Could there be a better alternative system? Short answer - no. Like democracy, it is imperfect but superior to all alternatives that have been tried.

Long answer - maybe later.

Milton Friedman once described the division of Germany into East and West as one of the few examples of a controlled experiment in economics.

Why is it that on one side of an arbitrary line there was East Germany and on the other side there was West Germany with such a different level of prosperity? It was because West Germany had a system of largely free, private markets allowed by the government. By contrast East German had a government that was controlled by a particular group, the Communist Party, that gave the people what the Party thought they ought to want and then of course funneled the wealth towards themselves. Unfortunately this repeated in history again and again.

Why is a place like Zimbabwe so poor when it was once the richest country in Africa - because it no longer has a government that allows the free market to work. As joke goes where is the capital of Zimbabwe? In Swiss bank accounts.

It is not markets that are the problem but governments. The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the "rules of the game" and as an umpire to interpret and enforce the rules decided on. However to achieve this state you need a system that allows failing or corrupt governments to be removed and democracy appears to be the most successful at achieving this aim.

Judging by the number of times the author mentions the word 'social'/'society', including mourning that "then desirable social attitudes, bonds, relations and social cohesion are diminished or driven out" and as he also speaks lowly of individual advancement, I am not convinced that he honestly condemns socialism.

The author criticises the existing "market", but never even mentions "free market". No current market is free, nor was any market in modern times ever allowed to be free. Government regulations are all over the place, along with preferences, privileges and even financial support given by government to companies and corporations at the expense of individual traders. Many of the faults the article mentions would be eliminated had people been allowed to form their own truly free markets, rather than be forced to trade using the money printed and manipulated by governments. In other words, the current market is anything but 'marvellous'.

As for welfare, justice, needs, etc., why of all things should this be the responsibility of markets? Markets are only one type of activity among many - markets did not cause the sun to light the sky, markets do not cause earthquakes and markets did not produce life on earth nor give them a meaning or purpose!

As the author abhors unemployment, a form of non-participation in the market, I suspect he has a complex love/hate relation with markets, similar to the beaten-wife syndrome. Otherwise one should instead celebrate people who live independently of this market.

By calling the market a "mechanism" the author denies its natural existence long before organised society came about. Indeed, when man conspires to take over and mechanise nature for his selfish desires, in this case for social engineering, the result is always worse.

I agree with much of the analysis in this article. It is absurd the extent to which market forces are allowed to dominate our lives. I regard them as a tool which is occasionally very useful, but which used inappropriately causes immense damage.

Just as you need more than one tool to build a house, so you need more than market forces to build a society.

Thanks for the reference to The Simpler Way website. I wasn't aware of it. Suspect I won't agree with some of it, because of the references to anarchism, but so what? It is important to read things you don't agree with, then formulate precisely why you don't, without denigrating the author. Previous commenters should try this approach. They haven't done much to rebut the faults of market forces.

Dear Philip,

You are very right!

The article, as written, did not entice me in the least to go and look at "The Simpler Way" website, thus it very poorly represents it : it's only your advice which sent me to look there, and what I find there is very different than the article - the article being mostly negative and speaking in slogans while the website mostly positive and reasoned.

Like yourself, there are things I agree with in "The Simpler Way" (including anarchism and how it is differentiated from Marxism) and things that I don't. Time permitting I will continue to read its interesting articles.

The "simpler way" site appears to be total crap, as it's based on incorrect assumptions about the limits of the current system.

Despite this the author does make a good point: markets are a useful tool, but that doesn't mean they will lead to the most desirable outcome. And that's certainly not because the markets aren't free enough.

It is clear that not everyone realises that our "fatal problem" has been caused by governments - including the current one; they are doing much the same as the previous one - spending money they do not have.

The practical example of: spend too much of other peoples' money (i.e taxpayers' money)and it well eventually run out, has come to pass.

Now they want to raise taxes - with total disregard on might very well run out too.

