Worth mentioning, Smith was primarily concerned when anyone had an unfair market advantage that would ruin the state of equilibrium.
Here's an anecdote: I've received hundreds of thousands of euros from my parents (in my early 30's), they fully paid my education in a well-known private lycée, a nice "classe prépa", an expensive French business school. They paid everything until I get a highly paid job in a European startup, incl. some student exchange programmes abroad. I'm getting dozens of €K a year as gifts (with absolutely zero taxes). I own a big flat in one of the most expensive city in the world (where prices keep rising), and tones of shares on the stock market (4x in a few years, thank you Wall Street). My gains on the sale of these stocks are taxed far below my salary, so I'm not working too much (I'm already saving 2/3 your yearly revenues, and own ~6x the median wealth in my country). etc. You probably get the point. I'd be glad if anyone can explain how I'm not taking advantage of an extremely unfair advantage, and what Smith (or any other liberal economist) suggests to reach a state of equilibrium where I have to compete fairly with my fellow citizens.
It seems that the most persistent problems we face often are. We can change our system of economic organization and politics but in the end the system is made up of individuals. Individuals who have all the same sort of flaws and who struggle with their human nature. It takes a lot of will and effort for a person to behave honestly and ethically. The interaction of peoples behaviors and the system they are in is a two way street.
I guess what I am saying is that we need to do the hard work of behaving better ourselves if we want to make our industry, community etc a better place.
Although this may be correct, it could also be the case that some systems nurture such "corruption" more than others. Changed societies produce changed people. For example, the widespread desire for fame only arose around the start of the 15th century but it really does seem quite natural to us now. A famous economist once wrote,
>Economists have a singular method of procedure. There are only two kinds of institutions for them, artificial and natural. The institutions of feudalism are artificial institutions, those of the bourgeoisie are natural institutions. In this, they resemble the theologians, who likewise establish two kinds of religion. Every religion which is not theirs is an invention of men, while their own is an emanation from God. When the economists say that present-day relations – the relations of bourgeois production – are natural, they imply that these are the relations in which wealth is created and productive forces developed in conformity with the laws of nature. These relations therefore are themselves natural laws independent of the influence of time. They are eternal laws which must always govern society. Thus, there has been history, but there is no longer any. There has been history, since there were the institutions of feudalism, and in these institutions of feudalism we find quite different relations of production from those of bourgeois society, which the economists try to pass off as natural and as such, eternal.
We tolerate the corruption that comes with certain societal structures, because we gain more by having them than we lose from the corruption. You can't scale anything to national or international size without introducing a principal-agent problem.
Pardon me, but I'm not immediately seeing the distinction, maybe I've read the statement wrong and found the wrong conclusion. Can you clarify/unpack that statement a bit? If it's not a property of human nature, how is it then endemic in human societies?
Does not the second sentence you're offering here completely betray the first?
In a close-knit, tribal society, limited by the human brain capacity for maintaining personal relationships, where everyone knows everybody else, it is not very profitable to betray a trust. After the first time someone does it, many of their peers revoke their trust, and that person then has to re-earn enough of it to reneg again. Each time, it becomes harder to get ahead.
In order to grow societies of larger sizes, we instituted trust-by-default relationships, just to make goods move from the loading docks. If human nature is 90% trustworthy, this is 90% safe. The remaining 10% can be dealt with via retaliatory mechanisms: bond revocation, lawsuits, arrests, etc. As long as the individual responsible can be identified, and punished, there is significant disincentive to reneg.
To grow larger still, we instituted pseudo-anonymous legal fictions. We started doing business with companies, instead of people. This provided an opening for the renegade 10%. They could let the company establish trust, take control of it or a portion of it, betray the trust for personal gain, and let the corporate shell take the brunt of retaliation--if anyone ever even found out about the betrayal. The type of person who would become corrupt is drawn to positions that are corruptible: the bosses of businesses and bureaucracies, and the cronies and collaborators of those corrupt bosses. The ultimate goal of a corrupt person is to be the fox in charge of a henhouse--nay, in charge of a whole poultry farm.
Whenever we rely on structure rather than people to manage societal complexity, the structures may be attacked whenever no one else is looking. The corporation cannot refuse to do as the CEO demands, as it has no will of its own. You can't watch everyone all the time; we just can't afford the costs of that kind of labor, that only humans can do. And whatever human oversight mechanism you may institute can then be infiltrated by the corrupt 10%, who can collude to profit from failure in oversight.
