How global capitalism actually works

From the Daily Blog … a look at how capitalism works and why the rich are getting richer on the backs of everybody else:

By Douglas Renwick

“There is a standard view of how capitalism is supposed to work given by the media. It goes something like this; capitalism is a system where people come together to freely exchange goods and services, including labour. Businesses compete competitively to give the most efficient outcome, and the profit motive gives incentive for innovation. People who become rich do so because they work hard to offer the market what it wants while the poor do not, so this wealth inequality is to a large extent the natural workings of the market. This is an imperfect but the best possible system.

That is I think the standard view given in the media, and I think most of it can be debunked while the rest can be turned on its head. I’ll be critiquing this view, but also give my own view of how I think Global Capitalism works. I’ll give what I think are realistic and viable solutions to the faults of Global capitalism at the end.

  • Capitalism is always seeking to make profit, and it was able to make profits in the period from 1945-1971 in the productive sector of the economy, and under this system there was high economic growth which was relatively egalitarian
  • the productive sector reached a certain capacity in the 1970’s, increasing productivity became less profitable … profits went into the FIRE economy … finance, insurance, real estate
  • the banking sector became wealthier and got turned into an institution that gambles rather than investing in productive things
  • the economy is now a system that is normally stagnant, and only grows when it is driven by speculative bubbles which eventually crash
  • real wages stagnate, as they have in New Zealand since 1984, while corporate profits go way up ……”

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