Is the US Moving Away from Capitalism and Free Market?

[mu_enrico]

According to Ray Dalio:

The economic world order is changing whether we like it or not. You can see it happening as people and companies around the world are losing income and savings, and central banks and governments are providing them money to try to compensate for those losses. And you can see it as the free market is no longer determining the allocation of capital — governments are.

Central governments and central banks are now creating trillions in money and credit and directing it to those they want to receive it. This will soon be followed by a debate, perhaps even a fight, about where this money should come from and who should have what in the new world. Such controls of spending and the ensuing political conflicts over it have occurred many times in history, especially when severe economic and financial downturns were accompanied by high levels of indebtedness and large wealth gaps. History has taught us that these conflicts take place both within and between countries. How these conflicts are resolved will determine whether the economic pie will grow and be divided well or contract and be divided through fighting.
Chances are that the new system we end up with will be significantly different from the capitalist system that we've gotten used to.

...

To make society work better, the new system must both increase the size of the pie and divide it well. Our ability to consume is dependent on our ability to produce, not the amount of money we get in the mail. You can't eat money. Somebody must get paid to produce and deliver what we consume. And we can't raise our living standards by just giving people money — they need to be incentivized to produce, and that must be done cost-effectively through some system that is not administered from the top. Most fundamentally, that system must strive to provide 1) equal opportunity to all those who have the potential to produce (because that is both most fair and most productive) and 2) basic needs to those who are unable to (because that is humane and what is fundamentally needed to have a good community).

Source: https://edition.cnn.com/2020/05/15/perspectives/ray-dalio-capitalism/index.html

* What do you think? It seems like the US is moving closer to central planning since the government decides to interfere with the free-market.
* At the time of this pandemic, should the government let the market regulate itself?
* What is the rule of the government in this "new capitalist" system? Should it be called "pure capitalism?"

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[figmentofmyass]

* What do you think? It seems like the US is moving closer to central planning since the government decides to interfere with the free-market.

the FED buying corporate debt does put a new face on things. they are now openly choosing economic winners and losers, pumping funds into failing businesses at their choosing when the free market would have let them go bankrupt. unlike treasury stimulus, there is no semblance of accountability or transparency. they are really fucking with the investment landscape.

in all fairness, the USA has never been a free market in the sense of laissez-faire economics. it's a "mixed economy" rife with regulations, subsidies, and welfare entitlements. https://en.wikipedia.org/wiki/Mixed_economy#Mix_of_free_markets_and_state_intervention

this takes it to a new level though.

* At the time of this pandemic, should the government let the market regulate itself?

there's essentially 2 schools of thought on this. the austrians and other austerity supporters think perpetual growth is a fairy tale and that the market should be left to its own devices even if that means a depression wiping out much of the economy.

the keynesians and other demand side economists see a depression as the ultimate evil, much worse than money printing and bailouts.

[abhiseshakana]

What I understand little about America is its oligarchy and strong plutocracy maneuvering. There are institutions such as the IMF world bank as a representation of the US government, but the real economic player in the US and in the world is wall stickers. Investors and markets are Wallstreet. Business people, money holders, hedge funds, private equity funds, venture capital, and investment banking are all on Wall Street. If the government issues bonds, Government bonds, the bonds that buy are investors on Wallstreet.

* What do you think? It seems like the US is moving closer to central planning since the government decides to interface with the free-market.

The tariff war is evidence of US interference with the free market, an overly intervening government in the free market has been increasingly seen in the Trump administration since the trade war blew.

* At the time of this pandemic, should the government let the market regulate itself?

In the name of democracy and the free market that is always echoed by the US the government should not intervene. Although the market mechanism is not always effective and efficient. because what is needed by consumers and suppliers is not always available, so that sometimes causes excess or lack of inventory in the market. Competition is not always effective, unfair competition such as monopoly will greatly disrupt the market balance. The emergence of community needs that cannot be provided by the market, such as public facilities.

Learning from the great depression, I think the historical evidence of the failure of the free market system, the government does need to intervene in the market with an adjusted level. Government intervention policies in the economy must develop that are adaptive in nature and adjust to market conditions.

* What is the rule of government in this" new capitalist "system? Should it be called" pure capitalism?

The US positions its government as a public service provider, regulator, supervisor, and driver of growth and stability.

The great depression is evidence that Laizes Faire is normatively impossible to implement.

[Upgrade00]

* What do you think? It seems like the US is moving closer to central planning since the government decides to interfere with the free-market.

