Not all humans have the same power in the market, so “some humans” versus the market makes sense. Not to mention that some humans can distort the market.
And do, Mr. Jobs.
The world is full of Communist and ex-Communist countries that were not industrialized before the Commies took over, and industrialized under their rule. The only one I can think of that was industrialized pre-Communism was East Germany. And maybe Poland.
Communism works economically. You can make a good case that it does not work nearly as well as capitalism, but work it does; it creates wealth, in the sense that any system or anything but the worker’s labor ever creates wealth.
Please. When the communists took over Russia, they hung the Kulaks and expropriated their farms. They executed or jailed hundreds of thousands of landowners and confiscated their land for huge collective farms.
Then they discovered that even something as simple as farming is not just about ‘collective action’ and labor, but about knowledge - knowledge locked in the heads of the people they killed. The result was mass famine, with tens of millions of people starving to death in prime farmland during years of weather conducive to high crop yields.
When they tried to apply ‘pure’ communism to industry, it was a disaster. As one Russian said, “They pretend to pay us, and we pretend to work.” There was no incentive to work when no one could advance their careers or their station in life through effort - everyone got paid the same regardless.
Stalin ‘fixed’ that problem as only he could - he simply began a program of identifying slackers and having them shot. That does wonders for motivation, but it also creates an attitude of keeping your head down, lest it be chopped off. So there was no innovation, no attempts at improving things. Another disaster.
After Stalin, reforms were made that created ways for people to get ahead. Of course, they had to play lip service to communism and the notion that everyone is equal, but like Animal Farm, some were more equal than others. So if you did your job well, you might become a foreman, and that would get you put on a different set of waiting lists for the goods you wanted, or open up apartments that weren’t available to you before you moved up in ‘rank’. If you made it to factory manager, you might get the use of a ZIL Limousine that belongs to the factory, and maybe a nice Dacha on the Black Sea.
Again, you just got to ‘use’ the limousine and Dacha, so on paper everyone’s still equal. But in practice you have some ‘workers’ being chauffered around in limos and vacationing on the Black Sea, while other workers lived in 600 sq ft concrete block apartments with their parents and children, sleeping four to a room. The effective wealth inequality was much higher than the mere income statistics indicated.
The incredible mismanagement of production was offset somewhat by the huge black markets that sprung up everywhere to provide what the people wanted and needed but which the government was incapable of providing. While technically illegal, the Soviets often turned a blind eye to them, recognizing that they were somewhat of a relief valve from the gross economic mismanagement of the government.
And even then, the Soviet economy dramatically under-performed the free economies. The Soviets also benefited from a program of stealing technology, as did the Chinese. That helped them keep up with the dynamic west a little more, but in the end the whole system collapsed under the weight of its own contradictions.
The same happened in China. Mao’s 5-year plans resulted in the deaths of millions and massive ecological destruction. China remained a backwards society until new reforms allowed for ‘enterprise zones’ and the opening up of China to capital markets and foreign investment.
But what really forced the change was the transition from an economy defined by large factories and heavy industry to one defined by information flows. Communism is utterly incompatible with an information economy.
Nevertheless, even the Stalinist model of totalitarian socialism does work – for limited purposes, i.e., heavy capital formation. In 1924 Stalin took control of a backward, agrarian country, marginally industrialized by the onset of WWI and that little industry devastated by that war and the Russian Civil War, and – by methods which were bloody, brutal, repressive, wasteful, but effective – by 1939 had turned it into an industrial power capable of going head-to-head with Hitler’s Germany; and Germany had always been at the leading edge of the Industrial Revolution. No way could that have happened, if Russia had had a free-market system during that period.
OTOH, central economic planning, lacking the constant corrective feedback of competitive market performance, is spectacularly inept at any kind of fine-tuning. Moreover, it does not encourage innovation very well. No state planner would ever have thought of something like the Sony Walkman, or the Pet Rock, or fabric softener. (Whether that is an argument for or against Stalinism is open to debate.)
From Economics Explained, by Robert Heilbroner and Lester Thurow:
This is the specific point against DeLong that I quoted.
This doesn’t apply to DeLong. If you want to criticize the very small minority of economists who have deluded themselves into believing that their “rationality” assumptions are literally true, then you’re not criticizing him. He would agree that a literal belief is misguided, and he wouldn’t be surprised that no one you know thinks that way. I’d guess you wouldn’t turn up empty-handed if you were looking for people who might agree with the basis of DeLong’s arguments, even if at first they didn’t understand the vocabulary.
If you want to make the general observation that reality need not conform to what people think, then that’s true. But I’d point out that some people have spent spent more time thinking about and discussing these issues. It’s a bit remarkable when a professional literally can’t think of a person who would disagree, even philosophically, with a point of methodology. Especially one who has read as widely as DeLong has.
