Free-markets vs Government: Why one is not better than the other

This is an evolving draft on why we need a mix of both markets and state, and why one is not inherently better than the other. Do let me know your thoughts. The article can be summarized as follows: It is too complicated for the state to run the entire economy by itself, and we need private players and markets. But the problem of corruption in statism does not vanish in market-economy. It merely morphs into a new problem of having to constantly keep a watch on anti-competitive practices. In addition, even with a competitive and free market, we are not assured of equitable growth and we need the government to constantly intervene and to support weaker players, so as to provide a level-playing field.

To clear a common misnomer: Free-market vs Statism argument is not the same as Socialism vs Capitalism arguments – one can have a state-directed capitalism (Dirigism) or a free-market socialism. You can think of a smooth curve connecting capitalism to socialism: a private company whose equity is shared 75:25 by 1000 shareholders and its individual owner is a more socialist (and less capitalist) than a company whose equity is shared 25:75. Cooperatives (whose members own almost equal equity) is an example of total free-market socialism, while a company whose benefits goes to a single individual is an example of total free-market capitalism.  So even those, who believe in free-markets as the solution to achieve eventual equitable development, are socialists. The other (usual) kind of socialists are statist-socialists who believe in state-directed equitable development.

We know the usual perils of total state-controlled socialism: At its most fundamental level, it boils down to the fact that the system becomes too complicated for the state machinery to plan and control in a top-down approach. Decentralization (Swaraj) is a means to reducing complexity, but it is not sufficiently reduced as to run an entire economy through a decentralized government. In free-markets, this issue of complexity does not arise since individuals act on their own, with competing incentives. But, as we will see later, the hope for equitable growth through completely unregulated markets is as much a blind-belief as in total statism. As as aside: Another oft-quoted reason against statism is lack of incentives for innovation. But this is misplaced. In principle, a democratic government always has an incentive to innovate in order to maximize benefits to electorate per rupee spent or per policy, so as to stay ahead in next elections. It is a different matter than once-in-five-year representative democracy is not enough of a check, and we need more participatory democracy.

Problems galore in both systems:

Statism can breed corruption in the way government functions but this problem does not vanish in unregulated markets and merely gets transformed into a new problem. A truly free market needs regulatory oversight in the form of strong competition regulators who can check collusion, predatory pricing, cartel formation etc, each of which is as hard to keep a watch on as checking corruption in total statism. It is hard to detect when two local wholesale procurers can collude, over chai or phone, to not outbid each other beyond a certain agreed price. Similarly, it is hard to detect whether a giant seller, with deep-pockets, is selling below his cost price in order to force other small sellers out of business only to raise prices in a latter monopoly. It is for this same reason that paid media continues to flourish even in a brutally competitive media market, since they see more value in colluding on this than competing through exposing each other.

We will also need another anti-corruption agency to keep a watch on competition regulators to prevent them from being bribed by anti-competitive players. In India, many do not even know about the existence of competition regulators. It is so compromised that even blatantly anti-competition deals like Jet-Etihad and Reliance-Network18 barely raises eyebrows. Reliance gas pricing scam is another recent example where, for lack of a gas market in India, the government should have better regulated Reliance’s gas auctions, but did not. In contrast, even in free USA, competition regulators have routinely broken down conglomerates like Bell Labs, Microsoft etc, and have denied merger proposals like the recent AT&T and T-mobile deal.

Equitable growth through unregulated-market

As I mentioned earlier, the belief that unregulated free-markets can bring about equitable development is blind. There are two components to a market  – (1) individual buyers and sellers (of any goods or services) and (2) the interconnections (market linkages for producers, linkages to investment capital, education capital etc).