In a way the United States has never been a perfectly capitalist society and various examples of government intervention in the market is abundant throughout history. The SEC has been in existence for many years now.

* At the time of this pandemic, should the government let the market regulate itself?

The major drivers of a free market would be the forces of demand and supply, this would allow those who show the ability to meet the demand of the public in taste and volume would thrive. This period of pandemic does shift the balance of the scale a bit, non-essential services are closed, SMEs are also hard hit, demand is equally regulated as movement of people is restricted. The lack of money in circulation also affects the market and by extension, the economy.

I believe there should be an intervention, at least until the market is again open, and people can go about business as usual.

* What is the rule of the government in this "new capitalist" system? Should it be called "pure capitalism?"

I think you may have meant to ask the role of the government in the new system. [I think] They would say they are the support for the free market to ensure it doesn't collapse. Technically they regulate the market.

[mu_enrico]

there's essentially 2 schools of thought on this. the austrians and other austerity supporters think perpetual growth is a fairy tale and that the market should be left to its own devices even if that means a depression wiping out much of the economy.

the keynesians and other demand side economists see a depression as the ultimate evil, much worse than money printing and bailouts.

And which one you prefer? Or you have your own "theory?"

In the name of democracy and the free market that is always echoed by the US the government should not intervene. Although the market mechanism is not always effective and efficient. because what is needed by consumers and suppliers is not always available, so that sometimes causes excess or lack of inventory in the market. Competition is not always effective, unfair competition such as monopoly will greatly disrupt the market balance. The emergence of community needs that cannot be provided by the market, such as public facilities.

What is more efficient than the market mechanism?

Learning from the great depression, I think the historical evidence of the failure of the free market system, the government does need to intervene in the market with an adjusted level. Government intervention policies in the economy must develop that are adaptive in nature and adjust to market conditions.

How the great depression is the evidence of the failure of the free market system? What happened in the great depression?

I believe there should be an intervention, at least until the market is again open, and people can go about business as usual.

What if the interventions make the situation worse than let the economy free as is, and let the invisible hand regulate the economy?

[figmentofmyass]

there's essentially 2 schools of thought on this. the austrians and other austerity supporters think perpetual growth is a fairy tale and that the market should be left to its own devices even if that means a depression wiping out much of the economy.

the keynesians and other demand side economists see a depression as the ultimate evil, much worse than money printing and bailouts.

And which one you prefer? Or you have your own "theory?"

i don't pretend to know what the ideal is. krugman and powell et al would say a depression in many ways is exponentially worse than slow devaluation by inflation. i wouldn't know but the idea is persuasive on some levels.

i suppose a 3rd idea would reinforce the notion that it isn't inflation per se that's the problem, but rather unpredictable and high inflation. i've heard convincing arguments that a 0.5% or 1% perpetual, but unquestionably stable/predictable inflation (like monero's tail emission) is superior to bitcoin's fixed supply dynamic.

i'm not nearly as offended by keynesians as many in the bitcoin realm are. i see the interest rates banks are paying. i'm capable of finding more reasonable places to park my money for better returns.

[bitgolden]

Doubt it. Right now, they are so much divided that they even made wearing a mask a political thing. Think about it, there are people in USA right now who thinks if you wear a mask you are a liberal and vote for the democrat party. And they are not wrong neither, most of the non-mask people are republicans but there are tons of people who wear masks and vote for both parties as well.

You know why? Because, they are not idiots and they realize that if you do not wear the mask you may end up DEAD. So, when a country is divided about wearing a mask to stay safe or not wearing a mask and risking death how could you expect them to change anything as major as capitalism. That country doesn't even make health a social policy, like if you have money you can live but if you are poor and don't have money you might as well die.

[FanatMonet]

There will definitely not be centralized planning in the USA, but here I see the noticeable spread of certain features of socialism, personally, for sure. The rich are too rich, and the poor are faced with huge problems with both money and work during the coronavirus.

[Ozero]

Any society, despite the various political systems existing in them, is centralized. Decentralization of management is partially possible only at the local level, the higher this level, the greater the degree of centralization of public administration. The task of each society is to establish a reasonable balance between centralization and decentralization of social relations.
Of course, our world is constantly changing and this process is continuous. There is no alternative to the current social order. At the same time, we understand that they are already outdated and an update is needed.

