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Thread: Has capitalism failed?

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[quote=SETH,332016](CONTINUED FROM LAST POST)

Now if unions go too far in their demands, salaries can grow to be too high for the intrinsic VALUE that they support. That is to say: with salaries too high, the basic cost for an item would exceed the price it could be sold for. Coolsprings' question is one I have asked myself before. If we pay a GM laborer $75 per hour, and the labor needed to produce cars makes the price too high to compete on the world market, GM will sell less cars and their profits will drop and their stock will drop. As Coolsprings asked: "how can they survive?". My answer is that they can't, unless something significant is done to change the situation.

For example: 1. GM could negotiate lower salaries with the unions (but this is NOT likely to happen)
2. GM could move to more automation to require less labor and produce cars less expensively. But the unions would resist this, and eventually the union would probably go on strike. Sooner or later the unions would negotiate reduced numbers of workers and the strike would end. Maybe GM would then be more competitive for a while, but the cycle will keep repeating itself. 
3. GM could use cheaper materials, but this would result in an inferior car, and people wouldn't buy it. 
4. Another crazy idea is that GM engineers could come up with a radically new and better car that is really cheap to run and uses new technologies and materials! A car that is inexpensive to build and never breaks down! Now there is a possibile approach for how GM could survive!

But based on Coolsprings' initial question: I believe that if nothing is done, GM can't survive. Ford is also having bad financial times for the same reasons as GM.

Capitalism isn't really the issue, and PURE capitalism died a long time ago. Free enterprise will survive, because people always want and need things, and there will always be other people to make these things and exchange them for a value commodity (money, gold, diamonds?) with the people who want them. Isn't that essentially the basis for free enterprise as practiced in China?

It sure looks like the USA is going through some hard times, and changes are needed for it to recover. Moving to too much government controls can make things a lot worse, since governments are notoriously inefficient in doing anything. Being just a spec of dust in the whole economic machine here, all I can do is hang on and hope for the best.[/quote]

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