# Socialism. Has it ever worked economically?



## ringledman (10 Mar 2010)

Socialism, communism, call it what you like. 

Has any nation ever got wealthy off it?

Economically, it has to be a disaster. The mere concept that government can be a better allocator of capital than the free market is ludicrous.

It seems like a history of failed utopian ideas...

A trip to Cuba reminds me of its failings. What a repressed and sad nation of people held back from success.

Or are there rare cases of it in history of ever having worked?


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## mathepac (10 Mar 2010)

Do you have examples of where capitalism (without state intervention, subsidies and protection of capitalists) has worked economically?


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## ringledman (10 Mar 2010)

mathepac said:


> Do you have examples of where capitalism (without state intervention, subsidies and protection of capitalists) has worked economically?


 
Capitalism is the only national wealth creator known to man. 

The USA was built of the principles of the free market, liberty, respect for property rights, low taxes, the rule of law and minimal government intervention.

http://www.youtube.com/watch?v=jj8rMwdQf6k

Unfortunately the nation is now destroying itself with socialism idealism and government intervention of every part of its economy.

There are many examples in Asia of the free market lifting millions out of poverty and setting them on the course to economic wealth. 

The problem is socialism seems to rear its head in every nation every few decades and destroys all wealth creating principles set before it.


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## Purple (11 Mar 2010)

When economic models become political philosophies they fail. Economics should be about a scientific and pragmatic search for the best way to  manage an economy. Therefore socialism and capitalism are not comparable; socialism is closer to a religion than an economic philosophy as it seeks to control many aspects of society. 
The brand of socialism that is espoused by the Irish Labour Party is a more pragmatic and centralist type. It accepts the free market but seeks to have more state intervention and social engineering. 

It should also be remembered that the free market is an artificial construct and open competition can only exist with intervention and active regulation from governments. I don’t see how pure capitalism or pure socialism could ever work.

The debate is really about what type of state intervention/interference should take place in the market and what it’s objectives should be.


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## Sunny (11 Mar 2010)

Does anyway really fall for the capitalism=good, socialism= bad argument anymore?
As Purple says, pure capitalism or socialism would never work. China is hardly the poster boy of capitalism or socialism for that matter but they don't do a bad job at creating wealth


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## z107 (11 Mar 2010)

Corruption will always destroy capitalism or communism.
As soon as you introduce politicians, it's the kiss of death.


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## z107 (11 Mar 2010)

Does anyone know why people had to join long queues for food in communist states?


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## ajapale (11 Mar 2010)

Does anyone know why we had to steal Trevelyan'shttp://www.google.ie/url?url=http:/...n+morn&usg=AFQjCNG1F_LS2Ip_N4G52DVx_ZOhHUV1PA Corn?


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## j26 (11 Mar 2010)

Sunny said:


> .. China is hardly the poster boy of capitalism or socialism for that matter but they don't do a bad job at creating wealth



Wouldn't China be regarded as state capitalist though, same as the USSR was?  It was still a capitalist society, it was just that the state appropriated the capital and directed it towards its ends.

I doubt whether pure socialism or capitalism (or anarchism for that matter) can exist on a grand scale, but can work very well in smaller societies/clubs etc. 

It doesn't stop them from being ideals to work towards though, and all are good depending on your perspective.



umop3p!sdn said:


> Does anyone know why people had to join long queues for food in communist states?


I believe that was due to the corruption within the system, and misallocation of resources towards nukes and such.


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## j26 (11 Mar 2010)

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## j26 (11 Mar 2010)

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## ringledman (11 Mar 2010)

umop3p!sdn said:


> Does anyone know why people had to join long queues for food in communist states?


 
Often in socialist or communist states the government think in their wisdom to set the price for food low. They think that this will help everyone to eat cheaply. Unfortunately all it does is reduce the supply of goods from the market as farmers either cut crops, divert them out of the country or let their farms become inefficient. The government's intervention eventually leads to people going hungry because they miss read the effect of their policy.

Whenever a government interfers in the allocation of capital in the free market then people become poorer for it. 

The free market is a finely balanced and excellent allocator of capital, resources and labour. It is not perfect but damn near. 

Peter Schiff or Tom Woods, had a great quote- 

Ever wondered how every coffee shop seems to appear in exactly the right place? Perfectly distanced from the next? This is the free market allocating capital, resources and labour to exactly the right place. 

Where the free market gets it wrong (i.e. two coffee shops too close) then the free market will soon reallocate those resources through one of the shops having to close and eventually re-open as something else that the area demands. 

Once governments interfere in the free market, disaster looms. 

Governments cannot allocate capital, resources and labour effectively. Not because government workers are any less intelligent but because there is no burden for wrong doing. If the government create a bad investment they don't go bust over it like the private sector, thus quickly taking out the misallocation quickly and efficiently from the economy. A government merely throws more money at the problem, from an apparently endless pit of free printed money. This money has not been created by any wealth creating industry. 

If it was so easy as print your way to wealth, Zimbabwe would now be the richest country on earth, and not one of its poorest with 70%+ unemployment.

Likewise an economy largely state run can never properly decide what people require and where. Because their is no 'creative destruction' of bad investments, the whole economy can appear healthy, although in reality the whole situation is an illusion until the total collapse of the entire system occurs. The USSR is a classic example.

The West is heading for a total collapse of the system at some point. I believe within 10 years we will face 20% inflation and possibly even hyperinflation of 50% plus. The US eventually will collapse as debt is currently at 350% of GDP when all unfunded liabilities are included.

The government caused this crises. The bankers merely hitched along for the ride of negative interest rates (i.e. below inflation) and massive monetary printing by Bush and Greenspan. Obama and Bernanke are even worse, trying to delay the original pair's mega credit binge with an even bigger government inspired bailout. These 4 have been an economic disaster for the US.

For a great read on all that is wrong with government intervention thne I recommend Jim Roger's 'Investment Biker' and 'Adventure Capitalist'.

