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Guest Post: What Marx Got Right
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
The crisis of capitalism has not been resolved; it's simply been papered over.
First, a disclaimer: this is an interpretive discussion of some aspects of Marx's analysis (which was based on the capitalism he observed in the late 19th century) applied to present-day cartel-state capitalism. It is not a scholarly or academic presentation.
The discussion covers a lot of ground, though, so please refill your beverage container and strap in....
That Marx's prescription for a socialist/Communist alternative to capitalism failed does not necessarily negate his critique of capitalism. Marx spent hundreds of pages analyzing capital and capitalism and relatively few sketching out a pie-in-the-sky alternative that was not grounded in historical examples or working models.
So it is no surprise that his prescriptive work is an occasionally risible historical curiosity while his critique stands as a systemic analysis.
Marx got a number of things right, one of which appears to be playing out on a global scale. You probably know that Marx expected capitalism to experience a series of ever-larger boom-bust cycles that would eventually precipitate revolution and overthrow of the existing financial-political order.
One driver of these cycles was the interplay of increasing production and declining labor costs. In broad-brush, Marx recognized that industrial capital (as opposed tofinance capital) could only increase profits and accumulate more capital by raising production and/or establishing a price-fixing cartel or monopoly.
Mechanization characterized industrial capitalism in the late 19th century, and Marx observed that as mechanization increased productivity, the marginal value of labor decreased on a per unit basis.
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. If you think this is only a 19th century or developing-world phenomenon, please examine this chart:
This chart shows that labor's share of the economic output is declining sharply.The reasons? The same two Marx identified: a surplus of labor and declining per unit labor cost. In effect, the economy produces more goods and services with less labor. Since the demand for labor is declining while the supply of workers increases, competition drives wages lower.
The crisis Marx foresaw appeared to unfold in the 1930s, but the expansive central state became a Savior State, marshalling its ability borrow huge sums of money to create demand by fiat.
In the postwar boom, the low-productivity service sector expanded as labor shared the bounty of cheap energy and rising industrial productivity.
Increasing cost of energy and marginal returns pushed capitalism back into crisis in the 1970s, but three forces emerged to increase labor's purchasing power:
1. The discovery of supergiant oil fields in Alaska, the North Sea and Africa.
2. Computerization improved the productivity of the service sector.
3. Financialization of the developed economies artificially boosted the purchasing power of labor and finance capital via highly leveraged debt and declining interest rates.
All those forces have been spent. No new supergiant fields have been discovered in the past 20 years, and while improving technology is extracting more oil from existing fields, that is maintaining global production rather than ramping it up by 25%-50%.
Digital technologies, software and automation have reached the point that capital is able to replace or reduce service labor in virtually all sectors of the economy. What happened to assembly-line jobs in the 1960s-70s is now happening to service-sector jobs.
Financialization has reached diminishing returns: interest rates are near zero and stagnant incomes cannot service more debt. Leveraged debt and phantom collateral have created shadow banking systems which are largely outside state control and vulnerable to systemic shock.
In effect, the Marxist crisis in capitalism has re-emerged. The "fixes" of declining energy costs, more service jobs and leveraging debt have run their course.
Though Marx didn't use the term rentier skimming operation, he described the mechanism in other terminology. 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.
By way of example, consider the recent purchase of thousands of rental homes by institutional investors. Finance capital buys 10,000 homes and rents them to people who earn their income from their labor. Finance capital is not producing any good or service; is collecting rent from labor, i.e. a rentier skimming operation.
Cartels are also rentier skimming operations, as the cartel price reflects the cartel's pricing power rather than the market value of the good or service. What is the market value of healthcare in the U.S.? Since healthcare is dominated by cartels, market pricing is purely for show: if you want to buy health insurance, there are only a few providers, and the price is roughly the same.
ObamaCare simply institutionalizes the healthcare cartels.
What is the value of a top-line fighter aircraft? Since there are only two producers left in the U.S., the price is understandably sky-high from either provider.
Care to guess the market value of TV/Internet service in areas served by one corporation? There is no competition, so the market price is undiscoverable. What's provided is priced by the cartel or monopoly.
The key feature of cartel-state capitalism is that increases in price do not reflect an increase in value provided, they only reflect an increase in rentier skimming. In effect, eliminating competition is the only sure way to maintain profits and accumulate capital. The best way to accomplish this is to influence the state to impose or support one's cartel.
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.
Once their ability to service more debt vanishes, so does demand for goods and services.
The rentier skimming of finance capital and the increasing productivity /decreasing need for labor both crush small business. When a rentier skimming operator buys commercial property, rents for small businesses instantly rise, driving out all but chain stores and stores catering to high-margin luxury markets. As the number of workers with discretionary income declines, labor's support of small businesses also drops.
Once a niche market becomes profitable, a high-volume corporation will step in and either buy up the small suppliers or source lower-cost goods from its global supply chain and undercut the small producers.
This dynamic is clearly visible in the erosion of self-employment and small business:
This is the result of competitive squeeze and finance capital's access to limitless cheap credit:
All this creates a problem for the Savior State, which must provide incomes to unemployed labor and protect politically powerful cartels. The only way the State can placate labor, industrial capital and finance capital is to keep interest rates very low and borrow $1 trillion a year to fill the structural gap between tax receipts (based largely on earned income, which is in relative decline) and State spending, which must rise as labor's share of the economy dwindles and the demands of banks and other cartels constantly expand.
This state solution to capitalism's structural crisis only works if interest rates remain low and the buyers of state debt believe their capital will be returned to them at maturity. Once it become clear that their capital cannot be returned (or the money returned to them will be heavily depreciated), the only marginal buyers of state bonds will be central banks which can print money to buy state debt.
This "solution" doesn't resolve either the crisis of capitalism or the state's structural deficits; it simply papers over these crises with financial legerdemain.
