What are the minimum prerequisites for Capitalism to be possible?

[myrkul]

While the individial capitalist might favor a monopoly power, his peers resist that for their own ends.  This balance of forces favors the legal establishment and enforcement of property rights.

Or subversion thereof?! You seem to have stumbled upon a point where Capitalism might create a pressure for governments to come into existence and enact various laws. I suspect this might be anathema to some...

Indeed, just as any prosperous trade route becomes a magnet for thieves. The question is, who do you trust to guard your caravan? A hired guard, or one of the thieves?

[Rassah]

To be fair, bonker is correct that monopoly is the natural tendency of a capitalist business; especially corporations. Since the point of business and capitalism is to acquire wealth, that often also means taking over an ever increasing share of the market. What bonker is missing is the fact that it's impossible to take over 100% of the market in anything for any extended period of time, due to competition and substitution (Coke tries to get a monopoly > Pepsi provides competition AND Tropicana Orange Juice provides substitution > Coke is forced to lower prices)

[MoonShadow]

I would contend that formalized property rights are a result of capitalism at work, not a pre-requisite.  It's provablely true that capitalism exists even in places for which it is, directly or indirectly, forbidden.  If the society at large does not recognize the property rights of a capitalist, then he will find a workaround to that limitation.  Thus, strong property rights could not be a requirement.

What about being a functional part of Capitalism at play? Is that fair? I don't really see how the practice of trade might somehow cause property rights afterwards.

Property rights are encourged by capitalism because efficiencies in markets favor strong property rights within those markets.  It's no secret that governments across human history are practially influenced by the wealthiest among them, and whenever capitalism has been allowed to dominate, the wealthy include those who became wealthy using capitalist principles, whether they understood them as such or not.  While the individial capitalist might favor a monopoly power, his peers resist that for their own ends.  This balance of forces favors the legal establishment and enforcement of property rights.

Or subversion thereof?! You seem to have stumbled upon a point where Capitalism might create a pressure for governments to come into existence and enact various laws. I suspect this might be anathema to some...

Certainly, but nor is a government a pre-requisite.  It's not inevitable either.  I think that we need to stop and agree on a definition for what capitalism is, for the purposes of this discussion.  As far as I can tell, I am the only person in this tread to point out that more than one popular definition exists.  Also, almost everyone's own understanding of the term varies, even if it generally agrees with one or the other common definition.  Are we talking about the ideological or economic definition of capitalism?

[myrkul]

To be fair, bonker is correct that monopoly is the natural tendency of a capitalist business; especially corporations. Since the point of business and capitalism is to acquire wealth, that often also means taking over an ever increasing share of the market. What bonker is missing is the fact that it's impossible to take over 100% of the market in anything for any extended period of time, due to competition and substitution (Coke tries to get a monopoly > Pepsi provides competition AND Tropicana Orange Juice provides substitution > Coke is forced to lower prices)

Thus, the equilibrium point of capitalism is not a single monopoly, but two or 3 big players, keeping each other honest through market competition, with a pack of smaller guys nipping at their heels, ready to tear to shreds anyone who falters, and claim their market share.

Of course, this only applies for industries where the economies of scale tend toward big companies. Many industries favor smaller companies. You might get a local monopoly in those, but you can't stretch that very far, because if your prices get high enough that it's cheaper to go to the next town over, you lose your business.

[MoonShadow]

To be fair, bonker is correct that monopoly is the natural tendency of a capitalist business; especially corporations. Since the point of business and capitalism is to acquire wealth, that often also means taking over an ever increasing share of the market. What bonker is missing is the fact that it's impossible to take over 100% of the market in anything for any extended period of time, due to competition and substitution (Coke tries to get a monopoly > Pepsi provides competition AND Tropicana Orange Juice provides substitution > Coke is forced to lower prices)

While true, taken alone, that statement does not prove his premise; that monopolies are an equilibrium state of capitalism.  While you provide one reason why, another is the issue of corporations themselves.  Corporations, as they currently exist, are not natural organizations within the context of capitalism ( economic definition) while they probably are within the context of Capitalism (political ideology).  Corporations are, by their very definitions, legal fictions of a nation-state; and thus cannot begin to exist in the absence of a government.  Although the disappearance of the national government may not be fatal to a corporation, due to the probability that any large and well funded corporation could reasonablely function in the place of government within it's own sphere of influence.  Corporations are, in effect, the children of the state that begot them, and may not require the care of the state after a certain maturity and development.

Yet, corporations that operate within the same industry cannot peacefully coexist in the absence of the parental state, so in the case of the fall of that parental state, corporations can be expected to behave badly towards each other and their peers' resources.  Much like the brothers of a recently departed king.  Companies that are wholly owned, however, function as an extention of that owner's own will; representing him both in business and reputation.  While a CEO can shrug off accusations of criminal activity under his charge, because of the distribution of responsibility that the corporate structure cultivates; the whole owner is truly responsible for the wrongdoing of his employees while operating in his employ.  This is not a small difference.

