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Does capitalism still work?

Stuart Denman | 13:00 UK time, Wednesday, 17 September 2008

Banks say they have made a fortune in recent years thanks to light-touch regulation.

hbos1nn_203.jpgBut the banks may now be in trouble, and today we learned that Halifax Bank of Scotland is in advanced merger talks with LloydsTSB, following uncertainty about the strength of HBOS after a run on its shares.

But what would regulation achieve and would it go against the ethos of capitalism?

What exactly should regulators have stopped the banks from doing? And did banks, in fact, cause the house price bubble by excessive lending?

Watch Newsnight's discussion below:

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  • Comment number 1.

    "What exactly should regulators have stopped the banks from doing?"

    They should have stopped them paying millons of pounds in bonuses to people making rash and unsustainable decisions on lending.

    They should have stopped that bloke singing on the adverts.

  • Comment number 2.

    The sums involved are bewildering but if nothing else the whole farce nails talk of dole cheats and scroungers.

    Let's have no more talk at Tory party conferences and the press of poor people being described as "spongers". We now know who the real spongers and parasites are.

  • Comment number 3.

    All banks and building societies have been very negligent in lending excessive amounts to individuals who they knew would struggle to keep up payments from the word go.

    I'm alarmed by the number of new homes being built on the outskirts of all towns and cities, and knowing that the large majority of those moving to them simply cannot afford to pay for them is even more scary.

    Nowadays almost everyone just expects to have what they want - larger home, bigger top-of-the-range vehicle, foreign holidays - regardless of how they pay for it, or how much debt they get into.

    Banks and Building Societies have played a huge part in all this, and they only have themselves to blame.

  • Comment number 4.

    The answer is no capitalism doesn't work. It has been and will always be about profiteering, exploitation, transferring jobs and factories, etc to locations where the conditions and pay is less.
    It has always been dependent on the mass of the population striving to make the minority rich and in privilege. The fact that more of a minority might gain access to wealth is irrelevant.
    In respect of the City and stocks and shares, the totally folly of dealers and companies in being able to gamble away the prospects of financial institutions and individuals, unregulated and under little governmental control, reveals the greed is good philosophy rules.
    Never trust a politician or banker!

  • Comment number 5.

    EVERY single time someone on Wall Street sneezes, let alone something major happens, the legions of loom pour forth to to announce the capitalism has failed, and it is time for xxxxxxism (these days greenism)

    It was hogwash every time before and it is hogwash now (organic hogwash you understand these days)

    The market has ups and downs, sometimes these are severe ups and downs.

    We have had long years of easy credit, low inflation and low interest rates, and yes the run has stopped.

    But the fact is, if you look at any measure of wealth, the nation, the world, will be richer after this all shakes out than before we started the now ended boom.

    That is how it is supposed to work. The existance of a unstable cycle, far from being a flaw in capitalism, it is a fundamental necessity of it.

    The big problem for the UK government, is that its primeminister spent years saying "no return to boom and bust". Not only did he delude himself if he really believed it, he has stored up for himself the mud now being thrown hourly at him.

    Regulation can not make a real difference. In the end the basic laws of supply, demand, greed, fear, enterprise, incentive and plain old luck will mean, that this is not the end of booms, nor yet busts.

    But it might be the end of the Primeminister.

  • Comment number 6.

    Capitalism has never really worked but especially now - what is sane and practical about never ending growth? the banks and governments got greedy, housing markets on both sides of the atlantic were allowed to spiral out of control and this is the net result. In a world where governments claim to be worried about climate change and resourse management, they should apply the same thoughts to the financial markets. I can only conclude that ecomomists don't have the sense they were born with.

  • Comment number 7.

    Much of our manufacturing industry has gone to the wall because banks and governments have refused to support them. Our public services are being hived off to the private sector to the detriment of our citizens.However, when a financial institution gets into difficulty of their own making the American and United Kingdom governments pour billions of pounds and dollars into them. Am I thick, or should they not be sorting their own self inflicted problems like they expect us to. I still receive unsolicited offers of credit cards and unsecured loans from a myriad of financial companies when we are constantly told that we are in an economic recession.
    Sean Appleby-Simpkin, Labour (not noo labor).

  • Comment number 8.

    Capitalism never worked, and can never work without some regulation. (Even the basic tenet, of making as much money as possible in the short term and not thinking about the future is fundamentally ludicrous). It is no surprise that we are in the state we are.

    Although in the UK we are not as bad as the US, we need to keep business OUT of our legislature and government and make sure that we regulate banks and industries as much as possible to allow them to function without becoming rampant. Regulatory bodies should be incorruptible and accountable. Obviously the argument to this is that if we regulate too heavily in a global economy we would not be able to compete for business. However, I have yet to hear a suitable cogent argument as to why we should have to compete for anything, especially in the 'developed' world.

