Results 1 to 9 of 9
  1. #1
    Saizou is offline Senior Member Always Around
    Join Date
    Jul 2005
    Location
    Helsinki, Finland
    Posts
    1,279

    Default Chile & economics discussion

    Split off from the Bush thread.

    Quote Originally Posted by Dante Obscuri View Post
    They are not the ones that invest. Investment is the starting point of businesses, and a vital part of the economy. With no entrepreneurs (who are the ones that make these investments), there are not businesses. With no businesses, there are no jobs (leaving the ones made by the government aside). Investments are always risky, that's why entrepreneurs gain high profits (or major loses). Skilled people gain more money due to the training/education they have had.
    But without workers there wouldn't be any businesses either. It is unreasonable to discount the input of an necessary group of people just like that.

    Quote Originally Posted by Dante Obscuri
    They also gain higher wages due to the scarcity in their skills. There are not many people that can manage an enterprise, perform a heart surgery, or write a software code, whereas there are many that can put the food you've bought in bags, or serve your meal in a fast-food restaurant. Factory workers earn less because their skills are more abundant, and because they haven't made investments in themselves - at least, not as much as the ones in higher positions (leaving corruption aside).
    That is an better argument, but it still isn't enough to justify the enormous differences in the distribution of wealth.

    Quote Originally Posted by Dante Obscuri
    Chile's unemployment rate is 7.8%. Their economy cannot grow faster due to their low resources. Also, Allende's coup was supported by most Chileans. Yes, people had jobs during his regime but, what's the use of it if you cannot buy anything with your wages.
    And yet less people lived in poverty during Allende's rule. That proves that people could buy stuff for their wages.

    Quote Originally Posted by Dante Obscuri
    Think about it: Allende leaves Chile with a ridiculous high inflation. What do businesses do? Do they hire more workers? No. Do they rise their workers' salaries? No. Do they lower wages? Yes. Do they fire workers? Yes. This is what happened. The high rate of inflation started with Allende, and the effects took place in Pinochet's regime. Pinochet ended up giving them stability.
    How do you figure that Pinochet's policies led to a better economy? As far as I've seen all the real economic growth has taken place after Pinochet was deposed.

    Quote Originally Posted by Dante Obscuri
    Yes, but, correct me if I am wrong - my knowledge in Russian history is quite poor, I've just started to get to know a bit about it, since a guy in my University is Russian - What did Stalin use that money for? Did he use it for the welfare of the people, or to finance the Cold War? Because, if he the latter is true, then your only comparisons between them are: Dictators, and murderers.
    Are you suggesting that Pinochet used money for the welfare of people? The fact is that he basicallty only used money on the Army, much like any military dictator.

    As for Stalin, he used the money to build heavy industry, mines and railroads. In the long term this was good for the people as it created an stable economic base, but the main reason why he did it was to be able to throw money at the Army more efficiently.

    Quote Originally Posted by Dante Obscuri
    Period of transitions, perhaps? For all I know, people under Communism led quite a poor life. Also, I've been told otherwise by this friend of mine I just mentioned (sorry for bringing this under discussion but, as I've already stated, I do not know much about Russia) that Russia became a better country after it adopted the market system. Actually, I've also had that impression after reading some books written by economists.
    Then your friend and those economists are wrong. During the early 90's poverty increased, life expectancy decreased sharply, there was a massive capital flight and inflation, and the purchasing power of the man on the streets went way down.

    I can't see any way how this would be a good thing, except for the deluded ultra-liberitarian fringe.

    Quote Originally Posted by Dante Obscuri
    As I already pointed out in this post, cause (in Allende's period) and effect (in Pinochet's). Past (30% unemployment), and present (7.8%), future (if everything goes right, it should be even lower; actually, that graph I linked you to, showed that the rate of unemployment was going down.).
    Yes, but it isn't thanks to Pinochet that the unemployment is going down, It's because the new rulers have started abandoning Pinochet's irrational policies for saner ones.

    Quote Originally Posted by Dante Obscuri
    Yes, I have no problems talking about economics. However, our views on the people that got killed differ. Discussions in which one side (you) holds full morals, and the other (me) is more flexible about them, never lead anywhere. You won't change your mind, and I won't change mine (just as in discussions about religion). In the end, dropping the discussion on morals, I think, is the only way in which we, even if we do not agree or accept out views, can show, at least, some respect at our freedom of thought.

  2. #2
    Dante Obscuri is offline Senior Member Community Builder
    Join Date
    May 2006
    Location
    Sodom and Gomorrah - Cocytus
    Posts
    3,254

    Default

    Quote Originally Posted by Saizou View Post
    But without workers there wouldn't be any businesses either. It is unreasonable to discount the input of an necessary group of people just like that.
    No, no, I am not discounting it; the proletariat IS important. However, without entrepreneurs and investors there are no jobs.

    Quote Originally Posted by Saizou View Post
    That is an better argument, but it still isn't enough to justify the enormous differences in the distribution of wealth.
    It actually justifies it, if you think about it (and yes, Pinochet failed badly at the distribution of income at the beginning of his regime). Let's say you want to sell apples. So, you buy the land, the capital (tools, machinery, etc.), other resources needed, and you also hire some workers. You just made an investment, and at the same time you are a risk bearer. Yes, the workers will be the one working with the land, and maybe supervise other workers but, will they earn as much as you do? Obviously not. I assume you'd pay them good salaries, still, you want to recover your investment; so, it is normal for you to earn far more than them. On the other hand, if your business does not prosper, who will have the hardest time, your employees or yourself? Yes, they lose their job but, they didn't lose all the money you did. This is why entrepreneurs earn as much as they do, and why workers do not earn as much as that.

    In the previous examples I mentioned entrepreneurs, but not people like engineers, doctors, or lawyers, who not necessarily are interested on starting up their own businesses. Why do they earn more than workers? Once again, investment. They (or their parents) invested in their education/training. They spent some time of their lives in which they could have been doing something else to gain knowledge and skills on a specific area. Investments pay-off.

