Reminds of the old solution of ending the disparity of income -- under socialism, everyone is equally poor.

The problem with capitalism is that it produces too much?

"Overproduction" is a specialty term among Marxists and Keynesians, mostly. I don't think that guy knows or cares which of those meanings he's invoking. The two differ somewhat, but in both, "overproduction" doesn't mean overproduction in the practical sense you're thinking of. And in the kind of pseudo-economic apocalyptic language political types use, it means angering the gods. Does it matter which ones?
REPENT!

"The problem with capitalism is that it produces too much"

"Let me get this straight. The problem with capitalism is that it produces too much? You would rather have the reverse problem? Socialism is your answer."

The first statement is a misdiagnosis, and the second is a false choice.

The problem isn't that capitalism produces too much, it's that due to the amazing gains in productivity in the past few centuries (which is itself a boon), it has become possible to create more goods and services than a population could ever need without needing to use the entire manpower of that population to create them. Unfortunately, without being employed and getting a paycheck, a member of said population cannot access those plentiful goods and services, despite the fact that their employment is not necessary or even wanted. Ignoring this problem, in part, led to the Great Depression, and we've only kept ourselves out of depression since then by loaning ourselves money and hoping that economic growth outpaced our dues. Unfortunately, that's not turning out to be a viable long term strategy.

No doubt, there are some (even many) out there who view this as the end of capitalism, and also view the only alternative as a command economy (or a close equivalent). Of course, we learned over the past century that such economies are even less adapted to handling this economic shift than capitalism may be. All bringing up socialism does is to make the believer in capitalism feel momentarily better about their position while ignoring the ongoing crises.

This is standard Marxist bullshit, straight out of "Das Capital". The reality is that when productivity goes up, due to technological advances (broadly interpreted), the wealth created is spent on new, up-till-then unmet needs, which creates new employment positions that adsorb the labor surplus (eventually - historical change can be very painful to the participants). This happened during the industrial revolution when the automation of farming tasks resulted in a massive migration of unemployed farm workers to the newly built factories in urban settings. This influx of new labor allowed industrial development that up till then was simply impossible. This pattern happened again during other technological changes and it is happening now all the time.

Our current unemployment problems are self-inflicted wounds, the result of foolish government policy. If/when we boot the current socialist regime from power, and undo the destruction they (and their statist predecessors of either party) have wrought, then we could see full (i.e. ~4% with no discouraged workers) employment again.

Marx never dealt properly with technological change - consider applying the already-absurd labor theory of value to a modern lights-out factory that has *no* line workers at all... Where is the value coming from if there are no workers? Lol.

But, it is pretty typical for leftists to point to problems caused by their own statist policies, blame "Capitalism" (which isn't really an 'ism and does not have the ardent defenders and partisans in the same way that socialism does), and demand further growth of government. Their constant ranting about "evil corporations" and how they run everything ("the bosses"), is pure BS. Just look at the spectacle of the head of BP being called on the carpet in front of the congressional committee to absorb a large dose of abuse. What is the power relationship there? How can anyone sane look at those proceedings (or any similar scenes that happened in the past), and conclude that corporations are running things?

Absurd.

My understanding is closer to Eric E. Coe's than to that of Aeneas'.

The argument against "over-production" has had very little appeal to most people. Which is why the environmentalists are trying to manufacture a new form of "green" morality which condemns all activities deemed "unsustainable."

In a way, he's right. Boom/Bust is an inherent failure of capitalism, and there's nothing for it but to remain vigilant and stay out of its way.

Of course, socialism's answer to this is the "Bust/Bust" economy. Solve the problem by having nothing to grow in the first place. Which is kinda useless.

What we've seen happen in the past decade or so is unique only in that it was a collapse of multiple simultaneous bubbles, with idiots trying to keep them inflated as long as possible to serve political interests instead of letting them collapse and be done with it.

We got over the Dot Bomb much more quickly because Bush ignored it. Capitalism works best when the government doesn't try to "help".

I get SO TIRED of people trying to put economic liberty in moral terms, i.e. some or other kind of free choice of economic exchange between free people is somehow morally wrong because some other person is left out or has different life situations or what have you..

freedom is what it is. If you try to moralize everything, you don't have freedom anymore, just one man's idea of what's right and wrong being jammed down another man's neck.

Much like I often hear lefties whining about re: christianity, social conservatism, etc.

By far the most damaging 'moral repression' in the history of mankind has been the kind that complains that economic liberty is evil and we have the moral answer to create a perfect society, utopia, all will be equal, etc. That has killed over 100 million people.

The only way around the boom/bust cycle is to end booms. all bust, all the time. Stalin had an economist in the 1930s who is still known for his theories, the large economic wave cycle of 50 years or so, and this guy told Stalin it was impossible to end the business cycle without permanent misery and starvation.

Stalin had him shot.

Jeezus I HATE LEFTY THEORY. It NEVER WORKS.

Two comments if I may.

First, I do find the premise funny given that back when I was in school, the leftists would claim that capitalism needed shortages to survive. I am not sure how to reconicle the two comments.