Role of network architecture:

Let us consider a simple trading market. Assume a static network structure and assume that there is no disparity between individuals other than in the way they are connected. There have been several experiments on the relationship between network architecture and growth of wealth. Consider the networks  in the figure below, where individuals exchange goods, say milk (unfilled circles) and wheat (filled circles), by starting out with equal amount of their products, and the exchange rate is dynamically market-determined during each trade. At the end of several steps of trades, it was seen that the better-connected individuals got increasingly favorable exchange rates at the cost of individuals who were less-connected. This confirms our hunch that, to reach an equal-opportunity society we should move towards uniformly connected individuals.

filled circles = buyers and unfilled circles = sellers

For more technical details, you can read the original paper “Behavioral experiments in networked trade” or  watch lectures 19, 20, 21 “Trading in Networks” of Coursera’s Networked Life

Evolution of network architecture:

But networks themselves are not static but evolve over time. The growth of networks themselves is a highly dynamical process. The growth models of real world networks is one where better connected individuals more strongly attract newer connections than less-connected individuals (Barabasi-Albert model of growth of real-world networks). This, together with the earlier results of network game theory experiments provides mathematical validity to the problem of “rich getting richer (at cost of poor, since wealth is fixed)” in totally unregulated market.

Role of variations in market players:

That was the case when individuals started out identical. Now consider real-world scenarios where, not every individual (every milk producer and every wheat farmer) is the same. There are some with better education, bigger farmlands, more cows, more money to invest, belong to established trading castes etc etc. Such variations in individual capabilities add to the effect of network variations and network growth variations in exacerbating inequalities in unregulated-markets.

Gatsby curve: Income inequality affects Income mobility

Empirical evidence from Great Gatsby curve also supports the above results. The more inequal a society is, the harder it becomes for someone to succeed and move up the income ladder, even if presented with equal market opportunities. In the following figure from wiki entry on Gatsby curve, higher gini implies higher income inequality and higher inter-generational income immobility translated into increased barriers to converting opportunities and to move up the income ladder  (India’s gini coefficient is ~0.39).

590px-The_Great_Gatsby_Curve

This makes a strong case for governments to provide social support to neutralize this inequality of converting opportunities. So, it is wrong to dismiss all social welfare as mere doles that make beggars out of poor people.

As an aside: If government is seen as just another player in the market, staunch libertarians argue that even the role of social welfare should be left to choice – ie. people should be allowed to donate to any charity of their choice than to be forced to pay taxes to government which then decides on how to spend it (even if some charities are tax deductible currently). In that case, some people might decide neither to do charity nor to pay taxes. But this is a slippery slope, and a next logic stop down that slope would be “who decides what is criminal and what is legal?” when morality varies across individuals and natural evolution allows literally everything under the sun (including physical assault, sexual assault, murder n robbery etc etc) and religious texts have their own versions of what is moral and what is immoral.

Trickle-down effect

There is also the oft-quoted excuse of trickle-down effect which says, even if rich get richer, as time goes on, the benefits of development trickle down from rich to the poor. This is also just a belief that is not substantiated. There is a field of physics called percolation theory which studies how some thing (be it wealth, an idea, an epidemic etc) percolates in a network when that thing is dropped at a few selected locations. In our case, we want to know how wealth diffuses through society when its major source is at points of rich players. Mathematical results from this field shows that the percolation depends very strongly on the structure of the socio-economic network just as in the case of trading experiments above: The wealth percolates down to the poorest players only for a very narrow and specific class of networks (called networks at critical point), while for a vast majority of others, wealth does not diffuse and stays clustered among the richer class. So, it is clearly unwise to give away land and natural resources at below-market rates to wealthy individuals, because it is much more likely to not diffuse than to diffuse. For a mathematical review of this topic, see “Critical phenomena in complex networks”

Conclusion

It is clear that it is too complicated for the state to run the entire economy by itself, and we need private players and markets. But the problem of corruption in statism does not vanish in market-economy. It merely morphs into a new problem of having to constantly keep a watch on anti-competitive practices. In addition, even with a fair and free market, we are not assured of equitable growth and development and we need the government to support weaker players and intervene in network linkages, so as to provide a level-playing field. It is also clear that merely giving away free land and gas to corporates in the name of trickle-down effect is not evidence-based.