Everything about the free market, libertarianism and the Austrian school of economics makes sense. Unfortunately government's will never give it a chance to succeed.

For a much more eloquent discussion of the problems of government's eternal failure whenever they interfere in the running of the economy, the excellent Tom Woods -  

http://www.campaignforliberty.com/article.php?view=15



> *Tooth Fairy Economics*
> Tom Woods
> 
> So the "stimulus" package, a dagger through the heart of the economy, has passed. The geniuses who govern us, who insist that seizing the produce of the voluntary economy and devoting it to arbitrary projects will make us wealthy, have had their victory.
> ...


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## Complainer (12 Mar 2010)

ringledman said:


> Capitalism is the only national wealth creator known to man.
> 
> The USA was built of the principles of the free market, liberty, respect for property rights, low taxes, the rule of law and minimal government intervention.
> 
> ...


Why don't you fill in readers of the full picture of the great US of A. Tell the readers how the USA leads the developed world in homicide rates, teenage birth rates, obesity rates, imprisonment rates, mental illness rates and infant death rates. Tell the readers how the USA lags the developed world in overseas aid, and social mobility (ability of children of poor parents to get rich) and child wellbeing (except UK, NZ and Israel). Tell the readers how the USA now spends more on prisons than on higher education, imprisons people at 14 times the rate of Japan and how the prison population has grown six-fold in the past 30 years.

The American dream, eh?


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## Purple (12 Mar 2010)

Complainer said:


> Why don't you fill in readers of the full picture of the great US of A. Tell the readers how the USA leads the developed world in homicide rates, teenage birth rates, obesity rates, imprisonment rates, mental illness rates and infant death rates. Tell the readers how the USA lags the developed world in overseas aid, and social mobility (ability of children of poor parents to get rich) and child wellbeing (except UK, NZ and Israel). Tell the readers how the USA now spends more on prisons than on higher education, imprisons people at 14 times the rate of Japan and how the prison population has grown six-fold in the past 30 years.
> 
> The American dream, eh?



I agree with you, it's far from perfect, but you have to take the massive emigrant population that they take in every year and the huge social problems that creates. Japan is a homogeneous, and quite racist, country so I it’s apples and oranges there. 

What’s your view on the OP’s question?


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## sunrock (12 Mar 2010)

umop3p!sdn said:


> Does anyone know why people had to join long queues for food in communist states?


 
Nowhere near as long as the queues in the depression of the 30s in America.
Generally the communist/socialist countries of eastern europe did a very good job in providing basic food to everyone. It was luxury goods that were in short suppy.
As regards Cuba, their main problem was the United States embargo and trade sanctions. Cuba has a fine record in health and education.If Ireland had similiar sanctions imposed we would be in a very sorry state....only cars from the 50s and no inward investment or indeed export markets for most of our produce.
As has been mentioned,the argument is far from clearcut as most countries are a mix of capitalist and the government having a big role. Being a rich powerful country is a big help as countries like the U.S. can get resoucres from around the world cheaply, instigating wars and coups if needed.In poorer countries  there is so little to go around that the culture is for sharing the limited resoucres,otherwise some people wouldn`t just be poor..they would die of hunger.
The U.S. has a tough welfare policy for poor americans but many of the richest americans receive government money and of course many big U.S companies get bailed out by the taxpayer so it is not a strict ideology.
My own view is that small buisnesses are best served by the private capitalist model,but some big buisnesses need to be state controlled like health and education and certain utilities. The less competition a buisness has the more regulation there needs to be.


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## ringledman (12 Mar 2010)

Complainer said:


> Why don't you fill in readers of the full picture of the great US of A. Tell the readers how the USA leads the developed world in homicide rates, teenage birth rates, obesity rates, imprisonment rates, mental illness rates and infant death rates. Tell the readers how the USA lags the developed world in overseas aid, and social mobility (ability of children of poor parents to get rich) and child wellbeing (except UK, NZ and Israel). Tell the readers how the USA now spends more on prisons than on higher education, imprisons people at 14 times the rate of Japan and how the prison population has grown six-fold in the past 30 years.
> 
> The American dream, eh?


 
You clearly haven't read what I've said, just jumped to a conclusion. Please re-read.

Firstly I'm no fan of the USA. Infact quite the opposite. The USA is a dump and a repressive statist regime. 

My writings and the video clip refer to the 'American Dream' of the century running up to the 80s. An economic miracle brought about by minimal state intervention in the running of the economy, low taxes, the rule of law, low debt and freedom for enterprise. 

Raegan was the last real free market advocate. 

The past 20 years for the US have been a statist run regime, whether democrat or republican. They have all been the same, government's expanding debt and interference in all aspects of the economy, resulting in the eventual bust. This is not free market real capitalism as was once the case in the US.

This is how great socialists and unions can run an economy -

http://www.youtube.com/watch?v=1hhJ_49leBw

Hardly capitalism at fault...

Thirdly, with regards to Cuba. Yes the embargo has stiffled the country, no doubt. A further sign of how states and government intervention screws people. Nonetheless the socialist people in power have created the bulk of their poverty. 

Cuba is a sad country. Yes they may have a good health and education service, agreed. But there is total desolation on the faces there. No freedom, huge corruption, Havana is an absolutely desolate city. The only people who make the bare minimum to survive are the people working in the tourist resorts. The government should be ashamed of the way they treat their people.

Communism and socialism has been proven to fail in every country is has been tried in. 

Real capitalism is always prevented from achieving its universal goals from statist and left leaning governments intent on expanding the state at an eventual detriment to all.


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## j26 (12 Mar 2010)

ringledman said:


> ...
> 
> Cuba is a sad country. Yes they may have a good health and education service, agreed. But there is total desolation on the faces there. No freedom, huge corruption, Havana is an absolutely desolate city. The only people who make the bare minimum to survive are the people working in the tourist resorts. The government should be ashamed of the way they treat their people.
> ....



Have you been to Cuba?

While the buildings are in a poor state of repair, the rest of your description is a gross mischaracterisation of Cuban life, certainly the Cuba I've seen anyway.


