[Comrade Ogilvy]

I would suggest that a recession couldve been avoided through non-capitalistic methods (but not nessecarily through allendes policies, as you say the country was still basically capitalist at the time).

No, a recession cannot be avoided in a capitalist economy. Attempts to avoid recessions, which are nearly always employed and have been since 1929 in this country, are by definition non-capitalistic, so your point is moot.

As for malinvestments - where was their money that there should've been, and why was it so important to liquidate it?

The boom-bust cycle in capitalist economies is created by central bank inflation. To make this brief, central banks attempt to keep the rate of interest close to the "real" rate of interest. The prevailing belief is one that was articulated by the Swedish economist Knut Wicksell over 100 years ago. The money rate of interest is seperate and distinct from the "real" rate of interest, as determined by capital stock. The goal of the central bank, in this praxis, is to align the money rate of interest (determined solely by supply and demand for money) with the "real" of interest.

I'm not going to bother debunking this shitty theory here (though I can forward you some information if you're interested), suffice to say that attempts to deal with it involve money creation by the central bank. The first users of this money are able to purchase commodities with newly created money at old prices. As the new money circulates through the economy, the entire price structure is distorted, since first users benefit first (duh), and each subsequent user derives a successively lower benefit, as prices begin to rise in response to newly created money. The resulting distortion of the price system causes modes of production that would not ordinarily be supported in a capitalist economy to arise. The result of this, of course, is that investment is directed into capital which is not actually efficient. While inefficient investments are often made, what makes this form of inefficient investment unique from a standard one is that it is affected by a "temporal warping of the supply curve", so that a majority of entrepreneurs and capitalists will follow suit and make bad decisions.

Ultimately, this inflationary boom must come to an end, for eventually the pool of real savings cannot support the credit creation by the central bank. The result is a sharp fall in economic activity and recession. The recession is a necessary consequence of the inflationary boom that preceded it, and in a recession malinvestments are liquidated. Interference in a recession merely lengthens the amount of time it takes for malinvestments to be liquidated, so that the economic malaise persists for longer tha necessary. The cause of the Great Depression was indeed severe levels of government intervention from all government authorities.

Positive for whom? Any large scale economic measure you care to prove this with makes no difference to the people who are unemployed or underpaid.

At the time it was undertaken, it was clearly negative for a majority of Chile's people. However, since the boom truly began, real wages and net worth have been rising for all Chileans, not just the rich as happened under Pinochet.

Is Norways oil that much more valuble than Chiles copper?

Yes, it is.

However, I can bring another example out - Belarus. While hardly a bastion of freedom and prosperity, it does have a lower unemployment rate than Chile whilst having near-soviet levels of intervention. It is also a lot closer to Chile in wealth than Germany or France are.

Belarus has also been stagnant for a good fifteen years now. Employment is maintained, but living standards are not improving. Belarus started from a relatively high base (the Soviet Union) compared to Chile, and it will be "left in the dust".

I understand. However, Cuba also has a lower unemployment rate and was not industrialised until recently. I would suspect free-marketeers would unanimously say that the policies of Chile are superior to the policies of Cuba, and consider the extra 6% unemployment a price worth paying because of the overall 'benefit' they see.

Yes, I would say that the unemployment in Chile is "worth it" in comparison to Cuba. Cuba has no future. Chile will become a first world nation.

Most of the choices that affect our lives (Will we be fired? Can we own a house?) are made without our consent by those richer than us.

This isn't accurate in the least. Our lives are affected by an incredibly intricate network that involves our own actions, the actions of those who directly command us, and untold billions of actors across the entire world whose decisions ultimately ripple around the world. While no man has true control over his own fate, we do have some control. It is no accident that people who are diligent, disciplined, and prudent are ultimately more successful than those who are not. If you work hard enough, you will own a house if you want to in enough time (assuming you aren't autistic or something).

You say that the economy is the sum of transactions and it affects us greatly, but if you get a $10,000 raise and I don't - the sum of our pay rises and I am not effected one iota (save being pissed off that the system screwed me AGAIN ). Worse, if you get a $10,000 raise and I get a $5,000 cut, the overall sum of our wages is greater, so someone might think our overall situation was better - however I am far worse off. Given that Betrand Russell couldn't prove 1+1=2 you will be hard pressed to convince me that any mathematical manipulation of monetary transactions is not abstract. And you will never convince me that the number at the end of your equations justifies human suffering.

I'm not going to try to convince you either, as the situations here that you're describing, while they do represent net economic progress, clearly aren't benefitting the whole. And I realize that in Pinochet's Chile, that is exactly what was happening. This is part of the reason why I believe Pinochet's program was flawed and unsatisfactory. Never forget that Pinochet had it in his interest to enrich the wealthy in order to maintain his grip on power, and that he wanted, "An economy that will take orders." It is an error to call Pinochet's program laissez-faire.

