Linked by Thom Holwerda on Sun 20th Mar 2011 20:20 UTC
PDAs, Cellphones, Wireless A major deal just went down in the United States, which seriously shakes up the mobile industry on the other side of the pond: AT&T has announced it plans to buy T-Mobile USA from Deutsche Telekom.
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RE[5]: Invisible hand
by ricegf on Mon 21st Mar 2011 23:00 UTC in reply to "RE[4]: Invisible hand"
ricegf
Member since:
2007-04-25

Well, I own quite a bit of stock myself (mostly in mutual funds), so I probably should take offense at your characterizing me as a "parasite". :-D

Stockholders provide capital for business expansion, and expect to earn profit commensurate with the risk that the expansion will fail. The average annual rate of return over the past 100 years (based on the S&P 500) after inflation is 6% to 7%. Not exactly usurious or abusive, IMHO - and a majority of Americans own at least some stock (bunch of parasites that we are).

One alternative is for a company to grow on a cash-only basis with a single owner. This is a great plan, IMHO, but it has disadvantages. If I owned Microsoft lock, stock, and barrel, for example, to which individual would I sell it when I wanted to do something else? And if I wanted to motivate my employees to perform at their best, what better motivation than if they own part of the company (sometimes called stock options or company stock programs). They may or may not receive an annual bonus, but they own their stock options - if the company earns a profit, their "bonus" is a sure thing!

So I suppose I disagree that I and my fellow shareholders are sponging off of the masses. We're actually financing their jobs. ;-)

Your suggested alternative is for the government to own all of the companies, bear the risks, and reap the rewards. This has some definite disadvantages, though. With a single owner, how much competition can you expect between different companies? Who will regulate their behavior (assuming we permit competition) or motivate them to take risks (if we don't)? Why would someone with a brilliant new idea invest his time and effort to build a market so that the government can profit from it?

Socialism sounds as attractive in theory as communism does, but in practice it tends to work less well - compare Taiwan and Hong Kong (capitalists) to China (formerly socialist), for example. When China decided to push for economic growth, they turned to a regulated form of capitalism, though keeping a communistic form of government. Looks like it's working pretty well to me. (You might read http://en.wikipedia.org/wiki/Chinese_economic_reform for a reasonably objective take on this.)

All this is just my considered opinion, of course. I far prefer a carefully regulated capitalism to the alternatives, as it seems to breed a *lot* of wealth rather quickly. What I really dislike, though, is a heavily laissez-faire system that allows anonymous mega-corps like AT&T to abuse customers - and particularly when I'm unfortunate enough to be one of their customers!

Capitalism works great when underpinned by morality and generosity - and when not, IMHO, the non-invisible hand of government has a duty to slap it straight again. :-D

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