Before I finish, let us look at trends of income inequality (remember: higher gini = more inequality) in USA, which has one of the most free markets (source: OECD table).

Gini coefficient for USA

Income inequality (lower Gini coefficient = more equality)

Some might say that beyond a certain level of development not everyone has the same drive to develop more and hence inequality will creep in. But, if you take the average standards of living, USA is still not at a place where it can be complacent (in inequality-adjusted HDI ranking, it figures at 23). It is not the highest even in per capita income. So, you cannot say that majority of Americans dont have enough motivation to prosper. The personal wealth of the Walton family that owns Walmart is equal to the combined wealth of the bottom 40% of all Americans! (source: Politifact)

About Gu'an

Blog: iamamangoman DOT wordpress DOT com
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18 Responses to Free-markets vs Government: Why one is not better than the other

  1. The author thinks the problem with statism is corruption and in the absence of corruption , a state directed economy would flourish . It is not true. Innovation cannot happen in a top down manner , it has to happen in bottom up manner and the state controlled economies fail miserably in that. Only markets can offer bottom up innovation

    The problem , according to the author , is collusion of market players. The assumption behind this is that markets always should perform efficiently with low margins. Low margins ensure that new players cannot come up . When the margins are high there is an opportunity for a new player to disrupt the market. Collusion cannot keep the prices exorbitantly high . The reason why new players don’t come up is because of govt regulations . it makes the barriers of entry really high for a new entrants. Whenever people say capitalism/free market they quote USA as the example. USA is neither free market nor capitalist . It is a crony capitalistic system where almost every sector is controlled by big players in collusion with govt regulators.
    There are very few sectors where active govt intervention would be required where monopolies are extremely hard to break. These are markets where natural resources are involved such as , roads , spectrum , water , minerals etc. In all other sectors govt interventions are undesirable

    Equality or equitable growth is neither possible not desirable. People are not born equal and any attempt to make them equal will result in disastrous results. However it is not to say that govt should not offer any help to the people . Govt can play a big role in offering primary education and basic healthcare . Govt can ensure that rules and regulations do not help the bigger players more . Govt should be able to protect the property and life of its subjects irrespective of their status .

    • Gu'an says:

      (1) Govt is not fundamentally different from conglomerates like GE, Mitsubishi etc (except for the equity structure). And it is not apparent that employees of conglomerates are any less innovative than employees (not equity owners) of garage-run tech companies. Governance need not be just top-down and can be pluricentric too: See articles at network governance, for example. Having said that, our current governance structure is miles away from being transparent, pluricentric, responding to continuous appraisals and fostering innovative. And for these reasons, I too believe that markets are our best bet now for creating value (including innovation).

      (2) There is no reason for govt to impede new entrants through unwanted regulations other than purely for their rent-seeking value, which is an issue of corruption. But even if one were to get rid of all these rent-seeking unwanted regulations, the barriers for new entrants are neither removed nor uniform – Ambani’s son will continue to have less of a barrier to execute a new business idea than me and I will continue to have higher rates of upwardly mobility (per unit of effort put in) than the son of a rural tribal putting in same effort. This is the structural barrier of unregulated markets that forms the bulk of my blog.

      USA is still one of the most unregulated markets in the world (As an aside: Since 1990s, US federal courts have decided to take a lenient view of even predatory pricing!). But where ever little regulation exists in US, it is enforced better than in India.

      As for where all there should be regulation, it is not enough only in those few areas where monopoly exists. Even in multi-player markets, not all players are equal and the bigger players have better leverage. This is merely the individual-level structural barriers that I referred to above, but now at the level of companies. So, there is a need for govt to regulate in many many sectors. Consider this: Indian pharma sector has 4000+ manufacturers and yet the top 10 corner about 40% of the market even though what they all sell are mostly all “perfect substitutes” (generic meds).

