Anyone know what makes a free enterprise economy work?

[Sooper8]

.............When Northern Rock went under, the whole nation bailed out them out (ie subsidised them) to the tune of £millions if not billions, for the sake of the banking industry and ultimately the countries economy................
Not that many years ago ,J K Rowling, single mum on benefits, struggling to pay the bills- 'subsidised' by the state to survive, now more than made up for that with her tax and income generation for a multitude of other industries.
Osbourne wants people to turn on themselves as opposed to looking at the minority who have the vast majority of the wealth in this country.

Actually many ordinary people had savings in Northern Rock....would you have preferred them to lose their money?
JK Rowling would be to me an illustration of how a safety net benefit system should work...there to support in time of need, not as an alternative to working.
I have no idea what Osbourne wants and, if I'm honest, very little interest....no idea what that sentence means, either.
I would like people to rely on themselves and make a life for themselves....its really quite comfortable these days, things which most people take for granted now used to be a luxury...a car, central heating, foreign holidays, hand-built bicycles. Yes, you can find somebody who has more money than they can spend....get over it!

In answer, no, I wouldn't want them to lose their money. I am making the point that when it suits the gov't/bank interests we can effectively nationalise a bank (ie a bank subsidised by everyones money). My more subtle point was that it is too important to let a bank go under- but if it is managed badly and goes under, then the only alternative is nationalisation by another name. If we had nationalised banks then it wouldn't have gotten to that point, and if profits were made they would go back to the 'owners' ie the people.
The Osbourne sentence in a nut shell means 'divide and rule'.
And yes, I was using Rowling as an example of a benefit system that works. Read my earlier post and I think you'll get where I am coming from...?

[horizon]

In view of the gloomy autumn statement, can anyone help out here?

Answers on a postcard please to the Chancellor of the Exchequer, senior economists, and in particular the Governor of the Bank of England.

Free enterprise economies do work fairly well as they organise the release of capital via joint stock companies and can harness innovation and efficiency. They stop working well after a time because profits are driven down by new firms entering the, yes, free enterprise economy i.e. it sows the seeds of its own destruction.

What then happens is that firms go bust, are taken over or merge and a monopoly is formed - the market is no longer free. What gets a free enterprise economy out of trouble is a variety of things: war (to break a monopoly), state intervention, fraud (as in the credit crunch) to name but three.

But best of all is a genuine discovery (electricity, Africa, cars, computers, drugs, mobile telephony, outer space etc etc) that allows companies or economies to create a genuine competitive advantage by exploiting it - and the whole merry-go-round can begin all over again ...


Footnote: Marx believed that capitalism was a real human advance. I agree with that. He also pointed out that it was based on new technologies (tools, agriculture etc) and new forms of social organisation (cities, joint stock companies etc). Once capitalism has exhausted its potential (it still has China, the polar regions and what's left of the rainforest to engorge upon), the tension between labour and capital will finally have to be resolved as it cannot be put off any longer - there will be no obtainable profits. At that point, society will evolve into the next stage of its development.

[The Mechanic]

In view of the gloomy autumn statement, can anyone help out here?

Answers on a postcard please to the Chancellor of the Exchequer, senior economists, and in particular the Governor of the Bank of England.

Free enterprise economies do work fairly well as they organise the release of capital via joint stock companies and can harness innovation and efficiency. They stop working well after a time because profits are driven down by new firms entering the, yes, free enterprise economy i.e. it sows the seeds of its own destruction.

What then happens is that firms go bust, are taken over or merge and a monopoly is formed - the market is no longer free. What gets a free enterprise economy out of trouble is a variety of things: war (to break a monopoly), state intervention, fraud (as in the credit crunch) to name but three.

But best of all is a genuine discovery (electricity, Africa, cars, computers, drugs, mobile telephony, outer space etc etc) that allows companies or economies to create a genuine competitive advantage by exploiting it - and the whole merry-go-round can begin all over again ...


Footnote: Marx believed that capitalism was a real human advance. I agree with that. He also pointed out that it was based on new technologies (tools, agriculture etc) and new forms of social organisation (cities, joint stock companies etc). Once capitalism has exhausted its potential (it still has China, the polar regions and what's left of the rainforest to engorge upon), the tension between labour and capital will finally have to be resolved as it cannot be put off any longer - there will be no obtainable profits. At that point, society will evolve into the next stage of its development.

Which will be....????

[thirdcrank]

.... Which will be....????

I'll predict a substantial change in the world order. Economies such as the US and UK are in substantial debt to Far Eastern economies, particularly China. This is deteriorating much faster than many people seem to grasp. The current stage is that we are reneging by tricks like printing more money which can only serve to reduce the value of what's in circulation. Up till now, it has suited the Chinese govt., to go along with this but there is no reason why they should do so. If they were to decide enough was enough, the only question then would be how quickly things would turn sour. The internet must play a big part in this. Sooner or later, the ordinary people in places like China will be questioning why they should be working their nuts off just to keep western society in the style to which we have become accustomed.

