This doesn’t really speak much to the “master” thing, but over the last few generations we have “financialized” (like securitised, but bigger) huge parts of the economy, and a lot of stuff that wasn’t really part of the economy in the past.
For example, health services are largely financialized via insurance. IE, you don’t directly buy health services, you buy insurance which buys health services. You don’t buy a house, you get a mortgage. You don’t support your parents (or colleagues) in their old age, you pay into pension or superannuation schemes. Education via student loans. Monthly expenses via credit card debt. Large ticket items via dealer finance. Public services via national debt…….Companies via private equity. Everything has a financial layer between payment and consumption.
Underlying a lot of this is a relatively simple fact that if debt is available, consumers (from 18 year olds to Finance Ministers) will take it. If loans are available for certain products, more of those products will be consumed.
Another (possibly evil) driver is that governments have chosen financialization as instruments for promoting stuff they want to promote. Need more corn? Crop insurance subsidies. Educate the masses? Subsidise student loans. Promote home ownership? Implicitly guarantee retail banks’ losses. Medical care for all? Tax free(subsidy) insurance. Flood problems? Flood insurance. Poverty? Microfinance.
So, banks got big. This has all sorts of weird effects.
One of the biggest problems in my opinion is the inflationary effect of this process. Real estate prices in many places are simply the amount that a bank is willing to lend buyers. If banks increase the amount a buyer can loan, house prices increase proportionally. IMO, the American healthcare saga is not really about ideology or competence or any of the stuff they talk about. The problem is that after 2-3 generations of wide scale subsidised financialization, prices & costs are so high.
My final thought is that part of the problem is the prominence of finance people in pubic decision making. They know finance. They believe in it. They use it to solve problems. They don’t see baks getting bigger as a problem. It’s kind of like the lawyer problem, who also have a lot of presence in politics. That means the legal field gets bigger all the time.
> My final thought is that part of the problem is the prominence of finance people in pubic decision making.
Indeed, I've read a few articles in NYTimes/WSJ now on the sale of public services in the US such as fire and water services to private equity firms. And the whole thing is told as a cautionary tale about banks and capitalism, which misses the bigger picture in how these things always start.
Typically the problems start because the government was overleveraged from taking on too much debt, typically due to poor financial management fueled by initially cheap capital from bankers operating in and out of government. Then when hard times come they continue to seek the easy answers from the bankers (instead of making hard choices like spending less) and end up selling off public resources giftwrapped in pseudo-market sounding language with very little of the actual benefits of markets: competition, private salaries, flexibility, etc.
These "banks" are famously like an octopus wrapping their tentacles around everything. We have some old effective methods for handling this type of behaviour when it's used improperly in the private sector, and there the harm is limited to a few usually wealthy parties. But it starts to get dangerous when these half-baked financial schemes that have worked in private markets get pigeonholed into government. Critical services like emergency services or drinking water are often ill-suited (and more importantly ill-prepared) to handle the potential downside.
Hopefully one day politicians will learn this lesson and learn to keep things simple in the public sector. Governments everywhere have a consistent track record of not managing money well and have a high-turnover of executives by design, so any complex financial instruments are just setting them up for failure and exploitation. Anything to do with government should be made dummy proof and straightforward. Public services should be run like public services. Mixing of private/public should be the exception, not the standard. And I say that as someone biased towards the private sector.
Sometimes I feel like this "extra layer"/middleman-adding is not only just to enable government interventions but is just fluff added so we could create jobs for those whose skills don't go beyond the typical white-collar worker. I might be wrong, but the image of extraneous University administrators and "not-enough" skilled labor kinda paints this picture.
The financialization you're talking about doesn't seem bad per se; it streamlines and "purifies" the exchange you actually want to do.
For example, if I have extra money, and I know someone who could ramp up his productivity if only he could make a one-time investment (say, a cow for his farm), then I buy him a cow in return for a share of its milk. Then, to diversify, I can find thirty such people. Then I find someone who can sell the milk for a cut...[1]
Instead of all of that, we have banks, where I just give them the money, and they make the loans (and do screening, credit reporting, foreclosure, etc) and pass me a cut of the returns.
