Toro

I agree with that statement. However, there is a very broad field of alternatives between communism and unfettered capitalism. In many debates 'capitalism' is equated with the 'US Model' and that is the distinction that I was trying to make. In many ways, Canada and Europe are better places to live than the US because it has a different approach to capitalism. On the other hand, the US does seem to be the place where most technological innovation seems to originate which means they are obviously doing something right but it is difficult to seperate all the different factors that lead to success. And there is more to life than making money as well...

It is true that over the past five years, there has been a massive flow of US dollars into the central banks of Japan and China. However, even before this, the majority of central bank reserves were in dollars. DeGualle used to complain about this as far back as the 1960s saying that the use of the US dollar as a reserve currency subsidized the US economy, which is correct. In the 1990s and 1980s, except for brief periods of time, private investors, not central banks, comprised the majority of investments in US dollars. The reason why this has not been the case this decade is because of the unwinding of the stock bubble. primarily in tech stocks. Also, sparhawk, understand that this focus on exports is so important in China and Japan because the consumer is not strong enough, unlike America. The structure of those economies are far more imbalanced than the US. There are three factors that determine the desireability of currencies as a reserve currencies - return, convertibility and confidence. If you look at all three of these factors, the US is dominant by far. Returns are higher in America than in Europe or Japan (the only three viable alternatives), the dollar is the most liquid and confidence is highest amongst investors in the US economy compared to Europe or Japan. I have to disagree with the statement about technology and standard of living causing the entirity of wealth. One common theme amongst all of them is technology, either through war or trade. Think about it. All empires were once small, but grew to become empires. They could not conquer other countries without technology. Countries with little technology never became empires as they could not accumulate wealth. But technology is an absolute, definite requirement for economic growth. It is the application of technology which lowers costs and expands markets for consumers. This is as critical today as it was a thousand years ago. Today, we call this application of technology in the economy "productivity". Simply because an empire was a military power does not mean it was an economic one, and vice-versa. The rise of England - which was a barren outpost in the corner of the world in 1500 - and the fall of Spain - which was a far more important nation in Europe - are fascinating tales. Gold from the Spanish conquests in Latin America essentially drained away from Spain to England because of Spain's inability to foster an economy that matched its naval power. In contrast, England became an economic power first, using that gold to build its navy and conquer the world. I would disagree with your comment about the industrial revolution and America, at least to a point. The primary market for the industrial revolution, at least until the mid-1800s, was Britain itself and Europe. In fact, the use of different types of iron in the United States disrupted the British iron industry. Certainly, Britain and America were important trading partners, but Britain supported the South in the Civil War because the South didn't like paying high tariffs on industrial goods made in the northeast and would have imported more industrial goods from the UK had the South won. Another interesting case is Holland. Holland was an economic power that far exceeded its military strength because it was the most open, trade-oriented nation in the world in the 1700s. On China, that's partly correct. But this is not unusual in terms of economic development, and is no different than how Canada and the US developed. Developing countries import capital because, by definition, they are capital short. However, there are a lot of Chinese getting rich - or so my Chinese friends tell me- which isn't merely a function of them working in multinational corporations. And BTW, real disposable incomes in China rose 440% from 1980 to 2000 compared to about 60% in the US. As for Japan, again, that is partly correct, and mainly responsible for the problems Japan is in today. The inability to create a dynamic consumer market is an outgrowth of this policy. Also, I have never argued for an "unrestricted free market economy." That's a fantasy, and those on the Left use this definition as a straw man for a silly argument - this thread for instance. As I stated earlier, there are many factors which contribute to economic growth, of which I don't feel like going into at the moment. An economy based on the price system and private ownership of capital, i.e. capitalism, is no gaurantee a nation will get rich in today's world. But a lack of such an economy is a gaurantee it will not get rich.

Incrementally, yes. China allows its citizens to get rich. It didn't under communism. The government still owns some huge, dinosaur state-owned companies that are unprofitable. But one of the reasons why they have gunned growth is to absorb the workers these state-owned corporations lay off workers and restructure for eventual privatization. Plus, foreign investment is flowing into the country, which it did not under communism.

You make a very good point Sparhawk. The last couple of years has seen extraordinary accomodation, both in monetary and fiscal terms (of which, professionally, I am somewhat critical). This has goosed growth over the past few years, and has almost certainly borrowed from the future. But its also important to point out that this extraordinary accomodation has boosted growth elsewhere as well. This accomodation was followed most other places in the world, especially in China, which directly benefits Canada as Chinese growth has pushed raw materials to all-time highs. It has benefited Europe as well. Currently, 10 year German bunds are yielding nearly a full percent lower than America. If it had not happened, then growth would have been lower everywhere, including Canada, Europe and Asia. Also, what has happened in America under Bush demonstates how silly this thread is. Keynes argued that in times economic slowdown, government should use fiscal and monetary policy to lift the economy, and tighten policy when growth is strong to avoid inflation. This is exactly what the Bush administration did. The difference between Bush's policies and traditional Keynesianism is that America's policy relied more on consumer demand as opposed to government. Non-defense discretionary spending grew at rates under Bush you never saw under Slick Willie, but the strategy was depenedent on the consumer. As for the US dollar, the US derives a benefit in that the dollar's status as the global reserve currency since it lowers interest rates. How low is really unknown, though some economists who've looked at this think it may add an incremental 0.25% or so to growth. But its very important to understand that one of the reasons why the dollar is the global reserve currency - an estimated 65% of global reserves are in dollars - is because of the structure of the US economy.