    Does privatisation of the public services actually improve them and drive down costs? No, since private companies are 'for profit' and the best way of making profit is to maintain a monopoly and thus a captive market and then providing the bare minimum service required to retain the tender and thus make as much money as possible. It is evident to me that this cannot be a good way of running anything which we deem as essential, such as utilities, public transport etc.

    Capitalism has its uses and is a relatively decent model in some cases, but to all those who argue that communism doesn't work, well, (it has never truly been tested but I shall concede for the point of argument) no, but nor does capitalism (which has been tested quite thoroughly and found wanting).

    Competition is the problem, not the answer.

  • Comment number 9.

    I would say that regulation goes against the spirit of capitalism, but when the capitalists themselves go cap-in-hand to the Government for a bail-out of their failed gambling, then they don't have a leg to stand on.

    The Government must also as an addition to regulating the way the banks lend money, they should also legislate to make the banks act with much greater sympathy and time to ordinary people who are suffering financially at this time.

    How dare the banks go cap-in-hand to the government begging for hand-outs whilst refusing help to those that need it most.

  • Comment number 10.

    The reason many financial institutions are struggling is more than a failure of strategy, but a failure of values. Money making strategies that are not connected to a values anchor will drift into doing things just because they make money, without thinking ‘is this the kind of activity a business like ours should be doing, how could it affect in the long term, the well being of our shareholders, customers and employees?’ I’m sure when this is all over there is a piece of research to do that shows a relationship between the size of bonuses paid out and the degree of poor judgement demonstrated. People talk about risk needing to be well rewarded, but where are the leaders who decide when the risk is irresponsible?
    Any business that sees its collective objective to make money for personal gain only will in the end eat itself. The argument that is sometimes made that if it’s legal then it’s legitimate doesn’t cut it. Modern business moves at such pace and with such complexity regulators and legislators can’t keep up, or sometimes even envisage what limiting framework is required until it’s too late. What is required is capitalism with a responsible dimension, which means being values driven, and that requires leading with integrity, a curiously old fashioned sounding notion.

  • Comment number 11.

    Does Capitalism work? Well that depends upon what you are trying to achieve. For the 1/5 of the worlds population living on less than a $1 a day, in great poverty, capitalism has not worked for them. Simon George (post 5) is clearly a believer in the trickle down effect, but this does not benefit the most poor in the world.
    The gap between rich and poor is increasing - even in Great Britain.

    Why should we accept the status quo just because a few past "xxxxxxisms" have not worked. We will certainly need to find a better answer if we are to find a way to live sustainably on our single planet, where 3 are required to maintain current consumption.

    Banks should be regulated as should companies. It is not acceptable for them to gamble irresponsibily with everyones financial security and ultimately ruin lives with their greed and callousness.

  • Comment number 12.

    So, where is all this money the banks have made? Who is benefiting? Or was it just paper money money anyway?

  • Comment number 13.


    Now you know why a) the USSR created an 'Iron Curtain' b) North Korea isolates itself c) New Deal 'National Socialist' Roosevelt said he could work with Joe Stalin, and why the curiously much maligned German NSDAP did what it did (economically) from 1933 onwards to try to recover from the excesses of free-market liberal-democracy.

    The 30 year systematic erosion of our ('nazi') Welfare Statet was a big mistake. The USSR didn't like Keynesian economics as it put the brakes on unfettered capitalism which the USSR had hoped would destroy itself through corrupt, ('light touch regulative'?) practices. Why do so many still believe that unrestrained Friedmanite/Chicago School debt-laden neoconservative capitalism is a panacea given what it did to the Tiger Economies and Russia? Why do so many still think that the 'fall' of the Berlin wall was such a significant event given that China has 10x the population of Russia, is still Democratic-Centralist (Stalinist) (just with an NEP). Note that China's economy is growing and that it leads the SCO which includes Russia and has Iran and Pakistan (note these especially given recent USA/Pakistan border events and pressure on Iran), plus India and Mongolia as observers?

    Flooding the EU/UK with 20 million more eager consumers from S. Asia and Africa to compensate for our below replacement level birth rates (insecurity driven?) certainly isn't going to be the answer to what's fundamentally wrong (as I see it). At least, not if one's really interested in this country as a nation state rather than as a cash-cow for international finance. On the other hand, looking at the cost of 'equalities' legislation (since the 70s especially) might get more people thinking about where the root problem and answers may be sought... painful those these may be for many long conditioned to revere anarchistic political correctness as freedom (rather than as subversion).

  • Comment number 14.

    Capitalism (along with religion) has caused most of the problems of the global community for many generations. Socialism, with all of its problems, has never been given a chance in terms of the time the experiment was given, mainly because of American paranoia. The West has backed right wing regimes all over the world, the most staggering being its lack of support for Mr Gorbachev in preference of the inebriate Yeltsin. At work, I am often chanted the Tory Blair mantra "we can not keep harking back to the past, we must go forward". Well those who ignore the mistakes of the past put us all in peril. Mr Blair also said "You don't have care about what you do as long as believe in it". I am sure that Stalin and Hitler would agree.

