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Mrgelastic's avatar

What is free enterprise for you?

Asked by Mrgelastic (508 points ) March 25th, 2010

I am doing some research on capitalism, and free enterprise, which is pretty much the same thing, but i wanted raw points of view on how it effects your life. the good the bad and the ugly of it all.

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26 Answers

La_Guerrera_Mas_Funki's avatar

Destructive.
Insatiable.

AstroChuck's avatar

A starship?

DarkScribe's avatar

It is when something that I want falls off the back of a truck. ;)

Blondesjon's avatar

The most awesome Star Trek convention EVER!

bobloblaw's avatar

When properly supervised, like any small child, the foundation of any society’s prosperity.

ETpro's avatar

Let me begin by saying it’s my life blood. I make my living from a small business. I am deeply grateful that this is possible here. I love what I do and am old enough now I probably would get put out to pasture if I were doing it in the corporate world.

Capitalism is a very good system. It gives people a built in incentive to produce and to innovate. In tests, it generally beats systems that don’t do that hands down.

I said all that to let people know that the following rant is not born of any hatred for capitalism or lust for socialism or (shudder) communism. Every formalized system mankind has tried seems to have its upper limit, that point at which the eternal yearning of humanity for an ever better, brighter, fairer world starts to bump it head on the glass ceiling of the very system we had created to deliver that. The age of empires hit it and crumbled. The age of Feudalism the same. Communism failed—although to be quite fair, it’s never been given a real test. Most communist countries weren’t honestly rationalized for the good of the people—the vaunted workers. They were actually set up to secure an ever grander life for the elite party bosses. China did that the least of the Communist countries and is the only one left still doing relatively well—though it has done so be gradually opening itself to free enterprise.

So where does capitalism stand? It’s endured for 220 years in America and much longer in Europe and other parts of the world. But it has its glass ceiling too, and I fear that globalization may end up the force that rams our heads into it till we either break through or bash ourselves to death.

Capitalism once relied on the investments of millions of small investors to fund large-scale enterprises like auto manufacturing, ship building, railways, aerospace, energy generation and such. These are critical enterprises for our form of life, and providing them in an efficient manner requires an enormous investment. The stock market worked wonderfully to provide that.

But globalization has changed the game in both useful and harmful ways. Small investors are being squeezed out of markets by money managers with computerized spot trading programs that react instantly to probabilistic occurrences in markets and move vast blocks of capital here and there in a flash, generating great wealth without making anything useful for anyone but the trader. Where little investors were content to invest in a company they believed in, and ride with it through thick and thin, these investors want ever higher quarterly profits, and will shift billions and even trillions of dollars anywhere in the world they can get the best return.

Corporate managers today must put profits above people, products and principles. They are brought in to jump[-start profits, negotiate golden parachutes for themselves, then lay off half the work force and out-source to the lowest wage areas on earth. Profits temporarily soar but then collapse when quality and productivity supper. But who cares, because the CEO gets millions for bankrupting the company.

Washington Post cartoonist Tom Toles drew a perfect description of our times the other day. It shows Senator Dodd asking a Wall Street tycoon “What do you think?” while holding a pack of Financial Regulations in his hands. The Wall Streeter replies, “We’ll take an initial position in support, then hedge it with derivatives, insulate ourselves with credit-default swaps, put pressure on with a highly leveraged unfriendly takeover and clean up by massively shorting the resulting collapse.”

What this cartoon recognizes is that we are at risk of moving from our Founding Fathers’ intent of being enjoying “government of the people, by the people, for the people” to one that struggles under government of the people, by the corporations, for the corporations. In such a scheme, corporations use their massive financial power to buy the government they need to continually maximize profits. Of course, there is something terrible, terribly wrong with this picture. What market will the corporations sell to after they extract all the money there is from everyone who was supposed to be their customers?

We can take our country back from the corporatist, put reasonable checks on free-market, pure laissez-faire capitalism, and still live on as a great nation, enjoying freedom and prosperity for an ever growing segment of our people. But not the way we were heading since the Reagan Revolution. The continual deregulation, the instinctive hatred of government and all who serve in it, the massive tax cuts for the rich and tax laws that leave the top one tenth of on percent in income paying a lower tax rate than their secretaries have to stop.

For 3 decades now, we have been transferring more and more wealth to those who already have so much that if they quit earning today and went on a spending spree, their great grandchildren would still be left with largess. We have moved money from the poor and middle-class to the rich and worse, piled up a mountain of debt that the globalists are not bound to stick around to pay. Capitalism? I’m all for it. Free market capitalism? It’s deadly. In the end, it’s today’s form of feudalism. The difference is the rulers don’t inherit through royalty but by being part of an elite handful at the top of the financial pinnacle.

