Capitalism -What is the End Game?

[dentist90]

I've wondered for quite some time where the capitalist economy as we know it will end up. I'm not talking about the private ownership part. If capitalism is predicated on profits derived from growth, can growth be infinite? Or is there a limit?
For example, an investor puts $100 into a company but expects $110 back eventually. To accomplish this the company must increase sales. It can do so by selling to new customers or aquiring competing companies. When we reach the point on this planet where there is no room for more people to be born the ability to expand has disappeared. The only way for a company to grow now is to aquire other companies. But once the dust has settled and there are only a handful of corporate 'superpowers' remaining (ie, literal monopolies) then what? Who will invest if there's no more room for growth? Will that be the end of inflation? Will the stock markets fold?

What am I missing? Is this just an extended pyramid scheme that will eventually play out?

[And, if at all possible, can we get some answers without the usual partisan bashing about how the libs are going to destroy capitalism. PRETTY PLEASE?]

[Dueller]

Thinking about getting into Amway, are we?

[DARISC]

Originally Posted by dentist90

What am I missing? Is this just an extended pyramid scheme that will eventually play out?

[And, if at all possible, can we get some answers without the usual partisan bashing about how the libs are going to destroy capitalism. PRETTY PLEASE?]

When I was very young and learned that capitalism is based on an expanding economy, i.e. an ever increasing customer base buying an ever increasing number of products/services, that exact question immediately popped into my mind - and I have yet to hear or read any explanation of how that can be sustained indefinitely.

World population growth is increasing at an alarming (to me) rate for the last century and has continued to do so on a constantly accelerating curve. Quite a few decades ago Bucky Fuller pointed out that we're on Sspaceship Earth, which is finite in size and resources, but only in the last few years has there been serious and growing consideration and concern given to that fact.

Capitalism strikes me as being primarily about getting and spending, not so much about building lives not focused on the acquisition of wealth and material objects, both of which behaviors, in one way or another, contribute to the depletion of Earth's resources.

Yeah, puzzling and unnerving if one has a world view and thinks beyond personal comforts and luxuries.

[pwd72s]

Capitalism gives the luxury of choice...If you choose to go after money & goodies, you can...if you choose to join a monastery, you can.

Socialism and communism removes choice...

It's about freedom...dig it???

[DARISC]

Originally Posted by pwd72s

Capitalism gives the luxury of choice...If you choose to go after money & goodies, you can...if you choose to join a monastery, you can.

Socialism and communism removes choice...

It's about freedom...dig it???

Dig it? Well, that's going back a few years!

I took the OP's post to be about the mechanism of capitalism, not about freedom (yeah dude, I really dig freedom - don't you? ) and not an invitation to take a political position and argue it's merits as compared to socialism and communism; that would belong in PARF - and the OP requested that we try to keep it out of there...no?

[RWebb]

you can have economic growth w/o pop'n growth - even if the pop'n is declining you could still have economic growth

[jyl]

"For example, an investor puts $100 into a company but expects $110 back eventually. To accomplish this the company must increase sales."

This seems to be the central premise of your concern. But why do you think this?

If a company makes a 10% profit today on $100 in sales, why do you think it cannot make a 10% profit next year on the same $100 sales? And thus deliver to the investor a 10% return, without sales growth.

I'd say your central premise is incorrect. If you agree, that probably resolves many of your concerns.

You have another premise that I think is also unsupported:

"But once the dust has settled and there are only a handful of corporate 'superpowers' remaining (ie, literal monopolies) then what?"

Why do you think the US or global economy will become dominated by a few large companies such that other companies can't grow? Is this what has actually been happening over the past decades? I have not seen any data on this, and would want to see some before I made this assumption.

[pwd72s]

Read Milton Friedman (sp?) on economics. His theory is all about economic freedom...freedom of choice producing the best life for all.

Economics is not a zero sum game. Thus the error in your thinking that capitalism is doomed in the same manner as a pyramid scheme.

[Porsche-O-Phile]

Capitalism is not inherently a pyramid scheme, however the current incarnation of it, which depends on debt so integrally to drive it, is.

This is an EXCELLENT summary of the inherent problem of fiat currency based on debt - it requires ever-increasing payments and creation of money (through creation of debt) simply to pay off old debt. Eventually it will hit critical mass and fail. Jury is still out on whether or not this is what we're seeing right now, but eventually it will happen.

The interesting side note to this is since banks/lenders create money through the creation of debt, usually by some sort of collateral backing (property deeds, etc.) the inevitable theoretical result would be that the "banking clan" would literally own 100% of the goods and resources in a society, although from a practical standpoint this would never occur since such a system would collapse long before reaching that point.

Anyway, I normally don't post videos - particularly long ones - but this one is absolutely, positively worth the watch, I promise (watch all five parts):

Money as Debt:

[dentist90]

Originally Posted by jyl

If a company makes a 10% profit today on $100 in sales, why do you think it cannot make a 10% profit next year on the same $100 sales? And thus deliver to the investor a 10% return, without sales growth.

