Jump to content
House Price Crash Forum
wonderpup

Was Marx Right About Capitalism?

Recommended Posts

Interesting take on Marx's analysis of the inherent contradictions in the free market system;

Here is a real-world example. When I first visited China in 2000, there was a massive glut of television production: the capacity to manufacture TVs had expanded far beyond China's domestic demand for TVs. To wring out a profit in a highly competitive industry, manufacturers had to ramp up production while lowering the unit cost of labor and the unit cost of each TV to undercut the competition.

If an assembly line of 100 workers could produce 1,000 TVs a day, the only way to lower the price of the TV is to either lower the wages paid to the workers or invest capital in machinery that enables the same 100 workers to produce 2,000 TVs a day.

At 2,000 TVs a day, the per unit labor cost falls in half. For example, at 1,000 TVs a day, the labor cost per TV might be $40. At 2,000 TVs per day assembled by the same 100 workers, the labor cost per unit drops to $20.

The key point here is that labor's share of the total production cost declines. If workers had taken home $1 million in pay to make 100,000 TVs at the old production rate of 1,000 TVs/day, they now take home $500,000 to make 100,000 TVs at the new production rate.

In other words, labor's share of value creation constantly declines as mechanization boosts productivity. Marx described the impact of another factor: oversupply of labor. As rural agricultural workers flooded into cities for jobs that paid cash, there was an abundance of factory labor. Competition for jobs pushes wages lower, so workers faced a double-whammy: their share of production relentlessly declined as productivity rose, and the pressure on wages constantly rose as per unit labor costs declined.

The competition to outproduce industrial rivals with cheaper per-unit production costs and labor's competition for jobs both generate a structural crisis in capitalism: as production of goods rises, both the cost per unit and the number of workers earning enough to buy the goods declines.

Lowering the cost of the TV no longer sells units if there are not enough workers with jobs to buy them.

Thus we get the paradox that even as our capacity to create abundance increases, the number of people able to access that abundence declines- leading to a self reinforcing dynamic in which competitive forces drive producers to seek to eliminate workers in order to capture a share of their dwindling aggregate wages.

Combine this attrition of incomes with the proliferation of rent seekers in the financial sector:

Finance capital also plays a role in the emerging crisis of capitalism, as finance capital (aided immensely by the Federal Reserve /central banks and the Federal government /central states) uses its access to nearly-free credit to buy assets that generate rents without having to produce any goods or services.

This further squeezes those with jobs, as rentier skimming transfers more of their dwindling earned income to cartels. Since the State acts as the bagman for cartels, rising taxes are simply another form of rentier skimming.

You see the crisis brewing: earned income is under pressure and labor is in structural decline. The only way the system can maintain demand for goods and services is either cash transfers from the Central State or loans extended to those with enough earned income to service more debt.

http://www.zerohedge.com/news/2013-07-12/guest-post-what-marx-got-right

So squeezed on one side by technology and on the other by rent extraction on a grand scale Labour increasingly fails to fulfill it's role as the source of demand- which is also the source of all value in the economy.

The 1% claim to be the source of all economic value- they are not- value only comes into being if someone somewhere has both the desire for a thing and the means to pay for that thing.

A civilisation of robots could represent the ultimate in productive efficiency- imagine a world where only machines existed, each labouring away ceaselessly to replace itself and it's fellows as they wore out- every aspect of that mechanised world working almost literally like clockwork in an endless repeating cycle of production and renewal- imagine an entire planet that operated in effect like one gigantic machine dedicated to the single goal of perpetuating itself into the future.

But the question is- does this machine planet create any value? I would argue that it does not. The word that springs to mind as I describe that machine civilisation is 'pointless'- what is it all for?

The problem being that our machine planet lacks an essential ingredient required to allow value to arise- it has no 'end user' it's productivity serves no purpose because there is no one there to endow that productivity with meaning and purpose- no external needs are met, nor are any desires fulfilled.