The Bangladeshis, the Vietnamese, and the Chinese were working non-minimum wage, high health-risk, uninsured, barely subsistence jobs before they were ever connected to world markets. Under Mao, tens of millions of Chinese starved to death under their communist system, as a direct result of that communist system. Now international companies have a chance to move in, and they can hire workers by offering relatively low wages because the situation was so godawful when they got there. The entire reason why the Chinese countryside is emptying out, and so many Chinese cities are becoming population megacenters, is that the opportunities from those jobs are considered so much better than the subsistence-level farming that they were formerly doing.
The Chinese have become richer participating in global markets.
The Vietnamese have become richer participating in global markets.
The Bangladeshis have become richer participating in global markets.
No other economic system in the history of the world has been able to accomplish this sort of trend so quickly. Your cites, such as they are, are all about the poor people and how terrible it is that they’re poor. Of course, they are. But these are the very same people who are pulling themselves out of poverty with international trade. You’re making big noises to signal to the world their suffering, while showing no apparent interest in the current trend of how they’re actually doing.
The trend is up.
This is like a mirror of the fetishism of commodities that Marx complained about. You can claim that it’s the logic of an individual business that they want cheaper labor. That would be completely true. But the logic of the individual is not the logic of the system. In order to lure sufficient people in to make a project worthwhile, they generally have to pay more – often twice as much – as the previous local market rate. The increased demand for labor improves conditions on the farms as well, as fewer farm workers are left competing for those jobs. The increased population in the cities requires more city services, which again creates new and better jobs. This is the “logic” that we’ve seen played out time and time again. It does not match the logic of any individual’s interest. The very productivity gains spurred by foreign investment are what drives up wages.
There has never been a flick of a switch that magically created developed-world conditions overnight. It has always been, in literally every case we’ve seen, a gradual step-by-step approach as slightly better jobs are created, which slightly shifts the population, which creates opportunities for slight improvements in lifestyle, which again leads to slightly better jobs. Shifts on the margin. Compound interest adds up over time. We look at the 10% wage growth that China was sustaining until just recently, and that was literally unprecedented for as long a period as they managed it. 10% is record-breaking. Earning 2 dollars a day this year, and 2.20 a day next year, and 2.42 the year after, and 2.67 the year after, is an astonishing growth rate if it can be sustained.
There are two comparisons we can make here. You prefer the comparison between developed-world wages and their wages. But no magic switch. The more relevant comparison is between the system they had before and the one that has created the current trend. The trend shows where they’re going. It’s up. Even five percent growth would manage to close the gap between the poorest countries and the wealth of the US if it could be sustained long enough.
Forty million starved Chinese might not agree, if we could ask them. The Soviets murdered sixty million of their own.
If you think that “worked” economically, then you have a very different idea from me about what economic power is supposed to accomplish. Industrialization from militarization is good when you’re fighting Nazis, but it doesn’t mean much for people’s livelihoods when collectivization and industrialization sputters and dies along other important dimensions of production, most tragically agriculture.
Quibble: I thought DeLong was engaging in rhetoric. I’ve probably encountered people who at least believe that they think that way. I suspect DeLong has as well.
To be fair Brainglutton was responding to, “And yet societies that adopt Marxist principles for their economic organization find themselves poor and backwards.” And that statement is highly misleading. Soviet communism can and did secure economic growth, largely via forced savings and high capital accumulation. Growth was sufficiently rapid so as to persuade lots of third worlders and a few first worlders that they had discovered a good developmental path. By about 1980 we had the means to compare third world countries following the Soviet model and those following the export oriented model. The latter was superior, but that’s not to say that the former didn’t deliver GDP growth. It did. During the 1920s - 1950s Russia did in fact industrialize, while other third world nations operating under capitalism looked on with envy.
As for the murderous excesses of Stalin and the famine under Mao… well that’s certainly a downside to put it mildly. But I assume Brainglutton was correcting the record, not advocating a dictatorship of the proletariat.
Agree on all other matters in your post.
To be fair to BG, I’m sure he meant “worked” for the guys at the top. They did quite well at securing resources for themselves.
Well shoot, the five year plans would have worked great.
If it weren’t for 50 years of unexpected bad weather.
[shrug] That’s true in every system. I meant what I posted in post #264 and what Measure for Measure posted in post #267.
Actually, no. NO ONE lives better than the top government officials in Communist countries. That’s not the case in countries like the US. Obama is pretty far down on the list of rich people in the US, and he doesn’t use government authority to secure resources unavailable to everyone else in the country. And he isn’t “president for life”. That’s the funny thing about communism-- it can only exist in a one party state. People would never choose that system for any length of time.
Pretty much all of Eastern Europe. Really, the only countries that did major industrialization under Communism were the Soviet Union, China, Cuba, and Vietnam. And Vietnam and China didn’t really successfully industrialize until they moved away from central planning towards a kind of mixed market system.
