. Microsoft won that one, despite loosing.
please explain?
It's not about IE vs Chrome, it's not about IE vs Safari. It's not about whatever-MS-mobile-OS vs Android vs iOS.
It's about IE vs Netscape and MS (illegally) "winning" that war despite losing in court.
Also, if you look at browser stats even today, arguably IE has an "unfair" share of the market -- but such things are hard to be certain of ("What is a 'fair' market share for the now much, much improved IE browser?").
The biggest thing MS did was probably to give away the browser for free, subsidizing the development of the browser, with profits from windows licences. That dumping effort effectively killed the market for (paid for) browsers -- eventually even Opera gave up charging end users for its browser.
Instead of "Capitalism is...beautiful" ideology it would be worth focussing on when it works and when it doesn't. Seems that there is strong evidence that capitalism harness human nature, property rights, and incentives to enable production. That's great. There is a lot less discussion about what it takes for markets to allocate resources efficiently. Two of the bigger prerequisites are "no externalities" and "symmetric information". Capitalism has no built-in mechanism to establish these conditions. A lot of our problems today go right to those factors. We could do something about it if our politicians would stop playing to the cheap seats. Sorry capitalism, you're ok but not that beautiful.
Since 1970, global population increased by 91% Since 1970, global aggregate GDP increased by 540% (in constant $)
I think that means that 540/1.91 = ~2.8x increase in per-person productivity on a global basis over the last 40 years. I would contend that capitalism drives productivity increases to a greater degree than communism or socialism, simply based on the fact that 8 of the top 10 economies in the world are arguably capitalist. (counting France as socialist and China as something else, not sure what at this point).
A better statistician than I can weigh in with wealth distribution, and I am betting that the average world citizen is better off today than 40 years ago, primarily due to capitalism.
Of course, if there is no customer, there can be no sale. However, the sale itself isn't always the point. Sometimes people do things just for the fun of it -- and that's capitalism, too.
I fail to see how these sentences form an "argument".
Yes, they need a healthy middle class if they want to keep a capitalist economy going. Here's the depraved little secret: they don't actually care that much about having a capitalist economy.
Social elites are almost always parasitic and actually quite non-ideological. If we were a communist or fascist state, it'd be the same people in charge, but instead of being corporate executives, they'd be government bureaucrats. They don't give a shit about "capitalism" or "socialism" so long as it's them on top. The ideology is something they tune to the peasants' shifting tastes.
It's not about economic well-being for them. It's about status. In a robust capitalist and technological economy, they get private jets. If the U.S. becomes Third World, they get white maids. Both are essentially status symbols, and they don't have an intrinsic attachment to one over the other, but they'd rather reign in hell than serve in heaven.
humans have needs.
there is no shortage of customers.
before currencies, there is trade. who is the customer in a trade before currency? it's an exchange, not a purchase by a customer from a seller.
Please don't make the mistake of confusing the system with the agents in the system.
Having said that, I think its important to emphasize some of the things that capitalism gets right: it is still a relatively open and distributed system that is able to evolve more freely than systems that are less so. Open in that many people can actually apply for loans etc. and start their own businesses. Distributed in that there are numerous options and usually no single point of failure.
I don't think that greed is necessarily fundamental to human nature. That's an oversimplification. Humans do need to compete sexually, but I don't think that extreme hierarchies are necessarily a requirement for that. Much of what is considered human nature is just the current state of our culture.
I think its hard to create a system that operates consistently and soundly as a whole but at the same time is robust, distributed and free to develop in different directions.
However, I believe sure that we can improve our current situation by injecting a more egalitarian belief system as well as more science and technology into the power structure and its operating principles, which means the financial system. For example, "economics" is now mainly gaming strategies for maintaining point (monetary) counts and the power that goes with them. But because economics is so critical to human decision making, it must at some point incorporate human needs, social science, and physical science such as ecology. There is a false belief that somehow these monetary gaming strategies and point/goods exchange systems (the economy) incorporate scientific knowledge, measurement, and technological knowledge automatically. That is not the case currently.
One of the problems with all of the systems, capitalistic or anti-capitalistic, is the tendency to move, either quickly or more slowly, towards centralization. When wealth/power as well as goods and services production concentrates it leads to vast inequality, poor distribution, stagnation, inability to cope with local conditions, etc.