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## ringledman (12 Mar 2010)

j26 said:


> Have you been to Cuba?
> 
> While the buildings are in a poor state of repair, the rest of your description is a gross mischaracterisation of Cuban life, certainly the Cuba I've seen anyway.


 
No I watched it on the TV. Of course I've been. I'm sorry but it is a sad country. 

It is not a mischaracterisation, don't come on here preaching that the socialist state of affairs there is great.

Firstly the city is in major dissrepair. Apart from the old town that has a lick of paint the rest is 3rd world. They cram hundreds into buses that can only be described as fit for livestock. There is a distinct lack of necessities, except those marketed to the tourists. 

The tourist resorts are islands seperated from the mainland and armed with guards. No locals are allowed to live on the tourist resorts and are bused in daily some hour or two away. These are the lucky one making enough off the tips to survive. 

Ive probably been to poorer countries but I've never seen people as sad as in Cuba.

A sad state of affairs. A great nation held back by a repressive statist regime.


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## bullworth (13 Mar 2010)

I remember reading somewhere that the USSR had a higher standard of living than Ireland in at least before or during the 1960s. Can anyone verify this ?


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## Purple (13 Mar 2010)

bullworth said:


> I remember reading somewhere that the USSR had a higher standard of living than Ireland in at least before or during the 1960s. Can anyone verify this ?


The problem isn't doctrine, it's lack of competence by those in charge at the top (both politicians and public servants, but mainly politicians; the civil servants can only advise, if their political masters are too stupid to listen then there is nothing they can do about it).

For the first 50 years this state was grossly mismanaged. In fact, other than a brief spell in the 60’s (under Lemass) and another between the mid 80's and the late 90's, (starting with Ray McSharry and ending after Ruairi Quinn) it has always been grossly mismanaged.

So Finance Ministers that were both left and right of centre did the right thing in the 80’s and 90’s and ministers that were both left and right of centre did the wrong thing after them.


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## ringledman (14 Mar 2010)

Anyone watched 'Tropic of Cancer' on BBC 2 tonight?

Cuba - Rations for all foods except the very basics. Consumer goods prohibatively expensive. 

Tourist waiters earning $100/day, being the average yearly salary for everyone else. 

The more educated, the less you earn.

Socialism at its best...


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## csirl (15 Mar 2010)

ringledman said:


> Anyone watched 'Tropic of Cancer' on BBC 2 tonight?
> 
> Cuba - Rations for all foods except the very basics. Consumer goods prohibatively expensive.
> 
> ...


 
Saw it and agree with the above.

The movement promoting turning parks and gardens into allotments to feed the populace sounds like what they were doing in the UK during the WWII food shortages. 

Cuba does not have a good health service - it is underfunded like most third world countries. I think those who keep on saying this have been taken in by the propoganda. According to the World Health Organisation, the life expectancy for a male in Cuba is only 67. Other indicators like infant mortality are also low.  - these stats say it all - not the characteristics of a country with good health care.

http://www.who.int/countries/cub/en/.


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## Chris (19 Mar 2010)

Purple said:


> When economic models become political philosophies they fail. Economics should be about a scientific and pragmatic search for the best way to  manage an economy. Therefore socialism and capitalism are not comparable; socialism is closer to a religion than an economic philosophy as it seeks to control many aspects of society.


Very good point, capitalism is an economic system, while socialism is a political system. You also point out something that proponents of socialism never mention: in order for the socialist agenda of one group of society to succeed it has to be enforced upon everyone. This is one of the biggest gripes I have with it.



Purple said:


> It should also be remembered that the free market is an artificial construct and open competition can only exist with intervention and active regulation from governments. I don’t see how pure capitalism or pure socialism could ever work.
> 
> The debate is really about what type of state intervention/interference should take place in the market and what it’s objectives should be.


Any form of intervention in a free market is based on a subjective view of a few people. Therefore, every intervention distorts competition. Pure free market capitalism does not allow intervention.
I also disagree that the free market is an artificial construct. Quite the opposite, it is the most natural form of economic exchange, i.e. people exchange products free from any coercion or enforcement as they wish to. As soon as you add regulations or other interventions the system becomes man made or artificial.



mathepac said:


> Do you have examples of where capitalism (without state intervention, subsidies and protection of capitalists) has worked economically?


Germany after WWII is as close as the world has seen to true free market capitalism in the last 150 years, even if it wasn't a conscious choice. The new government was way to busy with what a government is actually meant to do: national defense, policing, road infrastructure, etc, and therefore didn't intervene in the free market. This resulted in the most successful economic period Germany has ever seen, until a few years later state intervention was reintroduced, immediately causing negative economic results.
http://mises.org/daily/3635
For about 200 years after independence in 1776 the USA had miniscule state intervention. There were almost no taxes on individuals or corporations and the size of government was kept to a minimum. Over those 200 years the biggest economic boom took place because the state didn't intervene.



umop3p!sdn said:


> Corruption will always destroy capitalism or communism.
> As soon as you introduce politicians, it's the kiss of death.


Exactly! However, in true free-market capitalism, where the state is prohibited from intervening in the economy, there would be no bribing of politicians for economic benefits.




sunrock said:


> Nowhere near as long as the queues in the depression of the 30s in America.


The great depression was not the result of a failure of free market capitalism. It was the result of state intervention in the 20s through a massive increase in the money supply, and further intervention in the 30s through state spending, price/wage fixing, etc.



sunrock said:


> Generally the communist/socialist countries of eastern europe did a very good job in providing basic food to everyone. It was luxury goods that were in short suppy.


No, they did not do even remotely a good job at providing basic food. Have you ever talked to East Germans, Hungarians or Bulgarians that "lived" under communism/socialism? I have met many and I saw it first hand in East Germany after the Berlin wall came down. The diets of these people were far from adequate.



sunrock said:


> As regards Cuba, their main problem was the United States embargo and trade sanctions. Cuba has a fine record in health and education.If Ireland had similiar sanctions imposed we would be in a very sorry state....only cars from the 50s and no inward investment or indeed export markets for most of our produce.


