Why irresponsible Capitalism will end in Communism.

realitykeeper

Capitalism can only work if it is carried out responsibly. To be responsible, it must not run a perpetual deficit or maintain a perpetual debt. Individuals, businesses, banks and countries that run deficits should be seen to fail and bailouts should never be available.

The banks are masters of crony capitalism, lending each other the funds they need each day to balance the books. The protests against capitalism in 2008 was really about crony capitalism, as opposed to real capitalism but unfortunately most people do not know the difference.

Crony capitalism unlike real (old fashioned) capitalism must fail and when it does, people are likely to reject capitalism altogether. What replaces it may well be Communism - but by another name, because Communism itself is seen by many as a failed ideology.

Another challenge for capitalism is how to deal with this obsession with equality that has besieged modern day economic theory. One way of managing this is by transparency. Workers should feel they are working for themselves and benefiting from their efforts as opposed to benefiting from their time. In other words the link between effort and reward needs to be as direct as possible. For example, if you do something you get paid for that instead of getting paid by the hour which only encourages attendance but not effort or performance.

Finally, the minimum wage has to go in my opinion. The existence of a minimum wage demonstrates a lack of trust in the market valuation of a commodity called "labour". The markets should be trusted because (in the absence of political interference) market forces gravitate towards honesty which is ultimately a more profitable business strategy than dishonesty.

The existence of a minimum wage is what makes European companies incapable of competing with Chinese companies in the manufacture of low value goods. It is increasingly making European companies unable to compete with Chinese companies in manufacturing higher value goods.

Europe does not need more QE to compete. It needs cheap labour, less regulation and lower social costs.

alastair

No whipping advocacy in this one then?

johnnyskeleton

Mod note:

Hmmm....nope. This is a blog post not a discussion starter. Alastair, please dont make things personal.