The fascist powers of Italy, Germany, and Spain tested out a less refined version of this economic system during the Second World War, which proved to have an advantage over both communism from the East and capitalism from the West. My question is if it would work nowadays, and if my additions make it work better. Essentially, it works like this. Private companies exist. However, their "profits" go directly to the government. All the money they make. Before you say this is wrong, continue reading. Companies would guarantee wages for their workers and themselves, which the government could regulate to make sure they weren't too low or too high. Each company submits the amount of money it needs to break even to the government, and they get this amount to pay their workers accordingly, but the government keeps the profits. Before you knock it, keep reading. The profits the government keeps work as taxes, and would fund public things like infrastructure and the police and military. However, say the car industry was pharma industry was failing, but the paper industry was doing really well. The government could use the profits made from paper industries and fund the pharma industries. Before anything, lemme tell you the benefits of this system. What this system allows for is an just distribution of wealth, meaning that you'll obviously get less wages if you were a janitor, but you wouldn't have to fear corporate greed because companies gain nothing from exploitation. However, it beats socialism because companies dont benefit from not producing to a high standard because if they fail to provide, they lose money, and then not only do they immediately lose money, everyone else loses money too. Now, if it was an industry that was really important like the pharma industry, the government could intervene and make sure they would still get money so they dont go bankrupt, but if it was not that important, they government could choose not to intervene. What this also does is makes corporations want to pay their workers as much as possible because they wouldn't gain anything from paying them too little; the government could intervene and reset the wages, and even if they didn't, the only one making more money would be the government, so corporations wouldn't gain anything. I know I am leaving out a lot of the good things about this system, but, if people have a problem, i'll be able to voice them directly to that person rather than writing a book on this in this spot. Anyways, thoughts? This worked really well for the fascists, but it is not incompatible with democratic republics or most systems of government that countries use today, it'd just be slower.
First no, that is not what the fascists (or at least not the Nazis) tried. Second, no, that would not work. In a moment, a snapshot, you might think that it would work - like if instituted today, companies would mostly still run. However, where is the need for new innovation? Where is the drive? The simple fact is, like it or not, innovation is driven primarily by self-interest, not government mandates.
Well no, its in the best interest of companies to still innovate and produce new things, because they still need to make money, which is why it presents a viable alternative to socialism because socialism takes away this need. This keeps the private sector alive and still motivates them to produce more, because it correlates with higher wages and more money for not only themselves but everyone working under them as well.
But why? Why do they need to make money? You just said a company would just hand its profits over to the government. This would mean the excess profits are taken, with no benefit to the company for having more. If I have a company with 100 employees and pay mine 50k each, and you have a company that does the exact same, then I turn a 29% profit and you turn a 2% profit. I turn in 14.5x the taxes that you do, just because I did better. So then I slack off, and so do you, to where little to no profits are generated. Your counter that companies could raise their wages by having more profits - no, profits are the revenue minus costs - and you just said all profits would be taken by the government. AND IF the only way to increase a company's member's well being is to increase compensation such that profits don't really increase, then every company would do that as much as possible, and there would be almost no revenue for the government.
The system was in place prior to WW II. Spain which did not participate in WW II this system got going after the Republican forces were defeated by Franco's forces, with "some" help from their favorite uncle Adolf. Circa 1937 I believe ...
No, free markets work because free markets are the only way you can rationally allocate resources. Profits indicate you're satisfying consumer desires economically (i.e. putting resources to their highest valued use according to consumer's subjective preferences). In other words, profits play a vital role in a market economy and actually mean something. Losses indicate you're squandering precious resources in ways consumers do not desire. So in your system where you take the losses of one area and use the profits of another to subsidize it, you're bypassing consumer preferences and making your citizenry poor. I'd encourage you read Ludwig Von Mises's essay "Economic Calculation in the Socialist Commonwealth" for a further explanation of these ideas. Mises gave the example of a man examining whether or not he ought to build a railroad. On a market economy, the relative scarcity, demand, and value of things are all reduced to a common denominator-- price-- and therefore he has a rational basis for determining whether the railroad ought to be built-- whether the resources which would be devoted to making such a railroad would justify the reduction in the cost of shipping other goods. It's not obvious, a priori, whether the railroad should be built. Markets provide that answer, by communicating dispersed information to the individual considering making that decision. Conversely, consider your centrally planned fascist economy. You may say "But wait, there are prices!" and indeed there might be. But why then subvert consumer preferences and allocate more resources to firms and industries which are not satisfying consumer preferences in an economic way-- who are not rationally allocating resources? Indeed, losses are a vital market signal that that firm is not creating wealth for the rest of society, and that firm should either change its ways or step aside and allow others who can create wealth with that capital and those resources to do so. To retard that process-- or to actively attempt to fight it by subsidizing failing industries with profitable ones-- only makes your society poor. -- I know this may not fully register the first time you read it, but please do understand that this delivers a fatal blow to the notion that a fascist economy can create wealth. It will not be a waste of your time to read that essay I discussed earlier.
No its not socialism. Because socialism would just make everything a public industry. The government doesn't control the means of production, private companies do.
This is only if the failing industry is something we vitally need. If it was an economic blunder that wasn't worth saving, we wouldn't save it. But if it was during a war, and we needed to allocate more money to weapons and tank manufacture, it would make sense to fund them
Companies make profit to increase private wealth. However, under this system, you are still guaranteed your wages. So you and your boss still make the money you deserve. But the extra money that makes the company make more than what they needed would go to the government, unless the company had enough to pay everyone a little bit more. However, in order to make sure that companies wouldn't just keep all the money, the government would have certain taxes on goods, not individual wages. So like, say we decided that fast food was a luxury item that should have a tax, we just add that into the price of fast food without taxing the person paying for it.