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Correct and that's why: "Capitalism will commit suicide", Karl Marx
If there is a better example than this comment on the propaganda danger of labeling Goldman Sachs economics as capitalism, I don’t know what it would be.
Sorry that I just wasted 5 minutes of my life reading this bullshit article.
"The key point here is that labor's share of the total production cost declines"
Well, if it wasn't for the fiat money inflationary fraud those workers would have to pay less for those TV's that they were producing and all other products and services that benefit from lower production costs.
I'm sick and tired of reading about how capitalism needs to be regulated and how it "eats our young"!!
Capitalism: You consume less than you produce, you invest the savings and offer your products and services in a free market place
What the hell is wrong with that???!!! How is capitalism ruining people's lives???!!!
These shit heads are confusing "mercantilism" with "capitalism".
Mercantilism: Private individuals use the power of the state to enrich themselves.
The poster boy for mercantilsm is the banking industry.
Stop bashing capitalism.
Re: Private individuals use the power of the state to enrich themselves.
That's pretty smart-n-savvy of them, don't you think?
You "capitalist" true-believer are as bad as the Marxist and socialist. You exist in some sort of fantasyland where the smart-n-savvy people DON'T do everything possible to screw the dumbasses. And forming governments, creating monopolies, or cartels is exactly what ANY smart-n-savvy person would do in order for screw the dumbasses.
Politics is simply the smart-n-savvy people hiring sociopaths (politicians) to create bullshit, which is repeated by sycophants (MSM) and delivered into the brains of the team-masses of dumbasses. The dumbasses take the bullshit and convert it into self-delusion; and vote for the sociopath, who then does what the smart-n-savvy person hired him to do: FscrewK the dumbass!
All these capitialist defenders are like a bunch of children crying that their older brother took their candy. WFT did you think he'd do?
What amazed me is your blindness to the severe flaw in your own ideas. Before I respond, tell me Mr. NOT...what is your solution to the problem of self government and the ravages of capitalism? Share your deep thoughts on the solutions.
Bravo! orez65.
And I add this from Richard Benson of Specialty Finance Group:
“Man is such a lucky creature because machines do all of our work. Our economy and prosperity stand on the shoulders of the geniuses who invented the wheel, lever and plow, and the creative thinkers who dreamed up mathematics, the internal combustion engine, silicone chip and the internet. These innovations have led to wondrous and unforeseen leaps forward for mankind. Human ingenuity, mixed with a desire to do better and produce more with less, has relentlessly driven productivity forward…”
Therefore, asks Benson, "If mankind's machines produce more with less labor each year, why shouldn't the dollar I make this year buy more next year? Shouldn't this increase in productivity flow through to the wage earner and saver?”
Yes, it should. If a free enterprise culture produces innovation, then that culture should be a part of the resulting prosperity.
Re: If a free enterprise culture produces innovation, then that culture should be a part of the resulting prosperity.
How, well, sweet...
To bad the smart-n-savvy planned things otherwise, huh?
Must be nice to live is a fantasy world of a future capitialist utopia with all the smart-n-savvy people missing from it.
Right on. It is not the business of "a business" that needs to be protected for a good economy. It is the business of "creating business" that needs to be protected. People confuse the profitability and survival of one company with the survival of the business system. In Marx's example, he makes no mention of the 3 other businesses that were making the same product cheaper and better and able to survive.
Re: It is the business of "creating business" that needs to be protected.
The smart-n-savvy people LOOT business, just as they loot the dumbasses using government.
Figure out how to control the sociopaths and maybe your fantasy economic system will be realized.
Charles Hugh-Smith is as about as far away from a socialist as I am. You will also note that he said "First, a disclaimer: this is an interpretive discussion of some aspects of Marx's analysis (which was based on the capitalism he observed in the late 19th century) applied to present-day cartel-state capitalism."
As he has identified many times in his previous articles, our problems are not related to free market capitalism because that no longer exists on a large scale. Our economic problems are due to crony capitalism enabled by a fractional reserve fiat monetary system that, effectively, no longer has any kind of real reserve requirements which has further resulted in the financialization of nearly everything in turn made far worse yet by such things as leverage and rehypothecation.
Perhaps Charles Hugh-Smith is not a socialist. But linking the principles of capitalism with the exploitation of economies by major banks is to provide economy-destroying socialists with propaganda they use in capturing the young and low information citizens.
When a government gives the ownership and control of its medium of exchange for all things salable, for all commerce, to a small group of private international banking families to use in secret to become a supra-national world force, there remains no relationship to free market capitalism. In fact, it is to render individuals and nations powerless to protect themselves, whatever their government.
“I quote a Demand for Monetary Reform in England in 1943 under a Rothschild-controlled banker economy:
“All forms of government, whether conservative, liberal or labour, fascist, socialist or communist, fall alike under the control of a political Power Group, which is ultimately, and in large measure unwittingly, dominated by the Money Creators and Manipulators. In this way the national political power which - if the individual is to enjoy the maximum of personal freedom consistent with his duty to his conscience and his fellows - should be distributed throughout the people, has been usurped without their knowledge or consent.
“It will be seen that the present monetary system, which by its disregard of primary physical and ethical laws is inevitably destroying the civilization into which it has been introduced…”
The motive of capitalism is not one-world-government. The proponents of one-world-socialism, the money manipulators that own and control America’s currency, are directing their progress and power to a one-world-government.
The late Dr. Carroll Quigley, author of Tragedy and Hope, confirms the trajectory of socialism toward world government.
Marx had a looney 'labor theory of value. He also got the groups in comflict wrong.
http://fofoa.blogspot.com/2010/07/debtors-and-savers.html
He is only followed now because there is great power in redistribution of wealth.
Re: He is only followed now because there is great power in redistribution of wealth.