Nothing is wrong with that. The problem is when you have perverse incentives to start with (e.g. in fields like health care, or with lenders who have asymmetric information about the loans in a portfolio there's excessive trust in the vetting), where financialization just puts the same problem on steroids.
[1] Late edit: a better example of the "impure exchange" might be if I wanted to save for my retirement so I raised one more cow than I usually would with the intent to lend it out to others who are still working in return for milk, with the usual frictions like needing to convert to non-milk.
one of the things that irks me about (consumer) banks is that they've somehow convinced consumers that they should pay for banking services, instead of the receiving returns for loaning the banks money (which is what a checking or savings account is).
some of this is due to a lack of financial literacy on the part of consumers (financiers know that loans should come with an interest rate, not a charge for the privilege of loaning the money in the first place, but consumers on the whole apparently don't).
but there is also a regulatory mechanism exploited by consumer banks: FDIC insurance. without insurance, people are understandably reluctant to loan money to banks since they don't know if they'll get the money back. so the government (again, understandably) steps in and guarantees with tax dollars that you'll get that money back, even if the bankers are crooks. but of course, that means the government must try to tease out the crooks with a stringent set of tests and regulations around who they'll insure. and just like that, you have an anti-competitive choke point where incumbent banks use the regulations to guard against future competitors by keeping the regulatory barrier high.
(this is just another example of the financialization via insurance that you elucidate)
also, use cash. it's transaction-cost free, anonymous and universally accepted.
And it is based on the simple assumption that we can accumulate debt at any pace forever. Unfortunately I am not convinced it is the case. There is a debt to GDP ratio where the system will break.
Is there? Public or private debt? What model do you have that tells us where it is?
Yes, if the payments become too onerous or the ability to roll over is compromised (Greece passim), then you have a serious problem, but the whole thing does not magically blow up at a certain level.
Also, remember that at a global balance sheet level, debt == savings. Debt (personal+state+corporate) has expanded because there are more and more people saving for their pensions, and the savings glut has pushed down the price of debt.
(and the "missing trillions" stashed in tax havens have to be lent out somewhere, too)
The problem with financial services is customers are greedy - not banks
2. The challenge in building any business - is that they always start by trying to solve a problem - but power always corrupts
1. If google’s aim was to truly organise the worlds information or xxx would it behave like thsi
2. We say capitalism is good as through the pursuit of capital appreciation - these kinds of problems aggressively get solved but we reward financially - the creation of monopolies
3. This then leads to all kinds of things: styling of innovation; but also pronounces the accumulation of capital
4. The solution is whether you can construct a company in another way
5. I think its now clear that you strive to be too greedy - that power / money will eventually corrupt
1. Google search results
2. Uber vs lyft
3. Microsoft
6. But this process takes years
There are 2 sides to the economy, supply and demand.
Yes, the policies you describe do boost demand and that does cause inflation, but the supply side is not irrelevant. Less NIMBYism will help with housing costs, and maybe some reform could help with education supply. If demand is increasing (for example due to population growth and finance), ideally supply should also be able to increase.
This is a very well written argument. Any time government makes borrowing some asset easier, it gets abused. Subsidies, barring few exceptions are bad for the economy and now-a-days there seems to fairly unanimous agreement among economists about the same.
Countries like The Netherlands or Germany are considered so stable by the financial sector that they can get loans at negative interest rates. At that point, why not get the loan?
I don’t have an overarching theory, if that’s your question.
Some of them are probably good, others not.
Home mortgages have mostly done what the politicians and public wanted in rural and suburban areas. Some price inflation happened as a side effect, but a lot of that extra cost went into bigger homes so people get something for it. Slightly distorting to the market, but nothing terrible.
In dense urban environments where supply is inelastic, price inflation was a lot worse yielded a lot less. This is probably one of the biggest cost of living problems.
