Archive for the ‘Capitalism’ category

The Difference Between Capitalism and Extortion

26 March, 2007

I haven’t written for months now because I’ve been lazy, but the recent furore over ministerial pay in Singapore has forced me to defend capitalism once again. Not content with abusing the concept of Democracy, the paps have decided to mar the name of capitalism.

What happened is that they have decided to raise ministerial pay from $1.2 million to $2.2 million because the top few earners in the private sector earn that much.  This, according to them, will help attract talent and reduce the temptation to accept bribes, after all, we don’t want them to be underpaid and act like the directors in Enron now would we?

The fact is, capitalism cannot be used to explain what is happening here. In a capitalist society, consumers get to choose what they want. Investors get to choose what they want as well, as they buy and sell stocks. Neither situation is happening here. The elections were a farce, the fact is, with most of the voting districts unable to vote, Singapore wouldn’t qualify as a Potemkin Democracy.

So without the freedom of choice, the Capitalist argument cannot be applied here. This isn’t Capitalism, it’s extortion. In a Capitalist society, activists would give such leaders would get the boot and not fear imprisonment. Right now, there’s nothing Singaporeans can do.

The only purpose of this entry is to defend Capitalism. I am not as naive as to think that anything will stop our coffers from being raided.

Singapore’s Transport Market Distortions

28 July, 2006

The Capitalist Infidel has been watching as people around Singapore whine about transport price hikes again. This annual exercise has been carried out for years and nothing useful has come out of it. This is mainly because Singaporeans are barking up the wrong tree. The hikes come because the market is distorted, not because of the belligerence of the companies involved.

The Capitalist Infidel would like to remind the people of Singapore that private companies exist for the sake of making a profit. They have a duty to their shareholders to maximise profit. That means increasing prices and lowering costs. In free market, they should be allowed to set whatever prices they wish. The market then decides whether they are willing to pay for it or if they will look for substitutes. Therefore, what they are doing, as profit seeking companies is correct.

However, Singapore’s market for Transport has been warped by government demands for the purchase of a Certificate Of Entitlement(COE) for the ownership of private cars. Private cars are the only reasonable substitute available for the consumers. All other forms of motorised transportation, the only means of travelling to work by most commuters here are controlled by two companies, both of which serve different areas of Singapore.

The COE was first introduced to control the number of cars on the road to reduce congestion. But we now have electronic tolls in the form of Electronic Road Pricing (ERP). Therefore, we have a new tool to deal with congestion on the roads. With COE, whoever paid for it could drive as much as they wanted anywhere they wanted without incurring extra costs. With ERP, we can control the traffic by having people pay toll, so that they have incentives for using alternate roads and are in fact paying for any negative externalities they cost.

And of course if there was still congestion, prices could be raised or we could allow it to sort itself out. After all, there is only that much money people are willing to pay to sit in a traffic jam and people should be allowed to do so if they so choose. The unhindered buses on bus only lanes and trains in the Mass Rapid Tranist (MRT) system will only look more attractive to the people sitting in jams then.

The Capitalist Infidel supports the idea of public transportation because it reduces pollution and congestion but using COE not the way to go about it. COE does not discourage people from driving cars they already own. ERP does. And it is not the cars sitting in garages that cause problems, it is those on the road.

The Capitalist Infidel suggests that COE be scrapped and that the use of ERP be increased. This will let Singaporeans make better choices and no longer be price takers of public transport companies. It will allow Singaporeans a choice between having a car and paying to enter congested areas or taking public transport to avoid such charges and congestion.

Public Transport should still be subsidised, but in such a way that it helps them reduce costs and therefore prices so that they can attract customers. The way it should have been in the first place. Not what it is like now, when the prices of substitutes are increased which ends up in unfair prices from public transport companies, because they can.

This article is also posted on Honest Opinion

Constructive Rogues

25 July, 2006

Scientific American has recently posted an article on How Rogue Captains Built The First Global Market. The article detailed how some captains of the ships ignored orders from England to trade in established markets and return straight to England and instead exploring new locations and trading there for their own profit.

Instead of hurting the companies that they represented, they, to quote Scientific American, “enabled the East India Company to completely dominate East Asian trade by 1760, they also paved the way for the Industrial Revolution and the rise of capitalism by illicitly creating the first modern competitive market.” They were able to find alternatives to the established markets and receive goods at better prices and in fact enlarged the market and therefore allowed market forces, rather than cartels to control prices.

This is one of the best examples of how less control helps you gain more rather than less. It’s counter intuitive, it’s hard, but it works. In any case, even if you do not let go, people will find a way to get around your control. And you would most probably like the results.