The problem could well be fatal this time. Perhaps it needs to be, so that we can start again, and finally get some decent, competent, non-self serving people in parliament.

Third para should read: with total disregard for Abbott's promise not to.

I agree with everything Ted says, except for the premise, the conclusions and the solutions.

In the first place rich people don't get rich by accident, unless its an accident of birth?

And market forces only work when operating under intense competition!

And become even worse than publicly owned operations when they are the monopoly!

And even worse again when the start up capital is essentially borrowed and the profits used to service those borrowing, shareholders' expectations, and any and all tax liabilities; or rather those that like regressive payroll tax, fuel excise and GST, can't be avoided.

Even so, Government can raise money for around half that of private enterprise! And then use hat facility to the benefit of private players; cause they're too dense or incompetent to kick start anything!?

Unless you hark back to an era when we built things like the now impossible snowy mountains scheme, and a time even though carrying a huge wartime debt, managed to not only build stuff, but became the third wealthiest nation on the planet and a creditor one into the bargain! And a time where a single income was enough to buy a home, a serviceable motor vehicle, feed clothe and educate a family; and still manage an annual holiday! A lot has changed since then! We've privatized this and that, and thus deprived this and that treasury what they used to earn for the national estate! And it's fair to say, hissed both mining booms up against the wall; and compounded that stupidity, buy refusing to compete with superiority lead states?

And nowhere more as a glaring example of their success measuring our dismal failures, than between us and postage stamp sized and resource poor Singapore.

Who have just gone from strength to strength, even as we raked up exponentially expanding record domestic and foreign debt; almost as if there were no tomorrow!

And exactly what you'd expect in our case, when logic and reason are replaced with ideology and dogma! And exactly the opposite in visionary led Singapore!
Rhrosty.

Now that I've essentially bagged the current government and many previous ones, here are my solutions!

We need to replace a growing and unhealthy dependence on foreign capitalists and the foreign control that begets, with thirty year self terminating bonds!

And that would give us access to every penny of foreign capital we could ever need, without also inviting foreign control!

Always providing that money is earmarked for nation building income earning assets; that literally service both the interest and the debt!

And never a better time to kick start a dozen or more such projects; like say, long overdue rapid rail and the decentralization that would create.

Then there's the roll-out on a snowy mountains scheme scale of thorium powered, can't lose state owned energy projects, connected exclusively to micro grids!

Which as the first step, more than halve the cascading price of industrial energy; far and away the largest cost component of manufacture in this country!

Then with production cost more than halved by this essential measure, set about rebuilding the national fleet as a nuclear powered one!

And as such able to beat the pants of foreign flagged comp. still driving their ships with ever increasingly expensive diesel fuel!

And we need to apply some of Lee Kwan Yu's undeniable logic and just retain ownership of all state owned assets, even as we contract the labor in three year hire contracts to retain the essential competition component!?

We need to massively simplify our trade practices act; for entirely self evident reasons; and tax collection practice, to make it entirely unavoidable, and therefore free of all current and also cascading tax compliance costs!

And having done all that, create the wealthiest nation on planet earth.

We have all the necessary resources! All the missing is the political smarts and pragmatism!
Rhrosty.

There were plenty of criticisms of the status quo, but the article was hopelessly short of solutions. When are we going to get the next installment.

David

Communism does not work. How many times does the practice of central control have to prove to be a failure, before dreamers finally accept it is a failure because of human nature.

Collective farming under communism starved millions. To each according to their needs leads to each making sure they do no more than all the others. No reward leads to no effort.

Central control of industry has the same effect. No reward means no effort. The USSR failed because only the elites could improve their lifestyle, so no one tried.

China was a cot case, & starving, until the economy was switched to capitalist, & farmers were allowed to profit from their efforts. Now they are the factory of the world, awash with millionaires, & they are a major food exporter. Hundreds of millions now have a future, other than subsistence forming & starvation in the next drought.