    It sounds harsh but, that's what real life is. However, that's what the government is there for; they are supposed to help people in the lower side of the economy get more chances to improve their standards of living. Yet again, how do you distribute income, when your have hyper-inflation. That means that the money you (as a government) have cannot buy (pay for) much, and that you cannot increase taxes (in order to increase your reserves) because people are becoming poor since their purchasing power is going down. Politics and economics are not as easy as they sound; sometimes you have to take this kind of decisions.

    Quote Originally Posted by Saizou View Post
    And yet less people lived in poverty during Allende's rule. That proves that people could buy stuff for their wages.
    Yes, for a while; however, once again, inflation didn't start during Pinochet's period (at least, the hyper-inflation; Pinochet's regime met their own levels of inflation as well), and the fact still remains that, at the end, the people approved of the coup. If they were that happy with it, why did they support/approve it?

    Quote Originally Posted by Saizou View Post
    How do you figure that Pinochet's policies led to a better economy? As far as I've seen all the real economic growth has taken place after Pinochet was deposed.
    First, and foremost, he lowered the hyper-inflation, second, GDP grew. There was unemployment and poverty, yes but, that was due the inflation - businesses had to reduce costs; so, they lay-off workers, also, investment went down since it is too risky to invest in a country with high levels of inflation. That's the first part; during the 80s, his regime had to face an economic crisis in Latin America(it was in this period, when he changed some of his policies to some that weren't as extreme as the previous ones; this was really good in my opinion), and came out okay. By the end of his regime, some distribution of wealth started to be seen. People (some poor, and middle class) could buy colour TVs, vehicles became cheaper, and the quality of housing went up. They gave houses to poor people, and this ended up in the DFL-2 (small villages). 6 out of 10 houses had a telephone, 7 out of 10 had a car, and 9 out of 10 had a TV (either a colour one or a black-and-white one). They also gave property titles to poor sectors of the population, and moved poor people who lived in big cities, to other places where the houses were cheaper but, gave them higher standards of living. Why could they do that? Because by then, there was money. This is what I meant when I said that changes do not occur in the blink of an eye, even worse during times of crisis.

    Quote Originally Posted by Saizou View Post
    Are you suggesting that Pinochet used money for the welfare of people? The fact is that he basicallty only used money on the Army, much like any military dictator.

    As for Stalin, he used the money to build heavy industry, mines and railroads. In the long term this was good for the people as it created an stable economic base, but the main reason why he did it was to be able to throw money at the Army more efficiently.
    First of all, remember that Pinochet was using an extreme market model, with basically no involvement from the government; so, tax rates were really low. And therefore, tax revenues were obviously low. And yes, he used the money from that revenue in the military to keep them on his side.

    The problem with Stalin, from the little I've read, is that, unlike Pinochet, he controlled the economy as well. Check the following quote:
    Stalin's government financed industrialization both by restraining consumption on the part of ordinary Soviet citizens to ensure that capital went for re-investment into industry, and by ruthless extraction of wealth from the kulaks.
    A good deal of people was poor in Pinochet's regime but, he never took money from them, and made them even poorer.


    Quote Originally Posted by Saizou View Post
    During the early 90's poverty increased, life expectancy decreased sharply, there was a massive capital flight and inflation, and the purchasing power of the man on the streets went way down.
    Yes, but that's natural in a transition. All the same, Yeltsin's reforms were terrible. Privatization ended as just giving ownerships to some selected people, rather than focusing on competition, as a true market model should be. It was poorly planned, they never had plans to help all the people that was living on fixed incomes. They started giving out money (which caused inflation), and they never modified the wages according to inflation. People were not used to be efficient, and their products (due to their low quality) were hard to sell. Basically, they did most things wrong, and their change ended up creating problems for a good deal of people.

    However, Russia now is growing at an impressive rate. Right now the market system is still unstable but, better than in the 90s. Russia is one of the prospects to become the #1 nation, or so I've read.

    Quote Originally Posted by Saizou View Post
    Yes, but it isn't thanks to Pinochet that the unemployment is going down, It's because the new rulers have started abandoning Pinochet's irrational policies for saner ones.
    They have kept his policy. Chile is still a free market economy, and it is one of the most open economies. The difference is that they improved his model, since, in Pinochet's regime, the government was barely involved. If Pinochet's policies were useless, they would have dropped them; however, you could see President Lagos (a socialist president) signing an FTA with the USA, which follows pretty much Pinochet's open economy. Once again, I repeat, changes are not quick, and Pinochet's regime wasn't perfect; however, it paved the way for Chile to start growing.
    Last edited by Dante Obscuri; 11-30-2007 at 02:44 PM.


  3. #3
    deuce22 is offline Senior Member Community Builder
    Join Date
    Nov 2006
    Posts
    4,146

    Default

    yay, you guys have fun. :3


  4. #4
    Saizou is offline Senior Member Always Around
    Join Date
    Jul 2005
    Location
    Helsinki, Finland
    Posts
    1,279

    Default

    Quote Originally Posted by Dante Obscuri View Post
    No, no, I am not discounting it; the proletariat IS important. However, without entrepreneurs and investors there are no jobs.
    Well, to nitpick a little, it is possible to have economic systems without entrepreneurs or invastors.

    However, that's besides the point, which is that it's unreasonable to say that the entrepreneurs and investors create 80% of the economic output. It's not as if they're creating all that wealth by themselves, now is it?

    Quote Originally Posted by Dante Obscuri
    It actually justifies it, if you think about it (and yes, Pinochet failed badly at the distribution of income at the beginning of his regime). Let's say you want to sell apples. So, you buy the land, the capital (tools, machinery, etc.), other resources needed, and you also hire some workers. You just made an investment, and at the same time you are a risk bearer. Yes, the workers will be the one working with the land, and maybe supervise other workers but, will they earn as much as you do? Obviously not. I assume you'd pay them good salaries, still, you want to recover your investment; so, it is normal for you to earn far more than them. On the other hand, if your business does not prosper, who will have the hardest time, your employees or yourself? Yes, they lose their job but, they didn't lose all the money you did. This is why entrepreneurs earn as much as they do, and why workers do not earn as much as that.

    In the previous examples I mentioned entrepreneurs, but not people like engineers, doctors, or lawyers, who not necessarily are interested on starting up their own businesses. Why do they earn more than workers? Once again, investment. They (or their parents) invested in their education/training. They spent some time of their lives in which they could have been doing something else to gain knowledge and skills on a specific area. Investments pay-off.

