Globalization by deepgirl187

Quote:
Originally posted by SignyM:
Quote:
The "innovation" of capitalism is the idea that money is a commodity that can be "bought, sold and traded" like any other material.
Er, I don't think so. That's the innovation of foreign exchange market... floating currencies... whatever you want to call it. Capitalism existed before floating currencies. The real innovation of capitalism is the exchange value of labor.

---------------------------------
Always look upstream.

Noooo

I don't mean foreign exchange, I'm talking about money as a commodity. For example when you buy/sell shares you are effectively buying and selling value (which is ultimately money,) you can buy and sell debts, money itself has become a commodity to be used in industry just like basic materials. By extention that also covers labour because in effect with commoditised money you also get commoditised labour.

Edited to add
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What Smith describes can be thought of as "proto-capitalism." Manufactories had existed in Europe for a long time, trademen and artisans had always hired workmen and apprentices so the idea that someone could buy labour and then sell the product of anothers work wasn't new. However, if for example you invested in a clockmaker, you became a partner in his business and the only way you could get your money out of the business would be if he bought you out. The idea that you could sell on that investment to someone else, that the wealth was a transferable instrument is the innovation that modern capitalism has that previous economic systems didn't. The idea that you can have secondary and speculative trade in that value is the root cause of a lot of the problems.

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Wednesday, October 17, 2007 8:53 AM

I believe in solving problems, not sharing them.

Okay, I understand. Basically, the ability to express everything as "exchange value".
And is indeed a root cause of a lot of problems.

---------------------------------
Always look upstream.

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Wednesday, October 17, 2007 10:07 AM

I believe in solving problems, not sharing them.

Now that we're past the guys in twirly mustaches and that you're feeling better (I hope) I'd like to try some more theoretical discussion. I'm not so terribly interested in what do you call something as in what's really happening. Let me give you a f'rinstance:

Production that is not- or cannot- be automatically turned around into consumption could be called "profit". It could also be called "savings". OR "accumulation". It's not so much an issue THAT it occurs but what is done with it afterwards.

---------------------------------
Always look upstream.

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Wednesday, October 17, 2007 10:31 AM

Quote:
Originally posted by SignyM:
Now that we're past the guys in twirly mustaches and that you're feeling better (I hope) I'd like to try some more theoretical discussion. I'm not so terribly interested in what do you call something as in what's really happening. Let me give you a f'rinstance:

Production that is not- or cannot- be automatically turned around into consumption could be called "profit". It could also be called "savings". OR "accumulation". It's not so much an issue THAT it occurs but what is done with it afterwards.
.

Ok to keep it simple

profit == income and/or investment
salary == income and/or investment
savings == investment.

Unless you keep money in a shoebox or in your matress this remains true. So the Siggy "Profit is EVIL because it removes value from the system" is rubbish. It was rubbish before and still is.

My advice to you is DONT simplify because every example where you do you mess things up.

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Wednesday, October 17, 2007 1:53 PM

I believe in solving problems, not sharing them.

Yes but- no.

It's true that money is never "lost", in the sense that it's always in "the system" somewhere. But there are two variables that aren't described by simply saying that money flows everywhere:

1) The rate of exchange. It makes a difference whether that dollar bill is exchanged once a day or once a year.

2) What that dollar bill is used for.

---------------------------------
Always look upstream.

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Wednesday, October 17, 2007 2:43 PM

Kinda....

For the sake of argument lets assume you give out two lots of $10,000, one as a single amount of $10,000 to a rich guy and you give 100 poor people $100 each. The rich guy doesnt really need $10,000 so he banks it or invests it. The 100 poor folks spend theirs straight away.

The result is that the poor people's $10,000 hits the economy faster, it buys stuff and generates immediate demand in the economy. If you happen to need a shot in the arm for demand this is good news because it's FAST. The rich guy's money is slower to have an effect and that effect is initially in investment and not in demand. If your aim is to boost investment then this is also a good option.

The net effect of putting $10,000 bucks into the economy is the same seen from the point of view of the economy in general because ultimately that money does get spent on something it is the short term effect that differs.

I think you believe that the invested money generates no demand at all, which is wrong. If you think about it the reason companies issue stock is to gain money to buy things if they were not expanding somehow they wouldn't need the money. So ultimately invested funds is spent on goods and services just the same as wages.

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Wednesday, October 17, 2007 3:04 PM

FINN MAC CUMHAL

Quote:
Originally posted by SignyM:
So what you're saying is that capitalism isn't necessary. Right?

Well, if all we're talking about is the management of scarce resources, than no, it's not necessary. A feudalism or a communism or a slave economy have all proven to work to one degree or another. It's probably not a society that I want to live in, but it's certainly been done.

Quote:
Originally posted by rue:
Good on you. You should be very proud of all you've accomplished.

Yes, I should be, and I am.

Nihil est incertius vulgo, nihil obscurius voluntate hominum, nihil fallacius ratione tota comitiorum.

Nothing is more unpredictable than the mob, nothing more obscure than public opinion, nothing more deceptive than the whole political system.

-- Cicero

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Wednesday, October 17, 2007 7:10 PM

I have a vote and I'm not afraid to use it!

Finn

You just admitted that you're proud to have exposed yourself to everyone here as a sleazebag, a liar and a hypocrite. Way to go, dooood.

