The Wicked Witch of the West's Hourglass: The flaw in Capitalism. Part I

[ProfessorPlum]

There is a huge problem with capitalism, and it is this: like the Wicked Witch of the West’s hourglass, the money in capitalism flows up, from the people who don’t have much of it to the people who already have a lot of it. This suits the “haves” just fine, of course, because they become richer and more powerful over time, but it isn’t good for the system overall because of two negative consequences: first, people with little money run out of it quickly, and people with no money are a huge problem. Secondly, the money soon stops flowing and you have economic collapse. When the music stops you are left with a feudalistic society; money and power concentrated in the hands of a few overlords, with serfdom for the rest of us.

So, unfettered capitalism leads to people with no money and economic collapse. That unhappy outcome is as old as capitalism itself, and so humans, being clever little monkeys, have put on our thinking caps and devised ways to avoid it.

What do we do about people with no money? For one thing, we promote the social virtue of people living within their means. People running themselves into penury do nobody much good, and so we encourage people to save, to budget, to scrimp, to be careful, to plan for education and retirement costs, to earn, and to take care of themselves. When people run out of money or are in danger of doing so, we have set up systems to provide it for them so they can take care of their basic needs: aid to widows and orphans, Social Security, unemployment benefits, bankruptcy, Medicare and Medicaid, disability, food stamps. All of these systems provide a safety net for people who are unable to exchange their labor for money sufficiently, including but not limited to people who cannot do so because of their age or illness or sudden loss of employment.

The other thing that we do to keep economic collapse at bay is to slow down the rate at which money flows upward by making sure that it goes from the haves to the have-nots at a sufficient rate. So the government enforces things like the 40-hour work week, overtime rules, the minimum wage, and other labor laws including support for unions, which ensure that the captains of industry reward work enough to get money back down to the bottom, to keep the system flowing.

In a capitalistic society, therefore, one of the government’s most important jobs is to take money from the top of the hourglass and put it back on the bottom, either directly through progressive taxation to support the safety net, or indirectly by forcing capital to exchange enough money for labor. It takes from the rich to give to the poor (where have I heard that before?), but the upside is that people aren’t rioting in the streets, we have a generally good standard of living, and (most) people don’t live in economic slavery.

Rich people hate that. A fair chunk of their income (and in some cases their wealth) is taken by the government to give to needy people, and many of them are forced – horrors – to pay living wages to their employees. Shortsightedly, many of them don’t see the benefit of living in a society where the government intermediates on behalf of the have-nots. What is worse is that we have designed our corporations to behave like sociopathic rich people on steroids. And as corporate power has grown, the rich have been eying and opting for feudalism and economic collapse. We are in another Gilded Age, and they just might get it.

For corporations and some rich people (for convenience, let’s call this mindset “corporatist”), feudalism and economic collapse aren’t bad things to be avoided, but rather features. The government can be starved into impotence, the safety net can be taken apart, and the less wealthy will then have to rely on the largess and good will of the rich. Of course, the great unwashed won’t be happy about this, but the corporatists will also have private armies and crowd-controlling weapons, so there is nothing to worry about. And what’s left of the government can be used to serve them as well.

Next: implementing the plan so far

[Possumpoint]

1. Flaw In The Logic

Government imposition of Income tax is theft. Taking one person's property to give to another.

Abolish income tax and impose a value added tax on everything purchased.

[ProfessorPlum]

3. ? Did you forget your sarcasm tag?

Otherwise, take that regressive libertarian pie-in-the-sky bullshit elsewhere and serve it to someone who just fell off the melon truck. I hear there is an Ayn Rand study group down at the local high school!

The income tax (and don't forget about sales, gas, payroll, and every other tax - why is it this argument always focuses exclusively on income tax?) is the only thing that keeps the capitalist economy churning, and is a small price to pay to live in a society with the level of economic freedom that we enjoy.

Otherwise, again, welcome to feudalism and stagnation! Enjoy!

[Possumpoint]

4. Come Back

When you grow up and really understand how things work.

[ProfessorPlum]

7. Killer reply.

Guess I'll have to read "Atlas Shrugged" again and figure out the real deal, huh?

