My definition of capitalism is essentially free and voluntary exchange with minimal interference by government. So “government strong-armed capitalism” is to me an oxymoron, and is something I suspect we both would agree is “suboptimal.”

You are worried about “farming out” essentials to private enterprise, which is understandable. You list areas where the government should step in to invest in infrastructure, reduce the prices of food and heating, and “force down” the cost of health care. Are you not worried about the inefficiency which comes with virtually all government enterprises? (I’m not being facetious; I’m curious what you think.) The supply of food is certainly essential but I don’t see calls for government to take over the production of food. Same with clothing and most other “essentials.”

It’s easy to say that food prices should be lower. The devil is in the details! How would you do it? And beware of those unintended consequences!

Private enterprise, particularly in a truly competitive environment, tends to be more efficient than government – a LOT more efficient. I would in fact like to see government interference reduced to let the power of the market work. To me that is also the morally superior option. It leaves people free to make their own decisions while also raising living standards. Time and again the free market has generated lower prices, increased supplies and higher quality (see my prior quote from the Dallas Fed). We should be very cautious about doing anything to kill that golden goose! Those at the low-income end of the scale are the ones hurt the worst. I am not saying we shouldn’t have a “safety net” to help those truly in need. Of course that is also morally appropriate. But remember, the more wealth a society generates the better able it is to take care of the less fortunate.

So when you look at these food price rises, for example (and remember they are much worse in the 3rd world); or health price rises in the US; or house price rises in the UK and Australia; the question is not “is it capitalism that is evil” but “is there a better version of capitalism which would not rob us?”

The contention here is that there is: social democratic, rather than radical neo-liberal capitalism. Capitalism in which governments were willing to fund major infrastructure projects to reduce infrastructure bottlenecks that drive up inflation; capitalism which supported the poor to prevent them being priced out of food or heating; Capitalism in which governments used their bargaining power to force down the cost of basic health care. The alternative we are being presented is a system where all these essentials are farmed out to private enterprise, and the cost of these essentials rises because they are all areas of the economy where market failure punishes some people.

You need to consider the counter-factual of a different sort of capitalism, not the counter-factual of monolithic socialism.

Thena, and others, are looking relatively short term. That is fine, but remember that this thread originated with the review of a book which seems to claim (I admit to not having read it, only the review) that capitalism is a malicious system which spreads poverty and misery, a point to which I took exception.

I pointed out a recent UN report citing significant reductions in poverty around the world, progress which I believe is attributable to the increasing numbers of people living under capitalist systems. Pointing out that there is progress is not the same as claiming that all our worries are over. But pointing out that all our worries are not over is also not the same as claiming that capitalism is bad.

I readily concede that prices of certain food items have increased in the past few years. But citing anecdotal prices for 5 items from Central Maine over a 3-year period is hardly conclusive. That doesn’t mean average prices haven’t in fact increased – you just haven’t demonstrated that.

But even if average food prices have increased in the last few years, it doesn’t change the long-term reality. It’s not as if the US just became capitalist in 2005, at which point the price of eggs went up 50 cents. The US has been capitalist since before it became independent. I didn’t hear anyone complaining when prices were dropping.

And living standards have inexorably improved over the years and decades Not in a straight line, we all know there have been ups and downs. But I doubt many people would want to trade our standard of living for that of 100 or 50 or even 25 years ago. Nor would many trade our standard of living for that of any non-capitalist country today.

The point about food prices was recently well made by Richard Fisher, President of the Dallas Federal Reserve Bank: “Look back in time and you’ll see food becoming less and less expensive relative to other goods and services, even as the number of mouths to feed around the globe has increased and consumption per capita has grown. The price of corn, for example, may have increased noticeably over the past year, but it remains a bargain from a historical perspective: In 1860, the price of a bushel of corn was about 50 cents; translated into today’s dollars, that is about $12 a bushel. The current price is a bit over $3.

It is true that the long decline in relative food prices has been punctuated by occasional reversals as the pace of technological advance has fluctuated or as demographics have changed. I remain optimistic about the very long-run trend of declining food prices, but I do recognize that we may be in the midst of one of those reversals as the world economy adjusts to recent changes in demand. Biofuels production may be playing a part in today’s rising agricultural prices, but I believe this is minor in comparison to the evolving eating habits of billions of Chinese and Indians, the Vietnamese and former captives of the Soviet Union, Brazilians and Mexicans and others who are becoming increasingly wealthy. This reversal may take several years to play out before technology and investment can respond with sufficient supplies to put food prices back on their long-run course. In the meantime, we are subject to “agri-flation” that may be more sustained than we would like.”

The state power that ordinary people want to retain is the power of the state to manage crucial infrastructure and public space. This has been whittled away for years. The state power you see increasing with every crisis is the power of the police and security services - and it is being increased by people who claim to value “freedom” at the same time as they liberalise markets and remove our public infrastructure. Do you think this is a coincidence?

While the calculation of the inflation rate is done on a whole basket, Tim, the current situation is that cheap foreign goods are going down in price, while crucial basic goods - food, for example - are going up in price. For those of us who live lives that are not full of luxuries, this means a greater portion of our income is being chewed up. You also know full well that this current inflationary trend is leading people to use up capital, and some of us have a lot less of that than others. People who have capital can convert it into material goods which retain their value, while those of us who do not are doomed to a life of increasing service costs, reduced public services, and declining disposable income.

Finally, how do you reconcile your claim on the one hand that market liberalisation over the last 30 years has increased our standard of living, with your tendency to blame every rise in costs on government bungling. Surely as market liberalisation has proceeded there must be less government bungling, and a greater portion of those price rises are the responsibility of private agents….?