The welfare state is a disaster. It leads the lazy to become dependent bludgers, Teds disadvantaged by their own hand, but communism is a total catastrophe. It starves many of its own by making everyone indolent.

How on earth do we stop a new generation of dreamers making this same mistake on a far too regular basis? The first step in improving peoples lives is to demand they earn their daily bread. All wealth starts there. Handouts destroy initiative, leading to a new Greece, & poverty for all.

Hasbeen, why the rant against communism when nobody in this thread is advocating it?

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Rhosty, the economics of small scale thorium power are hopeless. Even at a large scale it's likely to be marginal.

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ttbn, the government owns the RBA, so can never run out of money. At the moment the problem isn't that they're borrowing too much, it's that they're borrowing too little. They're raising taxes to create the illusion of economic responsibility, and gullible fools like you have fallen for it.

I don't know what planet you live on Aidan, but this rubbish Ted is pushing yet again is straight communism, by a different name perhaps, but still the same animal.

Hasbeen, the rubbish that Ted is pushing does not feature the centralized control and the overwhelming public ownership that are usually considered the defining features of communism, so if it is communism it's sufficiently different from earlier forms of communism that the past failures of communism don't automatically apply to it.

Aidan, How many times do I have to say it?

You are wrong about the RBA not being able to run out of money. They can very easily run out of the only money that matters, which is FOREIGN EXCHANGE.

The bank, thank heavens, cannot print foreign exchange. Neither can it make foreigners lend foreign exchange to the bank.

We currently have a gross foreign debt of over 2 trillion, and it is growing every month. We are lucky to have a few good earners, such as selling houses to China, but no-one known hot long that racket will last.

With so many governments at the moment selling bonds at negative interest rates we are facing the biggest financial collapse in human history. The only salvation, for both the country and its citizens, is to follow the advice of Mr. Micawber.

plerdsus, I don't recall you saying it before, and had you done so I'd've informed you that the Australian government does not borrow any money in foreign currencies, and has not done so for the last twenty years.

If Australian people or companies borrow foreign currency, that's their business. If they can't pay it back, it's their creditors' problem. The government is not liable.

Having said that, IMO it would be much better for the economy if a higher proportion of the private sector debt were sourced domestically, and I think the RBA should do more to facilitate that. The result of doing so would be a lower Australian dollar in the short term, but the long term effect on its value would be the opposite.

Eighty years ago, Keynes explained that a temporary increase in government spending (without a corresponding increase in tax) can reverse the effects of a financial collapse. And yet people oppose doing so for fear of an IMPOSSIBLE outcome.

Aidan, read thorium cheaper than coal, before you go on digging an even deeper hole!

Firstly, very localized power is self evidently cheaper, because it doesn't lose power to transmission line friction! And for Australia that's about half the power we generate!?

The only reason for mega power stations is the national grid and our prewar decision to rely almost exclusively on cheap and abundant coal!

Even so, for the life of a thorium reactor, it's flat out consuming a truckload of thorium; given most of the fuel is consumed leaving only around 5% as actual waste. Which is far less toxic than that produced by oxide reactors; and anyway, thorium waste is eminently suitable for long life space batteries!

Whereas coal fired power consumes millions of tons annually of evermore expensive coal, produce tons of ash, compounded by increasingly expensive transport costs!

Thorium reactors are 50's technology and were only abandoned because there's no weapons spin off. And nothing prevents several/dozens of 40 MW modules being paralleled to create 500-1,000-5,000 MW's

And no I'm not talking about pushing CHEAPER THAN COAL thorium power through the great white elephant of a national grid, just a very adjacent manufacturing or processing plant; arguably the only way we can create a manufacturing model, more than able to compete with the emerging economies, or a geologically unstable Iceland.

And given just how much energy impacts and impacts again and again on the entire cost of production, massively reduce the cost of energy dependent manufacturing; or lowest possible carbon, metals smelting, or ship and sub building.