[Possumpoint]

8. You Want To Discuss

I'll discuss. You want to attack, I'll attack.

[ProfessorPlum]

10. OK, let's discuss your great point, that income tax is theft

It's true! The government takes from the rich and gives to the poor. It's very sad for the rich, and I cry large, watery tears for them.

But why does the government do it? Because the alternative is worse for everyone, including the rich. Read what I posted above.

There you go, Mr. Tit-for-Tat. More Tit!

[Possumpoint]

15. Please Read

reply #14

[Name removed]

17. Deleted message

Message removed by moderator. Click here to review the message board rules.

[ProfessorPlum]

18. Thanks, TP, I'm not taking him too seriously

More like a bored cat with a brain-dead mouse. But you are right about their argument style.

[Name removed]

63. Deleted message

Message removed by moderator. Click here to review the message board rules.

[HughBeaumont]

66. Oh my fucking GOD.

You're a flat taxer.

Ha ha.

Ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha . . .

Holy shit. It's so absolutely pathetic that they don't even TRY to hide it anymore.

"Libertarian" - One Who's Ashamed to Call Themselves A Republican.

The first clue's for free, Steve Forbes Jr. . . . "Flat Taxin'" is just another neo-contastic method of screwing the poor even worse than they're already being screwed and absolving the rich of paying their fair share even more than they're not now.

20% of 15,000 = 3000. 12,000 isn't really much for the poor person to work with as far as their numerous bills go. 20% of 1,500,000 = $300,000. Somehow, I DON'T think Charlie Moneybucks is going to be starvin' on 1.2 million a year. Nor, odds are, will he start a business and hire American workers, as the past 8 years of reverse Robin Hood-winking has proven.

I know, I know. "Called Capitalism. Don't like your lot in life, work HARDER!" You know, because that's why we're all poor . . . we simply just don't work HARD enough! :eyes: :eyes: :eyes: :eyes: :eyes: :eyes: :eyes: :eyes:

Look! It's a Ron Paul rally! Run!

:eyes:

[Commie Pinko Dirtbag]

81. Holy CRAP, I posted #80 before reading this gem.

So you'd like the government to take less money from the rich and more from the poor.

I'll ask flatly: do you vote more often for Democratic or Republican candidates?

[Baby Snooks]

25. Correction...

The government takes from the middle-class and gives to the rich and the poor. Which is why our middle-class is ending up under freeway underpasses.

[Oak2004]

44. Trust me, the poor haven't been getting much from anyone

Check the undersides of your nearest overpass, or your neighborhood tent city, for further information.

[malaise]

100. That's only true if the rich don't drive on the roads,

bridges, etc. The social good is the reason for income taxes.

Great thread.

[glitch]

48. Ouch. That should have left a mark but I can see from the reply it went overhead.

:rofl: but I enjoyed it.

[ThomWV]

58. The only word that comes to mind is 'claptrap'

I think that is the word that is used to describe utter nonsense. Thanks for saying what you did, someone sure had to.

[Stellabella]

5. Absolutely wrong.

A sales tax is extremely regressive and affects the lower income levels disproportionately.

Right wing blather about income tax as 'theft' is ridiculous. 'Tax and spend' is the way government WORKS. Always has been, always will be. It's the way businesses work too, and households. The Repuke way has been to borrow and spend, which has led us to this disaster.

It's just plain sick to call income taxes 'theft'. How else are you going to pay for defense, the highway system, police, fire, schools, regulation of the food supply, etc.? When this country was in the best shape income taxes on the very wealthy were very high. And there were NO bankruptcies among the wealthy.

[ProfessorPlum]

9. You are absolutely right

A VAT tax (which we already have on many things, including gas) would never, ever fund the services we need from our government (and it certainly wouldn't cover the corporate welfare thieves we also seem to have to pay for)unless it was ridiculously high - which would kill the economy.

[nxylas]

13. You only have to look at my state to see the truth in your post

South Carolina has an extremely regressive tax structure (along with regressive everything else), with most of its revenue being generated through sales taxes. Trouble is, when economic time are tough, like now, people stop buying stuff, and the revenue stream dries up. It's why we're having to get stimulus money from the federal government, if our asshole Republican governor doesn't refuse it out of fear of seeing Democratic policies succeed.