The US embargo is only partially to blame, and incidentally the embargo is a form of state intervention, not free market capitalism. The world is a big place, but yet Cuba has failed to create any meaningful productive sector, despite its low wages.
Also, to set the record straight, Cuba does not have a good modern health service. What it has is universal access to a poor service. It is a perfect example of what Churchill was referring to in this quote: "The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."


To the original question, socialism has never succeeded. Socialism is also regularly being reinvented. At first it was the confiscation of all means of economic production, but this miserably failed. It seems that socialists realised this, so they then moved onto confiscating the profit of economic production. Worryingly, they are now calling for confiscation/nationalization again. Let's hope this doesn't happen.
What socialists are also misrepresenting is that the current economic crisis is proof that free market capitalism has failed. The economic system we live with, does not even remotely resemble free market capitalism, but rather is more adequately called interventionism. State intervention is the main cause of all economic crises, and the last thing we now need is more of the interventions.


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## Complainer (19 Mar 2010)

Chris said:


> You also point out something that proponents of socialism never mention: in order for the socialist agenda of one group of society to succeed it has to be enforced upon everyone.


And this is different to capitalism how?



Chris said:


> Any form of intervention in a free market is based on a subjective view of a few people. Therefore, every intervention distorts competition. Pure free market capitalism does not allow intervention.
> I also disagree that the free market is an artificial construct. Quite the opposite, it is the most natural form of economic exchange, i.e. people exchange products free from any coercion or enforcement as they wish to. As soon as you add regulations or other interventions the system becomes man made or artificial.


This is nonsense. It is perfectly natural for many people to prioritise buying of Irish goods over imports in order to improve our economic woes, but those nice guys in WTO/GAAT have their own bibles of regulations to prevent such interventions. Regulations work both ways, not just the way that suits you.


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## Chris (19 Mar 2010)

Complainer said:


> And this is different to capitalism how?


If by capitalism you mean our current system then there is no difference. As I mention in my previous post, the current economic system does not remortely resemble free-market capitalism, it is more adequately called interventionism. In true free-market capitalism all participants in economic transactions are free to exchange products for money (and vice versa) as they see fit to do. The only thing that is enforced is property rights and and protection from coercion or manipulation. Apart from that everyone is free to transact in whatever way the see fit.
Herein lies the difference, nobody is restricted or encouraged to do anything specific that is decided by a higher authority.



Complainer said:


> This is nonsense. It is perfectly natural for many people to prioritise buying of Irish goods over imports in order to improve our economic woes, but those nice guys in WTO/GAAT have their own bibles of regulations to prevent such interventions. Regulations work both ways, not just the way that suits you.



Yes it is natuaral for people to prioritise, but prioritisation should not be enforced by a group of politicians. It should be up to individuals to choose whether they want to buy Irish or not. Forcing people through regulation to buy Irish will have absolutely no positive effect on the economy, as consumers will face higher prices than they would if they were completely free to choose where they spend their money. If you are happy paying a higher price for an Irish made product, good for you; if you want to buy a cheap Chinese product, good for you. This is what competition is all about, and distorting it through intervention will always result in higher prices or lower quality (directly or indirectly) for the consumer. 
If creating economic growth were so simple to achieve as prioritising the buying of local goods over imports, then banning imports would be the ultimate solution. Worked great for the GDR.


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## Complainer (19 Mar 2010)

Chris said:


> In true free-market capitalism all participants in economic transactions are free to exchange products for money (and vice versa) as they see fit to do. The only thing that is enforced is property rights and and protection from coercion or manipulation. Apart from that everyone is free to transact in whatever way the see fit.
> Herein lies the difference, nobody is restricted or encouraged to do anything specific that is decided by a higher authority.


But the capitalist system itself would be enforced by a higher authority. And the rules of that system (e.g. GAAT/WTO rules) are imposed by a higher authority. And those who want a system whereby public services are provided to all based need, rather than based on ability to pay are left swinging in the wind.



Chris said:


> Yes it is natuaral for people to prioritise, but prioritisation should not be enforced by a group of politicians. It should be up to individuals to choose whether they want to buy Irish or not. Forcing people through regulation to buy Irish will have absolutely no positive effect on the economy, as consumers will face higher prices than they would if they were completely free to choose where they spend their money. If you are happy paying a higher price for an Irish made product, good for you; if you want to buy a cheap Chinese product, good for you. This is what competition is all about, and distorting it through intervention will always result in higher prices or lower quality (directly or indirectly) for the consumer.
> If creating economic growth were so simple to achieve as prioritising the buying of local goods over imports, then banning imports would be the ultimate solution. Worked great for the GDR.



Forcing people NOT to prioritise through WTO/GAAT rules is regulation in itself. Or is it just one set of regulations that you seek to demonise?


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## Purple (19 Mar 2010)

I think when Chris talks about forcing people he is talking about government intervention, tariffs or embargoes etc.

I am of the opinion that people should be free to buy whatever goods they want as long as they are safe to consume. Protectionism impacts on the weak and the vulnerable and protects the haves from the have-not’s. 

I think that the free market is an artificial construct in as much as governmental oversight is required to stop businesses from abusing  their market dominance in order to become monopolies; we’d all be using Microsoft software, and a lower quality version of it at that, if it was not for governmental interference to allow other players to stay in the market.


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## ringledman (19 Mar 2010)

Purple said:


> we’d all be using Microsoft software, and a lower quality version of it at that, if it was not for governmental interference to allow other players to stay in the market.


 
Why should successful companies be penalised for having a high market share?

The aim of the free market should be limited regulation. 

If rival companies are any good they will naturally rise to the top and become a real competitor. We don't need government intervention to prop up unproductive companies or sectors. Resources (capital, land and workers) would be better to work at other more productive industries.

