Capitalism is obsolete

Not in use any more, having been replaced by something newer and better or more fashionable.

an economic, political, and social system in which property, business, and industry are privately owned, directed towards making the greatest possible profits for successful organizations and people.

Charity alone will not solve the world’s problems. Capitalism can help and at the same time put people back to work. There has always been a gap between what the government can provide and what the private sector can produce, a gap charities have long helped to fill. But as our world and economies evolve, we have an opportunity and a responsibility to reconsider how to fill this gap – to rethink the relationship between economic and social challenges, so that benefits and opportunities are available to more people.

First, this rethinking is necessary because people are demanding it. From Zuccotti Park to Tahrir Square, people are standing up and saying that for too many citizens the current systems are not working.

Second, the financial crisis has made plain that the path we were on was unstable and unsustainable. While our global economic system has brought benefits to many, it has also exacerbated inequalities, both within and among countries. Too much inequality not only hurts the poor and stifles the dreams of the middle class, it also hinders productivity and growth.

Finally, our increasing interdependence strengthens the link between our prosperity at home and prosperity abroad. It is hard to sell things people cannot afford to buy. Also, economic privation breeds political resentment with all its costly consequences. We therefore have a vital stake in the fates of others – a stake that extends beyond compassion to political stability and economic security.

1. Germany

Germany tops our list of one of the most capitalist countries in the world. Capitalism in Germany is found in its institutions such as banking and educational systems. German industries have prospered because the country has made it a priority to train its labor force to succeed in various industries. These various systems have worked together to make a robust capitalistic market for the country. The German model of prosperity supports allowing local entrepreneurs to develop and initiate new industries which help the people to communicate better with the world and to meet their needs in becoming current world players in the technology industries. The flow of goods exported from Germany are grouped into sectors, and Germany has the dominant role in exporting for markets which specialize in goods which are the result of patents, niche markets and new innovations and inventions within the country. For example, in the media industry, prosperous subsectors would be: film, radio, television, teleservices, advertisement, printing and publishing houses, and data processing software.

2. United States

Americans are known to be risk takers and capital makers. In the US it is possible to begin a business of humble means and expand it to grow into a conglomerate business model for people wanting to start a new business. Imagine a tiny dry cleaner who adds space in strip malls and soon owns over twenty businesses. This is the epitome of wealth and capitalism in the US. Capitalism in the US has no color and welcomes anyone willing to work hard, market a product and to bring it to fruition. Americans are said to be moved by their fear of failure and their greed for monetary success. Capitalism allows private ownership to spur production of goods and allows the private owner to keep and track profits for what sells. This allows exclusive rights and patents to the production of modern technology and boosts the social economy. Groups within industries shape the model for success in agriculture, commerce, service industries, technology and other industries. There are allowances for monopolies in financing, international trade, commodities, banking, insurance and commerce. Some of these monopolies are family run companies which are leaders in their industries and who have good will in the community which breeds loyalty for their products and services among competitive markets and the masses.

3. China

China has focused in the last fifty years on educating the masses and the effort has paid off. Adult literacy in China has risen to almost 95% and is steadily rising. China is placing a priority on the development of its human capital and offers it workers more on the dollar to produce goods for export. China reformed its economy and began to see economic growth as a result the GDP doubled and the government allowed a pro-business and market attitude to rule in the country as a whole. China focused on exporting goods and developed a new economy as a result. Its new focus on manufactured products created over a hundred million jobs for the Chinese which supported capitalism in the country and offered a higher quality of life for the residents. China is also a large global exporter, along with Germany and the United States. But is China really a capitalistic country? In a way, yes. The Chinese government allows entrepreneurship as long as it is done with the permission of the government.

4. India

India is beginning to realize its potential economically as it encourages capitalism throughout the country. The infrastructure is limited by the human capital available to take jobs offered by the companies poised to hire qualified candidates as corporations globally look to India for offshore needs (call center and telemarketing, etc.). Between India and China, they both account for the world’s population at almost 40% all tolled. The Indian government realizes the potential of capitalistic growth as it struggles to overcome an outdated caste system. India has a problem with its distribution of income and access to free markets, since many of its residents are poor and have no way out of poverty. Most residents of India are Hindus, and although they either worship Shiva or Vishnu, India still struggles with the caste system ranking humans in inherited socioeconomic classes. For this reason, a person is either born rich or born poor and has no way to reverse that status going forward. With the idea that much of its population is considered “untouchable,” dalit or unclean, it should be difficult for the country as a whole to prosper. But in fact, the rich get richer despite these internal issues. In the early part of the century, the caste system hampered India’s development, but today, lower castes are demanding to be reclassified and given full paying jobs which allow them to qualify for benefits, privileges and the chance at a higher quality life which was not possible in years past. Although many Indian residents are still illiterate (though Indian literacy rates are improving), they are realizing that it is possible to pull themselves out of poverty by any means possible. At the upper levels of education, India excels and produces very highly qualified graduates who go on to study and work in other countries around the world.

