Jump to content

Economics: What might work, what should work, what has worked (command v. open market)


Ser Scot A Ellison

Recommended Posts

3 hours ago, felice said:

Nobody gets special terms; the government owns all the businesses. Any company that needs additional funds to continue would be evaluated, and either wound up, bailed out, or handed over to someone more competent to run. "Influential supporter" currently tends to mean "donates a lot of money", which would no longer be a factor, and running a business into the ground isn't going to do anyone's non-financial influence much good.

What actually happened in the Soviet Union when something like your scheme was tried is that the allies and children of government officials would in fact get special help in ascending whichever hierarchy they were in. More generally, the command economy that you propose has been tried (in the Soviet Union and elsewhere) and it runs into a different set of problems than the market economy which, as far as I can tell, have been enough to force the abandonment of this model everywhere it has been tried (even China now uses a hybrid with plenty of rich people). What makes you think your idea will do any better?

Link to comment
Share on other sites

39 minutes ago, Altherion said:

What actually happened in the Soviet Union when something like your scheme was tried is that the allies and children of government officials would in fact get special help in ascending whichever hierarchy they were in. More generally, the command economy that you propose has been tried (in the Soviet Union and elsewhere) and it runs into a different set of problems than the market economy which, as far as I can tell, have been enough to force the abandonment of this model everywhere it has been tried (even China now uses a hybrid with plenty of rich people). What makes you think your idea will do any better?

Hence the problem.  People are people and people favor those they know.

Link to comment
Share on other sites

6 hours ago, SeanF said:

A society in which the government owns all the businesses, stock markets and private pensions are abolished, and personal wealth  is confiscated sounds like a dismally unpleasant place in which to live.

If you're currently a business owner with substantially more than $2 million in personal wealth, then relatively speaking, sure, your standard of living is going to go down. Funnily enough, most people don't fall into that category, and by those standards, the vast majority are already living in a dismally unpleasant place.

3 hours ago, OldGimletEye said:

I think I’ll just advance my usual position that there that decentralized economies seem to perform better than centralized ones because one person or organization simply can’t process all the information to decide what needs to be produced.

I'm not advocating centralisation, just nationalisation of ownership of capital. You'd still have multiple potential investors who could give you project the go ahead, they'd just all be working for the government rather than private capital owners.

3 hours ago, Altherion said:

What actually happened in the Soviet Union when something like your scheme was tried is that the allies and children of government officials would in fact get special help in ascending whichever hierarchy they were in.

It wasn't very much like my scheme, and we've got a century's worth of technological advances to apply to the problem (information technology in particular). And the Soviet Union started off as an impoverished feudal backwater, which wasn't exactly prime conditions for founding a utopia. Not that the capitalist world is entirely free of nepotism and class discrimination.

Link to comment
Share on other sites

2 hours ago, Scott de Montevideo! said:

Hence the problem.  People are people and people favor those they know.

Conflict of interest regulations. If you know the applicant, hand the application over to someone else to deal with.

Link to comment
Share on other sites

Just now, felice said:

I'm not advocating centralisation, just nationalisation of ownership of capital. You'd still have multiple potential investors who could give you project the go ahead, they'd just all be working for the government rather than private capital owners.

I know.

But, still don't think you've come up with a compelling set of institutions that would ensure this capital would be distributed efficiently.

I'm not exactly opposed to the idea, but this is something people on the left have to think deeply and hard about, if it's not to be screwed up and create the worst of both worlds, which is poor growth and deep inequality. As others have rightly pointed out, the government taking over all control of capital isn't a panacea for reducing inequality. Instead of capitalist trying to grab up all the good shit for themselves, you end up heaving a bureaucratic elite (or their friends) grabbing up all the good shit for themselves. If your not extremely careful, you end up creating a situation where you can't tell the pigs from the men.