So the paradox is that the more we succeed in eliminating ourselves from the productive process, both as producers and by extension consumers- the less and less real value that process will create. So the idea that ever more productivity and efficiency will lead inevitably to a higher and higher standard of living for the ordinary man and woman is false- and the reality of this trend is already visible in the growing disconnect between the productivity of the labour force and the share of wealth that labour force accrues- it seems that even as we become more productive our share of the pie is shrinking.

And this should not surprise anyone who gives it moment's thought- after all, if the need for a commodity goes down due to excess supply, then it's market value will decline- and since we are that commodity and making ourselves more productive in aggregate makes us individually less valuable then inevitably our market value- the value of our labour- will decline. ( Unless we have very rare skills or talents that cannot be easily duplicated- but that is not true of most people)

What Marx correctly identified is that for all it's incredible adaptability the one thing that Capitalism can not adapt to is the conflict between the drive to eliminate labour as an input with the need to preserve incomes as the only source of value.

Increasing productivity does not create value- it destroys it- the more we can produce using less people to produce it, the less tradeable value we will create- and the current tsunami of financialisation could be viewed as a response to this dilemma- it's as if the erosion of the ability to generate tradeable value in the real world has triggered an immune response whereby the financial system goes into overdrive in an attempt to compensate- so even as the trade value of real world goods and services decline this lost value is replaced by the pseudo value of the 'financial instrument'.

Bankers as antibodies? :lol:

Edited by wonderpup

Share this post


Link to post
Share on other sites

Interesting take on Marx's analysis of the inherent contradictions in the free market system;

We have neither a free market system nor a capitalist society because the medium of exchange (money) is controlled by a minority. As a result this minority can manipulate the entire economy. By giving private banks the ability to create debt they are able to decide who can have access to money and thus which sectors of the economy thrive and which wither.

Look at the UK. If you are a thriving self-employed businessman it can be extremely difficult to get even a short term loan yet a young couple with no assets (and thanks to the governments new lending scheme a minimum deposit) can get a mortgage for up to 5x joint income. The banks decide who get money, and therefore who has power.

When Marx was writing money and wealth were physical assets and he wanted these distributed and controlled by the people. Today the government could confiscate every house, precious metal, acre of land and enslave the entire populace but with a private banking system and with the effects of interest they would lose it all.

Share this post


Link to post
Share on other sites

Increasing productivity does not create value- it destroys it- the more we can produce using less people to produce it, the less tradeable value we will create-

The only possible solution in the long run is less people.

The liquidation is begun.

Share this post


Link to post
Share on other sites

The only possible solution in the long run is less people.

The liquidation is begun.

I agree assuming you mean one specific class of people: parasites (rentiers and banksters)

The only possible solution is less parasites.

The liquidation has begun. :ph34r:

Share this post


Link to post
Share on other sites
Here is a real-world example. When I first visited China in 2000, there was a massive glut of television production: the capacity to manufacture TVs had expanded far beyond China's domestic demand for TVs. To wring out a profit in a highly competitive industry, manufacturers had to ramp up production while lowering the unit cost of labor and the unit cost of each TV to undercut the competition.

The author almost answer's his own question in the first paragraph, over production (of television sets), more than likely caused by too much cheap credit (much like the glut of properties built in Ireland and Spain).

The rest of the article is just a list of the symptoms of over production.

Thus we get the paradox that even as our capacity to create abundance increases, the number of people able to access that abundence declines- leading to a self reinforcing dynamic in which competitive forces drive producers to seek to eliminate workers in order to capture a share of their dwindling aggregate wages.

Creating warehouses full of unwanted television sets is not abundance, it's an exercise in using up savings and scarce resources doing something stupid, and imposes a large opportunity cost (the greater the over production, the worse this cost becomes).

As an aside Marx did write an interesting critique of capitalism, unfortunately it's also a critique of human nature so there's not much we can do about it, such that brain washing and bullying the populace to become "Socialist Man and Woman" is an exercise in brutality, and a total waste of time (an abridged critique of Marx in one sentence).

