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Capitalism is the cause of prosperity
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thewake Offline
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Post: #1
Capitalism is the cause of prosperity

Milton Friedman Wrote:A major source of objection to a free economy is precisely that it ... gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself.

Capitalism is, defined by Dictionary.com, "an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth." The type of capitalism I intend to defend is known as the "free market." It is a market largely uninhibited by regulations, except in extraordinary circumstances. It is called "free" for a reason.

Let us, first, look at what a freer economy means for different countries. Both the Heritage Foundation and the Fraser Institute produce indexes measuring the degree of economic freedom in countries around the world. I will use the Heritage Foundation's data found here and here.

What we find is that countries with higher scores of economic freedom tend to have higher per captia Gross Domestic Products (which can be simplistically thought of as a country's income divided by the number of people it has). I will source GDP per capita from the CIA World Factbook. Let's take a look at these countries:

Libya:
-Economic freedom score: 35.9
-per capita GDP: $6,000 (2011 est.) $14,800 (2010 est.)
I put the data for two years because unrest in Libya has skewed GDP numbers making them lower than they would have been.
Burkina Faso:
-Economic freedom score: 60.6
-per capita GDP: $1,300 (2011 est.)
Russia:
-Economic freedom score: 50.5
-per capita GDP: $16,700 (2011 est.)
Romania:
-Economic freedom score: 64.4
-per capita GDP: $12,500 (2011 est.)
Estonia:
-Economic freedom score: 73.2
-per capita GDP: $20,400 (2011 est.)
Liberia:
-Economic freedom score: 48.6
-per capita GDP: $600 (2011 est.)
Peru:
-Economic freedom score: 68.7
-per capita GDP: $10,100 (2011 est.)

For reference, these are the top 5 freest nations:
Hong Kong
-Economic freedom score: 89.9
-per capita GDP: $49,400 (2011 est.)
Singapore
-Economic freedom score: 87.5
-per capita GDP: $59,700 (2011 est.)
Australia
-Economic freedom score: 83.1
-per capita GDP: $40,800 (2011 est.)
New Zealand
-Economic freedom score: 82.1
-per capita GDP: $28,000 (2011 est.)
Switzerland
-Economic freedom score: 81.1
-per capita GDP: $44,500 (2011 est.)

What the above data shows us is that there is a correlation (and, I would argue, a causal relationship) between economic freedom and a nation's per capita GDP, which is a decent measure of a nation's prosperity. In the Top 5 group, only one nation had a per capita GDP below $30,000 dollars (New Zealand). In the other countries with lower scores that I sampled, however, only one country had a per capita GDP, Estonia. Estonia had a per capita GDP of $20,400 and also had the highest economic freedom score of all the countries that weren't in the top 5 I showed here.

What I have demonstrated here is that having freer market is necessary to having a prosperous economy. Nations that are more capitalist generally o better off. Yes, the correlation is not a straight line and there is variation, which goes to show other factors can be important. But, if we had two identical nations and one was more economically free, it would be better off than the less free one.

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12-26-2012 04:36 PM
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SoulRiser Offline
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Post: #2
Capitalism is the cause of prosperity

South Africa (because I live here)
-Economic freedom score: 62.7
-per capita GDP: $11,000 (2011 est.)

One thing this doesn't take into account is the fact that basic stuff like food, housing, etc is generally cheaper in these more 'backward' countries. But yeah, more freedom = good.

Also, $11k per year... that's got nothing to do with average income per person, right? 'Cause there's no way in hell the average person here makes that much.

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12-26-2012 11:41 PM
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timf Offline
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Post: #3
RE: Capitalism is the cause of prosperity

Quote:A major source of objection to a free economy is precisely that it ... gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself.

I would suggest that there is a further distinction to be made. I would agree that a free market is a better alternative to central planning. However, I would not be so quick to include capitalism in with free market.

I suggest there is an aspect of capitalism that has not been adequately considered. The formation of capital (joint stock corporations) may resonate closer to the central planning model as opposed to the free market model. A corporation is an economic collective. As a collective, it can leverage more influence and power than a person.

In addition to size, the corporation has another advantage in law over the individual. The owners of stock in a corporation are not financially liable for what the corporation does as is the individual proprietor of a business.

