Is Capitalism Dead?

[biswa]

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<Just an open question posted to members>

 

[Yamaka]

biswa:

First you need to define the term "Capitalism".

1. Does that mean Capital formation only?

2. Does that mean the means of production and distribution are in the hands of private people, not with a Central Politburo of Govt?

3. Does that mean a robust market for the accumulated savings - the Capital - to be sold for a fee or dividend?

Etc. etc.

I believe Capitalism is alive and well... but it is not helping the weaker section of the Society...

India's top 300 million people are doing well under Capitalism or the Deregulated Economy..nearly half of these people are connected to the world by Broadband Internet.

..but the bottom 900 million people are subsisting under Rs. 150 per day of income.

Of this about 800 million are forced to live on Rs. 20 per day of income.... Why? Why?

Neither their Belief in God nor Capitalism help these people with a wretched life...

Why?

 

[biswa]

Well even people in the bastion of capitalism (New York City) are beginning to express their doubts. Here is NYU professor Nouriel 'Dr. Doom' Roubini on Marxism:

Nouriel 'Dr. Doom' Roubini: ?Karl Marx Was Right? - International Business Times

 

[kunjuppu]

Well even people in the bastion of capitalism (New York City) are beginning to express their doubts. Here is NYU professor Nouriel 'Dr. Doom' Roubini on Marxism:

Nouriel 'Dr. Doom' Roubini: ?Karl Marx Was Right? - International Business Times

biswa,

there are 8 million or so new yorkers. it is unrealistic to expect everyone of them to uphold the capitalist bastion. right?

in fact, more so than any other city, new yorkers, inspite of housing wall street, are among the most lively divisive group of debaters, with a healthy dose of sympathy and empathy for their less endowed humans, than any other usa city. that is what i think.

and dr roubini, has been among the forefront in his criticism of captialism as practised by his countrymen.

i have no problem if you quote dr doom, freestanding, without attributing him, to a change in the mindset of the new yorkers ie hitherto they were all strong capitalists, who have now converted. i dont think any such thing has happened.

 

[biswa]

Ok Mr K, forget NYC, forget Dr Doom. What is your opinion? Don't you see capitalism under siege all over the western world? Or is it a case of:

Capitalism is dead.
Long live capitalism!

 

[Servall]

In my view capitalism is not dead. Marx may have said, by its inherent nature, capitalism is doomed for failure, the bourgeoisie (the controllers of means of production) hired the proletariat (the laborers) to produce and control private ownership. Due to the sheer size of the proletariat and the continued class struggle between these groups someday he prophecied that this will result in the demise of capitalism. Did it?
Now, when we look around all over the world, the concepts of private ownership, opportunites for increased individual economic gains, free market forces are all at play. True there are threats to capitalism by way of : continued disparity between rich and poor, this has led over the years to international migration for opportunities placing risk on continued production in a market, threat to private ownership (tamil nadu is a classic example, forced seizure of properties, fear of economic freedom to engage in lucrative business opportunities due to governmental pressures), security threats from terrorist forces creating distress to ongoing operations of businesses and political instability..so the list goes on. But with continued regulations and necessary interference, the world governments continue to provide security and stability to markets. Capitalism may not be thriving, but it is very much alive!!

 

[amala]

Marx did predict that Capitalism would fail as Servall mentioned. He was after all an economist. However he failed to take into account that technology today would be so advanced as to allow capitalism to provide a higher standard of living in developed countries.

Its not dead yet and it may never die. But currently the future of capitalism sure does look bleak.

 

[Yamaka]

It's funny.. to recall that Marx wrote all his monographs using the facility of London Library, living away in a country where Capitalism was vogue.. and he did not earn a living there, always expecting hand-out coming from his friends in Germany!

Well.. Private Ownership, Means of Production and Distribution in the hands largely of private people, Market clearance following the dictates of supply and demand for a price etc etc WILL always be there..

As Amala pointed out, technology has changed so much that the equation now is NOT between the capitalists and the languishing labor.. the labor is now very sophisticated into KNOWLEDGE workers or Professional cadres of Engineers and Software developers etc.. etc..