Edited by GradualCringe

Share this post


Link to post
Share on other sites

As an aside Marx did write an interesting critique of capitalism, unfortunately it's also a critique of human nature so there's not much we can do about it, such that brain washing and bullying the populace to become "Socialist Man and Woman" is an exercise in brutality, and a total waste of time (an abridged critique of Marx in one sentence).

Marx's analysis of the problems of his times and their history had a lot of merit. Unlike the OP here, who sinks rapidly into deep nonsense after a promising thread title.

Unfortunately his solutions were classic Utopian, and had not a hope in hell of working in the real world. Indeed, quite unusually amongst historical figures in whose names atrocities have been committed (e.g. Christ, Keynes), Marx lived long enough to say that "if these people are Marxists then I most certainly am not".

Share this post


Link to post
Share on other sites

Socialism/Communism can only work when sufficient numbers realise that the alternative only works for <1% of the population. In the current state too many people are under the illusion that the alternative works for them. It is the job of politicians who serve the <1% to keep that illusion going. They seem to be doing a pretty good job.

Share this post


Link to post
Share on other sites
Guest eight

As an aside Marx did write an interesting critique of capitalism, unfortunately it's also a critique of human nature so there's not much we can do about it, such that brain washing and bullying the populace to become "Socialist Man and Woman" is an exercise in brutality, and a total waste of time (an abridged critique of Marx in one sentence).

The problem is that when you bully the populace to become "capitalist man and woman" they actually like it, and think it's for their own good. It's considered inherently virtuous and noble.

Share this post


Link to post
Share on other sites

Socialism/Communism can only work when sufficient numbers realise that the alternative only works for <1% of the population. In the current state too many people are under the illusion that the alternative works for them. It is the job of politicians who serve the <1% to keep that illusion going. They seem to be doing a pretty good job.

Capitalism only works for the 1%? So you don't having clean running water? Electricity? Food? Clothing? Shelter?

Share this post


Link to post
Share on other sites

Interesting take on Marx's analysis of the inherent contradictions in the free market system;

Thus we get the paradox that even as our capacity to create abundance increases, the number of people able to access that abundence declines- leading to a self reinforcing dynamic in which competitive forces drive producers to seek to eliminate workers in order to capture a share of their dwindling aggregate wages.

Combine this attrition of incomes with the proliferation of rent seekers in the financial sector:

http://www.zerohedge.com/news/2013-07-12/guest-post-what-marx-got-right

So squeezed on one side by technology and on the other by rent extraction on a grand scale Labour increasingly fails to fulfill it's role as the source of demand- which is also the source of all value in the economy.

The 1% claim to be the source of all economic value- they are not- value only comes into being if someone somewhere has both the desire for a thing and the means to pay for that thing.

A civilisation of robots could represent the ultimate in productive efficiency- imagine a world where only machines existed, each labouring away ceaselessly to replace itself and it's fellows as they wore out- every aspect of that mechanised world working almost literally like clockwork in an endless repeating cycle of production and renewal- imagine an entire planet that operated in effect like one gigantic machine dedicated to the single goal of perpetuating itself into the future.

But the question is- does this machine planet create any value? I would argue that it does not. The word that springs to mind as I describe that machine civilisation is 'pointless'- what is it all for?

The problem being that our machine planet lacks an essential ingredient required to allow value to arise- it has no 'end user' it's productivity serves no purpose because there is no one there to endow that productivity with meaning and purpose- no external needs are met, nor are any desires fulfilled.

So the paradox is that the more we succeed in eliminating ourselves from the productive process, both as producers and by extension consumers- the less and less real value that process will create. So the idea that ever more productivity and efficiency will lead inevitably to a higher and higher standard of living for the ordinary man and woman is false- and the reality of this trend is already visible in the growing disconnect between the productivity of the labour force and the share of wealth that labour force accrues- it seems that even as we become more productive our share of the pie is shrinking.

