Is Capitalism Profitable?

[Thersites]

A recent column by Jonah Goldberg got me thinking: for a number of companies, the free market is not the most profitable circumstance possible. It is in their interest in get government backing. We might relate this to the military-industrial complex Eisenhower feared, but I think the concept is no less accurate when talking about government in general than when it refers to the military. Big businesses and politicians can- and do- conspire for mutual gain. It is not more profitable for companies to allow competition: if they can get the government to help them eliminate their competition, they will do it. It seems to me, then, that the free market is not something that can happen unless the government deliberately takes steps toward making it so. If this is the case, it is certainly ironic: laissez-faire takes work.

Anyway, I think this is a topic worth discussing. If businesses do indeed try to squash the widespread practice of capitalism rather than foster it, is it worthwhile for us to build up a free market that will only attempt to destroy itself? If we do want free markets, what are our obligations as citizens, consumers, and potential entrepreneurs?

[Little Shepherd]

The people who say capitalism is profitable(such as myself) are not referring to it being mega-profitable for any single entity, though occasionally it is. Rather, it is the system under which the largest number of people, taking advantage of incentives and competition, can experience the greatest amount of profitability(income) possible.

Remember: it was government backing that originally caused the abusive monopolies(most notably in the oil and train industries) that later required intervention to break them up. Without such backing, companies can only gain a monopoly if they do something to earn it. If they try to be abusive, that just encourages competition to start up and people to go elsewhere.

Of course, even us super pro-capitalism people believe the government should have a role. A small role, but a necessary one -- to create and execute laws against fraud and theft. No fraud, no theft, no problem, no need for government intervention.

[Thersites]

The people who say capitalism is profitable(such as myself) are not referring to it being mega-profitable for any single entity, though occasionally it is. Rather, it is the system under which the largest number of people, taking advantage of incentives and competition, can experience the greatest amount of profitability(income) possible.

Agreed. But how can we achieve this, if the goal of every company is ultimately to eliminate its competition?

Remember: it was government backing that originally caused the abusive monopolies(most notably in the oil and train industries) that later required intervention to break them up. Without such backing, companies can only gain a monopoly if they do something to earn it. If they try to be abusive, that just encourages competition to start up and people to go elsewhere.

You do bring up an interesting point. Many, if not all, monopolies come about as the result of some form of government intervention.

Of course, even us super pro-capitalism people believe the government should have a role. A small role, but a necessary one -- to create and execute laws against fraud and theft. No fraud, no theft, no problem, no need for government intervention.

Including theft of intellectual property?

[Philosophickle]

Including theft of intellectual property?

No such thing.

[Darth Executor]

Including theft of intellectual property?

No such thing.

Fixed.

[rogue06]

No such thing.

I know a couple writers who would strongly disagree.

[Darth Executor]

Philosopickle doesn't respect any rights that he can trample without consequence.

[Thersites]

So... what does the government of a capitalist economy look like?

[joel]

Agreed. But how can we achieve this, if the goal of every company is ultimately to eliminate its competition?

That's not the ultimate goal of a company. The ultimate goal of a company in an unhampered market (insofar as its goal is monetary return) is to serve the consumers as best as it can.

The political (i.e., violent/coercive) means of eliminating/reducing competition has no place in capitalism. The government should never support it. Rather, its job is to defend people against violent means.

So... what does the government of a capitalist economy look like?

Defends individuals against aggression (violence, theft, fraud, and the like). No more, no less. It does not use the Sword to help anyone eliminate their competition.

Including theft of intellectual property?

I too am becoming increasingly convinced that there is no such thing as intellectual property.

[themuzicman]

Agreed. But how can we achieve this, if the goal of every company is ultimately to eliminate its competition?

The same way that sports teams continue to survive, in spite of the fact that their goal is to beat every other team every time: Given a proper competitive environment (enter government regulation), each company through its own innovations and actions, resists the efforts the efforts of other companies to push them out of the market.

You do bring up an interesting point. Many, if not all, monopolies come about as the result of some form of government intervention.

The early monopolies generally did not. They came about through unfair business practices and such, which have been dealt with.

Michael

[joel]

The same way that sports teams continue to survive, in spite of the fact that their goal is to beat every other team every time: Given a proper competitive environment (enter government regulation), each company through its own innovations and actions, resists the efforts the efforts of other companies to push them out of the market.

I disagree with the necessity of regulation. On the contrary, it this widespread belief of the masses that enables businesses to wield government force against their competitors. Most government regulation is urged not by consumers but by businesses in the industry itself to reduce/limit their competition.

