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Old 10-17-2002, 11:36 PM   #1
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The Logical End to Capitalism?

This is just a random philosophical pondering of mine. I don't necessarily even know if I will even agree with what I write tomorrow, so keep this in mind.

...

Looking at the state of some of America's largest companies today--the near-bankrupt state of the American airlines, movie studios, television, radio, <insert industry here>--is quite shocking really.

Truthfully, where do we go from here? It is difficult to imagine that any of these industries will ever emerge from their debt, just as we cannot imagine K-Mart ever emerging, except perhaps acquired in a merger. Mergers, in themselves, though, are hitting their logical end as well. The merger of AOL and Time Warner, the merger of Vivendi and Seagram / Universal...tough times hit and we see its wounds. Hollywood is as teetering towards destruction itself, as cinema ticket sales no longer cover the costs, and the DVD industry is the only thing propping it up.

Media, of course, has been quick to blame it on illegal internet downloads, but such an excuse is just that--an excuse. DVDs, which are in a similar slump as music sales, are downloaded at only a minute fraction of music downloads, due to the prohibitive download size (often > 500 MB) that even tax broadband connections (which, as found, are even a small fraction compared to modem users in America). Television networks are seeing a similar slump--ratings are at their lowest ever and have no signs of going up.

Airline industries...CDs...DVDs...what, indeed, do they all have in common? In fact, what do all these near-bankrupt industries have in common? They state that the public just isn't buying anymore...but can you blame the public? Statistics according to the Congressional Budget Office, between 1977 and 1989, the after-tax income of the top 1% of families rose 102.2%, the middle 20% of families fell 5.2%, and the bottom 20% fell 10.4%. Average earnings for workers, in 1982 dollars, fell from $8.55 in 1973 to $7.39 in 1993. And, while the official line claims that inflation hasn't gone up much, just think about the prices of things as they were 10-15 years ago and think about prices of things now--if you can't remember, think about "Now and Then" on "The Price Is Right." Think about automobiles. Think about everything that we are *supposed* to buy. And ask yourself where the hell this money is supposed to come from. Of course, you may be saying to yourself, "Hey...I made quite a bit more over the past few years." Well, bravo...but, sorry to burst your bubble, walk around most urban areas, look at most of the people walking around you, and ask yourself: do these people look like they can afford to jump on an airplane at a whim's notice, purchase a new automobile outright, and buy a lot of CDs and DVDs?

Herein lies the logical problem that is always avoided: how can you expect the public to continually spend *more,* but, at the same time, compete to keep wages *low*? Karl Marx theorized about the logical end of capitalism--that it would eventually destroy itself in enough time. Regardless, it is apparent that something has to change. For the economy to correct itself, there must be some stimulus for the average person to buy. Tax cuts have hit their logical end as well. Bush's tax cut proved to be ineffectual in doing anything--except to drive individual states into fiscal crises, forcing many of them to equally raise taxes.

To sit back and expect the economy to "correct itself" is a misnomer. What stimulated the economy in the 1990s was venture capitalism in the internet--in essence, a new market that never really existed (just look at the state of the internet today--swindlers, hackers, and pop-up ads). Our only hopes are currently hinged on far-fetched future technology--hydrogen fuel cell processes and nanotechnology--that are likely decades away. The last logical end is to get money to the working class and have them spend--and since the private sector is unwilling and/or incapable to do such a thing, the system itself is on the verge of self-destruction.

Your thoughts?

Melon
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Old 10-18-2002, 03:01 PM   #2
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This sounds like one long generalization to me. The movie, television and music industries are not near bankrupt at all.

Recently it was reported that NBC's revenue increased 8.5% to $1.99 billion and operating profits rose 11% to $545 million.

CBS Network also had upfront advertising revenues of approximately $1.9bn in primetime for the 2002-2003 season, versus $1.3bn for the 2001-2002 season.

ABC is sluggish, but definitely not bankrupt.

Cinema sales no longer cover costs? Doesn't this depend on the movie? If we look at Waterworld and the Postman (and other Costner movies ;P ) I can see how one would arrive to that conclusion.