However, small glitches.. in the form of recession/stagnation will come and go... Dr. Doom knows it very well...

One thing that puzzles me is this Deep Recession Since 1930s which started in 2008.. this seems to be of a different type -

There was fiscal stimulus of about $800 billion spent over two year period.. and there was massive monetary stimulus to the tune of about $1.8 trillions (by Fed's QE 1 and QE 2) - all this did not "prime up" the Employment Engine!

Why?

I believe more on Aggregate Demand as a stronger force in the economy than the Supply Side Vooddoo Economics of Reagan and Bush.

This means somehow the Govt policy must gear up Aggregate Demand by Govt Projects:

I favor massive Public Works:

1. Build 21st Century Electric Grid all across America/North America all underground with meters which can feed the grid from photocells on many homes and Govt buildings AND provide power from the grid (all seamlessly, trouble free).

2. Rebuild all the bridges and super highways to the highest standard.

3. Invest massively on alternate energy models: Solar, Wind, Thermal and Battery Power etc etc.

How to finance this?

By a Development Bank where Fed puts down some money, and attracts money from private investors by issuing 100 year tax-free bonds!

And make a slogan "Deficit and Debt don't matter... ONLY JOBS..and Growth matter"... Say it louder everyday!

What say you?

 

[kunjuppu]

It's funny.. to recall that Marx wrote all his monographs using the facility of London Library, living away in a country where Capitalism was vogue.. and he did not earn a living there, always expecting hand-out coming from his friends in Germany!

Well.. Private Ownership, Means of Production and Distribution in the hands largely of private people, Market clearance following the dictates of supply and demand for a price etc etc WILL always be there..

As Amala pointed out, technology has changed so much that the equation now is NOT between the capitalists and the languishing labor.. the labor is now very sophisticated into KNOWLEDGE workers or Professional cadres of Engineers and Software developers etc.. etc..

However, small glitches.. in the form of recession/stagnation will come and go... Dr. Doom knows it very well...

One thing that puzzles me is this Deep Recession Since 1930s which started in 2008.. this seems to be of a different type -

There was fiscal stimulus of about $800 billion spent over two year period.. and there was massive monetary stimulus to the tune of about $1.8 trillions (by Fed's QE 1 and QE 2) - all this did not "prime up" the Employment Engine!

Why?

I believe more on Aggregate Demand as a stronger force in the economy than the Supply Side Vooddoo Economics of Reagan and Bush.

This means somehow the Govt policy must gear up Aggregate Demand by Govt Projects:

I favor massive Public Works:

1. Build 21st Century Electric Grid all across America/North America all underground with meters which can feed the grid from photocells on many homes and Govt buildings AND provide power from the grid (all seamlessly, trouble free).

2. Rebuild all the bridges and super highways to the highest standard.

3. Invest massively on alternate energy models: Solar, Wind, Thermal and Battery Power etc etc.

How to finance this?

By a Development Bank where Fed puts down some money, and attracts money from private investors by issuing 100 year tax-free bonds!

And make a slogan "Deficit and Debt don't matter... ONLY JOBS..and Growth matter"... Say it louder everyday!

What say you?

y,

i like this. this is like the great depression 'new deal' projects like the TVA.

but then, FDR had a desperate nation, a democratic house/senate and even though opposed tooth and nail by wall street, was able to pull it off.

i thought obama would have that type of stature, but has proved NOT.

so, in the light of the current political usa environment, the tea party movement, in light of already huge debt, army in iraq and huge expense of military bases abroad (in 1930 usa had no base abroad barring cuba) & above all the dominant policing job that the usa has taken upon itself around the world, ...

i see no chance of any further government expansion or borrowing in the future. if at all anything, chances are that california like, 'mandatory balancing budgets' may become reality at the federal level.

obama could have been visionary, but i think he tried to be a 'nice' guy. 80 years later, FDR is still hated intensely by right wingers for his 'socialism'

 

[sangom]

I am not an economist and so my views may not be theoretically correct or even acceptable to many, still, these are my ideas.

Communism required an ideal leadership to implement its ideal philosophy but failed almost everywhere because it is not possible to have anything like "ideal leader/s". The communist super power today, viz., China is not communist in truth, it is an oligarchy.