[meic]

May I suggest because the West has the biggest, best military and nuclear weapons and seems quite prepared to use them to get their own way.

[thirdcrank]

May I suggest because the West has the biggest, best military and nuclear weapons and seems quite prepared to use them to get their own way.

I suspect we are past that stage. I'd agree that NATO seemed to overstimate the military strength of the Soviet Union during the Cold War (and IMO made the same mistaken assumptions about Russian strategy that others - mainly Napoleon and Hitler - made) but we are approaching a situation where the wWest may no be quite so strong. I think the US might be better placed than we would be if there were to be a major dislocation of trade for whatever reasons. The UK lacks the natural resources for any sort of return to a subsistence existence.

[531colin]

...........I'll predict a substantial change in the world order. Economies such as the US and UK are in substantial debt to Far Eastern economies, particularly China. This is deteriorating much faster than many people seem to grasp. The current stage is that we are reneging by tricks like printing more money which can only serve to reduce the value of what's in circulation. Up till now, it has suited the Chinese govt., to go along with this but there is no reason why they should do so. If they were to decide enough was enough, the only question then would be how quickly things would turn sour. The internet must play a big part in this. Sooner or later, the ordinary people in places like China will be questioning why they should be working their nuts off just to keep western society in the style to which we have become accustomed.

I agree. Very soon they will be running the world. They can already make anything in a fraction of the time, for a fraction of the cost...they are beginning to realise that we have got rid of all our manufacturing, we are totally reliant on them. At the moment they are very keen to supply our markets with manufactured goods of all sorts....I wonder why? Is their domestic market too small, and if so why is that? China is an unimaginably vast country, with huge differences between city and provinces.
What do they need from the West....maybe America's vast food production capacity? Overcrowded UK can't feed ourselves.

[al_yrpal]

I was in China again this year after a period of 30 years. There are lots of misconceptions about China. There is mass unemployment, wages are very low and the reason we can't compete is the $2 a day wages that most people earn. Because of the mechanisation of agriculture there are huge swathes of people out in the countryside doing nothing. In the hell hole towns they are building grim tower blocks everywhere to accomodate these people. You can't live where you like, everyone is controlled. The low rise slums in the centre of Peking are still there with a shared toilet every 50 metres. There is no free speech and the party controls everything. In the parks on Sunday morning pensioners gather to sing revolutionary songs together to get out of their cellblocks, its what communal Tai Chi is all about! . We cannot compete on low cost simple products that used to be made here, but we can tap into low cost manufacturing in Asia which represents 20% of product costs, reserving the other 80% for us to pay for design development sales marketing investment and profit. Just like James Dyson has done. The trouble is, as you have observed, most people don't work in manufacturing, never have, and if they have, have no idea of the economics. In other words few of us have any idea. Dyson does, but he is sidelined and no-one listens. It is so frustrating. I have been tempted several times in the last couple of years to start a new manufacturing business. I can see the gaps in the market and have clear ideas how I can profitably fill them. Example - crap hifi stands £1000 for an ugly assemblage of pine planks - absolutely awful, had to design and make my own.

Trouble is I'm retired! Humbug!

Al

[thirdcrank]

Al

If I've understood you correctly we'd be OK if we worked out how to exploit their workforce better, just so long as the régime agrees that that's the way to do it and manages to keep the lid on.

It may last long enough to keep me going but I fear for the future of my grandchildren.

[al_yrpal]

TC, yes, we should use their low cost factories to make our goods, which we design market and profit from. That's what Dyson is doing, closely followed by a few enlightened British companies. That leaves us with a big reservoir of people to do all the service jobs. Trouble is making things, and learning how its done has been shunned by British youngsters. The Germans are still hard at it. 99% of bicycles are produced like Dyson does it.... £ shops operate on a similar basis.

Al

[Edwards]

Al are you saying that we should exploit foreign labour, to work for slave wages with no health or safety protection and in slum conditions even employing small children.
Just so that some rich people in this country can purchase a few luxury status symbol goods.

If so does that not come back to my first post on this topic?

[al_yrpal]

Al are you saying that we should exploit foreign labour, to work for slave wages with no health or safety protection and in slum conditions even employing small children.
Just so that some rich people in this country can purchase a few luxury status symbol goods.

If so does that not come back to my first post on this topic?

No and no.

[Edwards]

Al your description of what is happening now in China does seem to me to be exploiting the local population thus keeping wages and conditions poor.
I got the impression that you seemed to support this when you said about keeping the design here and the manufacture in China.

[al_yrpal]

No, I don't support low wages and poor conditions, they are just a fact of life in Asia and we have almost no influence over them. If we didn't get them to manufacture things for us they would be even worse off, and if their conditions and wages were as high as ours what would be the point of getting things made there? They need us and we need them, a lot of people here seem to have given up. There is a way... At last the politricians always seem to want to have their photos taken in factories..... It's getting places for young people to get educated and trained and then get some experience, and then get an idea... It's a long road.

Al

[axel_knutt]

Read this if you want to see what causes it, and this if you want to see where it will all end up.