      Point of equality or equitable growth may be only asymptotically achievable, but that does not mean there should be no effort to make it more equitable than it is now (through state-regulation and free-markets). Your argument is like saying not everyone can be moral/legal and hence there should be no effort towards bringing about more morality or enforcement of law. And I dont see why disaster level should be directly linked to levels of equality and equitable growth, while I can clearly see how the opposite is true (strong inequality breeds civil unrest).

  2. Another problem with you is , you think innovation is done by conglomerates such as GE. It comes from everywhere , even in a garage (look at IT companies) . You think employees randomly innovate whether they are in GE or in a government organization. There is a huge difference. When GE loses money the shareholders of the company pays for it. When govt organization loses money the tax payer pays for it. GE does not force anyone to be a shareholder of the company. Govt forces everyone to be a tax payer at the gun point. Do you still think they are the same?

    A rich kid has an advantage over a poor kid in starting a business . But the point is , a poor kid has a lot of other advantages . He can work for cheap, he can pursue other interests other than his dad’s profession, he can be happy with lesser income etc etc. The bar is kept low for him to achieve happiness. The objective of life is not to start a business or to do a PhD , it is to be happy. You can’t just centrally plan what is required at the individual level.

    You talk about regulations in pharma sector where there are 4000 odd companies and some are very big. It shows your socialistic leanings. You can’t dictate what company should be big and how big that company should be .

    You start with a point of view of everyone should be equal . I repeat that it is neither possible nor desirable. You don’t respect laws of nature . You think it’s possible to use force and remodel the world according to your ideals. That is hubris . I wish you all the best . It’s OK if you try to change the world using your own effort/money in a non-coercive way. The problem is when you want to do it using the power of the gun using the state apparatus . I hope you don’t reach a position powerful enough to perform these social experiments on this population . As they say ‘the road to hell is paved with good intentions” .

    Inequality in itself does not create civil unrest. When you use force on people to create inequality ,it causes discontent. Civil unrest happens everywhere and it should happen from time to time. These are the safety valves of a society. I am not angry at Mahindra or Tata because they are richer than me, I personally don’t care as long as I have opportunities to work or start a business . And everyone will not succeed and that is the nature of life and be humble to accept it .Markets are driven by greed and fear, You will end up skewing the market if you take away the fear element .

    Poverty is not a new thing. People have always been poor if you apply the current standard. If some tribal is poor it is normal , they were poor historically. When you juxtapose his life against a person in a city he is relatively poor. That is the problem with comparison. Just because you bring democracy and bring ‘one vote one man’ does not make the tribal automatically deserve the same luxuries as the city dweller . Poverty is natural and wealth is something you need to make. Redistributing wealth only helps the ‘redistributor’ (govt) .

    • Gu'an says:

      (1) We are talking about something much beyond the simplistic redistribution of wealth by government. We are talking about making free-markets also fair-markets vis a vis correcting for disparities in conversion of opportunities, even when equal effort is put in. There is no reason why the benefit/effort ratio should be higher for a rich person than for a poor person. If one does not put in enough effort, then s/he deserves to prosper only according to their effort. But, when presented with equal opportunities, people who put in equal effort should benefit equally. This makes a free-market also fair.

      (2) Of course a rich kid has better opportunities than poor kid – there is no argument on this!! Narayana Murthy’s son can go to Cornell for undergrad if he doesnt get into JEE, but normal kids go to other colleges within India. He can afford to take up social activism or vocational jobs and still live comfortably. Heck, he can even become a saint and still lead a comfortable life! His value for money is not dictated by where he was born, but how he was raised. Even a poor kid can be raised to be content or be always greedy for more money.

      (3) That pharma example was to drive the point that, even in a sector that provides “perfect substitutes” like generic medicines, we have a severely lopsided market with retail price sometimes varying over 1000% for the same generic medicine! It is not me who is dictating how relatively big each company should be, but theory dictates that there should be almost “perfect competition” which means the companies have more or less equal market share with retail prices almost same. But reality of far different from this.