Capitalism provides for each person, freedom to improve his economic conditions according to his/her capability. So, naturally any capitalist society will give rise to economic inequality because people are not all equally endowed and so some will prosper more than others. A successful capitalist country should therefore have some system to redistribute the wealth so that the inequalities do not get aggravated beyond tolerable levels. For this the Government may have to do a bit of "Robin hood" job; take money from the rich and redistribute to those who do not have. The actual methods may vary according to the circumstances.

The type of Capitalism which the right in US prescribes, viz., the govt. should shrink, taxes should be reduced (or at least not increased), etc., may not be the type of Capitalism that will work any more anywhere.

In India we have too much of the Government thanks to our socialistic notions and so a reasonable reduction of Govt., can be done. But we are a corrupt people who are prone to take disobeying laws as symbol of heroism and possibly patriotism too Therefore, unless we embark on a massive, nation-wide, people-education programme and also improve, side by side our political masters to be free from corruption and feel that they are in truth "servants of the people" who elected them, this level of Government may be necessary. So, the IT boom and the consequent capitalist growth can be made good use of if we also bring about the people improvement programmes and gradually reduce Government.

Hence, all Capitalism is not dead imo, only some varieties of it.

 

[mscoomar]

hi all im new to this site... i just needed of an answer to a question which is long due in my heart. can anyone help !

Question: As you all know in hindus most of us will light a lamp (vilaku) with a gajalakshmi statue, where laksmi is decorated with elephants in front and also in back. but most of the people calling this as "kamakshi villaku" why the name is called so. is the villaku name is kamatchi vilaku or gaja lakshmi vilaku

 

[Haridasa Siva]

biswa: Though you just raised the question, you have not given your views. Y asked you to define Capitalism, which you haven't. That notwithstanding, I second what Y and Amala have mentioned. Capitalism is limping now but is not dead nor would it ever be. And we need capitalism to encourage initiatives. Otherwise people would become lazy expecting the Govt to feed them.

Sevall: You have good views. Request you to post more and be more active in the forum.

As is the case with many techniques, the 3rd world is now handling what US seems to have failed at - Capitalism. Only time can vouch for its success.

 

[Yamaka]

hi all im new to this site... i just needed of an answer to a question which is long due in my heart. can anyone help !

Question: As you all know in hindus most of us will light a lamp (vilaku) with a gajalakshmi statue, where laksmi is decorated with elephants in front and also in back. but most of the people calling this as "kamakshi villaku" why the name is called so. is the villaku name is kamatchi vilaku or gaja lakshmi vilaku

Hello mscoomar:

Welcome...

Perhaps, your question will get immediate attention if posted on a different Thread... there are Threads more appropriate than this "Is Capitalism Dead?".

Just a thought.

Y

 

[Yamaka]

I am not an economist and so my views may not be theoretically correct or even acceptable to many, still, these are my ideas.

Communism required an ideal leadership to implement its ideal philosophy but failed almost everywhere because it is not possible to have anything like "ideal leader/s". The communist super power today, viz., China is not communist in truth, it is an oligarchy.

Capitalism provides for each person, freedom to improve his economic conditions according to his/her capability. So, naturally any capitalist society will give rise to economic inequality because people are not all equally endowed and so some will prosper more than others. A successful capitalist country should therefore have some system to redistribute the wealth so that the inequalities do not get aggravated beyond tolerable levels. For this the Government may have to do a bit of "Robin hood" job; take money from the rich and redistribute to those who do not have. The actual methods may vary according to the circumstances.

The type of Capitalism which the right in US prescribes, viz., the govt. should shrink, taxes should be reduced (or at least not increased), etc., may not be the type of Capitalism that will work any more anywhere.

In India we have too much of the Government thanks to our socialistic notions and so a reasonable reduction of Govt., can be done. But we are a corrupt people who are prone to take disobeying laws as symbol of heroism and possibly patriotism too Therefore, unless we embark on a massive, nation-wide, people-education programme and also improve, side by side our political masters to be free from corruption and feel that they are in truth "servants of the people" who elected them, this level of Government may be necessary. So, the IT boom and the consequent capitalist growth can be made good use of if we also bring about the people improvement programmes and gradually reduce Government.