  • Comment number 15.

    It never did work. Eve the formerly fat cats will eventually become painfully aware of this, as their personal fortunes finally, inexorably, sink. The more you have, the more you have to lose.

    And as a basis for as humane society? Forget it.

  • Comment number 16.

    Is this not the very acme of a 'when did you stop beating your wife' question?

  • Comment number 17.

    What has always been the trouble with Capitalism and always will be is the fact that to create a few very big winners it needs a lot of losers to help them attain this position.

    Look at how fast the oil price goes up and how slow it is to come down. This explains it really!

  • Comment number 18.

    Capitalism works because people are superstitious rather than rational, they expect to win the lottery. Some do win, but at the expense of the losers… when the losers can no longer sustain the winners we have a financial shortfall, the prize money drops and people lose the incentive to gamble.
    The current lack of cash to fund the Casino known as "The City" has caused havoc, as although there are plenty of resources to sell, demand has fallen due to unusually excessive greed. Oil producers have jacked-up the price of oil and reduced demand, energy producers have jacked-up the cost of heating, lighting, farming, shopping… so the losers have reduced spending.
    Manufactured goods can be done more cheaply in low wage economies despite the transport costs, so we have rising unemployment, which reduces spending further…

    That's Capitalism Folks!!!

  • Comment number 19.


    Money doesn't work - it just talks big. It is the ultimate, high earning, fat cat.
    Money, particularly imaginary money, has no human dimension, hence it defies reason, like infinity and before the Big Bang.

    As I have said recently (into my shouting-bucket) we 'Apes Confused by Language' are a synapse too far. We are doomed by our evolution to elevate cleverness over wisdom, while unable to shake of the Ape who is obsessed with interfering with each other. Even the Bible failed to see that money ITSELF is beyond our control; love of money a second order effect.

    I would not start from here. Amoeba, maybe.

  • Comment number 20.

    "The gap between rich and poor is increasing - even in Great Britain."

    True, but the poor are not poorer, that are in absolute terms richer. Just because there is someone 1000 times richer than me today wheras yesterday he was 500 time richer, does not make me poorer.

    The world is much richer than ever, and the proportion of people in absolute poverty is declining as continents like Asia, South America and the Sub Continent grow rapidly.

    "Why should we accept the status quo just because a few past "xxxxxxisms" have not worked. "

    Since the current popular alternative, Greenism is when you strip way the colouring, is very similar to the ones which failed (state internvention, state control, regulation, trade protectionism ec) there is no reason to beleive it will work at all, indeed it would make things much worse.

    "We will certainly need to find a better answer if we are to find a way to live sustainably on our single planet"

    The best defence humanity has against catastrophe, is wealth.

    Consider. Whether the UK reduces its carbon emissions to zero or not, the world will likely continue to expand output of carbon dioxide. Therefore global warming (if you accept the currently held consensus) will happen regardless.

    Therefore what is our best course? to spend our wealth changing our lives so that we are carbon neutral? Or should we spend our wealth preparing our nation for the consequences of events we are likely to be unable to prevent happening regardless of our own green adgenda?

    The answer is an old fashioned cost benefit analysis to find the best compromise between the two extremes. (E.g. nuclear power providing benefits to both carbon output and preparing oursleves)

    I know this is a minority view at the moment, but it is a rational one, and in the end it is the one which will win out.

    It has the benefit of being the capitalist one after all.

  • Comment number 21.

    It cannot work, is bound to fail. You cannot have infinite growth in a finite system.

    Didn't Einstein prove that with his E=MC2

  • Comment number 22.

    Silly question. It might be sensible to ask

    "Does Capitalism work better than the alternatives ?"

    The answer is "It seems to work better than any alternatives tried so far." Recent troubles have shown there have been problems, but the capitalist world is much wealthier than the old socialist world ever was. Rather than throw out the baby with the bathwater we need to improve the system by correcting the faults discovered (for example, managers and other employees who made decisions based on personal commission payments, rather than the legally required profit interests of shareholders*).

    *Note, shareholders are not big business bogeymen; many are pensioners or pensioners to be. All are people and most people are shareholders, either directly or indirectly. That means profits are for the people. When business "sucks" profits out of people it "blows" them straight back to people as taxes (to pay for government spending on schools, roads and hospitals etc.), dividends to people or reinvestment for the future.

  • Comment number 23.


    Will the EU police come knocking to tell us we are not allowed to save ourselves? After all, this is the age when authority watches acts of drowning, in strict adherence to the rule book, is it not?

    In passing, how much of Clegg's 'New Politics' will his foreign masters allow?

  • Comment number 24.

    "Banks say they have made a fortune in recent years thanks to light-touch regulation" - the money they have made for themselves must have come from somewhere, they didn't make it out of nothing. So what they're saying is that they've stolen lots of money from ordinary people because the authorities have allowed them to.