I think the financialization of ordinary health services (not things like cancer or accidents) is terrible. I think it makes the whole industry a lot worse. Ultimately though, this is/was driven by consumer and voter demand not scheming villains.
Collectively, I think they might add up to different classes of problems.
This article doesn't even answer its own question of "how".
For those interested in the topic, I highly recommend Connie Bruick's Predators' Ball and Liar's Poker by Michael Lewis.
> Adam Smith, the father of modern capitalism
I hope we can stop conflating free markets for capitalism. Capitalism is to free markets what communism is to socialism. Adam Smith was very much focused on free markets, not capitalism. The author of the article, makes it clear later with
> Adam Smith, who believed that for markets to work, all players must have equal access to information, transparent prices and a shared moral framework
Capitalism often means different things to different people and it's often to an authors rhetorical benefit to leave it so.
When people say capitalism they typically mean one or more of the following:
* Free markets
* Free trade
* Private ownership of the factors of production
* A form of economic organization characterized by tradable claims of ownership, & ownership separate from management.
* A form of economic organization where the primary driver of the firm is profit.
* A counterpoint to socialism.
* A counterpoint to centrally planned/managed economies.
By never being clear about what one means, and just saying 'capitalism' a skilled rhetorician can convince you one thing is good (or bad) and then lump others in as part and parcel.
As you point out profit seeking businesses do not like free markets.
> Capitalism often means different things to different people and it's often to an authors rhetorical benefit to leave it so.
Sure, some, but if every author accepted this as immutable, we can never progress.
The issue is that when you have two separate ideals, each with their own qualities, allowing them to become synonymous provides a defense for the lesser ideal in the name of the better.
So, it makes it easy for bankers and capitalists to defend their actions in the name of a free market!
Fortunately you don't even have to read it from cover to cover to get the meat of it. Here https://www.youtube.com/watch?v=CZIINXhGDcs is a talk 80 mins long Graeber gave at Google.
Then once you've done that listen https://www.youtube.com/watch?v=8y_wz85ViLY to Robert Paul Wolff talk about the problem Ricardo, Smith, and Marx tackled. This one is a bit longer and it is tougher going but the pay-off is immense.
––
What this New York Times article and the recent Bloomberg https://www.bloomberg.com/news/articles/2017-09-21/why-wages... (“Why Wages Aren't Growing”) article that hit the front page here have in common is that they both refuse to recognise that Marx's critique of capital was correct in his day and it _remains_ correct.
The next part is important. We _must_ separate the critique from his proposed solution. To be very clear I can agree with Marx's critique but I do not have to agree that central collectivisation is the solution.
The very simple observation is this. For-profit capitalism over time will cause (a) workers to be exploited to the point where they can't actually take part in the society they're a part of (which hurts the capitalist too!) and (b) wealth gets concentrated inefficiently.
What the New York Times and Bloomberg (and many others) outright refuse to admit is that _Marx was right_.
Universal Basic Income. What is that but an alternate solution to collectivisation? Same applies to profit-sharing. It's the reason why charities are non-profits because we all recognise the alternative would be unseemly. The Tobin tax (taxing certain international financial transactions) is another solution. As are regressive tax regimes that hit the wealthiest hardest. Consider also alternate forms of incorporation like cooperatives. And so on. What all these have in common is that they try to address the flaw at the heart of capitalism. The sooner we stop calling people communists for putting forward sane solutions the better. If we don't address this there will be ruin and revolution and when that happens we'll have a messy rather graceful transition to a fairer society.
I wonder how long the modern idea of debt has existed? Mainly, that idea of owing someone something, (often) at a later date?
The concept of zero isn't even 5000 years old. Negative numbers were still being debated in the 1700s, though I think the first known use was in China's number rod system in 200 BCE. Conceptually, less than nothing is a funny thing and not really well grounded in the physical world.
It does make me curious. I'll have to look for the book. I find the history of mathematics to be fascinating, though debt may have originally been more culture and less math.