If you look at some recent movies like

My Big Fat Greek Wedding:
Production costs: $5 million
Cumulative Gross: $158,954,054 (according to Yahoo)

There are clearly movies like this all the time with huge gross at the box office and low productions costs. Most movies have huge costs when you take into account actor salaries and marketing, but their revenues are equally huge.

Look at some recent blockbusters:

Star Wars: Episode II:
Cumulative Gross: $302,105,585
(this will probably go much higher with DVDs and other sales factored in)

Austin Powers Goldmember
Cumulative Gross: $212,411,686

Signs:
Cumulative Gross: $224,635,135

Harry potter brought in $1 billion in worldwide sales overall!

I'd go on, but you can look at these companies yourself:
http://biz.yahoo.com/p/moviesconameu.html

Fox's revenue came to nearly 9 billion this year surpassing last year and the year before!

Disney's film business improved 2% to $1.6 billion -- but operating income dropped to $27 million from $164 million.
The company said marketing costs from films such as Snow Dogs, The Rookie and Return to Never Land had to be accounted for during this period. But it anticipates these movies, with average production budgets of $30 million, should eventually earn collective net profits of $150 million.

Sony, whose recent releases include Spider-Man, Men in Black II, XXX and Mr Deeds, has now broken the Hollywood record for highest one-year revenue for a single studio. The studio beat the previous record of $1.27bn (£824m), also set by Sony in 1997, when its hits included Men in Black, Air Force One and My Best Friend's Wedding.

Clearly production costs have skyrocketed, but I don't think that the studios are in the red here.

As for the income figures you've mentioned, which are quite dated, I don't see a huge decrease in consumer spending taking place. The economy is sluggish and flat, but most markets aren't exactly taking a dive. Perhaps it'll take time for this dip to occur, but I don't see any of the major economic indicators indicating the economy is dying. The economy has proven to be much like a seesaw and I don't think that a very short period of decreased confidence in the markets is any reason to postulate about the ends of capitalism (esp given the huge jumps in the dow in the last week or so).

Tax cuts take time to affect the economy. Also, it's difficult to ascertain which parts of the economy are aided by the tax cuts and which parts have been unaffected by the tax cut. I don't think you can argue that the tax cuts he pushed through last year have or have not staved off a worse economy than we have now. Remember, the Fed cut rates eleven times in calendar '01 and the Congress put out historic fiscal stimulus as well. We can't rush to judgement as to the eventually effect of all that. Also, the government is not here to bail out state losses with federal dollars so I don't see why the tax cut caused states to raise taxes.

The state of the internet is still strong in my opinion. Sure, it's not an arena of irrational exuberance as it was before, but the major players are still posting large profits (i.e. Cisco, eBay, etc etc). Amazon even posted its first positive earnings! I see increased growth in the internet as broadband becomes much more popular along with wireless infrastructures. The number of users accessing the internet continues to rise steadily.

"the number of people who use the Internet on a regular basis has dramatically increased from fewer than 90,000 in 1993 to more than 304 million in 2000. "
http://www.cnn.com/2000/TECH/computi...of.the.net.01/

Hackers, swindlers and pop-up ads? Ummm....I'm not sure what internet you're surfing, but I still do basically EVERYTHING on the internet. I listen to music, talk to friends, conduct research and buy almost everything on the internet because it's cheaper (except for food and some clothes). The internet is clearly existent and as important as ever. The venture capitalists made a mistake in investing large sums of money in companies that might never be able to turn a profit. Clearly computer sales skyrocketed, ISPs profited, the backbone of the internet (routers, switches, etc) generated profits, etc etc. These are REAL profits. The non-existent part was the companies that had a bad business model surviving off a bunch of hype and irrational investors. Clearly the bubble has burst and these sales have DROPPED, but sales are still being made every day on the net. I just bought a new CPU from Dell!

Technology is still being created everyday. Just because there isn't a huge boom in one sector every 10 years doesn't mean scientists aren't toiling away. I work with biology\biotech and some of the advancements that they're making are HUGE! Hopefully gene therapy will become a reality and drive health care costs down in the long-run. Computer companies are developing faster CPUs and storage systems that are incredibly small opening up the possibility of tiny super PCs! I also know there are a lot of advances in agriculture, fuel technology, etc etc that are in the works.