    It sounds harsh but, that's what real life is. However, that's what the government is there for; they are supposed to help people in the lower side of the economy get more chances to improve their standards of living. Yet again, how do you distribute income, when your have hyper-inflation. That means that the money you (as a government) have cannot buy (pay for) much, and that you cannot increase taxes (in order to increase your reserves) because people are becoming poor since their purchasing power is going down. Politics and economics are not as easy as they sound; sometimes you have to take this kind of decisions.
    I'm not disputing that some differences in the distrubution of income are justified. What I'm against is when the differences become unreasonably large.

    Your argument holds for moderate differences, becuse paying an skilled person more encourages people to improve thamselves and creates an positive effect on society.

    However, when the inequality becomes so large that the lower classes actually slip into poverty, the basically good principle starts doing more harm than good. Remember, the purpose of an economy is to make people better off. Huge differences in the distribution of income create an net loss of income, and therefore they aren't justified.

    Quote Originally Posted by Dante Obscuri
    Yes, for a while; however, once again, inflation didn't start during Pinochet's period (at least, the hyper-inflation; Pinochet's regime met their own levels of inflation as well), and the fact still remains that, at the end, the people approved of the coup. If they were that happy with it, why did they support/approve it?
    Maybe because Pinochet had dissenters shot?

    Quote Originally Posted by Dante Obscuri
    First, and foremost, he lowered the hyper-inflation, second, GDP grew.
    I can accept the argument that he lowered hyperinflation, however GDP growth in itself is an lousy indicator of real economic growth. There are several historical examples where the GDP in a country has grown, and yet people have become poorer. Again, remember that the purpose of the economy is to make people better off. High GDP growth is not a goal in itself, but the means to an end.

    Quote Originally Posted by Dante Obscuri
    There was unemployment and poverty, yes but, that was due the inflation - businesses had to reduce costs; so, they lay-off workers, also, investment went down since it is too risky to invest in a country with high levels of inflation. That's the first part; during the 80s, his regime had to face an economic crisis in Latin America(it was in this period, when he changed some of his policies to some that weren't as extreme as the previous ones; this was really good in my opinion), and came out okay. By the end of his regime, some distribution of wealth started to be seen. People (some poor, and middle class) could buy colour TVs, vehicles became cheaper, and the quality of housing went up. They gave houses to poor people, and this ended up in the DFL-2 (small villages). 6 out of 10 houses had a telephone, 7 out of 10 had a car, and 9 out of 10 had a TV (either a colour one or a black-and-white one). They also gave property titles to poor sectors of the population, and moved poor people who lived in big cities, to other places where the houses were cheaper but, gave them higher standards of living. Why could they do that? Because by then, there was money. This is what I meant when I said that changes do not occur in the blink of an eye, even worse during times of crisis.
    And yet more people are still living in poverty today. Sorry, but this is an inescapable fact. People became poorer during Pinochet's regime, and considering that he was in power for over twenty years it can't be all caused by spillover from Allende's days. Therefore Pinochet's policies must be considered a failure when we look at the big picture.

    Quote Originally Posted by Dante Obscuri
    First of all, remember that Pinochet was using an extreme market model, with basically no involvement from the government; so, tax rates were really low. And therefore, tax revenues were obviously low. And yes, he used the money from that revenue in the military to keep them on his side.
    Yes, I already knew that. I fail to see the point with this statement.

    Quote Originally Posted by Dante Obscuri
    The problem with Stalin, from the little I've read, is that, unlike Pinochet, he controlled the economy as well. Check the following quote:
    Naturally Stalin controlled the economy. He was an communist after all, and he was the first one who instituted central planning as an economic model.

    Quote Originally Posted by Dante Obscuri
    A good deal of people was poor in Pinochet's regime but, he never took money from them, and made them even poorer.
    Technically true. However, he set up an economic system which allowed private corporations to take the money from them instead. In the end, people still get poorer whether it's the government or private actors that rob them, no? Why would it somehow be better if the money goes to corporations instead of the state?

    Quote Originally Posted by Dante Obscuri
    Yes, but that's natural in a transition.
    I think that this is the problem with your reasoning. See, the economic problems of post-soviet Russia weren't some isolated troubles in a period of transitions. They actually managed to undermine the entire Russian economy. Hell, people are still poorer today than they were back in the 80's.

    If these were the normal result of a time of transition, we could expect the problems to go away after a time. Yet they still remain over fifteen years after the transition itself. That is no longer normal, now is it+

    Quote Originally Posted by Dante Obscuri
    All the same, Yeltsin's reforms were terrible. Privatization ended as just giving ownerships to some selected people, rather than focusing on competition, as a true market model should be. It was poorly planned, they never had plans to help all the people that was living on fixed incomes. They started giving out money (which caused inflation), and they never modified the wages according to inflation. People were not used to be efficient, and their products (due to their low quality) were hard to sell. Basically, they did most things wrong, and their change ended up creating problems for a good deal of people.
    Indeed. And all this is proof that laizzes-faire capitalism can actually be an worse economic system than communist planned economy. Much like Pinochet's laizzes-faire capitalism was disastrous for Chile. Which essentially is the point that I've been trying to make.

    Quote Originally Posted by Dante Obscuri
    However, Russia now is growing at an impressive rate. Right now the market system is still unstable but, better than in the 90s. Russia is one of the prospects to become the #1 nation, or so I've read.
    That's incorrect. The rate of poverty is actually increasing in Russia, and their growth is basically based on the export of oil and natural gas. And the profits from that export either go to the state, or to a few oil tycoons (the so called Oligarchs). There's nothing positive about that at all.

    Quote Originally Posted by Dante Obscuri
    They have kept his policy. Chile is still a free market economy, and it is one of the most open economies. The difference is that they improved his model, since, in Pinochet's regime, the government was barely involved. If Pinochet's policies were useless, they would have dropped them; however, you could see President Lagos (a socialist president) signing an FTA with the USA, which follows pretty much Pinochet's open economy. Once again, I repeat, changes are not quick, and Pinochet's regime wasn't perfect; however, it paved the way for Chile to start growing.
    But does this translate into better living conditions for the people? And I'd also like to point out that the term "free market economy" is a really broad concept. Pinochet's economic model was laizzes-faire capitalism, which is entirely different from the mixed economy models that most countries use.

