Does Capitalism Truly Reduce Poverty and Increase Wealth for All?

[Aquamarine]

Many things to reply to

1. Communism have mostly died but there are many other systems competing with capitalism, is not the only system. Left and right-anarchism, fundamentalism and feudalism are examples. More importantly, there are different degrees of capitalism and research shows that more is better.

Regarding left-anarchism and the welfare state in Europe, for example in Sweden:
https://www.physicsforums.com/showthread.php?t=48717

2. Regarding poverty, read through this forum again. Capitalism is the system that has the overwhelming empirical evidence for reducing poverty long-term. Note that inequality is not the same thing as poverty as some seems to think. If you have any other opinion, give an explanation for the empirical studies given.

3. There will be no malthusian catastrophe due to too little energy, there is plenty available. And the world population is stabilizing:
https://www.physicsforums.com/showthread.php?t=46384

4. Regarding war, if the world was democratic, there would be little need for a military since democracies never goes to war.
http://www.hawaii.edu/powerkills/PK.APPEN1.1.HTM

And more political freedom generally gives more economic freedom:
http://www.handels.gu.se:81/epc/archive/00002319/
http://www.appstate.edu/~dawsonjw/ejpefinal.pdf

5. Regarding garbage and recycling:
http://www.perc.org/pdf/ps28.pdf

6. Regarding libertarians and government, some advocate no government (right-anarchists), but most advocate a small government (minarchism). Those, like the Libertarian party, are very strong advocates of the Rule of Law and property rights.

Capitalism should be understood as what the various indexes of economic freedom try to measure: Rule of law, property rights, low taxes, few regulations, small state, sound money, and free trade. In short, a state that prevents people from gaining from others though the use of violence, but let voluntary cooperation build the rest of society.

But a "strong" government that socializes and regulates ever more parts of the economy is harmful,
http://mwhodges.home.att.net/intl-spend.htm
http://mwhodges.home.att.net/regulation.htm

7. Regarding the minimum wage and monopolies,
https://www.physicsforums.com/showthread.php?t=47769

8. For some answers to other objections see:
http://www.econlib.org/library/CEECategory.html

For example, on the dangers of regulating a "riskless society"

http://www.econlib.org/library/Enc/RisklessSociety.html
http://www.econlib.org/library/Enc/DrugLag.html

9. At last, a graphic illustration of the importance of economic growth and that the world is getting better:
http://www.whc.ki.se/index.php

 

[Selbstüberschätzug]

@Ludwig

The depression after 29 has made very clear that Capitalism don’t work. How US-Centric must someone be to say that. There really other examples. But I can’t blame you because you are probably a victim of the American schools…

Marxism is a flawed Idea? I don’t think so. You have to say what is failed of his Idea. There are more then one possible point which on can criticises and I don’t want to weaken a point if its not yours.

Yes, Marxism was established in Russia to early. Marx wrote that his theories has to establish in a developed Country. Maybe he would give himself surprised how well it worked anyway. but Lenin (which was in my country till he established the communism in Russia) thought internationally (“ Proletarier aller Länder vereinigt euch”) is the best known sentence witch Marx pointed out……

We have got anarchy. Capitalism and the use of force is anarchy in its purest form.. Woks it? Ore what do you mean? Where are the advantages beside to frighten some rich people?

 

[Selbstüberschätzug]

@Aquamarine

I have not the time to read your links. If you have an argument then say it in your on words. As fare as I can see all of your statements are holey like a swiss cheese.

 

[Aquamarine]

@Ludwig

The depression after 29 has made very clear that Capitalism don’t work. How US-Centric must someone be to say that. There really other examples. But I can’t blame you because you are probably a victim of the American schools…

Marxism is a flawed Idea? I don’t think so. You have to say what is failed of his Idea. There are more then one possible point which on can criticises and I don’t want to weaken a point if its not yours.