And this should not surprise anyone who gives it moment's thought- after all, if the need for a commodity goes down due to excess supply, then it's market value will decline- and since we are that commodity and making ourselves more productive in aggregate makes us individually less valuable then inevitably our market value- the value of our labour- will decline. ( Unless we have very rare skills or talents that cannot be easily duplicated- but that is not true of most people)

What Marx correctly identified is that for all it's incredible adaptability the one thing that Capitalism can not adapt to is the conflict between the drive to eliminate labour as an input with the need to preserve incomes as the only source of value.

Increasing productivity does not create value- it destroys it- the more we can produce using less people to produce it, the less tradeable value we will create- and the current tsunami of financialisation could be viewed as a response to this dilemma- it's as if the erosion of the ability to generate tradeable value in the real world has triggered an immune response whereby the financial system goes into overdrive in an attempt to compensate- so even as the trade value of real world goods and services decline this lost value is replaced by the pseudo value of the 'financial instrument'.

Bankers as antibodies? :lol:

and a couple of things that marx got very,very wrong.

1)he planned to destroy the capitalist system by means of deceit,traechery and every nefarious deed....actually to "create" the huge disparities between the haves and have nots, in order to provoke a "reverse-psychology" counter-attack on capitalism.

2) work for the sake of work is not a good thing.......the union of automobile red-flag wavers are still extremely upset at losing their jobs, but with the benefit of hindsight....hands up who thinks that this was actually quite beneficial?

what we have had for the past 30-40 years is successive governments cooking the books with "make-work for the sake of work" projects, but witjout any tangible benefit to socety as a whole.

I would argue that it is this system that must be destroyed in order for us to flourish....and if that means clearing out the dead wood in all levels of government,banking,politics and yes, industry too, then overall it is good and it is necessary.

if the apple trees in the orchard have developed a spot of blight do you?

i) smother the plants in baby-bio and wait till next year?

ii) engage in some pruning?

Edited by oracle

Share this post


Link to post
Share on other sites

Capitalism only works for the 1%? So you don't having clean running water? Electricity? Food? Clothing? Shelter?

The availability and affordability of those things is unrelated to 21st century capitalism as we are soon to discover.

Share this post


Link to post
Share on other sites
Guest eight

The availability and affordability of those things is unrelated to 21st century capitalism as we are soon to discover.

In the case of clean running water a lot of the donkeywork was done by municipal corporations.

Share this post


Link to post
Share on other sites

and a couple of things that marx got very,very wrong.

1)he planned to destroy the capitalist system by means of deceit,traechery and every nefarious deed....actually to "create" the huge disparities between the haves and have nots, in order to provoke a "reverse-psychology" counter-attack on capitalism.

2) work for the sake of work is not a good thing.......the union of automobile red-flag wavers are still extremely upset at losing their jobs,

but with the benefit of hindsight....hands up who thinks that this was actually quite beneficial?

Did he?

My understanding is that Marx was mostly a critic of capitalism and fairly light on actual proposals, and so much of the communist revolutionary stuff was due to other people.

what we have had for the past 30-40 years is successive governments cooking the books with "make-work for the sake of work" projects, but witjout any tangible benefit to socety as a whole.

I would argue that it is this system that must be destroyed in order for us to flourish....and if that means clearing out the dead wood in all levels of government,banking,politics and yes, industry too, then overall it is good and it is necessary.

if the apple trees in the orchard have developed a spot of blight do you?

i) smother the plants in baby-bio and wait till next year?

ii) engage in some pruning?

'What we have' is capitalism. Capitalism is rent-seeking, massive state control, regulatory capture and all the rest.

From what I know of Marx, he was basically right. Solutions proposed in his name, obviously not.

Share this post


Link to post
Share on other sites

Did he?

My understanding is that Marx was mostly a critic of capitalism and fairly light on actual proposals, and so much of the communist revolutionary stuff was due to other people.