I had understood that the top apparatchiks had a standard of living much lower than that of an American or European CEO. So, cite?
Sure, US Presidents are paid squat, both by US corporate standards and by the standards of the heads of states of other countries. But that’s neither here nor there.
How is it not a feature of capitalism? That’s the economic system we have–a global and totalizing system today, as you rightly say. There are certainly still countries which practice, within their borders, something different from what, say, the U.S. practices–but the world system is clearly capitalist.
And what happens when all the countries are “developed”? Who makes the t-shirts then? This brings us back the argument Sam Stone offered in the begining: unlimited, perpetual growth. I suppose it can work. We may have, in the future, exceptionally cheap fusion power and replicators–maybe then we can grow eternally. But that wouldn’t be capitalism anymore, either.
Again, no, I don’t. It’s the same false claim that alternatives need to be sketched out in detail before you can point your finger at what’s going and say: this is wrong. People in Malaysia get paid crap to make t-shirts because they are the cheapest labor force available, and skimping on labor is the constitutive way of capital to obtain surplus value. And capitalism requires capitalists to obtain surplus value. If Malaysians trade themselves up from $3 t-shirts, as well they might, somebody else is going to have to produce those t-shirts. But there’s no way to eternally move your production to cheaper and cheaper places, or to hire cheaper and cheaper workers, unless you systematically prevent their rise, OR you accept the periodic crashes that we’ve all become so familiar with. That’s the inherent logic of the capitalist system of accumulation.
Huh?! He says “Now I have never found anybody who thinks this way. … Nobody I talk to…”. I say: “That’s a ridiculous begining for any argument.” I’m certainly also critizing economist who believe in literal rationality, but here I’m just saying, without any prejudice to De Long, that it’s a stupid rhetorical point to make.
When? In 1700, when most of them were subsistence farmers, probably obligated to feudal overlords? You’re quite right that for most people, capitalism is a step up from feudalism. But I don’t suppose your argument is: yes, things could be better for them yet (if capitalist economies did not require companies to seek to pay the absolute minimum that they can get away with, for example), but at least they’re not being owned by some baron or other?
It’s perpetually fascinating to me that Mao and Stalin can come up everytime somebody says, listen, capitalism might not be the be-all and end-all of economic systems, but the depredations of capitalism are handwaived away (imperialism? oh, that’s politics! it’s nothing to do with economic systems; colonialism? ditto!; war? no, no, that’s not the system, that’s something else entirely; famineskilling millions a century before Stalin was even born? Hardly capitalism’s fault, eh?). Now, you might not be meaning to say that: but if you are willing to accept that capitalism kills just as easily as Communism, then please refrain from bringing up Stalin and Mao as though they stood easily for the necessary consequences of Communism–or worse, as thought they stood for socialism at large.
Richer as measured how? It’s a serious question.
Well, I’m one of those people who’d much rather say it’s terrible that they are poor than to say, I’m absolutely sure it’ll get well soon. That’s certainly right.
Why are those businesses in Bangladesh or China or Myanmar or Malaysia? Not because they aim to improve working conditions, but because labor there, whatever its local conditions, is cheaper than labor in the U.S. Thisis the way the system works. And the problem, of course, is that the world’s finite.
While in the U.S., wage growth has all but ceased. What money, then, will buy all the goods a growing economy is producing? Nobody’s. Leading us into the next crash. It doesn’t matter whether it’s THIS particular mechanism or some other of the usual market failures that will, but it will happen.
You say “more relevant,” I say “apples and oranges”. You say “it’s going up,” I say “foreever and ever?” How would a world look in which the wealth gap between poor and rich countries is closed? How would capitalism function? Who would work the factories? And how could we afford the prices at our newly-rich factory workers will need demand for their labor? Or won’t they be rich? Why wouldn’t they be? What standard of living will they reach? Why will anybody want to work in a factory anymore? You’re running up against **exactly **the same questions as socialism does, only you’re pretending you don’t have to, and that capitalism will go on, and on, and on.
Please spare me the pointless strawmen that I’ve whacked down over and over in this thread. It’s doing your credit a severe disservice.
We don’t need details. A broad outline would be fine, too.
While this is literally true, I am confident Barack Obama is never going to worry about money again as long as he lives. He’ll command fees for speaking engagements that exceed the annual salaries of most of his countrymen.
Beyond a certain level of wealth there really isn’t any meaningful difference in terms of how someone can “live better.” You don’t live any better on a billion dollars than you do on a quarter of a billion. Barack Obama will in any sense that matters be about as materially wealthy as a human being can be.
[QUOTE=Enterprise]
When? In 1700, when most of them were subsistence farmers, probably obligated to feudal overlords? You’re quite right that for most people, capitalism is a step up from feudalism.