Followed by who? The smart-n-savvy people use the government to FscrewK the dumbasses at the bottom.
You think the loot is moving to the "da people" when flowing to Big-Military, Big-Road, Big-Water, Big-Ag, Big-Ed, Big-Finance, Big-Airport, Big-PoliceState, Big-AntiDrug?
The smart-n-savvy aren't dumbasses. They aren't capitalist or socialist; they are screwIST.
Christ.... Restribution of wealth my ass. It's going UP not down.
We are not mired in capitalism gone wrong, or a failed capitalism model… We are mired neck deep in socialism. And we only need to face the eastern horizon to find the bubbling core of socialism’s high priests – The London School of Economics.
The significance of the London School of Economic's role is underscored by its founders… radical Fabian Socialists who would urge destruction of economic models based on individual achievement, free enterprise and freedom. So many highly placed economists and government policy makers have passed through the London School’s portals that they’ve become virtual alumni of advocates and practitioners for state socialism throughout the West.
The three most prominent leaders in the early days of Fabian Socialism were Sidney and Beatrice Webb and George Bernard Shaw. The Webbs, Jewish socialists, also founded the London School of Economics and Political Science in 1895; John Maynard Keynes, a close friend of the Webbs, also was a Fabian socialist.
A stained-glass window in the Beatrice Webb House in Surrey, England is especially enlightening. The mural depicts Shaw and Webb striking the earth with hammers. Across the bottom the masses kneel in worship of a stack of books advocating the theories of socialism. Thumbing his nose at the docile masses is H.G. Wells (who after quitting the Fabians denounced them as ‘the new Machiavellians’). The most revealing component, however, is the Fabian crest with appears between Shaw and Webb. It is a wolf in sheep’s clothing.
Fabian Socialist Keynesianism, which is the model used by Federal Reserve and most of today’s Ivy League universities, is committed to wiping out Christianity, to wiping out free trade using government-connected monopolies, to wiping out the middle class as prime enemy number one, and to setting up an international socialist One-World-Government.
And who today knows that it was the Fabian Socialists who came to Lenin’s assistance, helping him swell his ranks by one of its own, Ramsey MacDonald, later a three-time prime minister of Great Britain, who arranged for Lenin to use the Brotherhood Church in London’s east end to swell his ranks. And it was another Fabian, a wealthy American soap maker named Joseph Fels, who financed Lenin’s conference with a grant of 3,000 pounds.
But for that early cooperation between the communists and the Fabians, Lenin might have faded into the background and 62 million people been spared their lives under his continuing regime. Instead, here we are, hellbent toward his socialistic one-world concepts under the leadership of Barack and Michelle Obama, Nancy Pelosi, Harry Reid and Norman Podhoretz. And the death toll continues to rise.
Did it even bother John Maynard Keynes that his old and faithful Fabian comrade, George Bernard Shaw, praised Lenin as the “greatest Fabian of them all”? Or was he in total agreement?
As members of the Fabian Society, “which had as its chief aim the spreading of socialist ideas by non-revolutionary means: by reason and persuasion rather than by violence,” the Webbs raised funds for the new School of Economics and Political Science from wealthy patrons such as Charlotte Payne-Townsend who was to become the wife of George Bernard Shaw on June 1, 1898.
What were the objectives of the School? The Webbs explained that the primary object was to train students to understand the economic structure of their own and other countries, and so understand the relation between economics and politics. The goal was "gradual" communism.
It is nothing short of an eye opener to check out how many Keynesian policy officials and government economists who have been trained at the London School of Economics.
Re: We are mired neck deep in socialism
Crony-socialism Crony-capitialism, what's the different?
Nobody bitches about the CRONY scams they've been getting rich off of for 60+ years.
Big-Military, Big-Road, Big-Water, Big-Airport, Big-Ed, Big-Finance, Big-PoliceState, Big-OldFart, Big-Welfare, Big-Ag, Big-AntiDrug... are all scams that the Smart-n-Savve people have been looting the government with.
Do you expect the smart-n-savvy people to follow some sort "rules" which prevent them from being smart-n-savvy? WFT? Life is about screwing people any way you can. And Big-Gov is as lagit as any other scam that's ever been run on the dumbasses.
I think you have missed the meaning of life; it is not taking advantage of your fellow man... Instead it is making something of yourself and whenever you can helping your fellow man.
The despots, tyrants, socialists, communists, fascists and their co-conspirators are our enemies, not our countrymen. We must root out these destroyers and return to the gift that was given us by the selfless, brave Founders of this country. We are to celebrate individual achievement and individual freedom; that's the meaning of life, our Constitution, and the Declaration of Independence.
And when you have a chance, skim through the pages of history and compare the lives and political systems of Joseph Stalin and George Washington and you will discover the significance of their differences for the people who surrounded them and for those who followed them - in short, the impact that they had on the world.
Re: I think you have missed the meaning of life;
W T F?!!! The meaning of life is accumulating BLING and females. Christ....
The libertarians are as clueless as the socialists. No wonder you guys spend all your time arguing with each other over who SHOULD get the loot, while the smart-n-savvy are happily screwing all of you.
Who should get the loot…? Many Americans have willingly given their all to safeguard this country and the liberties for which they risked so much.
Many of those who shaped this country not only gave their fortunes but their lives, especially those signers of the Declaration of Independence, for the opportunities they had found in a new land, for the right to regulate their own affairs “so that they might assure the greatest good to the greatest number” – so that they could have a voice in their own government.
When Dolly Madison died, wife of the fourth President of the United States, she was, in the words of a contemporary, “…widowed, poor and without prestige of station [but] the same good-natured, kind-hearted, considerate, stately person, that she had been in the hey-day of her fortunes…
It was Dolly Madison who stayed behind in the last minute to save the original signed copy of the Declaration of Independence when Washington was invaded during the war of 1812 and Madison had fled the White House.
