Category: Economics, Finance, and Political Economy

WHY DID ICELAND DO IT RIGHT? A CRITIQUE OF CORPORATISM VS CAPITALISM

Because capitalism requires, and is defined by, the fact that risk takers both win and lose, and they bear the burdens of both their wins and losses.

There is nothing in capitalism that supports the privatizing of social gains, or the socialization of private losses. That isn’t CAPITALISM. That’s state CORPORATISM. The alliance between the state and the capitalists, AGAINST the general population.

Without the counter-incentive of risk, only totalitarianism of rules and regulations can attempt to control natural human behavior to socialize risk and privatize reward. That is what free riding and rent seeking do.

The purpose of competition in the market is to reward consumers by way of a competition between lenders, producers, distributors, and vendors. Whenever a competition exists, at least one party loses, but that is never the consumer – who always benefits. This is the most elegant form of redistribution ever created by man. It is a virtuous cycle.

But if the state INSURES COMPETITORS, it breaks the virtuous cycle, and provides incentives for competitors to privatize gains, and to socialize losses.

When you create debt of any kind, you are not in the clear with the profits until the debt is paid off. That is, you have earned only the right to USE the income from that debt, but it is not YOURS until the debt is paid off.

This is counter to human loss aversion instincts. In our emotional machinery between our ears, we own what we have. But that is not true, and cannot be. A debt and corresponding credit function as a production cycle. The good is not MADE until it is paid off.

Our legal system does not recognize this liability and that is why we fail to correctly adjudicate credit and debt, and why we fail to correctly implement policy to protect consumers and hold lenders accountable.

The reason is quite simple: the state is trying to put credit out there all the time in every way possible so that it creates employment and taxes from employment.

But the production cycles are lost in a sea of confusion and this immeasurable distortion in information is inconceivably complex, and impossible for economists to tease from the data.

The left’s proposition is that ‘it will all work out’. The right’s proposition is that we are undermining the entire SCIENTIFIC nature of the anglo model of economy we call capitalism.