5. Japan

The Japanese economy has rebounded from it’s near collapse in the 1990s and has prospered with Keiretsu networks. Japan has a state-led economic machine, which keeps the country in healthy economic shape. Japan has been interested in reform in a few major areas such as: labor relations, bank relations, corporate governance and supplier relations. Reform in Japan has included the country allowing more of the US management style of capitalism with restructuring to lay off workers when production is a the lowest cycles. Japanese companies also have learned to focus on specialization instead of going into too many business areas which are diversified. By focusing on a few key industries they are able to capitalize on gains and become industry leaders in many fields such as in high technology for mobile telephones and other communications components. Japan has continued with a hierarchy system which rewards loyalty and long-term employment with the same organization by the employees. By stressing a seniority-based pay system, the Japanese have encouraged employees to stay at one company for their entire lives.

By the beginning of the twenty-first century, the modern world economy looked strikingly similar to the classical order of the beginning of the twentieth century. International trade, investment, and finance were generally free from government restrictions. Most governments limited their intervention in markets and in international economic transactions. Migration was less free than it had been, and there was no overarching monetary standard, but otherwise there were many similarities to conditions a century earlier. Capitalism was global, and the globe was capitalist.

Global capitalism had, however, changed profoundly in the intervening years. Today, there is substantial government involvement in the economy, both in macroeconomic demand management and in the provision of a wide array of social insurance and other social programs. This is true of all developed countries and of many developing countries as well. The social democratic welfare state is now the OUP UNCORRECTED PROOF – FIRST-PROOF, 12/21/11, NEWGEN 02_Mueller_Chap1.indd 34 2_Mueller_Chap1.indd 34 12/21/2011 9:13:12 PM 2/21/2011 9:13:12 PM the modern capitalist world economy: a historical overview 35 norm rather than a novelty, and despite periodic objections it seems unchallenged as the standard organizational form of a modern capitalist political economy.

Just as contemporary capitalism incorporates substantial government supervision of national economic activities, it is also characterized by a dense network of international institutions. Some are regional, such as the European Union. Many are global, such as the IMF and the WTO. The informal cooperative arrangements of the gold standard era have given way to a much more complex array of formal international organizations.

However successful the contemporary economic order may be, it has not eliminated problems that have plagued capitalism since its beginnings. Foremost among these is the recurrence of periodic crises. A deep recession that began late in 2007 served as a reminder that financial and commercial ties among countries can transmit crises—even panics—from market to market with lightning speed. The crisis of 2007–10 also highlights the role of international financial flows, as it was in large part the result of a decade of very substantial cross-border lending and borrowing (Chinn and Frieden 2011). Financial and currency crises, it seems, are the price of open financial markets.

Although contemporary capitalism has been associated with rapid economic growth in many parts of the world—most strikingly, in communist-ruled China— there are still many parts of the developing world that remain mired in poverty. Whether this is due to excessive or insufficient reliance on markets or excessive or insufficient integration into the world economy remains a topic of hot debate. This is not surprising. It is almost certainly in the nature of capitalist political economies that there will be enduring conflicts over how and how much government should intervene in markets and how tightly and on what terms national economies should be tied to the world economy.

Over the past five centuries, capitalism has gone from being a novel economic system in a small region in Western Europe to being the prevailing form of economic organization in the whole world. The rise and eventual triumph of capitalism on a global scale has been associated with the most rapid economic growth in world history. It has also been associated with spectacular crises, wrenching conflicts, and a great and growing gap between the world’s rich and the world’s poor. Global capitalism holds out the hope of extraordinary social and economic advances, but it must address its weaknesses to realize these advances.

 A system which encourages and even necessitates exploitation will always lead to social unrest and stifle the development of civilisation because a system which breeds exploitation also breeds revolution. 

The Fair Labor Standards Act (FLSA) is a federal law which establishes minimum wage, overtime pay eligibility, record-keeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments.

Contract terms

The legal parts of a contract are known as ‘terms’. An employer should make clear which parts of a contract are legally binding.

Contract terms could be:

• in a written contract, or similar document like a written statement of employment
  
• verbally agreed
  
• in an employee handbook or on a company notice board
  
• in an offer letter from the employer
  
• required by law (eg an employer must pay employees at least the National Minimum Wage)in collective agreements - negotiated agreements between employers and trade unions or staff associations
  
• implied terms - automatically part of a contract even if they’re not written down
  

Implied terms

If there’s nothing clearly agreed between you and your employer about a particular issue, it may be covered by an implied term - for example:

• employees not stealing from their employer
  
• your employer providing a safe and secure working environment legal requirement like the right to a minimum of 5.6 weeks’ paid holidays
  
• something necessary to do the job like a driver having a valid licence
  
• something that’s been done regularly in a company over a long time like paying a Christmas bonus
  

By the beginning of the twenty-first century, the modern world economy looked strikingly similar to the classical order of the beginning of the twentieth century. International trade, investment, and finance were generally free from government restrictions. Most governments limited their intervention in markets and in international economic transactions. Migration was less free than it had been, and there was no overarching monetary standard, but otherwise there were many similarities to conditions a century earlier. Capitalism was global, and the globe was capitalist.

