US Does Not Have Capitalism Now: Stiglitz

[skippy911sc]

Layers of money managers that don't bear the brunt of losses but walk away with big payouts when things go well have turned the US economy to a type of "ersatz capitalism," Joseph Stiglitz, Columbia University professor and Nobel laureate, told CNBC Tuesday.

"An awful lot of people are not managing their own money," Stiglitz said. "In old-style 19th Century capitalism, I owned my company, I made a mistake, I bore the consequences."

"Today, (at) most of the big companies you have managers who, when things go well, walk off with a lot of money. When things go bad the shareholders bear the costs," he said.

Even worse, those giving the money to the companies are entities like pension funds that are managing money on behalf of other people, so there are "layers and layers of agency costs," Stiglitz said.

It's a system where "you socialize the losses and privatize the gains," which is not capitalism, he said.

There's "moral hazard everywhere," he added.

Need for Better Rules, Better Refs

Stiglitz stressed he is a big believer in market economies, but added that "if you don't have the right rules and you don't have the right referees the game doesn't work."

While stripping away rules like the Glass-Steagall Act -- which separated commercial and investment banks -- created an environment where credit default swaps and derivatives could thrive, he said.

"It was very clear that after the 1998 Long Term Capital Management (crisis), when one company almost brought down the global financial system, that we needed to do something, and yet we passed a law saying regulators couldn't do anything," Stiglitz said.

For 50 years after the depression there was lots of regulation and not one financial crisis and in the last 30 years there have been 100 financial crises, he said.

As for the argument that regulation stifles innovation, Stiglitz cited former Federal Reserve Chairman Paul Volcker, who said: "it's hard to find any evidence from anybody who's not in the industry that can show any clear link between the so-called financial innovations and increased productivity in our economy."

Instead of creating products to manage risks, the financial markets created new products that increased risks, Stiglitz added.

http://www.cnbc.com/id/34921639

He was on CNBC this morning and should be on Obama's economic team. This guy is good!

[invictus]

1. K&R

[MidwestTransplant]

2. Don't forget crony capitalism

[Echo In Light]

54. Predatory capitalism/Corporate welfare (which dwarfs social safety net spending)

[jotsy]

3. Welcome to DU.

I am by no means an economics expert, but when all this started coming to light late in '08, I remember suggesting that fictitious money was laundered up a chain to float the genuine article to the top, where it could be skimmed.

Thom Hartmann wrote a piece at Common Dreams awhile back and likened our financial markets to a sporting event without officials. 'Chaotic' I believe he called it.

[nightrain]

4. it's the dreaded "f" word--fascism--corporate protection by those in government

[Zoeisright]

30. +100000

That's exactly what it is. Privatized profits, socialized risks. And wealth concentrating at the top, while most people suffer.

[kenny blankenship]

5. Hurts doesn't it? Hey I feel ya Joe, but capitalism is whatever capitalists do to maximize profits

If that means insulating themselves from the consequences of their own bad decisions and greed, well that's capitalism. If that means using the government to coerce greater cash flow from the captive consumer base, well that's capitalism too. Capitalism EVOLVES Joe, like every thing else. Donning rose tinted glasses and looking fondly to the distant past ( back before the Crash of '29, when capitalists also owned the government) won't help you much. You can't get back that supposed Golden Age of pure, uncorrupted capitalism. The "mixed economy" of public sector leadership and regulation of capitalism that grew up and died between 1930 and 1970 is closer to the ideal you seek, but that wasn't pure capitalism either.

[arcadian]

15. That's bullshit

By your definition a bank robber is a capitalist.

[kenny blankenship]

16. Capitalist - someone who has surplus of money to invest and makes a living on investments

Bank robbers - the kind that walk into banks with guns at least- are very far from meeting this requirement.

[arcadian]

18. If somebody purchases a gun.

Say $700 on the black market with the sole intention of using it to rob banks, then they do so as a capitalist. That $700 investment could very well yield tens of thousands of dollars in returns.