  5. #5
    neruke is offline Senior Member Long Time Member
    Join Date
    Apr 2007
    Location
    Earth, still the best place.
    Posts
    768

    Default

    Get a room guys.

  6. #6
    Dante Obscuri is offline Senior Member Community Builder
    Join Date
    May 2006
    Location
    Sodom and Gomorrah - Cocytus
    Posts
    3,254

    Default

    Quote Originally Posted by Saizou View Post
    Well, to nitpick a little, it is possible to have economic systems without entrepreneurs or invastors.
    Yes but, that's no longer capitalism. And even then, you have the Government, which is the one starting a business. Once again, you have someone starting it up.

    Quote Originally Posted by Saizou View Post
    However, that's besides the point, which is that it's unreasonable to say that the entrepreneurs and investors create 80% of the economic output. It's not as if they're creating all that wealth by themselves, now is it?
    Obviously not, but they are giving far more inputs than a worker. A worker only gives his/her time, and his/her little skills. An entrepreneur gives his/her time, money (to buy capital and resources, and to pay for the human capital), and high skills (which required more time, and education/training); the entrepreneurs also bear the risk.

    Also, productivity has a broad definition, and I think this is something you're not taking into account. Productivity does not only involve how many inputs you can transform into outputs (which is what workers do) but, how many different uses you can give to those inputs (creativity). Also, coming up how can you lower the use of those inputs, without reducing your outputs. Or thinking how you can reduce your costs without reducing your outputs. (Managerial Ability). There are a few more points; all of this is part of productivity, and therefore, the creation of goods and services. As you can see, workers only make up one part.

    Quote Originally Posted by Saizou View Post
    I'm not disputing that some differences in the distrubution of income are justified. What I'm against is when the differences become unreasonably large.
    Those differences appear usually in monopolies (I'll explain why, later on this post). A competitive firm will pay fair wages to their workers. Also, before you say something like "this is why capitalism is bad" (due to the existence of monopolies) allow me to tell you that governments have monopolies of their own, and they pay as badly as monopolies (if not even worse). The problem here is corruption.

    Quote Originally Posted by Saizou View Post
    Your argument holds for moderate differences, becuse paying an skilled person more encourages people to improve thamselves and creates an positive effect on society.
    Not really. There are far less skilled people than unskilled ones. If you pay more to that minority, you are already creating some inequality. Some people think of it as unfair (some people are as whimsical as that, which may, or may not be justified, due to their circumstances). Not only that, when rough times come up, the ones with high skills, are the least likely to be fired, whereas the workers are the ones be taken out. Some of these differences create social resentment.

    Quote Originally Posted by Saizou View Post
    However, when the inequality becomes so large that the lower classes actually slip into poverty, the basically good principle starts doing more harm than good. Remember, the purpose of an economy is to make people better off. Huge differences in the distribution of income create an net loss of income, and therefore they aren't justified.
    Actually, lower classes slip into poverty when there is either a crisis, corruption, or both. The Gini Coefficient has not much to do with the HDI. Check the US, Hong Kong, or Chile for example. Those countries have high Gini Coefficients (all about 50-55); however, their HDI is high (88-95). Russia is also amongst these countries.

    Quote Originally Posted by Saizou View Post
    Maybe because Pinochet had dissenters shot?
    No, he didn't have enough power to do that, and, no one would make a coup without enough support. People wanted Allende out, and Pinochet grabbed the opportunity.

    Quote Originally Posted by Saizou View Post
    I can accept the argument that he lowered hyperinflation, however GDP growth in itself is an lousy indicator of real economic growth. There are several historical examples where the GDP in a country has grown, and yet people have become poorer. Again, remember that the purpose of the economy is to make people better off. High GDP growth is not a goal in itself, but the means to an end.
    Yes, GDP is not enough as an example - the Gini Coefficient and the HDI are far better examples. However, we're talking about a country that went through 2 economic crises (in the early 70s, and the early 80s). Lowering hyper-inflation and rising GDP are feats. That's not the end of the problem but, it is an improvement nonetheless (especially looking at the circumstances) - and as I already showed you, things started becoming good for the poor and middle class by the end of the 80s (once they overcame the crises).

    Quote Originally Posted by Saizou View Post
    And yet more people are still living in poverty today. Sorry, but this is an inescapable fact. People became poorer during Pinochet's regime, and considering that he was in power for over twenty years it can't be all caused by spillover from Allende's days. Therefore Pinochet's policies must be considered a failure when we look at the big picture.
    More people are not living in poverty today, in comparison to the 70's and 80's - and before you say that it is not as low as in Allende's period, I'll tell you again that the hyper-inflation occurred in his period, and that it was an important factor to the poverty levels in the 70s.

    As I've already shown you, the level of unemployment has gone down. The Gini Coefficient (which is still quite high, yes) went down from 57 in the year 2000, to 53 in the year 2003. Chile's HDI is 87, I think. All what I've shown you are improvements. They are slow, yes, but steady.

    Quote Originally Posted by Saizou View Post
    Yes, I already knew that. I fail to see the point with this statement.
    The statement was there to show that Pinochet didn't use the money of the people to use in in whatever he deemed as correct, unlike Stalin.

    Quote Originally Posted by Saizou View Post
    Technically true. However, he set up an economic system which allowed private corporations to take the money from them instead. In the end, people still get poorer whether it's the government or private actors that rob them, no? Why would it somehow be better if the money goes to corporations instead of the state?
    The only corporations that can 'rob' from people are monopolies, which are a bit hard to build when you have a system in which anyone can enter. Yes, there were some monopolies during his regime, I won't deny that but, they were not the only corporations there; they were not even the majority. As I've already told you, poverty grew because of the crises. Think about it, why would a regular firm (non-monopoly) would not pay fair wages to their workers, or charge high prices? You can think that it'd be obvious, since that way the evil entrepreneurs would make more profit, no? But it is not that easy. If you do not pay fair salaries to your workers, they will not be effective (assuming they will not leave and search for better opportunities in another company, which can happen). If they are not effective, your costs go up. If your costs go up, your prices go up, and as a result, people will buy less from you. In the end, you lose money.