I would also suggest that there is greater economic freedom in some less developed countries than in Western countries. For example if you tried to sell hot dogs on the street, in most modern cities, you would be shut down for any one of a number of violations of municipal law. Whereas in many less developed countries you would only have to bribe the local police.

I would also suggest that raw GDP may not be an accurate measure of prosperity because costs of living may be such that after expenses one's big income may not be all that big.

I would further suggest that the reality of capitalism does not match the theory. For example, banks that have been poorly run are declared "too big to fail" and we are taxed to support the foolishness of the greedy. Easy tariffs are accorded to big importers who would rather pay exploited labor in other countries than incur the expense of making products in their own countries.

I would make a significant distinction between a free market and the machinations of various economic collectives called corporations. In a free market individuals with businesses compete for the attention of customers. In a capitalist (corporate) market weaker corporations are taken over until only the largest remains, the customer is almost irrelevant.
12-27-2012 02:40 AM
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Potato Offline
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Post: #4
Capitalism is the cause of prosperity

"For example if you tried to sell hot dogs on the street, in most modern cities, you would be shut down for any one of a number of violations of municipal law. Whereas in many less developed countries you would only have to bribe the local police."

wtf does that have to do with anything??

"I would further suggest that the reality of capitalism does not match the theory. For example, banks that have been poorly run are declared "too big to fail" and we are taxed to support the foolishness of the greedy."

that's like saying the reality of law does not match the theory because there is murder. capitalism was not the cause of the bailouts.

"Easy tariffs are accorded to big importers who would rather pay exploited labor in other countries than incur the expense of making products in their own countries."

wtf do you mean by "exploited labor"? what the fuck does that even mean?? why would you make products in your own country when you can get it cheaper from somewhere else? why would you refuse to lower the production cost and therefore the price of your products? tariffs are just another way to steal from everyone and then hand out the money to the poor as some kind of charity. it creates jobs by fucking increasing the living cost of everybody else.
12-27-2012 06:36 AM
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thewake Offline
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Post: #5
RE: Capitalism is the cause of prosperity

(12-26-2012 11:41 PM)SoulRiser Wrote:  Also, $11k per year... that's got nothing to do with average income per person, right? 'Cause there's no way in hell the average person here makes that much.

Nah, GDP is " the market value of all officially recognized final goods and services produced within a country in a given period of time", according to Wikipedia. The income taken in by people is only part of that. If I'm not incorrect, South Africa has (or at least had) diamonds? The diamond trade could easily contribute to a higher GDP without actually increasing each person's yearly wage as much.

GDP and Per capita GDP only give a rough idea of a nation's prosperity, but they're the most readily available numbers.

(12-27-2012 02:40 AM)timf Wrote:  I would suggest that there is a further distinction to be made. I would agree that a free market is a better alternative to central planning. However, I would not be so quick to include capitalism in with free market.
Free market/laissez-faire capitalism is a type of capitalism, but capitalism is a very vague term. Which is why I clarify that I support the free market.

Quote:I suggest there is an aspect of capitalism that has not been adequately considered. The formation of capital (joint stock corporations) may resonate closer to the central planning model as opposed to the free market model. A corporation is an economic collective. As a collective, it can leverage more influence and power than a person.

In addition to size, the corporation has another advantage in law over the individual. The owners of stock in a corporation are not financially liable for what the corporation does as is the individual proprietor of a business.
What's wrong with human beings forming groups in order to gain advantage? That's what a corporation is, a group of people that have come together for a common purpose (usually to make money). The fact that corporations are granted personhood is mostly for the sake of convenience. Would it make sense to have to rewrite the deed to every Walmart store every time somebody bought or sold stock to include every stockholder? Also, because corporations are made up of people, it is logical they should have most, if not all, of the same rights as individual people.

The reasons I'm seeing that we have limited liability are two. For one, it encourages investment. If investors could be held liable for the actions of bad apples, they'd be loathe to invest. Number two, it's also for the sake of scale. If Walmart got sued and went bankrupt, would it make sense to nail every innocent investor for the money?