***************************************************************
"Global warming - it's not just a fact, it's a choice."

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Thursday, October 18, 2007 6:22 AM

I have a vote and I'm not afraid to use it!

"Unless you keep money in a shoebox or in your mattress this remains true."

That does sometimes happen. I don't think they use shoeboxes or mattresses however.

I don't know if you remember about 15 years back when the value of the dollar went down, as did the stock market, gold, real estate, bonds and pretty much every avenue of investment, not just in the US but globally. That hung on for about 2 years. What was happening was that people didn't know where to invest their excess capital. So they hung onto it, in currency. Better to let it slowly erode than invest it and lose it all, I guess.

Anyway, b/c money wasn't 'circulating' it caused a global recession.

And that's the other thing about money. The circulation itself is an economy booster. So to accumulate it in few hands and circulate it slowly is an economic negative, whereas to circulate it more quickly is an economic positive. That make the end result of capitalism - the accumulation of wealth in the hands of a few and slower circulation - a negative feedback on the economy. One needs to counter that with economic policies otherwise you get the inevitable depression.

***************************************************************
"Global warming - it's not just a fact, it's a choice."

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Thursday, October 18, 2007 8:18 AM

Except almost all progress for the last few hundred years has been financed by private investors. If that money didnt accumulate, if folks didnt have excess they pretty much had to invest there would have been no progress, no new industry spurring new jobs.

In addition I don't think anyone really believes that living hand to mouth paycheck to paycheck is the best way to live and yet according to your analogy that would be the most economically efficient. Investment does generate demand eventually because it does buy physical goods. I'm not sure that you can view it as a drag on the economy like Sig seems to suggest.

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Thursday, October 18, 2007 8:33 AM

I have a vote and I'm not afraid to use it!

I'd like to point out some exceptions to your post.

One is that there is a LOT of non-capitalistic investment even in capitalist countries. For instance, government 'invests' in infrastructure, schooling, health, police and research. (And that's just off the top of my head.) And further, without those investments, capitalism itself wouldn't be possible. One could argue that capitalism is best at appropriating socially generated value into private hands.

The second point is that many governments (China and Russia are two large modern examples) created non-capitalist economies that did transition from rural hand-to-mouth economies to modern industrial ones. And also drastically improved living conditions for the vast majority of their people.

You don't actually need capitalism to concentrate, invest and improve.

***************************************************************
"Global warming - it's not just a fact, it's a choice."

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Thursday, October 18, 2007 8:38 AM

I believe in solving problems, not sharing them.

Quote:
For the sake of argument lets assume you give out two lots of $10,000, one as a single amount of $10,000 to a rich guy and you give 100 poor people $100 each. The rich guy doesnt really need $10,000 so he banks it or invests it. The 100 poor folks spend theirs straight away.

So far so good.

Quote:
The result is that the poor people's $10,000 hits the economy faster, it buys stuff and generates immediate demand in the economy. If you happen to need a shot in the arm for demand this is good news because it's FAST.

With you so far

Quote:
The rich guy's money is slower to have an effect and that effect is initially in investment and not in demand. If your aim is to boost investment then this is also a good option.

This is where we part company. Investment does NOT have the same effect. Let's look at his potential investments:

He invests in increased production: Hires more workers, makes more widgets. Great. Stimulous because it's like giving 100 people $100 each.

He invests in research, pays some engineers, improves his product and grabs a greater market share. Stimulous because of the engineers' pay. Its like giving 10 people $1000 each one time, but they'll prolly spend the money anyway. He gains market share and hire more workers, but the follow-on effect on overall employment is zilch.

He buys out a competitor, and gives one guy $10,000. Not necessarily a stimulous. The question of what happens to the money just goes up to the top of this list.

He puts it in a bank account, which is like giving one person $10,00. Question cycles back to the top of the list.

He speculates in gold or foreign currencies. Not a stimulous. He may have well just put his money in a shoebox.

He invests in automation, which is like giving 10 people (the engineers) $1000 each in a one-time payment, but then TAKES AWAY $100 each from 100 people ad infinitum. Automation reduces prices, but not as much as the wages were reduced. Leads to reduced employment and demand ovreall.

Quote:
$10,000 bucks into the economy is the same seen from the point of view of the economy in general because ultimately that money does get spent on something it is the short term effect that differs.

I think I've shown this is not the case.

Quote:
I think you believe that the invested money generates no demand at all which is wrong.

Not true. But IF the overall effect of investment is to reduce employment (or reduce wages) then the net effect is to reduce economic activity in the long run.

The proof of the pudding, so to speak, is in the real world. Bush has been following "trickle down" theory for almost eight years. All of this "stimulous through investment" has only led to one thing: The biggest disparity in incomes since the 1920s, reduced production, and demand kept afloat only by a housing bubble and cheap interest rates.

---------------------------------
Always look upstream.

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Thursday, October 18, 2007 9:14 AM

Quote:
Originally posted by rue:
I'd like to point out some exceptions to your post.

There are a LOT of exceptions that's why I said "almost." It is perfectly possible for governments to build entire industries from almost nothing (German rocket development during WW2, British Jet development in the same period.) It is also possible for government to finance essentially private R&D to achieve a national aim -- the Apollo program for example. The infrastructure spending is economically important but it's not investment in research and development (well maybe development).