    Quote Originally Posted by Saizou View Post
    I think that this is the problem with your reasoning. See, the economic problems of post-soviet Russia weren't some isolated troubles in a period of transitions. They actually managed to undermine the entire Russian economy. Hell, people are still poorer today than they were back in the 80's.

    If these were the normal result of a time of transition, we could expect the problems to go away after a time. Yet they still remain over fifteen years after the transition itself. That is no longer normal, now is it+
    Yes, transitions are expected to last a certain period of time, and show some results; however, that is assuming that before you decided to start some change, you had a good plan, especially when you're intending to change the economic system to something completely different [from extreme Communism (leaving aside the black markets) to Capitalism, do I need to say more?]. If you have a poor plan, your changes will be catastrophic; that's what happened in Russia, poor planning.

    Quote Originally Posted by Saizou View Post
    Indeed. And all this is proof that laizzes-faire capitalism can actually be an worse economic system than communist planned economy. Much like Pinochet's laizzes-faire capitalism was disastrous for Chile. Which essentially is the point that I've been trying to make.
    No, poor planning kill economies, not laissez-faire. Also, in before China lol (for the Communism bit).

    Quote Originally Posted by Saizou View Post
    That's incorrect. The rate of poverty is actually increasing in Russia, and their growth is basically based on the export of oil and natural gas. And the profits from that export either go to the state, or to a few oil tycoons (the so called Oligarchs). There's nothing positive about that at all.
    Russia has enough resources (aside from oil and minerals) to become a great economy; all the same, how can they grow with the poor infrastructure they have due to the lack of competition during the Soviet era? This is why I say that poor planning killed the whole idea of becoming a rich country under capitalism. The change was too fast for a country that was not used at all to being effective, and not being effective equals death in a capitalism. They didn't start to do things properly until now. And, I'm sure that once they are in the right track, they'll be the next big thing.

    Quote Originally Posted by Saizou View Post
    But does this translate into better living conditions for the people? And I'd also like to point out that the term "free market economy" is a really broad concept. Pinochet's economic model was laizzes-faire capitalism, which is entirely different from the mixed economy models that most countries use.
    I've already given you the translation in 4 kinds of measurements (GDP, GDP per capita, Gini Coefficient, and HDI); their economy grows, and their standards of living have gone up as well. There are people who still lives in poverty yes but, once again, changes do not occur instantly. Sorry but, I still think that for you good changes are those who show results instantly, and in the real world, that doesn't happen.

    A free market is an economy based on the laissez-faire economic philosophy. A mixed economy is not an actual free market, but something in-between.


  7. #7
    AtrumIncendia is offline Senior Member Community Builder
    Join Date
    Jul 2007
    Posts
    3,896

    Default

    Quote Originally Posted by neruke View Post
    Get a room guys.
    You wouldn't understand, because this is America!

    But I don't understand either, so...

  8. #8
    Saizou is offline Senior Member Always Around
    Join Date
    Jul 2005
    Location
    Helsinki, Finland
    Posts
    1,279

    Default

    Quote Originally Posted by Dante Obscuri View Post
    Yes but, that's no longer capitalism. And even then, you have the Government, which is the one starting a business. Once again, you have someone starting it up.
    Actually, the simplest forms of economy don't even need businesses at all. However, this is all besides the point.

    Quote Originally Posted by Dante Obscuri
    Obviously not, but they are giving far more inputs than a worker. A worker only gives his/her time, and his/her little skills. An entrepreneur gives his/her time, money (to buy capital and resources, and to pay for the human capital), and high skills (which required more time, and education/training); the entrepreneurs also bear the risk.

    Also, productivity has a broad definition, and I think this is something you're not taking into account. Productivity does not only involve how many inputs you can transform into outputs (which is what workers do) but, how many different uses you can give to those inputs (creativity). Also, coming up how can you lower the use of those inputs, without reducing your outputs. Or thinking how you can reduce your costs without reducing your outputs. (Managerial Ability). There are a few more points; all of this is part of productivity, and therefore, the creation of goods and services. As you can see, workers only make up one part.
    Indeed. And entrepreneurs also only make up one part. Why then do you define the output so that 80% is created by the top 20%? The fact is that none of that output would be created without all the necessary components, so your definition seems completely arbitrary to me.

    For example, no industrial production would exist at all without the scientists and engineers who design the machines used in production, and those professions require far greater skills than any entrepreneur or manager needs. And yet scientists aren't paid as much as managers are, which seems contradictory to your claim that pay is based on skill.

    Quote Originally Posted by Dante Obscuri
    Those differences appear usually in monopolies (I'll explain why, later on this post). A competitive firm will pay fair wages to their workers. Also, before you say something like "this is why capitalism is bad" (due to the existence of monopolies) allow me to tell you that governments have monopolies of their own, and they pay as badly as monopolies (if not even worse). The problem here is corruption.
    When have I said anything about monopolies?

    Quote Originally Posted by Dante Obscuri
    Not really. There are far less skilled people than unskilled ones. If you pay more to that minority, you are already creating some inequality. Some people think of it as unfair (some people are as whimsical as that, which may, or may not be justified, due to their circumstances). Not only that, when rough times come up, the ones with high skills, are the least likely to be fired, whereas the workers are the ones be taken out. Some of these differences create social resentment.
    I think you misuderstood my point. What I was trying to say is that moderate differences in pay create an incentive for talented people to get an good education and do something productive for society.

    Quote Originally Posted by Dante Obscuri
    Actually, lower classes slip into poverty when there is either a crisis, corruption, or both. The Gini Coefficient has not much to do with the HDI. Check the US, Hong Kong, or Chile for example. Those countries have high Gini Coefficients (all about 50-55); however, their HDI is high (88-95). Russia is also amongst these countries.
    Your explanation is not the whole truth. The simple fact is that in any country there's an limited amount of resources to go around, and if some group gets an greater share of the wealth, someone else must get less. This is simple logic.