Hence, all Capitalism is not dead imo, only some varieties of it.

Dear Sangom Sir:

I agree Capitalism is not dead - it will weather thru all the challenges, I believe.

I want to ask some basic questions and get answers from readers:

1. How much should be the total taxation (direct taxes like income tax and indirect taxes like VAT) by ALL Gov'ts?

Today, Obama collects about 14.8% of total GDP (including payroll tax etc) at the Federal level, and States and local Gov'ts collect about 20% of the total GDP to run their show.. so the total is about 35% of the total GDP... this is much lower now than in say 2006 - the pre-recession period, when these entities collected as much as 45% of the total GDP.

I will say about 45% of the GDP should be the size of ALL Gov'ts. The rest 55% must be in private hands to spend the way they want it.

2. Who should be taxed, and what should be taxed and how much income should not be taxed?

I say the Capital Gains must be taxed at the highest marginal rate (say 39%) and the highest income people should be taxed at the same highest rate.

Dividends can be taxed as ordinary income.. it need not get special preference.

In US today, an income of $48,000 in a family of four is not taxed at the Federal level... but States can collect tax via sales tax (like TX does, very punitively). But payroll taxes apply which goes towards Medicare and Social Security, which come back as Entitlements.

I would like to get equivalent figures for India... somebody can provide the numbers for comparative analysis.

One discouraging feature of Capitalism is, IMO, that bulk of the people are left behind as in India... Why?

By enforcing the laws and curbing the black markets, abolishing corruption in walks of life Capitalism CAN protect the poorly skilled people trapped at the lower income level from abject poverty as it is in India today (about 800 millions subsisting on Rs. 20 income a day).

Educating the masses for the labor market is the best way of creating ladders of opportunity to ALL people, and must be funded by taxing the very top! Yes this is the Robin Hood role that an Elected Govt plays.

However, one Dr. Prahalatha of MIT says, "The Bottom of the Pyramid Supports the Top of the Pyramid, in economics also"

Perhaps, he means that Consumers at the bottom are the people supporting the wealthy siting at the top!

Cheers.

ps. You all could get a smell that I was a former Socialist! Lol

 

[Haridasa Siva]

Y,

You have put forth some interesting views and facts.
1. I envy people earning in US if they don't have to pay taxes for earnings up to US$48k p.a. In SA, we start paying income tax from the level of US$15k p.a.
2. If higher income group is taxed at a higher rate, isn't it like punishing someone for his ability (to earn more)? In my opinion, it is not a good sign of Capitalism.
3. Yes, curbing black markets is very essential in Capitalistic environment. Handling corruption, however, is a political function (raaj neethi) than an economic function.
4. I tend to differ from Dr.Prahalada's view that the bottom of the pyramid support the top in economics. I think it is other way round. If the top does not exist, the bottom would not be visible at all. It is the top of the pyramid that is supporting the whole pyramid in economics.

Yes, I see that your views on Capitalism does have a touch of Socialism. Even I had socialistic views and I think I still have. But I like Capitalism (Free Market Economy) more.

 

[kunjuppu]

biswa,

i think, as long as humans are allive, capitalism will live.

as i see it, capitalism itself has had a life of only 300 years or so, since the first industrial revolution led by england in the 1700s with coal generated steam being the primary mover of energy.

prior to that, it was an agrarian economy, all wealth owned by the king or the landed gentry or the church or its equivalent across the world.

the early 20th century made one grand and several copy cat attempts to build an economy and prosperity based on idealism ie communism. and it failed. failed abjectly, in the light of concentrated attack by capitalism, to such an extent, that today a distant island called cuba, is the sole communist country left, and that too, i feel, not for long.

meanwhile, captitalism was evolving though from the first edition of adam smith. germany, if i remember right, under bismarck, was the first, to put leash on unbridled capitalism, with state intervened pensions, holidays and medical care.

shades of communism or socialism, some might say. others might say that these are chapters off marx's das kapital. whatever it may be, capitalism shamelesss borrowed the best features of communism, and while managing to maintain the engine of wealth creation, attempted not to reduce the variation of wealth, but to provide the poorest of the poor, with the minimum needed, to keep him quiet, if not satisfied.

