Is Capitalism destined to fail?

[waterj2]

OK, I’ve been reading this, but have declined to comment because I haven’t read the stuff Oldscratch posted to start it all off. Reading Marx generally makes me angry and confused at his stupidity, so I don’t generally see the point of it. I see no reason to waste my time on theories that seem based on the assumption that people think as members of their economic class, rather than as individuals. I generally try to think like a capitalist, with at least some success, so I shouldn’t be able to see the truth of Marx’s work anyways.

It’s nice to see the capitalists easily holding their own here (and welcome keragigi), but there’s been a few things I felt compelled to comment upon. The first is to dal_timgar. Sentences start with capital letters. If you want me to take you seriously when you claim that PhD economists cannot do grammar school algebra, please follow grammar school grammar rules.

The second is to jmullaney. When combined with how often you make no sense whatsoever, your open mockery of others and general tone of condescension are incredibly annoying. Try perhaps explaining why you are right, rather than assuming it, and berating others for disagreeing.

And now to respond to this:

*Originally posted by jmullaney *

*Originally posted by kabbes *
I’d just damn the “sensible course” and make myself happy.

That’s right – material things will make you happy. Your net worth is how much you own. And don’t forget exploitation of third world labor is a good thing because otherwise they wouldn’t even have jobs.

Material things do indeed make people happy. This computer that I am using to rebut your points is making me happy at the moment. Certainly more is required in life than material goods, but I’ve noticed that everyone seems to purchase material goods in their quest to be happy. What are you proposing is the reason people buy things?

Without dwelling overly long on how that last sentence is completely unrelated to the first two, or what Kabbes said,
you are correct there, although I think you are being sarcastic. While conditions in sweat shops are bad, they are better than conditions would be in the absence of those sweat shops.

*Originally posted by Lemur866 *
Why do you feel that people have to work in sweatshops as a neccesary consequence of my wanting to go on vacation?

I didn’t say that. Obviously people do have to work in sweatshops. Because, who would if they did not have to?

Well, if the people there only had better options, the sweatshops would have to compete if they wanted to keep people working there. Or they could become fully automated. Certainly we can’t be far from having the technology to make a pair of pants efficiently by machine. Or are you suggesting that Nike et al. simply force people into actual slavery when there are abundant alternatives to working for them available.

I’m glad I’m not in the position of a sweatshop worker.

Someone apparently has to. People have to work in sweatshops in our economy. By being a part of the economy, you are participating in causing the misery of those who do.

By being a part of the economy, I am offering jobs in sweat shops to people who previously had worse lives than sweatshop workers. While not exactly the most noble thing to do, I am alleviating misery, rather than causing it.

Do you feel that if I make more money, I have to get the money from somewhere, so it must come out of the labor of the oppressed workers?

Perhaps not directly.

No, not at all. The idea that the amount of wealth in the world is necessarily limited is probably the most pervasive misunderstanding about economy (although the idea that protective tariffs help a country is close). A hundred years ago, there were far fewer people on the planet, and they were on average far poorer than we are now. A thousand years ago, there wasn’t any money.

And as long as baiting and switching is allowed, I might point out that if you make a hundred dollars a day, and they make one dollar a day, your hundred dollars actually makes their one dollar worth less.

I don’t see any reason that this would have to be true.

Would the [sweatshop] worker really be happy if the factory they work at closes? What is the alternative?

If you and everyone didn’t buy the products the factory made, it would shut down.

These people have been making widgets, and consuming some products X.

If no one wants the widgets, they stop making them, and still consume some products X.

Where’s the loss?

How would they continue to consume X without having any income? If there are other, better jobs available, why were these people working in the widget factory to begin with? Or do they somehow continue getting payed for not producing anything.

[waterj2]

Sorry, welcome kesagiri.

[Lemur866]

*Originally posted by jmullaney *
**
That’s basically the flaw in Lemur’s argument. We could just pay everyone a billion dollars a day and his “abstraction” doesn’t fall apart, but you can see the problem with it. Everyone would still work and create value and be able to exchange that thing which they have made for something of value and that would be great. And, he claims, making things of value makes everything more valuable. So pay everyone who works a billion dollars a day then. **

We could set the minimum wage at $1,000,000,000 per day. All that would do is devalue the currency. As long as we still have the same amount of goods and services and the same demand for goods and services then nothing has changed except the units we keep score in.