Socialism is about class solidarity and more equal redistribution of capital gains mostly via democratic process. Communism (or bolshevism and maoism) on the other hand is about exclusive small cadre party pretending to represent entire working class and seeking total control over society using all means including terror.
Free market is about leveling play field and equal access to marketplace for all actors big or small. Capitalism on the other hand is about maximizing control over markets and maximizing rent seeking.
I believe OP is trying to say that capitalism and communism pertain to who owns [the] property while free markets and socialism pertain to who/how/what gets produced.
Socialism was born from the belief that democratic forms of government aren't possible so long as there is wealth inequality, as the rich will simply hijack the government to serve their interests. Socialism, then, is a large bucket of political beliefs all concerned with different methods by which to keep a vibrant economy, while ensuring that all people are relatively equal, or at least equal enough monetarily that the government can be truly democratic, for some definition of democracy.
Communism was born of the belief that the previous type of society was not possible to achieve without an organized group taking the reigns and instituting such a society. But of course, people rarely step down from power once achieving it, so instead you usually wound up with small groups of people dictatorially running countries and doing as they pleased, in the name of 'socialism.'
Free market ideology is born of the belief that decentralized economic planning is a way of bringing enlightenment thinking to economic matters, and, more simply put, that thousands or millions of people making small economic decisions will ultimately be more efficient, fair, and rewarding for society as a whole than small groups of people attempting to make such decisions for everyone on their behalf, from far away (literally, or metaphorically).
In this analogy, the author is implying that capitalism is similar to free markets, as communists are to socialism. A small group of people, who acting in the name of the previous ideology, ultimately come to concentrate power among themselves at the expense of everyone else. These people paying lip service to the original ideology they were supposed to be a part of, while actively acting against it and ensuring it does not exist for the wider population.
I can't help but wonder how much of this would have been fixed by letting them fail. This is way out of my ballpark, but it still bothers me a lot that they don't face the same consequences I do for making mistakes.
Iceland let its banks fail and protected the taxpayers, and a few years later the economy recovered just fine. It's at a much smaller scale than the US or EU economy though, but still.
It's entirely unfair to use 'but still' as any sort of argument here. Iceland is not a large chunk of the world economy, nor does it have a premier position as the world's economic nexus to protect. It's well documented that cause/effect differs as your economy scales (just look at how behavior changes between a small startup vs a unicorn). While there might be some valid arguments for letting the banks fall, 'someone else did it and it worked' is not one of them.
Iceland effectively did bail its banks out, but only bailed them out for domestic depositors and screwing foreign creditors and depositors, which had severe foreign policy effects on Iceland.
Or, bail them out (emergency liquidity, QE1, etc) but also nationalize them at least on a temporary basis so that as they recover, the profits do not go to private pockets but rather are socialized.
Not that I've researched it, but I've read the auto manufacturers turned things around and repaid the bailout because they are in the business of producing things. It seems like the business of banking has it's own culture, if we don't recognize what they're about and say no next time I will be out rioting.
Exactly right. There has to be real consequences or else you get what we have right now which are these entities that are so powerful they can shift accountability away from themselves and thereby socialize all their losses while profiting to the tune of hundreds of billions of dollars.
The sad thing about this is that it seems like we haven't learned from the past. One of the hottest things in my local community right now is flipping houses. You have people levereged to the hilt with hard money loans, flippers teaching classes (and providing hard money loans), and home prices at or exceeding 2008 levels.
No no no, you aren’t understanding, let me aid you in doing so.
The people in 2008 just timed the market poorly. This time around, we’ll see all the tell-tale signs of a housing crash and get out right before it does so, all cash. Then, when all the stocks (Because, of course, banks will lose out on the highly leveraged positions of our non-fortuitous peers) have tanked, we’ll simply buy them at rock bottom prices, riding a wave of financial security into the nursing home.