Before James Madison died in 1836, financial ruin had overtaken him as it had his fellow Virginia planters, Jefferson and Monroe, and his wife inherited a debt-ridden estate…”
As for President Andy Jackson at the end of his life, Richard M. Ketchum writes in “Faces from the Past”:
“’My lamp is nearly burned out,’ he admitted, ‘and the last glimmer has come.’ For the past two years not a day had passed when he was free of pain; one lung was gone, the other diseased; he was tormented alternately by dropsy and diarrhea, racked by chills and fever. He sat quietly in the armchair, saving himself, a wasted figure in an old-fashioned, snuff-colored coat with high stiff collar. Beside him were his Bible, a hymnal, and writing materials; too poor to hire a secretary, and almost blind, he nevertheless did what he could to answer the flood of correspondence he received. The hand of death was on him, and each day the procession of visitors increase…”
William Ellery of Rhode Island, signer of the Declaration, returned to his home to find it destroyed and his personal treasures stolen... During the war, Delaware signer George Read's home was confiscated by the enemy, his wife taken captive and he himself was driven from place to place for six years... and the list goes on.
Re: especially those signers of the Declaration of Independence
Dude, do you know what year it is?
Stop with the childlike view of reality. People are asshole, the asshole win.
The Constitution was a nice idea, the smart-n-savvy people changed it (or ignored it) so they could they could FscrewK the dumbasses.
Are corporations people? Should the Fed exist, are all question the "children" ask. The "adults" that run society don't give a rat-ass about your Constitution or your fantasy of history.
Find the assholes, they've got to loot. Deal with.
What year is it? The year of Edward Snowden! And even a child can hear the glass of the tyranny cracking. If you have kids, ask one of them what's going on.
JR, I try not to swear but that is a f-ing outstanding post. Thanks for the history. I read ZH for comments like yours.
BTW, your basic assertion in the first sentence is absolutely true and what the Left always tries to hide.
This is not socialism. In socialism, there is a redistribution of wealth from the rich to the poor, an attempt at "equalization". This is the opposite of what we see today: the wealthy parasites are hoarding all trhe remaining wealth, and 99% of the middle class is being raped and will soon end up as serfs. I find it hard to believe that even the most rabid libertarians could call that "socialism".
You can wrirte all the long posts you want, but that does not change the fact that we are not in a socialist system. Don't get me wrong though, I'm not really a supporter of socialism; but this sure as hell ain't it.
Except the "value" of a product is not objectively embodied within it. The TV example is beyond idiotic. If 100 workers product 1000 TVs, if they produce 2000TVs their marginal product of labor has increased. Not decreased. They're able to produce more with less or the same. That's a productivity increase. They don't walk away with less because they're more efficient. That's part of the "labor value" theory that has been repeatedly destroyed intellectually as moronic.
Imagine this: a guy is on an island, and starts inventing incredible stuff on his own. He's brilliant. But everything he invents has already been produced by the market 40 years before he can get it to it to market. He makes a Walkman! From wood! Do I have to compensate him for his labor hours for his wooden Walkman? No! That's not how anyone would arrive at the price and therefore his taken home pay.
And showing an employment chart to show the marginal product of labor is declining? Please. That doesn't make sense in an imagination. How about this one?
And lowering the prices doesn't increase sales? There's not enough income to buy the products? Lower the price some more and see what happens. OH. You can't. Because your model set the price with the labor value theory. Stuck in the round about where nothing gets solved and you spiral down into ruin.
This is fantasy land shit. It's the very crust of what Marx got wrong.
Re: He's brilliant.
Ever notice how the "brilliant" people aren't all that smart-n-savvy?
The guys who SCREWS the brilliant guy IS smart-n-savvy.
ScrewISM, ask for it by name.
Keynes was really a Marxist after all.
Re: Keynes was really a Marxist after all.
Keynes noticed that the government spending money would create jobs. Keysen also said the loans should be paid off. The (often bearded) "Keynesians" never say to pay off the loans. Just as there are very few Christians but LOTS of "Christians" there are very few Keynesians but LOTS of "Keynesians".
The smart-n-savvy people screw the dumbasses using "Keynesianism". There's a huge different.
The only reason politicians swear by "Keynesianism" is the it gives them the fig leaf of argument they need to sell an unconscious public in order to sieze control of the printing presses and enrich themselves, the politically connected and the bankers.
If selling belief in the moon being made of cheese would enable them to print and spend money, they'd be telling us that myth with a straight face.
Re: If selling belief in the moon being made of cheese would enable them to print and spend money, they'd be telling us that myth with a straight face.
Exactly. The fantasy of capitalism can't exist any more than the fantasy of socialism can (or Marxism).
There is ONLY screwISM. Those with the duplicity to FscewK the dumbasses with bullshit win.
JMK also said you should put away revenue in savings during good times, then use the govt pump to help stimulate in bad times. He never said to just pump pump pump. The crooks in the media never mention this. The 2 ideas are integral to each other. If they are both not used, it does not work at all.
Ben Franklin was right. Our system works great if people are moral more than not, and enforce the law.
Anyways, we have had socialism in the US for a long time. We need to get rid of it.
Re; Our system works great if people are moral more than not, and enforce the law
Which means it CAN'T work. People are self-serving assholes. Always have been, always will be.
Keynes never advocated for savings of any kind.
OMG!! Where do I start??
"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."
And you are WRONG, WRONG WRONG on "The key point" Grasshopper! If the employer invests in machinery, it still costs the manufacturer $1M in wages! He just gets 200K TVs produced now instead of the 100K TVs produced before. The workers still have the same take home, it's the PRODUCTIVITY that has changed. The improved productivity allows the manufacturer to charge a lower wholsale price, and thus more people can now afford televisions. The manufacturer pays for the machinery because he now sells more TVs.