Second, Guy's comment may have truth to it in that the dicotomy may not be between capitalism and socialism but perhaps a fundamentially private economy as opposed to a statist/managerial economy or a state capitalist economy. A managerial state does not necessarily have to be socialist in the classic sense and can even be democratic in a sense. I am just not sure that is where I want to live.

No Eric, the Boom/Bust (you got the order correct, good for ya!!) is NOT an inherent feature of capitalism. It is an inherent feature of the fiduciary media, artificial credit, central bank run economy. Reread your Hayek if you please!!!

As for the nonsense over overproduction, or as Lord Keynes would say, a "general glut", again, this is absurd. First, production equals consumption, the very act of producing consumes. All acts of production are equally acts of consumption, whether in the present or in the future, future consumption being savings, which funds investment, all coordinated via the interest rate. And no, the paradox of thrift is anything but. Economists who subscribe to such ideas, and try to sell them to the public (especially those who've won nobel prizes, teach at ivy league schools, and moonlight for the NY times!!) ought to be e_PhD'd, then taken out back and tarred and feathered.

As for the general glut, well, prices will fall. Again, there's that Keynesian claptrap about deflation. it's our friend. It's a good thing. No, it's a great thing. Surely the only possible way to produce a "glut" would be through technical innovation, which makes production more efficient. We produce more with less, we improve our standard of living. As if "deflation" has hurt the computer industry!!!

Otherwise though you are right. Socialism does one thing very, very well: makes everyone equal. Equally miserable.

Capital(ism) does not need its detractors. Never has, never will. And, it is its detractors' sole life source. The detractors will never forgive that.

Rob,

Please note that it was Brian who said that "Boom/Bust is an inherent failure of capitalism."

Looking at those charts showing that the average bust ("recession") of the last century lasted a whopping 11 months if left unmolested by crusading government types, I don't even think the inevitable proof of capitalism's inherent evil is such a bad thing.

In fact, if we could somehow finagle it to prevent a disastrous government like this from ever being elected again, I'd volunteer to have regularly scheduled recessions every 8-10 years.

Back up a minute. Wasn't the argument during the middle of the last century that Socialism would outproduce free markets? That is, Socialism was superior because free markets produced less? Wasn't all the brouhaha about visiting Russia and seeing the future about how you could go from peasants to industry with all of its dams, factories, railroads and canals in a generation to show what lay ahead for the future of man?

Wasn't Marx's original take on Socialism that it would be so good, economically speaking, reap such abundance that a man could change careers thrice in a day?

And why should booms and busts be a part of capitalism? If it's an inherent part of anything, it's an inherent part of human nature. (We gorge when there's food, just like every animal.) That said, I think government intervention into price signals is a greater cause to worry about, as it amplifies up and down trends.

"A managerial state does not necessarily have to be socialist in the classic sense and can even be democratic in a sense."

It's democratic if you're on the take. It's less so if you're being taken. Nothing is ever Socialist when you're getting the goodies.

Old joke: "If socialism ever came to Saudi Arabia, within six months there'd be a shortage of sand."

Socialism seeks the equal distribution of misery. And in time, despite its best efforts, even at that it fails.

Finding yourself with more product than market demand is merely a signal to lower prices or reduce production while shifting the freed resources to other use.

Part of freedom is the freedom to fail. If a company sinks a massive amount of capital into producing ten times more product than the market desires, assuming there is little margin available for price adjustment, then they seek to minimize the losses and try to do a better job of measuring demand in the future. Some lessons must be learned the hard way.

'Hard way' being a relative term. In attempts at Marxism the lesson are all too often learned by overproduction of corpses.

Eric, people can misattribute someone else's remarks to you because of the way your blog software shows the name/date/time of the comment poster as a separator between the comments, not visually attached to either one of them. People who don't carefully examine whether that separator occurs at the beginning or end of a comment then have a 50/50 chance of misreading which it belongs to.

The boom/bust cycle is by no means inherent to capitalism, at least to the extent we see it with powerful central banking regimes. But, as typically is the case, statists blame capitalism for some shortcoming or other, erect an agency to combat it, and when that agency inevitably makes the problem worse, insists that the only possible cure is ever more government power. Never do they admit the possibility that their own prior intervention is at fault.

The problem with socialism is that humans are inherently lazy and they won't bust their ass unless they're properly motivated. If the fruits of busting butt are nothing more than what the neighbor gets for goofing off all day not much is going to get done. Shortages will ensue.

Capitalism has great motivators but that eventually causes Brian's boom/bust scenario. If something is the going thing, everybody jumps in and overproduction follows. The solution is war.

In war, you can't really overproduce, since as soon as you produce an artillery piece, airplane or tank you take it out and let the enemy blow it to smithereens. Production of war material produces the wages that allow workers to buy consumer goods so the civilian market takes off too. An additional feature is that both sides, but the losing side in particular, has their physical plant blown to hell. That leaves the victor without competition for several years and the loser gets to rebuild his production facilities to the latest, most advanced standards. The only sticky part is you need a magnanimous victor not a Versailles-style victor. The war scenario works. WWII pulled the world out of depression and set the stage for 60 years of prosperity for both winners and losers. We need to do it again. But no nukes - total destruction is just that.