[drlukacs]

 actually, we should not be too important what it is, it is important that the US now needs to do everything to revive their economy. capitalism has made people really unable to survive this epidemic and what is certain is that the government must get involved. they need to adjust their economy so that people will not suffer badly in the coming months. maybe they will change many policies in Capitalism but only in the short term.

[mu_enrico]

i suppose a 3rd idea would reinforce the notion that it isn't inflation per se that's the problem, but rather unpredictable and high inflation. i've heard convincing arguments that a 0.5% or 1% perpetual, but unquestionably stable/predictable inflation (like monero's tail emission) is superior to bitcoin's fixed supply dynamic.

Inflation != Increase money supply mate
Perhaps the focus should be to increase productivity (more goods and services), not to tweak the emission rates.

The rich are too rich, and the poor are faced with huge problems with both money and work during the coronavirus.

In a socialist country, the rich (the regime) will be filthy rich, and the poor (the ordinary people) will be so miserable. There's no way they can get out of that situation, unlike in capitalism, where everyone can try their luck as entrepreneurs.

[DoublerHunter]

^ Let me explain my opinion, every society has a different centralized political system. Decentralized governance can only be done at the lower levels of a government's political system but it cannot be at the high levels of the political system. Because this high-level political system can only handle public administration. What each society should do is establish a balanced and rational system of centralization and decentralized relationships in each society. Because we all know that the world is constantly changing and this is a process that we will never be able to stop.

[fabiorem]

Only now you noticed it?

The US is a socialist country for a long time already. Their government still allows people to have guns, though.

[Upgrade00]

What if the interventions make the situation worse than let the economy free as is, and let the invisible hand regulate the economy?

Well, a government intervention would be through QE, providing stimulus for SMEs and support for major players etc. There are quite a number of downsides to this; Inflation notably. This would have a domino effect, the value of cash would be reduced and people who have them stashed up in savings' accounts gets poorer. Assets would also spike in price.
This could also create an unequal market, and create a design that would shortchange some businesses. These would further adversely affect the economy and the recovery process would be slow.

On the flip side letting the market operate freely, would leave the economy stagnant for a period of time. Spendings would remain low and businesses would lose out, I can't tell how long it would take for the market to recover.

[Darker45]

* What do you think? It seems like the US is moving closer to central planning since the government decides to interfere with the free-market.

The modern free market is not absolutely free, never been. Capitalism was never about absolute freedom in the market. It was about fair competition and equal opportunity for all. This freedom has always been within the bounds of laws, regulations, and other perimeters.  

* At the time of this pandemic, should the government let the market regulate itself?

No, not absolutely. There is always what we call public interest. The capitalist market is profit-oriented. Somehow, the government has a responsibility to make sure that such a goal will not be to the detriment of the overall society.  

* What is the rule of the government in this "new capitalist" system? Should it be called "pure capitalism?"

Of course, not. The "leave alone" preference of laissez-faire is simply impossible to implement. But this does not mean that the government will take over private firms. They will just intervene whenever necessary. After all, they have the largest stake in the society.  

[azmirihaque]

The world economy is passing a crisis moment when most of the business men have locked their shutter and producers have stopped their production and there by they are losing huge profit. You should know that world's export and import have declined below 50%. So, the govt. and central banks are trying to up rise this declining economy by providing loan, incentives and subsidy etc. to the business men, producers etc. In such special moments, it is necessary of the govt. to interfere and regulate the market. All these steps are for the benefit of the free market economy, not for changing the capitalism system.  I think, when this pandemic situation will over, free-market will go freely and no question will be aroused on the existence of pure capitalism.       

[gantez]

Only now you noticed it?

The US is a socialist country for a long time already. Their government still allows people to have guns, though.

But I was thinking a country that allows for guns is more like a liberal country and not socialist 

I have heard and read that US is a presidential system where there are checks and balances and not socialist that is centralized.

[el kaka22]

This was done during a pandemic period and I doubt it would continue forever. But even in a pandemic situation they helped companies more than they helped people and we all have seen how useless that is. Trump actually has three tweets about how stock market moved above 25k, one in 2018, one in 2019 and one recently, he talked about how awesome stock markets are going by pointing out the three same levels and doesn't even realize it.

When you help people, those people spend the money on companies and companies profit anyway. If you pay it to companies directly, they just pay themselves bonuses. So, at the end of the day america is still a big capitalist country, the biggest capitalist country in the world, and even if it doesn't work they are brainwashed and will continue to be one.