Banks were supposed to be stable and boring. The quest for 'financial innovation' in the heady 80s accompanied by rocketing bonuses and compensation has led to highly unstable economies with risk and reward mixed up with government intervention, too big to fail, regulatory capture and lobbying and now basically stand isolated.
During the asian financial crisis the IMF and WB were gung ho about free markets, austerity and enforcing failure without exception but as soon as it hit western economies the whole field of economics changed with words like 'too big to fail' and 'systemic risk' entering the economic vocabulary.
How does one explain oil being at $40 and $140 with supply and demand and free markets. There is a lot more going on that is often hidden behind jargon that obfuscates than informs.
Isn't oil a commodity with a variable supply but relatively fixed demand? Big price swings are what you would expect in a situation like that.
One can argue that some suppliers act "irrationally" when they artificially restrict their output to drive up prices (OPEC), but this is what you would expect to see in that situation.
I'm not sure how the author can assert with a straight face that Dodd-Frank is essentially sacred, a lack of community banks is hurting the economy, and that it's all the big banks' fault.
A loan to your your local mom-and-pop shop is a much riskier investment than a bond to a large corporation. DFA discourages risk-taking with the new capital requirement rules. Thus, community banks are fighting over a small pool of profitable loan opportunities and their numbers shrink. On the other side, small businesses have a harder time getting loans.
Regulatory compliance overhead from DFA hits community banks harder than big banks as well, so they're consolidating and leaving fewer true community banks.
None of this is has much to do with the actions of big banks. It's the natural consequence of DFA. If you don't like the status quo, you need to change DFA. Not necessarily to pre-2007 rules, but some small changes could provide a big boost to community banks.
Embracing technology could be a better solution. Government should fund open technology development as necessary to ease the burden of financial regulatory compliance. Technology could and should make it possible for smaller banks to comply with federal regulations with the same efficiency as big banks -- at the same time, federal regulations should be allowed to become as complex as necessary to surface and discourage fraud and systemically risky behavior.
Free markets are all good until the government fail to regulate them. Decentralization from state and political influence is good, until nobody is in control anymore. Then it's chaos.
To be frank I think that US banks might be influenced by foreign powers just like it happened for the last election.
I think that finance will damage sovereignty in the long run. It really looks like common citizens don't really have a say on how finance work in terms of politics.
The problem is, that we let banks become so big and important for our economies, that they can make the rules, if we want it or not.
The rules that Obama made, where hardly enough to prevent the biggest problems, of the system. But even those are abolished by the new president, since they might limit the possible profits, rich people can make.
And so we live on in the land of unlimited profits for the 0,1% and the unlimited losses for society.
Readit News
For example, health services are largely financialized via insurance. IE, you don’t directly buy health services, you buy insurance which buys health services. You don’t buy a house, you get a mortgage. You don’t support your parents (or colleagues) in their old age, you pay into pension or superannuation schemes. Education via student loans. Monthly expenses via credit card debt. Large ticket items via dealer finance. Public services via national debt…….Companies via private equity. Everything has a financial layer between payment and consumption.
Underlying a lot of this is a relatively simple fact that if debt is available, consumers (from 18 year olds to Finance Ministers) will take it. If loans are available for certain products, more of those products will be consumed.
Another (possibly evil) driver is that governments have chosen financialization as instruments for promoting stuff they want to promote. Need more corn? Crop insurance subsidies. Educate the masses? Subsidise student loans. Promote home ownership? Implicitly guarantee retail banks’ losses. Medical care for all? Tax free(subsidy) insurance. Flood problems? Flood insurance. Poverty? Microfinance.
So, banks got big. This has all sorts of weird effects.
One of the biggest problems in my opinion is the inflationary effect of this process. Real estate prices in many places are simply the amount that a bank is willing to lend buyers. If banks increase the amount a buyer can loan, house prices increase proportionally. IMO, the American healthcare saga is not really about ideology or competence or any of the stuff they talk about. The problem is that after 2-3 generations of wide scale subsidised financialization, prices & costs are so high.