post war europe went one further step - it included free education, healthcare and pension at 60 years for all. from 1950s to 2000, i think, europe was closest to heaven on earth, with its widespread prosperity, freedom of movement of people and above all provided such an upward mobility for its white citizens, that they had to import labour from other countries to do the lower end jobs.

now for various reasons, we think capitalism is in crisis. why? not because anyone is going to go hungry in europe or the usa. but because there is 10% unemployment? in the usa? but so what? germany for 10 years post reunion dealt with 10+% unemployment and nothing untoward happened. the usa has had low employment levels only since the post second world war build up of highways which provided a fillip to massive state aided construction and kept the returning soldiers, those who did not take advantage of state funded college education, busy till other industries came upto speed.

recently there was an article that the usa consumer spending only 2.7% on chinese goods and that 55% is service produced in the usa

Mish's Global Economic Trend Analysis: "Made-in-China" Only 2.7% of U.S. Spending; Really? What Does It Mean? Inflationists Take Note

but this marginal 1.3% has resulted in the closure of key usa industries which employed a couple of million folks or so. the first group to get hit, was union labour - those fatcat uaw auto workers, who came hangovered to work on monday with such regularity that a new car model, 'monday morning made' came into the english usage. also to pay for their viagra and divorce lawyers, the union bargained and won.

what was lost was their jobs, because the average joe american did not want to subsidize these workers. likewise happened to rubbermaid workers and so many other usa brand names. i think, it was the capitalist wall street plot to destroy the strong union movement, with much more finesse than what happened in margaret thatcher's britain, where she used the iron fist.

by and large, the key usa electorate, ie the farmers have been left intact. even though the farmers are a minority in the voting league, they are spread in across the entire usa, and able to elect senate and representatives way out of what their numbers warrant. wall street is intact. the entitled middle class of white retirees, professionals, armed services are intact.

so who lost? the afro americans, mexicans, the illegal immigrants who did the construction labour. and the unionized whites. the establishment inthe usa is not shedding much tears for these folks. if at all anything, the ruling class has snipped off obama's high flying feathers, and he is in danger of losing his job 2012. guess who is going to win - the likes of nikki haley, michelle bachmann or sarah palin or their male clones. all of these are mouthpieces of the purist form of capitalism, among whose top commandment is balanced budget, followed by shrinking government, and no government entitlements to the poor ('let them eat cake' eh!!)

so, i think, the usa capitalism is not only alive, but kicking, and through creation of the crisis, which is their own making, and greed, they have ensured what little state aided assistance for the weaker sections existed in the usa, will now be slowly but definitely choked out of the much needed $$$ oxygen and hence die unfunded and uncared.

if one looks across the pond, most of europe has abandoned the post war social democratic ideals of a classless society. today europe too, is a pale but imitation of usa, with inner city ghettos populated by coloured folks, surrounded by gated communities of prosperous whites. why should the french whites give up their privleged living to subsidize and bring up the standard of an arab immigrant. only to see, more of them cross the mediterranean and swarm the public welfare system.

biswa, you asked and this is my answer. this is not a statement of belief. more a statement of fact, as i see it. living in canada, just north of the usa, with most of its social welfare net still standing intact. not sure how long though, for once uncle sam turns his mean eyes on his timid northern neighbour, we too will wilt, and let our capitalist quislings call the shots and try to grab power. time alone will tell

for now, for want of any other alternative, capitalism is on another chapter to rule and let no one else rule. atleast for 25 years, when china meets its first major crisis. who know what the chinese will come up with as altnernative?

 

[Yamaka]

Y,

You have put forth some interesting views and facts.
1. I envy people earning in US if they don't have to pay taxes for earnings up to US$48k p.a. In SA, we start paying income tax from the level of US$15k p.a.
2. If higher income group is taxed at a higher rate, isn't it like punishing someone for his ability (to earn more)? In my opinion, it is not a good sign of Capitalism.
3. Yes, curbing black markets is very essential in Capitalistic environment. Handling corruption, however, is a political function (raaj neethi) than an economic function.
4. I tend to differ from Dr.Prahalada's view that the bottom of the pyramid support the top in economics. I think it is other way round. If the top does not exist, the bottom would not be visible at all. It is the top of the pyramid that is supporting the whole pyramid in economics.