Yes, Marxism was established in Russia to early. Marx wrote that his theories has to establish in a developed Country. Maybe he would give himself surprised how well it worked anyway. but Lenin (which was in my country till he established the communism in Russia) thought internationally (“ Proletarier aller Länder vereinigt euch”) is the best known sentence witch Marx pointed out……

We have got anarchy. Capitalism and the use of force is anarchy in its purest form.. Woks it? Ore what do you mean? Where are the advantages beside to frighten some rich people?

Contrary to what you think, the great depression was caused by the socialistic intervention of Hoover and Roosevelt. Previous depressions had been relatively quick affairs, it was the the state intervention that prolonged and deepened the depression to levels never seen with less regulations before.
http://www.mises.org/freemarket_detail.asp?control=258&sortorder=subject
http://www.mises.org/fullstory.aspx?Id=1389

Regarding the theoretical and empirical failures of communism, read this thread again. See also the link about left-anarchism and Sweden in my previous post.

For the most famous theoretical destruction of socialism (very long),
http://www.econlib.org/library/Mises/msS.html

 

[Ludwig]

The depression after 29 has made very clear that Capitalism don’t work. How US-Centric must someone be to say that. There really other examples. But I can’t blame you because you are probably a victim of the American schools…

I have no idea what you are talking about. I said the same thing you said above about the depression of 29, and you accuse me of being US-centric? I don't get it! Let's clear some facts first:

- I am not American, don't live in the US, and don't intend to
- I am not an enthusiast of capitalism; I think it's a corrupt system
- Contrary to what some people claim here, most of the world is capitalist, including Latin America, Africa, India, and so on. Anyone can find plenty of proof that capitalism doesn't work in the streets of Bombay or Caracas. (for those ready to say "ah, but those countries are not really capitalist, otherwise they'd be rich" - please spare me the nonsense)

So Selbstüberschätzug, I don't know what prompted your response, but your apologies are accepted

Marxism is a flawed Idea? I don’t think so. You have to say what is failed of his Idea.

Back in school, I once asked this question to my Economics teacher, who was very enthusiastic of communism:

- Master, in capitalism fear of poverty is what motivates people to work. If a person can't be poor in a communist society, what motivates them to work?

His reply was:

- In communist countries, people are motivated to work because they desire the good of society.

I was very impressed with his answer, but this was back in 1986 (I think), before the Perestroika. No one really knew much what was going on behind the iron curtain. The truth, as Gorbachev let the world know a few years later, was that nothing motivates people to work in communism.

So the flaw with Marxism is that it doesn't have a strategy to motivate people to work. I believe you said so yourself.

We have got anarchy. Capitalism and the use of force is anarchy in its purest form.. Woks it? Ore what do you mean? Where are the advantages beside to frighten some rich people?

I said anarchy "in the good sense of the word", but perhaps that sense has been lost. There was a time when anarchy meant freedom from oppression; these days it means more a free-for-all chaos. I made a poor word choice. But I still think we need freedom from oppression. We need less policemen bullying honest citizens (that's what they do most of the time), less politicians passing laws to benefit the rich (that's what they do most of the time), less lawyers defending the "rights" of people who can afford to pay their fees, and so on.

 

[russ_watters]

This thread is starting to parallel the other similar one. Anyway, the most important point to me is this one:

2. Regarding poverty, read through this forum again. Capitalism is the system that has the overwhelming empirical evidence for reducing poverty long-term. Note that inequality is not the same thing as poverty as some seems to think. If you have any other opinion, give an explanation for the empirical studies given. [emphasis added]

Quite frankly, most of you guys are quite simply refusing to accept reality at face value.

 

[Selbstüberschätzug]

@Ludwig, Aquamarine has already shown you way I'm not so pleased with your example from the short correction of and after 1929.

But if you take the stock-exchange as a hole as your example. Then you are probably right

 

[so-crates]

In a true implementation of capitalism, there would not only be no trade barriers, but no labor barriers as well. Thus if GM moves a plant to Mexico, the workers should be able to move with it. No immigration or trade barriers pretty much implies the elimination of states and governments. Its ironic that capitalism shares this trait with Marxism :-)

A pure capitalistic society would also have no intellectual property laws.

We can therefore conclude that pure capitalism is not a viable economic system in our present global society.