My final thought is that part of the problem is the prominence of finance people in pubic decision making. They know finance. They believe in it. They use it to solve problems. They don’t see baks getting bigger as a problem. It’s kind of like the lawyer problem, who also have a lot of presence in politics. That means the legal field gets bigger all the time.
Indeed, I've read a few articles in NYTimes/WSJ now on the sale of public services in the US such as fire and water services to private equity firms. And the whole thing is told as a cautionary tale about banks and capitalism, which misses the bigger picture in how these things always start.
Typically the problems start because the government was overleveraged from taking on too much debt, typically due to poor financial management fueled by initially cheap capital from bankers operating in and out of government. Then when hard times come they continue to seek the easy answers from the bankers (instead of making hard choices like spending less) and end up selling off public resources giftwrapped in pseudo-market sounding language with very little of the actual benefits of markets: competition, private salaries, flexibility, etc.
These "banks" are famously like an octopus wrapping their tentacles around everything. We have some old effective methods for handling this type of behaviour when it's used improperly in the private sector, and there the harm is limited to a few usually wealthy parties. But it starts to get dangerous when these half-baked financial schemes that have worked in private markets get pigeonholed into government. Critical services like emergency services or drinking water are often ill-suited (and more importantly ill-prepared) to handle the potential downside.
Hopefully one day politicians will learn this lesson and learn to keep things simple in the public sector. Governments everywhere have a consistent track record of not managing money well and have a high-turnover of executives by design, so any complex financial instruments are just setting them up for failure and exploitation. Anything to do with government should be made dummy proof and straightforward. Public services should be run like public services. Mixing of private/public should be the exception, not the standard. And I say that as someone biased towards the private sector.
Sometimes I feel like this "extra layer"/middleman-adding is not only just to enable government interventions but is just fluff added so we could create jobs for those whose skills don't go beyond the typical white-collar worker. I might be wrong, but the image of extraneous University administrators and "not-enough" skilled labor kinda paints this picture.
That's (in a somewhat roundabout way) is similar to one of David Graeber's arguments, you might like his book.
For example, if I have extra money, and I know someone who could ramp up his productivity if only he could make a one-time investment (say, a cow for his farm), then I buy him a cow in return for a share of its milk. Then, to diversify, I can find thirty such people. Then I find someone who can sell the milk for a cut...[1]
Instead of all of that, we have banks, where I just give them the money, and they make the loans (and do screening, credit reporting, foreclosure, etc) and pass me a cut of the returns.
Nothing is wrong with that. The problem is when you have perverse incentives to start with (e.g. in fields like health care, or with lenders who have asymmetric information about the loans in a portfolio there's excessive trust in the vetting), where financialization just puts the same problem on steroids.
[1] Late edit: a better example of the "impure exchange" might be if I wanted to save for my retirement so I raised one more cow than I usually would with the intent to lend it out to others who are still working in return for milk, with the usual frictions like needing to convert to non-milk.
some of this is due to a lack of financial literacy on the part of consumers (financiers know that loans should come with an interest rate, not a charge for the privilege of loaning the money in the first place, but consumers on the whole apparently don't).
but there is also a regulatory mechanism exploited by consumer banks: FDIC insurance. without insurance, people are understandably reluctant to loan money to banks since they don't know if they'll get the money back. so the government (again, understandably) steps in and guarantees with tax dollars that you'll get that money back, even if the bankers are crooks. but of course, that means the government must try to tease out the crooks with a stringent set of tests and regulations around who they'll insure. and just like that, you have an anti-competitive choke point where incumbent banks use the regulations to guard against future competitors by keeping the regulatory barrier high.
(this is just another example of the financialization via insurance that you elucidate)
also, use cash. it's transaction-cost free, anonymous and universally accepted.
Yes, if the payments become too onerous or the ability to roll over is compromised (Greece passim), then you have a serious problem, but the whole thing does not magically blow up at a certain level.
Also, remember that at a global balance sheet level, debt == savings. Debt (personal+state+corporate) has expanded because there are more and more people saving for their pensions, and the savings glut has pushed down the price of debt.