Link to comment
Share on other sites

10 minutes ago, OldGimletEye said:

But, still don't think you've come up with a compelling set of institutions that would ensure this capital would be distributed efficiently.

The starting point is "exactly the same institutions we have now operating in exactly the same way, just under different ownership"; I agree that the current system isn't efficient :P

But we're really talking about designing a whole new socio-economic system, which is a pretty big job for one person posting on a fantasy book forum. Personally I think "how could the potential issues with such a system be addressed" would make for a more interesting conversation than "that can't possibly work".

10 minutes ago, OldGimletEye said:

As others have rightly pointed out, the government taking over all control of capital isn't a panacea for reducing inequality.

It's necessary but not sufficient.

Link to comment
Share on other sites

4 hours ago, felice said:

If you're currently a business owner with substantially more than $2 million in personal wealth, then relatively speaking, sure, your standard of living is going to go down. Funnily enough, most people don't fall into that category, and by those standards, the vast majority are already living in a dismally unpleasant place.

 

More people than that would see a decline in their standard of living:-

1. Overseas investment in any country that adopted such a policy would plummet.  That would lower growth and employment.

2. Businesses would relocate overseas, again hitting growth and employment.

3. Anyone who invests money in shares, pension funds, life assurance etc. would be hit hard.  That's a much bigger group than the rich.

And, I'd dispute your final point.  Western societies have their flaws, but they do have a high standard of living.

 

Link to comment
Share on other sites

11 hours ago, felice said:

 

Private investors have also been known to make bad picks. I don't know much about Leyland, but Coal was a dying industry no matter what anyone did, and Steel was in a mess before being nationalised. And the government was often prioritising employment over profits, which isn't what a private owner would do but is perhaps better for the country as a whole.

Private investors make bad picks, and lose the money they've invested.  When governments make bad picks, they turn to taxpayers to subsidise their failure.

Link to comment
Share on other sites

5 hours ago, felice said:

The starting point is "exactly the same institutions we have now operating in exactly the same way, just under different ownership"; I agree that the current system isn't efficient :P

But we're really talking about designing a whole new socio-economic system, which is a pretty big job for one person posting on a fantasy book forum. Personally I think "how could the potential issues with such a system be addressed" would make for a more interesting conversation than "that can't possibly work".

Well the problem we have here is really don't have a very good template to work from. And so we are left with doing a lot of guessing. And so it becomes a big leap into the great unknown, and there are lot of things that could be screwed up, and that makes me nervous.

5 hours ago, felice said:

It's necessary but not sufficient.

I'm not sure if it's even necessary. I'm pretty sure, here in the US, that boosting the power of labor would work. And greater anti-trust enforcement, along with progressive taxation are other tools.

Link to comment
Share on other sites

Relevant.

First the CEO Business Clowntable Crowd was crowing about the "skills gap". I guess it never occured to them that high unemployment could persist for a very long time. 

Now they are crying their little old eyes out about labor shortages.

http://uk.businessinsider.com/labor-shortage-good-news-workers-2018-7

Quote

"America’s labor shortage is approaching epidemic proportions, and it could be employers who end up paying," CNBC reported this week. 

Well, boo hoo! Think it's time we have ourselves one big old pity party.

 

Quote

The other supposed problem is "skills mismatch," where firms would like to hire but can't find employees with the right skills. In an environment of rising wages, it suddenly becomes possible to match skills again.

Amazing how that works.

http://theweek.com/articles/783356/how-capitalist-class-strangling-american-economy

Quote

In response, the capitalist class is stoking one of its signature coordinated freakouts. At business house organ CNBC, Jeff Cox writes with aching pathos: "America's labor shortage is approaching epidemic proportions, and it could be employers who end up paying." (Pardon me briefly to dry the tears from my cheeks.)

Somebody give me a tissue. Tears are streaming down my cheeks. I haven't been this emotional since seeing Old Yeller die.

