Quote from: Sjalq on January 28, 2011, 05:41:30 PM

Forums unfortunately do not fully lend themselves to working through arguments like these.

If you mean that my response was terse, I can grant you that. However, the forum can facilitate as productive and detailed a discussion as we can manage. It is up to us to set the standard.

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The only way that the government can run production at a loss is by forcefully taking resources from the people. It will do so either through direct taxation or inflation. Once that resource is depleted government will collapse and yield that it too is not immune to the law of natural consequences. Take the collapse of the Soviet Union as an example.

Even in a purely capitalistic society, you must agree that resource (re)allocation will not happen unless there is some sort of mechanism for enforcement. Not all transactions will occur with all parties (especially those that pay "external" costs) happy with the outcome.

The situation that I was thinking of is, for instance, an economy suffering due to the effects of widespread real-estate speculation as a result of economic "financialization." Consider the production of raw material, such as concrete or steel. If they were still being produced in the country suffering economic problems, the limitations of private ownership (fiduciary responsibility to meet quarterly targets) will force the companies to lay off large portions of their labor forces. This will further depress the economy, as the laid-off workers no longer have the ability to consume goods and services. The process degenerates via a positive-feedback mechanism.

Now, let's consider those industries being run outside of the constraints of quarterly profits. The industries can continue to produce raw materials, which are required for things like infrastructure development and maintenance, as well as other goods. The work force can continue to consume goods and services. Yes, the government incurs a debt, but this is a situation in which debt is tolerable. In good times, countries should be accumulating surpluses to help deal with the bad times. Anyways, the positive feedback situation present in the previous example, with which we are very familiar - we are experiencing it now - would be mitigated and the economic situation would improve far more rapidly. After recovery, the industries would return to profitability and the debt repaid.

Of course, this requires a large industrial capability to produce raw basic goods - currently lacking in the US.

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It is unfortunate that the argument persists that either the New Deal or WW2 "pulled" the economy out of the great depression. Due to consistent government intervention the economy took a decade to restructure itself.

The New Deal helped control some costs, but we can debate that. I'll put that aside for now. With respect to the war, I think your case it far weaker. The enormous production of war materials (think of all the steel, aluminum, textiles, etc. required) certainly helped pull the country up. Notice that the country incurred debt in the process (bonds), similar to the process I outlined in the second case, above. The clincher was that the US emerged as the dominant economic and military power after WW2. This afforded unparalleled opportunities to exploit resources and labor on a global scale. The party has been ending in the last few decades, which is partly why the US economy has been developing so many bubbles and why it is now based on pure, unsustainable debt. There are things that can be done to arrest and reverse this process (such as (re)establishing domestic modern productive industry), but the people that own the country don't like those options.

Another (rarely mentioned) factor that helped bring down the rate of unemployment is the gruesome fact that over 400,000 working-age American men perished in the war.

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Industries that did not produce or provide that which ordinary people could use needed to be shut down and the resources (human and otherwise) reassigned to active sections of the economy. The economy recovers once this restructuring is underway, once people have to quit their jobs as SUV sales people and instead go be hybrid car sales people. It is akin to constantly sending out fire fighting teams in an ecosystem that is dependent on seeds being exposed to extreme heat to germinate. People do not want to face the painful restructuring process and instead prolong the suffering.

The above process can happen in spite of consistent government intervention but what is not valid is to say that since it happened we can only be thankful since imagine how long it would have taken without the government intervention.

I'm having a difficult time parsing these paragraphs.

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Saying that companies that deliver things are inefficiencies is like saying arteries are inefficiencies since they require resources and only add to the distance blood needs to travel to an organ.

Now the individual will of people not "perfect" but it can organize resources faster and more accurately than any central planning body has ever proven to.

Perhaps. But that isn't the situation I had described. What I described are two centralized systems operating in series.

1) the government funding basic research to develop technologies that are to be commercialized by private companies

2) the private companies that take those technologies and repackage/market them (for a hefty price) to the people that already paid to have them developed in the first place.