Qui custodiet custodes? It's corrupt cop-watching cops, all the way down.
It's like an auto-immune disorder. How can your body possibly defend itself from its own immune system, at the same time as all the foreign pathogens? So the corruption becomes endemic, because there are not enough people watching to keep everybody honest all the time.
If you put out a tray of goods with a price label and honor box, 90% of people will pay the correct amount if they take something. It only takes one renegade to empty the tray, break open the honor box, and ruin the whole thing for everyone. Or even just to take goods from the tray without paying, one at a time, until the profits are all gone. It's not worth paying someone to watch one tray. So set up a camera to watch it. That just adds a separate camera-disabling step for the renegade. Put up a camera-watching camera. The renegade tapes a photo of the tray-watching camera over the lens, disables it, then loots the tray. It's an arms race. The only way to win is to put another human in the loop, and the instant you do that, you have to pay them, and then your profit margin is shot. Besides that, there's always the 10% possibility that the person you pay to watch your tray is a corruptible individual, and they'll just go halfsies with the tray-looter.
> Except in edge cases which might not really be capitalism
Oh well then those weren't real communism either. /s
You aren't wrong, but it's worth noting that the US protection of capitalism (more or less) was a pretty awful force throughout the 20th century.
Moreover, in its idealized form, capitalism has less of the state, whereas in its ideal form, marxism/communism has strong involvement of the state, versus classical socialism/anarchism in the Proudhon/Benjamin Tucker sense. There's even an essay by Tucker from the 19th century where he predicts the rise of leninism, gulags, venezuela-like conditions etc, as a natural consequence of Marxism, long before they even happen.
Otherwise, there are many contemporary examples of concentration of capital. Whether it is distributive isn't the question, but more the trends of distribution.
It's also quite interesting you mention central banks here, considering the substantial evidence of bulge bracket banks acting as an antithesis to your statement about risk (i.e "too big to fail").
I think it's only fair to judge the entire reality surrounding an economic system.
Too often people want to abandon markets and replace it with something that solves some of the problems but introduce tons of their own, instead of fixing obvious problems within the current system that was otherwise working well.
The better solution is a bunch of smaller experiments being run simultaneously in large economies (Ala at the state level) to see what works best. Instead of pretending we can have a one-size-fits-all best solution for the entire world.
Same as any other system which allows largely unchecked power.
That's the same argument that says "USSR/DDR/Cambodia/NK/etc was no real communism".
We might excuse a few diversions from a political/economic system, but after some point, like with anything else, capitalism is what capitalism does time and again.
It seems like corruption is simply endemic to the human condition. It has nothing to do with capitalism/communism/etc. Whatever the system happens to be, we will find a way to corrupt it.
Having said that, I find it to be rather unproductive and pessimistic to assert corruption is endemic to humanity and has nothing to do with ideology. Instead I would argue that the nature of the corruption has everything to do with the ideological foundations of said system.
This kind of blank-slate, "New Soviet Man" idea has been tested and found lacking.
How so? Is corruption different somehow depending on the ideological foundations of the system? Corruption is corruption. Every system has rules. When you subvert those rules for personal gain, that's corruption.
Of course.
Different systems enable, empower, and encourage, different types of corruption.
(Corruption being an abstract word, in programming terms there's no corruption "class", just corruption instances. So the nature of those corruption instances depend on the classes defined in the program -e.g. capitalism.c- you're running...).
(And of course share some basic corruption types, present in all societies/systems, e.g. theft -- the POSIX of corruption).
Check the @pjc50, @Traster etc comments at the top.
And @humanrebar already put this in abstract form: "It's worth noting that luminary capitalists like Adam Smith were very much concerned with privately enabled rent seekers in addition to government enabled ones"
Those are specific examples of corruption here in the US. Are you asserting that you wouldn't be able to find the same corruption, for example, in China?
Please provide a single example of corruption that can occur under capitalism, but wouldn't occur under another economic system. Because I'm asserting they do not exist.
> And @humanrebar already put this in abstract form: "It's worth noting that luminary capitalists like Adam Smith were very much concerned with privately enabled rent seekers in addition to government enabled ones"
Yes, he was perfectly right to. There are always private parties. Even under communism.
