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Cap Good

Government Intervention Solves

Severe income inequality is not inevitable – government intervention solves

Mark Thoma ’14, a macroeconomist and econometrician and a Professor of Economics at the Department of Economics of the University of Oregon (3/25, “The Fiscal Times,” The Week, http://theweek.com/articles/449564/inequality-america-not-inevitable, lpc)
Some degree of inequality is needed to provide the incentives that make a capitalist system work, but inequality has risen far past what is needed to induce the effort that makes the system function. Would those at the very top of the income distribution — where inequality is increasing the most — really work less if they only received $250 million instead of $350 million per year for their efforts? At some point, one I believe we've passed already, the benefits of inequality in terms of incentives are surpassed by the costs. As Joseph Stiglitz argues, "Inequality leads to lower growth and less efficiency. Lack of opportunity means that its most valuable asset — its people — is not being fully used. Many at the bottom, or even in the middle, are not living up to their potential, because the rich, needing few public services and worried that a strong government might redistribute income, use their political influence to cut taxes and curtail government spending. This leads to underinvestment in infrastructure, education, and technology, impeding the engines of growth." Capitalism is a wonderful economic system, but it is not perfect. Government intervention is needed to soften the impact of recessions, to overcome market failures, and to offset the rising inequality that threatens capitalism's ability to serve the vast majority of households to the fullest possible extent.

Money in politics is the problem – not cap

Joseph Stiglitz ’14, American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences and the John Bates Clark Medal (6/27, “Inequality Is Not Inevitable,” http://opinionator.blogs.nytimes.com/2014/06/27/inequality-is-not-inevitable/?_php=true&_type=blogs&_r=0, lpc)
One stream of the extraordinary discussion set in motion by Thomas Piketty’s timely, important book, “Capital in the Twenty-First Century,” has settled on the idea that violent extremes of wealth and income are inherent to capitalism. In this scheme, we should view the decades after World War II — a period of rapidly falling inequality — as an aberration. This is actually a superficial reading of Mr. Piketty’s work, which provides an institutional context for understanding the deepening of inequality over time. Unfortunately, that part of his analysis received somewhat less attention than the more fatalistic-seeming aspects. Over the past year and a half, The Great Divide, a series in The New York Times for which I have served as moderator, has also presented a wide range of examples that undermine the notion that there are any truly fundamental laws of capitalism. The dynamics of the imperial capitalism of the 19th century needn’t apply in the democracies of the 21st. We don’t need to have this much inequality in America. Our current brand of capitalism is an ersatz capitalism. For proof of this go back to our response to the Great Recession, where we socialized losses, even as we privatized gains. Perfect competition should drive profits to zero, at least theoretically, but we have monopolies and oligopolies making persistently high profits. C.E.O.s enjoy incomes that are on average 295 times that of the typical worker, a much higher ratio than in the past, without any evidence of a proportionate increase in productivity. If it is not the inexorable laws of economics that have led to America’s great divide, what is it? The straightforward answer: our policies and our politics. People get tired of hearing about Scandinavian success stories, but the fact of the matter is that Sweden, Finland and Norway have all succeeded in having about as much or faster growth in per capita incomes than the United States and with far greater equality. So why has America chosen these inequality-enhancing policies? Part of the answer is that as World War II faded into memory, so too did the solidarity it had engendered. As America triumphed in the Cold War, there didn’t seem to be a viable competitor to our economic model. Without this international competition, we no longer had to show that our system could deliver for most of our citizens. Ideology and interests combined nefariously. Some drew the wrong lesson from the collapse of the Soviet system. The pendulum swung from much too much government there to much too little here. Corporate interests argued for getting rid of regulations, even when those regulations had done so much to protect and improve our environment, our safety, our health and the economy itself. But this ideology was hypocritical. The bankers, among the strongest advocates of laissez-faire economics, were only too willing to accept hundreds of billions of dollars from the government in the bailouts that have been a recurring feature of the global economy since the beginning of the Thatcher-Reagan era of “free” markets and deregulation. The American political system is overrun by money. Economic inequality translates into political inequality, and political inequality yields increasing economic inequality. In fact, as he recognizes, Mr. Piketty’s argument rests on the ability of wealth-holders to keep their after-tax rate of return high relative to economic growth. How do they do this? By designing the rules of the game to ensure this outcome; that is, through politics.