      (4) What is the “law of nature”? If unregulation is nature’s law then so should be murder and dacoity! But there are enough instances of cooperation as well as selfishness, in evolution. And there is no apriori reason why one is more justified over the other. Even mathematically, most optimal solutions are often found when there is global cooperation (take the Prisoner’s dilemma game or the Braess’s paradox). Your view of individuality is simplistic. The central theme of this blog is that, even if totally unregulated, the future of every individual depends on other individuals, to varying degrees. So, even with your policy of non-regulation and unhindered personal choice (economically speaking), you are deciding the future of others around you as much as someone who is asking for regulation. And of course you can try to change things against its natural flow – we do it all the time whenever we expend a resource like energy to do work (physically speaking).

      (5) Civil unrest increases when there is greater disparity. This is undeniable. But if you say this is required, then you are again deciding for others, and this is what I said above.

      (6) Differences in fear (between different individuals) should be reflected purely by the amount of greed they have – ie, greater fear of losses for the one who has taken greater risk – and not by disparity of structural barriers that they face. Govt regulation is to merely correct this disparity in structural barriers, and not in correcting the disparity of greed/fear.

      (7) I gave the metaphor of conglomerate to reflect the size of government, and to drive the point that innovation can happen in both conglomerates and garage, *not* just in the former. And yes, governments are no different from conglomerates – the stakeholders in a government are its citizens who own shares of it. One can take up citizenship in tax-free heavens if they like, and many do take too. But anyway, this is not the main focus of my blog. You may consider government to be distinct from the other players, and it does not change what I wanted to say.

  3. The assumption that two people putting in the same effort should get the same result is not valid . The margin between a winner and a loser is very narrow usually. Take olympics as an example . Do you recommend giving a gold medal for everyone? Or a miss universe for all participants? The next problem is life is not as simplistic as a 100m dash. There are 100’s of parameters to judge. And who do you want the judge to be , the omniscient Mr government?

    When I said civil unrest is unavoidable, I’m talking from empirical evidence . I’m not deciding for others . I’m just making observations. I know you have solutions for all problems . But I don’t pretend so. What I say is diseases are unavoidable and sometimes treating a disease is better than trying to prevent them

    You misunderstand “law of nature” . Nature does not support equality or conformity. Unequal things cannot be made equal. Survival of the fittest is the law of the nature and the fittest does not mean a physically stronger person should rule. The laws of the market says a better product/service would win . An arbitrary entity called govt cannot determine what is better .The DNA does strive to improve itself over generations . That’s why people want to give their children a head start .

    You compare governments to companies and you suggest that citizens who don’t like their governments/rules should denounce their citizenship. Have you ever thought for a while that the land is neither owned by the government nor the collective/majority. My ancestors were born in this land and over the centuries they made it what it is. The government is a relatively new custodian ,may be a few decades old. I’m forced to become a stakeholder whether I like the government or not . It can take away your liberties at the stroke of a pen just because they have the monopoly of using force in a geographic region and not because it is moral. I just wish to say that massive social engineering that you suggest are no different from the communist experiments. The western nations are also performing their socialist experiments (they don’t admit so) on their populations. The results are always the same . Massive unemployment, stagnant economy, crippling government debt and rapidly disappearing civil liberties and we are very much close to civil wars with all the equality they promised .

    What I say is , any solution that involves a gun (use of force or threat to do so) is a fundamentally bad solution. You have no qualms to use force when it suits your plans. The difference between my stand and yours is as simple as love and rape

    • Gu'an says:

      You seem to be arguing on principles, when there are two glaring inconsistencies in your position:

      (A) You missed a key point in my earlier argument: There is no binary classification as monopoly versus competitive market. In fact there are no markets that are perfectly monopolistic – it is as ideal as perfect competition. Competition metric is a continuous variable. Yes, you can argue on its precise definition (and there is a wide range of competition metrics), but that does not take away the point that there exists a gradation to competition. So, your position that there should be regulation where market is monopoly (which is actually near-monopoly) but not otherwise is inherently inconsistent.