But if I create goods and services, then I have added to the worlds wealth by that small little amount, right? There is one more package of tofu made, one more child taught the pythagorean theorem. Doesn’t that add to the world’s wealth? When I do that, then the people who want to use that tofu, or want their child to learn the pythagorean theorem, give me little pieces of paper that I can exchange for some of the wealth that THEY created at their jobs or businesses or farms. And I can exchange the money for goods and services that third parties have created…even ones that live halfway around the world. The more money I make (and that’s what I’m doing…creating value…literally MAKING value which is kept track of by money) the more things I can get, and the more things others can get.

Think of it in reverse. Suppose I refuse to manufacture tofu or tutor children. Well, someone out there is going to want a slab of mouthwatering tofu, but it won’t be there because I never made it. So the price of tofu rises by some tiny tiny amount…which means that the money that they make is worth less since it buys less. But if I make more tofu, the price goes down and their money is worth more.

Now, you may argue that if I make tofu it hurts the other tofu makers. So it does. But suppose they cannot compete with me…my tofu is so superior that they are forced out of business. Bad, right? No, good! Now they can make something that people want rather than the inferior tofu they used to make. While my actions may hurt the tofu manufacturer, everyone else on earth benefits. It is not a zero sum game where every time I benefit someone else loses. If the economy were a zero sum game, then how did we ever get out of subsistence farming? How did the industrial revolution happen? The more we create, the more we CAN create. It is a virtuous circle.

[Lemur866]

*Originally posted by jmullaney *
**

*Originally posted by Lemur866 *
Why do you feel that people have to work in sweatshops as a neccesary consequence of my wanting to go on vacation?

I didn’t say that. Obviously people do have to work in sweatshops. Because, who would if they did not have to?

**

There are people who do have to work in sweatshops. But that is not because of capitalism. It is because there are no other alternatives FOR THEM. Capitalism would work just fine with nothing but automated factories and white collar workers. Capitalism doesn’t require that people work for low wages. It’s just that capitalists won’t pay people more than they have to to get them to work. If people won’t work for the wages the capitalists offer, then they either have to raise wages, shut down, or automate.

I’m glad I’m not in the position of a sweatshop worker.

Someone apparently has to. People have to work in sweatshops in our economy. By being a part of the economy, you are participating in causing the misery of those who do.

**

No. I didn’t cause their misery. Their misery is caused by poverty, lack of infrastructure, no education, bad government, corrupt officials, soldiers, bandits, aristocrats, priests. Were the people in Thailand rich until the corporations came and herded people into sweatshops? No, they were poor subsistence farmers who worked all day every day trying to scratch a living out of the soil and hoping that some aristocrat or bandit (same thing, really) didn’t steal so much from them that they would starve. If I set up a factory and hire subsistence farmers am I harming them? I’m not helping them because I’m a nice guy of course. All I want to do is make money. But as a consequence of my greedy materialistic pursuit of obscene wealth, these farmers get a job. And since they aren’t farming, then the supply of food drops so the price increases so the people still farming increase production and make some money selling food. Some people make enough money to send their children to school, where they learn to read and write and perhaps are able to do other things than sweatshop labor or subsistence farming. The economy starts to diversify. As a consequence of my pursuit of material wealth, I have inadvertantly created material wealth for others.

Do you feel that if I make more money, I have to get the money from somewhere, so it must come out of the labor of the oppressed workers?

Perhaps not directly.

So, the more I make (the more value I create), the less others have? No. It is not true.

You are right, this complete non sequitor from your last quote is not true – unless you work at a printing press and actually make money! Nice try at bait and switch though.

Does the fact that I buy a t-shirt mean that some third world person has to do without a t-shirt? No. I can have a t-shirt, the third world person can have a t-shirt. The fact that I am paid a certain amount of money for my work does not mean that someone else has to be paid less money.

Then you go on to state a few more facts which has nothing to do with anything:

In fact, the more I make (the more value I create) the MORE others have. If I create lots of value, I can exchange it for other things of value. So if I create value, then others can exchange the valuable things they create for the valuable things I create.

Your point?

You implied that the more I make, the less others have. I tried to show that the more I make, the more others have. You feel that third world poverty is a result of my material wealth. I disagree, and I’m trying to show why.

So, the more I create, the more valuable their creations are, since the potential universe of valuable things they can exchange their valuable things for has increased by that small amount.

Unless you are making the same things they are, in which case you make what they have made worth less.

And as long as baiting and switching is allowed, I might point out that if you make a hundred dollars a day, and they make one dollar a day, your hundred dollars actually makes their one dollar worth less.

Not true. If I make goods worth $100.00, then their one dollar is worth more because now they can buy those goods where before they could not.

Would the [sweatshop] worker really be happy if the factory they work at closes? What is the alternative?

If you and everyone didn’t buy the products the factory made, it would shut down.

