Becoming a Capitalist President in El Salvador. Some advices?

[AlexES16]

It has to do with capitalism in that only in true capitalistic environment can this be practiced. And I don't find it unacceptable. If a worker does not like the conditions of his/her employment they are free to find work elsewhere. In this situation an employer may have to reconsider the hiring standards in order to retain employees and remain competitive in a given market.

Thats my point =)

 

[AlexES16]

Then you should copy how Hong Kong became so. It's very easy (for your government). For more information see:
http://www.ted.com/talks/paul_romer.html"
Basically, invite a trustworthy first-class nation (like Britain, or a west-European nation) to completely govern a small region of your country for a fixed time, say 100 years. Foreign companies will want to invest their money in that region (because they will trust its stability better than anywhere else in Latin America). Many of your own people will freely move into the region, for better paying jobs and the higher human-rights standards expected from Western governance. Within a lifetime, you will have a great city that is the pride of your continent.



Transparency is a major issue. A good idea I've heard would be to ask for foreign bodies to send teams of their accountants into your country. They can help you get rid of corruption. Once corruption is gone, your country will be naturally more productive, and foreign investors will no longer be as afraid to invest more capital into your economy.

It is not smart to completely privatise education or healthcare. Both are socialised in "first world" countries. (In the past, some people traveled from the USA to Cuba to get better health care.) Likewise, environmental regulation is important (for capitalism, the term is "externalities". If no single person has ownership of the environment, then regulation is always necessary). The countries with the highest living standards are all capitalist countries, but tempered with social welfare institutions and market regulations, this is all compatible.

There is a number of organisations that have done lots of research into ways of best improving countries where the living standard is comparatively low. You should try to make use of their expertise. I'd say you want to be looking to the type of people that are invited to TED, and invite them to you.

Great information. Something like a regulated capitalism but still capitalism.

But i don't see how to build a city in such a small country like mine.

 

[CRGreathouse]

In my understanding it is the same measurement in the US. The difference with employment-to-population ratio is known, and monitored. It is all available
http://www.bls.gov/webapps/legacy/cpsatab1.htm

I'm familiar with the workforce participation rate and its difference from the unemployment rate and the ratio of employed persons to (persons in the workforce + discouraged workers). But the post I replied to suggested that, in France at least, the unemployment rate could be (artificially) reduced by reducing the number of people on the welfare rolls, and this is of course different from excluding discouraged workers or institutionalized persons, etc.

 

[cristo]

If my boss were to come down here and fire me and he gave me no reason what-so-ever, I would leave and not come back or even consider legal retribution. I will not be fired, because I provide a competitive service for my employer and my employment is based on merit.

This is a very naive view. Are you saying you'd be happy if in, say, 10 years you were fired and replaced with a youngster that the company only has to pay a fraction of your wage?

 

[vertices]

Some solutions:

-Open the country to foreign inverstion
-Deregulate the economy
-Privatize Important sectors
-Make the government more transparent so there be more trust in iverstion.

There is strong empirical evidence that such policies would make things much, much worse for your nation.

 

[Gokul43201]

This is a very naive view. Are you saying you'd be happy if in, say, 10 years you were fired and replaced with a youngster that the company only has to pay a fraction of your wage?

(not speaking for drankin, but ...) I, personally, wouldn't be happy with myself, if I haven't, in 10 yrs, made myself worth a lot more than a youngster new to the job. Nor would I be happy knowing that the only reason I haven't lost my job to a capable youngster is that it is mandated by some higher power that I not be fired, irrespective of my worth to my employer.

There is strong empirical evidence that such policies would make things much, much worse for your nation.

When you make a statement like that, it behooves you to provide said evidence.

 

[Pythagorean]

You still don't know that the car charge is free for you. You just don't directly pay for the electricity at the time of the charge. Maybe your next raise is off because the business's bottom line is off. Maybe you get laid off for the same reason, and so on.

Ok, I agree with you; that's a possibility...

But that still doesn't mean that "there's no such thing as a free lunch" is a true assertion. Because, following your method of inserting convenient exceptions, I *could* work for a company whose stock expenses are so high that it's electricity bill is considered pocket change no matter how much it fluctuates, and never factors into wage budgeting. Or I *could* frame someone else for stealing the power in some other way and earn a raise faster, killing two birds with no stones.