So, clearly, capitalism is alive and well. People still want to spend money. They want newer and better stuff. We don't need a revolution in technology each week to keep our standard of living and justify our economic model. Viva capitalismo!
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Old 10-18-2002, 05:47 PM   #3
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Re: The Logical End to Capitalism?

I've read in an article, that in the last years the US Government gave more money to the industry than they paid taxes.

If that's true the USA has no Capitalsim at all - it's like Socialism just a little difference..
..the money is taken from the poor and given to the wealthy.

Anyway, the idea that capitalsm works out positive for the Society is naive.
If everyone tries to make maximum profit for himself the rich become richer (because they have more power) and the poor will become slaves of their debts
It would only work out if all people would be nice and willing to help each other..
..but in this case every economic model would do it

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Old 10-18-2002, 06:37 PM   #4
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A new wave of revolutions ???????
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Old 10-18-2002, 06:53 PM   #5
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Originally posted by pinkfloyd
A new wave of revolutions ???????
It would be helpful to invent a better model before throwing away the old one

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Old 10-18-2002, 08:06 PM   #6
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Re: The Logical End to Capitalism?

Quote:
Originally posted by melon
Herein lies the logical problem that is always avoided: how can you expect the public to continually spend *more,* but, at the same time, compete to keep wages *low*?Your thoughts?

Melon
i agree melon.

as much as i agree with your growing disparity between income and expenditure for the normal individual analysis i will ignore that. do so and what you have described is called the law of relatively constant media expenditures. the law states that household expenditures on media + entertainment products and services are resoundinly elastic. each household has an established level of money income that can be spent on such items and it takes a large income effect to be changed in an upwards direction.

i can't find the resource right now but it has been proven in the canadian market for the eighties and nineties i believe.

as for the end of capitalism...i think we are more likely to see a more dynamic model with no behemoths. just many players, very few of them(if any) across all industries acting as price setters. most will be price takers. this is suggestive of mansell's idealist model vs. the strategic model(where oligopoly or, worse, monopoly rules).

i guess i am agreeing that capitalism is nearing the edge of its existence, as we know it. however it will prosper, and we as a society will hopefully be the better for it.
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Old 10-18-2002, 08:59 PM   #7
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Anyway, the idea that capitalsm works out positive for the Society is naive
And this is why Russia and China both have turned to capitalism in the last 10 years?

??

Mark
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Old 10-19-2002, 05:01 AM   #8
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Originally posted by MadelynIris


And this is why Russia and China both have turned to capitalism in the last 10 years?

??

Mark
- Not everything governments deciede is done because it was better for their country.
- I didn't say that capitalism was the worst model.
- Also.. i'm sure that some people (with lots of influence) made lots of profit with t his decision - that dosn't result in profit for everyone (when you take a look how many poor people in the former USSR don't earn enough money to live anymore.

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Old 10-19-2002, 10:58 PM   #9
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These people aren't poor because the country has turned towards capitalism. They're poor because of their communist history and widespread corruption. The rich might be getting richer in this country and the gap between the rich and poor might be widening, but what matters is the income of the poor relative to the income necessary to meet basic needs (such as those laid on in Mazlow's hierarchy). The middle class is still strong in America and we're not seeing a huge shift of people from the middle class to below the poverty line. They might not be able to afford yachts and caviar, but they can meet their basic needs and will probably never support a revolution against the current system. Sorry to let all of you socialists down. It's only the young rebels and former hippies who talk about a turn to socialism really.

See that staircase? Yes, that's the one, it will lead you away from the ivory tower. Back down to....reality.
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Old 10-20-2002, 12:26 PM   #10
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Hello,
do i get you right that with "communist history" you you're refering to their planned economy?

A better example for the failiure of pure Capitalism might be New Zealand. They changed from social market economy to "pure capitalsim" they did everything you can read in the books, liberal markets, less regulation - and it just got worse for the people living there. Also a few became verry rich - overall the pople there had less then before.