Also we must keep in mind that in an unhampered market, the only real means available to a firm to push competitors out of the market is to serve the consumers better than their competitors do. That is the nature of the "pushing them out of the market." The competition in the market is not akin to war or even sports, but is a jumping over each other to serve the consumers better. In an unhampered market, the 'environment' is always competitive, even if at any given point in time there is only one firm in an 'industry,' for anyone who figures out how to serve the consumers better can jump in any time.

Also, we should keep in mind that the basic feature of the unhampered market is not competition, but cooperation (the division of labor).

Many, if not all, monopolies come about as the result of some form of government intervention.

The early monopolies generally did not. They came about through unfair business practices and such, which have been dealt with.

This is not true. In fact, monopolies were recognized as being so exclusively created by government, that that was the original definition and use of the term "monopoly."

Rothbard pointed this out:

"Let us turn to its classic expression by the great seventeenth-century jurist, Lord Coke:

A monopoly is an institution or allowance by the king, by his grant, commission, or otherwise . . . to any person or persons, bodies politic or corporate, for the sole buying, selling, making, working, or using of anything, whereby any person or persons, bodies politic or corporate, are sought to be restrained of any freedom or liberty that they had before, or hindered in their lawful trade.

[...]
This definition of monopoly goes back to the common law and acquired great political importance in England during the sixteenth and seventeenth centuries, when an historic struggle took place between libertarians and the Crown over the issue of monopoly as opposed to freedom of production and enterprise.
[...]
That this definition was formerly important in economic analysis is clear in the following quotation from one of the first American economists, Francis Wayland:

A monopoly is an exclusive right granted to a man, or to a monopoly of men, to employ their labor or capital in some particular manner."

http://mises.org/rothbard/mes/chap10...Monopoly_Price

There was (and is) no significant danger of monopoly in an unhampered market. The setting of a supposed 'monopoly price' would simply attract other entrepreneurs to that opportunity for profit. Thus would-be monopolists and cartels seek government enforcement of their monopoly/cartel because it is unsustainable in an unhampered market.

[Thersites]

That's not the ultimate goal of a company. The ultimate goal of a company in an unhampered market (insofar as its goal is monetary return) is to serve the consumers as best as it can.

The political (i.e., violent/coercive) means of eliminating/reducing competition has no place in capitalism. The government should never support it. Rather, its job is to defend people against violent means.


Defends individuals against aggression (violence, theft, fraud, and the like). No more, no less. It does not use the Sword to help anyone eliminate their competition.

But couldn't corrupt government officials institute such policies?

[joel]

But couldn't corrupt government officials institute such policies?

Yes, but that would not be a feature of an unhampered market. And if the people would not stand for that kind of thing, then it could not happen, or at least not last very long. Unfortunately, the masses of the people have this love of government intervention, or at least think that it is somehow necessary, and it is this ideology that permits such government encroachments. There were periods in history, such as the nineteenth century, where the ideology of the masses was much more libertarian, and because of this, businesses were much less able to gain political favors. And it was a period of unprecedented improvement in the material well-being of the masses.

[Little Shepherd]

Agreed. But how can we achieve this, if the goal of every company is ultimately to eliminate its competition?

The goal of each company is to be as profitable as possible. Now it's true that this could result in the competition going bye-bye, but only if they are able to do a better job of serving the customers than that competition. Otherwise there would be no incentive for the consumers to choose them over their competition. With over 300 million people in America alone, that would be no small feat(and it gets even less feasible when you consider international trade).

You do bring up an interesting point. Many, if not all, monopolies come about as the result of some form of government intervention.

Many, but I'm not sure I'd go so far as to say "most." I've only really read up on a few of the more egregious monopolies that were caused(and later broken up) by government intervention. Because they had no fear of competition -- government had limited consumer choice artificially -- they were able to do some things that were extremely abusive.

Including theft of intellectual property?

That's a really weird area of property law, and I honestly don't know where I stand at the moment. The most I can say is that I think having some intellectual protection is good, but I think such should be extremely limited. The original patent laws were put in effect to encourage inventions -- without such a patent system in place, it would be nigh impossible to guarantee that the inventor would get any credit or benefit from his/her inventions, and there would go a huge incentive for inventing things in the first place. I like incentives, but I'm just not sure it should be the government providing them. At least not at the federal level(my views concerning government action at the state level are a good bit more lenient).

[Thersites]

Yes, but that would not be a feature of an unhampered market. And if the people would not stand for that kind of thing, then it could not happen, or at least not last very long.

The operative word, I think, is "if". What happens if "if" isn't the case?

Unfortunately, the masses of the people have this love of government intervention, or at least think that it is somehow necessary, and it is this ideology that permits such government encroachments. There were periods in history, such as the nineteenth century, where the ideology of the masses was much more libertarian, and because of this, businesses were much less able to gain political favors. And it was a period of unprecedented improvement in the material well-being of the masses.

What about the transcontinental railroad?