Monday, March 18, 2013

Capitalism and Socialism

I am a capitalist. It is capitalism that makes my current living possible. I have always lived a bit below my means. I starting buying stocks a lot time ago and now I am living off the dividends my stocks earn.

Because I believe in the benefits of capitalism is why I loan money via the micro loaning site Kiva.org. These are small business loans and they promote capitalism. That is people earning their living by selling something. Capitalism after all is just people earning their living by working for themselves or someone else.

Capitalism goes very well with other things I believe in such as democracy, rule of law, freedom of speech and individual freedom of action. It is capitalism that makes my current living possible. Capitalism, is not a political system, it is a market system. It also needs rules set by governments to work properly. For example, it works much better when there are standards in such things as weights and measures. Of course, all market systems work better with such standards. For example, the Romans brought in such standards to facilitate trade. Of course, too many rules can strangle any market system.

I do not believe in socialism as I do not believe that it works. Socialism talks about redistributing wealth. However, you must create wealth to redistribute it. Socialisms flaw is that is that it only redistributes wealth it does not make any wealth. Talk socialism to its logical conclusion and everyone ends up poor.

I do not believe in perfecting mankind as I think that mankind is just fine. Perfecting mankind was the main aim of communism and it talk of creating a new soviet man. Humans are messy creatures; they are combinations of good and bad. Mostly people fit into very grey areas of good and bad. If we were perfect, we would be more like machines, and I cannot see any good in this.

I believe we need some social programs. We do need a safety net for people who are not currently able to make a living. We do not need a permanent welfare roll. I do not think that our current system of welfare works. There is no incentive for people to get off welfare. Every $1 they make, welfare takes back a $1. What we need to do is to offer an extra $1 for $1 welfare recipients make. (However, these rules are changing.)

We need to help people earn a decent wage, so they do not need welfare and we can go on to help others. Currently, we have permanent welfare recipients and others who live on the street that get no help whatsoever. Does this make any sense at all?

Even Nordic countries which have managed socialism better than anyone, have voted in more right-wing governments every once in a while to moderate their socialism and bring their finances into line. Places like Sweden have recently lowered taxes and have brought in school voucher systems.

It is said that socialism last as long as there is other people's money to spend. But the same is said of democracy. Notice that recently everyone talks about how they deserve their entitlements (of health care and pensions especially), but no one wants to pay for it. It maybe that we are trying to test out this statement.

They are now going after those who they feel are rich and could pay for this stuff. Prior to this government debt was used and thought of as free money. However, now it is realized that government debt is not free money. Neither is going to work. If people want good health care and pensions, they are going to have to pay for it.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

8 comments:

  1. Do you think you could post about your experiences with Kiva? Where there any interesting things that you invested in? Do you expect most of your loans to be repaid?

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    1. Well over 90% of kiva loans are repaid. Way better that the repayment of any Western Bank.

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    2. I will look into writing about Kiva. I have been loaning out money for a number of years and only one loan was not repaid. This is a good record.

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  2. I like reading your stock analysis. I too am a supporter of kiva.org, and have been a supporter for many years. But at some level kiva.org has always bothered me - instead of building community it fosters a system of exploitation. Exploitation of the community.

    I don't think anyone would argue with the statement that capitalism is based on exploitation. The only reason we have our standard of living is because some person in a factory in China is working for pennies a day. The only reason I have asparagus in winter is because someone in Chile is working in a field doing backbreaking work for pennies a day. I cannot understand how capitalist justify this. (Hypocritically, I continue to eat asparagus.)

    Maybe they justify it because it is all we have ever been taught and never looked at any alternatives in a serious way.

    You said: "Capitalism goes very well with other things I believe in such as democracy". A bit of analysis shows capitalism cannot survive in a functioning democracy. A functioning democracy is "self-correcting" in that the masses would never allow the rich to exert undue influence on society - the masses would simply use their vote to restrict the accumulation of massive wealth. A functioning democracy puts constraints on the accumulation of massive wealth - capitalism does not tolerate constraints.

    Capitalist talk about the strength of a free market but what they really mean is a free market for the masses and socialism for the wealthy. We have just witnessed massive bailouts for the banking business and the auto business.

    I recently read "The Spirit Level" and it provides well researched data that maps the well being of a society against capitalist ideology. Consistently, countries like US and the UK end up on the wrong end of the scale. The Scandinavian and Japan consistently ended up at the other end.

    In closing, I am an avid investor and I too make my living off the stock market but I am not fooled about what makes the machinery of capitalism work.

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  3. Capitalism is a market system. It is purely and simply a market system. It is not a political system. People can exploit others, but it can also provide a free and fair exchange. However, it works best with rules which a Rule of Law country can provide.

    I am not fooled by capitalism or what it can and cannot provide. I invest, but only in companies that I feel are well-run and honest. You cannot know everything a company does, but you can get a sense of whether or not they are operating as they should.

    I wonder how well our democracies are functioning. We have great wants as far as medical care and pensions goes, but we do not wish to pay for it. We want someone else to pay. It would seem that it will be self-correcting when we have no choice but to pay our own bills.

    However, I do feel that democracy is probably the best form of government and capitalism is the best form for a market system. The capitalist market system and raised millions upon millions of people out of poverty and this is a huge accomplishment.

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    1. I want to restate that I enjoy your blog.

      Saying that capitalism is a market system and not judging its impact on society strikes me as a hollow statement. If as I contend, it is a system that will destroy us then that is important - regardless of what you call it.

      With respect to your statement of raising millions of people out of poverty, consider the population of Latin America, most of Africa, India and China. In those countries there are billions of people living in very poor conditions. In our own country, capitalism is now rolling back the gains we all made in the sixties.

      Consider this brief analysis of capitalism and slavery:

      Slave owners has some minimal responsibilities to their slaves: they had to provide minimal housing, minimal health care and minimal food otherwise the owners would lose their slaves.

      Capitalist are not burdened with this (I am speaking of the 3rd world but soon coming to a neighbourhood near you). If a worker in a factory in China or a worker in the fields in Chile get sick, they are replaced by someone else.

      Capitalism is a system that is even cheaper to run than slavery - a true profound accomplishment.

      I do not want to take over your blog with this discussion so this will be my last submission.

      I wish you all the best

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    2. Consider this: Slave societies do not work well. It is why the south lost the civil war.

      Capitalism has raised millions of people out of poverty and this is good.

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    3. Capitalism works better with the certainty of the Rule of Law. The Rule of Law is a pre-condition for democracy. The wealth produced by capitalism is also a pre-condition for democracy.

      Man’s inhumanity to man is legendary. Capitalism did not cause it, does not particularly promotes it and it is not necessary for capitalism to function.

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