The Price of Oil

[boedicca]

Originally Posted by Vautrin

After Capitalism had its party (the profits), and now needs to face the music. It is not government that forced the banks to lend to subrprime lenders. The banks were in it for the money. Nothing noble about that. Quite what capitalism is about.

It wasn't Capitalism - it was government enabled fraud. Banks loaned money to unworthy borrowers, with the government acting as a safety net. Then some of them packaged up these subprime mortgages, rated them as superior investment grade (which was fraud), and sold them off. That is not Capitalism - it's Fraud.

As asked, are you willing to gamble that Ford, General Motors and the likes are going bust, because the banks need to call in their loans? Yes or no?

The big American Auto companies are hurting because they are not making enough products that customers want to buy (i.e., fuel efficient hybrids). Auto companies in the U.S. have their own credit arms, so they are largely not affected by banks calling loans.

Calling loans is not really the problem in the U.S., it's that money has tightened due to banks getting back to more rational lending practices (i.e., lending to people who can actually pay back the loans). I wouldn't even call it a problem - it's a much needed adjustment

Again, see above. Why are the banks wrong to make money?

Not all ways of making money are equivalent. Someone who makes a product which consumers voluntarily purchase is not the peer of someone who robs a victim at gunpoint (or as somebody who profits from fraud).

You appear to be making the common mistake of equating making profit under any circumstances with Capitalism. There are many ways to unethically profit - but not ones that are consistent with Pure Capitalism, the hallmarks of which are voluntary transactions under conditions of sufficient information to make rational choices.

Part of the problem is that vested interests are opposed to developing new techniques. You don't expect Ford to develop a transport system that makes their core business obsolete. Actually you are demanding that of the oil companies. Which would be bad for their business, and the last thing they would do unless forced to.

Actually, I do expect Ford to develop vehicles which consumers wish to purchase if it wishes to remain in business - just as I expect energy companies to invest in alternatives there customers desire, or else to go out of business. Toyota's performance is excellent because they are making cars people want to buy. If they can do it, so can Ford.

Oil companies may or may not invest in alternatives - that is a decision to be made by their boards of directors. The smart ones are.

[Vautrin]

Banks loaned money to unworthy borrowers, with the government acting as a safety net. Then some of them packaged up these subprime mortgages, rated them as superior investment grade (which was fraud), and sold them off. That is not Capitalism - it's Fraud.

Fictional example:

How would you fare, if the banks called in your loans now, even though your financial situation is healthy? You'd simply be punished for being with Citi instead of say Morgan & Stanley for instance. At some point it becomes nonsensical that a choice you made would be responsible for your fiscal ruin (simply because you don't condone fiscal fraud, and if they don't inform you they are into that), but that is also part and parcel of Capitalism.

This begets the question: should you be compensated with some crumbs from Citi (if it goes bust) and lose your business, or would you have government pay up, to ensure that Citi and thus your business remain in existence? Pure Capitalism would say the former, but it is also clear, that that would take down an additional business which is "healthy". The downturn would be more severe in the first scenario than in the second, even though it would pave the way for more "sustained" growth in the future, but that is partly because you'd start again in a worse scenario.

How one determines fraud without having access to the "real" data (and thus start prosecution) is beyond me. How would anyone even sort out the the legal mess? And it is not fraud if you can get away with it (the lovely innocent until proven guilty clause). Would you be happy that the government gets access to information about your legitimate loans? I can imagine you'd be wary, and rightfully so.

I'll cite you the great railway speculation in Europe and the US to a lesser extent. Capitalism of the free market kind always comes along with investments that provide a poor return, or are schemes to make a lot of money. In fact bogus schemes were so chronic, that States were forced to make some legislation, to prevent people being milked for their money in bogus investments.
Most foodstuffs have extensive regulations, simply to prevent companies to put all kinds of unhealthy crap in it. I read a lovely piece on the role of legislation on the quality of bread, and research from the 19th century on what substances were found in bread. Needless to say bread was quite lethal in some cases. The same holds for a plethora of products and services.

Calling loans is not really the problem in the U.S., it's that money has tightened due to banks getting back to more rational lending practices (i.e., lending to people who can actually pay back the loans). I wouldn't even call it a problem - it's a much needed adjustment

This argument does not compute. If money has tightened, that should only be a problem if the "tightened" (and we are not talking about 15-20% interest rates, like in the 1980s) rate would be unaffordable to whatever company or individual. Now what does it tell you about companies that live on the edge? That they actually displayed poor business savy. Now if those companies fail, that is because they were poorly equipped to compete, and thus they SHOULD fail, for the benefit of capitalism as a whole.

You appear to be making the common mistake of equating making profit under any circumstances with Capitalism. There are many ways to unethically profit - but not ones that are consistent with Pure Capitalism, the hallmarks of which are voluntary transactions under conditions of sufficient information to make rational choices.

That is a bogus argument. Capitalism is not an ethical system. The closest ethical stance to values inherent to capitalism is probably a version of utilitarianism.

The assumption that sufficient information is given on products and services is often quite problematic. Aspartame will be the next big hit, for causing all kinds of health problems, even though advertising focuses on its alleged health benefits. Same with smoking. How long did the tobacco industry deny what is now considered to be obvious?

As for the rational choice theory, that is even more problematic. I present you the PR industry.

We can put a classic Marxist analysis of capitalism next to Pure Capitalism, and the notion of ethical profit becomes problematic (and no, it is not true that Marxists claim that profit is the root of all evil, or that profit is bad per se).