  • Comment number 25.

    I've given this a lot of thought. How can we ensure this doesn't happen again, at least not to the same extent?

    The answer is not an end to capitalism and it's certainly not government ownership or intervention. Those principles are contrary to a free market.

    It would be easier to explain in 3 pages rather than 3 paragraphs but in essence, the responsibility lies with shareholders.

    Shareholders need to be far more involved in the governance of the businesses they own. The days of funds owning large chunks of stock and religiously voting with the board must end.

    Management of businesses, especially those that manage and invest in risk should be overseen by those very entities and individuals that own the business. They are ultimately responsible for the health of their investment.

    This is a departure from the traditional detachment seen between the shareholder and manager. Perhaps now is the time, for yields on shares to grow somewhat, to accommodate the cost and time that proper shareholder governance would require.

  • Comment number 26.

    Does capitalism still work?????

    This question seems ludicrous to me.

    Approximately 30,000 people die of want for basic needs every day in a world of plenty.

    Surely for any system to work it must address this fundamental imbalance.

  • Comment number 27.

    Guys what planet are you living on? Capitalism has given us mobile phones and laptops, which do provide people with greater control over their lives, means to communicate and organise more effectively. We are linked up in ways never before experienced by humanity.

    All this technology has over accelerated the production of profits, globally, and what we are now experiencing is a call for an MOT. u

    The lesson for politicians and economists is that you have to apply the breaks if you want a safe continuous journey.

  • Comment number 28.

    what would regulation achieve and would it go against the ethos of capitalism?

    I hope regulators will find a way to sensibly limit the use of derivatives to set up ultra-complex instruments then sold to customers who have no idea of associated risks. Not even bank consultants quite understand the bombs they have in their hands (or may be they do and quickly pass them over to anyone).

  • Comment number 29.

    The opening shot of the New York stock exchange of several people in a gallery clapping when the bell rings must be symptomatic of a near frivilous approach to the work of that place

  • Comment number 30.

    The ethos of capitalism?

    Be serious.
    Who should care about that?

    Look, it is the entire vertebrate population of this planet that is going to go to the wall. I know because I'm an ecologist who has been working in several parts of the so-called Third World for thirty years.

    Don't worry about Lehman Brothers, HBOS et al. worry about how you too are going to find food for your family in ten years time.

    Check out web sites like 'arcticseaicenews' and quietly try to consider the implications of what is really happening out there - globally.

    Governments, and the for-profit corporations are now far too enmeshed in expedient short-termism to act effectively for the barely perceived 'common good', even if they had ever wanted to.

    These 'rich boys' clubs' are not going to be able contain things much longer.
    The carbon capture and scarce mineral resources fuel the wars which are now merging; despite capitalism's advocates attempting to portray this as something else entirely.
    The war on sense and common nature has gone on long enough. Yet I pray that we may still have a few years in which to learn to change our ways.

    Whatever happens, Capitalism will soon be history; if there is anyone left here to write about it.

  • Comment number 31.

    I'd like to know where the money has gone.

    Money does not evaporate - it travels from one place to another and it's only in the transaction that it has any meaning in contact with real lives.

    Banks lent heaps of money to the US sub-prime mortgage market. Borrowers (presumably) used it to buy houses from developers and other vendors. The vendors delivered value to the borrower so in my mind are entitled to their money.

    The defaulting borrower on the other hand has basically stolen our cash. No doubt the mortgagor will re-possess the homes and sell them at whatever (low) price they can get to help defray the defaulted loan.

    So another US home-owner gets a cheap home - hopefully this time able to sustain their mortgage.

    Where did the money go? It disappeared into homes that a lot of US citizens got for a lot less than they should have paid. Or to put it more simply the world just built a lot of houses in the US for free.

    I think we need to ask the US government how they intend to repay the world.

  • Comment number 32.

    Yes it still works, with proper supervision and regulation. The current crisis is a prime example of it working. It is a result of initially failed market supervision by central banks who failed to target asset price inflation through allowing interest rates to stay to low for way too long.

    This was like holding open the biscuit tin for children. The cost of money was so cheap we all wanted to use whatever we could borrow and bankers wanted to lend it to us as they could make money.

    As if this wasn't enough Investment Bankers started a merry go round of new products that meant 'leverage' was parcelled up and sent round and round so even more money could be lent. In order to 'hedge' the risk they invented other means of spreading the risk and when the music stopped they were all left holding bits of paper not knowing what was behind it.

    And they are still trying to sort that out - which is why some are going bust and all are making huge right-offs.

    But make no mistake - it started with Central Bankers failing, spread to everyone who borrowed beyond their means and back into the wholesale financial markets as greed (inadequately regulated) became stronger than fear.

    The solution is not more regulation. It is SMARTER regulation (regulators)and supervision (central bankers), for when it happens again - as it most certainly will.

  • Comment number 33.