Yes, I see that your views on Capitalism does have a touch of Socialism. Even I had socialistic views and I think I still have. But I like Capitalism (Free Market Economy) more.

Hello Siva:

1. There are very many deductions, exemptions and tax credits available in the US Tax code... people should aware of it and avail all those in order to escapte Federal Income Tax if you make $48k or less.

2. Progressive Taxation is the hallmark of Taxation in most of the Western Democracies, including the US: This means poorest section pays no tax (in fact many get what's called Earned Income Credit or Refundable Tax Credits etc) and the highest income earners pay the highest RATE. Yes, on the face of it the Capitalist will say it is not FAIR... but if you think of it, if you make the SAME RATE across the board, it will be extremely punitive and awful.. That's the reason the current Progressive Taxation is followed, I believe.

3. To understand Dr. Prahalatha, you need to look at what Sam Walton did with his Walmart... the Walton Family all put together will be the Richest in the world (all happened in the last 30 years!).

He envisioned to serve largely the lower middle class and poor section (by income) by making retailing accessible to them and selling at prices "quite reasonable and affordable" to them.... He knew his profit margin is razor thin.. but by serving hundreds of millions of CUSTOMERS, he made money and became the Richest in the World..

So, to expand this idea, if Apple or Google wants to thrive BETTER, they have to look for the largest segment of the population - here the lower levels of the Pyramid has most CONSUMERS or the CUSTOMERS - at the lower level of the Pyramidal Consumer Structure.

If they somehow find a way to reach them, as Walton did, they will be better off.

Therefore, Bottom of the Pyramid Supports the Top of the Pyramid, in economics also.

Stay tuned.

 

[Yamaka]

y,

i like this. this is like the great depression 'new deal' projects like the TVA.

but then, FDR had a desperate nation, a democratic house/senate and even though opposed tooth and nail by wall street, was able to pull it off.

i thought obama would have that type of stature, but has proved NOT.

so, in the light of the current political usa environment, the tea party movement, in light of already huge debt, army in iraq and huge expense of military bases abroad (in 1930 usa had no base abroad barring cuba) & above all the dominant policing job that the usa has taken upon itself around the world, ...

i see no chance of any further government expansion or borrowing in the future. if at all anything, chances are that california like, 'mandatory balancing budgets' may become reality at the federal level.

obama could have been visionary, but i think he tried to be a 'nice' guy. 80 years later, FDR is still hated intensely by right wingers for his 'socialism'

Dear K:

I hear you..

1. I favor slow reduction in Military... the two WARS are slowly winding down... Osama is killed, and Al Qaeda is on the run, at least after the Arab Spring in Egypt and Tunisia.

Why do we need to spend almost U$680 billions on Military every year...slowly we need to bring down to say U$400 billions a year.

2. Obama is NOT FDR.. and the times have changed so much - most Americans did NOT know that FDR could not walk on his own feet because of polio!

Now, about 30% of US citizens believe that BHO was not born in the US!!!! They are the Birthers, which is unthinkable in earlier era... the media has changed too... they dwell MORE on trivial gossips, innuendo than substantive issues... Culture has changed for the worse, IMO.

3. On TEA Party Movement: This is the Organized Political Opposition to the Black Democratic President in History.

About 1/3 of it consists of Birthers I mentioned above. Another 1/3 are the so-called Libertarians who hate big government and the rest are the so-called fiscal Conservatives...

If you ask any of them to justify their Taxed Enough Already acronym by asking them,

"How much did Obama collect as TOTAL tax in the last three years, and compare that to W Bush in his first 3 years?"

The answer "Obama has taxed US a lot... he has given Healthcare to EVERYBODY and has owned the Auto Industry, and has wasted $780 billions on Stimulus etc etc".

The FACTS are

1. Tax rate has NOT changed one bit during this 3 years.

2. Obama has collected only LESS than 15% of the GDP as total federal tax, while W Bush collected as much as 19% of the GDP up until 2006.