Quote:

One could argue that capitalism is best at appropriating socially generated value into private hands.

It does in your country because government choses to pay private companies to do it's research. It's the opposite back home -- we'd all be speaking German if Henry Royce hadn't decided to spend his own companies money on developing a new aero engine the government had no intention of buying.

Quote:

The second point is that many governments (China and Russia are two large modern examples) created non-capitalist economies that did transition from rural hand-to-mouth economies to modern industrial ones. And also drastically improved living conditions for the vast majority of their people.

That's not entirely true. China spends a lot of money on infrastructure and education that private companies can then take advantage of.

I would argue as you seem to that government sets up the physical conditions that establishes a market that capitalism then exploits. If there was running gun battles in the streets and nobody could get safely to work there would be economic costs to business. If a business had to pay the actual cost of the education of it's employees from kindergarden to the point where they could do practical work it would be an enormous burden (like healthcare is.) So yes governments set up a friendly economic environment for business, which is why business taxation is not "unfair" a service has been provided that makes your business possible.

Quote:

You don't actually need capitalism to concentrate, invest and improve.

"

I don't recall that I ever claimed you did. All I said was that most inovation has come from private investment and it has. The CD in your music player comes from Sony and Phillips not from the Dutch and Japanese governments, the solid state laser that plays it comes from (I believe) Bell Labs as does the transistors and chips that make it operate. Could a government like Chana have ordered the R&D, mandated production and distribution of such a device? Of course, but the point is they DIDNT.

And BTW that was Phillips and Sony's money not funds paid for by the left hand of DARPA.

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Thursday, October 18, 2007 9:30 AM

I believe in solving problems, not sharing them.

So, to continue:

Capitalism is very good at one thing. (Which BTW is not research. I can point to a number of critical discoveries... ancient and modern...that had nothing to do with capitalism.)

The thing that capitalism is very good at is using its accumulated money to reduce the amount of labor that goes into a product and relocating that technology to where labor is cheap (and productivity is low).

Now, I have no particular interest is sweating things out the old-fashioned way. Given the choice between picking out cotton seeds by hand and the cotton gin, I'll choose the cotton gin. The PROBLEM with capitalism is that it ties the distribution of money to labor. To illustrate the conundrum with an extreme example: if you automate all production and put everyone out of work, even if the products are very very cheap they'd still cost too much for people who have no income whatsoever. (I realize it's an extreme, but that problem occurrs in diluted form everywhere.)

So you have the problem: How do you balance production and consumption while STILL being able to accumulate enough money to invest in better production techniques?

---------------------------------
Always look upstream.

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Thursday, October 18, 2007 9:51 AM

I have a vote and I'm not afraid to use it!

Fletch

I just have to joke around a bit - "It does in your country". :folds arms, taps foot: So now it's my country. Well as long as you live here it's your country, too mister.

Anyway ...

"because government chooses to pay private companies to do it's research"
"All I said was that most innovation has come from private investment and it has."

Government gives grants to universities and researchers for - as it's sometimes called - 'blue sky' research, and also for applied research. The government doesn't give grants to private companies for that, so your first statement is wrong. As to the process of public research (innovation) followed on by private appropriation -

It was publicly funded researchers who figured out how to sequence DNA. Craig Venter used that (publicly) created science to try to sequence the human genome first in order to privately patent it. In other words, he intended to expropriate publicly created value into private hands - his. (And then government researchers raced Venter to sequence the human genome - and won - b/c the idea of a private patent on the human genome so offended them. Those same researchers put the genome in the public domain where it has a greater multiplying effect on further innovation.)

Anyway, there are lots of examples of direct conversion of publicly create value expropriated into private hands.

And as we seem to agree on, the indirect things that make capitalism at all possible are socially created.

So what I see is that capitalism is in fact parasitical on society, and not beneficial. And that research and development (a public concentration of wealth), and investment and production for discrete goods (currently private) can both be done publicly.

(I had to caveat 'discrete goods' b/c there are in fact 'public goods' which private investment and production don't address.)

***************************************************************
"Global warming - it's not just a fact, it's a choice."

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Thursday, October 18, 2007 10:35 AM

Quote:
Originally posted by rue:
Fletch

I just have to joke around a bit - "It does in your country". :folds arms, taps foot: So now it's my country. Well as long as you live here it's your country, too mister.

."

I dont get to vote, I get no say on policy decisions or the use of my tax dollars. Your government can chose not to renew my Greencard or indeed throw me out for almost any reason as long as they can prove due process. Should I leave I get no immediate right to readmission (though I have a reasonable expectation given the Green card.) If for example I worked abroad for over a year my immigration status would lapse and I would have to start the process over.

I get no protection from the US embassy when travelling abroad (my wife does and I suppose they may look after me by association but it is not a requirement.)

So no it's not "my country" I just happen to live here.

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Thursday, October 18, 2007 10:54 AM

Quote:
Originally posted by rue:
Fletch

I just have to joke around a bit - "It does in your country". :folds arms, taps foot: So now it's my country. Well as long as you live here it's your country, too mister.

Anyway ...

"because government chooses to pay private companies to do it's research"
"All I said was that most innovation has come from private investment and it has."