Quote:I would also suggest that there is greater economic freedom in some less developed countries than in Western countries. For example if you tried to sell hot dogs on the street, in most modern cities, you would be shut down for any one of a number of violations of municipal law. Whereas in many less developed countries you would only have to bribe the local police.
That may very well be true (and I think if people want to sell hotdogs they ought to be able to), but hot dogs don't create a developed economy. Factories, chain stores, technology, etc. make a developed economy what it is. These places do not have the freedom or the stability to build those institutions, and as such they wallow in poverty.

Quote:I would also suggest that raw GDP may not be an accurate measure of prosperity because costs of living may be such that after expenses one's big income may not be all that big.

In the future I could possibly use gross domestic product at purchasing power parity per capita.
http://en.wikipedia.org/wiki/List_of_cou...per_capita

Quote:I would further suggest that the reality of capitalism does not match the theory. For example, banks that have been poorly run are declared "too big to fail" and we are taxed to support the foolishness of the greedy.

Nothing ever exactly matches theory, but what you're describing here is the corrupting influence of government intervention, not a free market.

Quote:Easy tariffs are accorded to big importers who would rather pay exploited labor in other countries than incur the expense of making products in their own countries.
I hate to sound insensitive to the plight of third world laborers, but what one finds is sweatshops and the like actually pull people out of absolute poverty. A decent explanation can be found here: http://www.youtube.com/watch?v=Dx5fzBNO4l4
A shorter explanation here: http://www.youtube.com/watch?feature=pla...2sW2wt3nLU

Quote:I would make a significant distinction between a free market and the machinations of various economic collectives called corporations. In a free market individuals with businesses compete for the attention of customers. In a capitalist (corporate) market weaker corporations are taken over until only the largest remains, the customer is almost irrelevant.

That's not necessarily true. What we find is that market competition among corporations can actually create more choices. Take, for instance, Standard Oil. "Some economic historians have observed that Standard Oil was in the process of losing its monopoly at the time of its breakup in 1911. Although Standard had 90% of American refining capacity in 1880, by 1911 that had shrunk to between 60 and 65%, due to the expansion in capacity by competitors." (Wikipedia). This is the result of market competition.

Also, take a look at the world around us. At one time, Microsoft was king of computing. However, while it still has a large market share, it isn't the undisputed champion anymore. More people are buying Macs. Microsoft certainly doesn't have a hold on the smartphone market.

As long as the government doesn't restrict entry into a market (such as the smartphone market), there will be new competition. The way the government restricts entry can be through licensing or through costly regulation. That's one reason some industries are so uncompetitive.

I would like also to say that your comparison between government central planning and corporate organization is flawed. Here's a list:
*Corporations are voluntary associations. Government is forced association.
*Government is inherently monopolistic. Corporations. while they can be monopolies, are not inherently monopolistic.
*Government central planning encompasses a whole economy. Corporations, on the other hand, participate on the level of individuals in an economy.

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12-27-2012 02:07 PM
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Ky Offline
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Post: #6
Capitalism is the cause of prosperity

I would like to attempt an explanation as to why I support a free market with little to no government intervention, but I honestly can't 1-up any of the posts above. Razz

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12-27-2012 02:17 PM
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thewake Offline
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Post: #7
Capitalism is the cause of prosperity

Here's a video that outlines basically what I said, but in more easily understandable terms:


Watch on YouTube

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(This post was last modified: 12-28-2012 12:26 PM by thewake.)
12-28-2012 12:24 PM
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IamNoone Offline
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Post: #8
Capitalism is the cause of prosperity

Vertical Socialism worked really well for the Inka, and that had almost no freedom
But other than that, this generally makes sense, except I think 100% economic freedom will have negative effects.

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I need you to think for you and stop being a servant
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12-31-2012 06:59 AM
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thewake Offline
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Post: #9
Capitalism is the cause of prosperity

Point me to some information on this Vertical Socialism and Incas.

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01-01-2013 08:00 PM
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IamNoone Offline
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RE: Capitalism is the cause of prosperity

Almost none exists on the Internet, unfortunately. I'll post it as soon as I find the pages where the author talks about it.

I read it in 1491 (a book).

The purpose of life is a life with a purpose
So I’d rather die for a cause than live a life that is worthless
I don’t need the circus or the day of national observance
I need you to think for you and stop being a servant
-Immortal Technique, The Martyr, The Martyr
01-06-2013 03:46 AM
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