How does investment in machinery that increases productivity force a decrease in wages? The author introduced his argument as an "or" ["either lower the wages paid to the workers or invest capital in machinery"] yet he drew the conclusion as if there is no choice but to lower wages. Before TVs, cars, furniture, etc. were mass produced, only the wealthy could afford them. Productivity improvements through capital investments make things better - period.
Also, the author conflates "crony" capitalism with capitalism. Crony capitalism is Fascism or Socialism, but definately not capitalism.
Re: Crony capitalism is Fascism or Socialism, but definately not capitalism.
That's because capitalism is a fantasy of (mostly) semi-autistic males that can't seem to comprehends that the smart-n-savvy people get MORE wealth by FscrewinG people than competing in market place and possibly failing.
FFCS, if - for a moment - you could possibly THINK like a smart-n-savvy person, wouldn't YOU purchase some sociopaths (politicians) and create a government to FscrewK the dumbasses by controlling their currency?
(Like, OMG, a bunch of idealists on this site).
Up your meds.
Re: Up your meds.
Thanks, I'll take that as two point.
Easier to bitch about the "capitalism" not existing than trying to figure out why it can't.
Okay, put down the meds an enlighten us with your solution. Let us see your genius rather than just your endless whining and bitching here.
I think the main compnoent is that ever increasing production, however its achieved eventually leads to bubbles.
The last 30 years provided more and eaiser ways to make homes. Did we make better homes, or more homes? We made more, lower quality homes. Men used to actually hammer the nails, now everyone has an air gun. Workers used to have to turn a screw driver with their hands...now we have screw guns.
So now we have a glut of home built in lonely awful suburbs and elsewhere. Do you really want to live in a subdivison with no nieghbors?
Same thing happened leading up to the great dust bowl in the 30's. Each new increase in productivity (machinery, automation) didn't mean working less hours to make the same amount of wheat...the inclination was to increase production, which was great until the wheat market collapsed.
And now we have subisidies for farmers to prevent that from happening again. Tell the farmers(big agra) you want to take away that line in the federal budget.
Was Marx entirely right? Of course not...but the fact of the matter is that the competitive incentives in capitalism, lead to these types of self-implosions just as sociialsim has its own self-destruct designs. Each system is trying to combat a side of our biology and mentality that is considered illogical, if only we could all be SPOCK.
Ah, but the archetype that is "The Next Big Thing" only throws the system out of whack temporarily. After recovering from the recoil, the production increases are incorporated wisely and the next big thing comes along.
I think there is a problem with the speed of distribution of new things. Take Vioxx, it came on the market and 10 million people started taking it. 30,000 heart attacks later, they banned it. Turns out, it's still very useful for certain health conditions -- just not a cure-all -- so now they're fighting the government to let them put it back on the market. If we would just take it a bit slower, we could curb that recoil and incorporate new things responsibly.
Each successive "Next Big Thing" requires more and more energy and resources, and the world is running out of both. This will all end very badly.
I am so tired of the endless claims that the world is running out of resources. We are not even close to running out of anything. Human ingenuity applied in free markets endlessly finds solutions. The other problem with this idea, if you believe it is that it leads to the belief that someone with near infinite power will have to distribute the shortages and manage mankind for their own good. This empowers the leftist-statists.
FreedomGuy, I think you've been reading too much Peter Schiff. Have you ever worked in the resource sector? Do you have any idea how specifically the resources mined and taken from the earth get transformed into goods and services for you to consume? Why has global oil production not increased in 8 years despite price more than doubling, almost tripling over that period? Why did the US peak in oil production in 1970, and has gone down ever since, with a few minor and temporary reversals along that path as new fields were developed (that, much like today's short term tight oil boom, were at the time hailed as proof that the US would not run out of oil)?
What are the typical copper ore grades being mined today, and how do they compare to 50 years ago?
Not ever increasing production, but ever more efficient production. This productivity improvement leads to lower prices and greater availability of goods.
he talks about wage per produced unit.
you double production then the wage per produced unit becomes twice as small.
the article is great and explains it all perfectly.
The only thing not pointed out clearly is that capitalism does ok as long as it has new markets to expand into and only starts to fail when markets are full and there is no more way to expand (trully global markets)
So, your read of the following:
" 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."
results in you understanding "wage per produced unit"?
You read "...$1 million in pay...they now take home $500,000" and you understand "wage per produced unit".
BWA-HAHAHA!!!
Thank you Charles Hugh-Smith for giving Marx some credit. His critique of capitalism was pretty much spot on. His solutions, not so much. Although, to be fair, we should remember that no one really ever tried his solutions. Lenin and Mao hijacked the rhetoric of Marxism for their own dictatorial purposes, and that pretty much set the pattern for all the other "Marxists."
Americans tried Marx's solution.
And we're trying it again now!
Of course, there are only two polarized economic / political options available to build a society around -- ultra free markets or fully state controlled ones. THERE IS NO IN BETWEEN... ;)
100 million innocent dead people is proof enough for me and most others that believe in empirical reality.
Couldn't your argument be applied equally to Fascism:
"To be fair, we should remember that no one really ever tried Fascism. Hitler and Mussolini hijacked the rhetoric of Maurras and Sorel for their own dictatorial purposes, and that pretty much set the pattern for all other "Fascists."
Marxism and Fascism do not work - because they consolidate too much power with the State. "Imperfect" people take over the State, and ruin results. This pattern occurs relentlessly throughout history, but no track record is worse than that of the Marxists.
Re: Marxism and Fascism do not work - because they consolidate too much power with the State.
DO NOT WORK?!! W THEE F do you think you've got now and in Beijing? What do you think the boyz in Bussels are trying to recreate?