[hazek]

For the sake of argument, let's assume that human beings are like programmable Lemmings that don't really know anything. They've recently climbed down from the trees and are faced with resource scarcity for the first time ever. Thus, Capitalism does not already exist, it needs to be somehow created... If people want it to exist, that is.

I guess "resource scarcity" might be one prerequisite. If everything is abundant and easily available, there's no real need for trade, is there?

And I guess the idea of Capitalism and wanting Capitalism to exist might be other requirements. The humans might proclaim in Modern English: "hey, let's trade stuff!"


What other requirements are there, if any? And why might they be needed?

You are misinformed about what capitalism is.

Pure capitalism is absolute freedom coupled with respect for rational property ownership. Consequently those are also the only two prerequisites you need for capitalism.

(definition of rational property ownership: ownership based in first principles supported with reason and not some illusion supported with violence)

[blablahblah]

...
What other requirements are there, if any? And why might they be needed?

You are misinformed about what capitalism is.

Pure capitalism is absolute freedom coupled with respect for rational property ownership. Consequently those are also the only two prerequisites you need for capitalism.

(definition of rational property ownership: ownership based in first principles supported with reason and not some illusion supported with violence)

That doesn't make sense. If the concept of property ownership is rational, presumably there's some rational cause for it? I'm prepared to accept that property ownership might be irrational, e.g.: it's axiomatic and it "just is" or "it got made up because it's inherently true", but that's like saying that god "just is". No-one (in this thread or any of the other discussions I've seen) has ever presented a rationale for where the concept logically comes from.

[hazek]

...
What other requirements are there, if any? And why might they be needed?

You are misinformed about what capitalism is.

Pure capitalism is absolute freedom coupled with respect for rational property ownership. Consequently those are also the only two prerequisites you need for capitalism.

(definition of rational property ownership: ownership based in first principles supported with reason and not some illusion supported with violence)

That doesn't make sense. If the concept of property ownership is rational, presumably there's some rational cause for it? I'm prepared to accept that property ownership might be irrational, e.g.: it's axiomatic and it "just is" or "it got made up because it's inherently true", but that's like saying that god "just is". No-one (in this thread or any of the other discussions I've seen) has ever presented a rationale for where the concept logically comes from.

Would your confusion be lifted if I substituted rational with logical? English is not my native language and I perhaps mistakenly treat those two as synonyms.

[Snipes777]

If you could slow down for a second... I'm trying to get to the bottom of this 'Capitalism' thing from first principles. The Lemming humans (from the OP) are being bombarded with new ideas:
Ownership? What's that?
Property? What's that?

Did the concepts exist before anyone "put pen to paper" or made sounds to describe them for the first time? Can a 'concept' be a law of nature? Or were the concepts created by people? They couldn't create themselves -- that would be paradoxical.

Capitalism -> Lending, and other options for using more capital than one could generate themselves and a market to sell the result to -> Wealth Generation and Better Products and Services -> More Leisure Time (you don't need to work 24/7 your whole life to work, you only need to work 8/5 for 40 years) -> Better Ideas -> More Ideas, Freedom, Agorism, Capitalism -> Lending for those ideas...etc.

This is how I imagine the cycle. So I guess in order for people to trade, they need more resources than they need to survive on average for a community. Thus, some elemental form of technology to allow people to produce more than with their own hands. However, even then people have, and would again, figure out tools and technology to make things better, even if it requires starving for a few days or waiting until there happens to be a large amount of food one season to eat.

[Luno]

Interesting reading, but one question:

Some of you believe that the natural occurrence of a state to enforce rules regarding property rigts, trade practices, etc is a necessity.

But how is a state administration different from any big player? Do you define state as a monopoly with alturic motives or is it in reality just the largest dog in the yard who has a monopoly on Force, punishment or rewards to it's employees?

Every company has top down organisation, It's laws, punishment (monetary or exclusion), secrets based on your level in the organisation. They wage wars on the competition.

The argument that a state has monopoly to print money or collect taxes is in the end also about it's capacity to excert force on those who disagree.

So isn't government just the largest gang in town? or the single most suscessful corporate monopoly within it's country?

[Rassah]

To be fair, bonker is correct that monopoly is the natural tendency of a capitalist business; especially corporations.

While true, taken alone, that statement does not prove his premise; that monopolies are an equilibrium state of capitalism.  While you provide one reason why, another is the issue of corporations themselves.  Corporations, as they currently exist, are not natural organizations within the context of capitalism ( economic definition) while they probably are within the context of Capitalism (political ideology).  Corporations are, by their very definitions, legal fictions of a nation-state; and thus cannot begin to exist in the absence of a government. 