    A regulation that prevents anyone taking out a mortgage for more than three times their certified yearly earnings would have gone a long way to stop over borrowing and the consequent inability to service such loans when interest rates rise. It used to be like this, of course.

    The really annoying thing about the current and recent turmoil in the financial markets is the way that the top management layers in these troubled companies seem to escape the consequences of their actions - no criminal proceedings and the retention of their salaries/ jobs or at the very most and a very handsome payoff.
    It is left to their more junior employees and their customers to shoulder the burdens - to say nothing of taxpayers in general.
    The people who should really suffer are those who constructed the sort of loans policies that encouraged people of limited means to take out loans that they could never afford to service - I am thinking in particular of self certification mortgages. Small wonder that house prices rose so strongly in Britain in the later 90's and early 2000's.

    Might it be that the money spent in propping up failing institutions could be better spent in supporting those who suffer as a result of their fall. In other words; let them go bust and spend public money directly on those 'ordinary' people who suffer as a result. This would pose additional, complicated and substantial problems that would be extra to those of subsidising a company that runs out of credit. It would certainly punish the perpetrators of risky management though and make money lenders much more cautious in the future.

    Unbridled capitalism will always work in cycles like this, fueled by basic greed as it is. The trick is to get the regulation right.

  • Comment number 34.

    There has been a stupid culture of people being unable to behave like grown ups for years. It is driven by capitalists through the media, for example look at the cars people want to drive, giant over priced handbags, botox, the list is endless. Modern mass media employs idiots with no sense of perspective or responsibility. Home owning, spending and all the rest of it is promoted as a god- given right. Banks have pandered to the masses infantile desires. There are fewer intelligent people to govern and we are all in need of urgent parenting. It's the survival of the fittest unfortunately. People's everyday good sense has gradually been worn away by celebrity "culture". It's pitiful.

  • Comment number 35.

    You can only counter the effects of greed by regulation. Greedy men will always cut corners to achieve their ends. The Victorian industrialists. The monopoly oil and steel men. The bankers of today. If you don’t control them then their greed will triumph and only a bonfire of their vanities will stop them in their tracks. It’s on fire as we speak…

  • Comment number 36.

    '16. At 2:25pm on 17 Sep 2008, DrKF77'

    Amen, brother. Here's another, like those I see in gadget mags:

    'Could this be a question on par, smarts-wise, with a small box of rocks?'

    I tend to steer clear of these discussions as I don't know much 'theory' and am one of those who likes to make and do rather than talk and, er, talk.

    Plus I still have this odd notion of only spending what you have, and/or can afford. Silly, I know.

    But I am not sure that this is contrary to the better aspects of capitalism, as I understand it/them.

    What I would suggest is that it seems to me that most, if not all the failures (or, 'not working') in this case were by a bunch of 'smart' folk, who were/are paid a mint and were not actually that smart and/or down right greedy or even crooked, who thereby messed up a system they had made over-complicated to profit from dealing in rather than making anything.

    And were allowed to by pretty much the whole 'establishment' in theory paid to look after the interests of the majority of the people they represent and/or inform.

    That would be government and most media, with many now closing, or calling for the closing of all manner of previously lucrative or vicariously irresistible doors once the horse has hopped into the Lear with some extra 'we must inject stability' wonga.

    Thus leaving those without public sector or trust funds to pick up the tab, especially come retirement... again.

    But maybe I have missed the subtleties.

    'Jenkins, fire me up the expenses! I feel a jolly to New York to report on this is called for!'.

  • Comment number 37.

    "Didn't Einstein prove that with his E=MC2"

    No, it has nothing to do with resourse limited bounded systems (the Earth).

    If you want a law that might help you try the Second Law of Thermodynamics (look it up)

    This is the one that says you can not have a perpetual motion machine, so sort of helps your argument

    But since we have not even begun to exploit the fall potential of the whole population of the whole planet, we are along way off reaching any such limits

  • Comment number 38.

    they only thing they did wrong was not to sandbox the risk operations from the usual banking operations. There is nothing wrong with risk if one respects it.

    If it was sandboxed and it failed then the other financial operations would be unaffected. One can set a limit for say no more than 25% of a firm is high risk.

    So the way forward is for strict separation of functions. ie different bank accounts. Not one big pot.

  • Comment number 39.

    Re:- HBOS + Lloyds. The phrase "the bigger they come the harder they fall" springs to mind? Another good old Yorkshire saying is "never a borrower or a lender be". I though that Thatcher and Tory Blair were in favour of more competition not less. Are we not in danger of creating large Government backed monopolies? Whoops sounds like state control. Pity we could not pump some money into the motor industry.
    Sean Appleby-Simpkin (feeling smug socialist).

  • Comment number 40.

    What did the Scandinavian nations do back in the late 1980's when it all went pear shape then? Your the journalists you look it up!

  • Comment number 41.