      (B) Your view against government forcing you to conform to competition regulation is again inconsistent. You seen to agree that government should enforce law and order (and even basic infra like education etc thorough basic taxation). But there is no universal definition as to what constitutes morality (even killing for pleasure is not prohibited in nature). So, what makes you think that government has the right to frame the laws of the land and tell people how they should and should not behave? Hence the inconsistency.

      footnotes:
      (1) The disparity need not be small or narrow. It can be huge and it is huge in many case. Again, using Indian generic pharma sector, look at the ratio of biggest and smallest market shares of even simple generic meds. Or even the network game experiments I mentioned in the blog, where the huge final disparities were purely due to what connections they were “born” with when entering the game. There are 100s of parameters to even criminal and civil cases – dont we expect the state judiciary to examine and give verdicts?

      (2) Regarding civil unrests – we are not talking of getting rid of them completely like how we cannot get rid of criminality in society. We are talking about making them less frequent and less severe, like for crimes.

  4. I said monopolies are perfectly fine as long as it is not achieved by controlling natural resources such water, spectrum ,minerals etc . If Gillette has a monopoly in razor market or if android has a monopoly is phone OS , then so be it. Competition is nice to have , but it should not be achieved by crippling a stronger player. It should be done by eliminating hurdles that exist for new players (usually erected by existing players) . Actually most of the market monopolies are the products of corporate-govt collusion.

    Law and order is not same as rigging the market or picking the winners in a market. I find it laughable that you can’t differentiate both. Law and order is strictly about protecting your life and property and enforcing contracts between free entities. Your argument goes like this “killing is natural , so if we can prevent/punish killing using govt it should be OK for govt to punish a naturally successful businessman ” . Man is a product of his mind unlike a beast which is a product of it’s physical power . That’s why men deal with each other using their mind and reason and beasts indulge in use of force. So what is natural for animal is not natural for a man and the same may not be true for another species .

    You are talking about civil unrests as if it is a truism that civil unrests are caused by inequality alone. People protest against unfairness. Most of the protests are against governments . An example is the occupy wall street movement. In reality the people are not against rich people , they are against the bankers making money at the expense of people using govt collusion . Why do people not protest against Steve Jobs or Mark Zuckerberg?

    If you dig deeper , you will realize that government is the root of most of the problems. The solution is less government less regulation and more market , less controls and more freedom.

    • Gu'an says:

      You only increased your inconsistencies from two to three:

      You dont have a logical reason why monopolies should be regulated only in natural resources but not in others. Why is controlling monopoly in spectrum etc important but not in other important sectors like pharmaceuticals/food supply?

      You have not addressed the point that there is no such things as monopoly versus competitive markets. It is a continuous metric. Even in those sectors where you prefer regulating monopolies, there are no perfect monopolies to start with. So even you believe that we need competition regulation in markets that are not not perfect monopolies.

      Regarding laws of human kind and beast: You sound like there are irrefutable lines that separate humans from other animals and irrefutable lines that separate morality from immorality, when there are none in nature. Obviously I was not arguing for getting rid of regulation of crimes, but I was merely using this point to show to you that even you have your own beliefs which are neither dictated by nature nor by logic.

      So, I suggest you give up on invoking lofty general principles of nature to support your (inconsistent) beliefs, and accept that we are not differing in principle but only in technicalities like what should be the definition of a competition metric?, how much regulation should be there for a given value of that metric and a given sector? etc etc.