The fact that these modules can be mass produced and trucked wherever they're needed, brings the cost of producing energy massively down; ditto decommissioning!

And with the cost of energy dependent production literally halved, it can be halved yet again, (world's cheapest) for our domestic users; by changing to very locally produced and used, endlessly sustainable biogas, powering our homes 24/7, via super silent ceramic fuel cells; which by the way, also produce endlessly sustainable, free hot water!

Thereby adding billions to the current discretionary spend!
Rhrosty.

Hasbeen old mate, before you go on bagging Ted as a latter day/closet commie, please study the historical evidence on whether private or public energy is cheaper!

I ask you to compare the difference for business and or local enterprise almost exclusively!

Similarly, compare private/public communications/air travel!

Please compare us and our debt levels, as opposed to those of a smaller Singapore, the darling of many PRIVATE ENTERPRISE multinationals.

How can a much smaller resource poor, war ravaged and bankrupted Singapore, with barely a resource to bless herself with, so massively outperform us economically?

I mean, we have mountains of iron ore, veritable underground oceans of coal, (locked away) oil and gas; and a much larger population; and therefore ought to be able to beat the pants off of a socialist Singapore!?

Or for that matter, any part of socialist Scandinavia, who build/manufacture small arms, small engines, chainsaws, motor mowers, trucks, trains, tractors, ships, subs and planes, just to mention some?

We have people just as smart too?

Just not in any of our parliaments or positions of power and influence, apparently?

Or could it be we are just overburdened with too many Nay Sayers, who as usual know all the reasons it can't be done; or why we can't compete, or need to sell our souls to foreigners, for the right to exist/consume?

I for one am puzzled as how that example actually allows us to compete in the global market place! Do we need somebody's permission to once again become a country that makes things?

Hard to blame labor costs, (16% averaged) when professional salaries in any of the aforementioned (high tech?) economies could be 2.5 times our Australian average?

Maybe the real problems are the (privatized) costs of fuel, power, water and transport, the multifaceted nature of industrial production or processes here; all compounded by the tyranny of distance?

Whadda you think old mate?
Rhrosty.

Rhosty, read my comment in the Revitalising Manufacturing thread before you go on digging an even deeper hole!

Where did you get the LUDICROUS idea that half the power we generate is lost in transmission? The actual figure is more like a twentieth. I don't have the exact figure for Australia, so maybe it's an eighteenth or nineteenth, but that includes all the losses in transmission and distribution. Which means that all of the conclusions you came to based on the premise the grid's a white elephant are invalid.

Nuclear power, whether from thorium, uranium or plutonium, is expensive not because of high fuel costs but because of high staffing costs and high equipment costs.

The small modular thorium reactors you advocate DON'T ACTUALLY EXIST! The reason it's sometimes regarded as 1950s technology isn't that it was perfected in the 1950s; rather it's that development of it was largely abandoned after the 1950s! The dream that these modules can be mass produced and trucked wherever they're needed is unlikely to come true any time soon, and when it does their running cost will be high. The electricity cost will probably much higher than from wind power here; certainly much higher than Iceland (with its very abundant hydroelectric and geothermal resources).

Combined heat and power from ceramic fuel cells (whatever the source of the methane) could be very useful, but because they're only able to operate at high temperatures the economic advantages aren't anywhere near as strong as you seem to think.

Actually Aidan, the Indians have built a few Thorium reactors, and I understand from earlier posters, the Chinese may be building one a week?

Transmission line losses are on average around 17%, whereas distribution losses are 50%, or a combined total of 67% averaged!

I would ask other posters to ignore nay sayer Aidan and simply google transmission line losses, and observe what the electrical engineers KNOW having spent many years actually studying and working on the subject.

Which might suggest to some not allowing the likes of Aidan to do their thinking for them, and do a little independent research for themselves.

And no I'm not advocating any of Aidan's links; and for the most obvious reasons!

I myself worked for a power authority in a science related position, which ought to be enough for most posters to go take a look see for themselves, if only to see how much egg Aidan is wearing?