Key to Tech

Capitalism key to innovation and tech

Chris Berg ’13, research fellow with the Institute of Public Affairs in Melbourne, Australia. He is the author of In Defence of Freedom of Speech: From Ancient Greece to Andrew Bolt and the coeditor of 100 Great Books of Liberty (July/August, “Why Capitalism Is Awesome,” Cato Institute, http://www.cato.org/policy-report/julyaugust-2013/why-capitalism-awesome, lpc)
Each year the glossy business magazine FastCompany releases a list of what it considers to be the “World’s 50 Most Innovative Companies.” This list is populated much as you would expect. In 2012 the leader was Apple, followed by Facebook, Google, and Amazon.com. Spot a theme? In the top 10, there are only two companies that are not primarily digital companies. One, Life Technologies, works in genetic engineering. (The other — try not to laugh — is the Occupy Movement. FastCompany describes them as “Transparent. Tech savvy. Design savvy. Local and global. Nimble.”) Not only are most of them digital firms, but they’re all flashy and unique, and they’re almost all household names. Everybody from Forbes to BusinessWeek hands out most innovative company awards. They’re all pretty similar and predictable. But these lists have a perverse effect. They suggest that the great success of capitalism and the market economy is inventing cutting edge technology and that if we want to observe capitalist progress, we should be looking for sleek design and popular fashion. Innovation, the media tells us, is inventing cures for cancer, solar panels, and social networking. But the true genius of the market economy isn’t that it produces prominent, highly publicized goods to inspire retail queues, or the medical breakthroughs that make the nightly news. No, the genius of capitalism is found in the tiny things — the things that nobody notices. A market economy is characterized by an infinite succession of imperceptible, iterative changes and adjustments. Free market economists have long talked about the unplanned and uncoordinated nature of capitalist innovation. They’ve neglected to emphasize just how invisible it is. One exception is the great Adam Smith. In his Wealth of Nations, the example he used to illustrate the division of labor was a pin factory. He described carefully the complex process by which a pin is made. Producing the head of the pin “requires two to three distinct operations.” To place the head on the wire is a “peculiar business.” Then the pins have to be whitened. The production of a pin, Smith concluded, is an 18-step task. Smith was making an argument about specialization, but just as important was his choice of example. It would be hard to think of something less impressive, less consequential than a pin. Smith wanted his contemporaries to think about the economy not by observing it from the lofty heights of the palace or the lecture hall, but by seeing it from the bottom up — to recognise how a market economy is the aggregate of millions of little tasks. It’s a lesson many have not yet learned. We should try to recognise the subtleties of the apparently mundane.

Key to Environment

Market based solutions solve environmental problems and resource depletion

Raj Navanit Patel Mr ’10, George Washington University, (“Crisis: Capitalism, Economics and the Environment,” Undergraduate Economic Review, http://digitalcommons.iwu.edu/cgi/viewcontent.cgi?article=1125&context=uer, lpc)
Argument 1: Tragic commons can be mitigated by quasi or fully established property rights
The free market solution to the tragic commons is to extend fully realizable, enforceable and transferable property rights to members of the commons so as to internalize the costs of resource use on the person using the resource. Extension of property rights thus mitigates the depletion and degradation of the natural resource without the theoretical cost of severely compromising the ingrained and necessary psychological constitution of the homo economicus agent that is required for markets to work efficiently (I.e. without violating the ‘self-interest’ clause of economic agents, a staple of most neo-classical models). My point here concerns economics as a science in general. Market based solutions are, on the whole, committed to the premise that agents do not act altruistically independent of an overarching self-interest and thus the notion of the extension of property rights gives the economist theoretical tools to tackle the dilemma of the tragic commons without violating what seems to be a fundamental tenet of the science.