These people have been making widgets, and consuming some products X.

If no one wants the widgets, they stop making them, and still consume some products X.

Where’s the loss? **

No, they do not still consume X. They consume X-y. If X-y is small enough, then they die. How could they consume the same amount if they have no money and no job? No, they must consume less, unless you are imagining that we will simply give them the things they need. Even if we give them minimal aid, enough to keep them from starving, they are still worse off than before.

If they cannot make widgets, who will sell them the food, shelter and clothing they need? If we must give them food, clothing and shelter, then we must pay for it from taxes. So other people are forced to work harder to keep the former sweatshop workers from dying.

If the sweatshop is still going, then the sweatshop workers can feed themselves. The taxpayers have more money…perhaps they can use it for other charitable things, like schools or medicine for the sweatshop workers rather than food, if they are in a generous mood. Or perhaps the sweatshop workers will eventually become skilled enough and wealthy enough to provide those things for themselves.

The desire of capitalists to pay the lowest possible wages has the ironic result of capitalists seeking out the poorest people on earth and offering them jobs. Funny how these things work, eh?

[RickJay]

*Originally posted by jmullaney *

*Originally posted by RickJay *
If they don’t work, they have no money to get products X.

But pricing is set by supply and demand. The supply is already there. If they don’t have the money to buy product X, the price will drop until they do have the money to buy product X. Then they do consume them. No loss.

That’s cute, but re-read the original scenario. If a factory shut down, would the workers lose something?

Somehow, I don’t think the workers at one factory constitute all the consumers in the economy. One factory’s worth of workers will not make a significant different in prices. The world price structure will not collapse if you lose your job, or even if 500 people lose their jobs at the widget factory.

And if they WERE the entire economy, there’d be nothing to buy, because they aren’t working anymore.

How do you think these people survived before there were sweatshops?

I can’t believe anyone would seriously think buying items made in a sweatshop is good for the people who work there. Or even that imperialism is a good thing.

Get used to it. It IS, in many cases, good for them. As has been pointed out, fifty cents an hour beats fifty cents a week.

If you want to take away these people’s jobs, go right ahead. You explain to them why they should lose their incomes.

[RickJay]

*Originally posted by dal_timgar *
the P-38 was a product of mechanical engineering, it had 2 gasoline piston engines, since it flew at 400 mph the engineers must have known something about aerodynamics in 1940.

cars are products of mechanical engineering, they usually have only 1 gasoline piston engine. they roll along the ground so almost any stupid aerodynamic shape will work. lots of room for useless variation. it’s 30 years after the moon landing and we have computers coming out of our ears. one would think mechanical engineers could figure out how to get cars nearly perfect by now.

What’s wrong with the way they are? They’re incredibly efficient machines. Wonderfully engineered. Why don’t you come up with a design for an affordable, economical vehicle that can last for 150,000 miles in the hands of a complete dork who always forgets to get the oil changed and couldn’t change a tire to save his life? I’d say they’re doing a great job so far.

If your comparison is to a P-38, why don’t you find out what a P-38 cost in adjusted dollars and see how many families would fork out that kind of dough for a vehicle? You can deduct the cost of the weapons. I’m betting a P-51 Mustang cost a few bucks more than a Ford Mustang. Family cars do not have to shoot down Bf-109’s, though of course fighter planes aren’t nearly as good for backseat necking.

I cannot imagine how you would improve on my Buick Regal to make it a superior vehicle without jacking the price through the roof. It’s remarkably trouble-free, fantastically comfortable, fast, fuel-efficient, and hauls more stuff than I ever need to haul. I even have a CD player in it. What’s to fix?

cars purchased by car rental companies get added to GDP. cars purchased by consumers get added to GDP. the rental cars get depreciated and subtracted from GDP to compute NDP. the depreciation of cars purchased by consumers, even tho there are many more, does not get subtracted. how come?
grammar school algebra.

The problem you have isn’t with people failing algebra. The problem you have is with what’s being measured. I am confident most economists can solve algebra problems. My $1000 bet stands.

As to your point that GDP is flawed - well, DUH. I hate to break this to you, but no one number is going to tell you everything you want to know about an economy, and no economist on Earth is stupid enough to say it will. Incompleteness-as-proof-of-defect is a bad argument, dal. GDP is commonly used simply because it’s a relatively quick, easy number to throw around. Come on, economists don’t actually think it exactly measures every bit of wealth in a country.

If you think NDP is the perfect metric, you’re wrong. You just can’t communicate that amount of info in one number.

[RickJay]

economist (complete with advanced degrees) and if you provide some high school algebra problem I shall take my best stab at it.