I think we need to do a better job of centralizing information schemas and holistic knowledge but do that in a way that does not compromise the ability to evolve those knowledgebases and distribute production or lead towards centralization of power, etc. Its not easy, but I think its a technological problem we can solve.
Not true! If everyone had access to a magical worldwide pool of all the economically relevant information that exists in the mind of any member of the human race (along with a search engine or something to let us index and query the data for effective use), there would probably be more trade, not less -- it would be easier to identify opportunities and connect buyers and sellers. The Internet did this, to a first approximation -- there are all kinds of niche products you can buy on the Internet.
> For example, if many people knew how to obtain the proper license or whatever and where to go to buy wholesale, then they would bypass retailers entirely.
Sam's Club, eBay, Newegg, overstock.com -- there are lots of ways for ordinary people to avoid paying retail. Many people do frequent these websites; retail is dying.
> Similarly, if many people had knowledge about how to start a business and knew several friendly venture capitalists or bank officers, many of them would start their own businesses and there would be few people to do the actual work.
For the first 100+ years of America's existence as an independent country, most Americans were small businesspeople -- farmers, mostly. The notion that working for someone else is the norm, and having your own business is the exception, only happened with the Industrial Revolution, when new technology shifted the economy toward businesses that required lots of workers and capital.
Since the Internet/software world is one of the major growth areas of the economy, and doesn't require any capital investment beyond a computer, an Internet connection, and (rather optional) formal training in the field, we're seeing that many people are choosing to start small businesses as individuals or small teams with minimal capital.
I look dimly on people who say "Capitalism is driven by X" where X is some narrowly defined band of things. From Rand to Marx, theories that look like invariably turn out wrong, sometimes disastrously so. In economic speak, an incentive is anything that a person in question might want. The desire to acquire information and the rewards of using it are one kind of incentive. It's common for random econ pundits to try to redefine "incentive" as "greed", and this should be the first clue that they either don't know or don't care what economists actually think.
a) Infrastructure b) Political stability c) Market Regulation (e.g. fair competition, orderly markets, currency,etc) d) and risk reduction
Capitalists are free to asks for any other thing that decreases risk, it doesn't mean the government has to respond in all cases. I disagree with George, there is not direct path between incentives and socialism.
This is demonstrably not true in the presence of Firms. Agents in the markets are hierarchies, and the internal competition in a hierarchy is very much darwinian. This second tier of this two-tiered chess game is not without consequence.
Is certainly an interesting opinion.
My first thoughts were that he seems to be confusing motives and methods. Information and knowledge certainly flow through a capitalist system and are definitely required in order to do well, but they are not the motive for most capitalists, In fact I can think of very few millionaires who are in business for the learning and philosophy, whereas the desire to own more stuff or money often is a driving force.
As for saying that socialism is the end product of greed, and that it is greed that leads to a socialist welfare state, well. Someone should definitely tell this to some of the various murderous dictators that have been propped up by capitalists in the name of stability, security and favourable trading positions. They'd have a pretty good laugh about it while checking their numbered accounts.
Also, if greed leads to the creation of welfare for the poor, presumably this means that the problem is the greedy poor. Which given that by definition they cannot be very good at being greedy as they have no stuff, makes me doubt that it was their greed that led to the creation of welfare, and that maybe having less than 100% employment might have more to do with the massive mechanisation and export of labour.
If you look at corporate hierarchies, however, you see that they're run internally like command economies. Headcounts and projects are written up and assigned by gloomy, bureaucratic committees detached from the actual heartbeat of the business. You're assigned a role, and if you try to "compete" by seeking a different role or starting a skunk-works project, most companies will fire you or otherwise work to shut you down. Companies are statist in the extreme.
Corporatism is a system designed to give the best of both systems (capitalism and socialism) for a well-connected, parasitic social elite (called "the 1 percent", but really they're about 0.2%) and the worst of both for everyone else. You see this, for example, in commercial air travel, where you get Soviet quality of service but the bizarre, unpredictable pricing you'd expect from a runaway market (that is actually not so much a "market" as an algorithm designed to fuck you over).
Fascism was (by modern US standards) a center-left ideology. It emphasizes collectivism/corporatism, authoritarianism and nationalism.
You are also using the term "corporatism" incorrectly. Corporatism is a political system which elevates the rights of privileged corporates (a better modern term would be "special interest groups") above the rights of individuals. A good example of modern corporatism would be disparate impact-based policies - e.g., "we shouldn't allow this neighborhood to gentrify because a privileged corporate might disproportionately move out of this neighborhood."