OK, so I might concede a link between unemployment and productivity -

I didn't state that there was a link between unemployment and productivity, merely that a modicum of unemployment is natural and unavoidable. In theory, as an economy develops further, more efficient communication structures, superior capital allocation systems, and improved transport should decrease the overall level of unemployment (the "natural rate"). However, there is no real example for this, as intervention as been steadily increasing for the last 100 years.

however there is still a link between unemployment and profit. The bosses want to keep us fighting over the scraps.

This is incorrect. In an individual firm, the firm benefits if he can reduce his wage costs. However, higher unemployment in an economy is indicative that the economy is producing below its full potential, meaning that overall profits will actually be lower for the capitalists. Capitalists desire a number of cartelization schemes to benefit themselves at the expense of consumers, workers, savers, and shareholders, but I do not see higher unemployment as being one of them.

How much of this is due to technological advancement though? Capitalism seems quick to take the credit for better machinery (and the period you quote did feature some rapid advancement in that area).

Well, productivity is a result of capital deepening, which is technically speaking independent of technological advancement. However, eventually you hit a wall as to how much capital can be efficiently deployed, and this is where technological advancement comes in, in that new machinery is invented. Furthermore, technological advancement discounts obsolete machinery, so "scavengers" can increase their productivity by purchasing older capital at steep discounts. However, technological advancement is heavily tied to capitalism itself. As you so eloquently argued against that Totalitek moron in the PnD forum, technological advancement requires human freedom in order that creativity may express itself. Furthermore, the incentive structure that is created by capitalism naturally allows entrepreneurs to flourish and invent new things. As such, capitalism is very conducive to technological development. The fact that the Soviet Union throughout its history invented almost no technology is very illustrative. Almost all of its semiconductors, for instance, had to be imported, even in the 1980s.

I'm not suggesting that you support unemployment (and the associated suffering). What it seems to me you are saying is that it is an unpleasant but bearable side-effect of a system that ultimately proves positive - even to the currently unemployed man. I would dispute that there is an overall positive effect here.

This is correct, I am saying that unemployment is a bearable side effect, even to the currently unemploymed man. Thanks to the superior productivity improvements in a real free market, the unemployed man lives in an economy that otherwise would be of a lower overall development, and he will readily find a new occupation in not too long of a time.

The poor had to suffer decades of low wages and scarce jobs in order to reach the present position whilst the rich were having a party during the same period. The poor were forced to make this sacrifice in order to 'fix' the economy.

In a normal recessionary situation, everyone suffers (aside from a few farsighted individuals who beat the market), including the rich. Remember those videos of stockbrokers jumping to their deaths in 1929? Pinochet deliberately ensured that the rich did not suffer, because they were vital to his powerbase.

The point of all this, is that Chile was a genuine attempt at an economically laisez-fair system, and the problems it experienced under Pinochet are relevant to any discussion of systems that advocate market freedoms. I believe that any such system will sacrifice the welfare of the poor for the 'greater good' of the economy, as happened in Pinochets Chile.

Chile was not an attempt at a laissez-faire system, and it is not a laissez-faire system today. It was an attempt to create a freer economy. In a situation where a sharp recession was required, Pinochet extended the malaise, and deliberately protected the rich. Today, everyone is better off, but if I were arguing in, say, 1983, I would've argued against Pinochet, because most people were not benefitting at all.

[SpiderMonkey]

No, a recession cannot be avoided in a capitalist economy. Attempts to avoid recessions, which are nearly always employed and have been since 1929 in this country, are by definition non-capitalistic, so your point is moot.

My point is, that the economic hardship suffered by the Chilean people was avoidable, simply not in a way you'ld like.

<snip>

"temporal warping of the supply curve"

<snip>

Maybe they should've raised the shields.

I think I see what you are saying - but I still maintain that pushing in the opposite direction than pinochet (i.e. towards a completely socialist economy) would've solved this problem. Any form of planning, be it local or central, would've been able to sort this problem out.

At the time it was undertaken, it was clearly negative for a majority of Chile's people. However, since the boom truly began, real wages and net worth have been rising for all Chileans, not just the rich as happened under Pinochet.

You sound as if peoples lives are an investment, that suffering is worth it for the long term benefits. What of those who didn't live through Pinochets regime (not just the ones he murdered)? What about people whos youth occured in those years?

Belarus has also been stagnant for a good fifteen years now. Employment is maintained, but living standards are not improving. Belarus started from a relatively high base (the Soviet Union) compared to Chile, and it will be "left in the dust".

Belarus has a GDP growth rate of 6.8% and Chile has a growth rate of 3.3%. The Gini Coefficient is also lower in Belarus, so this growth is going to be more evenly distributed amongst the population.

Again, I'm not holding up Belarus as a shining example of socialism (its pretty much the last redoubt of the Soviet Union).

Yes, I would say that the unemployment in Chile is "worth it" in comparison to Cuba. Cuba has no future. Chile will become a first world nation.

Thats a matter of opinion, and the capitalist oligarchs that ran Chile never bothered to ask the people what their opinion was. Forcing somebody else to make a sacrifice because you believe it to be ultimately beneficial is autocratic and just plain wrong.