    Do you remember building societies that were carpet bagged in to banks, was not Halifax one of them, did not ordinaryaccount holders receive thousands 'compensation' in the process? What do they think now?

  • Comment number 42.

    I am amazed and apalled that all of this mess could have happened in these modern times. To think we have had a Labour government for more than ten years and they still allow this kind of skullduggery to go on is a disgrace. They are all incompetent or have closed their eyes to again the incompetence and very suspicious behaviour of our banking system. I tend to think the former, the govenment are in my opinion a load of rubish. All they can do is to keep on bragging how good they are, the wonderful things they have done, we have seen the last of "boom and bust"and here we are. They have been walking around in a maze, they could not run the proverbial cockle stall. I dispair.Righthon

  • Comment number 43.

    The question of whether capitilism works is a question of what is "works"
    If "works" means raising the average standard of living in the world, while increasing the spread, then "yes" it works.

    What capitilism relys upon is the thing that stops any other system from working, i.e. humans's

    a) selffishness ; people are in the first extent interested in their own well being, rather than of their neighbours. Would someone volunteer to take a pay cut, such that their neighbour had work?

    b) laziness ; If people are not properly motivated to "work", and get things regardless of how hard they try, then they will try less

    c) stuipidity ; not everyone is a computer programmer, not everyone can do research. The majority of people need work that involves simple physical intervention, and this kind of work uses resources that are limited.

    Clearly this is a sweeping description of humanity, and does not apply to each person individually. But does describe humans as a whole. Currently there have been no other alternatives put forward, and even science fiction only provides two

    a) Star Wars ; which is nothing more than a hitech, war engulfed future of what we have now. Highly exciting but not I think the goal

    b) Star Trek ; which is nothing more than a military group of software engineers.

    We need an alternative!!

  • Comment number 44.

    How about a closer look at Adam Smith.

    In The Wealth of Nations he wrote that, "people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

  • Comment number 45.


    The fact is, most people have been voting for anarchism (at the ballot boxes and elsewhere) for about three decades now. As a consequence, social values have changed dramatically (this is obvious to those who remember when most people only spent what they earned (apart from their on their mortgage). Before Thatcher and her assault on the 'nanny-state', preoccupation with business and money was widely considered vulgar, which is exactly what one would expect given that la large part of the population was contributing to both the building and management of nationalised means of production. Britain essentially had the basics of State Capitalism up to the 1970s, and then made-over anarchists (call them Trotskyite grass-root Worker's Democrats if you prefer, I reckon they're the same thing, so did Stalin - Trotskyites don't like State Capitalist Stalinists) took it all apart, and most people have been giving them a mandate to keep on doing so ever since. There isn't an Old Labour Party anymore, it was deemed too much like the USSR by the USA (for USSR read 'evil dooers' or if you prefer Islamo-Fascists). In the USSR, many of the de-regulated business practices that we now take for granted as central to Liberal-Democracy were classed as criminal offences, literally crimes against the people.

  • Comment number 46.

    Yes, tropicalboubou, you are spot on.

    I have, for quite some time, considered that capitalism and having a planet to live on are mutually incompatible as capitalism depends on growth.

    If we are to stand half a fighting chance, the least we can do is to regulate, and we'd better get on with it soon. Talk about fiddling while Rome burns (fiddling can be taken somewhat literally in this case).

  • Comment number 47.

    The country is now reaping the consequences of the irresponsible overlending of the banks and building societies of the last eleven years, knowingly lending money to gullible people who they knew had little chance of repaying it,the "correction" of house prices was inevitable leaving the fat cats with their obscene profits and the rest to absorb the dire problems that we see now.

  • Comment number 48.

    There is nothing wrong with Capitalism except that like every other system ever tried in the world, sooner or later the system becomes disabled because of inherent or innate greed on the part of the people.

    The present Capitalism employed by the U.S. for example has always been an imperfect mechanism, however imperfect it still managed the wealth of a nation better than any other system employed by any other major world power.

    A very fine line between moral philosophies must not be violated, so when it is violated, changes must be made ...usually to stop and catch up to all the new ways of cheating people manage to discover in a free society. Freedom carries the great weight of responsibility with it and if the people in charge do not insist upon and enforce a certain code of rules or morality-parts or the whole of a system may collapse. So....we tinker, repair, patch, prosecute and hope for the best; however with the world at large having become more secular as each year passes-with the Judeo Christian under constant assault, THAT is what we should be fixing. Freedom insists on a very tight code of morality to insure it's own future. No morals=no freedom=no capitalism=Armageddon sooner rather than later.

  • Comment number 49.


    "It is clear to me that financial services and insurance has gotten away from its core competence and that is dangerous," said Dinallo, who compared companies' strategies to driving a car while putting on make-up, looking at a BlackBerry and having a conversation: "That is not the way to drive a car safely."