[kenny blankenship]

21. Only if he then hires somebody else to do the bank job.

If he does it himself he is not receiving passive income from investment, but is a laborer not a capitalist.
A woodcutter of yore who buys an axe in the village to cut trees in the forest to then sell as firewood in the village is not a capitalist. He's a self employed laborer. He is a capitalist if he has a SURPLUS of capital - money to hire labor and to own the axe- so that he can send someone else into the forest to fell trees and stay in the village to manage the full time selling of firewood. He is a modern capitalist if his surplus of capital is such that he can be invested in some business(es) and derive income from them without taking an active role in daily management - his income is strictly from dividends, interest, and capital appreciation, not from salary or wages.


Willy Sutton self-employed laborer


Joe Cabot, capitalist

[JDPriestly]

26. Traditionally, shopkeepers, owners of small factories and enterprises

were capitalists. They have become rare -- either bought out or beaten up by big business.

[Zoeisright]

31. Why don't we just go back to the regulated capitalism AFTER 1929?

Don't need 'rose-tinted glasses' for some REAL government regulation. And high taxes on the rich, which helped create and sustain the middle class.

[Enthusiast]

45. It is the responsibility of

the government to protect the country from enemies both foreign and domestic. Those that foisted this unregulated kind of predatory "capitalism" on the country are enemies - Phil Gramm for one example and Alan Greenspan for another.

This might seem simplistic to a sophisticate such as yourself but it is true and it is the truth most of us believe.

[change_notfinetuning]

6. And what about competition? When I studied economics, competition was a

key component of capitalism. In today's capitalism, as worshiped in the United States, it seems like competition is capitalism's enemy. That's the core of DLC/Republican capitalism.

And your answer, flameboys and flamegirls? I'm waiting. I doubt you'll disappoint. Big Business and Wall Street are counting on you. Pounce like the "associates" in a Walton heir's wet dream would.

[truedelphi]

29. Yes even in the "awful" nineteenth century, real competition

Was in a solid and revered position among the plethora of those ideals that "Capitalists" believed in.

It is what made it possible for Anti Trust statutes to come about.

But then the Big "Too Big Too Fail" Crowd came along, circa 1980's and beyond, they wanted the rules written so that they had control, and no one else did.

[change_notfinetuning]

32. Yep, ever since Reagan, and even during the Clinton years. But I made one

mistake in my earlier post. They love competition, absolutely love it. Can't get enough competition, but that's only when it comes to labor. When it comes to ownership/means of production, then competition is the enemy.

[truedelphi]

33. Ah yes, tht was a mistake. but I didn't see it until

You mentioned it.

[SnowCritter]

59. So true

Stiglitz points that out in his book "The Roaring Nineties".

Allow me to paraphrase - "First, businesspeople generally oppose subsidies, for everyone but themselves. ... Second, everyone was in favor of competition, in every sector but their own. ... And third, everyone was in favor of openness and transparency, in every sector but their own. ..."

[icnorth]

49. Competition to a capitalist is not the enemy

it is a welcome challenge on a level playing field. To a Corporatist competition is the enemy and a nightmare to be eliminated by any means possible. Corporatism is in control of the seat of government, not capitalism.

[Leopolds Ghost]

52. Not only that you have the spectacle of "ordinary progressive" Americans shopping at Wal-Mart

And essentially boycotting "non-nsame brand" stores to the point where real estate developers exclude "non-name brand" stores.

5% of all books -- a Progressive commodity of choice -- are bought from independent bookstores. Chew on that, DU.

[Leopolds Ghost]

53. They say "I've never heard of that place, go to Potbelly" "They won't survive, we already have an X"

"Why would wou want to buy stuff at (local deli) when it's so much more expensive? I'm PROUD of the savings I bring home for my family! Fiscal responsibility!"

[FreakinDJ]

7. EXCELLENT POST +1Million

[90-percent]

8. One Trend

With the transfer of wealth reaching records of concentration in the upper income brackets not seen since before the GREAT DEPRESSION, it behooves all of us average working people to learn as much about economics as we possibly can!

I watch the excellent Max Keiser videos here and maybe it's time I look in to all the financial terms he uses. He seems to know what these thieves are up to pretty good and videos about it all the time.

-90% Jimmy

[Romulox]

9. DU has several steely-eyed capitalists who cannot speak to this point. nt

[AlphaCentauri]

10. The US economy is not about productivity anymore

it's about managing money

[change_notfinetuning]

12. But boy, can we manufacture new forms of gambling, or what? n/t

[AlphaCentauri]

13. well like in the old kingdoms

the king manage the money of the rest and behave like a parasite

[Leopolds Ghost]

55. Not only! It's about wealth management for the trillions we spend on military

What, you thought all that money went to nat'l security? It's about creating a corpora-fascist state.