DO NOT WORK!!!!??? Fascism is the only NATURAL system that exists. The smart-n-savvy people run things the dumbasses worship their success.
do I detect a tiny bit of survivorship bias here?
Freedom seems to work best and there are no dictators involved. One day, someone will try that.
Why does capitalism fail?
"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."
Even if you accept that China is an example of capitalism, there are lots of other options beyond this false dilemma presented by CHS.
CHS FAILs!
Remember that China has a government manipulated currency, central planning and is officially communist before you begin to state that they are any example of real capitalism. What the lesson that most lefties miss but the Chinese actually are starting to get is that more freedom results in more prosperity. It is a matter of degree.
The problems with capitalism (free-markets) observed by CHS are actually the problems of increasing government interference with capitalism.
Re: The problems with capitalism (free-markets)
The problems with capitalism (free-markets) is they are a fantasy of (mostly) semi-autistic males (as is socialism).
Re: problems of increasing government
This is ONLY a problem if you aren't getting RICH off the government. If you'd look around, you'd see the smart-n-savvy people ARE getting rich off the government.
This is a financial site. Do you see ANY GODDAMN PATTERN here? WFT would YOU do if YOU happened to be smart-n-savvy? Eliminate the best way that exists the FscrewK the dumbasses?
Jeeezzzz. How simple can things be?
It's okay, I can see that you are mentality handicapped sociopath that can not get along with others and understand the long term benefit of not screwing people on the market so that your returns in the long run can be that much better.
You're short-sighted thanks to your Marxist philosophy that you have adopted without even realizing it.
Pure Capitalism cannot exist anymore for cartels and globalization will only happen quicker. The Monetary system is a dying game.
Good luck wankers. You'll never make your marker. Just visit the cemetary to see your lost marxist sitting 6 ft down in a dirt bed.
http://tpc.pc2.netdna-cdn.com/images/various_uploads/Poster_Angry_Baby_C...
As always a great article by Charles on where we currently are and why there may be trouble ahead.
It still seems the best way out of this is to force recognition that the timeline in the zerohedge tagline is actually a great deal less certain than most realise. If a critical mass of people start to believe we may be able to devleop medification to have the capabiiity to increase human lifespan by a factor of 10 say within the next 50 years and furthermore IF we can credibly suggest that behaviour rather than wealth will be the principal eligibility criteria to get this treatement then we may be able to throw capitalism, marxism and cronyism all onto the scrapheap of history where they all belong and try something new. We are remarkably unfocussed on finding out if this is possible at present and that is a human failure of epic proportions at present.
"The key feature of cartel-state capitalism is that increases in price do not reflect an increase in value provided, they only reflect an increase in rentier skimming. In effect, eliminating competition is the only sure way to maintain profits and accumulate capital. The best way to accomplish this is to influence the state to impose or support one's cartel."
The money quote. "Cartel-state capitalism." Just about sums up 200 years of history. Print this out and frame it, hang it on the wall.
I up-ticked you because I agree.
That quoted passage attempts to explain something which has been rolling around what's left of my mind for quite a long time but I've never found the time to articulate it. Two things on this:
- I heard someone important say the other day that "big corporations have no interest in free market capitalism any longer. They are only interested in controlling and dominating their marketplace."
Which leads me to my own experience:
- I posted the other day that I've noticed how ever more corps are distancing themselves from their customers. Nowadays you struggle to find out who's who in any large corp or bank, let alone what their office addresses or telephone numbers (apart from the Customer Helplines which are stuffed full of dorks who read out scripts). Trying to get hold of any manager is virtually impossible.
Serving a free market's customers depends upon knowing a thousand particulars that will be learned only by those interested in knowing them.
Re: Serving a free market's customers depends upon knowing a thousand particulars that will be learned only by those interested in knowing them.
Which is why the smart-n-savvy people don't bother. They loot the corporations and the government and the dumbasses pay.
WFT is so hard about understanding that the asshole always win.
Serving a free market's customers depends upon knowing a thousand particulars that will be learned only by those interested in knowing them.
Screwing the dumbasses depends upon knowing a thousant particulars that will be learned only but those interested in knowing how to create bullshit.
Live and learn.
A communist revolution would be better than the mess we are in now. Bring on the workers paradise!
This article is bullshit. CHS (who I usually enjoy reading) claims to analyze Marx, when in reality he is accepting Marx's main premise that labor is entitled to a certain percentage of productivity.
The main difference between capitalism and Marxism is that capitalism knows that labor is a component of productivity rather than the reason for productivity. People start businesses to make money, not to create jobs or serve any larger purpose (i.e., the greater good). Labor is subject to supply and demand laws, like other inputs of productivity. Too much labor = cost of labor goes down (salaries). Not enough labor = cost of labor goes up.
What Marx failed to understand is that under capitalism, labor is FREE (as in FREEDOM) to save money and become the producer!!! Invent the next best thing. Grow the pie. Don't demand an ever larger piece of the same pie.
Capitalism also means, of course, minding your own business. Something that government and socialists CANNOT do. So, yes, we have a big problem in this country. But it is not capitalism. It is big government and socialism. Crony capitalism, while bad, doesn't hold a candle to the damage of big gov and socialism.
+3 dead philosophers
You believe that labour "produces", do you? To "grow the pie"? Would you believe that the size of that pie has actually been dramatically shrinking over the history of humankind? Since 97% of the world's energy literally comes from burning dead things that used to be alive (fossil fuels, food, and biofuels), and since energy is needed to do absolutely everything in society and the economy, then in order to increase the size of "the pie", we'd have to increase the total planetary production of living things for us to then kill and burn. In fact, it's actually gone down 10% despite the Industrial and Green Revolutions. If you factor in all the fossil fuels we're burning and not replacing, then it's gone down way more.