    Eric Dinallo, New York state's insurance superintendent

    Cognitivism, i.e. the idea that the economy, and much else besides, is all about what people think and believe to be true rather than what really is the case, has a lot to do with the Alices-in-Wonderland/(Walter Mittys) who have brought this about, but as they're now everywhere, not just in the financial sector, it will be aver difficult task to correct this.

    Liberal-Democracies (I hate to have to say it) have essentially been feminised, except sadly, from the demographic (and economic) perspective, women clearly are not doing what women do best.

  • Comment number 50.

    Capitalism will still continue to "work" in it's brutal and uncaring fashion, unless and until it is replaced by something more appropriate. We need to build a genuine international movement for socialism. Some of us are trying to progress this in Manchester next week. Why not come and join us. More details here

  • Comment number 51.

    That is music to my ears,,,,
    We have to balance the values, we can not just earn and live, tha's what they do in Capitalizem. In there there is only one goal, live and survive, but at the same time it can not go on since it controdict itself. WE have to find the BALANCE,,,,,,, Not USSR nor USA,,,, but something better than Europe, we hope,,,,

  • Comment number 52.

    In times of emergency or crisis action by a central authority has always been required.
    The question,"does capitalism work" would never be applied in war time, Russia effectively won the second world war by ruthless state direction of economic resources and production methods, and there is a strong argument that by not adopting such policies until 1943, germany effectively lost the war.

    Again, in a time of crisis and shortage like war time, the only tenable way to allocate scarce resources among the population was by rationing by the state

    However much one might champion unfettered capitalism, it has and can only ever operate within a framework of societies in whch the state has created the secure environment in which they can exist, and provide all the essentials that business need to operate within, namely a societal structure that supports its citizens and provides infrastructure, education, health needs and (in the past for the UK) affordable housing

    The workforce that businesses need have been sustained by all these state directed services, which makes it not ring true when any taxation is seen as unfair by the business lobby

    And at the end of the day, is wealth on its own is never going to be the right and fair way to allocate what will increasingly be realised to be scarce resources on a world basis

  • Comment number 53.

    Can anyone tell me why GPD of a country includes spending on credit when that is not cash. It would be more sensible to do GPD
    on only those items which increase the country's wealth.

  • Comment number 54.

    I think an important part of the problem is with the British obsession with house ownership and investing in houses (instead of something else).

    The Irish are similar to the British on this score but not other Europeans such as the French, The Spanish (and I think the Germans), and others.

    We need a housing market where people can pay reasonable mortgages. People who want to invest in second homes should be persuaded from doing so (and persuaded to invest in something else) - higher capital gains tax for second homes, for example.

    It's not just a moral issue that young people should be able to buy their first homes. It's, also, a practical economic issue as well.

    And for those who can't afford to buy (for whatever reason) well it shouldn't be considered such a bad thing to have to rent (it's considered quite normal on the continent). And things should be put in place to make renting a more viable option than having to buy.

    But at end of day something needs to be done about the absurdity in high house prices in this country. If the government doesn't do something in the future regarding this then we are just going to go through the same again - affecting everyone not just people who can't afford to buy a house / pay their mortgages.

    Of course there are other factors involved but high house prices in ths country (compared to other countries in Europe, for example) certainly hasn't helped.

  • Comment number 55.

    Capitalism died the moment Governments started bailing out large banks and insurance companies, no exactly letting market forces do there job.
    If the Greedy almost corrupt institutions had been aloud to coplapse the would have been chaos.
    The will be anyway I say it can only make it worse. The will all fall eventually any way this way the just take the Governments money with them too.

  • Comment number 56.

    capitalism is based on an ever increasing consumerism and this cannot go on ad leads to a practice of artificially creating needs.which begins a great temptation to revise standards or find loopholes thus a slippery slope

  • Comment number 57.

    It seems to me that Al Kida have managed to bring down the global trading banking system by planting share traders taking exhorbitant amounts of money out of system and leaving the developed world in a state of chaos

  • Comment number 58.


    "I didn't believe in pushing lollipops to kids. I thought what we were asked to do was a little bit intimidating."

    Dr. Sophie Kain, The Apprentice 2007

    But there's no arguing with caveat emptor he tells us, even if your clients are only into lollipops and have IQs a couple of standard deviations below the average EU adult - that -2SD=70, i.e. the mean for adults in sub-Sahara Africa .... pause for thought viz. emerging markets (but be careful, as any mention of these individual differences by group is a taboo, can you see why in terms of markets and 'morality'?)

    There was once a time when the world was less equal (viz a viz the sexes), a time when men went out to work to earn money so they could support a family. Then equal opportunity for the sexes was peddledas 'freedom', a Human Right'. The de facto consequence was more consumers, more women with independent disposable incomes (they do most of the shopping), rising prices (especially property) and most significantly of all, falling birth rates everywhere where this was effectively peddled, so much so that all the so called free-market capitalist Liberal-Democracies are now well below replacement level (East Europe has been hit worse, but see Spain and Italy). So consider the empirical consequences for consumerism longer term. Lollipops.