As another example, the US bailouts of GM and Chrysler will prove to be a complete disaster. Japan created zombie firms that returned 100 times less than they cost the taxpayer to prop up. 

The sign of successful economies are where good companies are allowed to rise to the top and bad companies dissapear. Creative destruction is good for the health of economies.


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## Chris (19 Mar 2010)

Purple said:


> I think when Chris talks about forcing people he is talking about government intervention, tariffs or embargoes etc.
> 
> I am of the opinion that people should be free to buy whatever goods they want as long as they are safe to consume. Protectionism impacts on the weak and the vulnerable and protects the haves from the have-not’s.
> 
> I think that the free market is an artificial construct in as much as governmental oversight is required to stop businesses from abusing  their market dominance in order to become monopolies; we’d all be using Microsoft software, and a lower quality version of it at that, if it was not for governmental interference to allow other players to stay in the market.



Large corporations have become so large and dominant, precisely due to regulations. The more regulations a government introduces, the more difficult it is for new companies to be created and then compete with the large established companies. With all the talk of regulting the financial industry more, not one financial corporation is publicly rejecting such an idea, because it makes sure that competition is kept at bay.
Ontop of that, the largest corporations in the world do not have to fear losses like small companies do; look at all the financial institutions that have been bailed out by tax payers! It's like flipping a coin and saying heads I win, tails you lose.
Could you provide some more detail in how government interference increased competition in the computer market? The fine imposed by the EU did absolutely nothing, it wasn't even punishment when the amount is compared to Microsofts revenue. People were switching to Macs and Linux long before the anti-trust cases.


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## Purple (19 Mar 2010)

Chris said:


> Large corporations have become so large and dominant, precisely due to regulations.


Can you back that up please?
For an example of how large companies can abuse their market position just loom at Standard Oil. If a company has lots of cash it can keep competition out of the market by below cost selling, targeted at their budding competitions market.

There has to be a legal framework that business is conducted within, unless you’d like to see a return to charter companies like the British East India Company? Therefore there will be some form of government regulation, be it overt of more subtle. 
As for all crashes being caused by government interference, as far as I recall the Tulip Mania of the 1630’s was not caused by any government but a simple speculative bubble.

There's a big drive in the rightwing media in America at the moment to sell the virtues of completely free market capitalism. I’m not a big fan of the clowns on Fox News and their fanatical attempts to re-write economic history (I'm not saying you're like that!). Life is complex and one size fits all dogmas that purport to offer a simple answer to everything really don’t stand up to scrutiny.


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## Chris (19 Mar 2010)

Purple said:


> Can you back that up please?
> For an example of how large companies can abuse their market position just loom at Standard Oil. If a company has lots of cash it can keep competition out of the market by below cost selling, targeted at their budding competitions market.


Let me try and explain differently. Take as an example horse drawn carriage rides in a park. Initially, there are no regulations; if you have a horse and a cart you can try and attract customers that want to take a trip around the park. Business takes off and more people start offering the same service. The best thing you can do to protect your business from new competitors, is appeal to the local council or government that there should be regulation and strict rules of this service "for the benefit of the customers". As you are already established in the business new regulations are not much of a problem for you. But if you have to add the cost of complying with regulations to all other start up costs then setting up the business quickly becomes less appealing. 
European financial regulations are so strict and costly to businesses that there are no new banks being formed, even though it should be quite easy to compete with essentially insolvent banks.
As for Standard Oil, below cost selling is the ultimate benefit to the consumer. If they can somehow remain profitable while selling below cost, then from a consumers point of view there doesn't need to be much competition. Even a large cash stockpile will ultimately dwindle by continued below cost selling, resulting in higher prices and more room for competition.



Purple said:


> There has to be a legal framework that business is conducted within, unless you’d like to see a return to charter companies like the British East India Company? Therefore there will be some form of government regulation, be it overt of more subtle.
> As for all crashes being caused by government interference, as far as I recall the Tulip Mania of the 1630’s was not caused by any government but a simple speculative bubble.


Yes indeed, the tulip mania was a speculative bubble, but there was plenty of government intervention. Take a look at this article for a different look at the crash: [broken link removed]



Purple said:


> There's a big drive in the rightwing media in America at the moment to sell the virtues of completely free market capitalism. I’m not a big fan of the clowns on Fox News and their fanatical attempts to re-write economic history (I'm not saying you're like that!). Life is complex and one size fits all dogmas that purport to offer a simple answer to everything really don’t stand up to scrutiny.


Oh yes, those guys at Fox; you're absolutely right, they are constantly re-writing history, and are also in absolute denial of their "everything is great in the economy" reporting of 2006/7. My economic beliefs are as much aligned with them as they are with Marx and Engels. While on the surface they are calling for free markets, they are also calling for massive government deficits and Federal Reserve money printing, which from the Austrian School's point of view is the ultimate government intervention. The only difference between Republicans and Democrats (economically speaking), is that Democrats admit that they will increase government size, power and spending, while Republicans state the opposite, but still do it.
Yes, life is complex, just as complex as nature. And just like human interference in the balances of nature, interference in economic balances of the free market are equally as devastating.


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## ringledman (21 Mar 2010)

Chris said:


> Yes indeed, the tulip mania was a speculative bubble, but there was plenty of government intervention. Take a look at this article for a different look at the crash: http://www.econ.ucla.edu/thompson/Document97.pdf


 
Yes government intervention is at the root cause of nearly all bubbles.

The current crises was caused by the Fed, Ecb, BoJ, BoE, etc keeping interest rates too low for too long in relation to inflation this past 15 years. Also far too much monetary expansion, money printing and public sector binges (unsupported by any wealth creating private industry).

Governments caused the current mess we are in. 

Peter Schiff has done some interesting historical research and states that small, mild, recessions should occur every 4-5 years. This is a healthy occurance where people pay down debt and speculative bubbles are kept at bay. 

The West went from 1991 to 2008, the longest period in history without a recession. We now face the mother of all depressions as a result of government intervention and artificial proping up of an unsustainable system. 