Government gives grants to universities and researchers for - as it's sometimes called - 'blue sky' research, and also for applied research. The government doesn't give grants to private companies for that, so your first statement is wrong. As to the process of public research (innovation) followed on by private appropriation -

When the government gave Gruman Aircraft $1B to build a lunar lander do you really believe that Gruman received no business benefits from that money? That the research did not end up in products it sold to the government or other people? Boeings entire passenger jet program sits on the shoulders of work the US government paid for as part of getting jet transports. THAT is the kind of government R&D I'm talking about, the kind done by private corporations with development grants paid for with Tax dollars.

I'm not talking about "Blue sky" because discovering something and industrialising it are two different animals. You might spend $10 Million to find something in a lab and $100M developing that discovery into something you can sell, are you really saying that the guy that spends the $100M is benefiting unfairly?

Quote:

So what I see is that capitalism is in fact parasitical on society, and not beneficial. And that research and development (a public concentration of wealth), and investment and production for discrete goods (currently private) can both be done publicly.

I disagree. What you are describing is a command economy. Things will only get built if it suits government purposes, you will only get to buy what the government says you can buy. Nobody does it that way, not anywhere, the few places that tried it are not around anymore. If capitalism has a "cost" a benefit it gets from society you make capitalistic enterprises pay their own way -- which incidentally most do. Your government doesnt account for even a small fraction of your GDP even it's arms related R&D and blue sky funding is small fry compared to the investment made in private companies and labs. If drug X was developed in a public lab then the government should licence it as a generic and have done with it. It's the fact that neither the gov or the generic companies can afford the extensive human testing to bring drug X to market that prevents that from happening. If I take that blue sky idea and pay to develop it, test it and market it shouldnt I be rewarded for that? Especially as not all promising "Blue Sky" ideas ever make it to usefull products?

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Thursday, October 18, 2007 11:32 AM

I believe in solving problems, not sharing them.

So, to reiterate:

Quote:
Capitalism is very good at one thing. (Which BTW is not research. I can point to a number of critical discoveries... ancient and modern...that had nothing to do with capitalism.)

The thing that capitalism is very good at is using its accumulated money to reduce the amount of labor that goes into a product and relocating that technology to where labor is cheap (and productivity is low).

Now, I have no particular interest is sweating things out the old-fashioned way. Given the choice between picking out cotton seeds by hand and the cotton gin, I'll choose the cotton gin. The PROBLEM with capitalism is that it ties the distribution of money to labor. To illustrate the conundrum with an extreme example: if you automate all production and put everyone out of work, even if the products are very very cheap they'd still cost too much for people who have no income whatsoever. (I realize it's an extreme, but that problem occurrs in diluted form everywhere.)

So you have the problem: How do you balance production and consumption while STILL being able to accumulate enough money to invest in better production techniques?

---------------------------------
Always look upstream.

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Thursday, October 18, 2007 11:54 AM

I have a vote and I'm not afraid to use it!

"THAT is the kind of government R&D I'm talking about, the kind done by private corporations with development grants paid for with Tax dollars."

I see. So, are you saying that's a good thing ? Tax dollars going directly to benefit business ? B/c what I have seen is that government subcontracting to private industry often ends up more expensive and less economically beneficial to the populace as a whole than if the work is done directly by government workers. The health care 'industry' is a prime example of that. So, come to think of it is providing 'security' in foreign countries like Iraq.

"I'm not talking about "Blue sky" because discovering something and industrializing it are two different animals."

True, but only artificially and temporarily so. Many governments have government-run corporations to do just that.

"... are you really saying that the guy that spends the $100M is benefiting unfairly?"

The guy who spends $100M is not even beginning to pay for the upfront investment society made - and that includes education, creating and maintaining standards (ie NIST) - AND the 1000 or so $10,000 research projects he didn't perform to find the one that would have an immediate application - and without which he HAS no business.

"If capitalism has a "cost" a benefit it gets from society you make capitalistic enterprises pay their own way -- which incidentally most do."

NO business would be able to repay the full cost of social investment. So yes, they are benefiting unfairly.

"It's the fact that neither the gov or the generic companies can afford the extensive human testing to bring drug X to market that prevents that from happening."

Ahem. Are you saying the government can't afford $500M total development cost for a drug ? When it's spending $177M per day in Iraq ?
It's not that the government can't, it's that it chooses not to. And in fact, business has a cozy deal with government, and select government officials with business. Should the paradigm shift, business would be swept away by the combined economic power of society.

***************************************************************
"Global warming - it's not just a fact, it's a choice."

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Thursday, October 18, 2007 1:56 PM

Quote:
Originally posted by rue:
"THAT is the kind of government R&D I'm talking about, the kind done by private corporations with development grants paid for with Tax dollars."

I see. So, are you saying that's a good thing ? Tax dollars going directly to benefit business ? B/c what I have seen is that government subcontracting to private industry often ends up more expensive and less economically beneficial to the populace as a whole than if the work is done directly by government workers. The health care 'industry' is a prime example of that. So, come to think of it is providing 'security' in foreign countries like Iraq.

No I'm saying that's how your government choses to do things. You seem to be saying that all the government funds is "blue sky" projects that industry "steals" In reality such base research is usually the first step in a long expensive process to make a product. That was NOT the kind of investment I was talking about. I felt the need to clarify that. For the record I see direct funding by governments of contractors more agreegous than the use by private companies of discoveries made by public research which I view as natural and expected. The point of public reseach is to increase the sum of human knowledge and/or discover things of use to the nation, they dont nescessarily have immediate or obvious technical application. As an engineer part of my job is to use scientific knowledge in practical ways.