Actually, I do expect Ford to develop vehicles which consumers wish to purchase if it wishes to remain in business - just as I expect energy companies to invest in alternatives there customers desire, or else to go out of business.

That is where PR and advertising comes in. If the people get convinced by any means that Ford is better than Toyota, people will buy Ford. And we all know that advertising is not rational at all (can someone PLEASE explain to me what scantily clad women tell me about the quality of ANY car?), thus undermining the theoretical construct of Pure Capitalism.

[F&L]

Originally Posted by Vautrin

That is a bogus argument. Capitalism is not an ethical system. The closest ethical stance to values inherent to capitalism is probably a version of utilitarianism.

Her argument is correct. Utilitarianism essentially boils down to socialism. History has proven capitalism to be the most ethical system. There are and will always be evil men who will take advantage of whatever system is in place. For a society to advance and prosper, there must be the incentives that only capitalism can provide.

[Vautrin]

Originally Posted by F&L

Her argument is correct. Utilitarianism essentially boils down to socialism.

I disagree on that. Some strands of utilitarianism do to a social democratic set of ideals and principles, but that is quite different from socialism.

History has proven capitalism to be the most ethical system.

1. History does not prove anything.
2. I can come up with oodles of examples of the unethical nature of capitalism. Should that include or exclude the production of Zyklon B which was wholly justified in capitalistic terms?
2b. If you grant that capitalism is just about the production of goods, and not about the use of those products, then there is no way to prove capitalism's superiority over say feudalism.

[F&L]

Originally Posted by Vautrin

I disagree on that. Some strands of utilitarianism do to a social democratic set of ideals and principles, but that is quite different from socialism.

It's socialism lite. It lacks morality and is a stepping stone on the way to the removal of human rights.

History has proven capitalism to be the most ethical system.

1. History does not prove anything.

History shows that capitalism has lifted more people from poverty than any other economic system. History has also shown repeatedly that socialism and communism fail.

2. I can come up with oodles of examples of the unethical nature of capitalism. Should that include or exclude the production of Zyklon B which was wholly justified in capitalistic terms?

Capitalism is an economic system, not a way to determine if a product should be developed. As I said before, people can do evil things under any system.

2b. If you grant that capitalism is just about the production of goods, and not about the use of those products, then there is no way to prove capitalism's superiority over say feudalism.

Capitalism is about individuals or companies owning the means of production, distribution and freely trading with each other. One of our basic human rights is the right to own property, Freedom cannot exist without property ownership.

[Vautrin]

Originally Posted by F&L

History shows that capitalism has lifted more people from poverty than any other economic system. History has also shown repeatedly that socialism and communism fail.

Only because there is 6.5 billion people now, as opposed to the couple of hundred millions 400 years ago. Also, if you check your stats, more than 50% of the world population has to come by on less than $2 a day. Hardly anything but poor. Likewise, you can also make the same argument that capitalism has been the most succesful system to create poverty.

There has not been a modern socialist state ever. So it is quite amusing you say they have failed. That is like saying the USS Enterprise has failed, even though no such space ship has ever been built by any civilization we know of.

Freedom cannot exist without property ownership.

Oh yes it can. Talk to the Aborigines.

[F&L]

Originally Posted by Vautrin

Only because there is 6.5 billion people now, as opposed to the couple of hundred millions 400 years ago. Also, if you check your stats, more than 50% of the world population has to come by on less than $2 a day.

Poor is relative. I wish I could live on $2 a day.

There has not been a modern socialist state ever. So it is quite amusing you say they have failed. That is like saying the USS Enterprise has failed, even though no such space ship has ever been built by any civilization we know of.

There's never been a purely capitalist state either. Government can never keep their hands out of it.

Freedom cannot exist without property ownership.

[Vautrin]

Originally Posted by F&L

Poor is relative. I wish I could live on $2 a day.

So your boast is relative. So what does it mean? Nothing.

There's never been a purely capitalist state either. Government can never keep their hands out of it.

Yes but unlike socialism, there have been / are capitalist states. Not true of socialism (which is historically impossible as long as capitalism exists).

How would you have pure capitalism in the first place?

[F&L]

Originally Posted by Vautrin

So your boast is relative. So what does it mean? Nothing.

It means I'm not poor. I'm richer than the guy who makes $1 or $0.

Yes but unlike socialism, there have been / are capitalist states. Not true of socialism (which is historically impossible as long as capitalism exists).

There are no purely capitalist countries(that includes the US). What we have are countries that are a mix of capitalism and socialism.

How would you have pure capitalism in the first place?

No government regulation of the economics of business or society.

[Vautrin]

Originally Posted by F&L

I'm richer than the guy who makes $1 or $0.

How is capitalism succesful in uplifiting people from poverty, if poverty is a relative concept? It is not, and given the premise of poverty being relative, nothing can. So the boast is nothing but meaningless banter.

What we have are countries that are a mix of capitalism and socialism.

Again that is not socialism, but social democracy. Big difference.

No government regulation of the economics of business or society.

That would gravely undermine capitalism itself. Capitalism requires legislation on things like property (and thus theft & fraud), patents and copyrights to name the most obvious. And some other basic rights and restrictions. All these things affect the economics of business and society.

If you trust companies not to screw up your food, or actually inform you about the nefarious products they are willing to sell you (they are even willing to do when there are regulations, so I fail to see why capitalists are unwilling to do that when there are no regulations; for a recent example just think of the Chinese toy scare), more power to you. Just don't think you have the recourse to a legal system to collect damages ...

[boedicca]

It's good to see this