I think that the latter examples are brought upon by social pressures, and thus are irrelevant to the "invisible hand" concept (no offense, if that sounds harsh).

Each person's self-interest leads to their desire to better themselves. To do so, they must compete with others in society and perform a valuable service or create a valuable good. This competition causes society to improve as a whole, and thus your theory is absolutely correct.

The only problem with this concept lies within monopolies, which result when one competitor gains too much power. Monopolies can be large or small - if one butcher shop edges out all of the others, that shop has a localized monopoly. In most systems, such issues are avoided by good laws, and thus the system is constantly allowed to improve.

But systems become corrupted, and falling from higher hurts more.  Is it worth the trade-off, or is there an alternative?  We tend to look at the peak of a civilization when we talk about its living standard, but those peaks often last only a short period of time in comparison to the civilization's existence: so is the relative lower standard (that is the result of a fall from greatness, which is itself a result of corruption, which is a result of self-interest) an acceptable price to pay for those moments where the system works as intended?

I agree with Rousseau in that, for a good government to exist, the people themselves must be good. However, a corrupt people eventually results in a corrupt government. Corrupt laws eventually stem from a corrupt government. In this example, the people are corrupt for creating a system that eventually breaks much like a large wave - it peaks for a moment, as you said, then crashes over itself. Were people not overly greedy, the wave would be self-perpetuating and the crest would never be reached. Because the people are corrupt, the government that is created by those people is likewise corrupted, and thus can perform a "corrupt" act of limiting industry. However, when the people become uncorrupted (ie, less greedy) the government and the system must also change to allow for more free-market fluctuation.

I think that the system eventually corrects itself, independent of outside influences, if the majority is allowed self-determination. However, when other forces control the will of the people, the system's success or failure is in limbo. As long as the populace retains control, the system will, in a sense, reboot - that simply takes time.

Suffering might happen in that period of time, but if so it will be necessary to right the economic values of the people.

That assumes that people are capable of becoming and remaining non-corrupt.  History demonstrates otherwise.  Is there a system sustainable in its own right that can protect against any kind of human corruption?  I mean, self-interest in itself, by your definition, is corruption; so the question becomes can individual corruption lead to benefits for society?

You have misinterpreted my definition of corruption - I don't believe that self-interest is always the equivalent of corruption. Each human being must take care of himself or herself first and foremost, above anyone else. That is self-interest, but it is human nature - it cannot be labeled as corruption. However, when human beings become willing or are forced to hurt others to improve their own standard of living, then the system is corrupted and must be changed. Two examples for illustration.

A butcher is providing meat to a small town at a rate that allows him to live comfortably while keeping his product available to most people in the town. However, he decides that he wants to buy a luxury car, and in order to afford the car, he outrageously raises his prices. The townspeople are financially hurt by this, but because he is the only butcher, they must buy his meat. Prior to his desire to buy the luxury car, he was interested in himself foremost - he wanted to maintain a good lifestyle above all else - if not, he could have simply given away the meat. However, he became greedy - corrupted - and wanted a higher standard of living. Thus the system was corrupted and changed needed to be put in place.

Secondly, imagine an African diamond mine (just watched Blood Diamond, so this was the first example that came to mind). To stay alive, you must find one diamond a month, otherwise you will be shot. If you find two diamonds however, you will be given better food. One man has found his monthly diamond, he is guaranteed survival. However, another man hasn't. The second man finds his diamond on the last day of the month, but the first man (because he wants better food) steals the diamond. The first man's greed leads to the second man's death - the system is corrupted. Perhaps this is a bad example because the situtation is bad all around, but you understand what I mean - the system is broken because the people involved have become corrupted. They want more than they require to survive and are willing to exploit others to get what they want.

I am not implying that communism is a worthwhile economic system. Some people provide more valuable services than others, because of their expertise or the difficult of their work, and thus are paid more for that service. For example, a doctor might drive a Porsche. Is that more than he needs? Yes. But it is not evidence of corruption if he didn't hurt someone else to get it.

There is no system to protect against human corruption other than pure anarchy, because in such a lack of system, everyone is equally corrupted and no one cares.

As I have illustrated above, self-interest does not equal corruption - the butcher didn't provide free meat, nor should the first miner have given away his only diamond so that someone else could survive. Corruption can help a system momentarily, but it cannot be sustained, or else the system will fall. Self-interest is a fact of life - exploitation is another altogether. I do not know how this fits with the current crisis, because we are dealing with banks and corporations instead of butchers and miners, but the same principles apply - take care of yourself, but don't needlessly harm someone else to do so.

the butcher isn't corrupt for raising his prices...the whole point of capitalism is that you are allowed to dream for however much sucess you want. If he raises it to high, people will stop buying and a cheaper butcher will open up shop.