Green capitalist proposals incentivize sustainable development

Kyla Tienhaara ’13, Research Fellow, Regulatory Institutions Network, ANU College of Asia and the Pacific (09/02, “Varieties of green capitalism: economy and environment in the wake of the global financial crisis,” Environmental Politics, http://www.tandfonline.com/doi/pdf/10.1080/09644016.2013.821828, lpc)
Green capitalist proposals At the outset, it must be acknowledged that there are, in fact, hundreds if not thousands of varieties of green capitalism currently being floated by individuals and organisations, which overlap to varying degrees. I do not aim to provide a complete survey of these proposals, but instead focus only on a small sample of some of the most prominent documents produced in English by think tanks and non-governmental/international organisations from 2008 to 2012. Green New Deal The first comprehensive report (in English) to address the global financial crisis from a ‘green’ perspective was released by the Green New Deal Group (GNDG) – a collaboration between economists, journalists, and environmental advocates and driven by the London-based think tank the New Economics Foundation – in July 2008.2 Although the influence of the recommendations made by the GNDG is debatable, there is no doubt that the report helped to popularise the term. Furthermore, while the report was targeted to a British audience, many of its policy prescriptions could be applied across the developed world. The GNDG identified and highlighted the link between the root causes of the financial and environmental crises, pointing out that the unsustainable levels of debt that contributed to the global financial crisis also fuel unsustainable consumption of energy and other resources: The triple crunch of financial meltdown, climate change and ‘peak oil’ has its origins firmly rooted in the current model of globalisation. Financial deregulation has facilitated the creation of almost limitless credit. With this credit boom have come irresponsible and often fraudulent patterns of lending, creating inflated bubbles in assets such as property, and powering environmentally unsustainable consumption. (GNDG 2008, p. 2) As a consequence, the GNDG report contained proposals for the ‘structural transformation of the regulation of national and international financial systems, and major changes to taxation systems’, as well as specific suggestions on how to tackle climate change (GNDG 2008). In terms of reforming the finance sector in the short term, the GNDG argued that the British government should: tighten controls on lending and on the generation of credit; force the demerger of large banking and finance groups (with retail sections split from corporate finance and from securities dealing); and subject all derivative products and other exotic financial instruments to official inspection (p. 24). The ultimate aim of such policies is ‘an orderly downsizing of the financial sector’ (p. 25). In the longer term, the GNDG also proposed the reintroduction of capital controls, efforts to shut down tax havens, and a global jubilee of debt cancellation (across developed and developing countries) (pp. 24–27). The more targeted ‘green’ elements of the GNDG plan included a program of public- and private-sector investment in energy conservation (with a focus on the buildings sector) and renewable energy, backed up by price signals created through carbon taxes and a high price for traded carbon (p. 36). It was argued that these latter measures would also help the British government fund the Green New Deal. Another source of funding mooted was a windfall tax on oil and gas companies (p. 37).

Transition Wars

Switching systems risks catastrophe

David Barnhizer 6, Professor at Cleveland State University’s Cleveland-Marshall College of Law (“Waking from Sustainability's "Impossible Dream": The Decisionmaking Realities of Business and Government,” Georgetown International Environmental Law Review)
We cannot take the chance involved in slowing down our economic system through the imposition of new rules requiring the internalization of heretofore external costs, or through the "friction" that would be applied if we sought to govern economic activity through totally coherent "sustainability" institutions. It will be all we can do if we can even come close to sustaining our ability to fulfill existing social obligations and incrementally contribute to the reduction of poverty and creation of opportunity in the world. Whatever else might be said about the consequences of the Western economic model, there is a clear moral basis to the system it supports and that we now must determine how to sustain.66 Although proponents of economic stasis argue in faivor of either slow growth that takes all the effects of our activities into account or even for full stasis, these are not realistic options.67 We are not beginning from a zero point, but one where expectations, dependency, cultures, and systems are already in place. Consider the enormous public and private deferred debt bills and unfunded obligations undertaken in the United States and Europe in the form of a series of budgetary "IOUs."68 In the United States we have incurred massive debt obligations that allow us to make comparatively small payments now but that will require enormous balloon payments later. We would have difficulty meeting those obligations even in a healthy economy due to the demographic shifts we are experiencing as our population ages. But there is no reason to believe that we will be able to "sustain" the health of our economic and social systems. As they come due, the balloon payments will necessitate some combination of higher taxes, abandonment of the promises themselves, or reductions in what can actually be delivered. The Western system of social support may have to change and support lessened social and economic expectations, but there is a great difference between lessening and complete collapse. While a modification of the core social morality of the Western system may become necessary, it is not morally acceptable if preventable. We need to understand the impact of the false arguments of free trade which are in many ways veiled justifications for destroying the moral strength of Western culture by penalizing Western productive activities for carrying the social costs governments mandated they sustain, while rewarding competitors for avoiding such obligations and encouraging our productive economic activities to relocate to regions of the world that do not require them to carry the burden of expensive social choices.