Capitialism has been dead for about 200 years or so. What we have now a form of corporate socialism.

 

[selfAdjoint]

Capitialism has been dead for about 200 years or so. What we have now a form of corporate socialism.

Capitalism as you define it - pure market without any government influence at all - never existed. Even in the time of Adam Smith and Diamond Jim Brady the government was enforcing contracts and levying taxes, to say nothing of performing its own transactions in the marketplace. It was government action that created the modern corporation, inculcated modern banking, and protected favored enterprises.

 

[so-crates]

Capitalism as you define it - pure market without any government influence at all - never existed. Even in the time of Adam Smith and Diamond Jim Brady the government was enforcing contracts and levying taxes, to say nothing of performing its own transactions in the marketplace. It was government action that created the modern corporation, inculcated modern banking, and protected favored enterprises.

This is true, thank you for clarifying. What I meant that society, especially in America, was headed towards a pure capitalistic model before the industrial revolution . I should have said "the idea of capitalism has been dead for about 200 years".

 

[Aquamarine]

An example of a capitalistic society without barriers to immigration, at least for whites, was the US of the nineteenth century. An enormous amount of people immigrated and found and created employment, industries and better living standards. A similar situation is now taking place in China, were hundreds of millions of people are moving in order get a better life. So capitalism can handle the desire of people to seek a better life. Other system have great difficulty, freedom of movement was extremely limited in the communistic states, with people ordered to work and live in a certain place.

Intellectual property rights can certainly exist in capitalism. Property rights in general is an important part of the capitalistic system.

Regarding the industrial revolution, there was very little capitalism before that. Look at what capitalism is: Rule of law, property rights, low taxes, few regulations, small state, sound money, and free trade. In short, a state that prevents people from gaining from others though the use of violence, but let voluntary cooperation build the rest of society.

Before the industrial revolution most of these were missing. Kings and nobility could arbitrarily decide rules and laws for the rest of society. Violence and crime was high, making for example trade and traveling very dangerous. The property rights of the common people were routinely ignored. Taxes were high and often enormously complicated with for example numerous tariff borders within a country. Guilds restricted competition in the towns. The peasants were bound to the land and village communities similar to guilds prevented competition. Usually the liege had monopoly on different services in his domain. Wars were very common and often paid for by high inflation.

It was first when this started to change that a revolution took place. The name "industrial revolution" is misnomer, it was a capitalistic revolution and equally important in agriculture. Estimates of gdp/capita before this revolution are essentially flat, is was first when capitalism was introduced that this started rise and poverty started to decline.
http://www.minneapolisfed.org/pubs/region/04-05/essay.cfm
http://www.j-bradford-delong.net/TCEH/1998_Draft/World_GDP/Estimating_World_GDP.html

 

[Aquamarine]

More on capitalism in this thread:
https://www.physicsforums.com/showthread.php?t=49793&page=10&pp=15

Contrary to what the communists, anarchists, greens and others claim, it is a fact that poverty is declining very rapidly worldwide. In fact, poverty defined as the percentage of people with an income of under 1$ (PPI adjusted), has halved in developing countries since 1980. Thanks capitalism.
http://www.worldbank.org/research/povmonitor/

A more theoretical argument. There is the perception that rules are necessary to prevent the companies from exploiting the workers, for example by setting a very low wage. But what is preventing the exploitation is the fact that the companies are competing with each other for the available workers. More on why the minimum wage regulations actually causes unemployment and actually lowers average wages for those working:
https://www.physicsforums.com/showthread.php?t=47769

But who should help those that cannot work for example due to health or other misfortune? The answer is of course the same in all political systems, welfare/charity paid by those who are working. But must welfare/charity be organized by the state? Why assume that private welfare/charity cannot do the job?

The welfare organized by the western states is in no way guaranteed. In fact, the long-term projections shows that the western welfare states are headed towards bankruptcy. In fact, it they were corporations, they would already be in bankruptcy. So state welfare have already failed. Not to mention the creation of a large class of people who only live completely or partially on state welfare without working while able to do so.

