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[h=2]Pure Capitalism Is the Root Of All Our Troubles[/h]
June 8th, 2012 |
Author: Contributions
Actually pure greed is, but doing something about human nature needs separate measures and takes a long time. Meanwhile, we will need something more concrete, albeit still mighty challenging to implement.
The issue is that any one model (economic, social, political or otherwise) cannot hope to succeed as nothing is perfect. It is usually a hybrid system that can compensate for flaws and shortcomings. Thus, when governments the world over adopt a free market system, you will have a situation where resources go to the ones with the money to give the highest bid.
Economists may view this as an efficient way of allocating resources, but is it? The basic economic model of Demand & Supply is often adopted but this basic model cannot account for human behaviour. What if rich group has a very high demand for a limited resource? They will bid highly for it in an attempt to ensure that they will get it. What is this resource is not a luxury ie it is not something people must have (ie transportation, homes, education, tuition, food), generally speaking?
The result is a necessity becoming unaffordable for the rest. This is because the market price is set at the high levels offered by the rich. However, if supply levels exceed that which is demanded by the rich, won’t prices come down to meet the aggregated demand of the whole market?
This is where the basic economic model lets us down. The prices may not come down, come down enough or in time if the suppliers have the resources to wait for demand to catch up. There are many cases of such practices. Property developers in particular are famous for holding off on launches till the market sentiment improves. Landlords, reject more reasonable rents as they chase each other in demanding higher and higher rents just because their ‘neighbour’ managed to get a rich tenant.
The issue of property prices is an especially vexing one. As we humans conduct all our activities on land, high property prices affect everyone. When high rentals or sales prices are obtained for one property, greed causes all other landlords to use that as a benchmark whether justified or not. They can get away with it because as private owners, they have set the price they like. Such is the free market system.
A huge problem occurs when the demand by the less well-off is also high but they lack the funds to meet the market price. They will either wait and hope for the prices to come down or they will have to forgo other expenditures to afford the properties or to take loans they really can’t afford.
Another evil practice by landlords is to increase the rent should the tenant be doing well or just as a matter of routine. In such cases, the property has no incremental value and the landlord is not providing anything more valuable. Thus, to demand higher prices for nothing is rent-seeking and value-destroying. This is because the property will eat in the profits of the tenant, making it harder for them to survive.
This is truly ugly greed but is widely accepted.
With the rich controlling more and more of the resources, it creates a vicious cycle from which it is hard to break, due to greed.The rich wouldn’t want it any other way and they usually have the power to decide things for the rest of us.
But we should ask ourselves if we want the rich to have more money to bid for and obtain yet more resources, to arm themselves with the knowledge and skills needed for success and to price out the less well-off from what they need.
Some will argue that more resources may not always matter. Well of course it may not always matter, but most of the time it does. How many children can do equally well without as much tuition and enrichment help? How many small companies can be equally successful without as much resources as the bigger ones? There is only one Facebook, one, Microsoft etc. These companies started really small but how many can be like them? Also, many start-ups will need cash infusions at some point, infusions from the rich.
I am not advocating communism as we all know that it won’t work either. Rather, a hybrid known as socialism can be the answer. We mustn’t ignore human nature in all our decision-making; the rich would have us do that as it plays to their strength and distorts society in their favour.
As a democratic country, we must all speak out and make a stand against a purely capitalistic society based on free market principles because we are not all simply lines on any graph. More regulations to address human flaws and irrationalities have to be implemented because these flaws and irrationalities exist and impact everything we do.
To ignore such realities is stupid and we are clever and self-aware enough to recognise it and to do something about it.
.
John Chan Chi Yung
.
33 Votes
Actually pure greed is, but doing something about human nature needs separate measures and takes a long time. Meanwhile, we will need something more concrete, albeit still mighty challenging to implement.
The issue is that any one model (economic, social, political or otherwise) cannot hope to succeed as nothing is perfect. It is usually a hybrid system that can compensate for flaws and shortcomings. Thus, when governments the world over adopt a free market system, you will have a situation where resources go to the ones with the money to give the highest bid.
Economists may view this as an efficient way of allocating resources, but is it? The basic economic model of Demand & Supply is often adopted but this basic model cannot account for human behaviour. What if rich group has a very high demand for a limited resource? They will bid highly for it in an attempt to ensure that they will get it. What is this resource is not a luxury ie it is not something people must have (ie transportation, homes, education, tuition, food), generally speaking?
The result is a necessity becoming unaffordable for the rest. This is because the market price is set at the high levels offered by the rich. However, if supply levels exceed that which is demanded by the rich, won’t prices come down to meet the aggregated demand of the whole market?
This is where the basic economic model lets us down. The prices may not come down, come down enough or in time if the suppliers have the resources to wait for demand to catch up. There are many cases of such practices. Property developers in particular are famous for holding off on launches till the market sentiment improves. Landlords, reject more reasonable rents as they chase each other in demanding higher and higher rents just because their ‘neighbour’ managed to get a rich tenant.
The issue of property prices is an especially vexing one. As we humans conduct all our activities on land, high property prices affect everyone. When high rentals or sales prices are obtained for one property, greed causes all other landlords to use that as a benchmark whether justified or not. They can get away with it because as private owners, they have set the price they like. Such is the free market system.
A huge problem occurs when the demand by the less well-off is also high but they lack the funds to meet the market price. They will either wait and hope for the prices to come down or they will have to forgo other expenditures to afford the properties or to take loans they really can’t afford.
Another evil practice by landlords is to increase the rent should the tenant be doing well or just as a matter of routine. In such cases, the property has no incremental value and the landlord is not providing anything more valuable. Thus, to demand higher prices for nothing is rent-seeking and value-destroying. This is because the property will eat in the profits of the tenant, making it harder for them to survive.
This is truly ugly greed but is widely accepted.
With the rich controlling more and more of the resources, it creates a vicious cycle from which it is hard to break, due to greed.The rich wouldn’t want it any other way and they usually have the power to decide things for the rest of us.
But we should ask ourselves if we want the rich to have more money to bid for and obtain yet more resources, to arm themselves with the knowledge and skills needed for success and to price out the less well-off from what they need.
Some will argue that more resources may not always matter. Well of course it may not always matter, but most of the time it does. How many children can do equally well without as much tuition and enrichment help? How many small companies can be equally successful without as much resources as the bigger ones? There is only one Facebook, one, Microsoft etc. These companies started really small but how many can be like them? Also, many start-ups will need cash infusions at some point, infusions from the rich.
I am not advocating communism as we all know that it won’t work either. Rather, a hybrid known as socialism can be the answer. We mustn’t ignore human nature in all our decision-making; the rich would have us do that as it plays to their strength and distorts society in their favour.
As a democratic country, we must all speak out and make a stand against a purely capitalistic society based on free market principles because we are not all simply lines on any graph. More regulations to address human flaws and irrationalities have to be implemented because these flaws and irrationalities exist and impact everything we do.
To ignore such realities is stupid and we are clever and self-aware enough to recognise it and to do something about it.
.
John Chan Chi Yung
.
33 Votes