 

Link to comment
Share on other sites

10 hours ago, SeanF said:

Private investors make bad picks, and lose the money they've invested.  When governments make bad picks, they turn to taxpayers to subsidise their failure.

Just like in 2008?

Back in the 70s a Canadian politician, David Lewis, had  phrase that should be in the lexicon. 'Corporate welfare bums'.

Link to comment
Share on other sites

14 hours ago, felice said:

It wasn't very much like my scheme, and we've got a century's worth of technological advances to apply to the problem (information technology in particular). And the Soviet Union started off as an impoverished feudal backwater, which wasn't exactly prime conditions for founding a utopia. Not that the capitalist world is entirely free of nepotism and class discrimination.

Can you elaborate on how your scheme is different from the classical command economy? As far as I can tell, in your scheme, the government controls the means of production with an exception for sufficiently small businesses (less than $2M). The Soviet Union didn't have that large an exception, but otherwise it was not that different (all of the stuff regarding the transition does not really matter -- we know it is possible to to make a command economy work for a while). The really important point is that the government control the means of production; most of the good and bad things about a command economy flow from that.

Regarding technological advances: if we ever develop an AI that is smarter than any human being, I think a command economy may become competitive. However, we're nowhere near that and, as far as I can tell, the technology developed so far has mostly made hybrid economies leaning towards command (e.g. China) more totalitarian (look at their "social credit score" and the associated monitoring and analysis).

Link to comment
Share on other sites

40 minutes ago, Altherion said:

Can you elaborate on how your scheme is different from the classical command economy? As far as I can tell, in your scheme, the government controls the means of production

Ownership isn't the same as control. Individual entrepreneurs would still be coming up with their own business plans and running their companies as they saw fit, within reasonable guidelines. They'd just be working for different shareholders, who care about more than just maximising profit. Oh, and executive salaries would be capped at a more reasonable level. Most people wouldn't see much difference in their day-to-day lives, aside from their standard of living increasing.

40 minutes ago, Altherion said:

with an exception for sufficiently small businesses (less than $2M).

The $2m isn't for business ownership; I was thinking more along the lines of personal homes etc. It's probably overgenerous.

40 minutes ago, Altherion said:

Regarding technological advances: if we ever develop an AI that is smarter than any human being, I think a command economy may become competitive. However, we're nowhere near that and, as far as I can tell, the technology developed so far has mostly made hybrid economies leaning towards command (e.g. China) more totalitarian (look at their "social credit score" and the associated monitoring and analysis).

We don't need AI for our incredible ability to acquire, transmit, and process data to be useful. We've already got companies bigger than small countries that operate on a command basis internally and use IT to be vastly more efficient than any organisation of comparable size could have been in the past.

IT gives totalitarian governments more power; it doesn't cause totalitarianism. It can potentially give democratic governments more power to protect their institutions against corruption, if used well.

Link to comment
Share on other sites

History has proven several times that plucky individuals do not retain the opportunity to start business and receive capital.  There is no communist system yet that could avoid the venal avarice of human nature.  A system of patronage emerges and the bureaucrats become powerful and wealthy, jealously hoarding their privilege.  I don’t know why the hard left keeps assuming away human nature.  Venezuela has a system similar to Felice’s description and look how that turned out  

On the other hand, I share the widespread frustration with the past decade of tacit collusion by capital/corporations to depress wages to expand profits, which goes back even further in mercantilist countries like Germany, Japan and China under indirect govt policy like labor reforms or currency mgmt: they all depress household spending power to maximize employment.  There is enough fear that a few will lose their jobs that the majority accept lower real wages.

That needs to be addressed but turning to communism is like using a chainsaw to trim a hangnail. 

Link to comment
Share on other sites

Well the way things are looking it seems the USA will turn to fascism before socialism and enact even worse economic policies than the plutocracy it already is. Karistocracy was it?

