Capitalism

It should be noted that while my opponent asks for a staunch defender of socialism, I am no such stalwart. I am taking this debate mainly out of boredom. I offer the following observations pertaining to the debate. Obv 1 My opponent has not defined exactly to what extent Capitalism should be defined. Is he arguing for a complete free market system which includes private businesses owning water utilities, prisons, etc.? I don’t know. With the debate this broad and no guidelines set up by the original poster, it should be assumed he is arguing for complete privatization of the economy. It is never specified which country should embrace Capitalism either, but my guess is the US. This is accurate given his original post and the fact that he is upset about nations turning toward socialist practices. He never defines socialism either, but it could be assumed that the type of policies considered “socialistic” would be ones that nationalize or regulate the free market. Framework Obviously, the debate needs to focus on the benefit to the people that the Capitalist system can provide. This is due to governments’ sworn duty to uphold the general welfare of the public under a social contract. If this contract is broken, then the government is not doing its job. CP: Mixed Market Economy Instead of a complete capitalist economy, I put my support behind a mixed-market economy with a free market as well as a social safety net for vulnerable populations who would live in destitution otherwise. In other words, I support the status quo over the complete, capitalist economy that my opponent supports. C1: Monopolies, more than just a board game In the US, monopolistic and oligopolistic behavior can be conclusively attributed to economic decline. Observe the graph from the Economist: (1) It is clearly shown that return on investments and capital have increased over the years for US businesses. The Economist attributes a lot of this to the consolidation of companies worth $10 trillion since 2008 (1). Normally, an increase in profits indicate an upturn in the economy. However, the uptick in profits does not reflect innovation or the pay of employees. In fact, the Economic Policy Institute found that: “From 1973 to 2013, hourly compensation of a typical (production/nonsupervisory) worker rose just 9 percent while productivity increased 74 percent (2).” This occurs for a very simple reason: monopolistic behavior means that businesses can raise prices, profits etc. without any fear of any repercussions due to lack of competition. Barry Lynn and Phillip Longman of the Washington Monthly in the spring issue of 2010 explains how companies use the “innovation through acquisition” method which was popularized by Cisco in the 90s when it gobbled up over 100 small companies that were innovating. Jobs were lost in these small businesses, and Cisco gained that much more power over employees in their sector, allowing them to lower pay for employees as plenty of opportunities for higher pay disappear into thin air as companies are swallowed whole and only a few major companies compete against each-other. Google used this method to acquire game-changing technologies that lead to Google Earth, Google Docs, and Google Analytics. This trend pervades drug companies especially, as when Pfizer took over Wyeth and Merck bought out Schering-Plough. The deals resulted in over 30,000 jobs being killed off (3). When a few companies have major clout, they can then fix prices to whatever they want. Under US law it is illegal. However, to revert to a complete capitalistic economy with no regulation would bring chaos to consumers in terms of price. Cardozo Law Review in their 2012 review of 75 cases of price-fixing among cartels, (not drug cartels, just a plethora of key players in industry that raised prices together a la a monopoly or oligopoly,) they found that: “For the economic studies’ post-2000 sample, the national and international cartel median overcharges averaged 20% and 25.8% (4).” Essentially, one sees an increase in price for no reason. There are mountainous articles, research etc. proving how monopolistic and oligopolistic behavior increases consumer prices. Although, I can’t exceed the character limit, so I might as well give an example as opposed to a massive list. I will focus on a more recent event undertaken by AT&T. The LA Times reports in July of 2018 on the recent merger between AT&T and Time Warner. While AT&T promised an uptick in performance and efficiency, the opposite seemed to occur. The cheapest streaming service provided by AT&T jumped by $5, a 14% increase, while quietly boosting its administrative fee from $0.78 to $1.99 monthly to bring in $800 million in extra revenue. As part of the “better service” aspect of the merger, the company put forth a $15 a month plan that offered less channels than the one that had its price increase by $5 (5). UC Berkeley Economist confirms the price-fixing reality by telling the LA Times the following: “…studies have shown that mergers result in “more increases than decreases” when it comes to prices, but “there have been mergers with price decreases, as best the economists who’ve studied them can estimate (5).” Without clear guidelines to decrease monopolistic behavior that would not exist in the affirmative world of complete Capitalism, we see increased prices, lower pay, and less innovation. American workers are going to lose countless jobs. The government would only allow companies to pursue profit with reckless abandon without any interference. C2: EITC (boring acronym, really important) While often criticized, aspects of the social safety net have the potential to decrease poverty and increase employment. This is exactly what the EITC aimed to do. For all intents and purposes, it succeeded. The EITC is a refundable tax credit that increases for every dollar a person makes until stagnating and phasing out when not needed anymore. By incentivizing work, the EITC increases employment and hours on the job. The Federation of American Scientists estimates that refundable tax credits including the EITC and the Child Tax Credit reduced poverty by 3% according to government figures from the US Census Bureau when they included tax and transfer programs in their studies regarding poverty reduction (7). An NBER working paper from 2015 also found that the expansion of the EITC during the 90s decreased poverty by 9.1 million people, including 4.7 million children (8). In a separate NBER study, it was found that employment would increase by 7.3% if the EITC were to increase by $1,000 (9). The income acquired by low-income households increases consumption because they are likely to spend their money on goods. Business Insider in 2017 confirms this, finding that the bottom quintile of earners spends 4% more on food and over 10% more on housing when compared to the top quintile of earners (9). The benefits of the EITC, according to recent literature, also trickle down to children of EITC recipients. Michigan State University in a 2013 working paper explains exactly why, as 97% of recipients have children, and an increase of $1,000 to the EITC increases the chance of graduating high school for the child in question or receiving a GED by 2.1%. This creates opportunities for disadvantaged people who would otherwise live precariously (10). Conclusion I do agree that aspects of Capitalism are good for the people. However, reverting to a Capitalist economy completely does not benefit the citizen. Instead, it entrenches corruption through monopolies and removes poverty fighting tools like the EITC. 1. https://tinyurl.com... 2. https://tinyurl.com... 3. https://tinyurl.com... 4. https://tinyurl.com... 5. https://tinyurl.com... 6. https://tinyurl.com... 7. https://tinyurl.com... 8. https://tinyurl.com... 9. https://tinyurl.com... 10. https://tinyurl.com...