Okay, more rebuttals You are portraying society as "two-tier", as if the few "kings" are living off of "honest-hard working people who often live in slums". That's about as bad of a stereotype as assuming that all Canadians live in igloos and take dog-sleds to work. The vast majority of Americans, Canadians and everyone else in the West is middle-class. This makes absolutely no sense whatsoever. To be continued...

Fixed it for you.

But eureka, 1.3% isn't good. America is expected to grow 3.5% this year and 3% next. Its funny though that during the time period of east German integration, Germany grew at the same rate as France and faster than Sweden. Surely you're not going to blame the integration of east Germany on slow growth rates in France and Sweden now, are you?

If you truly believe that, you might want to take more than a course on Keynesianism. Try studying England from 1700-1900, Holland in the 18th century, Japan from 1870-1910. Then study Argentina from 1900-1930, and what has happened since. The richest countries in the world got that way through the market price system where capital was allocated based on return, not because of any notion of "social justice." No, not "most" of the wealth. A great deal of the wealth is. But that's always the way it has been in America since the beginning of its existence. Yet, America is now the richest, most powerful nation in the world. See a connection? I don't necessarily disagree that America should invest more in the poor. But that's a far, far cry from saying that "capitalism is in crisis". No one with an understanding of economic history could possibly believe this. Funny though that there has been more outsourcing in America than Europe - America has lost a greater percentage of manufacturing jobs than Europe has - yet economic growth has been higher in America. See a connection?

Income is not stagnating. Personal income in the United States was $10.228 trillion at the end of the second quarter, up from $9.614 billion at the end of the second quarter last year. That's 6.4%. Its risen 11.5% since the end of 2003. Europe can only dream of that type of "stagnation". And its not going to "a very small minority". http://www.bea.doc.gov/bea/newsrel/pinewsrelease.htm The French have a term for our economic structure. They call it the Anglo-American model. Its used in a derogatory manner by many in Europe. Canada, as well as Australia, can be classified in the Anglo-American model. Canada, does not have 35 hour work weeks. Canada does not give its employees 7 weeks off a year. Canada does not make it difficult to fire employees. Etc., etc. Canada does have a more generous social safety net, but Canada is closer to America and the UK than it is to France, Germany or Sweden. Canada likes to think its more like Europe since it helps differentiate Canadian identity from the US. But in reality, Canada is an (North) American nation. Thank heavens.

You took a course? I know a little about various strains of economic thought as well as economic history.

I'd like to change the title to The Growing Prominence of Capitalism As countries around the world have been throwing off the shackles of state-domination to make themselves and their populations richer - in particular, in Asia - and grow their economies. First, understand that the author of this thread is merely setting up a straw man. There is no pure capitalist society in the world. In the west, all economies are mixed economies. The only difference is degree. To paraphrase Churchill, its the worst, except for all the others. Socialism inflicts harm on society by squelching growth and removing freedom. Incorrect. The author himself says that So clearly, it is generating real income growth. It has, however, not generated enough. But that's a much different argument than its not generating any at all. Since 1980, German real growth, adjusted for purchasing power parity and applying a constant currency, was 2.2%. However, since 1990, it has been -0.6%, as it has been in France. Thus, over those 13 years from 1990-2003, GDP has fallen 7.5%. Now I don't know if low-income earners grew much faster than the rest of the economy, but assuming that wages grew at the same rate of the economy as a whole, and the "fairer" European model assured that low wage earners kept pace with high wage-earners, even if low wage-earners in the US so 0% real wage growth, they did better than Europe. In socialist paradise Sweden, growth fell 2.4% annualized. Thus, using the same assumptions, low wage-earners in America would have been 27% better than Swedish low wage-earners from 1990 to 2003. The best thing about capitalism is that it generates the most wealth for the most people, most of the time. That does not mean it always generates the most wealth for all the people all of the time because, in fact, economic growth is dependent on many variables, some far more important than the structure of the economy, i.e. rule of law. I find the author's next statement perhaps the most interesting. So what? Good for them. Rather than resenting these people, we should try to emulate them But there's a reason for it, of which Winter doesn't explain, and my guess may not know. The reason why income grew so much over that time period is because much of the wealthiests' income derives from capital gains from assets, i.e. stocks, bonds, real estate, etc. From 1966 to 1982, in nominal terms, the Dow Jones Industrial Average rose exactly 1 point. Thus, during that time, there were no capital gains at all. In fact, in real terms, holders of stocks saw negative capital gains until 1991. Bonds were even worse. Long-term government bonds in the mid-60s were yielding around 5%. In the early 1980s, interest rates were pushing 20%. Since the price of a bond is inversely correlated with the yield of a bond, bond holders were crushed. So, for the previous 15 years, these two asset classes saw negative real returns. But since 1981, both were in tremendous bull markets until 2000. This is not unusual. If you know anything about asset markets, returns tend to cycle over multi-decade cycles where they do nothing for the first 10-20 years, then explode for the next 10-20 years. My guess is that for the next 10+ years, returns on stocks and bonds will be very low relative to history. To be continued...