Global capitalism had, however, changed profoundly in the intervening years. Today, there is substantial government involvement in the economy, both in macroeconomic demand management and in the provision of a wide array of social insurance and other social programs. This is true of all developed countries and of many developing countries as well. The social democratic welfare state is now the modern capitalist world economy: a historical overview 35 norm rather than a novelty, and despite periodic objections it seems unchallenged as the standard organizational form of a modern capitalist political economy.

Just as contemporary capitalism incorporates substantial government supervision of national economic activities, it is also characterized by a dense network of international institutions. Some are regional, such as the European Union. Many are global, such as the IMF and the WTO. The informal cooperative arrangements of the gold standard era have given way to a much more complex array of formal international organizations.

However successful the contemporary economic order may be, it has not eliminated problems that have plagued capitalism since its beginnings. Foremost among these is the recurrence of periodic crises. A deep recession that began late in 2007 served as a reminder that financial and commercial ties among countries can transmit crises—even panics—from market to market with lightning speed. The crisis of 2007–10 also highlights the role of international financial flows, as it was in large part the result of a decade of very substantial cross-border lending and borrowing (Chinn and Frieden 2011). Financial and currency crises, it seems, are the price of open financial markets.

Although contemporary capitalism has been associated with rapid economic growth in many parts of the world—most strikingly, in communist-ruled China— there are still many parts of the developing world that remain mired in poverty. Whether this is due to excessive or insufficient reliance on markets or excessive or insufficient integration into the world economy remains a topic of hot debate. This is not surprising. It is almost certainly in the nature of capitalist political economies that there will be enduring conflicts over how and how much government should intervene in markets and how tightly and on what terms national economies should be tied to the world economy.

Over the past five centuries, capitalism has gone from being a novel economic system in a small region in Western Europe to being the prevailing form of economic organization in the whole world. The rise and eventual triumph of capitalism on a global scale has been associated with the most rapid economic growth in world history. It has also been associated with spectacular crises, wrenching conflicts, and a great and growing gap between the world’s rich and the world’s poor. Global capitalism holds out the ho

Unless our socioeconomic system is based on scientific methodology and reason, it will always be detached from technical and physical reality to at least some degree. This means that we will inevitably create conceptual problems within our collective social consciousness that end up effecting[sic] our real-world situation in remarkably idiotic and destructive ways. 

1. Prove what you just said is true. Why is it that the system not being based on scientific methodology or reason means that social consciousness will have problems that end it up affecting the real world in remarkably idiotic and destructive ways?
   
2. What does this have to do with Capitalism being Obsolete? Even if I were to concede that it has the problems you said on top of being unscientific then how does this mean that Capitalism is not in use any more, having been replaced by something newer and better or more fashionable?
   
3. Capitalism is scientific because it correctly understand human psychology and the motive to work. This is why the entire world except North Korea and Cuba have it within their politics and economy and why Communism has been consistently dying out post WWII whereas Capitalism has spread internationally at a phenomenally steep yet consistent rate to the point that only two nations on Earth currently don't have it or believe in it. If it was as unsustainable and unscientific as Prop suggests, Socialism and/or Communism would have flourished after the Cold War and at least from WWII to the Cold War we'd have seen Communist nations having gained such a stronghold due to their superior strategy in their oh-so-scientific way of running things. This is not what we saw; the exact opposite occurred.
   

All because we rely on social constructs such as the monetary system. I have already provided an example of this with the great depression.

Firstly, even if capitalism was the only way to effectively and efficiently motivate humans to work (which is a ridiculous claim) 

Even if capitalism was the only way to effectively and efficiently motivate humans to work that would not make it scientific.

My belief is that economics is somewhat more vulnerable than the physical sciences to models whose validity will never be clear, because the necessity for approximation is much stronger than in the physical sciences, especially given that the models describe people rather than magnetic resonances or fundamental particles. People can just change their minds and behave completely differently. They even have neuroses and identity problems, complex phenomena that the field of behavioral economics is finding relevant to understanding economic outcomes.

But all the mathematics in economics is not, as Taleb suggests, charlatanism. Economics has an important quantitative side, which cannot be escaped. The challenge has been to combine its mathematical insights with the kinds of adjustments that are needed to make its models fit the economy's irreducibly human element.