[HIJACK!]
How about a word problem?

Tonight’s meeting of the Socialist Workers International, featuring keynote speaker Pro L. Tariat and his speech “The Dual Value World, Or Maybe There’s Three Values, Or Four, You Know, Whatever Works For You Guys” needs you to do the marketing by posting posters around the campus (on hemp paper, of course!)

Admission to tonight’s meeting is $4, because everyone has to contribute to the worker’s paradise, dude. The number of attendees can be expected to be a=50+p+(4p)^0.7 where A is Attendance, P is the number of Posters you put up, and M is the amount of Money your parents send you to go to university while you spout Marxist stuff, but that’s not in the equation 'cause you don’t like to talk about it.

1. If posters cost $7.50 each, what the the optimum number to put up?

2. Solve for poster price at $7.00 and $8.00. At what price would it be worth not posting any posters at all?

3. Does the optimum number change if $15 must be diverted from the proceeds to buy “The Battle of Los Angeles” by RATM so you have some bitchin’ music at your rally?

4. Does this political stuff, like, TOTALLY impress the chicks? Explain, using specific examples. (<1500 words.)

[/HIJACK!]

[kabbes]

As others have tried to point out dal, one of the first things drummed into you about single figure indices such as GDP, NDP or NNP (why not include things like rental income from abroad?) is that they are fundamentally flawed and that they should always be taken with a pinch of salt. No economist in any position of authority is going to base any decision purely on the fact that GDP growth was x%. There are a contiuum of statistics that get used, from GDP right up to attempting to consider as many variables as you can handle at once.

My degree is actually in mathematics; it’s postgraduate studies that I have been invloved in economics. I consider myself able to do grammar school algebra. At the risk of (a) losing all credibility by getting it wrong and (b) missing the wonderful tone of irony in RickJay’s post, I’d say (to the nearest poster) (1) 12, (2) 8, 20 and $13.10, (3) no and (4) like, totally dude. Chicks dig the vision.

regards,

pan

[dal_timgar]

so i’m still waiting for an EXPLANATION for why depreciation of automobiles purchased by consumers is ignored. i have never seen economist try to estimate it in any year. to the extent that you can’t do grammar school algebra with a variable you NEVER OBTAIN you are correct, but i am saying economist are MISTAKEN by ignoring it. find some web pages that contain the phrases:

  "depreciation of consumer goods"

or

“depreciation of durable consumer goods”

you will even notice that “net domestic product” doesn’t show up any where near as often as “gross domestic product.”
guess economists don’t want to pay much attention to depreciation.

you keep claiming to be right but you don’t come up with any EXPLANATION.

and if someone doesn’t like my senteces not starting with capital letters he can give me a D in english.

Dal ‘one-trick, off-topic’ Timgar

[RickJay]

*Originally posted by dal_timgar *
so i’m still waiting for an EXPLANATION for why depreciation of automobiles purchased by consumers is ignored.

Nobody’s ignoring it. I’m sure you can find those figures if you look around. It’s just not considered a terribly important thing to add up, since it’s fairly consistent.

Car depreciation doesn’t really change much relative to the total value of cars - they depreciate at more or less the same rate now as they did five years ago - so there’s no overwhelming need to bother. Simply put, dal, you’re the only one who’s worked up about it. If you want those numbers, figure it out yourself.

you will even notice that “net domestic product” doesn’t show up any where near as often as “gross domestic product.”
guess economists don’t want to pay much attention to depreciation.

This has been patiently explained several times. Gross domestic product calculates gross PRODUCT - e.g. what you produced. Car depreciation isn’t production. GDP is a shorthand way of estimating what’s produced, not the total amount of wealth in the country.

I don’t know why you’re so worked up about GDP, but you have to bear in mind it only measures one thing, production, in a given time frame. If you want to know the total domestic wealth accounting for depreciation, those figures do exist, but they aren’t in great demand because there isn’t much you can do with them. Or figure it out yourself.

I’m not sure how much more clearly it can be explained. GDP does not include depreciation for the same reason batting average does not include stolen bases. It’s a measurement of something else. You’re looking at the wrong number.

“Net domestic product” sounds interesting but if the only thing you’re adding on to GDP to get NDP is car depreciation, your NDP number won’t mean anything. (Actually, you should find a different term, because NDP has a different meaning in economics.) Lots more depreciates than cars, and some things appreciate.

[jmullaney]

So, Lemur – why not pay everyone equally? Doesn’t everyone who works add the same amount of value?

[kabbes]

I’m sure that we must be horribly OT by now but to paraphrase what we keep trying to tell you:

To what use do you intend to put your calculated NDP?