Good lord, there are so many things wrong with this essay, I don't know if I have the time to address them all. I'll get to them in due time. First, there is no "crisis" in capitalism. Second, check out the growth rates of the last 35 years. http://www.mapleleafweb.com/forums/index.php?showtopic=3710 Since 1980, the US has outgrown Europe. That is also true since 1990 and since 1995.

However, it appears that the Germans aren't quite ready to embrace change. It's a dead heat. http://www.nytimes.com/aponline/internatio...lection.html?hp

There is some truth to the statement that unemployment in Germany is at least in part due to unification of the East, which is running somewhere around 18%. Having said that, German companies are re-locating plants to Poland, Slovakia and Hungary, not eastern Germany, because when the east was re-incorporated, it adopted the same labour rigidity as the west. The problem, however, of attributing the lack of growth and employment to unification ignores the fact the same problems are evident in many other European economies with similar models as well. Jobs and growth will continue to migrate out of western Europe into eastern Europe and elsewhere until Europe reforms itself. The situation in North America is clearly much better. Trying to differentiate between "real" and "unreal" jobs is a red herring, and a fall-back for the failures of the European model. If one is to differentiate between real jobs and unreal jobs, take a look at government jobs in the public sector, and link that to productivity growth in the economy. In the name of "fairness", the Left is squeezing the lifeblood out of the system, hastening its continuing slide.

The German stock market is up 20% since May when Schroeder called the election, in part because the market thinks Schroeder will lose and Merkel can get the economy growing again. But she's been blowing it. Hope she wins. And eureka, unemployment in Germany is nearly 12% according to German statistics. Actually, if you standardize unemployment calculations, its substantially lower. Its 9.3% compared to 5.0% in the US and 6.8% in Canada. Unemployment has been rising in Germany over the past 2 years. It was 8.2% in 2002. http://www.oecd.org/dataoecd/41/13/18595359.pdf When you do those GDP figures, make sure you do it in constant currency. Germany has been growing a bit over the past 18 months, but slowly. However, what you need to see is a long-term trend. The German economy has moved in fits and starts over the past decade, seeing some growth before losing steam.

Considering that Tory roots run deep in his family - his father was a close confident of Mulroney - I just can't see it.

I didn't think Mirror was bad at all.

Funny though that some of the greatest fortunes were made from fairly modest means. Nicely fits the dogmatic stereotype though. Fiction. Unless, of course, you view the world through an antiquated, outdated 150 year-old Marxist prism.

Sure, if you look at the world through an outmoded, antiquated Marxist prism...

In today's NP David Frum talks about the French. About how they have created a category of 'intermittent' workers - actors for example (Michael Harding would love that) who draw benefits from the government when not at work, displaced factory workers who government classifies as 'disabled' so they can collect money, workers who are permitted to retire at age 55. In the meantime Canada is seriously discussing extending the retirement age beyond 65. I wouldn't call that better, let alone "a helluva lot better". <{POST_SNAPBACK}> Well, if you think having high unemployment, low economic growth, stagnating standards of living, and an impending pension crisis within the next few decades as good, then yes, I guess France and Germany are better off.

Good Lord, is this Canada we're talking about?! And Liberals?! SENATORS?! Wow! Man oh man, this is great stuff! I am bloody impressed. They get it! I might have to move back to Canada!

Taxing savings is about the single worst tax there is. It expropriates capital.

Hey, its easy when you don't have any flaws...

No its not. This is totally incorrect.

You raise a good point, and I think Toro missed it... Truly, there isn't a 'rigid caste system' where your last name defines the work you will toil at for the rest of your life. However, where one is born in the US certainly plays a role in the opportunities one will have. Areas such as this, like Harlem, or South Central Los Angeles virtually ensured that a person would spend more time just trying to survive versus studying to attend Julliard or Harvard.To say that there is equal opportunity for all in the US (and even Canada, but we are subject to less extremes) is purely hypothetical. No I didn't. Social mobility in the United States is very high compared to the rest of the world AND most of Europe BUT it appears to not be as high as it was 20 or 30 years ago, according to recent studies, including one that was released this year. Canada has actually surpassed the US in social mobility according to the recent studies.