Exactly.  And further, self-interest also often unintentionally hurts others.  Anyway it seems inevitable that self-interest will be extended in such a way that the perpetrator is aware of damage he causes others; natural even.  So given that corruption must exist, the question still remains if there is a sustainable system.  Sunshine points out, as I think greenhattedamigo did earlier, that a system can be self-correcting on a certain scale.  But I've yet to come up with a system that is completely self-correcting without, as greenhattedamigo put it, hitting the "reset" button; and that "reset" process seems more damaging than it's worth, if it's avoidable at all.

with globalization hitting the reset button means we all go down so anything sustainable has to be better than that

so like icy said it comes down to whether the transition from beneficial self interest to corruption is inevitable

Well I don't think this butcher is that affected by globalization that much; he runs a local butcher store.  Maybe if the economy goes down people won't buy as much meat...but people are always going to need food.

It doesn't affect him directly.  But look.

Let's say wall street crashes and burns.  The Chinese government is suddenly broke.  Russia and the Middle East can't sell their oil.  European governments are nearly broke and major european companies go bankrupt because they can't sell American products any more and they're not subsidized by the failed government.

American banks won't lend money, if they survive at all.  So the local bank in the butcher's town won't lend him the money he needs to buy the meat from the farmers; that is, if the farmers have enough money to maintain their cows at all, which is unlikely.

So then the butcher doesn't have enough meat, so he can't sell enough to live on, so he has to raise his prices.  But meat is more expensive than other foods to start with, so no one buys his meat, and the butcher is now in destitution.

Obviously this situation is a little stretched, but you get the idea.

I mean yeah but if EVERYTHING crashes, no one will have money to pay for anything.

Yes there would. Inflation would skyrocket, money would be printed by the bundle. Case in point - Zimbabwe under Mugabe.

Unless the government collapsed. If that happened, people wouldn't really give a **** about money would they?

Haha then Will Smith would roam around NYC looking for surviors

The situation isn't stretched at all.  It's happening all over the world due to the collapse of globalisation. 

If anyone really believes that the "invisible hand" really exists anymore is an ignorant idealist.  Clearly, self-interest does not lead to the preservation of the community.  If that was so, predatory lending wouldn't have run rampant and all those investments banks would still be around and the economy would be in perfect shape.  [expletive], we wouldn't even need capitalism as the world would function perfectly fine if self-interest drove the community to higher levels.  [expletive], we wouldn't even need a government. But, sadly, that's now how the world works.

Not the collapse of globalization, persay, but rather the collapse of an element in the newly global world is causing the collapse of other elements.

Your point is valid, and I agree as long as we assume that the individual does not realize it is in their best interest to follow societal laws, support a government, etc. (without that assumption, the original question doesn't make much sense, I guess).  However, greenhattedamigo is making the argument (which, although I disagree with it, has some validity as well) that the reason for the collapse of institutions without government etc. is not self-interest, but corruption; in other words, acting for one's own benefit is only called self-interest when it does not cause unnecessary harm to others, if I understand correctly.

But that element was the driving force of globalisation.  Globalisation was driven by exploitation.  Now, that exploitative drive has been revealed as unstable as it let loose a torrent of fraud, violence, and unrelenting greed.  What then, does that mean for globalisation?  It's time is nigh and a much more tamed version must replace it if it is to see any continuance whatsoever.

And yet, it is always those at the top who define what self-interest is, and as long as no one possesses the foresight to see the end result of their self-interest, then this will indubitably happen again.

I disagree fundamentally:

1. Globalization is not driven by exploitation.
2. Neither exploitation nor globalization released "a torrent of fraud, violence, and unrelenting greed."
3. Globalization is not at an end.

Globalization was driven by economic opportunity.  Those who did not profit from it can call it exploitation as much as they want, but to claim that paying an Indian $5000 to do what an American would do for $50000 is exploitation is ludicrous.  Both amounts offer similar lifestyles in their respective countries; there is merely an imbalance of living style.  Has there been exploitation?  Of course.  More than there would have been without globalization?  On the contrary, almost certainly less.  Humans have been moving towards globalization since the evolution of homo sapiens and it's not about to stop because 2% of people lost some money--as they have every 15 years since American-style Capitalism was first implemented.

I'm not sure I understand you here.