Quote:

"I'm not talking about "Blue sky" because discovering something and industrializing it are two different animals."

True, but only artificially and temporarily so. Many governments have government-run corporations to do just that.

If the product that is being made has national security applications or you live in China maybe. News flash on Chinese government companies, they are making some apparatchiks and government cliques very wealthy not adding to the public good.

Quote:

"... are you really saying that the guy that spends the $100M is benefiting unfairly?"

The guy who spends $100M is not even beginning to pay for the upfront investment society made - and that includes education, creating and maintaining standards (ie NIST) - AND the 1000 or so $10,000 research projects he didn't perform to find the one that would have an immediate application - and without which he HAS no business.

I'm sorry but that's absurd. If the government was fully funding the development of these discoveries are you really proposing that they should support all of them, even the ones that have no practical application?

Last I checked we dont fund most research with the idea of industrialising the results. We fund research to increase our overall knowledgebase. In fact we often have no idea what may be usefull, a lot of discoveries only becomes usefull later, when linked with other discoveries.

If you are suggesting that the only purpose for the research is to ultimately use it for economic gain then shouldn't we axe funding for all programs that have no obvious economic benefit? If on the other hand you are saying that not all research should be for economic gain why should an company that uses government research be "morally endebted" for spending on projects that would never and could neve benefit it?

But the solution to this purity problem is easy. Let's simply stop government funding research at all so those dirty capitalists can no longer have a "free ride."

Quote:

"If capitalism has a "cost" a benefit it gets from society you make capitalistic enterprises pay their own way -- which incidentally most do."

NO business would be able to repay the full cost of social investment. So yes, they are benefiting unfairly.

Don't be stupid. They already DO pay the cost, either directly or indirectly. they pay it in company taxes on taxes on the income of employees that wouldn't have jobs if the company didn't exist, they pay it in import export duties and indirectly in capital gains taxes. All that money the government spends on roads and teachers and such, that comes from taxes large and small and those taxes ultimately come from the economic activity of companies and individuals. Fred's pizza's can't afford to pay for the 6 lane suburban road that passes by his building and without which he has no business. But he pays in taxes some part of the cost of that road as does every business on it and all nearby businesses via taxation. That is where the money you are spending comes from.

Quote:

"It's the fact that neither the gov or the generic companies can afford the extensive human testing to bring drug X to market that prevents that from happening."

Ahem. Are you saying the government can't afford $500M total development cost for a drug ? When it's spending $177M per day in Iraq ?
It's not that the government can't, it's that it chooses not to.

Like I said, the only folks to try and do it that way aint here any more but you know what. I like that idea, let's do it. Let's pick a few promising programs from public research every year and fund them to generic production and gift them to humanity.

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Thursday, October 18, 2007 2:01 PM

Quote:
Originally posted by SignyM:
So, to reiterate.

Sorry Rue's discussion is more interesting. After I deal with your leading assumptions a fifth time my concentration wavers. I may get back to you later but right now Rue is winning in the marketplace of ideas...

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Thursday, October 18, 2007 5:03 PM

LEADB

Quote:
Originally posted by Fletch2:
Quote:

"It's the fact that neither the gov or the generic companies can afford the extensive human testing to bring drug X to market that prevents that from happening."

Ahem. Are you saying the government can't afford $500M total development cost for a drug ? When it's spending $177M per day in Iraq ?
It's not that the government can't, it's that it chooses not to.

Like I said, the only folks to try and do it that way aint here any more but you know what. I like that idea, let's do it. Let's pick a few promising programs from public research every year and fund them to generic production and gift them to humanity.

I'd be up for it, see what happens. I'd even accept a compromise where the gov then licenses it out to any generic producer(s) willing to pay some reasonable fee set at recovering the invested money in the drug over, say, 10 years (or , if not a drug, whatever it is).

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Friday, October 19, 2007 6:03 AM

I believe in solving problems, not sharing them.

Quote:
After I deal with your leading assumptions a fifth time my concentration wavers.

You keep syaing the same thing over and over: Investment has the same effect as wages. Trickle down is the same as trickle up. I have analyzed your assumption

1) In detail by looking at possible investments and their specific effect on demand

2) Globally, by examining what happens in aggregate

3) Real-world, by looking at the results of eight years of Bush's trickle down policy

4) In the extreme, by taking the current situation and projecting it to its endpoint.

You haven't even begun to understand a thing that I've said, and except for repeating your mantra (like it's some sort of wisdom) you haven't actually refuted my arguments. So try explaining to me- and the other readers here- WHY "investment" has such a good effect on "the economy". Use use examples, use math, just don't repeat the same old-same-old. Because if you do you WILL be bored, and so will I.

---------------------------------
Always look upstream.

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Friday, October 19, 2007 7:29 AM

I believe in solving problems, not sharing them.

I would suggest that certain things be placed in the hand of government and that many things be delegated to cooperative-type businesses.

The cooperatives have to follow certain rules including: NO PROFITS. All business income will be used to pay expenses: wages, supplies, taxes, research, interest, advertising. That way, business income will be completely distributed at all levels and iterations for consumption.

Money for better production will come from loans, not stock sales. Do away with the stock market.