The advance of behavioural economics is not fundamentally in conflict with mathematical economics, as some seem to think, though it may well be in conflict with some currently fashionable mathematical economic models. And, while economics presents its own methodological problems, the basic challenges facing researchers are not fundamentally different from those faced by researchers in other fields. As economics develops, it will broaden its repertory of methods and sources of evidence, the science will become stronger, and the charlatans will be exposed.

Objectively speaking, there is no such thing as monetary value or ownership. These things were literally made up by humans.

Second, humans have been motivated for thousands of years before capital was invented. In fact, before we where even self aware organisms we where motivated to work in order to survive. Capitalism is no different than any other system in this regard, people generally work to survive and prosper no matter what system they live under.

Play as Many Hands as You Can

In the long term, your wins and losses will most likely even out and stabilize at your skill level. A sample is the number of hands that a player is dealt in his career. The number of hands that make a sample can be quite high for a regular player. The more hands played, the lower the variance. There are a few ways to increase the number of hands you play. You can simply play poker more often, play in fast games, or play multiple tables simultaneously online.

Variance is a Big Deal in Online Poker

To show how major this variance-factor is, let’s return to John for a moment.

John – our live poker grinder from our previous examples – just discovered the online poker world and he’s as decent online as he is in his local casino.

Let’s say he beats the $0.50/$1 No-Limit Hold’em tables online with a win rate of five big blinds per 100 hands (which is already way above average for decent players).

His standard deviation is 100 big blinds per 100 hands (that’s a usual standard deviation for six-max tables online).

Live, John plays 4,000 hands per month, so let’s see how he does online over this period. Again we head over to the Pokerdope.com variance calculator, enter the three parameters (win rate, standard deviation and number of hands) and take a look at the results:

Click here to see the relevant graph.

See what’s happening here? Those samples go wild!

Over 4,000 hands John can expect to win 200 Big Blinds (which corresponds to $200 at the $0.50/$1 tables) on average, but he will encounter plenty of very hefty swings.

Let’s go through some numbers:

• The probability of John losing money over 4,000 hands is 38%
  
• There’s a 2.5% chance (once every 40 trials) that John will lose more than $1,000 (10 or more buy-ins) over 4,000 hands
  
• In fact more than 30% of the time John will be stuck in a downswing for more than $2,000
  

Variance is a [Redacted]

The reason why variance has such a huge impact was already given above: win rate. A decent online player might win five big blinds per 100 hands -- maybe 8-10BB per 100 if he or she’s really brilliant and playing at a relatively low level.

While in theory that’s a nice number it’s only a tiny fraction of this player’s standard deviation over 100 hands.

This means that variance will kick you in the butt every now and then and there is not much you can do about it. Your win rate is simply too low to negate a big downswing within a couple of hundred hands.

You might need thousands (maybe even tens of thousands) of hands to recover from your downswings.

More Hands, Less Variance

Let’s take a look a look at how to counter this variance problem.

The key to getting your variance under control is to play more hands. Almost all professional online grinders play tens of thousands of hands per month – some even play more than 100,000 hands (each month and every month).

If you are a winning player, accumulating more hands will inevitably reduce the impact of any short-term variance. The downswings wont just vanish, but you’ll out-win them eventually.

So let’s – again – return to John from our previous examples. He decided to give online poker a real shot and started playing 20 days per month, averaging 2,000 hands per day (playing 4 to 6 hours per day).

Per month he’s playing 40,000 hands. He plays $0.50/$1 No-Limit Hold’em and averages a win rate of five big blinds per 100 hands. His standard deviation is 100 big blinds per 100 hands.

What results can John expect for one month of playing? Well, let’s enter those numbers into the variance calculator:

Click here to see the relevant graph.

While still looking quite wild, this simulation does not look too bleak.

• There’s only a 16% chance that John will end up with a losing month
  
• There’s a 5% chance that John will either lose more than $2,000 or win more than $6,000 in one month
  

After 40,000 hands variance still is a factor, but it’s already a much smaller one than over only 4,000 hands.

We can also simulate John’s possible results over 400,000 hands (which is 10 months worth of play for John):

• The chance of losing money over 10 months (400,000 hands) is tiny: 0.08%
  
• The chance of winning an amount somewhere between $7,350 and $32,650 is 95%
  
• The chance of being stuck in a $2,000 downswing at any given time is slightly over 30%
  
• The chance of being stuck in a $5,000 downswing (that’s 50 buy ins!) at any given time is around 4%
  

While those numbers might still look intimidating, unfortunately that’s the best one can come up with. Playing well, avoiding tilt and amassing plenty of hands is the only way to deal with downswings.

Those numbers also show: if you’re a decent (meaning: winning) player, you can negate negative variance by playing the necessary volume.