[dgibby]

19. Yes, our multi-millionaire governor, who advocates letting the

economy collapse, even though it will be "painful" (but just not for him.)! And unemployment at 9.6% and climbing. Charleston area is planning to close 5 schools due to lack of funding. Do you know if the Gov's kids are in public schools (I seriously doubt it)?

[nxylas]

20. They're probably homeschooled

Though unlike most homeschooled kids, their reading list won't just consist of the Bible. It'll consist of the Bible and Atlas Shrugged.

[dgibby]

21. Speaking of the Bible,

I'm waiting for Sandford to announce that he's selling all his stuff and giving all his money to the poor! Maybe then he, too, could feel the "pain" he so cavalierly advocates for the rest of us.:evilgrin:

[nxylas]

22. The Republican Bible doesn't include those verses

In fact it's pretty much just Leviticus.

[dgibby]

26. How true! My bad!

:rofl:

[TrogL]

54. You forgot Revelations

It contains their justification for sheering the sheep.

[Possumpoint]

14. Your Reply

is wrong. Income tax wasn't instituted until the civil war and was sold as a tax only on the rich. If I remember right it was codified by the 16th amendment which was finally approved under questionable circumstances. Our income tax produces $1.4 trillion dollars of income. When you compare that to the $535 billion potentially paid on the national debt it doesn't cut it. Corporate taxes make up much of the difference but companies have learned to put their headquarter offshore.

When our federal government was first created, public welfare wasn't part of it responsibility. Now everyone looks to Uncle Same with their hand out. The destruction of the republican form of government occurs when the population learns that they can look to Uncle Sugar and expect money to flow to them.

I don't buy the the argument that a VAT hits the poor dispositional. I want the VAT on everything. That includes stock purchased and received as pay. If you bring goods into the country, pay VAT.

[ProfessorPlum]

16. So your argument is that we used to not have a safety net

or an income tax . . . so? Do you propose that life was so much better back then? Whenever I read about the 19th century, it's all farmers marching on Washington because they are starving to death, and massive fluctuations in the market that leave people exposed, people bitching and whining because they are being beaten or killed when they try to organize labor, dying of disease and poverty, being maimed in mining accidents and left with zero income . . . a real paradise.

the public welfare IS part of government's responsibility. The "general welfare" is mentioned TWICE in the Constitution, both in the preamble ("in order . . . to promote the general welfare") and in the clause that gives the government the ability to raise and spend TAXES: "to pay the Debts and provide for the common Defence and general Welfare of the United States".

How is the VAT not "theft"? Aren't you taking money from people to give to other people?

[Stellabella]

35. No, YOU are wrong.

This country is too big and too complex to not include public welfare. It's a fact that VAT hits the poor disproportionately (you misspelled the word, brainiac). It's not something you 'buy' or 'believe', it's a fact.

And BTW, you have totally forgotten about all the advantages YOU have already taken from the system, paid for by OTHERS' income taxes.

The Federal Highway System
Public Schools
Libraries
Post Office
National Weather Service
Police and Fire Departments
Defense
Water and Sewer
Trash Disposal
Safe Food
Safe Vehicles
Air Polllution Controls

Are you really such an IDIOT that you think that this country can get by on a sales tax? Shove it where the sun don't shine.

[Possumpoint]

64. Your Analysis

is flawed. Many of items you use are not supported by income tax. Try again.

Your inability to factually demonstrate your point in itself speaks volumes as to the quality of your final comment.

[Tsiyu]

91. Your Analysis is flawed

To classify income tax as "unfairly burdening the rich with the problems of the poor," to act as if this is merely stealing from one class to give to another, must be the greatest myth Western culture ever sold to itself.


Suppose your vast wealth comes from creating a product. People buy and use your product. You make money.

But I'm a poor person currently paying close to 10% (TN) tax on many things I buy, including my animal feed.

Now. Why should I care if the highways are smooth and orderly so that raw materials can flow to your plant? I don't give a damn about those highways as I'm too poor to use them. Find road improvement money somewhere else.

Why should I care if your employees can't read or write or do simple math? Educate them yourself! No more school taxes (and I have paid my share on other farms) for me!