What do you mean it's "something you vitally need"? If it's something you vitally need, then consumers would be willing to pay for it on a free market. Does the shoe market spontaneously collapse and require government assistance, or, when the shoe market collapses, do we leave the capital and resources where they lie and let someone else come along and take over those means of production in the hopes of making a profit? I think your example of war is a misnomer. At best, this would leave your advocacy at "We should have free markets, except we need to take some for war." Sure, you might need military defense but that doesn't mean that the military defense is going to be economical. (there is no way of knowing, if the costs could be personally controlled by consumers, how much they would have been willing to pay on military defense. It's possible they would have preferred one more unit of some consumer good over one more unit of ammunitions to defend against potential foreign threats.) So you can advocate for us siphoning off some resources for war, but that doesn't mean such actions are in accord with sound economics-- indeed, we know that war does not make us wealthier, but poorer, but we decide it's worth the cost because some people are going to attack us. The reason I'm belaboring this point is because you're advocating that central planners run the entire economy as they do when they take resources for war. But wars destroy. You don't want the government allocating resources if there's not a very imminent threat, and even when there is an imminent threat, we cannot pretend that such management makes us wealthier-- the purpose of an economic system in the first place. Your response doesn't take into account the vital role that prices play on a free market. Whatever you think about the nature of man (e.g. incentives for business under your plan) Mises's price critique of socialism is a fatal blow to anyone advocating an economy of anything other than free markets. Again, I encourage you to read his essay. I laid out a brief sketch earlier but I feel you're not fully grasping the implications of the argument.
Liberals such as myself fought so hard for freedom. Individual rights and liberty were the precious gems of the enlightenment. I don't know how it can be 2016 and people still feel they have the right to control others' behavior and tell them that they don't have the right to eat fast food if they are so inclined. Again, what makes us wealthy is when consumer preferences are fulfilled. That's economics 101. If you want wealth, choose free markets. If you want to control people's behavior, then don't call your system an "economic system." Economic systems, by definition, attempt to allocate resources economically-- to their most highly valued use. The standard we use for the most highly valued use of resources is consumers' subjective preferences. If your "economic system" rests on the premise of telling consumers they cannot have what they want, then your system is not an economic system at all.
Before anything, you need to learn how to differentiate Economic Systems from Property Theories. An Economic System asks three basic questions: What shall be produced? How shall it be produced? For whom shall it be produced? A Property Theory answers only one question, and that is, "Who should control Capital?"
Of course it works, nationalized socialism is what we have today with our wars on crime, drugs, poverty, and terror.
Did I ever suggest that you dont have the right to have what you want? No. I just said that some things deserve to be taxed more than others. You being a liberal would agree that we should not tax healthcare. However, the government needs to make money somehow? So what do you propose. We dont enforce taxes? The we have no government funds. Or shall I take it from your wages? Well then, this is direct taxation on your liberties. You being a liberal would not agree with that either. So an indirect tax on certain commodities is the way to go. What makes us wealthy is when the consumer preferences are fulfilled. True statement. Never do I curtail consumer preferences. However, you being a liberal would also agree that we shouldn't let there be a rich 1% with more money than they need while others starve. So people should be guaranteed wages just for doing their job, whether or not their company is successful or not. Now, if a company is really failing, then the government can say, look, youre not making enough money, you have to lower wages. Again though, things shouldn't be left for the government to decide because that's basically communism/socialism, which doesn't work to allocate resources economically, using your words. So the best alternative to both cold capitalism and fantastical socialism would be this economic system.
Well, based upon the concerns you raise, I think you simply misunderstand. Say the government knows that we need more cars, or that the real estate market is collapsing, rather than wait for a collapse or let a problem happen and be cleaned up, we could allocate resources towards these markets to keep them alive before they fail. Now, again, if its just some company not providing for the consumer well enough, then they should be left to die. I also think you immediately believe that this system is against free markets. This system is all for free markets, just that we need to focus on more than just making an individual rich. Human nature dictates that everyone does thing for the interests of themselves. The problem we see today, however, is that there is such a gap between rich and poor that no matter how hard you work, you still wont be able to climb out of poverty. This system seeks to change that, without curtailing the 1% to benefit the working class, as socialism would dictate. Socialism seeks to handicap the upper class so the lower class can catch up. This system simply guarantees higher wages for people and prevents outsourcing. It also makes sure that jobs are more secure so that the worker wont have to fear losing his job because a company fails, unless the company makes an error, but it would be easier for him to find another job. My point about war was that, the only way to wage a total war would be to make sure that everyone works towards the war effort. However, companies couldn't care less about a war unless it immediately effects them. This system seeks to make sure that everyone is on board with public interests without physically going in and annexing the industry.
Well, I dont want to get into stats, but fascist Italy, during the Great Depression, felt virtually nothing. Spain's economy skyrocketed after Franco beat the republicans. Germany's economy increased dramatically when Hitler took over. They all used systems similar to this. I can give you numbers if you want.
Just to make sure I understand what you're saying. A state tries to become self sufficient by propping up key industries that are needed for defense and for internal revenue. To make sure that there is constant employment the state will make sure that certain companies do not fail. Thus this leads to stability and economic growth. This is it right?
A lot of people do not understand profit. https://www.aei.org/publication/the...-36-profit-margin-which-is-about-5x-too-high/
As far as Italy and Spain, I dunno. As for Nazi Germany you do have to take into account how much of their wealth came from increased Arms Production and looting the Jews. All of Hitler's Generals wanted to wait until 1943 to start WWII, when they would have had Tiger Tanks and Jet airplanes. Hitler had to start it in 1939 because he simply couldn't afford to keep going without looting someone else.