If you can answer this, perhaps we can tell you why it isn’t widespread.

regards,

pan

ps: No, I think I’ll give you an ‘F’

[kabbes]

Hmm - a simulpost with RickJay there. Dal - whatever answer you give to my question, RickJay’s post is the answer.

regards,

pan

[QuickSilver]

*Originally posted by jmullaney *
…why not pay everyone equally? Doesn’t everyone who works add the same amount of value?

I know you must be kidding. Right? (Please say your are…)

[jmullaney]

Nope. I don’t think there is a problem there. But this is Lemur’s utopia he’s putting together – I’m sure he’s got a plan.

[kesagiri]

*Originally posted by dal_timgar *
so i’m still waiting for an EXPLANATION for why depreciation of automobiles purchased by consumers is ignored.

Given your inability to use the proper grammer, your complaint about my algebra skills is pathetic.

Also, read my post…or any definition of GDP. Your complaint is irrelevant. Decpreciation of consumer goods is not a factor because GDP is the value of all final goods and services over a given time period. Hence when you buy that used rental car it does not get factored into GDP. It was counted in a previous years GDP. Ever hear of double counting. Sheesh, you really deserve a serious flame for your obtuse nature.

** find some web pages that contain the phrases:

“depreciation of consumer goods”

or

“depreciation of durable consumer goods”**

You wont find them because it is irrelevant.

[kesagiri]

I also can’t resist bashing Dal Timgar a bit more.

Depreciation only makes sense for consumer durables. Bread is a consumer good (I have some at home) and it isn’t going to depreciate because I am going to consumer it.

[QuickSilver]

jmullaney -

Please forgive me if I’m stating the obvious and/or if I’ve completely misundestood… but no, not everyone who works adds the same value. Perhaps this is untrue in the case of unskilled labour. After all, two guys digging a ditch add equal value if they are getting paid the same hourly wage and are shoveling the same amount of dirt in the same amount of elapsed time.

This is not the case in skilled labour where the work is not akin to assembly line work and requires assets such as higher education, experience and tallent.

[kesagiri]

I got the following from Duncan Foley’s review of one of John Roemer’s books. Foley is summarizing Marx’ theory of exploitation.

** It is not hard in this perspective to conclude that in private enterprise economies capitalists appropriate the surplus product. Marx saw in the theories of the classical economists, particularly Smith and Ricardo, the basis of an explanation of the mechanism through which capitalist exploitation works. The source of a surplus product in any society can be regarded as surplus labor time, labor the society can expend over and above what is necessary for its simple reproduction.**

This begs the question for me. If the laborers are expending more labor than they are being compensated for why work for the capitalist? Why not start up their own production process with an employee owned firm? Thus, they can reap all of the benefits of their labor.

Here is the rest of the quote for those who are interested.

** Smith and Ricardo had put forward a labor theory of value, which argued that the source of value was the expenditure of labor. Marx, putting this slightly differently, saw value as the form labor takes in commodity producing societies, that is societies where production is organized through the exchange of products. Value in this sense is ordinary money value: the social product in a commodity producing society appears as a mass of value, the gross national product, if you will. Marx regularly translates directly between money value and labor time, thus positing a direct quantitative connection between money and average social labor time in commodity production. (For a more complete development of this interpretation of Marx’s theory of value and exploitation, see Foley 1986 and 1982, Dumenil, 1980, and Lipietz, 1982).**

**
[/quote]

Roemer’s view of exploitation is also discussed. It is more rigorous than Marx’ and more interesting IMO

[Tretiak]

dal_tigmar,

In an ideal world, we would measure the stream of services consumed and call that National Product (of some sort). So a loaf of bread, consumed immediately would be $2.00 added to NP. A $20,000 car “consumed” over 10 years would add $2000 to National Product (using straight line) for ten years. However, this is quite difficult to do so instead everything is depreciated immediately. So my $20,000 car is added to GDP immediately and removed the next year (so to speak).

In aggregate this is not a problem as the stock of automobile service although it is not entirely accurate it provides a reasonable proxy for the service flow method if you assume a certain amount of homogeneity amongst the mix of automobiles. Oh, and here is the algebra…

10 people each have a car, each a differnt age: 1 year, 2 years… 10 years. After ten years they buy a new car.

The automobile services consumed for the year is $20,000 (10 times $2000) every year.

However since measuring service flows like this is difficult we will use the current method. Every year one of the ten buys a new car adding $20,000 to our National Product estimate. Since all the other folks had their autombiles depreciated immediately they add nothing. Violia, we have $20,000 added in both scenarios.

That is if I did the algebra right.