 

[AlexES16]

(not speaking for drankin, but ...) I, personally, wouldn't be happy with myself, if I haven't, in 10 yrs, made myself worth a lot more than a youngster new to the job. Nor would I be happy knowing that the only reason I haven't lost my job to a capable youngster is that it is mandated by some higher power that I not be fired, irrespective of my worth to my employer.


When you make a statement like that, it behooves you to provide said evidence.

Thats good, capitalism really make you be better.

 

[AlexES16]

This thinking is good about how the internet is the closest to a free market capitalism.

 

[drankin]

This is a very naive view. Are you saying you'd be happy if in, say, 10 years you were fired and replaced with a youngster that the company only has to pay a fraction of your wage?

Naive? That's life son. If I've been there ten years and some newby kid can just show up and do my job as well as me for half my pay, then I deserve to be replaced. I am no longer being competitive in the work force. That's capitalism. It would not hurt my feelings if it happened today! It would motivate me to work even harder at my professional game. My work is worth what the market determines. If I don't like it it's my prerogative to adapt and increase my worth in the market as required. Noone owes me a job.

And the adults who don't get these concepts still live in their moms bacement.

 

[drankin]

Thats good, capitalism really make you be better.

Bingo. It really does force a person to work hard and continually improve ones self.

 

[vertices]

When you make a statement like that, it behooves you to provide said evidence.

Take Chile, under Pinochet (the posterboy for free market fundamentalism), for example. That country was left in ruins by the time he was ousted.

 

[humanino]

Naive? That's life son. If I've been there ten years and some newby kid can just show up and do my job as well as me for half my pay, then I deserve to be replaced.

What if your company can just close doors, leave everybody behind and relocate in China ? No compensation, you are not even told in advance. How would you feel about that ? In your view, would not that kind of behavior be an optimal organization for modern capitalist societies ?

/And the adults who don't get these concepts still live in their moms bacement.

I do not agree with you, yet I can spell mom's basement.

It really does force a person to work hard and continually improve ones self.

I'm sorry but those are all theoretical arguments not reflecting reality. You know, Hitler improved the productivity in Germany and was quite efficient at forcing people to "continually improve themselves". He just disregarded human rights to achieve that.

 

[drankin]

What if your company can just close doors, leave everybody behind and relocate in China ? No compensation, you are not even told in advance. How would you feel about that ?

You keep asking people how they would "feel". As if the world is run by regarding everyones "feelings". Quit making up scenarios and asking my how I would "feel". But, to answer your question, I would "feel" like getting another job.

I do not agree with you, yet I can spell mom's basement.

Did I hit a nerve? In your case we'll just call her momma.

I'm sorry but those are all theoretical arguments not reflecting reality.

Theoretical? I'm being payed in the market place that I've worked in for 20yrs theoretically?. And you pulled the Hitler card? Really?

I hope you are paying your mom some rent.

 

[humanino]

...

I do not live in my mother's basement, I left home after high-school and you did not hit any nerve. I just remain convinced that you are not being helpful to AlexES16 by describing concepts of capitalism which are not real. The well-being of employees and their human rights are an important ingredient in our modern societies. I think the recent crisis also illustrates this idea.

edit
It is not about the Hitler's card. It is about illustrating that your argument in favor of a wild imaginary capitalism (It really does force a person to work hard and continually improve ones self.) is not a helpful one.

 

[drankin]

I do not live in my mother's basement, I left home after high-school and you did not hit any nerve. I just remain convinced that you are not being helpful to AlexES16 by describing concepts of capitalism which are not real. The well-being of employees and their human rights are an important ingredient in our modern societies. I think the recent crisis also illustrates this idea.

edit
It is not about the Hitler's card. It is about illustrating that your argument in favor of a wild imaginary capitalism (It really does force a person to work hard and continually improve ones self.) is not a helpful one.

What human rights are you referring to that you seem to think that what I am saying is violating??