    Therefore, if the rich get an large enough share of the wealth in a country, it directly follows that the lower classes will slip into poverty. This can be offset a bit by growth, but it's also a fact that economic growth tends to benefit the rich more than the poor. Therefore the relative distribution of wealth is even more disproportionate.

    We actually have plenty of historical examples of this, like Great Britain in the 19th century, where the rich became richer and the lower classes were forced to live in poverty.

    Quote Originally Posted by Dante Obscuri
    No, he didn't have enough power to do that, and, no one would make a coup without enough support. People wanted Allende out, and Pinochet grabbed the opportunity.
    Over 3000 dead people would probably like to disagree with your claims. Also, tens of thousands were imprisoned and tortured for resisting Pinochet.


    Quote Originally Posted by Dante Obscuri
    Yes, GDP is not enough as an example - the Gini Coefficient and the HDI are far better examples. However, we're talking about a country that went through 2 economic crises (in the early 70s, and the early 80s). Lowering hyper-inflation and rising GDP are feats. That's not the end of the problem but, it is an improvement nonetheless (especially looking at the circumstances) - and as I already showed you, things started becoming good for the poor and middle class by the end of the 80s (once they overcame the crises).

    More people are not living in poverty today, in comparison to the 70's and 80's - and before you say that it is not as low as in Allende's period, I'll tell you again that the hyper-inflation occurred in his period, and that it was an important factor to the poverty levels in the 70s.
    Very well. Let us assume, for the sake of the argument, that the poverty in the 70's was caused entirely by Allende. However, even so it still doesn't explain the poverty today, thirty years later. This is where your argument breaks down, because there's no way that an temporary economic crisis will show effects thirty years later, given that rational economic policies are implemented afterwards. That is, if Pinochet's economic policies really were sound, the rate of poverty today wouldn't be higher than during Allende's rule. Hell, here in Europe it took less than ten years to fully recover from the Great Depression which was a far worse crisis than anything Chile has gone through.

    Now do you get the general idea on my argument?

    Quote Originally Posted by Dante Obscuri
    As I've already shown you, the level of unemployment has gone down. The Gini Coefficient (which is still quite high, yes) went down from 57 in the year 2000, to 53 in the year 2003. Chile's HDI is 87, I think. All what I've shown you are improvements. They are slow, yes, but steady.
    And I'm not saying that Chile isn't improving, what I'm saying is that it isn't thans to Pinochet. If anything, he made things worse before they got better.

    Quote Originally Posted by Dante Obscuri
    The statement was there to show that Pinochet didn't use the money of the people to use in in whatever he deemed as correct, unlike Stalin.
    And what does that have to do with anything?

    Quote Originally Posted by Dante Obscuri
    The only corporations that can 'rob' from people are monopolies, which are a bit hard to build when you have a system in which anyone can enter. Yes, there were some monopolies during his regime, I won't deny that but, they were not the only corporations there; they were not even the majority. As I've already told you, poverty grew because of the crises. Think about it, why would a regular firm (non-monopoly) would not pay fair wages to their workers, or charge high prices? You can think that it'd be obvious, since that way the evil entrepreneurs would make more profit, no? But it is not that easy. If you do not pay fair salaries to your workers, they will not be effective (assuming they will not leave and search for better opportunities in another company, which can happen). If they are not effective, your costs go up. If your costs go up, your prices go up, and as a result, people will buy less from you. In the end, you lose money.
    Please. Drop the rethoric. I haven't talked about any "evil entrepreneurs" and I don't intend to start either.

    And your argument only holds if a few conditions are true. First of all, the workers must have power that balances the power of the corporations. Otherwise, an individual worker will always be powerless compared to the corporation especially if there's high unemployment, like in Chile during Pinochet's regime. If unemployent is high, the supply of work is higher than the demand, and therefore the corporations can comfortably lower salaries. Therefore, if conditions are such that unemployment is constantly high, the working class are impoverished by default.

    Anyway, to give workers power, you need unions. This is simply a fact, as the only way workers can put pressure on a corporation is if they act united, and therefore they can get higher average wages than otherwise. Guess what? Pinochet basically destroyed the chilean unions, and therefore made the workers powerless. Which again led to the fact that corporations comfortably could lower the wages.

    Thirdly, of corporations can export wares easily, they have little need for an internal market, because there are profits to be had outside the country. Therefore, they have no incentive to pay high wages to their workers, because they won't sell their ware to those workers anyway. Again, this was true during Pinochet's regime.

    Therefore, we already have three conditions that refute your theory. High unemployment, weak unions and free trade combined with laizzes-faire policies lead to impoverishment of the working class with no economic crisis or direct government involvement needed.

    Quote Originally Posted by Dant Obscuri
    Yes, transitions are expected to last a certain period of time, and show some results; however, that is assuming that before you decided to start some change, you had a good plan, especially when you're intending to change the economic system to something completely different [from extreme Communism (leaving aside the black markets) to Capitalism, do I need to say more?]. If you have a poor plan, your changes will be catastrophic; that's what happened in Russia, poor planning.
    Isn't that the exact same argument the Communists use when you point out the failures of their system? Good ideas, but poor execution? Just pointing out the irony here.

    Quote Originally Posted by Dante Obscuri
    No, poor planning kill economies, not laissez-faire. Also, in before China lol (for the Communism bit).
    No, the fact is that the problems themselves are inevitable once you decide to switch to laizzes-faire. To be frank, laizzes-faire a failure as big as complete central planning.

    Quote Originally Posted by Dante Obscuri
    Russia has enough resources (aside from oil and minerals) to become a great economy; all the same, how can they grow with the poor infrastructure they have due to the lack of competition during the Soviet era? This is why I say that poor planning killed the whole idea of becoming a rich country under capitalism. The change was too fast for a country that was not used at all to being effective, and not being effective equals death in a capitalism. They didn't start to do things properly until now. And, I'm sure that once they are in the right track, they'll be the next big thing.
    The problem here isn't really whether they're in the right track. If they were, none of that shit in the early 90's would have happened. Nowadays the russian economy is a hollow shell, and there are few signs of improvement.