"Blue sky" research to be funded by the government.

NO intellectual property. If you make money, you make it thru production. It's an integrated system that has all of the elements that make capitalism good: competition, improving production... and none fo the elements that make capitalism bad: runaway concentration of wealth and attendant destruction of demand.

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Friday, October 19, 2007 8:06 AM

Quote:
Originally posted by SignyM:
] Not true. But IF the overall effect of investment is to reduce employment (or reduce wages) then the net effect is to reduce economic activity in the long run.

I'm not going to pick through this one piece at a time because I simply dont have time (catching a plane in a few hours.) Some observations in general that deal with the overal thrust of this.

1) Siggy "simplifications" end up the way they do because they generalise to the point where they no longer have meaning. It's like the way the Hitchiker's Guide concludes there is no life in the universe (despite the fact that is obviously untrue. The Guide says that there are a finite amount of life in the universe but that the universe is infinate. Since any finite number divided by an infinite one is as close to zero as makes no difference that proves there is no life in the universe.

If one person owned everything there would probably be no economic activity because nobody else would own anything to allow them to buy anything. So yes taken to that extreme you'd be right. The problem is that like all your simplifications by the time you strip out everything so people can see the "purity" of your position it's nonsensical. I addressed this a while ago and as always you ignored it.

Fred automates his factory. He lays 60 people off. In doing so he improves productivity and generates more income. That extra money is invested or spent and that in turn generates more activity which needs to be filled by hiring more people somewhere in the economy. Can I garentee that all 60 of Freds redundant workers will get jobs as a result or that the jobs will be as well paid. No, but at least some of the jobs created (in the design, manufacture and maintainance of advanced production machinery) will probably be better paid than the ones that were lost.

2) The point you seem to have missed is that companies do not exist to give people jobs. Jobs exist to fill needs in companies. If that need goes away that job goes away. So if Fred can totally automate tomorrow that's a business decision and nothing more. People do move on to other jobs and as long as there are jobs in that market things will eventually even out. The robot on an American factory floor is less of a threat to an American job than a real human gainfully employed in China because the benefits of that machines economic activity stays in the US economy.

3)There will never be a point where you could meaningfully get 100% automation, because machines dont know how to make things unless they are told. My uncle worked in teh machine shop of a factory that was massively automated. Why? Because if they needed small numbers of bespoke parts making (and you DO even for a mature product) it is just not economic to buy a machine and then have patterns for every conceivable thing you might need it to make. No cost benefit over a skilled man with a precision lathe, it would cost so much to set up you couldnt spread that cost over the accounting period for the new machine.

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Friday, October 19, 2007 8:06 AM

Quote:
Originally posted by SignyM:
] Not true. But IF the overall effect of investment is to reduce employment (or reduce wages) then the net effect is to reduce economic activity in the long run.

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Friday, October 19, 2007 9:12 AM

I have a vote and I'm not afraid to use it!

I think there is a benefit to look at these things as a type of mathematics. It's valid to say 'approaches zero with time'. That lets you know that indeed the (mathematical) function of a process is ... whatever is the conclusion.

If it weren't for that ability - to isolate the main elements of a process and examine them individually - humans would never have 'discovered' gravity, a solar-centric earth orbit etc.

My impression is that the Milton Friedman school of economics makes the claim that things are too fluid, interconnected and dynamic to be able to meaningfully extract information about how it works.

But others (including the author of the book I listed above) not only have a different point of view, they actively contradict the Friedman 'school of economics.' They believe it IS possible, and necessary, to isolate the basics of a process (investment feedback, international trade, globalization) in order to examine it fruitfully. In fact, that was the opening argument in the book.

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Friday, October 19, 2007 9:25 AM

I've said it before and I mean it economics is not a science because at its core it's talking about people and people are unpredictable. You can isolate gravity because gravity is a constant and it's behavior is constant.

For example, speculation in a market is essentially gambling, you gamble that the market will continue to go up at least until you have dumped your investment, I'm not entirely convinced that you can model when or if speculation will take place. That's the problem with the Sig method of simplification it either over simplifies or completely ignores the fact that humans adapt around things. I knew a Russian guy who before the fall of the Soviet Union fixed radios for the Mafia. The Soviet system had become like Sig suggests, radios were available but too expensive for most people to buy. People built their own, repaired old ones, sold stolen production or whatever. If a need exists people will find a way to fill it and people will generate "capital" to buy things through their labour.

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Friday, October 19, 2007 9:49 AM

I have a vote and I'm not afraid to use it!

I don't think SignyM is proposing replace this system (as I very obviously am). So I don't think you should project the discussion into a proposal for 'fixing' things, and then address that position that was never made.

I think SignyM is trying to elucidate the processes of economies in a very neutral way - trying to figure out where are the strengths and where are the weaknesses of any particular approach.

And you both seem to accept the result of this modeling when it comes to teasing out strengths of the capitalist system. And you yourself use this approach to conclusions of your own. But when SignyM uses the same approach to describe capitalism's internal contradictions or weaknesses you cry foul.

So, I truly hope to see a real discussion between the both of you and not this kind of shadow boxing.

The thing I would like to see next is if you believe capitalism has NO weaknesses. And if not, why not.

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"Global warming - it's not just a fact, it's a choice."

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Friday, October 19, 2007 9:53 AM

I believe in solving problems, not sharing them.

