General Question

marinelife's avatar

Can equality and enough for all be achieved in capitalistic system?

Asked by marinelife (62485points) July 18th, 2008

The middle class is disappearing. Real wages are lower than they have been in decades. The gap between the wealthy and the poor is widening.

Can this be corrected without socialism? Is some socialism a bad thing? Without government intervention how can people be turned from selfishness and me-centric behavior?

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15 Answers

robmandu's avatar

What makes you think more government can bring about such things? The financial prowess exhibited by the social security and medicare/medicaid programs?

And, as a society, are we really doing so bad?

marinelife's avatar

@robmandu Food for thought.

Here are some of things that got me started in posing this question:

1. Non-Profit Sector: “The pay of chief executives at nonprofit organizations is growing twice as fast as the wages of other workers at such groups, according to a new Chronicle analysis of compensation at more than 3,770 organizations.”

2. Corporate Sector: “Median CEO pay among the 10 biggest publicly traded employers in Southern Arizona was $4.3 million in 2003—161 times that of the median worker pay in Pima County, an analysis of the Star 200 survey of major employers and public salary data shows.

Such statistics stoke the debate over whether executive pay, which has risen an average 8 percent each of the past 10 years, is excessive even as Congress mulls raising the minimum wage for the first time in eight years, from $5.15.

“There’s no question the rate of pay for CEOs has risen faster than any other occupation,” said Graef Crystal, a columnist with Bloomberg News who has been following executive compensation since 1959. “It’s way out of whack.”

Poser's avatar

Yes. It is only through capitalism that this can be achieved.

There hasn’t been a socialist society that was able to do away with the gap between the wealthy and poor. Socialism merely rewards mediocrity and laziness. It is the selfishness of capitalism that grew the US to superpower status. While you are focusing on the gap between CEO and employee pay, you are ignoring the overall increase of wealth in all classes.

Selfishness and greed are not bad things, in and of themselves. They are motivators that cause some to try harder than others, or to see opportunities that others miss, or to take risks that others are too afraid to take. Those who try harder should reap the benefits of their work. Selfishness doesn’t equal crime.

robmandu's avatar

Ah… I get it.

The question is can the government artificially limit wages for certain positions and hope that that will mean a more equitable distribution of those monies?

Probably say something like: no position at a company can be compensated more than oh, 10x the lowest paid position.

But you see, that would remove the incentive for someone to run a company. And make no mistake… that is a high pressure, high demand job most of the time. Those folks often give up family, friends, and even health in the pursuit of running the company. (Their life, their choice. Not something I’d do.)

Why take on such a challenging job for little discernable reward over regular position?

Steve Jobs is a good example. Now he only accepts a $1 salary each year. What a great guy, right? He also accepts billions of dollars in stock and options. So, there’s ways around the system.

That said, who are any of us to say that Steve Jobs does not deserve that kind of compensation? That he has enough? That that money is best put elsewhere? Apple very likely would be a minor historical figure today if Jobs didn’t return to run the place.

And look at Bill Gates. Dude has wa-a-a-a-a-a-a-ay too much money, right? Well, you might have said that a few years ago. Today, you’d point to the Bill and Melinda Gates Foundation as a good thing.

Who, I ask, is a better steward of untold billions of dollars? The U.S. Government? Or the private individual with a philanthropic heart?

I’ll vote for the individual every single time. (And I don’t even like Bill and his company’s business practices.)

marinelife's avatar

@Poser What you said about increase in wealth is not true.

“American men in their 30s today are worse off than their fathers’ generation, a reversal from just a decade ago, when sons generally were better off than their fathers, a new study finds. It also says the typical American family’s income has lagged far behind productivity growth since 2000, a departure from most of the post-World War II period.”

robmandu's avatar

Fun with statistics

* Forty-six percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.

* Seventy-six percent of poor households have air conditioning. By contrast, 30 years ago, only 36 percent of the entire U.S. population enjoyed air conditioning.

* Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.

* The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)

* Nearly three-quarters of poor households own a car; 30 percent own two or more cars.

* Ninety-seven percent of poor households have a color television; over half own two or more color televisions.

* Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.

* Seventy-three percent own microwave ovens, more than half have a stereo, and a third have an automatic dishwasher.

marinelife's avatar

@rmd I have been around enough CEOs to know they don’t deserve that much differential in their pay. Also, while I find robber barons fascinating, I am not sure they do do the best job of spreading the wealth.

I am not really advocating a change to socialism. I agree with Poser that we do not want to rob people of initiative. Isn’t there something on the continuum between greed and mediocrity?

I do wonder if perhaps there is a new way that has not been tried.

robmandu's avatar

@Marina, there might be… but socialism (which the definition of is pretty much up to debate) ain’t gonna be it.

I think the founding fathers, who knew a great deal about goverment theory, were on the right track.

That said, I absolutely agree that people can be better. I just don’t think that a government, any government, regardless of best intentions, is capable of such a lofty goal.

Mangus's avatar

I’m interested in the difference between a government and a private-sector organization, like a corporation. @robmandu: I’m very familiar with the line of argument you are taking, but I think the question is worth thinking about. Both are groups of people making decisions about resources. What’s the fundamental difference, in your mind?

Both have a variety of similar organizational mechanisms: committees, directors, votes, hiring, firing, degrees of transparency and secrecy, multiple divisions, rules documents, etc. Is the difference just the basic orientation?

Private sectors groups do everything to make money, and then we hope we all get enough wealth and resources in the meantime. While governments try to aim directly at wealth and resource distribution, and that just fails, because there’s “no competition”? Or something else?

Poser's avatar

The difference between a business and a government is simple. A government’s job is to spend money. A businesses job is to make money.

I am almost as low on the totem pole of federal government as you can get, and I see it every year. Efficiency in government—at least monetary efficiency—is punished. If a government agency is able to get it’s job done and still has a portion of it’s budget left over at the end of the year, they will lose that much from their budget next year. So at the end of each fiscal year, departments begin to frantically spend money for fear of losing it next year.

The most successful businesses, however, are able to find ways to cut costs whenever possible. That is why there is no longer any such thing as a defined benefit pension plan in the private sector, and why companies instead offer 401k’s. The law that made that switch, btw, was passed in 1974, and may help to explain the findings of the study that Marina linked to. Since a company has to match whatever amount you put in your 401k plan, they can afford to pay you less.

For example, say Company A hires two employees at $40,000 per year each. Employee A takes advantage of the company’s 401k matching and starts putting $5000 per year into his retirement account. That means that the company really could have afforded to pay him $45,000 per year but didn’t, since they knew he might have maxed out the 401k and they’d have to match that. Employee B decides not to put anything into his account, so the company has to match his $0. They could have afforded to pay him $45k per year also, but now that they don’t have to match anything, they’re $5k in the black. So when you add it all up, the company had $90k with which to hire two employees, which would have been $45k each. They only ended up paying $85k. The money that a company expects to spend on matching an employee’s contribution is money that could be paid to the employee. I wonder if the study included defined contribution dollars in their income figures.

Mangus's avatar

Well, I think this is fantastically oversimplified and flippant: “The difference between a business and a government is simple. A government’s job is to spend money. A businesses job is to make money.”

There are horrible cases of business inefficiency. And there are great cases of government just getting things done. I think the differences between the two aren’t as great as they’re generally made out to be, which is a funny thing to find myself saying. I thinks folks on both the right and left (in different ways) play up those differences a lot.

I think the real difference is in orientation. Do you organize things around everyone seeking profit, and assume the result will be needs being met? Or, do you organize things around just trying to make them happen, and assume there won’t be too much inefficiency? In the former, one assumes error correction will happen because of competition. In the latter, we often assume there is no error correction, thus all the talk about iefficiency and corruption.