This is why the American empire was built -- to vacuum up the remaining resources from the rest of the world after the US hit Peak Resources is 1970, and has been going down ever since (US oil production is much less than what it was in 1970 -- that's why the US today has an oil trade deficit). Arguably, the reason the US empire is now crumbling is because the world at whole is now at Peak Resources and can't sustain that inflow to the US anymore (sure, the system is corrupt but it has been corrupt for 100 years since the Federal Reserve took over -- what's so different about today that makes it actually start to fall apart? -- an inability for the economy to continue to grow its way out of corruption and institutionalized theft from the middle class).
Can you define for me what "production" actually is?
You are building upon that same sad fatalism, why not just solve the world the trouble of supporting you and commit suicide instead?
Commit suicide? It may be possible that we could save the world if we develop solar energy, so that is essentially my life's purpose. I see it as unlikely that we'll make the required changes though, given the lack of understanding and concern amongst in the broader population, and seeing that our oppressors seem to not care one bit about our future.
" Can you define for me what "production" actually is?"
Sentient beings need and want things. The tree in my backyard produces air, I need the air and breath it; that is non economic production because no voluntary exchange of values took place. If you needed or wanted some air to breath and couldn't get any maybe I would bottle up some from my tree and bring it over to you for exchange of all the food in your house. That would be economic production because an exchange of values was involved.
You know..... That gives me an idea. I'm going to write a business plan and take it on over to Lord Rottenchild, I think we could get something going here.
I suppose my gripe with the article (or maybe Marx and not the article) is that, through technology, the return of productivity per unit labor increases. So, it seems terribly obvious to me that if the input of labor stays constant and output (productivity) increases, naturally labor will be proportionally smaller. Was Marx saying that efficiency is a bad thing? I think he was just arguing about price.
Also, it's kind of silly to assume that there will be no more large resource discoveries or technological advances. There's still a lot of wind, sun and tides we can harness -- that tech is still in it's infancy thanks to oil (not bad-mouthing oil btw, it's great stuff).
There are no more big resource discoveries left, or magic technologies to save our asses. Look up Tom Murphy's blog "Do the Math", in which he analyzes all of our energy options in great detail. He is a NASA physicist with experiments on the Moon. The future does not look good.
Says the guy that doesn't think about other bodies in our solar system when talking about resources...
I'm sorry to break the bad news, but Star Trek misled us all. The other planets do not have resources we could use, because the amount of energy required to get them back here is literally astronomical. Once again, TV has led us astray. We're stuck on Planet Earth and will have to deal with it.
Give up on Mark. He falls for the endless claims of "limited resources...we are all going to die!' BS. I believe there was a quotation from someone famous at the end of the 19th century saying we should close the U.S. patent office as all useful things had been invented.
What is in fact, limitless and proven by history is that mankind's ingenuity and ability to solve problems is unlimited. While it makes me uncomfortable, I will even say that it could be solar energy, wind, tidal, or even fusion. If we have free markets which actually reveal true energy inputs when left alone, we will find our way.
Why is it that the US needs to import almost half the oil it burns, FreedomGuy? (the US oil trade deficit is 13% of global oil production). Why hasn't "mankind's ingenuity" been able to "solve the problem" of decreasing US oil production and increasing US oil imports?
Take a look at oil production in Texas. Oil shale is a thousand Spindletops.
Would you please be able to provide charts of historical oil production rates in both Texas and the whole US? Thanks.
I bow to your unlimited knowledge that "There are no more [...] magic technologies to save our asses."
Keep that statement in mind, so can laugh about yourself when you learned some humility.
Learn some humility? So I am being hubristic for pointing out the facts and trends which are shaping our future, am I?
I guess I do exhibit humility -- for 25 years I've worked in aquaculture and forestry, and for the last 5-10 years in mechanical engineering designing pipelines, ports, factories, and power plants. I guess that experience has instilled in me the humility to accept that we do not "produce" anything, and that we are still bound by the natural laws and processes that support us, that have not in any way been overturned as a result of Treknology.
I'm one of the people designing this magic technology you refer to and I can tell you that there are indeed no new technologies that are going to save our asses in time. The only one which has a hope of helping us out is solar thermal and PV, along with electric transportation and some form of synthetic carbon fixation. But the sheer magnitude and time scale of the transition required is well beyond what we have available, as I'm sure most here would realize that the current system is ready to blow at any time. After that, it will be much more difficult to make the transition. In short, we had the opportunity in the 80's and the 90's, and we blew it. And it won't be just our proverbial "children who will pay the price", it will be us. WE are the children of the 80's that those warnings referred to. The end is here, now, staring us in the face.
I'm sorry if you don't like the facts and numbers I present, but they unfortunately are what they are. If you prefer to instead bury your head in the sand and place your faith in MSM science fiction Star Trek koolaid, I guess that's your right. But then in that case you're just another statistic contributing to the problem.
Too bad you select to look at "the opportunity in the 80's and the 90's, and we blew it" but prefer to ignore things such as the fact that the Club of Rome, among others, forecasted in the 70s that vast parts of humanity would soon die off from starvation, and that didn't turn out that much on target or a helpful prognosis either.
Nobody can forecast what discoveries/inventions will be made in the future, so you brushing off any possible serious improvements is as baseless as someone expecting salvation from technology.
You do not exhibit humility, but more a kind of fatalism. And I'm an electrical engineer too, so put your supremacy trophy away.
GREAT ARTICLE
Tyler you just lost a shit ton of my faith in you. For months now I began thinking you were starting to come around, but somehow Marla has still corrupted you and you still have not yet learned the lesson of Robert Paulson.
["His name was Edward Snowden"]
Ill put this in simple terms any first grader can understand.