      • Leave aside the ideological angle for a while. Let us look at the real world for a change

        The power of govt to bring in arbitrary regulation is fraught with danger.. Governments are known to have an insatiable appetite for revenues. Govts inevitably use all their powers for revenue generation. Look at the entire western world .We can see runaway deficits and skyrocketing taxes . The private sector is crumbling under the weight of government

        Democracy and mass media has made equality fashionable. We are observing the unraveling of that experiment in western Europe and North America. Equality leads to stagnation and massive unemployment . Coupled with welfare programs they are all facing economic implosion or a massive civil war .

      • Gu'an says:

        Thats what I have been telling you by pointing out your inconsistent beliefs – that, there are no ideological differences between you and me, and we are differing only in the details (definition of competition metric and quantum of regulation for a given value of that metric).

        Regarding rest of your statements, I concur with Kumar – that, they are are sweeping generalizations neither backed by any empirical evidence nor by apriori logic.

        For example, consider your statement “The private sector is crumbling under the weight of government”. You may see government regulation of, say walmart (whose promoter family’s worth is equal to the combined worth of bottom 40% of all Americans), as crushing the spirit of companys’ equity owners. But I see that as an investment in providing level-playing field for those bottom 40% which unshackles roughly ~125 million americans, many of whom will go on to create better value for society and more jobs.

  5. Kumar says:

    “Equality or equitable growth is neither possible not desirable. People are not born equal and any attempt to make them equal will result in disastrous results.”- what a prejudiced opinion.

  6. Kalyan says:

    An excellent discussion. Age old dispute fought in a new way. Both of you are geniuses

  7. Kumar says:

    “The power of govt to bring in arbitrary regulation is fraught with danger”
    ——>
    1.It seems that you want to play the game without any rules and no one should umpire
    2.Who is to decide what is arbitrary

    “Governments are known to have an insatiable appetite for revenues. Govts inevitably use all their powers for revenue generation. “—->If you are feeling that way then change the govt.

    “Look at the entire western world .We can see runaway deficits and skyrocketing taxes . The private sector is crumbling under the weight of government”——>Sweeping statements. try to exemplify.

    “Democracy and mass media has made equality fashionable. We are observing the unraveling of that experiment in western Europe and North America.”—–>We are only observing the private enterprises in their greed forced govts to wage wars and occupy other nations

    “Equality leads to stagnation and massive unemployment . Coupled with welfare programs they are all facing economic implosion or a massive civil war “.—->Sweeping statements. try to exemplify.

  8. Apologists of govt,

    When I say private sector all people take examples of Walmart and all other behemoth corporations which rule the economic landscape. What people do not observe is the 1000’s of corporations which didn’t get formed because of govt regulations and market manipulation.

    Capitalism is not same as crony capitalism. Capitalism is not possible when the capital (money) itself is corrupted by government . What do you expect when a Wall St bank can borrow 100’s of billions of dollars for free for running their market manipulation game and when the average Joe has to earn every single penny with his sweat. What do you expect when the interest rates are kept far below the inflation by govts? As long as govts continue to manipulate currencies and credit markets it is not possible for the small guy to compete with the large guys .

    “Give me control of a nation’s money and I care not who makes the laws.”
    – Mayer Amschel Rothschild

    “If you are feeling that way then change the govt”

    By playing the game of democracy? It is completely rigged against you. You don’t win with that game. You have no idea what you are up against? Even an elected representative cannot change the govt.

    “Who is to decide what is arbitrary”

    I’ll help you understand. When the rights of the minority are taken away to appeal to the wishes of the majority you get arbitrary laws. Taxing the rich to ‘help’ the poor and to bring equality is arbitrary . Giving free loans to the crony capitalists to ‘stabilize markets’ is arbitrary. Govt stealing farmer’s land to setup Industries is arbitrary . In all these examples , you can see the umpire being a part of the game and influencing the outcome .

  9. “The personal wealth of the Walton family that owns Walmart is equal to the combined wealth of the bottom 40% of all Americans!”