Why would I worry if a plague wipes out your entire workforce right before a huge order - the one that will float your business all year - goes out? Screw public health care! I probably won't catch that bug since I don't get out much.

And why on earth would I care if some other company is stealing your ideas and your logos and your reputation? I'm not paying for laws or courts to hear your silly problems.

People stealing from your business? Hire your own detectives. I don't need law enforcement up here. None of us has anything to steal!



Did you get "The Myth" yet or shall I go on.....

[raccoon]

98. Well said! nt

[Selatius]

43. What you say is true about the original form of the federal government, but at the same time...

the federal government originally allowed slavery as well. Governments change all the time. To expect that the federal government not do what people want is only a recipe for a violent rebellion.

[wuushew]

24. The government as the printer and minter of money is the ultimate owner

Money provides a circulated societal benefit as a useful exchange medium of value.

However if you truly owned the coins in your pocket then logically why would there be laws prohibiting the melting down of pennies and nickels for profit? The answer of course is that violates the implied "lease" arrangement of using it.

Long long ago the IRS would accept chickens as payment for tax obligations. I suppose you could argue that was theft.

[EstimatedProphet]

31. Bullshit

People get rich by theft. If people were paid what their work was actually worth, there'd be no way to make a profit, and there'd be no rich.

[unblock]

50. how is it that taxing income is theft but taxing outgo is not?

if you were arguing against a wealth tax, you might have a tiny point.

but whatever logic lets you think that a tax on income is theft applies equally well to a vat tax.

[Possumpoint]

65. Think About What You're Saying

Taking a portion of a person's income versus the decision to purchase an item knowing that you will pay tax on it.

[unblock]

73. so if i receive money for providing a service, that's sacred

but if i spend money to receive a service, that's not.


and in the end, how does it really matter if you tax the giver or the receiver? a tax on trade is a tax on trade.

[Commie Pinko Dirtbag]

80. Perhaps the brackets thing is what displeases Possumpoint?

That's the only relevant difference I can think of.

[unblock]

82. it's probably being on the losing side of an argument that displeases him.

:evilgrin:

[Commie Pinko Dirtbag]

83. He admitted he doesn't actually mind that the taxed entity is the income.

In a message that was deleted due to a personal attack. But a non-attack part of his post read like this:

I oppose income tax for the reasons previously stated. The only way it could become even remotely palatable to me is a flat tax on all income.

In other words: "Income tax, unlike VAT, hits the poor less, and the poor are filthy and inferior and God commands them to be crushed by the Righteous, to which I humbly belong."

[EstimatedProphet]

84. You take a job knowing that you will pay taxes on the income

By the "logic" you use in this thread, people should refuse higher paying jobs because they know they will be taxed more. And, you conveniently forget to talk about how you still must pay or necessities, so again by your "logic" sales taxes on those necessities is theft.

[Commie Pinko Dirtbag]

85. See #83. -nt

[EstimatedProphet]

87. Exactly. I got your back.

[Commie Pinko Dirtbag]

52. Let me see if I get this straight.

Seizing part of money when it is exchanged for a product = good.
Seizing part of money when it is exchanged for hours of work = bad.

Why, exactly, is that so? What's the big difference between the two situations? Why would a VAT not be "theft" or "taking one person's property to give to another?"

[leftofthedial]

88. and by gob Amurka will be grate wuns agin!

[anonymous171]

2. Yep. That's why a high estate tax is so important.

It prevents economic royalty from forming.

[Phoebe Loosinhouse]

6. I really enjoyed reading that.

It took me awhile to get around to it, but I'm glad I did.

It's all a matter of balance, isn't it? The middle class is what provides the buffer zone between les miserables and the aristocrats. Creating and maintaining a middle class and a semblance of a social safety net is what assures the upper classes that they won't end up riding in tumbrels on their way to a guillotine.

Related, but slightly off topic, I read an interesting article that maintained that part of the reason for the collapse of the Mayan civilization is that it became topheavy with aristocracy which just made too many unsupportable demands on the diminishing lower classes.

[ProfessorPlum]

11. Thanks, PL, you are right

A large, healthy middle class, which can contribute to the social good and also take care of itself to a large extent (barring injuries and accidents) is an enormous boon to this scheme.