'What we have' is capitalism. Capitalism is rent-seeking, massive state control, regulatory capture and all the rest.

From what I know of Marx, he was basically right. Solutions proposed in his name, obviously not.

no,that's corporatism.

capitalism is the freedom to produce what people need/desire, but also the responsibility to accept that occasionally people are going to design better stuff for cheaper, and the old business model needs to adapt or die.

corporatism seeks to monopolise everything and then pull up the drawbridge by locking in armies of rules and beaurocrats to stifle the new upstarts.

it harbours the seed of its own destruction too..as it cannot accept that it's position as alpha male of the pack can and will be challenged and replaced...like the old lion it will fight and fight until it is given an ass-kicking by a younger more virile model

Share this post


Link to post
Share on other sites

Capitalism only works for the 1%? So you don't having clean running water? Electricity? Food? Clothing? Shelter?

I do have all of these things as long as I serve a capitalist master who pays me less than I earn so to enrich himself.

I am not a marxist. In fact I'm currently financially independent due to some poor young couple borrowing twice the amount I payed for a house in order to buy the house from me.

What a flocked up system.

Share this post


Link to post
Share on other sites

Interesting take on Marx's analysis of the inherent contradictions in the free market system;

Thus we get the paradox that even as our capacity to create abundance increases, the number of people able to access that abundence declines- leading to a self reinforcing dynamic in which competitive forces drive producers to seek to eliminate workers in order to capture a share of their dwindling aggregate wages.

Not at all. it increases the efficiency of the economy by producing 1000 tv's per day at a price reduction of $20. the value of wages of everyone buying TV's goes up by $7.2 million per year.

what you keep missing the point is that driving down prices increases the value of the wages for the people buying the stuff which is the most important thing.

take the often misunderstood example of henry ford with him paying his workers more:

Car production in the year before the pay rise was 170,000, in the year of it 202,000. The total labour establishment was only 14,000 anyway. Even if all of his workers bought a car every year it wasn’t going to make any but a marginal difference to the sales of the firm.

We can go further too. As we’ve seen the rise in the daily wage was from $2.25 to $5 (including the bonuses etc). Say 240 working days in the year and 14,000 workers and we get a rise in the pay bill of $9 1/4 million over the year. A Model T cost between $550 and $450 (depends on which year we’re talking about). 14,000 cars sold at that price gives us $7 3/4 million to $6 1/4 million in income to the company.

It should be obvious that paying the workforce an extra $9 million so that they can then buy $7 million’s worth of company production just isn’t a way to increase your profits. It’s a great way to increase your losses though.

note also the increase in income to ford would be $7million in turnover, not profit, whilst the increase in wages would cost him $9million so he would be losing massive amounts of money if he was relying on his workers to buy his products, and that’s even if every one of his workers bought one and bought one every single year...

Ford actually increased wages to reduce staff turnover and reduce labour costs because staff turnover at the time was very high and thus so was the cost of recruiting and training, loss of production. Also ford didn’t advocate paying his staff enough to buy his stuff. His aim was to pay more than his rivals so that his workers stayed with him, which is an early market-led principle about wages.

If ford worked on the principle of relying on paying his workers enough to buy his goods, he would be making a loss and go out of business.

ultimately saving consumers money increases the value of their wages, which you regularly gloss over.

Edited by mfp123

Share this post


Link to post
Share on other sites

no,that's corporatism.

capitalism is the freedom to produce what people need/desire, but also the responsibility to accept that occasionally people are going to design better stuff for cheaper, and the old business model needs to adapt or die...

What you describe has as much connection to real people in the real world as does the communist picture of happy workers striving to work together out of nothing more than than pure altruism.

You're a man sitting in a McDonalds looking up at the lovely picture of a massive juicy big-mac, and then looking down at an actual big mac, and then complaining that they didn't give you a real big mac.

