Capitalism. A house of cards?

Question

With the fiasco of "Northern Rock" in the UK and the prime lending furore in the US, do you not think that our whole economy is a house of cards?
Is the Stock Exchange not anything more than a glorified bookmakers?
Wasn't the the great depression caused by pumped up greed and then loss of confidence?
I'm not saying that we should go back to the barter system, but it would at least ensure a more equitable, solid system, or not?
Can't we do it any better, or must avarice always lie at the heart of an economics?

"If the change comes, it will be when the wages and living standards around the world reach a kind of equilibrium. Then people might be able to see past competition to cooperation."
This seems like a good argument for true globalisation. If we keep on buying from poorer countries where wages are lower then surely the cost of living and wages will go up.
Then somewhere else will be cheaper and we'll buy from there.
Fair enough, but will we ever reach a global balance or will it always be a matter of buying from the latest cheapest county?
Will we ever reach a worldwide equilibrium?

Answer 1

Capitalism is not a house of cards. It is, like all social structures, a shared delusion. People buy into the capitalist economic models, and their common acceptance gives it power. The same is true of every social structure, from religion to pop culture. As long as the majority of people empower that structure it will survive.

People will defend their shared social beliefs with violence. The only way the system changes is when a majority, or a vocal minority, lose confidence. That rarely happens, and it is a slow process. The move from mercantilism to capitalism, or from monarchies to democracies, is a bloody process. There are many stops and starts along the way.

Can we do better? Not as long as people buy into the competetive nature of capitalism, and believe they have a chance to better themselves. If the change comes, it will be when the wages and living standards around the world reach a kind of equilibrium. Then people might be able to see past competition to cooperation.

Answer 2

A modern market economy is indeed a house of cards. Its success depends on people doing what they promised do. When too many people are unable or unwilling to fulfill their promises, we have a crisis. Fortunately or unfortunately, there is no other basis to build a modern economy.

Are stock exchanges glorified bookmakers? Yes and no, depending on your perspective. Yes, because they do accept bets. No, because the game that is played on a stock exchange is a positive-sum game, whereas bookmakers generally administer negative-sum games.

Was the Great Depression caused by pumped up greed and then loss of confidence? Perhaps (other explanations include overregulation of the banking system, underdiversified economy, and unexpected bumper crop), but it was prolonged by downright stupid fiscal policy.

As to your claim that the barter system would ensure a more equitable system, it's simply wrong. A number of societies in pre-Columbian America lived under a barter system, and invariably ended up as brutal tyrannies where a war-loving tribe would subjugate and exploit its neighbors, with the bulk of wealth controlled the ruling family.

Distribution of wealth is determined largely by government policy and demographics, rather than by how the underlying economy works...

Answer 3

Well I think capitalism needs regulation, and we probably do a poor job of it. But I think it can be done. This type of mixed capitalism + regulation + welfare state has worked for use in the past, even though now I think it is becoming too corrupted.

But I don't think our current system is necessarily a house of cards.

A small amount of the stock exchange does deal with new issues, which reflect new investment in GDP. However most is just gambling with the nations wealth. I would like to see a law that says that if you buy a stock, you have to hold onto for a certain period of time. Not sure that would actually work.

Most people think the Great Depression was caused by a mixure of the run on banks (caused in part by drought and the collapsing agricultural employment), too rapid growth which led to large dislocatations of labor and reductions in demand, sudden collapse of trade by Smoot-Hauley, too little money creation by the FED, and a lack of regulation with things like margin requirements. But remember there were other crises and depressions back then, so it does seem to be something endemic to a free market capitalism that Marx warned us against.

Answer 4

The U.S. is a house of cards. We can't do what you said about continuing to buy from developing countries because we are the largest debtor nation on earth. Somebody else has to step up and start buying all the plastic pink flamingos and doodads for their homes and yards. "Unfortunately", other cultures have more class.

If capitalism really existed, the US would've declared bankruptcy long ago and the world would've moved on.

The global economic superstructure is severely flawed and has begun to implode.

Answer 5

Nope, capitalism is a house of bricks. The sub prime problem is way over blown.

Why is that EU countries are now moving away from socialism?