I wouldn't be surprised about the Mayans. Was this a book by Jared Diamond called "Collapse"?

[Phoebe Loosinhouse]

12. No. Actually it was in an old National Geographic I was reading

in a doctor's waiting room. It was so fascinating that I didn't mind my wait and I was terrified they would call me before I finished the article.

[pinqy]

23. Shouldn't claims be supported?

I'd like to see the logic, reasoning, and preferably the math behind "the money in capitalism flows up, from the people who don’t have much of it to the people who already have a lot of it. "

[pampango]

27. Some claims sound so good, they don't have to be supported.

:) All you have to do is compare the quality of life under feudalism to see that the wealth has been sucked out of the average person under capitalism. Feudalism and communism have not proven to be very good at generating wealth for the majority of people. No one here would argue on behalf of unfettered capitalism, but "fettered" capitalism has a better track record than any other 'ism.

[ProfessorPlum]

29. ? Yet Another Bushie, or have I misplaced the sarcasm in your

post?

[pinqy]

30. Would that make a difference?

Whoops, posted in the wrong place.

[ProfessorPlum]

28. Another one?

I'll tell you what, why don't you research the opposite claim, and get back to me? And then let me know how those great unfettered marketplaces, like Argentina, where there was no social safety net, demonstrate how the money flows down to the poor.

I'll set my stopwatch. Anddddd . . . . . Go!

[pinqy]

32. Your lack of response is noted.

Common bad debating tactic is to turn the burden of proof on the other person. Either you can support your claim, or you haven't actually thought about it.

[ProfessorPlum]

33. Yes, I noted your bad debating tactic.

And to you I say: Tu Quoque!

[pinqy]

34. What did I do?

No bad debating tactic on my part....I asked a simple question as to where you derived your premise. You told me I had to support the opposite of your premise. That's ridiculous.


I have not stated ANY position. I'm just asking you to state where you got your premise from. Why is that so difficult for you?

[ProfessorPlum]

36. I see, you've switched to whiny victim mode now

As tom_paine notes above, it was a quick switch from bullying mode.

Goodbye.

[pinqy]

41. Ah, so that's how it works...

You: X is true!
Me: Where's your support that X is true.
Several other people: Of course X is true, how dare you question it.
You: Show that X isn't true.
Me: I'm not saying X isn't true, I'm asking why you say it is.
You: La la la la I don't have to talk to you.

Sad. You sound like a Creationist.

[TrogL]

55. You've left bribery out of the equation

Argentina's economy openly thrives on it.

It's theoretically illegal here, but it still happens.

[Greyhound]

37. Just how many times, in how many ways would you like it supported?

We have about 30 years of evidence that this idiotic strategy is and has always been an abject failure.

Is your Google broken? There are literally millions of pages of data that clearly show how this failure has come about.

[pinqy]

40. Just once...

Define terms and present a model.

[Greyhound]

45. Then use the search tool, it is right at the top of the page. I understand that you

are not here for any purpose but to stir up shit, but this is so well documented here and all over the net, that it is clear you have not intention of doing so.

[Ikonoklast]

38. Are you deliberately obtuse? Really?

Ignore the evidence in front of your nose, let alone economic theory regarding unfettered capitalism and its results.

The end game is a feudalism.

[pinqy]

39. I'm quite aware of economic theory

What particular model are you referring to?

[Ikonoklast]

42. Do your own research.

I've already done mine.

You are just trying to be disruptive without actually wanting to discuss anything, just gainsay each post.

Have a nice stay.

[pinqy]

62. then what the hell are you doing?

I tried asking a simple question in this thread and got nothing but the run around from all but one person. From you, I get nothing but insults and pointless responses. Get a life.

[TrogL]

56. This isn't Keynes

While he was in favour of redistribution, his methodology (or at least the part that's relevant at the moment) is to retrench the economy through revitalization of infrastructure.

While I admire Obama's attempt to get this off the ground, it's dying the death of a thousand cuts (pun intended) and his protectionist stance will prevent him getting enough raw materials and manufactured goods (US does NOT have the capacity) to get it accomplished.

People want jobs, not handouts.