Yes, I know - there is a human suffering and death downside but natural selection ended in the early 20th century and a little (less than 10 percent of population) culling can't hurt.

I guess you can refer seeking Alpha to the Keynes/Hayak rap. There was no greater defender of the free market than Hayek but he saw these contractions as necessary. After all greater efficiency will mean lower prices and the resulting lower return will mean the eventual shift of capital to where it is more urgently needed.

The bust gets worse when the market is consciously inflated (such as in our housing market) so that the class of current haves can keep raking in the money even though its time for the cycle to turn. A successful capitalist will become a socialist if he can freeze his position (or his heir's position) in society. He will push to get every bit of wealth he can consume and he will do so under the guise of social welfare (Should that be called Goring?). In the long run the problem of socialism is that socialists don't know when to stop stealing.

In the long run the problem of socialism is that socialists don't know when to stop stealing.

I like that.

Eric, yes I see that. I apologize for the misattribution.

Progressives believe that it is fundamentally immoral for one man to have a fancy car while other men have to hitchhike. Come the Revolution, everyone will hitchhike!

Two things we could do to turn the periodic tsunamis of boom/bust in the business cycle into manageable ripples would be to eliminate the price distortion caused by taxing production. We need to shift to a single, universal, and uniform tax on sales. The economic benefits of switching to this tax model are difficult to overstate.

The second thing we should do is end the government's monopoly over money by accepting competing metal based currencies as legal tender. Competition would force the managers of the greenback to do the right thing more often than not, and perhaps the influx of fresh capital would lessen the temptation to monetize things like debt and equities.

Stephen, the problem with complaining that Capitalism is inherantly "Boom/bust' is that Socialism as an alternative is inherantly bust/bust. Boom/bust is much better than bust/bust. Thatisall.

Stephen, the problem with complaining that Capitalism is inherantly "Boom/bust' is that Socialism as an alternative is inherantly bust/bust. Boom/bust is much better than bust/bust. Thatisall.

IN other words. . .Socialism is in the state capitalism is in a 'bust phase _All the time_.

One slight bone to pick with many of you. Socialism doesn't make everyone miserable. Since socialism is a 'planned' system, the 'planners' make sure they're not miserable. If you doubt me, just check who's golfing and entertaining frequently and who's not.

Profits fall every 60-80 years??

I guess when compared to 5-30 million of your citizens being killed every generation or so as a defect of communism, it isn't so bad

Not sure of the agenda (if any) of the person who made that comment at Seeking Alpha, but as noted be Eric, he's somewhat correct.

Noting that a system has inherent flaws is only problematic if you assume that every problem needs, or can even accommodate a solution.

And as noted by many, the common 'solution' of socialism is a cure worse that the disease.

michelle raises a great point - there are layers of socialism, as it evolves towards communism, and many fail to recognize (or intentionally hide) that in its purest form, a permanent oligarchy is created at the top that has massive control over the maximum number of people. Many seem to always give credit to the socialist, as though they are most likely driven by benevolent intentions, and perhaps are just misguided or only fail because "it just won't work"... but lets be honest with ourselves, those who are driven by the desire for power will use whatever is available to gain it, and these systems give them the most. I personally don't believe for an instant that socialist leaders are driven by benevolence; I think that is the core level self perpetuating lie of socialism - a lie by design - intended to draw in the weak, contain the strong, and entrap those with opposing views into an endless debate similar to what has been written above...

A pure man, who can also be benevolent, fundamentally recognizes that liberty for oneself cannot exist without ensuring it for others... and we have a free market when everyone agrees to this. The radical socialist who aspires to be an elite communist will never even acknowledge this, because to do so would reveal that they do now want freedom for others - they want power over them.

One cannot talk about capitalism vs. socialism in the abstract. One must consider the species whose society is being organized.

Fortunately or unfortunately, members of the homo sapiens species are programmed to advance themselves and their families, to the detriment of others if necessary. Competition with others is the root of our existence.

Interestingly, advances in our species have been rooted in systems that bring many people together and organize their efforts in somewhat the same direction. For example: religious movements that focus people's energy towards serving their God, patriotism/nationalism which focuses people towards serving their Country/Leader, and capitalism which organizes people into corporations that compete with each other for profit. Socialism/communism is one such organizing system, which has a stated goal of serving the greater good, but which in practice ends up serving a Leader in every documented case. Socialism would work well for a species quite different from homo sapiens... a species that does not value personal gain or comfort or power over contributing to the collective good. Something like an advanced version of ants. In our case, it ends up devolving into a simple power elite that rules by force and decree, until a revolution happens.

So far, in our history, capitalism/corporatism wrapped in an organizing governmental system to set the rules has been the most successful, objectively, of all. That is not to say it's great. Corporations suck in many ways, but it seems to me they suck a lot less than oppressive, all-controlling governments. At least there's some competition and choice going on.