DarkScribe's avatar

@ETpro I’m all for it. Free market capitalism? It’s deadly. In the end, it’s today’s form of feudalism. The difference is the rulers don’t inherit through royalty but by being part of an elite handful at the top of the financial pinnacle.

Have you ever considered making vinegar with all those sour grapes?

“We” don’t transfer wealth anywhere. It is earned and spent. Many of the extremely wealthy come from poor backgrounds – they didn’t inherit, they earned. No one is stopping other from doing the same thing – other than lack of determination.

ETpro's avatar

@DarkScribe All taxation transfers wealth. There is no other way to run a government than to transfer wealth.We had no real middle class in the USA till after WWII. From then till 1980, we built one of the strongest, most prosperous middle classes on earth, and pleanty of people became millionaires and even billionaires during that time. All that time, we were paying down a pile of debt we racked up fixing the Great Depression then fighting WWII. That was working.

Reagan changed it. He put us on a course of deregulatino that eventually resulted in what came dangerously close to Great Depression II. He cut the top tax rate from 70% to 28%, the same as a factory worker pays. That trippled the National Debt in his 8 years. That is the greatest addition of debt any president has given us in our entire history. Bush 41 kept the debt curve going straight up and would have doubled the debt Reagan left him had he been able to win a second term. Clinton pushed the top rate back to 39.6% and the debt curve turned back down, both in real terms and as a percent of Gross Domestic Product. He left office with the largest budget surplus in history, which Bush 43 promised to maintain. Far from keeping his word, he blew through the surplus and doubled the debt yet again—plus wrecked the economy requiring us to inject trillions to avoid a complete financial collapse.

In the past decade, real income for middle class Americans has gone down for the first time in our history. At the same time. real income for the top 10% has risen, and for the top 1% it has skyrocketed. This should not surprise anyone when you cut the top tax rate in half and eliminate estate taxes.

Without an estate tax, we are moving into the age of dynastic wealth. As wealth accumulates very rapidly in the hands of those at the top. There real tax rate is often under 20%. The earn all they need for a year in a few weeks, and can use what they accumulate after that to buy up investments wherever deals are hot, so that next year they will earn far more. They can pass all that wealth on to their children. Particularly now that the Supreme Court has taken of the lid on corporate political spending, they can advertise to their heart’s content lobbying to slant laws to make them ever more wealthy. That’s the seeds of oligarchy.

I am not bitter at all. I can just see what’s wrong with that picture, and how to make it better.

mrrich724's avatar

Look up Laissez Faire. That is capitalism. Just keep the government out of it. Otherwise, the more you make, the harder it is for you to make it.

In America, we believe (as a country society) that it is our responsibility to make opportunity available, that everyone should have access to healthcare, that we should help the helpless, and the less fortunate.

True capitalism would let those less fortunate fall by the wayside. You only deserve something if you can crete and produce and provide for yourself.

DarkScribe's avatar

@ETpro DarkScribe All taxation transfers wealth.

Not unless you regard Government revenue as wealth. It is not being transferred from one class to another, it is being collected from all classes. Your statement ”For 3 decades now, we have been transferring more and more wealth to those who already have so much that if they quit earning today and went on a spending spree” implies that wealth is being transferred to other member of society, not to the Government.

ETpro's avatar

@mrrich724 Laissez-faire is not synonymous with capitalism. Let’s do look both words up. Merriam-Webster says:

laissez-faire: n.
1 : a doctrine opposing governmental interference in economic affairs beyond the minimum necessary for the maintenance of peace and property rights
2 : a philosophy or practice characterized by a usually deliberate abstention from direction or interference especially with individual freedom of choice and action

capitalism: n.
: n economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

The difference is subtle, but not trivial. Free market as it is understood today, and as I understand you to be advocating it, it exactly the form of capitalism that just brought our—and by extension, the whole world’s—financial markets to the brink of a deep chasm.

It is saying banks can get to big to fail because they must be totally unfettered. It is saying they can engage in banking, investment banking and investment insurance all at the same time. And it is stuck then with the fact that if they are too big to fail and realize it, they can take any risks they want, make enormous profits when their luck holds, and the taxpayers simply have to make them whole or live with the depression that results when their luck runs out.

@DarkScribe When you pay taxes to the government, do you think that money just evaporates? It goes places. Some to government employees, some to military personal, some to big corporations, some to little corporations, some to grants, some to the poor and so one. In other words, they transfer it. All taxation transfers wealth. That’s not what it is set up to do. It is set up to provide for the defense and the common good. But in doing that, all governments end up moving money from here to there.