Private welfare could take the place of state welfare. People in the US give more than 10 times as much in charity as the people in Sweden, measured in percentage of GDP. If taxes are lower and there is less state welfare, people will give more to private charity. And private welfare will be exposed to competition and thus be much more efficient than state welfare. Only those truly in need will receive welfare and in a more efficient way.

 

[CharlesP]

American capitalism is a fraud perpetuated by such lie engines as the Cato institute and the Heritage Foundation. They say the words but what they do is really play monopoly. The rich have gotten richer and the rest of Americans have gotten poorer in recent times. See http://www.zmag.org/
Malthus has been proven correct. Today there are more starving people than ever before. The world is overpopulated and global warming is proof, accompanied by massive unprecedented extinction. The US is on the brink of economic collapse when the oil runs out. Hopefully this capitalism cult will be short lived.

 

[russ_watters]

The rich have gotten richer and the rest of Americans have gotten poorer in recent times.

This is factually wrong and the facts have been given to you. You have no excuse for continuing to assert this: it may have been ignorance before, but now its a lie.

Today there are more starving people than ever before.

This, while (probably) not specifically facutally wrong, is highly misleading: since the population grows exponentially, there could well be more starving people today than ever, even as the starvation rate has fallen - and it has fallen dramatically.

edit: I'll be generous since I didn't see it on the last page: http://www.census.gov/hhes/income/histinc/h03ar.html is the mean household income for each 5th of the population (and the top 5%) for the past 37 years. As you can see, even after adjusting for inflation (second table), over every period greater than 5 years in the past 37, household income has increased for the bottom 5th of the population and is currently 31.8% higher than 37 years ago.

Edit2: Just in case you are hoping to use the last 4 years of decreases for the bottom 5th to prove your point, look over at the top 5% - it has decreased for the past 2.

 

[Selbstüberschätzug]

@Russ Watters. I want to say that I’m not interested in only the USA.. As we seen before we life in a world witch is globalised. I would like to see figures witch includes the really poor on our planet.

But beside of that. The income really don’t says to much in your country. You have to see that relatively poor people have to pay more for healthcare, schools, food, security… then in your golden 60th. Therefore your Inflation numbers may be correct for the hole economy but isn’t the same fore all Income classes ore aren’t taken to account.

 

[russ_watters]

@Russ Watters. I want to say that I’m not interested in only the USA.. As we seen before we life in a world witch is globalised. I would like to see figures witch includes the really poor on our planet.

Aquamarine's poverty rate figure (dropped by 50% in the past 25 years) is global. And while I would also like to see some numbers on wider segments of the population, the destitute poor are (were) a huge fraction of the global population by themselves. So really, you could say that capitalism has actually helped more poor people than rich people.

But beside of that. The income really don’t says to much in your country. You have to see that relatively poor people have to pay more for healthcare, schools, food, security… then in your golden 60th. Therefore your Inflation numbers may be correct for the hole economy but isn’t the same fore all Income classes ore aren’t taken to account.

I'm not sure what you mean - inflation is a measure of buying power and is largely based on consumer goods (like food). And the poor don't generally pay anything at all for healthcare, schools, or security.

 

[Tom McCurdy]

American capitalism is a fraud perpetuated by such lie engines as the Cato institute and the Heritage Foundation. They say the words but what they do is really play monopoly. The rich have gotten richer and the rest of Americans have gotten poorer in recent times. See http://www.zmag.org/
Malthus has been proven correct. Today there are more starving people than ever before. The world is overpopulated and global warming is proof, accompanied by massive unprecedented extinction. The US is on the brink of economic collapse when the oil runs out. Hopefully this capitalism cult will be short lived.

The US although heavily oil dependent will not go into economic collapse when the oil runs out... besides capatialism works and is probablly the best system for any country to use to be sucessfull. If the US were to go into economic collaspe that would severly F@#k up the enire world's economy. The only real danger to the US economy right now is the growing power of the EU.

 

[Selbstüberschätzug]

@Russ Wetters

The figures saying something about the earning from below 1 $ per day.