    Quote Originally Posted by Dante Obscuri
    I've already given you the translation in 4 kinds of measurements (GDP, GDP per capita, Gini Coefficient, and HDI); their economy grows, and their standards of living have gone up as well. There are people who still lives in poverty yes but, once again, changes do not occur instantly. Sorry but, I still think that for you good changes are those who show results instantly, and in the real world, that doesn't happen.
    And I've already said that thirty years isn't instantly. Yes, I agree that Chile is improving today, I'm just not agreeing that it it thanks to Pinochet.

    Quote Originally Posted by Dante Obscuri
    A free market is an economy based on the laissez-faire economic philosophy. A mixed economy is not an actual free market, but something in-between.
    Well, if you want to define it that way, fine. Of course, that also means that no county n the world actually has a free market.

  9. #9
    Dante Obscuri is offline Senior Member Community Builder
    Join Date
    May 2006
    Location
    Sodom and Gomorrah - Cocytus
    Posts
    3,254

    Default

    Sorry for the delay, I've been quite busy to reply. I've also trying to talk with some Chilean teachers (who lived in Chile during Allende's and Pinochet's era); I think I'll be able to talk with them by the end of this week, or by the next one. Anyway, for what little I've just been told the "equality" in Allende's seems to overestimate the actual living conditions in his regime. For now, all I can give you is the following pics:

    http://espanol.geocities.com/rucatregua/Imagen05.jpg <--- People fighting each other in the streets for food.
    http://espanol.geocities.com/rucatregua/Imagen23.jpg <--- The three articles in the left side say (from the up to down):
    1. People dispute their food with guns: 4 wounded people.
    2. Why do they ration food if there's nothing to eat?
    3. "If you want to eat, you'll have to vote for Popular Unity (Allende's party)".

    The one in the right says something like: "Popular power must take arms."

    http://espanol.geocities.com/rucatregua/Imagen12.jpg <--- Some of the "pieces of art" that Castro sent Allende.

    http://espanol.geocities.com/rucatregua/Imagen08.jpg <--- More violence in the streets.
    http://espanol.geocities.com/rucatregua/Imagen26.jpg <--- Again, more violence.

    http://espanol.geocities.com/rucatregua/Imagen33.jpg <--- People doing queues to get their share of food.

    Quote Originally Posted by Saizou View Post
    Actually, the simplest forms of economy don't even need businesses at all. However, this is all besides the point.
    Barter you mean? If that's the case then yes, you're correct but, we're no longer living in an era where a (macro)economy can use barter. Anyway, this is quite beyond our discussion. Feel free to reply to this, if you want.

    Quote Originally Posted by Saizou View Post
    Indeed. And entrepreneurs also only make up one part. Why then do you define the output so that 80&#37; is created by the top 20%? The fact is that none of that output would be created without all the necessary components, so your definition seems completely arbitrary to me.
    I think I didn't explain myself well, since I've mentioned the entrepreneurs mostly. In that 20% I meant: Entrepreneurs + Other skilled people [people who have a degree (I'm not taking some artists and sportsmen into account)]. Anyway, back to the entrepreneurs, yes, they make one side of the economy as well, but, once again, compare the inputs.

    Quote Originally Posted by Saizou View Post
    For example, no industrial production would exist at all without the scientists and engineers who design the machines used in production, and those professions require far greater skills than any entrepreneur or manager needs. And yet scientists aren't paid as much as managers are, which seems contradictory to your claim that pay is based on skill.
    A scientist may not necessarily be able to run a corporation as efficiently as an entrepreneur, no? I wouldn't say more skills, but different ones. Anyway, you need someone to fund the scientists or to give them a place to work; the ones to do this (aside from the Government) are entrepreneurs. Once again it all comes down to investment and risk. (Do you know how much money is invested on research and development for say... (legal) drugs? If you do (and I'm quite positive you do), then you can imagine how much an entrepreneur loses when these drugs are not effective, or even worse, if it goes to the market, and it ends up causing problems.)

    Quote Originally Posted by Saizou View Post
    When have I said anything about monopolies?
    Ah, sorry, I strayed a bit from the topic.

    Quote Originally Posted by Saizou View Post
    I think you misuderstood my point. What I was trying to say is that moderate differences in pay create an incentive for talented people to get an good education and do something productive for society.
    Yes, that's true. And I'm quite positive that someone who has studied computer science doesn't want to earn the same salary a regular worker does, but much more, given the time and money he has invested in his education/training.

    You must also remember that companies pay higher wages to skilled people in order to attract them and keep them. They do not have to do the same with regular workers, who are quite abundant. In the hypothetical example that one day everyone has a degree, and there are no workers but, there's still the need for them, then people will pay higher wages for those willing to do that job since the the supply of that kind of labour would be pretty scarce (when compared to other ones).

    Quote Originally Posted by Saizou View Post
    Your explanation is not the whole truth. The simple fact is that in any country there's an limited amount of resources to go around, and if some group gets an greater share of the wealth, someone else must get less. This is simple logic.

    Therefore, if the rich get an large enough share of the wealth in a country, it directly follows that the lower classes will slip into poverty. This can be offset a bit by growth, but it's also a fact that economic growth tends to benefit the rich more than the poor. Therefore the relative distribution of wealth is even more disproportionate.
    If the rich get an insanely high shares of the wealth that makes people slip into poverty that can only mean 2 things (this is assuming a regular environment, with no crisis): 1) There's corruption, and 2) There's no competition. People in competitive (and not so corrupt) environments can only aim to make normal profits and to pay fair salaries to their workers in order to be effective.

    Economic Growth also involves giving your people higher standards of living. Remember, the more effective your people is, the more your economy grows.

    Quote Originally Posted by Saizou View Post
    Over 3000 dead people would probably like to disagree with your claims. Also, tens of thousands were imprisoned and tortured for resisting Pinochet.
    Those were the leftists. Also, the armed forces didn't take action out of their own accord, they were called to do so more than once. The majority of people wanted them to do so. In this case some people were killed for the benefit of the majority. [Some people even label those people (the Allende supporters) as terrorists, which is not so odd since the MIR was amongst them].