Yea, I can see that. There would still be dividend returns on investment. But if McDonalds had built it's last restaurant there would be no more room for capital growth. And if the market for supplying burgers is saturated, the only way to get in would be to take some of McDonalds market.


Why do you think the US or global economy will become dominated by a few large companies such that other companies can't grow? Is this what has actually been happening over the past decades?

Yes, this has been happening I'm sure. Mergers, aquisitions and takeovers to increase one's market position. In the example above, if there are no more people being born to consume the burgers the only way for McD's to grow is to take over other smaller operations.

I kinda wonder what will happen to stock prices in the distant future when there are no more markets to expand to. Emerging technologies will be the answer I guess. If no new markets we will need new products. I'm certain that capitalism as we know it will move at a much slower pace at the least. New investment will be limited to new developments in tech as there will be no room for expansion into wider markets. I dunno... won't be there to see it anyway.
There may always be room for lenders to help these people to aquire the goods they want sooner rather than later. Bankers and cockroaches may be the last survivors of armageddon (came close to being political right there)

[DARISC]

Originally Posted by pwd72s

...Thus the error in your thinking that capitalism is doomed in the same manner as a pyramid scheme.

I never stated that I thought that.

I don't see where the OP did either.

He asked a question about how it all works and I have the same question. I plan to watch PoP's vids when I have the time.

[jyl]

"Why do you think the US or global economy will become dominated by a few large companies such that other companies can't grow? Is this what has actually been happening over the past decades?

Yes, this has been happening I'm sure. Mergers, aquisitions and takeovers to increase one's market position. In the example above, if there are no more people being born to consume the burgers the only way for McD's to grow is to take over other smaller operations."

Okay, when I hear "I'm sure" but don't see any actual data, then I get skeptical. I think it is important to really examine if that premise is true. There is a lot of stuff about the economy that isn't as we'd intuitively think it is.

Here is a place to start. Statistics about Business Size from the Census Bureau Poke around here and you might find an answer. In 2002, total revenues of US companies was $22.8TR. 35% was companies with over 10,000 employees. Has this share significantly increased or decreased over the past several decades?

[carambola]

the end result of capitalism is socialism.
the company gets so large to where it becomes the government.
in the process the means of production and all resources have been previously acquired.

[Zeke]

I don't believe the population burden is finite. I don't believe capitalism necessarily results in expansion and/or profit. I think we can get a lot more people on this planet and become a lot poorer. Will the economics be controlled by only a few? Certainly yes.

Will there be people living in caves like the Taliban or starving to death? Certainly yes.

[DARISC]

I've not decided whether it should or not, but this kinda freaks me out:

[dentist90]

The vids PoP posted are very interesting. Video #3 comes closest to what I'm trying to question. How can interest be returned infinitely in a finite world? And a 10% return on investment doesn't do anyone any good if there is 10% inflation.
For thousands of years a goat was worth 5 chickens. Then some enterprising person said I'll give you 6 chickens tomorrow for a goat today. Debt and inflation are born. It's all good until we can't produce enough chicken to pay our goat debt.

[DARISC]

Originally Posted by dentist90

...It's all good until we can't produce enough chicken to pay our goat debt.

You're just worried that your patients won't have chickens to pay their dental bill...oh wait! You're in Canadia, not the U.S.

[dentist90]

Originally Posted by milt

I don't believe the population burden is finite.

Not sure what you mean by this. The caring capacity of the world is infinite? I would think that when all the available soil on the planet is occupied by people standing shoulder to shoulder we have reached a limit. We will run out of water and resources long before this happens though.

On an unrelated note, Gold as a form of economic standard is a farce to me. I don't get it. Might as well be glass beads, cause when it comes right down to it food and water are WAY more important and valuable than gold. In a financial collapse if my neighbor had 100lbs of gold, but I had a garden, I would consider myself wealthier.

[dentist90]

Originally Posted by DARISC

You're just worried that your patients won't have chickens to pay their dental bill...

Not worries. I got that Amway thing going for me!

[dentist90]

Originally Posted by jyl

Okay, when I hear "I'm sure" but don't see any actual data, then I get skeptical. I think it is important to really examine if that premise is true. There is a lot of stuff about the economy that isn't as we'd intuitively think it is.

To be certain global market saturation hasn't happened yet. And you're correct, this is just my intuition working. But if you are in the business of selling shoes to a world where the number of feet is finite the only way to get bigger (and increase stock value) is to aquire other shoe companies. Here is a site listing scores of large mergers and aquistions:Recent Corporate Mergers

I hear Continental and United airlines are attempting to merge. This is what I see as the inevitable result of a shrinking or limited market and the priority to maintain share value (and viability: get big or get eaten). I don't think it is a huge stretch of the imagination to envision a future where there is only one airline company dominating all air travel. The only thing stopping this merger right now is government regulation, which really isn't part of capitalism but rather an attempt to balance it with public good.