3. When Obama came into Office in Jan 2009, he inherited about $1.2 trillions a year of Budget Deficit, which came via the unfunded mandates of W Bush:

a. Wars, b. Tax cuts of 2001 and 2003 c. Part D of Medicare given to Seniors all yearly expenses not funded by taxation, but financed by borrowing from Bond Holders of China, India, Japan and others.

Where were these Fiscal Conservatives when W Bush was deficit financing of all this items?

Where were these Libertarians when W Bush went in to Iraq for Democratization of Arab World?

I know where were these Birthers before!

I expect Obama to go very AGGRESSIVE next year - the Election Year, taking on the Republican Opposition toe to toe...

But he NEEDS the support of his own constituencies - Younger voters, college graduates, women, hispanic and blacks.

These people are now dejected by this persistent unemployment affecting THEM the most in the last 3 years... these people need to be fired up to go to the Polls next year....

If they go to polls, and Obama takes a clear AGGRESSIVE role in taking on the Republicans, he will WIN...

Wait & watch...!

 

[sangom]

Dear Sangom Sir:

I agree Capitalism is not dead - it will weather thru all the challenges, I believe.

Dear Y,
I am not so sure. Human greed is likely to degrade Capitalism and then the opposite viz., some form of extreme regimentation like the communism or Taliban is likely to hold sway till the pendulum swings to the mid point once again and goes all the way to uncontrolled capitalism. I feel this will be the possibility over a very long time, unless we get some form of government by real saintly people, we may have an alternative.

I want to ask some basic questions and get answers from readers:

1. How much should be the total taxation (direct taxes like income tax and indirect taxes like VAT) by ALL Gov'ts?

Today, Obama collects about 14.8% of total GDP (including payroll tax etc) at the Federal level, and States and local Gov'ts collect about 20% of the total GDP to run their show.. so the total is about 35% of the total GDP... this is much lower now than in say 2006 - the pre-recession period, when these entities collected as much as 45% of the total GDP.

I will say about 45% of the GDP should be the size of ALL Gov'ts. The rest 55% must be in private hands to spend the way they want it.

According to me these details will be country-specific and it will be erroneous to lay down a rule for the whole gamut of nations. For a country like India I feel it is the shape of the economic pyramid which will be relevant; people/households earning above 150% required for a standard family (2+2 or 2+3) at the Poverty Line may be taxed directly. But since in India there are very many indirect taxes also, the scenario is very complex and only experts can say what segment should be taxed directly.

2. Who should be taxed, and what should be taxed and how much income should not be taxed?

I say the Capital Gains must be taxed at the highest marginal rate (say 39%) and the highest income people should be taxed at the same highest rate.

Dividends can be taxed as ordinary income.. it need not get special preference.

In US today, an income of $48,000 in a family of four is not taxed at the Federal level... but States can collect tax via sales tax (like TX does, very punitively). But payroll taxes apply which goes towards Medicare and Social Security, which come back as Entitlements.

I would like to get equivalent figures for India... somebody can provide the numbers for comparative analysis.

One discouraging feature of Capitalism is, IMO, that bulk of the people are left behind as in India... Why?

Please see my comments on the previous item above. I am sorry I don't have comparative Indian figures with me.

By enforcing the laws and curbing the black markets, abolishing corruption in walks of life Capitalism CAN protect the poorly skilled people trapped at the lower income level from abject poverty as it is in India today (about 800 millions subsisting on Rs. 20 income a day).

Educating the masses for the labor market is the best way of creating ladders of opportunity to ALL people, and must be funded by taxing the very top! Yes this is the Robin Hood role that an Elected Govt plays.

The real thing to be done is egalitarian distribution of "purchasing power" to the lowest tiers of the pyramid; all the other items will facilitate this but the actual modus operandi for the redistribution of the purchasing power will vary from country to country and even from state to state within a country. Ultimately it boils down to self-governance at the grassroots or village or canton level.

However, one Dr. Prahalatha of MIT says, "The Bottom of the Pyramid Supports the Top of the Pyramid, in economics also"

Perhaps, he means that Consumers at the bottom are the people supporting the wealthy siting at the top!