[/QUOTE]
In the case of the Vietnamese and Chinese, it is quite specifically a step up from communism and, for the Vietnamese, the colonialism that preceded it. Vietnam has seen incomes rise and absolute poverty decline as a result of economic reforms aimed towards more liberalism, free markets, and international trade. China’s story is essentially the same.
Bangladesh, of course, was part of Pakistan until 1971, so for them it’s a step up from being an ill-treated part of a ferociously repressive state.
You don’t have to go back centuries to feudal times. The improvement in people’s lot in life in those countries is within the living memory of people now, and is directly connected to international trade and allowing the markets some freedom to work on their own.
[QUOTE=Enterprise]
Well, I’m one of those people who’d much rather say it’s terrible that they are poor than to say, I’m absolutely sure it’ll get well soon. That’s certainly right.
[/QUOTE]
- Who said it’ll get better “soon”?
- If we eliminate the “soon” bit, why are these statements contradictory?
Of course it’s terrible that people are poor. It is also apparently true that liberalization of economic policy, free markets, international trade and the like reduce poverty. It’s very bad that people are poor, so why not try the best possible solution for fixing that?
People in Vietnam were, until the late 1980s, about as poor as people can be. Now they’re not. They’re still very poor, and the country, being a mix of Communist dictatorship and control and free markets, still has a lot of structural problems with its economy. But being goggled-eyed at the fact they aren’t living the high life is like being surprised people in England in 1830 weren’t as wealthy as they are now. As Hellestal points out, true economic growth is a succession of small, marginal improvements that happen by the millions, over and over again.
There is no shortcut to solving a severe problem.
[QUOTE=RickJay]
While this is literally true, I am confident Barack Obama is never going to worry about money again as long as he lives. He’ll command fees for speaking engagements that exceed the annual salaries of most of his countrymen.
Beyond a certain level of wealth there really isn’t any meaningful difference in terms of how someone can “live better.” You don’t live any better on a billion dollars than you do on a quarter of a billion. Barack Obama will in any sense that matters be about as materially wealthy as a human being can be.
[/QUOTE]
This is, of course, a more recent phenomena and wasn’t always the case even in living memory for all presidents (Truman is the best recent example I can think of). There have been several presidents who left the WH nearly destitute, though today that doesn’t seem likely to happen.
While I think you are right that Obama will be pretty well off, he’s not going to be anywhere near the same league as, say, Bill Gates or even most Hollywood A list stars/or many top shelf professional sports stars, so I think overall John’s point stands. There is a difference between someone who has a billion (or even a quarter of a billion) dollars in capital and someone who MAKES a few million a year (which is probably what we are talking about with Obama…maybe even 10’s of million a year in speaking engagements and book deals). It’s more than you or I make, but it’s not in the same league as the truly rich, IMHO anyway. YMMV. 
I’m not certain Obama will actually be less wealthy than an actor or a pro sports stars. Athletes and actor get gargantuan contracts but their window of income is usually very limited - star athletes are done between age 30-40 - whereas Barack Obama can give speeches for huge sums until he’s too old to stand at the podium.
I am not suggesting Obama will personally be in possession of as much money as Bill Gates, but pointing out that saying this makes him poorer than the top dog of a dictatorship is kind of silly. Obama will not be, in any sensible way, worse off than Robert Mugabe, Vladimir Putin or any other dictator. Beyond a certain level of material wealth, the marginal utility of additional dollars begins to approach zero. That’s why Bill Gates is happy to give away billions. The money doesn’t serve him any purpose anymore except to give him the satisfaction of giving it to people to whom it does make a difference.
Barack Obama is already a millionaire, after all, and stands to make money at a rate that means he can enjoy material wealth to about the limit of a human’s ability to be materially wealthy. In no meaningful way will he be less wealthy than anyone else.
When Obama doesn’t have to give speeches or write books to make his money he will have arrived at that point. 
I understand what you are saying, and to some degree I agree, but I don’t think that, at least initially, Obama will be at that level. Yes, he is technically a millionaire…but then, so are a lot of people (I project I’ll be one in less than 20 years, probably less than 15). And certainly once he leaves the White House he will start making some serious money, and eventually that will translate into a lot of wealth (assuming he uses that money wisely…something I have no doubt he will). But it’s not going to be an instant thing, more a progression, since he won’t have that sort of wealth right out of the gate (unlike the top Communist party officials who did…which is part of John’s point I think). I also think the difference between what Obama is likely to accumulate in, say, then next decade (say, $50 million in assets) and what someone really wealthy has (over a $100 million in same) is more of a difference than you think it is. Certainly, once you get to a certain level the differences become more and more marginal, and really boil down to how you want to give it away and to whom, or what exotic hobbies or collections you want to have.
At any rate, it’s only been relatively recently that Presidents of the US were generally assured of having a good living (or any money at all) after their presidency…this has certainly not always been the case.