    While it may be a fact , I have a couple of objections with the above statement.
    1) You assume that it is wrong for anyone to own so much wealth compared to the poor people. This is absurd. A person should be able to be wealthy depending on the amount of value offered by him. What if Walmart offers more value to the people than 40% of the poorest Americans? Walmart is not a natural resource which is owned by entire country . They created the business and they own it . People are free to not buy from Walmart and they are also free to compete with them . Actually poor people love Walmart more than the intellectuals who spout these kind of platitudes

    2) Instead of looking at the how much wealth Walmart has there is a need to look at the factors which made them so rich and also look why are the competitors not able to come up and undercut such a profitable business. Part of it is that Walmart is an extremely efficient business . A part of it is Walmart had access to large amount of cheap capital which competitors didn’t have (for which the govt is a culprit). I don’t pretend to know anything much about that but I hate these kind of statistics being presented as if it if it is crime to be successful

  10. Kumar says:

    “When I say private sector all people take examples of Walmart and all other behemoth corporations which rule the economic landscape. What people do not observe is the 1000′s of corporations which didn’t get formed because of govt regulations and market manipulation.”

    This market manipulation is done by existing Corporations and not Govt.
    Which Govt regulations prohibit formation /entry of new players

    “Capitalism is not same as crony capitalism. Capitalism is not possible when the capital (money) itself is corrupted by government .
    What do you expect when a Wall St bank can borrow 100′s of billions of dollars for free for running their market manipulation game and when the average Joe has to earn every single penny with his sweat.”
    Here you are wanting EQUALITY for avearage Joe. Isnt it.

    “As long as govts continue to manipulate currencies and credit markets it is not possible for the small guy to compete with the large guys”
    If Govt leaves the arena small guys will perish .

    “Give me control of a nation’s money and I care not who makes the laws.”
    – Mayer Amschel Rothschild

    That is why Govt[law makers] should control nations money

    “By playing the game of democracy? It is completely rigged against you”.
    Prejudiced view

    “You don’t win with that game. You have no idea what you are up against? Even an elected representative cannot change the govt”.
    That depends upon who you are and who you elect.

    “When the rights of the minority are taken away to appeal to the wishes of the majority you get arbitrary laws.Taxing the rich to ‘help’ the poor and to bring equality is arbitrary ”
    .
    You are not earning your income from a vacuum. You have utilized the national resources including brain power developed at the expense of the state

    “Giving free loans to the crony capitalists to ‘stabilize markets’ is arbitrary. Govt stealing farmer’s land to setup Industries is arbitrary . In all these examples , you can see the umpire being a part of the game and influencing the outcome “.

    This part is true, but not due to state as such, but due to umpire corruptly yielding to so called corporates. In Democracy the good news is that Corrupt umpire can be changed.
    The solution is not the absence of Govt, but a responsible equitable State.
    Reply

  11. You have no idea about democracy my dear

    Democracy is about majoritarianism . The individual rights and liberties are sacrificed at the altar of the collective, in a democracy. According to US constitution a federal tax must have been an apportioned (everyone pays equal tax , not equal rate ) tax. In 1913 they introduced income tax which was against the constitution and they got away with it . The point is, even the constitution cannot save you from the stupidity of the mob. In a democracy the rights of the individuals do not matter. Whims of the mob is what matters.

    You must be thinking that a non-corrupt government will solve all the ills of the collective. Even if a govt is not corrupt the masses will be corrupt. They will always ask for free bread and circus and the masters will be glad to oblige. Democracy is nothing but backdoor socialism. It will seem to work for a while

    • Kumar says:

      Democracy is not majoritarianism. Please go through the concept of Fundamental Rights. Get to read constitutonal debates on them. A true democratic state goes by the rule of law and holds the FR cant be trampled by state. We are not talking about street democracy, but state democracy.

      In democracy People get the Govt they deserve- If they are corrupt so will be the Govt.
      If people change and demand clean Govt such Govt will arise.No other system is satisfactorily working than democracy

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