Ceramic fuel cells have an energy coefficient of 80%; or if you will 4 times better than coal fired applications.

And given they're sited where the power is consumed, are not subjected to the usual transmission and distribution losses, which according to my electrical engineering friends, averages around 67%.

And as such locally sited Aussie invented ceramic fuel cells produce the cheapest domestic power in the world, even more so, when the fuel source is domestically created waste to methane, scrubbed biogas!

Or put another way, endlessly sustainable and virtually free fuel!

It also might be of some interest to you Aidan, that thorium has allowed large scale solar thermal energy, to become base load energy, that successfully competes with coal, now today!

The only ludicrous thing here Aidan is your endless obfuscation; and on subjects you obviously know zero about or pushed way off into a distant future?

We're are competing for our very livelihoods here with all the emerging economies, and shouldn't be reluctant to ape some of their best examples?

Perhaps all we need are a few Indian and Chinese electrical engineers to show us how they've done it!
Rhrosty.

Every western style economy rests on just two support pillars, and therefore any fool in his right mind should look for and accept the cheapest energy and the lowest costing tax system!

Yes people are sometimes hurt financially by economic change, as occurred when we ditched our clothing and textiles manufacture, only to see the importers soak up obscene profits, rather than see consumers get a better deal, the intended outcome!?

Albeit some of that changed when some of the bigger retailers started importing directly from the factories, to cut out all the usual middlemen.

Simply put, cutting out all the profit demanding middlemen (inclusive of money burning state governments) and their markups/management fees, could halve the cost of living, and with it, destroy the wages/cost/price spirals; all assisted by a long overdue return to the inflation beating gold standard; and all essential service rolled out as more reliable, government supplied (cheapest possible )models!

We just don't need paper shuffling middle men, be they the usual money for nothing business broker barons, empire building bureaucrats, (diabolical do it double dithers) or corrupt/serially incompetent state parliaments!?

All of which could be replaced by an elected, single winner takes all state governor, with a staff of around a dozen competent administrators!?

And as such only constrained by the budget, genuine whistle blowers and people power, rather than an extremely expensive obstructionist opposition! Thereby saving as much as 35 billions+ per?

People with powerful vested interest, or anything but the national interest, genuine entrepreneurial economic opportunity, and we Australians in mind, can go argue differently! Or better yet, go take a running jump!
Rhrosty.

Rhosty, I stand by my claim that the small modular thorium power stations don't exist yet. I'm aware India's building thorium reactors – it's something that they had a strong incentive to use thorium because of uncertainty about uranium availability. But neither they nor China are nearly as far along the process as you seem to think. See http://en.wikipedia.org/wiki/Thorium-based_nuclear_power to find out where countries are really at.

Whatever you did for that power authority, you were obviously quite isolated from the technical side of it, or you'd know that 17% and 50% losses in series add up to 58.5% not 67%. But of much greater concern to your credibility is the fact that you got those numbers from an unsourced claim on a website, whereas more reputable websites show much lower figures and their sources.

So I'd encourage you to follow your own advice and do some proper research.

Ceramic fuel cells are, as you say, very efficient (whether the gas comes from biological, geological or synthetic sources). So why aren't they in widespread use yet? If you look at the case against, instead of just looking at the case for it, you are likely to gain a much better understanding of the issues.

I'm puzzled as to what you think I've been endlessly obfuscating? I thought I was pretty clear, but if you want something explained better, just let me know!

But your claim that it's the only ludicrous thing here is a blatant lie. IF IT WERE TRUE I'd be extremely interested that thorium has allowed large scale solar thermal energy, to become base load energy, that successfully competes with coal, now today! But you've confused two completely different molten salt technologies.

No western style economy rests on just two support pillars! Things of more advantage than the cheapest energy and the lowest costing tax system include:
• The rule of law
• Good infrastructure
• A highly skilled workforce (therefore a good education system)
• Cheap (and fairly easily available) credit

That last pillar rules out a gold standard.There are better ways of controlling inflation anyway.