The only reason I brought up corporations is because their purpose is specifically to increase profits, and thus market share. If I had simply said "the tendency of a capitalist business is to increase profits" I would have been wrong, since not all private business strives to increase profits or increase market share. Some are happy just where they are, since increasing profits or market share would result is more work than owners are willing to take on.
Carry on.

[myrkul]

The argument that a state has monopoly to print money or collect taxes is in the end also about it's capacity to excert force on those who disagree.

So isn't government just the largest gang in town?

Bingo. At the core of it, Government is just a protection racket that is able, by virtue of it's willingness to commit violence, and it's successful propagandizing of it's "customers," to keep other rackets from muscling in.

[Snipes777]

Also, almost everyone's own understanding of the term varies, even if it generally agrees with one or the other common definition.  Are we talking about the ideological or economic definition of capitalism?

Does anyone have issues with this definition of Capitalism?
http://en.wikipedia.org/wiki/Capitalism
Capitalism is an economic system that is based on the private ownership of capital goods, or the means of production, and the creation of goods and services for profit. Elements central to Capitalism include capital accumulation, competitive markets, and a price system.

[MoonShadow]

Also, almost everyone's own understanding of the term varies, even if it generally agrees with one or the other common definition.  Are we talking about the ideological or economic definition of capitalism?

Does anyone have issues with this definition of Capitalism?
http://en.wikipedia.org/wiki/Capitalism
Capitalism is an economic system that is based on the private ownership of capital goods, or the means of production, and the creation of goods and services for profit. Elements central to Capitalism include capital accumulation, competitive markets, and a price system.

Yes, it's too broad.  You need to read a bit further in to see the problem...

There are multiple variants of capitalism, including laissez-faire, welfare capitalism and state capitalism. Capitalism is considered to have been applied in a variety of historical cases, varying in time, geography, politics, and culture.[5] There is general agreement that capitalism became dominant in the Western world following the demise of feudalism.[6]

Economists (including political economists) and historians have taken different perspectives on the analysis of capitalism. Economists usually emphasize the degree to which government does not have control over markets (laissez-faire), as well as the importance of property rights.[7][8] Most political economists emphasize private property as well, in addition to power relations, wage labor, class, and the uniqueness of capitalism as a historical formation.[9] The extent to which different markets are free, as well as the rules defining private property, is a matter of politics and policy. Many states have what are termed mixed economies, referring to the varying degree of planned and market-driven elements in an economic system.[9] In the 20th century, in reaction to the negative connotations sometimes associated with capitalism, defenders of the capitalist system often replaced the terms capitalist and capitalism by phrases such as free enterprise and private enterprise.[10]

The term capitalism gradually spread throughout the Western world in the 19th and 20th centuries largely through the writings of Karl Marx.[5]

And then things get more detailed here...

http://en.wikipedia.org/wiki/Capitalism#Types_of_capitalism

While I do agree that capitalism describes an "economic system" the very use of that term implies a structured plan, presumedly by human planners, as opposed to a natural & emergent order that develops on it's own if not interfered with by governments or other third parties.

[ImNotHerb]

"What are the minimum prerequisites for Capitalism to be possible?"

Not interfering with voluntary exchange.

[Richy_T]

Still on page 1 but I didn't see it there...

Capitalism needs a store of value. It doesn't work exchanging  chickens for corn if  the chicken spoils and the corn rots. Sure, you'll eat well but it's only when you get to chicken jerky, feathers for decoration and dry storage for the corn that capitalism kicks in

[Richy_T]

I remember Microsoft being subjected to huge anti-trust action. It was smart enough to maintain a monopoly and, as such, was forced to let competition in.

Unfortunately, monopolies are a natural equilibrium state of capitalism. To function effectively, capitalism must be supported by a hidden system of authoritarian control..

This is what exists today.

You remember the huge action. What you don't remember is that George Bush got in and it ended up with a slap on the wrist (and that's stretching it) for Microsoft.

[Rassah]

You remember the huge action. What you don't remember is that George Bush got in and it ended up with a slap on the wrist (and that's stretching it) for Microsoft.

And, by the time the wrist slapping happened, Microsoft had already lost its monopoly status in whatever it was being sued for

[myrkul]

Still on page 1 but I didn't see it there...

Capitalism needs a store of value. It doesn't work exchanging  chickens for corn if  the chicken spoils and the corn rots. Sure, you'll eat well but it's only when you get to chicken jerky, feathers for decoration and dry storage for the corn that capitalism kicks in

Pre-money capitalism typically traded the chickens alive and kicking.

[Richy_T]

Still on page 1 but I didn't see it there...

Capitalism needs a store of value. It doesn't work exchanging  chickens for corn if  the chicken spoils and the corn rots. Sure, you'll eat well but it's only when you get to chicken jerky, feathers for decoration and dry storage for the corn that capitalism kicks in

Pre-money capitalism typically traded the chickens alive and kicking.

I guess live chickens are a valid form of stored value