Marx was an EDOMITE working for the ROTHSCHILDS who CHANGED HIS NAME to sound less "JEWY'. More here: http://labviruscom.blogspot.com/p/the-edomite-bloodline.html
Who cares if he was right or not, only shows his foretelling of the agenda having played itself out. Whoop Fucking Eee. <salsa fart>
Now gather your testicles together, and FOCUS on the enemy, having clearly DEFINED it. Further, ENLIST those who can help in this fight.
Dont dilly dally. Shit or get off the pot. Or keep jumping sharks, I dont give a damn.
http://labviruscom.blogspot.com/2013/07/sometimes-it-takes-all-i-have-to...
Seriously Tyler, youve totally lost sight of the importance of making fuking SOAP. And chemical burns.
I think its time to slice your nuts off. We were told you would say these things.
That was an article submitted by Tyler, not Tyler's opinion himself.
There are many Tylers and they aren't named Tyler.
Nice try, Smith, but not only is your "analysis" the same old apologist crap defending Capitalism as a viable "going concern", but you start with calling Marx "prescriptive". Newsflash...anyone "seriously" interested in the smartest economist of all time (Marx) should be aware of "statistical writing analysis" applied to all historic writers as they are published in modern times. It is widely known that Engels is the "prescriptive" voice in the Manifesto and most other "pro-revolution" pieces. Marx came from a wealthy family (of course) and hence cited the flaws of the oppressive Capiltaist engine as the mechanism of its demise. If you squeeze a balloon at the bottom, everything goes to the top...the balloon's volume is equal to man's caloric output...it is finite. Sound familiar? Nix the micro-econ as it is a subset of the basic overall structure. Human behavior, as it relates to "producing" is scientifically measurable in calories. Once something is produced for use, having it resold by adding margin is not "production"...it is dilution. Sound familiar? Debt, whether measured in money, or QE29, is merely the diluted exchange value (inflated, perverted, "vulgar" arbitrary assignment of a number that is not related to caloric output) given to "use value". The "profit" is passed over and over and over without producing a Goddam thing. Ti can only go on for so long...and "that", my wise friends, is what Marx saw.
Nice try, Smith, but not only is your "analysis" the same old apologist crap defending Capitalism as a viable "going concern", but you start with calling Marx "prescriptive". Newsflash...anyone "seriously" interested in the smartest economist of all time (Marx) should be aware of "statistical writing analysis" applied to all historic writers as they are published in modern times. It is widely known that Engels is the "prescriptive" voice in the Manifesto and most other "pro-revolution" pieces. Marx came from a wealthy family (of course) and hence cited the flaws of the oppressive Capiltaist engine as the mechanism of its demise. If you squeeze a balloon at the bottom, everything goes to the top...the balloon's volume is equal to man's caloric output...it is finite. Sound familiar? Nix the micro-econ as it is a subset of the basic overall structure. Human behavior, as it relates to "producing" is scientifically measurable in calories. Once something is produced for use, having it resold by adding margin is not "production"...it is dilution. Sound familiar? Debt, whether measured in money, or QE29, is merely the diluted exchange value (inflated, perverted, "vulgar" arbitrary assignment of a number that is not related to caloric output) given to "use value". The "profit" is passed over and over and over without producing a Goddam thing. Ti can only go on for so long...and "that", my wise friends, is what Marx saw.
Nice try, Smith, but not only is your "analysis" the same old apologist crap defending Capitalism as a viable "going concern", but you start with calling Marx "prescriptive". Newsflash...anyone "seriously" interested in the smartest economist of all time (Marx) should be aware of "statistical writing analysis" applied to all historic writers as they are published in modern times. It is widely known that Engels is the "prescriptive" voice in the Manifesto and most other "pro-revolution" pieces. Marx came from a wealthy family (of course) and hence cited the flaws of the oppressive Capiltaist engine as the mechanism of its demise. If you squeeze a balloon at the bottom, everything goes to the top...the balloon's volume is equal to man's caloric output...it is finite. Sound familiar? Nix the micro-econ as it is a subset of the basic overall structure. Human behavior, as it relates to "producing" is scientifically measurable in calories. Once something is produced for use, having it resold by adding margin is not "production"...it is dilution. Sound familiar? Debt, whether measured in money, or QE29, is merely the diluted exchange value (inflated, perverted, "vulgar" arbitrary assignment of a number that is not related to caloric output) given to "use value". The "profit" is passed over and over and over without producing a Goddam thing. It can only go on for so long...and "that", my wise friends, is what Marx saw. Simple, got it?
The issue in the article is not Marx, but the fact that increases in efficiency and productivity are consolidated to the top, and there is no attempt by the ruling classes to provde a solution, instead they are feeding off it and promoting it.
There are no ruling classes unless you allow them.
"that", my wise friends, is what Marx saw. Simple, got it?
Nope, I must just be daft prol. If I use my calories to go back to making shirt buttons by hand rather than just sitting around saving them waiting for the mangos to ripen, will that help. I'll go ask Ludwig.
The only thing Marx got right was how to die. Now if only the Marxists would save us the trouble.
Should I say sorry? To be PC? I spit on his grave in my morning walk. What a wanker.
Marxists' criticism of capitalism is often brilliant and accurate, just the same way that free market capitalists a la Milton Friedman's criticism of communism and Marxism is often brilliant and accurate.
The problem with both of them is that both philosophies are purely materialist and deny the importance of organic human ties. In other words, both philosophies think that a German (be he a consumer in the free market view or a worker in the Marxist view) has more in common with a Chinese consumer/worker than he does with his own fellow German who just happens to be a factory owner.
As Ezra Pound so eloquently put it, “[Economic] Liberalism and Bolshevism are in intimate agreement in their fundamental contempt for the human personality. Stalin ‘disposes’ of forty truckloads of human ‘material’ for work on a canal. We find the [economic] liberals talking about the export of ‘labour.’”
Marxism and pure free market capitalism are both internationalist world views that both lead to one practical conclusion: one world government.
You got it half right.