I think what you meant by "corporatism" is actually "cronyism".
In a U.S. context, rural conservatives share many more of those features than either urban conservatives or liberals: they combine a mild economic populism with opposition to multiculturalism, strong support for American exceptionalism, suppression of "deviant" individual behavior (porn, profanity, blasphemy, homosexuality, etc.), support for a strong military, etc. A closer but now largely defunct analog might be the old Dixiecrats.
In Europe you commonly find descended ideologies in the far-right parties. In Denmark, for example, the Dansk Folkeparti combines support for a social welfare system—for Danes—with strong opposition to allowing non-Danes to enter the country, exclusion of immigrants from social-welfare benefits, legislation in favor of protecting Danish culture and combatting the importation of foreign cultural elements, banning mosque construction, and a strong military to fight Islamism worldwide.
That said, fascism isn't all that accurately classified as left wing either. While modern left wingers do embrace the collectivism that fascism is based on, fascism doesn't care much about "social justice", "inequality", or any of the other big left wing buzzwords.
Similarly, fascism cares very little about various other right wing values, e.g. traditional protestant values or whatever. They are a convenient way to convince particular corporates to join your syndicate (making it stronger), but that's all.
This is why I characterize it as "center left" - it doesn't fit easily with any mainstream ideology, but collectivism does point more left than right.
Racism is also irrelevant when attempting to determine where fascism lives. Racism is split pretty evenly across American political parties, and it is not a significant part of any major American ideology: http://marginalrevolution.com/marginalrevolution/2012/08/rac...
Before Hitler forced him to pass anti-Jewish laws, Mussolini wasn't particularly racist, just nationalist. His thing was the eternal greatness of Italy, the connection to ancient Roman glory, the new legions of Italy rebuilding the Roman empire, reorienting society on martial and patriotic lines, etc., etc. The collectivism basically stems from that: the Nation above all. To me, that's a very right-wing sort of collectivism, whereas both the left and liberals have more of an internationalist and multicultural orientation.
It's true that it's not libertarian (either right-libertarian or left-libertarian). But I don't think it's too alien from cultural conservatism and "national greatness conservatism", which also places a high emphasis on patriotism and the nation, and is highly critical of individuals who deviate from what they see as the good of the community (hence the traditional conservative support for censorship of blasphemous, prurient, and seditious literature, as they believe it's the government's job to prevent this kind of deviance). As one litmus test, we might look at which parts of the political spectrum support mandatory Pledge of Allegiance recitation, in order to train the youth to put their Nation first.
Similarly, "Nation Above All" sounds a lot like "Ask not how the State can serve you, ask how you can serve the State" (JFK's verbiage tweaked only slightly). "All within the state" sounds like it describes the "Life of Julia".
I'd really like to know what modern conservatives you feel embody the "Nation/State Above All". Isn't Romney's slogan these days "we [individuals] built it, not the state?"
As for punishing those who deviate from what they see as the good of the community, most major ideologies favor that. It's nothing unusual, which is why there is also traditional liberal support for censorship (of slightly different topics).
I don't do much air travel, so I can't say much about this personally.
My questions about this specific topic are as follows:
1. Why don't the substandard airlines have their lunch eaten by a startup airline which combines good service with a simple pricing schedule?
2. What alternative are you proposing?
> Corporatism is a system designed to give the best of both systems (capitalism and socialism) for a well-connected, parasitic social elite
As far as I know -- again, I don't fly on a regular basis -- you don't have to be part of a "well-connected, parasitic social elite" to fly business class; cash or credit card will suffice.
Likewise, you don't have to have any qualifications whatsoever, let alone be part of the "well-connected, parasitic social elite...[which is really] about 0.2%", in order to build your own company or become a shareholder of a publicly traded one.
Really? Then someone please inform the capitalists.
So when, for example, a large multinational executes workers demanding better pay and conditions in third world country factories, it's all about information and knowledge.
Mainly, the knowledge that killing those guys will send a message to the rest of the workers, and keep the factory costs down.
http://www.amazon.com/The-Coke-Machine-Behind-Favorite/dp/15...
Just an example. There are million others, from lobbying and having special laws made for them in western countries, to setting up governments of people they approve and taking down governments they don't like in so called "Banana republics".
http://www.amazon.com/The-Coke-Machine-Behind-Favorite/dp/15...