    Quote Originally Posted by Saizou View Post
    Very well. Let us assume, for the sake of the argument, that the poverty in the 70's was caused entirely by Allende. However, even so it still doesn't explain the poverty today, thirty years later. This is where your argument breaks down, because there's no way that an temporary economic crisis will show effects thirty years later, given that rational economic policies are implemented afterwards. That is, if Pinochet's economic policies really were sound, the rate of poverty today wouldn't be higher than during Allende's rule. Hell, here in Europe it took less than ten years to fully recover from the Great Depression which was a far worse crisis than anything Chile has gone through.
    Chile's unemployment rate during Allende's last year was 4.8% (which completely overstates the economic situation in that era. He had almost full-employment, but he broke the economy by doing so, e.g. you had much more people working in an industry than what it was designed for, and far beyond the level that would have been effective). The links above show that the situation wasn't as good as you believe it to be. Also, my argument has not been broken down in any way, I've showed you the rates of unemployment [7.8% and going down (I think the one in your country is about 7%, and yours is considered to be one of the best countries in the world)], I also showed you the Gini Index which was still high, yes, but going down as well, and the HDI is quite high.

    Quote Originally Posted by Saizou View Post
    And I'm not saying that Chile isn't improving, what I'm saying is that it isn't thans to Pinochet. If anything, he made things worse before they got better.
    Why do they keep his most of his economic policies? Why is that the last years of his government were described as Chile's economic BOOM (that term is used to a country that is doing well)?

    Quote Originally Posted by Saizou View Post
    And what does that have to do with anything?
    You're the one that started comparing them. I was showing you some differences between them.

    Quote Originally Posted by Saizou View Post
    Please. Drop the rethoric. I haven't talked about any "evil entrepreneurs" and I don't intend to start either.
    I got that impression after reading the following:
    he set up an economic system which allowed private corporations to take the money from them instead. In the end, people still get poorer whether it's the government or private actors that rob them, no?
    If I misunderstood what you meant, I apologise.

    Quote Originally Posted by Saizou View Post
    And your argument only holds if a few conditions are true. First of all, the workers must have power that balances the power of the corporations. Otherwise, an individual worker will always be powerless compared to the corporation especially if there's high unemployment, like in Chile during Pinochet's regime. If unemployent is high, the supply of work is higher than the demand, and therefore the corporations can comfortably lower salaries. Therefore, if conditions are such that unemployment is constantly high, the working class are impoverished by default.
    There was high unemployment because corporations didn't want to hire more workers. The wages were low because people refused to buy, meaning that the corporation sales were terrible. I'll have to remind you, once more, that Chile went through 2 crisis during Pinochet's period, and none of them are his fault.

    I do think, however, that the government should have got more involved once things started to stabilise, in order to prevent corruption from some business owners. I've already said his government was not perfect.

    Quote Originally Posted by Saizou View Post
    Anyway, to give workers power, you need unions. This is simply a fact, as the only way workers can put pressure on a corporation is if they act united, and therefore they can get higher average wages than otherwise. Guess what? Pinochet basically destroyed the chilean unions, and therefore made the workers powerless. Which again led to the fact that corporations comfortably could lower the wages.
    You're just pointing once side of the things that unions do. Unions are also corrupt, and some of them have done terrible things like threatening people's lives. Also, they are just there for the benefit of a minority, and amongst that minority, there's also unfairness, since a few gets the most benefits. Let us not forget that they also rise barriers for others that may want to enter the force. Hell, just look at the Teacher's Union of some countries; they've made that part of the system quite ineffective, and they cost society better levels of education.

    I do get your point but, your fighting one evil with another one. And let us remember, Unions always win.

    Quote Originally Posted by Saizou View Post
    Thirdly, of corporations can export wares easily, they have little need for an internal market, because there are profits to be had outside the country. Therefore, they have no incentive to pay high wages to their workers, because they won't sell their ware to those workers anyway. Again, this was true during Pinochet's regime.
    And sell what? You can force your employees to accept low wages but, you cannot force them to be effective after paying them unfair salaries. You cannot sell bad products to people, even worse in the International market were you have far more competition (and people that are actually effective) than in your domestic market. If anything, you'd try to sell your poor products to your people but, since you are facing an open market, you will also fare poorly.

    Unfair wages leads to ineffectiveness. Ineffectiveness leads to poor products and high operations costs (which lead to higher prices). You do not fare well with that anywhere.

    Quote Originally Posted by Saizou View Post
    Isn't that the exact same argument the Communists use when you point out the failures of their system? Good ideas, but poor execution? Just pointing out the irony here.
    However, Communism is on the verge of death while Capitalism (mixed markets) si pretty much the world's official economic system.

    Quote Originally Posted by Saizou View Post
    No, the fact is that the problems themselves are inevitable once you decide to switch to laizzes-faire. To be frank, laizzes-faire a failure as big as complete central planning.
    Yes, laissez-faire is a big failure if you intend to keep it forever. It is too unstable, maybe even more than Communism. However, I believe both systems can prove to be useful in specific situations, for a limited amount of time.

    Quote Originally Posted by Saizou View Post
    The problem here isn't really whether they're in the right track. If they were, none of that shit in the early 90's would have happened. Nowadays the russian economy is a hollow shell, and there are few signs of improvement.
    This is why I said that the reforms they used to keep the Perestroika were poor. If they would have taken the proper measures, then things would have gone smoothly. They privatised the economy and gave it to a selected people, and that ended up in monopolies. Hell, if they were to have monopolies, they could as well have remained as Communists. The following summarise what little I know about Russia:
    http://news.bbc.co.uk/2/hi/business/7096426.stm
    http://www.youtube.com/watch?v=glVHSLNk8kI

    Quote Originally Posted by Saizou View Post
    Well, if you want to define it that way, fine. Of course, that also means that no county n the world actually has a free market.
    They have semi-free markets (the degree of freedom vary depending of the size of each countries' governments), which is, in my opinion, much better than a free one. However, the risks are higher. If your private sector is full of corrupt people, and so does your Government, you have pretty much no one to ask for help. That's the sad reality for most Latin American countries, mine included.
    Last edited by Dante Obscuri; 12-05-2007 at 03:39 PM.


 

 

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
vBulletin Skin by: ForumThemes.com
Powered by vBulletin® Version 4.2.0
Copyright © 2014 vBulletin Solutions, Inc. All rights reserved.
SEO by vBSEO 3.6.0 PL2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162