The second colon says something about 2 $ per day. Here the figures are 66.7 to 52.9.

Considering that the globalisation has reached in the last town in the world in the last 25 years the figures saying nothing. ( Before the globalisation many where able to live without any money now the situation has changed)

Aside of that what caused the increase the wealth (manly for the already rich / threshold countries) in the world ( and in this perspective) capitalism or technologies?

Yes Inflation is based on a common goods-basked. But if you are poor the things witch you are forced to by from this basked are others then if you are rich. Won’t explain this to the last detail.

 

[CharlesP]

This is factually wrong and the facts have been given to you. You have no excuse for continuing to assert this: it may have been ignorance before, but now its a lie.

A lot of people don't agree with you. I just heard (NPR) that three million people have died in the Congo in recent years.
http://zena.secureforum.com/Znet/zmag/articles/nov97sklar.htm
http://zena.secureforum.com/Znet/zmag/articles/hermanjulyaug98.htm
http://www.larouchepub.com/other/2001/2803_import_bubble.html
I don't think that capitalism or even humanity can stop this death sentence http://dieoff.org/page137.htm.

 

[Aquamarine]

A lot of people don't agree with you. I just heard (NPR) that three million people have died in the Congo in recent years.
http://zena.secureforum.com/Znet/zmag/articles/nov97sklar.htm
http://zena.secureforum.com/Znet/zmag/articles/hermanjulyaug98.htm
http://www.larouchepub.com/other/2001/2803_import_bubble.html
I don't think that capitalism or even humanity can stop this death sentence http://dieoff.org/page137.htm.

Congo is certainly not a capitalistic country. On the other hand, there have been a great reduction in poverty in those countries that have embraced capitalism. And as much of the world has embraced capitalism, there has been a huge reduction in poverty worldwide.

Looking only at income in the US and those poor there, read the thread from the beginning and especially my first post. In addition, I do not understand how capitalism can be to blame since government size and regulations are constantly increasing. In other words, those negative effects you think are due to capitalism have happened at the same that capitalism is slowly decreasing in the US.

And the malthusian energy catastrophe have been discussed in several other forums where your arguments have been proven wrong.

 

[polyb]

If I may interject,

aquamarine and russ, can you point out any problems with "capitalism" per se? Because all I have seen in this thread suggests that you guys think that it is some kind of pancea. For me that raises the flag!

So how about it?

 

[russ_watters]

aquamarine and russ, can you point out any problems with "capitalism" per se? Because all I have seen in this thread suggests that you guys think that it is some kind of pancea. For me that raises the flag!

So how about it?

There are, of course, problems with capitalism and we've never claimed there aren't. Dealing with the power of large corporations is still difficult, even with the Sherman Act. Dealing with those who fail in the Darwinian process is a big problem. The US isn't anywhere near complete capitalsim because of such problems with it.

Neither of us have said anything like what you are implying. All we're saying is its the best system out there and has been enormously successful - and that is straightforwardly, factually true. What should raise a red-flag for you is the lies being told here against it!

 

[selfAdjoint]

I have a theory that capitalism, left to itself, tends toward oligopoly. I know that von Mises or one of the other gods of the Austrian school has an argument that this is due to government interference, but his data is from Germany, which was dirigiste from the git-go. If you look at the US, we do have the Sherman Antitrust act, and every generation there's a high profile prosecution under it - Ma Bell, Microsoft, etc. And yet in spite of this anti clumping trend in the US, practically every manufactured product the consumer buys is manufactured by a Pareto oligarchy: 50% of the products are made by one company, 20% by another, 10%-15% by a third, and the rest by a gaggle of small guys. In older product lines the small guys are thinned out. The evolution from Adamic competition to oligarchy is fast, too, see the history of the desktop computer.

 

[polyb]

Thanks selfAdjoint, you delivered a point before I even had a chance!