We face an even bigger government debt induced total collapse of the system at some point down the line (I give it 10 years for the West to collapse). 

All this mess is as a direct result of incompetent governments. 

The ROOT CAUSE of the crises lies firmly with the governments and criminal central banks. The private bankers contributed to the crises by latching onto the loose monetary policies created by the central banks. This financial engineering added nothing to the Western economies, having a zero sum net effect on long term wealth creation. 

Nonetheless, the governments and central banks created the situation for the fraudulent bankers to play along to. 

Once the West totally collapses under a hyperinflationary currency collapse; brought about by socialist public sector run economies, without any real 'wealth creating' private industry then we can start all over on a firm foundation of real libertarian and austrian economics.

This view is slowly coming to light bit unfortunately the general public will continue to be hoodwinked by statist governments who know nothing about real 'long term wealth creating' economic societies.

After all wealth in the West has been totally destroyed and stolen by these incompetent people in power then we will have the opportunity to try a different course. A new economy built on firm foundations of:

minimal taxes
minimal governments
the rule of law
private property rights
minimal regulations
Incentivising saving
Economy built on exporting goods and services
minimal debt and consumption

Until then, I'm holding onto my gold, silver and Asian assets.

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_'The interventionists do not approach the study of economic matters with scientific disinterestedness. Most of them are driven by an envious resentment against those whose incomes are larger than their own. This bias makes it impossible for them to see things as they really are. For them the main thing is not to improve the conditions of the masses, but to harm the entrepreneurs and capitalists even if this policy victimizes the immense majority of the people'_ *Ludwig Von Mises*


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## Complainer (21 Mar 2010)

Chris said:


> Let me try and explain differently. Take as an example horse drawn carriage rides in a park. Initially, there are no regulations; if you have a horse and a cart you can try and attract customers that want to take a trip around the park. Business takes off and more people start offering the same service. The best thing you can do to protect your business from new competitors, is appeal to the local council or government that there should be regulation and strict rules of this service "for the benefit of the customers". As you are already established in the business new regulations are not much of a problem for you. But if you have to add the cost of complying with regulations to all other start up costs then setting up the business quickly becomes less appealing.


So the tourists in Killarney should have to wade through piles of horse manure because of some theoretical view that 'regulations' (about horse nappies in this case) will restrict market competition?



Chris said:


> With all the talk of regulting the financial  industry more, not one financial corporation is publicly rejecting such  an idea, because it makes sure that competition is kept at bay.



This might be a good time to replay Sean Fitzpatrick's infamous interview of a couple of years back (was it with Marion Finucane?) bemoaning how 'excessive regulation' was holding back these bastions of growth and development.


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## Purple (21 Mar 2010)

Complainer said:


> So the tourists in Killarney should have to wade through piles of horse manure because of some theoretical view that 'regulations' (about horse nappies in this case) will restrict market competition?


 How about a law that states that you have to clean up after your animal if it defecates in a public place (like there is for dogs)?





Complainer said:


> This might be a good time to replay Sean Fitzpatrick's infamous interview of a couple of years back (was it with Marion Finucane?) bemoaning how 'excessive regulation' was holding back these bastions of growth and development.


 He was being dishonest when he said that. Anyway, that's not the point Chris is making.


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## Chris (24 Mar 2010)

Complainer said:


> But the capitalist system itself would be enforced by a higher authority. And the rules of that system (e.g. GAAT/WTO rules) are imposed by a higher authority. And those who want a system whereby public services are provided to all based need, rather than based on ability to pay are left swinging in the wind.


The only thing that needs to be enforced by government is criminal law, property law and contract law. My point is that governements should be precluded from deciding what and how means of economic production are put to use.



Complainer said:


> Forcing people NOT to prioritise through WTO/GAAT rules is regulation in itself. Or is it just one set of regulations that you seek to demonise?


Yes it is a regulation, but not on the economy, rather on the government. Making it illegal for governments to tinker in the economy (through stimulus, tax incentives, tariffs, etc.) restricts governments, not the means of economic production.




Complainer said:


> So the tourists in Killarney should have to wade through piles of horse manure because of some theoretical view that 'regulations' (about horse nappies in this case) will restrict market competition?


Tourists in Killarney have nothing to do with my example. To add to Purple's comment, we do not need to regulate through horse nappies. We do not need to spend time on money to come up with a report and pay horse experts for feedback. All that needs to be done is the enforcement of existing littering laws.



Complainer said:


> This might be a good time to replay Sean Fitzpatrick's infamous interview of a couple of years back (was it with Marion Finucane?) bemoaning how 'excessive regulation' was holding back these bastions of growth and development.


I would strongly suggest that you do not believe a single word that man mutters. How many financial institutions have publicly complained against the talk for new regulations, except for rules on executive pay? Regulation protects those that are being regulated, not their customers.


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## sunrock (27 Mar 2010)

I do believe if we had minimal government interference in the Irish economy ,we would have a much more productive country.
Reduce the minimum wage and welfare rates to the bare minimum.
Reduce taxes on work and VAT.
Reduce public sector numbers and reduce the remaining workers salaries.
All these measures would mean that people would have a big incentive to work and costs would fall across the board stimulating all buisnesses.
The only problem is the transition pain would be so painful no politician would endorse it.


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## Complainer (27 Mar 2010)

sunrock said:


> I do believe if we had minimal government interference in the Irish economy ,we would have a much more productive country.
> Reduce the minimum wage and welfare rates to the bare minimum.
> Reduce taxes on work and VAT.
> Reduce public sector numbers and reduce the remaining workers salaries.
> ...


WHy not just legalise slavery?

But seriously, why this mad rush for 'more productive'? What benefits arise for society from a 'more productive' country?


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## ringledman (28 Mar 2010)

Complainer said:


> WHy not just legalise slavery?
> 
> But seriously, why this mad rush for 'more productive'? What benefits arise for society from a 'more productive' country?


 
Slavery is the state stealing individual's wealth through taxation or inflation in order to pay for non-productive statist enterprises or welfare dependents.