 

[AlexES16]

Take Chile, under Pinochet (the posterboy for free market fundamentalism), for example. That country was left in ruins by the time he was ousted.

Dude you realize that Chile is best country in Latin America?

http://en.wikipedia.org/wiki/List_of_countries_by_Human_Development_Index


http://www.heritage.org/Index/Country/Chile

 

[AlexES16]

I was thinking in Environmentally Regulated Capitalism.

 

[AlexES16]

In my school i am debating with socialist every moment.

Their strong points are(they win a lot of support with this):

-Enviroment
-Healthcare
-Education

 

[humanino]

What human rights are you referring to that you seem to think that what I am saying is violating??

Referring to "human rights" might be borderline, what I had in minds is

1) Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.
[...]
3) Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.

If a business owner can fire anybody as they please, then it will be hard to have the right to work and to a just remuneration.

 

[drankin]

Referring to "human rights" might be borderline, what I had in minds isIf a business owner can fire anybody as they please, then it will be hard to have the right to work and to a just remuneration.

This is where we differ completely. Work is not and should not ever be a "right". It is contrary to the competitive nature of capitalism. It offers no incentive for an individual to be competitive in the workplace and therefore improve the competitveness of the company product as it leverages its supply and demand in the market. What you are pitching is not capitalism, it is socialism.

 

[loseyourname]

In my school i am debating with socialist every moment.

Their strong points are(they win a lot of support with this):

-Enviroment
-Healthcare
-Education

They're simply failing to recognize that nations with market economies still need means of dealing with public goods and other instance of market failure. That's why we require publicly owned corporations to comply with FASB accounting standards and release publicly available annual reports, because information symmetry is a foundation of competitive markets and they won't function as well without it. It's also why we regulate things like water pollution, because otherwise, someone downriver bears the cost of a production activity aside from the consumers and producers of the good, creating negative externalities and market failure. Education and many facets of healthcare (like vaccines) exhibit very clear positive externalities and so the government subsidizes them to bring the market back to an efficient equilibrium.

Your friends are just committing the economic version of Galton's Error. Capitalism doesn't mean all-or-nothing we don't provide public goods or correct market failures. It's just a commitment to the notion that many heads are better than one and individual consumers and producers know their own preferences and utility expectations better than a central planning committee does.

 

[humanino]

This is where we differ completely.

It may be, but I would like to understand your point of view better. When you say

the competitive nature of capitalism.

You certainly do not say capitalism and competition are equivalent. Do you mean to say that capitalism implies competition, or that competition implies capitalism ? This really confuses me, to me there is no reason they should be related a priori. They may come together, they may come separately, there is no necessity in the relationship between them.

To me capitalism is a social organization aiming at maximizing private profit. I agree that competition is constructive in a capitalist society, but I do not see why it should be a necessary ingredient.

What you are pitching is not capitalism, it is socialism.

I do not think so, but maybe from your perspective. From my perspective, socialism and capitalism are not even contradictory. Communism is contradictory to capitalism.

 

[drankin]

Here is one of a few definitions via dictionary.com:

World English Dictionary
capitalism (ˈkæpɪtəˌlɪzəm)

— n
Compare socialism free enterprise , Also called: private enterprise an economic system based on the private ownership of the means of production, distribution, and exchange, characterized by the freedom of capitalists to operate or manage their property for profit in competitive conditions.

 

[loseyourname]

To me capitalism is a social organization aiming at maximizing private profit. I agree that competition is constructive in a capitalist society, but I do not see why it should be a necessary ingredient.

Actually, economic profit at equilibrium in a pure competition model is zero. What competitive markets maximize is called net social surplus, a sum of consumer's surplus and producer's surplus. This sum is maximized when both components are equal. Profits exist when producer's surplus is larger than consumer's surplus, keeping net social surplus at a less than optimal sum, and this situation can only persist in the absence of competition. That's precisely why competition is so important to capitalism. The use of mechanisms (usually political favoritism) to intentionally subvert competition to cause either consumer's or producer's surplus to persist in excess of the other quantity is called "rent-seeking" and is a cardinal sin of a market economy.

 

[humanino]

That's precisely why competition is so important to capitalism.