Fred automates his factory. He lays 60 people off. In doing so he improves productivity and generates more income. That extra money is invested or spent and that in turn generates more activity which needs to be filled by hiring more people somewhere in the economy. Can I garentee that all 60 of Freds redundant workers will get jobs as a result or that the jobs will be as well paid. No, but at least some of the jobs created (in the design, manufacture and maintainance of advanced production machinery) will probably be better paid than the ones that were lost.

Not only can you not guarantee it theoretically, but I can show it does not happen. Just plain doesn't. I've already cited the results Bush's policies, I can point to the recent Russian and Indian experience with capitalism (growth of a middle and upper class, more than offset by impoverishment of everyone else.) as well as historic examples of dozens of other nations.

So we will agree to disagree, and as I feel that I have theory, math, and evidence on my side I'll continue to say that capitalism causes the concentration of wealth which leads to recessions and depressions. In fact, this theory came about through the study of the causes of economic depressions. In your rosy view of capitalism, depressions should never occur. But clearly they do.

The challenge is to capture the benefits of capitalism w/o including the bad parts.

Your response is simply to say: capitalism has no "bad parts".

---------------------------------
Always look upstream.

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Friday, October 19, 2007 3:12 PM

LEADB

Sig,
I'm not entirely sure where you are headed. You aren't claiming we have pure capitalism in the US, are you?

Best I can tell, we have capitalism with significant socialist protections; though I think part of your point is the Bush admin is tearing back some of the protections, and heading toward 'purer' capitalism, and I'd tend to agree; and I'm suspecting it is not a good thing.
==
I'm also starting to be curious what it is Rue wants to replace our economic structure with.

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Friday, October 19, 2007 3:17 PM

I have a vote and I'm not afraid to use it!

A philosophy.

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"Global warming - it's not just a fact, it's a choice."

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Friday, October 19, 2007 4:03 PM

I believe in solving problems, not sharing them.

Quote:
Sig,
I'm not entirely sure where you are headed. You aren't claiming we have pure capitalism in the US, are you? Best I can tell, we have capitalism with significant socialist protections; though I think part of your point is the Bush admin is tearing back some of the protections, and heading toward 'purer' capitalism, and I'd tend to agree; and I'm suspecting it is not a good thing.

First of all, there never was "pure" capitalism and there never will be. Not because of government socialist tendencies but because capitalism (as featured by Adam Smith anyway) requires that competition take place "without fear or fraud". Right now, business has such a vast legal advantage (enforced by guys with guns, tasers, and batons) over workers that the competition which is supposed to take place among roughly equal actors is simply business playing one nation off against another for the cheapest environment ... with no power large enough to demand meaningful negotiation. That is NOT capitalism.

USA business interests abroad (and at home) are often enforced at the point of a gun- all you have to do is look at the Mideast, the Phillipines, Indonesia, Carribean, and South and Central America for a long, sordid history of government-sponsored rape and pillage and tyranny. The hellhole that we created in Haiti or Nicaragua or the Marianas yesterday is the hellhole that we compete against today.

So what Bush is promoting is what is called "socialism for the rich and capitalism for the poor". It's a one-sided policy.

If he were to promote capitalism, the first thing he would do is place unions, individuals, and business on the same tax structure, with same benefits, and the same legal responsibilities and liabilities. A business that knowingly makes a decision which kills people should be put to death (broken apart and sold off).

But capitalism does has some strong points. People have often said "If you don't like it so much what would you put in its' place?" We've already tried communalism, feudalism, mercantilism, command economies, socialism, and corporatism... the hard part is coming up with something that would be a living, evolving system with its own set of interests and motivations that would embrace the best parts of capitalism w/o reproducing its worst features.

And that's what I'm aiming at.

I'd like to think along with people who'd like to come up with somehting better. The problem is, so many people think there is nothing better.

---------------------------------
Always look upstream.

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Friday, October 19, 2007 4:29 PM

I have a vote and I'm not afraid to use it!

That's why the first and hardest thing you have to do is change a mind.

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"Global warming - it's not just a fact, it's a choice."

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Friday, October 19, 2007 8:52 PM

Quote:
Originally posted by rue:
And you both seem to accept the result of this modeling when it comes to teasing out strengths of the capitalist system. And you yourself use this approach to conclusions of your own. But when SignyM uses the same approach to describe capitalism's internal contradictions or weaknesses you cry foul.

I'm actually trying to match his style in the hope it will result in him hearing me. Unfortunately it produces yet another oversimplification which is why I'm becoming convinced I'm wasting my time.

Quote:

So, I truly hope to see a real discussion between the both of you and not this kind of shadow boxing.

It takes two to have a discussion and unfortunately Siggy has decided that accepting his anti-profit rant is a pre-requisite of having that discussion we will get nowhere.

Quote:

The thing I would like to see next is if you believe capitalism has NO weaknesses. And if not, why not.

It doesnt have weaknesses, it has problems, huge huge huge problems, that include such things as US interpretation of IP, Us corporate personhood, the distorting effects of large players in markets where they illegally limit competition, the distorting effects of media ownership, the effects of money on the political process....

However none of them are Siggy's "profit drag" theory and since accepting that is the only way we will ever stop him from ranting and as I'm not going to accept his idea because it's stupid I guess we wont get to discuss the rest.