Edited by (Blizzard)

Share this post


Link to post
Share on other sites

Marx, and the latter day banking socialists, overlook creative destruction. Where you don't look at one item being forever commoditized and marginalised, you instead look at brand new inventions destroying the old commodity and replacing it. When this happens new wider margins are created. GDP , economic output, so beloved of the usurers, may stay static with creative destruction but the economy and life improves. The usurer dismisses this because the usurer grows his profits by increasing lending and lending only increases in aggregate if output is growing ie.if gdp is growing.

Share this post


Link to post
Share on other sites

Socialism/Communism can only work when sufficient numbers realise that the alternative only works for <1% of the population. In the current state too many people are under the illusion that the alternative works for them. It is the job of politicians who serve the <1% to keep that illusion going. They seem to be doing a pretty good job.

And then what happen to the <1% of the 'socialist utopia'? You know... nice Commissioners who live in small huts and cycle so their countrymen can have more..

Edited by easy2012

Share this post


Link to post
Share on other sites

In the case of clean running water a lot of the donkeywork was done by municipal corporations.

No doubt funded by local and central tax payers and supported by the various plumbers, pipe manufacturers, copper miners etc.

The toaster project guy tried to understand the complexities of modern supply chain and it astonished him.

http://www.thetoasterproject.org/page2.htm

Share this post


Link to post
Share on other sites

Marx, and the latter day banking socialists, overlook creative destruction. Where you don't look at one item being forever commoditized and marginalised, you instead look at brand new inventions destroying the old commodity and replacing it. When this happens new wider margins are created. GDP , economic output, so beloved of the usurers, may stay static with creative destruction but the economy and life improves. The usurer dismisses this because the usurer grows his profits by increasing lending and lending only increases in aggregate if output is growing ie.if gdp is growing.

No capitalist gives the whispiest ****** about creative destruction. They care about making money.

Share this post


Link to post
Share on other sites

'What we have' is capitalism. Capitalism is rent-seeking, massive state control, regulatory capture and all the rest.

Capitalism does not require an over-large state, indeed for most of its existence there has been no such thing.

Post 1918 and especially post 1945 have been historical aberrations.

Share this post


Link to post
Share on other sites

No capitalist gives the whispiest ****** about creative destruction. They care about making money.

That's like saying a football player doesn't care about red cards he only wants to score goals.

No player wants the sanction, it's just part of the game.

Creative destruction removes inefficient competitors and as part of a natural free market is an immutable natural law.

This is yet another horse shite wonderpup thread where he discounts the entire sweep of human history because it doesn't fit his strange ideology.

there are of course enormous wealth imbalances, mostly due to state intervention (banking, land laws etc. ) .

But to live in a period of unparalleled material abundance and to look at the people who make all of it possible I.e. Genuine capitalists and squeal "hey I bought that guys stuff because I wanted it and now he has my money" takes a special kind of infantile argument.

Share this post


Link to post
Share on other sites

No capitalist gives the whispiest ****** about creative destruction. They care about making money.

You make the most money by innovation. That IS capitalism. Deploying capital to IMPROVE what exists and cash in on your entrepreneurship.

Share this post


Link to post
Share on other sites

Capitalism does not require an over-large state, indeed for most of its existence there has been no such thing.

Post 1918 and especially post 1945 have been historical aberrations.

Capitalism has only really existed for a few hundred years and in that time the state has exploded.

Capitalism requires a strong state in order to enforce the rules of a game that creates a large number of losers and a smaller number of winners.

However, that somewhat misses the point.

The idea that 'the state' is what happens in Westminster or Washington is just misdirection, and a convenient excuse to marginalise the tiny bit of democracy we have left. The government is the set of people who have significant power.

The accumulation of capitalism in a capitalist system leads to an accumulation of power.

In a free-market utopia, the time will come when those capitalists who have power will pay security companies to break unions, or impose restrictions on competitors, or whatever, simply because they can.

As I said, ideas about free markets and voluntary trade are as utopian as ideas about peaceful cooperatives and altruistic workers.

Edited by (Blizzard)

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 242 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.