So it's a bit of a difference without meaning imo. I'd be happy enough to have propagandist hate organs like fox news outlawed, get money out of politics permanently (by both a part of the budget reserved for campaigning). I don't have a good solution to the way the government whores itself out to corporations by the revolving door of advisory (unqualified) bribe positions after serving in office, but....

Link to comment
Share on other sites

5 hours ago, felice said:

Ownership isn't the same as control. Individual entrepreneurs would still be coming up with their own business plans and running their companies as they saw fit, within reasonable guidelines. They'd just be working for different shareholders, who care about more than just maximising profit. Oh, and executive salaries would be capped at a more reasonable level. Most people wouldn't see much difference in their day-to-day lives, aside from their standard of living increasing.

Ownership isn't the same as control, but the distinction is subtle and can be erased altogether if the owner cares enough to do so. It's true that your new "shareholders" would care about more than maximizing profit, but what they'd care about instead is staying in power and gaining even more. Entrepreneurs who do not serve this cause would be removed regardless of their other qualities.

As to salaries: yes, they'll be capped... but in a command economy, they're no longer a very interesting measure of anything. For example, the salary of China's Politburo Standing Committee members (the highest level of their government) is only about twice the per capita GDP, but don't be too worried about the Politburo members and their families -- they live as well as the elites of any other nation.

Link to comment
Share on other sites

On 7/14/2018 at 10:48 AM, felice said:

What I'm suggesting isn't a command-style economy; it's more like nationalising the venture capitalists. As a starting point, you'd have the exact same people with the exact same funds available to invest in exactly the same way, the only difference being that they'd be paid a salary* instead of getting a return on investments, with any profit going back to the government. It can be improved from there.

For a start, the criteria for accepting a proposal should change to consider the public good. Eg a proposal to make a more addictive form of chocolate would certainly be a profitable one that any private venture capitalist would jump at, but would be rejected by anyone who takes ethics into account. And the same system could fund projects that won't make any profit but have benefits for the community, the environment, etc.

And the current venture capitalists aren't necessarily the best people for the job. You'd need a wide range of specialists in various fields to properly evaluate different proposals and determine whether they're potentially viable.

I'm also suggesting a state-subsidised crowdfunding system, where anything can get funding as long as enough people back it, no matter what the government thinks about it (anything legal, anyway).

 

(* though do the megarich actually make their own investment decisions now, or do they already hire people to do that for them?)

We kind of had that for a while. The Development Finance Corporation (set up by Robert Muldoon's National Government and state owned) was an investment bank and venture capital corporation which was basically a lender to ventures that were deemed too high risk for private venture capital / investment banks. A lender of last resort if you will. It was the investment bank that helped bring the world the wonderful product Sylk, the kiwifruit-based vaginal lubricant, which was about to win an innovation award until the award organisers realised Sir Robert himself would be announcing and handing out the award, so they quickly gave it the silver medal instead.

It was a very successful investment bank. During the time it was state owned it never made an annual loss. But then the '84 Labour govt came in, went on a big govt company / asset selling spree and sold DFC as part of that. Without really realising what DFC was or did and how it's lending and business model could not survive in the private sector (and just after the '87 crash). About 6 months after DFC was sold it collapsed and died. Tower group pretty much stripped it of any assets and talent and left the rest of the company to rot. Almost drove my father to suicide that sorry episode. Actually it did drive him to suicide, but he hit the brakes before getting to the edge of the cliff (literally, not figuratively).

Link to comment
Share on other sites

22 minutes ago, The Anti-Targ said:

We kind of had that for a while. The Development Finance Corporation (set up by Robert Muldoon's National Government and state owned) was an investment bank and venture capital corporation which was basically a lender to ventures that were deemed too high risk for private venture capital / investment banks.

I get the feeling that history will be kinder to Muldoon than it is to Lange. Which is not to defend what went on between 1975 and 1984, or its implementation, but some of the stuff feels ahead of its time.

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

×
×
  • Create New...