    Conclusion: Liberal-Democratic free market capitalism is biologically unfit, so no, capitalism does not work, the demographics prove that indisputably. But fewer and fewer seem to care about 'geeky' facts anymore .... perhaps a paradoxical increase in dysgenesis as a consequence of 'education, education, education', equalities and immigration (see previous NN posts over the years).

  • Comment number 59.

    Of course Capitalism works! Well it does for greedy bankers, multi-nationals and politicians. They will not suffer from a self inflicted credit crunch. I believe that Tory Blair (how did he avoid prison) has been offered a seat on the board of a (still surviving) US bank, presumably for services to the American Government. So much better and more lucrative than having to buy a peerage.
    Sean Appleby-Simpkin. Sad but still smug socialist

  • Comment number 60.

    Dear moderator. Why don't you have a section for positive comments as well as a complaints section? I would like to comment on some of the messages in context rather than 50 messages later?

  • Comment number 61.


  • Comment number 62.

    All short selling activity must be stopped forthwith by requiring the vendor to produce documentary evidence that he is selling what he has in stock. Capitalism with a human face can be accepted but sheer greed on the part of speculators and hedge fund managers who line their pockets with 'rewards' running into obscene millions and billions should be stopped forthwith. Hedge fund managers total dominance on government's taxation policy should be destroyed and just because speculation and gambling has gone for 1000 years does not mean that it can't be stopped or controlled now. If this unbridled greed is not stopped forthwith I would not be surprised if the western countries and the rest of the world will face a bloody revolution and heads will roll.
    Mansukhlal Shah

  • Comment number 63.

    Well, this is where the "Global Village" leads to! We are all at the mercy of international financiers who see us as cattle to be fattened and slaughtered for their profit.

    Time to rid ourselves of the parasites.

  • Comment number 64.

    It has long been recognised that banks risk making loans, which if they can go wrong, could not only wipe out their equity but depositors money too.

    Because of that
    1) governments operate deposit guarantee schemes and 2) regulate banks.

    What has just happened is not a failure of capitalism, it is a failure of regulation. 'Light touch' regulation was a green light to abuse the state deposit guarantee.

    It does not take a genius to work out that if you lend people mortgages worth 7, 8 or even 9 or ten times their salaries, often on an interest only basis, there is a very serious risk that the loan will default. If interest rates ever went back to 10% they would be left paying 70%, 80 or even 90% of their GROSS salaries in interest payments. Regulators should have stopped this practice in its tracks ages ago.

    But this became common practice in the last few years and indeed BIS regulations encouraged mortgage lending over other types, because it was 'less risky'.

    Unfortunately it is clear that the 'risk experts' at regulators and the banks were nothing of the kind.

    Before anything else is done, every Central Banker in the US and UK should be fired and people with a modicum of commonsense hired.

  • Comment number 65.

    I would like to quote from Thomas More's Utopia written 492 years ago
    'When all property is private and the whole emphasis is on money, it is difficult and almost impossible for the republic to be governed justly and to flourish in prosperity'.
    Not bad for the man beheaded at the behest of Henry VIII nearly 500 years ago. Perhaps we never learn and never will.

  • Comment number 66.

    It feels like all we've done in the last 70yrs is delay the fall of capitalism. What ended the last slump? Socialist work schemes and a world war, from what I can tell.
    How come no-one is blaming the current problem on Thatcher's free market? State control is more or less the best solution (look at Northern Rock now), yet the electorate will almost certainly vote for the Tories when the next election comes around. So we plan on ending the crisis through privatisation, do we?
    And now Obama's won the election in the US. Hopefully he'll have some decent policies, if the senate lets any of them through. Inaction almost destroyed Western democracy back in the 1930's; it feels like it's about to repeat itself...
    And this is coming from a 16yr old...

  • Comment number 67.

    I sympathise with the last comment, except that, taking a more long term view, it may be a good election for labour to lose. People are beginning to forget what the Tories were like. It is about time they were reminded again. The current crisis is with us for years and it will get worse.

  • Comment number 68.

    Let's start by rephrasing the question: "Does parasitism work?". Capitalism is not the problem, per se; symbiotic resource exploitation, equitable, based on carrying capacity of the ecosphere and deriving its growth from synergistic industry *could* work and be sustainable, both, economically and environmentally.

    Instead the current paradigm rewards parasitic exploitation that benefits only very few individuals, intent on gorging, in obscenely excessive, wasteful consumption. Globalised, Corporate interest leaves all other organisms, from invertebrates to humans, to scrabble over dwindling resources.

    After thousands of years of bronze-age models of economic imperialism, are now paying their logical dividends: in the Petri dish we call Earth, we have only toxic economies and environments.

    It is the fate of all pathogens, in a closed system.

  • Comment number 69.

    #68 tmuk55

    Brilliant. Unfortunately how many others understand this?

    Celtic Lion


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