I would like to further your hypothesis and take it to a more generalized prospectus of economics: Any economical system will tend towards a system of oligarchy. I think Pareto demonstrated this in his work and sets a basis for which to come grips with the inherent problem of any economic system. Namely people who will do anything and everything to monopolize an economy for their own benefit. I don't care how you name it: capitalism, socialism, communism, etc., everyone of these has demonstrated that they can be manipulated by those willing to do so. Unfortunately many people can not see the factual forest for the semantic trees. So comes the question of what kind of system would best. Well I would have to contend that perhaps we can start with a rationalism that stands in recognition to the very simple fact of these human shortcomings. Fortunately many of the founders of the U.S. were painfully aware of this problem and has given us something to go by.

I was also trying point to russ that even though capitalism has it's merits, it also has it's detriments as well. An example can easily be seen in the current situation involving medicine. In the pursuit of profit people are not necessarily getting the treatment they need and quite a few are getting "bad medicine" which is lethal. Market forces do not work in the same way with medicine as it does say with tennis shoes. Sure, I can buy a pair of shoes that are lousy and not buy them again, thus implementing the "market force". But when it comes to medicine, well I may not have a second chance to exercise the same discretion and force the market into correction.

I would also like to reframe this whole debate into the system of game or graph theory. I think it would be more enlightening and robust in terms understanding the inherent complexities of economy. Otherwise all particpants in this "game" of internet chatroom discourse will actually lose because there will be nothing more than a bunch of huffing and puffing the the tune of "my sophistry is better than yours"!

 

[selfAdjoint]

I would also like to reframe this whole debate into the system of game or graph theory. I think it would be more enlightening and robust in terms understanding the inherent complexities of economy. Otherwise all particpants in this "game" of internet chatroom discourse will actually lose because there will be nothing more than a bunch of huffing and puffing the the tune of "my sophistry is better than yours"!

Cosma Shalizi has some stuff in his archives in that direction. Here is his site:

http://www.cscs.umich.edu/~crshalizi/weblog/

 

[polyb]

Cosma Shalizi has some stuff in his archives in that direction. Here is his site:

http://www.cscs.umich.edu/~crshalizi/weblog/

WOW! Thanks selfAdjoint, a blogger right up my own wacky alley! I would like to do my graduate studies in complexsystems and Cosma seems like the kind of people I would like to study/work with. It is going to take me a while to find his stuff on game/graph and economics though. Once again, thanks!

 

[selfAdjoint]

Hope you can study with him; he's looking for work, as you will find if you study his site. All my best wishes for you; I think complex systems are the secret of a lot of what we need.

 

[Aquamarine]

Those thinking that capitalism most lead to a harmful oligopoly should read this thread. Skip to my last posting if in hurry. Read for example the history of why the Sherman act was created:
https://www.physicsforums.com/showthread.php?t=47769&page=5&pp=15

That there is a oligopoly in many markets is not an argument in itself. That reflects that fact that in those market that is the best structure, for example markets requiring very large investments cannot have many small competitors. Those arguing otherwise must show that oligopoly is more harmful than some regulated alternative, not that it exists in some cases.

There are those who for various reasons have less ability and may not be able to compete. But they would have those difficulties in any system and they must be supported by the others. That is charity, no matter if it is done by the state or individuals. And as I have pointed out in this article before, why cannot charity have competition and efficiency like other sectors of society?

Regarding medicine, it is no different than any other market. The demand is endless, for example it would be good if all people could have an complete body MIR scan and interpretation by the very best radiologist every year. But since that is not possible, the free market is the best way to organize the limited resources available.

Regarding the tennis shoe example, firstly there should be the possibility to sue for things like false advertisement or malpractice, secondly competition is not done by one individual but by many. And people are learning from the mistakes and experiences of others. This can be a market in itself, like magazines doing reviews of computer games, cars or various household devices.

There are of course problems in capitalism that may require limitations. One very interesting theoretical one is "The tragedy of the anticommons". But I think it is actually an argument that there are some property rights laws that are better than others, not an argument against property rights in itself. That problem can be solved by competition between many small states that have somewhat different laws.
http://www.sciencemag.org/cgi/content/full/280/5364/698

Other proposed problems (often imaginary or having good if less than perfect solutions or with no proof that there exists better solutions):
http://en.wikipedia.org/wiki/Market_failure

 

[selfAdjoint]

That there is a oligopoly in many markets is not an argument in itself. That reflects that fact that in those market that is the best structure, for example markets requiring very large investments cannot have many small competitors. Those arguing otherwise must show that oligopoly is more harmful than some regulated alternative, not that it exists in some cases.