(and the "missing trillions" stashed in tax havens have to be lent out somewhere, too)
Yes, the policies you describe do boost demand and that does cause inflation, but the supply side is not irrelevant. Less NIMBYism will help with housing costs, and maybe some reform could help with education supply. If demand is increasing (for example due to population growth and finance), ideally supply should also be able to increase.
Economist has presented a well written argument here: https://www.economist.com/news/briefing/21651220-most-wester...
Some of them are probably good, others not.
Home mortgages have mostly done what the politicians and public wanted in rural and suburban areas. Some price inflation happened as a side effect, but a lot of that extra cost went into bigger homes so people get something for it. Slightly distorting to the market, but nothing terrible.
In dense urban environments where supply is inelastic, price inflation was a lot worse yielded a lot less. This is probably one of the biggest cost of living problems.
I think the financialization of ordinary health services (not things like cancer or accidents) is terrible. I think it makes the whole industry a lot worse. Ultimately though, this is/was driven by consumer and voter demand not scheming villains.
Collectively, I think they might add up to different classes of problems.
We have a total disaster mid-way through. This has to change.
Why do you think this?
For those interested in the topic, I highly recommend Connie Bruick's Predators' Ball and Liar's Poker by Michael Lewis.
> Adam Smith, the father of modern capitalism
I hope we can stop conflating free markets for capitalism. Capitalism is to free markets what communism is to socialism. Adam Smith was very much focused on free markets, not capitalism. The author of the article, makes it clear later with
> Adam Smith, who believed that for markets to work, all players must have equal access to information, transparent prices and a shared moral framework
When people say capitalism they typically mean one or more of the following:
* Free markets
* Free trade
* Private ownership of the factors of production
* A form of economic organization characterized by tradable claims of ownership, & ownership separate from management.
* A form of economic organization where the primary driver of the firm is profit.
* A counterpoint to socialism.
* A counterpoint to centrally planned/managed economies.
By never being clear about what one means, and just saying 'capitalism' a skilled rhetorician can convince you one thing is good (or bad) and then lump others in as part and parcel.
As you point out profit seeking businesses do not like free markets.
Sure, some, but if every author accepted this as immutable, we can never progress.
The issue is that when you have two separate ideals, each with their own qualities, allowing them to become synonymous provides a defense for the lesser ideal in the name of the better.
So, it makes it easy for bankers and capitalists to defend their actions in the name of a free market!
Fortunately you don't even have to read it from cover to cover to get the meat of it. Here https://www.youtube.com/watch?v=CZIINXhGDcs is a talk 80 mins long Graeber gave at Google.
Then once you've done that listen https://www.youtube.com/watch?v=8y_wz85ViLY to Robert Paul Wolff talk about the problem Ricardo, Smith, and Marx tackled. This one is a bit longer and it is tougher going but the pay-off is immense.
––
What this New York Times article and the recent Bloomberg https://www.bloomberg.com/news/articles/2017-09-21/why-wages... (“Why Wages Aren't Growing”) article that hit the front page here have in common is that they both refuse to recognise that Marx's critique of capital was correct in his day and it _remains_ correct.
The next part is important. We _must_ separate the critique from his proposed solution. To be very clear I can agree with Marx's critique but I do not have to agree that central collectivisation is the solution.
The very simple observation is this. For-profit capitalism over time will cause (a) workers to be exploited to the point where they can't actually take part in the society they're a part of (which hurts the capitalist too!) and (b) wealth gets concentrated inefficiently.
What the New York Times and Bloomberg (and many others) outright refuse to admit is that _Marx was right_.
Universal Basic Income. What is that but an alternate solution to collectivisation? Same applies to profit-sharing. It's the reason why charities are non-profits because we all recognise the alternative would be unseemly. The Tobin tax (taxing certain international financial transactions) is another solution. As are regressive tax regimes that hit the wealthiest hardest. Consider also alternate forms of incorporation like cooperatives. And so on. What all these have in common is that they try to address the flaw at the heart of capitalism. The sooner we stop calling people communists for putting forward sane solutions the better. If we don't address this there will be ruin and revolution and when that happens we'll have a messy rather graceful transition to a fairer society.