Competition between different businesses, sure ! I have no doubt that free enterprise is vital to capitalism. My concern was about how to create an incentive to work within one given company. In drankin's proposal, the removal of workers' protective laws would create the incentive for being productive. This is this specific aspect which I strongly doubt. For instance, psychological counseling is a business which has flourished in England. Industrial and organizational psychology is a key tool for human resources. There are other means to create work productivity in a positive fashion, which in turns also is business itself !

 

[drankin]

Competition between different businesses, sure ! I have no doubt that free enterprise is vital to capitalism. My concern was about how to create an incentive to work within one given company. In drankin's proposal, the removal of workers' protective laws would create the incentive for being productive. This is this specific aspect which I strongly doubt. For instance, psychological counseling is a business which has flourished in England. Industrial and organizational psychology is a key tool for human resources. There are other means to create work productivity in a positive fashion, which in turns also is business itself !

Removal of protective laws? Like protection from being fired because your boss decides it's best for the company? You see, an employer has rights too. He has the right to fire you if he feels you are a detriment to the business so the company can maintain it's competitive edge in the market. At least in the US this is true.

Capitalism isn't just about corporations and large businesses, it's aslo about individuals who have their own skillset necessary in the market that they leverage to maximize their personal income if they so choose. If you make it difficult for one to get fired you make it difficult for someone else with a better skillset, whatever that might be, to get a position. If the position is no longer based on merit, then you cripple the capitalistic/competitive nature of the business that created that position.

 

[loseyourname]

Well, labor economics gets complicated more so than general microeconomics. Theoretically, pure competition in the labor market produces a more efficient equilibrium as well when the marginal revenue product of a worker equals his indifference point between the marginal utility of labor and leisure. People work exactly as much as they want and they are paid exactly what they are worth.

The first obvious problem is that marginal revenue product is extremely difficult to measure, and even when it is not, a company's financial performance is not always cleared tied in any meaningful way to labor productivity due to macroeconomic factors. This is fine if we have perfect labor mobility, because like in drankin's hypotheticals, if a company is no longer able to pay what a worker feels he is worth, he can leave. More realistically, there are a huge number of factors constraining labor mobility, such as non-transferable institutional knowledge, moving expenses, and the reality that workers have families that may not want to move or may not be able to move. This is why the federal government subsidizes moving expenses and corporate training expenses, to increase labor mobility and theoretically bring the labor market closer to an efficient equilibrium.

The other problems are usually related to the social costs of unemployment and underemployment, which are born by everybody even if just in the form of neighborhood blight due to homelessness and panhandling in a society that does absolutely nothing to combat it. This is why we have minimum wage laws, subsidized housing, and things like the EITC to make labor worth more to a worker even at low wages. Ideally, though, I think drankin is right that the best way to tackle the problem is to move these costs (since they are social costs) from the employer to society at large. Let employers fire people when they will and pay wages as low as they wish, but subsidize this via direct wealth transfers to individual laborers. The problem there is, even though it's cheaper and more efficient to directly transfer wealth than it is to indirectly subsidize through wage laws and labor protection, it's politically unsellable to just give money to people because it's seen as welfare and unfair to people who are worth more to their employers, who don't realize they're going to pay for it one way or another regardless.

Unfortunately, a place like France kind of employs the worst of both approaches, heavily subsidizing unemployment while also making it near impossible to lose a job, which combine to create historically stable high unemployment and a more systematic and persistent transfer of wealth from workers to non-workers.

To address you specific example, though, I think if in 10 years a company finds it cheaper to move its operations completely, it should be able to do so. Protecting workers at the expense of harming business competitiveness ends up hurting everyone in the long run. However, we shouldn't ignore all of the people that lose their jobs. We should probably pay their moving expenses in full, pay fairly generous but short-term unemployment benefits, and aid them in retraining if that is necessary. But it's better to bear that cost as a social cost than to force businesses to bear it, harming their competitiveness. The problem, again, is that it's probably politically unsellable in the US to be that generous to the unemployed even if it actually allows businesses to be more competitive and make both goods and services and labor markets more efficient. Republicans would attack it as subsidizing laziness and giving an incentive not to work and Democrats would attack it as subsidizing the offshoring of American jobs when in reality it's just allowing businesses to operate more efficiently and freely without destroying the lives of workers.