I'm saying that some types of corruption are endemic to certain systems. And if we see these types of corruption time and again on a system, then the system enables that type of corruption.
>It seems like corruption is simply endemic to the human condition. It has nothing to do with capitalism/communism/etc. Whatever the system happens to be, we will find a way to corrupt it.
My argument wasn't about corruption in general (which we will always have under every system), but about a certain type of enterprise-related corruption, that can't be brushed away by "no true Scotsman/capitalism", as if 'truly adhering' to the ways of capitalism would eliminate it.
If a system of government promotes X then there will appear X-related corruption. Capitalist governments promote enterprises, thus appears enterprise-related correction. Governments which promote the church will foster church-related corruption, etc. etc..
I don't see how this observation about capitalism is a particularly interesting one. Perhaps you could make some ground with "and capitalism uniquely allows this corruption to flourish on a scale never seen before" but that's not what I've seen in these kind of kneejerk criticisms.
Governments which are the party will promote party corruption. [looks at China] Yup. Checks out.
Just because people are creative and invent new ways to be corrupt doesn't mean captilist societies are indifferent.
I would expect people skeptical towards corporations to see some common ground here.
And by that standard, I'll take capitalism every day of the week:
https://ourworldindata.org/grapher/world-population-in-extre...
A good deal of research justifiably focuses on what life is actually like and the nature of exploitation in capitalist societies, and especially under neoliberalism. I'd point you to the work of D.K. Foley, Dumenil and Levy, Roberto Veneziani, Naoki Yoshihara, G.A. Cohen and John Roemer on those points.
That sort of ignores the actual theory of communism, but so far it's a pretty accurate assessment.
Some people will do that in any system, it's human nature.
Now, in a system that has the rule of law you cannot be prevented to do something that isn't illegal. This is actually the best (or least bad) system we've come up with.
It's childish to blame capitalism.
In a systme that has the rule of law, the lawmakers can choose to make certain behaviours legal if or when they harm the society. For example, private and corporate tax loopholes can be closed, and corrupt behavior can be outlawed or a liability instituted that the harmed party can claim.
It's childish not to blame capitalist governments for allowing certain kinds of corruption that are left to fester.
Jeff Bezos can amass $100 billion in wealth and donate it to philanthropic causes, but if he decided to open source AWS or pay his workers a living wage, or pay publishers a reasonable price for books, etc, he wouldn't have $100 billion in the first place.
I would argue that this is not strictly speaking true. There are successful companies which don't (seemingly) put profit first. Examples include Morning Star (tomatoes, not the newspaper)[1], Mondragon[2] and perhaps most co-operatives in general.
Capitalism very clearly and unapologetically forces this, while some people imagine that, somehow, that constraint does not apply in other systems.
no, that’s too strong a claim. capitalism’s innovation is that it redirects greed into productive uses and allows personal gain in the process. so it explicitly accounts for our greed but doesn’t depend on it. it allows more pro-social forms of trade and competition as well.
the reason it seems so heartless/exploitative is that highly competitive markets push the competitors to extremes and money is used to keep score. and people cheat easily; some not to lose, some to win at all costs. (even in non-highly competitive markets this happens if status is highly sought by owners/execs)
What national economic system can function without people exploiting the system for personal gain?
The top 5% of children in some measure of ideal traits for just ruling are whisked away to a bubble where they are educated for the purpose of governing, with no opportunity to ever rejoin the general populace. They have absolute power but no opportunity to benefit themselves or their families.
That or we could tax externalities globally.
So he's not subject to max SSN and Medicare taxes?
Could you sketch out your idea a bit more? At the moment, I'm not getting it.
There are tons of ways to force people that don't involve putting a gun on their head...
"forced" can happen in more ways than one. Workers in third world sweatshops aren't forced by law to work there, but they are forced by capitalism to work there to feed their families.
Also: Exploit (v)
2. To use selfishly for one's own ends.
I don't believe that Bezos or other employers are acting selfishly when them employ people, even when they make a margin on that labor. (In fact, if they don't make a margin on that labor, they would be better off to stop employing that person, meaning the situation where the employee and employer both make money on the deal is the most stable state.)
That's a baseless claim.
There's nothing inherently capitalist about corruption. It's a property of power, not capitalism.