Your second question - Turn it on its head what benefits arise from a 'less productive' socialist run country? None. 

High productivity leads to greater income for the country, leading to lower taxes and a greater standard of living for all.


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## Complainer (28 Mar 2010)

ringledman said:


> High productivity leads to greater income for the country, leading to lower taxes and a greater standard of living for all.


Some interesting leaps of faith there. Has this actually happened anywhere?

The Irish version was;

Higher productivity, leading to lower income taxes and higher consumption taxes (penalising those who earn less) and a greater standard of living for some (but definitely not all).


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## Purple (28 Mar 2010)

Complainer said:


> Higher productivity, leading to lower income taxes and higher consumption taxes (penalising those who earn less) and a greater standard of living for some (but definitely not all).



We stopped being highly productive when we had a building and public sector boom (massive numbers entering both sectors with pay increases way ahead of inflation). Higher consumption taxes were required to pay for the increase in public sector numbers (and to a lesser extent pay). The income tax base was then narrowed to penalise those on higher incomes (the myth that high earners pay less tax was exposed in this thread). 

If anyone really thinks that higher productivity leads to a situation that "penalising those who earn less" then they don't understand very basic economics or the first thing about what’s happened in this country over the last ten years.


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## Chris (29 Mar 2010)

Complainer said:


> Some interesting leaps of faith there. Has this actually happened anywhere?



Switzerland is one example: high wages, low income taxes, low VAT, very high standard of living.



Complainer said:


> The Irish version was;
> 
> Higher productivity, leading to lower income taxes and higher consumption taxes (penalising those who earn less) and a greater standard of living for some (but definitely not all).



Higher consumption tax was a  state intervention. Apart from that Ireland may have injoyed some productivity gains in the early yearts of the boom, but then the government induced construction and property boom took hold. I would say that for at least the last 8 years there has been no gain in productivity in Ireland. Does anyone have detailed GDP figures with a break down by industry for the last 10 years?



Purple said:


> If anyone really thinks that higher productivity leads to a situation that "penalising those who earn less" then they don't understand very basic economics or the first thing about what’s happened in this country over the last ten years.



Absolutely. In a purely free-market economy (as taught by the Austrian School of Economics), where government is not allowed to intervene in any way with the economy, and the size of government is always kept to an absolute minimum you would have the following situation: an increase in economic productivity increases revenue for government, which rather than spend this increased revenue, is passed back to the tax payer in the form of lower taxes, which means that everybody gains.


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## dahamsta (29 Mar 2010)

ringledman said:


> Socialism, communism, call it what you like.



Reminds me of the guy on George Hook the other day, who in response to a comment about Joe Higgins, said "well, the Wall came down you know". At least George picked up on it.

When the first sentence of your thread about economics demonstrates that you don't know the difference between socialism and communism, it's time to stop typing.

adam


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## Purple (29 Mar 2010)

Chris said:


> Higher consumption tax was a  state intervention. Apart from that Ireland may have injoyed some productivity gains in the early yearts of the boom, but then the government induced construction and property boom took hold.



I agree with that though I’d also add the public sector boom to the list; massive increases in numbers and substantial increases in pay which flooded money into an overheated economy. I contend that this had as much or more of an effect on pay inflation that the construction bubble.


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## Complainer (29 Mar 2010)

Chris said:


> Switzerland is one example: high wages, low income taxes, low VAT, very high standard of living.


How do you measure 'very high standard of living'. I see Switz coming behind Ireland on the Human Development Index, though those figures are a little dated. They are low on obesity measures (must be exporting all the chocolate). They seem to be right in the middle of the tables for developed counties on measures like infant deaths, drug use, imprisonment rates, trust measures, so I wondering what measures you were using?


Chris said:


> Higher consumption tax was a state intervention.


But low income tax wasn't? Is it just those decisions that you don't like that you label 'interventions'?


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## Chris (30 Mar 2010)

Complainer said:


> How do you measure 'very high standard of living'. I see Switz coming behind Ireland on the Human Development Index, though those figures are a little dated. They are low on obesity measures (must be exporting all the chocolate). They seem to be right in the middle of the tables for developed counties on measures like infant deaths, drug use, imprisonment rates, trust measures, so I wondering what measures you were using?


Yes Switzerland is behind Ireland, but the HDI rating of the top 10 countries are minutely different. However, Switzerland achieves this top 10 spot with extremely low taxes. Add to that higher wages and an increadibly good health service and system, based on universal private health insurance, that costs less per person than the Irish system and delivers hell of a lot more. Swiss unemployment is around 4%, and this in a country that has a very large financial sector during the worst financial crisis of modern history.
I have also visited Switzerland a couple of times, and have friends who have moved their in recent years, and feedback is extremely good.




Complainer said:


> But low income tax wasn't? Is it just those decisions that you don't like that you label 'interventions'?


My point being, that lowering one tax and increasing another to please the governments needs/wants is direct intervention. E.g. stamp duty on houses was gradually reduced and then abolished for FTBs which fueled the housing bubble; at the same time Ireland had one of the highest VAT rates in the EU.
All forms of taxes are interventions and should always be kept to an absolute minimum. This can only be achieved by having a government that is as small as possible, which directly contradicts socialism.


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## Complainer (30 Mar 2010)

Chris said:


> Yes Switzerland is behind Ireland, but the HDI rating of the top 10 countries are minutely different. However, Switzerland achieves this top 10 spot with extremely low taxes. Add to that higher wages and an increadibly good health service and system, based on universal private health insurance, that costs less per person than the Irish system and delivers hell of a lot more. Swiss unemployment is around 4%, and this in a country that has a very large financial sector during the worst financial crisis of modern history.
> I have also visited Switzerland a couple of times, and have friends who have moved their in recent years, and feedback is extremely good.


OK, so it is all anectodal evidence, based on a couple of visits and a couple of friends. Hardly a basis for an economics arguement.