But here’s the thing: Human beings organize life all the time without competition. Families, voluntary organizations, large-scale non-profits. All of those are groups of people who make decisions about resource allocation without using competition and profit as organizing principles.

I also think it comes down to assumptions about human nature. Capitalism expects the worst from people. Socialism (with a small s) expects the best. I expect the best from people in my family. Why can’t I do that on a larger scale?

Poser's avatar

Of course there are inefficient businesses. I never said all businesses were profitable. The difference I was trying to highlight is that businesses can’t long afford to remain inefficient, while governments have no real need to be efficient.

The difference between government and the families, voluntary organizations and non-profits that you mention is that those organizations rely on voluntary or personal contributions. When a non-profit relies solely on contributers’ approval of how they spend their money, they will do whatever possible to maintain efficiency. Their income stream relies on it. When a family’s income is not unlimited, they will find the most efficient way possible to reach their goals.

With government, their income stream is nearly unlimited. Since they don’t rely on voluntary contributions, the money that they are spending is never at risk of diminishing. Taxes never go down. And speaking as a federal employee, I have seen this repeatedly, even at my low level. Efficiency may be desired in government, but it is rarely achieved or even stressed as important.

Mangus's avatar

Good points Poser. I think underlying what you are saying (not putting words in your mouth, just what I think is foundational to what you are saying) is two things: power and accountability. When you talk about approval, you talk about accountability. Since those forms of organization are so completely voluntary, they can be very accountable. Anyone can pull support voluntarily at any time.

Likewise, on the flip side, governments are unique in all of these examples in that they have a monopoly on force, which is a basic form of power. They can harm, kill, incarcerate and tax. So, they can use power to prevent being held accountable. If governments lacked those basic monopolies on power in society, they’d be forced to be more efficient, as those voluntary organizations are. Likewise, this highlights the differences between corporations and government. Give a corporation a monopoly on force, and what’s the difference between it and a government?

Maybe I’m not answering or talking directly at the question anymore. But these are interesting connections I’d not exactly made before.


Poser's avatar

@Mangus—Not only are those voluntary organizations able to be more accountable, but they must be in order to earn revenue. If I find that the Red Cross is squandering my donations on corporate jets and vacations for their staff, rather than humanitarian aide, I’m going to stop donating, and they’ll lose income. Likewise, businesses—whether public or private—must be accountable to their investors or risk losing valuable capital. They must also, in a different way, be accountable to their customers/clients or risk losing income from sales.

What you say about governments is exactly correct. They have a monopoly on force, therefore, we as citizens can’t take our business elsewhere. If we disapprove of how our tax dollars are being spent, we can’t elect to stop paying taxes. Therefore if a government is wasteful and blatantly inefficient (as ours is), they still don’t risk losing income. The only recourse you and I have as “customers” of our government is to vote for someone else. More often than not, that will have little or no effect.

In governmental systems such as Communism, citizens aren’t “customers” of the state, as we are in the USA, but are subjects of the state. So in a socialist state, you have absolutely no recourse when the government is wasteful with your dollars (or rubles or pesos).

So yes, it is the government’s monopoly on power that keeps it free (or mostly free) from being held accountable. But it isn’t this power that makes it inefficient. It is the freedom from competition that makes it inefficient. There is nothing that the government can do that a corporation—with a focus on profit—couldn’t do better and cheaper. But since there are many things that the government has deemed only it is allowed to do, it has used its monopoly on force to give it a monopoly of many other things.

It is this monopoly on force that leads me to believe that anarcho-capitalism is the only truly “fair” system, and the only one that can achieve what Marina has asked.

grayreason's avatar

It dosen’t really matter which is better the government will be full on socialistic by the middle of next year. With the government buying up mortgages, loans, and debts everything soon will be owned at least in part by the government. That plus universal health care will put us on par with the average socialist country.

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