[Leopolds Ghost]

56. Large & small nonprofits were told to apply for DHS grants for EVERYTHING

because that is where the nation's wealth is tied up.

[AlphaCentauri]

60. That is what create the layer of unproductive earnings

or subsidized wealth.
In any other country it would be seen as the government subsidizing the private enterprise.

[Ganja Ninja]

11. "money managers that don't bear the ... losses but walk away with big payouts when things go well"

They walk away with big payouts regardless of how things go.

[me b zola]

14. K&R

[JVS]

17. Moribund Capitalism

[Greyhound]

19. Not a chance, Summers hates Stiglitz and Summers is one of Rahm's boys.

Probably the single worst aspect of Obama's administration (and the main reason the Obama = shrub meme is still working) is the financial crew he put in charge. They have done exactly what the biggest economic brains on the planet told him us must not be done.

[robdogbucky]

20. The father of ESOP's analysis works for me

Louis Kelso:

"...Kelso long believed that he had not originated a new economic theory but only discovered a vital fact that the classical economists had somehow overlooked. This fact was the key to understanding why the private property, free market economy was notoriously unstable, pursuing a roller coaster course of exhilarating highs and terrifying descents into economic and financial collapse.

This missing fact, which Kelso had uncovered over years of intensive reading, research and thought, drastically modifies the classical paradigm which has dominated formal economics since Adam Smith. It concerns the effect of technological change on the distributive dynamics of a private property, free market economy. Technological change, Kelso concluded, makes tools, machines, structures and processes ever more productive while leaving human productiveness largely unchanged. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contributions through labor.

Differential productiveness over time concentrates market-sourced income in the hands of those who will not recycle it back through the market as payment for consumer goods and services. They already have most of what they want and need so they invest their excess in new productive power. This is the source of the distributional bottleneck which makes the private property, free market economy ever more dysfunctional. The symptoms of dysfunction are capital concentration and inadequate consumer demand, the effects of which translate into poverty and economic insecurity for the majority of people who depend entirely on wage income and cannot survive more than a week or two without a paycheck. And since, as Adam Smith laid down, economic demand begins with the consumer and consumer purchasing power, the production side of the economy is under-nourished and hobbled...

http://en.wikipedia.org/wiki/Louis_O._Kelso


"The Roman arena was technically a level playing field. But on one side were the lions with all the weapons, and on the other the Christians with all the blood. That's not a level playing field. That's a slaughter. And so is putting people into the economy without equipping them with capital, while equipping a tiny handful of people with hundreds and thousands of times more than they can use."

--Louis O. Kelso in Bill Moyers: A World of Ideas, (1990)



Just my dos centavos

robdogbucky

[bullwinkle428]

22. KICK - Coming up on Thom Hartmann...RIGHT FUGGING NOW!! (1:05 P.M. EST)

:rofl:

www.thomhartmann.com

[KittyWampus]

23. Don't the guys at the top walk away with a bundle no matter what?

[Blue Owl]

24. We are through the looking glass

Things ain't what they used to be, the game has changed, and the system is rigged.

[nightgaunt]

25. When the gamblers own the casino they are fully covered with us to pay for it

That is they can play whatever they want and still win even when they lose. As we have seen with AIG and Goldman Sachs etc. They are still at it because the rules remain the same and we are still cruising to hit another ice-burg. Till the system is changed, the rules are rewritten to make sure that if they want to gamble big they will not bring down the economy and lose as they should. Until then we are heading for a Greater Depression, we are in a Great Depression now.

[readmoreoften]

27. Sheesh. It's capitalism. It's just "advanced capitalism" or "late capitalism".

According to Marx, the logic of capitalism eventually destroys the petty bourgeoisie (shopkeepers, small business owners, etc.) pushing them out of business and into the working class to compete as labor. It also eventually purchases the political system.