Cheers.

ps. You all could get a smell that I was a former Socialist! Lol

In India it is rightly so. All the economic production except probably the IT and BPO sectors, is done by the poorest sections and the wealth so generated goes on concentrating increasingly as it travels upwards in the pyramids and the Ambanis, the Tatas and the Birlas continue to amass wealth in hundreds of crores. It is not the consumption-driven economy but agrarian one. I think in the US, and in many western countries, the agriculturists come somewhere in the middle of the pyramid and they are always protected to maintain their level through subsidies. Still these countries import much of their food stuff from outside. That is not yet the case in India thanks to the near-starvation at the base of the pyramid.

 

[Servall]

Marx did predict that Capitalism would fail as Servall mentioned. He was after all an economist. However he failed to take into account that technology today would be so advanced as to allow capitalism to provide a higher standard of living in developed countries.

Its not dead yet and it may never die. But currently the future of capitalism sure does look bleak.

Amalaji: Inasmuch you and I could not predict what the human brains would invent in the next 50 years, Marx didnt have a way either. But his greatest contribution was to caution the generations to come that there would be astronomical increase in productivity (thereby acknowledging inventions) in the labourers' capacity to produce more than what they could consume!!

If we assume the world population to be 2 billion, there are 2 billion galaxies or milky ways that constantly conjure up new inventions as we speak, big and small. The intent of each of these inventions is to lay out least capital,and least labour with the largest return. It was this 'greed" that Marx alluded to, that would create the conflict between the bourgeois and the proletariat. With the least labor time spent to produce and the inability to generate enough income for himself to sustain for the times he has to be idle, according to Marx, this will create the struggle between the buyer and seller. Detroit today can roll out 60 cars an hour, the letter that my grand father waited to receive for 10 days takes nano seconds today to receive, the list is endless. One flaw I think that the Marxian theory assumed was that it was the labourer who created this surplus, I tend to think it was the invention that made the surplus possible.
Nevertheless, Capitalism still has endured the 1930's, the failed states, near-collapse of banking systems in Greece, Spain and Portugal, our own melt downs in the western economies. I agree with Mr. Sangom that these human galaxies and milky ways, inasmuch as thought of the great scientific inventions, have not conjured up creative tax and distribution systems to bridge the gap between the rich and the poor.
As for me, I still wish I had lived two generations ago where there were no computers, I still waited by the old post office to get my letters from the loved ones, had the old Philips radio and received my morning news papers to get my international news, travelled two days by steam train to visit my kids 300 miles away!! I would have had a little track of land, employed few men to till that soil and be subsistent and in my own way remained a capitalist!! I probably had my own stress but I would have managed them with more free time. My grand father lived to be 92 living the way I indicated and his quality of life was nothing less than I have today, much cleaner, he still gave a bit to the needy in his own way with whatever he made from being a simple station master!!
As for capitalism, it will never die, as long as these galaxies can keep thinking!!
Amen!!

 

[sangom]

I think we are fast approaching an era when the relevance of capital and labour will be less important and the things like fresh and usable water, unpolluted air, dwindling energy reserves, etc., will become very mighty factors in economics. And no one can say what sort of changes will be needed if there are significant climatic changes like say Europe becoming colder. Hence we cannot at this stage say confidently that any "ism" will live live long and never die, imo.

 

[biswa]

Thank you all for the rather stimulating discussion. Mr Haridasa had asked for my views, so here they are:

I am not a great economic theoretician, so I will refrain from offering a formal definition. I had meant it more as a socio-economic question. Most people have simplistic views and tend the equate capitalism with The West.

Now that The West (mainly North America and Western Europe) seems to be beating a retreat after the recent economic crisis, there is a lot of chest-thumping in the BRICs (Brazil, Russia, India and China) that their economic model was better than the unbridled capitalism of the west. In fact China has gone on record after the US debt crisis that it knows how to manage its affairs better.

We know that all the BRICs support oligopolies with implicit or explicit blessing from the state. They also have an impressive gap between the rich and the poor. Corruption is at epic levels. So why do many ppl think that the western model is flawed? Or if so, what is the better model?