You can say that, but it destroys the thing that the market is valued for: its invisible hand in setting prices. Oligopolies work by administering profits, and contrary to economics 101, when they don't sell enough product, they may not lower the price but raise it, to make their profit constant with the lower sales. Ford and GM have actually done this in the past. This behavior is known as inelastic prices, and the prices of an awful lot of what we buy in the US are inelsatic. What then becomes of the free market? What becomes of equilibrium economics?

 

[Aquamarine]

You can say that, but it destroys the thing that the market is valued for: its invisible hand in setting prices. Oligopolies work by administering profits, and contrary to economics 101, when they don't sell enough product, they may not lower the price but raise it, to make their profit constant with the lower sales. Ford and GM have actually done this in the past. This behavior is known as inelastic prices, and the prices of an awful lot of what we buy in the US are inelsatic. What then becomes of the free market? What becomes of equilibrium economics?

No, oligopoly means few participants, not that they are not competing. Since they are competing, they cannot raise their prices above their competitors. They can of course try to form an agreement with each other limiting competition, but in practice they will usually try to cheat on each other, breaking the agreement. And outsider will see the large profit potential and will enter the market as new competitors. In the end those companies keeping the agreement will be the losers, with their market share taken by those cheating and new competitors.

 

[russ_watters]

AKA - price fixing, which is not a market force (its a way to circumvent market forces) and is also illegal. The airlines have done this as well.

 

[Aquamarine]

AKA - price fixing, which is not a market force (its a way to circumvent market forces) and is also illegal. The airlines have done this as well.

Yes, but some argue that it not necessary to regulate that. Cheating and new competition will in the end stop price fixing by itself. The regulations have a cost in oversight and in bringing cases into the justice system. And more importantly, that in many cases the regulations have been used by weaker competitors to restrict a stronger competitor that produced superior goods to lower prices.

 

[Burnsys]

here in argentina in 2001 we had a mayor economic crisis.. 20% of the people went below the poverty line, i guess that means less demand. but oil prices rised, telephone, electricity, food, everything rised when lees people have the money to buy them.

oil corporations (Repsol, shell, exoon) in argentina always rise the prices togheter,they never fight each other, and when a new small company emerge, they buy it... they leave us no choise but to buy OUR oil extracted from OUR soil to them.
Btw, they have polluted our rivers too...

 

[Aquamarine]

here in argentina in 2001 we had a mayor economic crisis.. 20% of the people went below the poverty line, i guess that means less demand. but oil prices rised, telephone, electricity, food, everything rised when lees people have the money to buy them.

oil corporations (Repsol, shell, exoon) in argentina always rise the prices togheter,they never fight each other, and when a new small company emerge, they buy it... they leave us no choise but to buy OUR oil extracted from OUR soil to them.
Btw, they have polluted our rivers too...

Regarding Argentina and energy:
http://www.mises.org/fullstory.aspx?Id=1518

And we have discussed Argentina before in this thread, including the rivers.

 

[selfAdjoint]

No, oligopoly means few participants, not that they are not competing. Since they are competing, they cannot raise their prices above their competitors. They can of course try to form an agreement with each other limiting competition, but in practice they will usually try to cheat on each other, breaking the agreement. And outsider will see the large profit potential and will enter the market as new competitors. In the end those companies keeping the agreement will be the losers, with their market share taken by those cheating and new competitors.

That's just idealistic dreaming. It is in the interest of the CEO of any of these oligarchs to achieve the maximum profit for a given cost. Competition militates agains that, by driving down prices. Cooperation is more cost effective in many instances, and cooperation under the table is how they do it. Even Adam Smith understood that; he specifically stated that his invisible hand only worked if there were so many producers that they couldn't effectively collude.