[figmentofmyass]

i suppose a 3rd idea would reinforce the notion that it isn't inflation per se that's the problem, but rather unpredictable and high inflation. i've heard convincing arguments that a 0.5% or 1% perpetual, but unquestionably stable/predictable inflation (like monero's tail emission) is superior to bitcoin's fixed supply dynamic.

Inflation != Increase money supply mate

there are two types of inflation---monetary inflation and price inflation.

https://en.wikipedia.org/wiki/Monetary_inflation
https://en.wikipedia.org/wiki/Inflation

they are directly related:

Monetary inflation is a sustained increase in the money supply of a country (or currency area). Depending on many factors, especially public expectations, the fundamental state and development of the economy, and the transmission mechanism, it is likely to result in price inflation, which is usually just called "inflation", which is a rise in the general level of prices of goods and services.

this is exactly why people fear that money printing policies will result in high inflation or hyperinflation. increasing the money supply devalues each unit of money, increasing prices.

Perhaps the focus should be to increase productivity (more goods and services), not to tweak the emission rates.

the fundamental problem presently is that people are spending less money on goods and services, due to high unemployment and lack of confidence in the future.

we already have a problem of too much productivity. there is no demand for the current level of productivity, which is why there are so many layoffs happening. you can't get people to buy stuff they don't want just by making more of it.

[mu_enrico]

there are two types of inflation---monetary inflation and price inflation.

https://en.wikipedia.org/wiki/Monetary_inflation
https://en.wikipedia.org/wiki/Inflation

Still, the citation from Wikipedia is weak.

This article includes a list of references, but its sources remain unclear because it has insufficient inline citations. Please help to improve this article by introducing more precise citations. (January 2016)

Source: https://en.wikipedia.org/wiki/Monetary_inflation

Here is why...

Austrian:

when a government increases the quantity of paper money, the result is that the purchasing power of the monetary unit begins to drop, and so prices rise. This is called inflation.

Unfortunately, in the United States, as well as in other countries, some people prefer to attribute the cause of inflation not to an increase in the quantity of money but, rather, to the rise in prices.

Source: https://mises.org/library/inflation

Mainstream:

In the long run, inflation is caused by growth in the money supply. Inflation, the rate of growth in the average level of prices, can vary over the short run for many reasons. Over the long run, however, the rate at which the central bank (the Federal Reserve System in the United States) causes the stock of money to grow determines what the inflation rate is.

Source: Williamson, Macroeconomics 6th ed, Pearson

I think Mises' view is more biased, or he wants to emphasize "printing money" in his lecture. The evidence why the mainstream definition of inflation is more accurate is in the short run, for example, on Islamic fasting month (in the Islamic majority country), inflation will be high not because of printing money stuff, but because an increase in demand since people tend to eat more quality/complete foods during that period.
https://journal.umy.ac.id/index.php/esp/article/view/6576

the fundamental problem presently is that people are spending less money on goods and services, due to high unemployment and lack of confidence in the future.

we already have a problem of too much productivity. there is no demand for the current level of productivity, which is why there are so many layoffs happening. you can't get people to buy stuff they don't want just by making more of it.

Well, since economics is a social science, there's no such thing as binary yes or no, let's spin it shall we
Needs or wants are not equal to demand.

Demand is an economic principle referring to a consumer's desire to purchase goods and services and willingness to pay a price for a specific good or service.

Source: https://www.investopedia.com/terms/d/demand.asp

As long as people are still alive and healthy, people will always need products and services, but they are unable or unwilling to pay at a particular price level. Hence, the idea is to keep producing because more supply will lower the price, with the hope that people can or willing to pay at the new price level. By giving incentives for essential businesses, they will keep producing, keep paying its worker, lower the price, plus preventing scarcity and hoarding at the same time.

Only now you noticed it?

Yes, "I'm an idiot sandwich."

On the flip side letting the market operate freely, would leave the economy stagnant for a period of time. Spendings would remain low and businesses would lose out, I can't tell how long it would take for the market to recover.

What if economics is like mother nature? https://www.youtube.com/watch?v=emvV1rdzlwo

@fabiorem @gantez, a country that allows guns, is a Marlboro country.

When you help people, those people spend the money on companies and companies profit anyway. If you pay it to companies directly, they just pay themselves bonuses. So, at the end of the day america is still a big capitalist country, the biggest capitalist country in the world, and even if it doesn't work they are brainwashed and will continue to be one.

Ah I remember watching/reading this case somewhere, is it the 2008 bailouts?