I generally try not to raise to the bait when the well-off and opinionated suggest “everybody knows socialism doesn’t work”. But sometimes a call to order is appropriate, particularly when a protagonist suggests that the market is the main cause of our problems. In this instance this is Ted Trainer.

Due to the restrictions placed on this blog, I need to explore this issue in 3 parts.

It is just too easy to blame the market, instead of tackling whatever motivates or constructs the market. Under capitalism, even if there was no market and goods were distributed according to politics, the faults that Ted identifies would be much, much worse.

Poor people do not simply have “little or no effective demand”. This is not caused by markets per se. The restricted “effective demand” of different social groups is as much caused by politics and various non-market economic practices than whatever exacerbation may arise from markets. Markets are where poverty is felt – not where it is caused.

I found Ted’s excursion into domestic communism, both strained and vexatious. Domestic work produces use-values, not exchange-values – utilities, not commodities. Our problems arise through faults within commodity production and distribution, not through Mum’s and Dad’s providing meals to their kids.

Excluding direct violence and fraud, you can only create rich and poor through interfering in the production, distribution and consumption of commodities. If everyone lived like Robinson Crusoe there would be no rich and poor even though different groups would have different standards of living.

But more importantly – if these Crusoe groups exchanged some goods on a free market based on socialist principles, the differences in standards of living would decrease. On the other hand if such goods were exchanged on some other market basis, feudalism, mercantilism or capitalism, huge disparities and exploitation could arise and probably would

Part 2:

So blaming the market, makes no sense and does not help us in any way, and may even do damage by misdirecting progressive social activism. The real problem is the political structure within which the economic system develops and operates and within which the rights of different social groups are adjudicated.

You only get rich and poor and an increasing gulf between the two if you have, what Paul Samuelson calls, “bourgeois economics” [J. Ec. Lit., (1971), 399]. The Greeks and Romans increased the gulf between rich and poor by plundering their neighbours. Feudal lords and priests increased the gulf between rich and poor through taxation, early merchants made themselves rich through exclusive rights and in modern times, capitalists continue this practice through the political economy of Capital.

Capital does not need a market to accumulate. It just needs a society and a suitable State. In fact under capitalism, gulfs between rich and poor increase as markets become restricted. If there was a truly free market, capitalism would have disappeared long ago. You cannot make a capitalist profit if there is free entry and freely accessible information.

So we can answer Ted’s question: “The 'marvellous market' is the main cause of our fatal problems – A ridiculous question?” in the affirmative.

However markets can still lead to problems in the absence of bourgeois economics and no one is suggesting that a future society should be based solely on free markets. Humanity is so diverse and challenged by its own growth that markets can never produce the most beneficial outcomes for all. Some form of social regulation and some forms of production based on need not market power are necessary.

Part 3:

Ted also presents Faults 2, 3, 4, 6 and 7, but while he associates these faults with markets, his elucidation generally burrows down to the underlying truth – viz:

Fault 2 – “yield most return on investment.”

Fault 3 – “labour and money into commodities”.

Fault 4 – “transfers much wealth to the wealthy…get an income without working”.

Fault 6 – “define efficient in terms of the monetary return on investment”.

Fault 7 – “a more selfish, mean, unequal, predatory and callous society, focused on individual advancement and beating others in competition”.

None of these are inherent in markets. They all arise from bourgeois economy and the intrusion of anti-social forces arising from the accumulation of Capital.

There are three intrinsic problems with markets. Firstly they produce prices based on opposition between supply and demand which can easily contradict value, and secondly they cannot service the needs of every individual. Finally markets tend to respond more to short-run events and leave the long-run consequences to future generations. Keynesians can be blamed for this.

There are even more problems with markets if the standard of money is corrupted and prices are driven away from value by the impact of providing debt to segments of the population based on differing conditions such as interest rates.