Corruption appears in Capitalism, Communism as well as in social market economy. Corruption leads to wrong politics (Buying laws). *wild conspiracy theory start* Maybe corruption lead to Capitalism in Russia? *wild conspiracy theory end* (okay that was a joke - don't take it serious)

"but what matters is the income of the poor relative to the income necessary to meet basic needs"

100% agree - but that's the problem in the former USSR id didn't work out - just the rich became richer and the poor got less relative to the income necessary to survive.

I read in an article that the middle class is the big looser in the US in the same time where top managers raised their income more than 100% the middle class lost more then 10%. (the costs for housing, food, fuel,.. increased also)

As i said before, there are worse things than Capitalism - but stopping to think about beter alternatives will lead to stagnation (in it's best case).

Just fools can seriousely ask for a change to planned economy but capitalism at it's finest (deregulation) dosn't work out either.
It will lead to abuse of power (as we can see).

Imho Marx work "Das Kapital - Kritik an der Politischen ÷konomie" is a interesting but dangerous book - dangerous because it can lead to wrong conclusions. He was a bright observer, throw away his conclusions and make up your own.

If Marx is a political taboo for you take a look at the work of the "Club of Rome" it's less missleading but it shows that our capitalsm dosn't work for long term future.

Klaus
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Old 10-20-2002, 12:29 PM   #11
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... i almost forgot..

It's allways an advantage to study the oposite system (in my case Marx). Most of the time the "enemy" is not a 100% fool.
Because of that his critics can help us to increase our economic model.

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Old 10-20-2002, 02:19 PM   #12
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Quote:
Originally posted by garibaldo
This sounds like one long generalization to me. The movie, television and music industries are not near bankrupt at all.
You make great points, and I thank you for making them. What is highly interesting is the fact that it is *the media* itself making these statements about its own poverty. The question, hence, is whether the media is lying to garner sympathy--perhaps in the form of government subsidy-- or whether it really is blowing all of its money.

True, there are films like "Harry Potter" and "Lord of the Rings." But then there are many like "The Adventures of Pluto Nash," which cost upwards of $100 million to make and only made about $3 million.

Television has hurt since the expansion of cable broadcasting. In the early 1980s, a TV show that had a 20 rating would be considered for cancellation. The top shows now barely hit a 15 rating. The difference now, though, is the sheer expense of television programming. E.R., for instance, costs well over $1 million an episode before one even factors actor salaries. The rise of "reality shows," hence, have been their saving grace; no real writers, no actors, etc. The question, though, comes as to whether society will accept this form of television programming in the long-term.

Quote:
Technology is still being created everyday. Just because there isn't a huge boom in one sector every 10 years doesn't mean scientists aren't toiling away. I work with biology\biotech and some of the advancements that they're making are HUGE! Hopefully gene therapy will become a reality and drive health care costs down in the long-run. Computer companies are developing faster CPUs and storage systems that are incredibly small opening up the possibility of tiny super PCs! I also know there are a lot of advances in agriculture, fuel technology, etc etc that are in the works.
I agree with you here. I have confidence that this will, indeed, bring great, concrete prosperity in the future--unlike the false-bottomed prosperity of speculative dot-coms. The question I ultimately pose, in the end, is, first, what are we supposed to do in the 10-20 year interval before this is a reality, and, second, if the general public shall be able to afford it.

And, just to clear confusion for anyone, I don't want capitalism to collapse. I just have clear concern about the manner that capitalism has been conducted over the last 10-20 years. It certainly does not feel like a good sign when you have mega-conglomerates near bankruptcy and whole industries (i.e., the airline industry) in poor health. Combine that with large personal debt, long work hours, and issues of corporate irresponsibility, and I wonder if some degree of re-regulation is warranted.

Anyhow, much appreciation for the detailed response to this topic...

Melon
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Old 10-20-2002, 02:30 PM   #13
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Re: Re: The Logical End to Capitalism?

Quote:
Originally posted by Klaus
IIf that's true the USA has no Capitalsim at all - it's like Socialism just a little difference..
..the money is taken from the poor and given to the wealthy.
Truthfully, complete, unregulated capitalism is what Karl Marx experienced. Capitalism of the late 19th century was a nightmare--long hours, little pay, little workers' rights, child labor, industry monopolies, and wealth concentration like you wouldn't imagine. The likely thought of Marx was that, at this rate, capitalism would eventually consume itself--e.g., all companies would eventually merge into one mega-company that would collapse--and implode on its own.