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Saturday, October 20, 2007 4:07 AM

I believe in solving problems, not sharing them.

Fletch2: The concept of "profit as a drag" comes from the history of serious economic depressions that seem to go hand-in-hand with capitalism. Despite that you seem to think it's a lunatic explanation concentration of wealth is the classic explanation for the problem of wharehouses stuffed with goods and nobody able to buy. Just because the problem has been ameliorated with the introduction of "monetary policy".... a "fix" that we still apply today... doesn't mean that the process has gone away. All it takes is a committed "supply sider" like Bush to amp up the "gain" on that particular feedback, and recession (or worse) will come roaring back.

Now, concentration of wealth is a demonstrated effect of capitalism. You can see it here, and everywhere that capitalism touches. Unless there is some feedback to control that particular process, it will inevitably end with a very few people having a lot of money, and most people having very little. Not only is that "not fair", it's sure-fire way to destroy the demand that drives the economy. In the USA we tried fixing the problem with monetary policy, the EU used actual redistribution of wealth. Unfortunately for the USA, the monetary policy (making more money available through low interest rates) fueled the development of an "alternate currency"- housing speculation- in which people depended on the increasing value of their homes to support their spending.

You can disgaree with me all you want, and I'm sure you will, but the day to day facts of our economic decline require some sort of explanation and I'm convinced that explanation lies in "profit as a drag", which is aided and abetted by our current administration. And if the concept is as faulty as you claim, what DOES cause economic depressions and concentration of wealth? And why do we continue today to apply the remedy that was dreamt up in response to such a faulty theory?

BTW- You think this is "ranting"?

HAHAHAHAHA!!!!
---------------------------------
Always look upstream.

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Saturday, October 20, 2007 11:47 AM

LEADB

If you would direct your attention to this chart:

http://finance.yahoo.com/currency/convert?amt=1&from=USD&to=EUR&submit
=Convert
you can see one of the effects of allowing too many dollars slip into circulation. $80/barrel oil is only 50Euros/barrel. I wonder what the price of oil in Euros was a year ago....

Edit: Oil was about $60 last year, and .8 Dollar to the Euro. About 48 Euros/barrel.

Interesting. One could reasonably argue the value of a barrel is the same this year as last (minor rise) while the value of the dollar is dropping.

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Sunday, October 21, 2007 6:37 AM

I believe in solving problems, not sharing them.

Too many dollars.... and the ones that aren't with the top 1% are outside of the country, thanks to our imbalance of trade.

That's why I've been actively looking for investments not based on the US dollar for about the past year: international stocks, international bond funds, gold, currency baskets etc. The fall of the dollar and the coming recession was an easy call. I've been trying to project what's going to happen as a result.

When you have an economic slowdown it can happen in one of two ways: with inflation (the infamous "stagflation" of the 70s) or deflation (the Great Depression). I suspect that the average person in the USA will get the worst of both worlds: starving for dollars while prices of everything the USA imports (which is just about everything) will skyrocket. (People who assume that the cost of goods in the USA will drop to meet the US demand don't realize that the cost of goods in the USA will reflect international demand.) So yah... we'll be holding the bag. Think about the devaluation of the Argentine peso in 2002 and the crisis around that time.

If you want to protect your worth, you should know that - aside from trading currencies in the forex and purchasing international commodities like gold and oil- a nation holding US dollars can only purchase dollar-denominated investment: US stocks, US real estate, US Treasuries. So foreigners holding US dollars can only "dump" them in certain ways. Right now, the overseas institutions that are holding dollars and dollar-denominated investments like Treasuries and US stocks (China, OPEC) are "leaking" their dollars into gold and other currencies, or simply refusing to accept more USD. They don't seem to be buying US real estate (as happened in the 70s when Asians with suitcases of cash bought up homes in LA and commercial real estate elsewhere) or US stocks (whose price has fallen despite numerous rescue attempts by the Fed.) But if you want your supply of dollars to increase as the value of the dollars falls, you have to be holding whatever it is that foreigners will be willing to buy should they choose to dump our currency. Aside from gold and other currencies, I haven't figured out what that is.

Also, the elections are coming up in a year, which may strengthen the dollar, so I wouldn't hold anything that can't be converted at about that time.
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Always look upstream.

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Tuesday, October 23, 2007 7:14 AM

I have a vote and I'm not afraid to use it!

Without having had such a specific analysis, I too came to the conclusion: 'things can't go on this way'. (And hence the repeated debate with Rap.)

Despite being able to point to shifting and isolated positive indicators, overall there are major problems with the US economy - federal deficit spending, loss of jobs and imbalance of trade, failing infrastructure (as an economic issue), low R&D, low numbers of US graduate students in technical fields, foreign oil dependence -

And other worrisome trends by other countries looking after their interests - oil being priced in euros (many countries will not accept USD), as SignyM mentioned countries gradually reducing their dollars (treasuries and bonds) in favor of gold (and euros), etc.

While some (Rap) may find it unpatriotic to invest against the dollar, I personally have no interest in going over the cliff following the path Dubya laid out. And in reality he himself has no intention of going over the cliff with the rest of the country - he has HIS escape well constructed and ready. (Dubai anyone ?)

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"Global warming - it's not just a fact, it's a choice."

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Tuesday, October 23, 2007 8:08 AM