Capitalism is the control of the economy with CAPITAL--surplus profit extracted from goods by suppressing the wages of those who design, build, mine, service those goods (workers). Of course speculative financial capital takes it even a step further by adding something of a confidence game into the circulation of profit--but without the goods that are mined, serviced, designed, and manufactured by the working class, lets see how long that speculative economy lasts...

[Hydra]

28. I know

Everyone keeps saying "It's not capitalism"

Sure it is- it's capitalism in it's most natural, primal state. People with money use it to create more money and shut other people our of the system, therefore reaping profits in the form of social, political and physical power...which they then use to take it up to an entirely new level.

Isn't it beautiful? An unabashed monster, and people even apologize for it.

[martymar64]

34. My term of choice is Kleptocracy

Our social network system is systematically being stripped and sold off. Health Insurance is only the beginning. The plan is to privatize medicare and social security via unelected panels and leave ordinary people to the whims of thieves. Our government is starting to more resemble that of places like Mobutu's Zaire.

[Odin2005]

35. We have FASCISM.

The synthesis of State and Corporate power.

[veganlush]

36. indeed.....n/t

[nadinbrzezinski]

37. Haven't I been posting this for years?

The US is NOT a capitalist country, period

[Political Heretic]

38. Obama's picked economic team completely disagrees with Stiglitz

Even though ordinary Americans agree with Stiglitz and see the same joke of a system that he does.

Obama chose to assemble economic advisers who's chief interest is in amplifying the effects of the current failed system, not changing the system itself.

[mistertrickster]

39. Brilliant analysis, and a fine summary of it. Thanks for this! nt

[Grand Taurean]

40. Stiglitz should be treasury secretary.

[DeadEyeDyck]

41. K & R

here, here

[Faryn Balyncd]

42. I second that, Grand Taurean....

K and R

[Enthusiast]

43. We make the changes Stiglitz

advocates or eventually the entire thing will collapse in around us. The next time will cost Americans their meager social safety net. But I imagine the military industrial complex will remain an unscathed sacred cow until there is not a drop of milk for a hungry baby.

Folks, this is no longer a debate about economic theory. We know what happened and how it happened and the ones responsible have been handsomely rewarded. THIS IS NOT RIGHT.

If President Obama wants to FIX the economy he needs to see to it that those responsible are charged. He needs to push laws through that will restore confidence to the consumer. That confidence alone would be a tremendous boost to the economy.

[Enthusiast]

44. You have it right, skippy911sc.

Stiglitz is the best! We can correct the abuses if we listen to Stiglitz.

[SergeStorms]

46. Socialize the losses......

and privatize the profits. If that's "capitalism" I'm a monkey's uncle. Try to get basic health care for every American, though, and those same corporations (along with the GOP and it's minions) will cry SOCIALISM quicker than a New York minute.

And the average un/misinformed U.S. citizen will bristle with images of communists flowing over the borders and stealing everything they have. But they don't quite have that same reaction when Wall Street actually IS stealing everything they have. Then it's "free market forces" that are at work. :banghead:

What it all boils down to is that most Americans are stupid, STUPID people. They believe whoever shouts the loudest and who has the biggest American flag pin on their lapel. We're a lazy, self centered, jingoistic, nationalistic people, and we deserve the government we get because of it.

[TankLV]

48. x 1000

YOU "get it"...

[Vidar]

47. K&R.

[lonestarnot]

50. And some employers do not just invite employees, they mandate that a plan be utilized.

Slave labor at its finest. :puke:

[DeSwiss]

51. In his book "FREEFALL......"

...Stiglitz hit upon something which also immediately resonated with me, in addition to turning my stomach the minute I heard it:

The entire series of efforts to rescue the banking system were so flawed, partly because those who were somewhat responsible for the mess--as advocates of deregulation, as failed regulators, or as investment bankers--were put in charge of the repair.

Reprinted from Freefall by Joseph Stiglitz. Copyright (c) 2010 by Joseph E. Stiglitz. Used with permission of the publisher, W.W. Norton & Company, Inc. http://www.huffingtonpost.com/2010/01/19/freefall-excerpt-its-not_n_427509.html">LINK

- K&R

[Jefferson23]

57. Another great man Obama ignored. n/t

[Javaman]

58. This all can be easily fixed...

remove "person" status for corporations.

[Overseas]

61. Exactly. K&R! //nt

[fascisthunter]

62. too many Lemons in Congress