This isn't accurate in the least. Our lives are affected by an incredibly intricate network that involves our own actions, the actions of those who directly command us, and untold billions of actors across the entire world whose decisions ultimately ripple around the world. While no man has true control over his own fate, we do have some control. It is no accident that people who are diligent, disciplined, and prudent are ultimately more successful than those who are not. If you work hard enough, you will own a house if you want to in enough time (assuming you aren't autistic or something).

My boss controls if I am to be fired or not. Media magnates control the choices I have in what TV programmes I watch and what newspapers I read (which is largely why I do neither much anymore).

As for being diligent, disciplined and prudent - yes, as I am one of the fortunate ones born into a country with a slight amount of class mobility (not nearly enough), then with those qualities I can at least make myself middle class. However, at the same time, some will be born rich and maintain that wealth by exploiting others. They will not have any of the qualities you mention because they don't need them.

I'm not going to try to convince you either, as the situations here that you're describing, while they do represent net economic progress, clearly aren't benefitting the whole. And I realize that in Pinochet's Chile, that is exactly what was happening. This is part of the reason why I believe Pinochet's program was flawed and unsatisfactory. Never forget that Pinochet had it in his interest to enrich the wealthy in order to maintain his grip on power, and that he wanted, "An economy that will take orders." It is an error to call Pinochet's program laissez-faire.

I didn't think you supported Pinochest Chile, but I do think that his regime was an attempt at laissez-faire capitalism in the same way the Bolshevik revolution was an attempt at Communism despite the fact most Communist don't support what it did.

This all comes back to the quote I posted at the beginning. I think Friedman has done a good job of condemning his own ideas because the attempt to put them into practice didn't have any of the characteristics that he wanted (political freedom and prosperity).

This is incorrect. In an individual firm, the firm benefits if he can reduce his wage costs. However, higher unemployment in an economy is indicative that the economy is producing below its full potential, meaning that overall profits will actually be lower for the capitalists. Capitalists desire a number of cartelization schemes to benefit themselves at the expense of consumers, workers, savers, and shareholders, but I do not see higher unemployment as being one of them.

Thats only assuming the demographic consuming the employers production is the same demographic he takes his employees from. The main point about globalisation is that this is not the case. One demographic (the west) act as consumers whilst the other demographic (the third world) suffer the unemployment and crappy conditions required to keep wages down.

Well, productivity is a result of capital deepening, which is technically speaking independent of technological advancement. However, eventually you hit a wall as to how much capital can be efficiently deployed, and this is where technological advancement comes in, in that new machinery is invented. Furthermore, technological advancement discounts obsolete machinery, so "scavengers" can increase their productivity by purchasing older capital at steep discounts. However, technological advancement is heavily tied to capitalism itself. As you so eloquently argued against that Totalitek moron in the PnD forum, technological advancement requires human freedom in order that creativity may express itself. Furthermore, the incentive structure that is created by capitalism naturally allows entrepreneurs to flourish and invent new things. As such, capitalism is very conducive to technological development. The fact that the Soviet Union throughout its history invented almost no technology is very illustrative. Almost all of its semiconductors, for instance, had to be imported, even in the 1980s.

But I would debate the link between capitalism and political freedom, which is one of Friedmans ideas that I think was disproven in Chile.

Yes, I would agree that the USSR lacked the freedom required to be a true technological power, but you have to bear in mind that non-authoritarian leftist movements have been mercilessly crushed every time they have arisen, applying an almost darwinistic filter to the left - only our most violent factions survive long enough to make a big impact on history. This is another topic though.

This is correct, I am saying that unemployment is a bearable side effect, even to the currently unemploymed man. Thanks to the superior productivity improvements in a real free market, the unemployed man lives in an economy that otherwise would be of a lower overall development, and he will readily find a new occupation in not too long of a time.

But he could live in an economy of lower 'development' with lower unemployment, and not have lost his job in the first place. It seems that his period of unemployment provides a collective benefit not an individual one.

In a normal recessionary situation, everyone suffers (aside from a few farsighted individuals who beat the market), including the rich. Remember those videos of stockbrokers jumping to their deaths in 1929? Pinochet deliberately ensured that the rich did not suffer, because they were vital to his powerbase.

Can you argue that in any free-market orientated government, this would not be the case? Wouldn't the rich favour free markets until those markets turned against them, then come running to the government for protection?

Chile was not an attempt at a laissez-faire system, and it is not a laissez-faire system today. It was an attempt to create a freer economy. In a situation where a sharp recession was required, Pinochet extended the malaise, and deliberately protected the rich. Today, everyone is better off, but if I were arguing in, say, 1983, I would've argued against Pinochet, because most people were not benefitting at all.

Just because it did not live up to your ideal of a laissez-fair system is no reason to say it was not an attempt at one. Also, saying everybody is better off now is to suggest that people can wipe a few decades from their memory. Each moment of our lives is unique, and moments spent suffering are not just a waste at the time, they are a waste for the rest of your life.

[Paradigm]

You can't have a truly free market in an otherwise authoritarian country. For example, if you censor the press, that's interfering with the the media market. If you ban books or make drugs illegal, that's tampering with the free market. Economic freedoms are dependent upon social freedoms.