Our society is healthiest when it has a strong and vibrant middle class as well as a group of entrepreneurs, financiers and business managers providing lots of jobs for the working class. The more regressive a tax system you set up, the less that can happen. With a flat tax, wealth will always flow rapidly to a tiny handful. Some of them may just be smart, or lucky. Others have the right connections. But once dynastic wealth starts to accumulate, freedom is in jeopardy. Look no further than Haiti to see a flat-tax example.

jerv's avatar

Great idea but easily corrupted/perverted.

mrrich724's avatar

@ETpro
I know that the “definition” of laissez fair is not the same as capitalism. I almost majored in economics just to study the laissez fair concept.

However, they are VERY close.

I believe the government shouldn’t get involved in the growth of banking. Because guess what? If a bank crumbles, it should crumble. There should not be a bailout for the rich. But on the same ground, if people want to be stupid and build dept, I don’t think the bank should be punished for that. Those who are to unwitting and want to throw away money should give it all to the banks, and those who are enterprising enough will not allow that to happen to them.

In a laissez fair society, the government would not prevent a bank from doing what it wants, because the people will decide how much power they allow a bank to have, and a government will not take the peoples’ money to “bail out” a bank when it does inevitably fails.

But that is free enterprise. Literally, enterprise that is free to develop and wilt as it so chooses, and the government will just be there to enforce the rules that protect property, not to intercede and enforce rules upon the system itself.

They teach it in Econ101, America is not a pure Capitalist society. And it is not purely free enterprising.

mrrich724's avatar

So in short, laissez fair does not have room for government interference, which I believe is what free enterprise is. Free of interference.

ETpro's avatar

@mrrich724 We at least agree on definitions. That’s a major step :-)

I agree with letting one bank fail. Letting the entire financial system lelt down is quite another thing. The last time it happened—also brought on by excessive leverage, risk taking and lack of regulation —it brought the entire world’s financial system down, took more than a decade to fix and triggered a world war in which 60 million people got slaughtered. That was, with 2 exceptions, before the nuclear age. What would WWIII cost in blood and treasure? That’s a hell of a price to risk for the dream of pure free-market economy.

Everywhere that it has been tried, free-market capitalism has produced not a paradise but a hell hole.

mrrich724's avatar

@op, also look up Randian philosophy, I think those ideals mirror capitalism in its purest form

mrrich724's avatar

My answer was not Intended to argue in favor of the ideals mentioned, but just to answer the question posed on fluther. I agree with u, the ideals behind capitalism and laissez fair are not perfect in practice, but those are definitely things op should discuss in a paper or whatever he is asking for.

ETpro's avatar

@mrrich724 I am very familiar with Ann Rand and Objectivism. Here ideal world would likely produce wonderful benefits for a few truly brilliant people and leave the rest as economic serfs. No sale. As I mentioned at the outset, I run a small business. I know all too well the difficulty of complying with every city, state and federal regulation on this and that. And don’t get me started on trying to understand the Federal Tax Code. Methuselah given Einstein’s brain wouldn’t have had time to fully digest that before he croaked. So I agree that government should only regulate as necessary. But as the last bust and the original Great Depression show, some regulation serves the overall interest even of business.

mrrich724's avatar

Like I said, my point was not to argue one side but to bring up points that the op should consider. But now I’m curious, should the truly brilliant be stifled for the benefit of others?I await your answer, but I’m going to sleep, so I look forward to it in the AM.

ETpro's avatar

@mrrich724 Should the truly brilliant be stifled for the benefit of others? Oh heavens no. And if I had any brilliance I would be off to bed myself. But I submit that Bill Gates and Warren Buffet have hardly been stifled. They actually have done fairly well.

Boombip's avatar

Free enterprise is an important part of our econemy today. Almost every major company started out as a free enterprise. Walmart, google, Dell, apple, the list goes on. With out free enterprise the world as we know it wouldn’t exsist.

jerv's avatar

@Boombip But the world has changed. Now you have to compete with those guys, and chances are that you’ll either be steamrollered or bought out, thus reducing consumer choices and perpetuating monopolies. That is not free enterprise!

UScitizen's avatar

It is the absence of (alleged) governmental interference in the lives and actions of citizens.

Mrgelastic's avatar

Wow i really didn’t expect such a quality post, thank you all i have a great amount to write about now

ETpro's avatar

@Mrgelastic This place can be pretty amazing at times. You certainly have a wealth of competing viewpoints now. Good luck with your paper, but be sure to tap into some real experts in economics as well. Find a good source in the Chicago School such as Milton Friedman and balance that with an advocate for regulation not of prices but of fair business practices and monopolistic businesses.

You might start here.

RomanExpert's avatar

For me, free enterprise is the best way to prosperity. @DarkScribe The number one way to get rich in America is to inherit the money.

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