Chris said:


> My point being, that lowering one tax and increasing another to please the governments needs/wants is direct intervention. E.g. stamp duty on houses was gradually reduced and then abolished for FTBs which fueled the housing bubble; at the same time Ireland had one of the highest VAT rates in the EU.


I'm not clear why you persist in labelling Govt policies that you don't like as 'intervention'. Any Govt policy, whether increasing or lowering taxes are interventions.



Chris said:


> All forms of taxes are interventions and should always be kept to an absolute minimum. This can only be achieved by having a government that is as small as possible, which directly contradicts socialism.


Apart from this being your personal opinion, is there any good reason why it should be taken as Govt policy? Is your entire arguement based around the one unproven example of Switzerland, or is there something more here?


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## Purple (30 Mar 2010)

Complainer said:


> OK, so it is all anectodal evidence, based on a couple of visits and a couple of friends. Hardly a basis for an economics arguement.


no, he added anecdotal evidence after giving some facts.




Complainer said:


> I'm not clear why you persist in labelling Govt policies that you don't like as 'intervention'. Any Govt policy, whether increasing or lowering taxes are interventions.


 The less the government takes out of the economy and redirects back in the less they are intervening.




Complainer said:


> Apart from this being your personal opinion, is there any good reason why it should be taken as Govt policy? Is your entire arguement based around the one unproven example of Switzerland, or is there something more here?


 Will he change your mind if he does?


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## Chris (30 Mar 2010)

Purple said:


> no, he added anecdotal evidence after giving some facts.
> 
> 
> The less the government takes out of the economy and redirects back in the less they are intervening.



Thanks Purple, this answers the questions.



Complainer said:


> Is your entire arguement based around the one unproven example of Switzerland, or is there something more here?



As already mentioned, the Swiss case is not unproven. Another example of huge economic gains in absence of most government interventions is Germany after WWII (I already posted a comment and link, but here it is again: http://mises.org/daily/3635).
The UK and most of Europe, along with North America had the biggest, continuous (100+ years) economic growth in history during the industrial revolution, which was led by private enterprises at a time when taxation and government intervention was at a minimum. This led to an improvement in living standards and life style of everyone, unmatched, in even the remotest sense, by anything that any government has ever tried.
BTW, my argument is based on Austrian Economics and is not just some theory I have come up with.


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## zephyro (30 Mar 2010)

Purple said:


> It should also be remembered that the free market is an artificial construct and open competition can only exist with intervention and active regulation from governments.



Possibly but some people think otherwise: http://en.wikipedia.org/wiki/Anarcho-capitalism


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## mainasia (4 Apr 2010)

Chris said:


> Thanks Purple, this answers the questions.
> 
> 
> 
> ...


 
This could have more to do with technological advances than systems of government e.g. look at China now. Your dataset may be too short, the length of time for judgement too brief. China is a country where the government controls EVERYTHING yet is doing spectacularly well. Other very successful countries in the region have followed similar though less authoritarian model in general...Taiwan, Korea, Singapore, HK. They have large amounts of private companies but many are/were state sector or sponsored as national champions by the government in some way.

Basically, travel a little, learn a foreign language, get the anglo-centric and euro-centric view of thinking out of your heads.


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## ringledman (4 Apr 2010)

mainasia said:


> This could have more to do with technological advances than systems of government e.g. look at China now. Your dataset may be too short, the length of time for judgement too brief. China is a country where the government controls EVERYTHING yet is doing spectacularly well. Other very successful countries in the region have followed similar though less authoritarian model in general...Taiwan, Korea, Singapore, HK. They have large amounts of private companies but many are/were state sector or sponsored as national champions by the government in some way.
> 
> Basically, travel a little, learn a foreign language, get the anglo-centric and euro-centric view of thinking out of your heads.


 
China's economic growth stems from an authoritarian free market. They are hardly socialist in the realm of running a large bloated state. You won't find much in the way of socialist 'social services' in China.

People there are expected to look after themselves and their families. 

Sinagpore was built on an authoritarian free market that did everything in its power to bring in foreign companies and capital. Low taxes & low state regulation of business under Lee Kuan Yew.

HK - Built off the back of low taxes, low regulation and the rule of business law under the British rule.

Asia is probably the least socialist region of the world and part reason why the 21st century is its century. The socialist/communist states there are opening up, reducing regulation and burdensome state enterprises and welfare. 

We in the West are doing the exact opposite, hence why we will eventually have a total collapse of our debt based system.


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## Purple (4 Apr 2010)

mainasia said:


> This could have more to do with technological advances than systems of government e.g. look at China now. Your dataset may be too short, the length of time for judgement too brief. China is a country where the government controls EVERYTHING yet is doing spectacularly well. Other very successful countries in the region have followed similar though less authoritarian model in general...Taiwan, Korea, Singapore, HK. They have large amounts of private companies but many are/were state sector or sponsored as national champions by the government in some way.
> 
> Basically, travel a little, learn a foreign language, get the anglo-centric and euro-centric view of thinking out of your heads.



China is a super corporation with surfs rather than employees.


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## Chris (6 Apr 2010)

mainasia said:


> This could have more to do with technological advances than systems of government e.g. look at China now.


Yes indeed, but all those technological advances came from private enterprises that prospered through innovations. No governments intervened by using taxation to redistribute money into certain sectors. It was the free market and profit/loss system without government intervention that set this time of vast technological and industrial growth in motion.



mainasia said:


> Your dataset may be too short, the length of time for judgement too brief. China is a country where the government controls EVERYTHING yet is doing spectacularly well. Other very successful countries in the region have followed similar though less authoritarian model in general...Taiwan, Korea, Singapore, HK. They have large amounts of private companies but many are/were state sector or sponsored as national champions by the government in some way.


China's "total control" is a common misconception. It took a friend of mine 9 months to expand his business by 25 employees in Germany in 2008. Last year he set up his first production facility in China, with 70 employees, and it took him a total of 3 months and far less paper work and regulation to satisfy. China makes it a lot easier to do business than most people think.


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