The concept of zero isn't even 5000 years old. Negative numbers were still being debated in the 1700s, though I think the first known use was in China's number rod system in 200 BCE. Conceptually, less than nothing is a funny thing and not really well grounded in the physical world.
It does make me curious. I'll have to look for the book. I find the history of mathematics to be fascinating, though debt may have originally been more culture and less math.
Would you explain this a bit more?
Free market is about leveling play field and equal access to marketplace for all actors big or small. Capitalism on the other hand is about maximizing control over markets and maximizing rent seeking.
Socialism was born from the belief that democratic forms of government aren't possible so long as there is wealth inequality, as the rich will simply hijack the government to serve their interests. Socialism, then, is a large bucket of political beliefs all concerned with different methods by which to keep a vibrant economy, while ensuring that all people are relatively equal, or at least equal enough monetarily that the government can be truly democratic, for some definition of democracy.
Communism was born of the belief that the previous type of society was not possible to achieve without an organized group taking the reigns and instituting such a society. But of course, people rarely step down from power once achieving it, so instead you usually wound up with small groups of people dictatorially running countries and doing as they pleased, in the name of 'socialism.'
Free market ideology is born of the belief that decentralized economic planning is a way of bringing enlightenment thinking to economic matters, and, more simply put, that thousands or millions of people making small economic decisions will ultimately be more efficient, fair, and rewarding for society as a whole than small groups of people attempting to make such decisions for everyone on their behalf, from far away (literally, or metaphorically).
In this analogy, the author is implying that capitalism is similar to free markets, as communists are to socialism. A small group of people, who acting in the name of the previous ideology, ultimately come to concentrate power among themselves at the expense of everyone else. These people paying lip service to the original ideology they were supposed to be a part of, while actively acting against it and ensuring it does not exist for the wider population.
The people in 2008 just timed the market poorly. This time around, we’ll see all the tell-tale signs of a housing crash and get out right before it does so, all cash. Then, when all the stocks (Because, of course, banks will lose out on the highly leveraged positions of our non-fortuitous peers) have tanked, we’ll simply buy them at rock bottom prices, riding a wave of financial security into the nursing home.
During the asian financial crisis the IMF and WB were gung ho about free markets, austerity and enforcing failure without exception but as soon as it hit western economies the whole field of economics changed with words like 'too big to fail' and 'systemic risk' entering the economic vocabulary.
How does one explain oil being at $40 and $140 with supply and demand and free markets. There is a lot more going on that is often hidden behind jargon that obfuscates than informs.
One can argue that some suppliers act "irrationally" when they artificially restrict their output to drive up prices (OPEC), but this is what you would expect to see in that situation.
A loan to your your local mom-and-pop shop is a much riskier investment than a bond to a large corporation. DFA discourages risk-taking with the new capital requirement rules. Thus, community banks are fighting over a small pool of profitable loan opportunities and their numbers shrink. On the other side, small businesses have a harder time getting loans.
Regulatory compliance overhead from DFA hits community banks harder than big banks as well, so they're consolidating and leaving fewer true community banks.
None of this is has much to do with the actions of big banks. It's the natural consequence of DFA. If you don't like the status quo, you need to change DFA. Not necessarily to pre-2007 rules, but some small changes could provide a big boost to community banks.
To be frank I think that US banks might be influenced by foreign powers just like it happened for the last election.
I think that finance will damage sovereignty in the long run. It really looks like common citizens don't really have a say on how finance work in terms of politics.
The rules that Obama made, where hardly enough to prevent the biggest problems, of the system. But even those are abolished by the new president, since they might limit the possible profits, rich people can make.
And so we live on in the land of unlimited profits for the 0,1% and the unlimited losses for society.