As I think I mentioned above, water privatisation has been conducive to people’s well being. The privatised water companies in England provide cleaner water, with fewer leaks, with less environmental damage, more cheaply, than the Govt run company in Scotland or the directly Govt supplied service in Northern Ireland. We’re lucky in that we’ve been able to see the results of a controlled experiment there.

“Your defense rests on the idea that completely liberalised markets are so good that sometimes its worth governments forcing them down their own or other peoples’ throats.”

My defense rests partly on the fact that markets are so good, yes. Also on the fact that I don’t see them being forced down people’s throats. Further, that Klein’s basic thesis, that each crisis is taken as an opportunity to do so I regard as entirely wrong. In the western world each crisis has, as far as I can see, led to an increase in State power, not a decrease.

“Australia is insulated from these corn price rises (it is a food exporter),”

Err, how insulated? If global prices rise then as long as Australia is plugged into the global economy (which as you note, it is) then domestic prices will rise with global, surely?

For Thena: sure, some thingsw have gone up in price. Some have gone down. What matters, when calculating the inflation rate, is the average of all of those. Because that’s what “the” inflation rate is. An average of all of them.

As I understand it corn prices have only started rising in the last 6 months and the effects are expected to start flowing through food prices from now. But a lot of the prices quoted above are not in any case dependent on corn.

I note you have completely avoided my more “factual” comment about current inflation in Australia. Australia is insulated from these corn price rises (it is a food exporter), and the evidence of rapid price rises over the last 2 - 3 years is very strong. Inflation has been held in check by plummeting prices of imported goods while local essentials - fresh food and housing - have skyrocketed. Similarly NZ, with the developed world’s most open markets.

We also stock up on staples when we visit New Hampshire, because the same stuff is about 10% cheaper in Portsmouth NH (about 2 hours or so away) than here in central Maine. Part of our specific problem is geographical isolation: the northern half of the state is very rural so the further you get north of Portland, the more you pay for anything that has to be freighted there, because it’s a round trip to nowhere. I would expect similar factors in other isolated rural regions like the US mountain west (outside of the Denver and SLC metro areas) and also in Canada more than, say, 300km north of the US border.

Food price increases haven’t got exactly one cause. It’s not tidy. Part of it’s because oil has gone up, which raises the price of freight and also the production cost (tractor fuel, fertilizers). Part of it is the demand for ethanol raising corn prices. Part of it is freaky weather destroying the juice oranges in Florida a couple of years ago. (Why is the weather freaky? Not touching that. Weather is freaky. It’s 70 degrees outside today, which is unheard of in mid-October around here.) Part of it is contamination issues with produce grown in California that I think were water-related (and why the hell should a lettuce travel 3500 miles to get to my fridge, anyway?)

But the bottom line is that I’m paying around 40% more for food than I did two years ago, and I’m paying around 40% more for fuel than I did two years ago, and I not getting a 40% higher wage than I did two years ago, and forgive me for thinking that this does, in fact, present a real problem.

Hunh? You’re trying to use United Fruit as an example of a free market? The Government of a country goes to war with another country so as to establish a monopoly supplier in that second country? And you want to call this free markets? I’d call that one of the more military aspects of fascism personally.

Please try to understand me: there’s a huge difference between what business can get governments to do and free markets. As the classical liberal that I am I rail against producer capture of the powers of government just as much as I do anyone else capturing them. For exactly the reason you give: UFC.

Indeed, one of the major reasons I don’t want to have governments intervening in markets is because I am certain that such power will get captured and misused in that manner. Again, I’m not a conservative, thinking that business is good and can never do wrong, while the unions and the people are the baddies. I’m a liberal in the old sense meaning that I am extremely suspsicious of government having power over and above the most basic minimum: because I am certain that such power will get captured and then be misused.

“Tim, state intervention into markets for food with these new biofuel rules are new, and are having effects on food from now. The price rises pointed to above are older than that.”

Err, those are 2007 prices, or so the comment says. This is still 2007 isn’t it? The rises in corn prices have been over the past 12-18 months, haven’t they?

Let alone that things would be better with “less private markets.””

You’re right, gator. There really is no evidence of anything wrong anywhere, especially in the sphere of economics.

Every man is a king, all the children are bright and shiny, all people everywhere are living in the highest state of peace and harmony, war is but a dim memory, mansions are available free for the asking, as are Porsches, Mercedes, BMWs, gasoline sells for $0.10 a gallon, farmers practically give food away - oh, and Rush Limbaugh just won the Nobel Peace Prize for his humanitarian work in bringing the truth about the Glorious Conservative Revolution to all of humanity.

If we could just capture and eliminate that counter revolutionary criminal Emmanuel Goldstein Al Gore, the world would be perfect…

(gator, most people’s wank-fantasies involve imagining other people naked or something. I wonder why your’s seem to involve the supremacy of Reichwing talking points?…)

Also as I said above, this has nothing to do with markets vs. not-markets. It’s about how we choose to manage the markets we have, and modern governments forcing liberalised markets on us which we don’t want (with United Fruit as the classic example you haven’t yet answered).

Off Topic for Exholt, if you are crazy enough to still be reading this:

I am assuming you are the same exholt I have argued with before at feministing. I have put up a new post at my blog in connection with the Yasukuni Jinja and Japanese history, which I thought you might be interested in. I would be interested in your comments (there not here). The post is just below the post with the picture of the hornet. The address is hopefully on this comment, assuming I have gotten it right…