 

[loseyourname]

Capitalism isn't just about corporations and large businesses, it's aslo about individuals who have their own skillset necessary in the market that they leverage to maximize their personal income if they so choose. If you make it difficult for one to get fired you make it difficult for someone else with a better skillset, whatever that might be, to get a position. If the position is no longer based on merit, then you cripple the capitalistic/competitive nature of the business that created that position.

This is a really good point that often gets lost in these discussions. The NY Times just ran a piece the other day on the effect of tenure and the end of mandatory retirement on employment prospects for young academics. We're really seeing this nationwide as people retire later and later, leaving fewer and fewer jobs available to the fresh blood graduating from college every year.

 

[humanino]

Removal of protective laws? Like protection from being fired because your boss decides it's best for the company? You see, an employer has rights too. He has the right to fire you if he feels you are a detriment to the business so the company can maintain it's competitive edge in the market. At least in the US this is true.

Just a reminder, this conversation started with the russian guy who fires you for no reason, only because he so pleases. That is what I find unacceptable, and I still believe this is illegal.

 

[drankin]

Just a reminder, this conversation started with the russian guy who fires you for no reason, only because he so pleases. That is what I find unacceptable, and I still believe this is illegal.

It's not illegal in Russia.

 

[humanino]

It's not illegal in Russia.

From your own link

But government officials say such extreme measures could violate Russia's labor laws.

So without further information, it does not seem settled yet. And I still have not seen why this should be justified.
http://www.mn.ru/society/20100818/187990753.html
Also
http://www.mn.ru/society/20100813/187983560.html

 

[drankin]

From your own linkSo without further information, it does not seem settled yet. And I still have not seen why this should be justified.
http://www.mn.ru/society/20100818/187990753.html
Also
http://www.mn.ru/society/20100813/187983560.html

I explained why I think it should be allowed. An employer should be able to hire and fire whomever he/she wants for whatever reason he/she wants. If an employee doesn't agree, he/she is free to find employment elsewhere. This is pure free market capitalism. With an emphasis on "free"dom to run your business as you see fit.

 

[loseyourname]

Just a reminder, this conversation started with the russian guy who fires you for no reason, only because he so pleases. That is what I find unacceptable, and I still believe this is illegal.

Yeah, I guess the point I was getting at was that, in a perfectly competitive labor market, with perfect mobility of labor and many employers preventing anyone employer from acting as a price setter, this guy's action would be self-defeating in that he would not attract quality labor and his business would go under, leaving market share to be filled by other employers, allowing the employees he fired to work there.

The issue is that labor mobility is not perfect and people incur material losses moving from one job to another. Other firms can't gain market share instantaneously, so at least some people would remain unemployed for lengths of time the government would need to subsidize in order to allow this type of behavior.

For what it's worth, I think the labor mobility subsidies in the US do a pretty good job. When we're not in a massive recession like we are now, the cyclically unemployed tend to find new work relatively quickly and don't become an excessive burden or blight on society-at-large. Our homeless tend to be mentally ill or drug addicts, which is a completely different and unrelated problem.

As it stands in the US, it would be illegal for an employer to fire someone explicitly for their religious beliefs, but illegality of cause only becomes an issue when you fire someone for cause. It is usually legal for most employers to lay off for no explicit cause at all and, because of the fairly competitive labor market and subsidized labor mobility, we don't really end up with worker armageddon because of it.

Plus, most of our largest employers are public corporations that would never appoint morons like this to make decisions for them.

 

[humanino]

I explained why I think it should be allowed. An employer should be able to hire and fire whomever he/she wants for whatever reason he/she wants. If an employee doesn't agree, he/she is free to find employment elsewhere. This is pure free market capitalism. With an emphasis on "free"dom to run your business as you see fit.

I should mention that I would agree with you that this is acceptable in a society with very low unemployment. The main reason I have difficulties with the idea is that employment is pretty bad right now. So that also seems in line with what loseyourname describes.