However, Marx died before the Progressive Era of the first two decades of the 1900s, where the idea of regulated capitalism came into play. Here, we had most of these abuses ended through government legislation. Between the last two decades, however, many of these "protections" have been lifted; and, as expected, upon deregulation, the abuses returned. California's utility deregulation, for instance, returned the power companies to the same chaotic state 100 years ago--private utilities manipulating supply for high prices. Regulation had assured they would be nothing more than non-profit regional monopolies.

So, with the trend of deregulation, the thought of Marx's ominous theory of self-destruction has some relevance. Can capitalism *really* thrive in complete theoretical deregulation, or is regulation required to keep capitalism in check from destroying itself?

Melon
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Old 10-20-2002, 02:35 PM   #14
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Originally posted by MadelynIris


And this is why Russia and China both have turned to capitalism in the last 10 years?

??
Communism is a failure, because it assumes that people will be happy being all the same. The idea of advancement--"greed"--is a pivotal part of human nature. However, it is my belief that one is not forced to choose between one extreme--laissez-faire capitalism--and the other--Soviet-style communism. Capitalism is the only current system that satisfies our need for advancement, but it is my view that regulation is needed to temper the potential abuses that such "greed" may cause; and, even with regulation, one still had millionaires and billionaires.

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Old 10-20-2002, 08:36 PM   #15
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Quote:
Originally posted by melon


You make great points, and I thank you for making them. What is highly interesting is the fact that it is *the media* itself making these statements about its own poverty. The question, hence, is whether the media is lying to garner sympathy--perhaps in the form of government subsidy-- or whether it really is blowing all of its money.

True, there are films like "Harry Potter" and "Lord of the Rings." But then there are many like "The Adventures of Pluto Nash," which cost upwards of $100 million to make and only made about $3 million.

Television has hurt since the expansion of cable broadcasting. In the early 1980s, a TV show that had a 20 rating would be considered for cancellation. The top shows now barely hit a 15 rating. The difference now, though, is the sheer expense of television programming. E.R., for instance, costs well over $1 million an episode before one even factors actor salaries. The rise of "reality shows," hence, have been their saving grace; no real writers, no actors, etc. The question, though, comes as to whether society will accept this form of television programming in the long-term.



I agree with you here. I have confidence that this will, indeed, bring great, concrete prosperity in the future--unlike the false-bottomed prosperity of speculative dot-coms. The question I ultimately pose, in the end, is, first, what are we supposed to do in the 10-20 year interval before this is a reality, and, second, if the general public shall be able to afford it.

And, just to clear confusion for anyone, I don't want capitalism to collapse. I just have clear concern about the manner that capitalism has been conducted over the last 10-20 years. It certainly does not feel like a good sign when you have mega-conglomerates near bankruptcy and whole industries (i.e., the airline industry) in poor health. Combine that with large personal debt, long work hours, and issues of corporate irresponsibility, and I wonder if some degree of re-regulation is warranted.

Anyhow, much appreciation for the detailed response to this topic...

Melon
Actually, the airline industry has been hyping its own demise more than the media because the government appears so willing to bail it out. Also, the airlines know that the American economy will stagnate if they all go bankrupt because so many business travelers depend on airlines.

The trend in the 90's has been for top actors to demand $20 million a flick. Chris Tucker got $20 million for Rush Hour 2! Clearly this is a huge problem with costs. Also, I suggest getting rid of actors after two failed movies (i.e. Kevin Costner, Eddie Murphy, etc).

I doubt that will take 10-20 years for new technology to present itself. The work being done in university labs is quickly becoming a reality. All technologies have been expensive to start with. VCRs cost several thousands dollars and my first 286 computer cost well over a thousand. It'll take time, but everything eventually becomes affordable (everything within reason). I'm not suggesting a laissez-faire (sp?) model. I agree that some regulation is necessary. I'm sure we'll disagree as to how much regulation is necessary. For example, while some liberals might demand a living wage for third world industrial workers, I would disagree and point out that any government imposing those rules may quickly lose those industries leaving the workers much worse off.

I hoped that cleared up my position.
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