[readmoreoften]

70. If you were aware of economic theory, you'd know EXACTLY the name of the model.

[pinqy]

76. Exactly?

He could be suggesting anything from Anarcho-Communism to Welfare Capitalism. There's a lot of room in between.

[Phoebe Loosinhouse]

46. I'll take a stab at answering the question about the flow of money going up

The poorest of all has one thing and one thing only of value - their labor. Their labor has worth only if someone with more than he/she has some wealth, or something to trade for the labor. When they pay for the labor, that is the single instance that money will ever flow downward, after that, it's all an upward spiral.

A person must have shelter, so they pay the owner of the shelter - upward movement of money from tenant to landlord
A person must have food so they pay the farmer - upward movement of money from consumer to land and animal owner
A person must have transportation so they pay the bus company - upward flow
A person must have clothing so they pay the person with the loom - upward flow
Etc. etc. etc.

The next phase is when the person has decided they want to climb a rung up the socio-economic ladder so they determine to buy their own shelter, so they pay the bank with interest. Upward flow.

Success can almost be counted as the day someone is ABLE to make a downward movement of money, in other words to pay for some labor that you yourself no longer want to do - pay a housekeeper, hire a driver, etc.,but the downward flow is a choice and a luxury.

That's why I enjoyed the Op so much, I had never visualized the flow of money upwards as the very nice analogy of the hourglass with the sand that runs up. It does flow up, I just had never thought of it in those terms. It also demonstrates how cynical the whole trickle down theory is, because it demonstrates that the proponents of that theory KNOW that the natural flow is up!! Trickle down is literally the crumbs that fall out of the pockets of the rich.

My big issue with all economic theories is that they are all or nothing. Communism, capitalism, democracy, socialism, libertarianism, etc. when I think what is needed is a blend. I lean towards a capitalistic democracy with a whole bunch of socialism thrown in for social safety nets, healthcare, education, the environment and a good dose of government oversight and regulation so that the amoral capitalists don't make serfs of us all. And, yes, I think at a certain point, excessive wealth needs to be highly taxed because it loses societal value when it is just hoarded in the counting houses of the uberrich.

[glitch]

49. Excellent post, and I like your version of social capitalism. nt

[pinqy]

51. Interesting

But overly simplistic. That was my suspicion and why I asked Professor Plum to explain his premise. The model fails to include the fact that everyone along the way is a consumer, so both a seller and purchaser of the results of labor. The tenant pays to the landlord, but the landlord has to pay for maintenance, repairs, his food, and various other goods and services. The real model isn't linear, but more like a web of interrelated transactions.

Sure there are situations, especially in the Middle East, where the flow is closer to the model you present, but that's hardly representative of Capitalism as a whole because that situation is the case of one dominant natural good with no manufacturing base. With the existance of a healthy middle class, the linear flow of concentration doesn't hold as the amount of people spending on more than just basic necessities moves things around, not just in one direction.

[Phoebe Loosinhouse]

53. Well, I did say upward spiral, implying circular as well as vertical motion

but, ultimately the trend is upward. Plus, I was never laying out a "model" as you put it or saying that the OPs opening thoughts were anything that concrete, although I agree with the premise that unlike water that finds the lowest level, capital along with power/influence will find the highest level. I never thought of it that way and it was somewhat eye-opening to me. Surely you've heard the phrase, "it takes money to make money".

All discussions like this tend to be overly simplistic - how could they not be? That's why discussing things with idealogues is always so difficult - they think things must be all one way or another. Life, and economics, and history are never so simple.

[readmoreoften]

72. Why theories don't "blend": the answer

(1) Where did banks get their money?

In most explanations of economic theory, we usually resort to 19th century or earlier analysis--people with looms and so forth. The reality is that capitalism is the doctrine that those who own invest in workers and/or means of production who make them more money. The question is always, well... where the hell did the money come from in the first place. The answer for those brought up in capitalist ideology is singular: hard work. Someone 'worked hard' or 'had a good idea' somewhere down your family line and now you're rich, lucky you.

But reality shows us that this is hardly how it works. There are isolated instances of working class people striking oil or coming up with an invention when they weren't in the cornfield slaving away. But the reality is this: wealth comes from two sources (1) the legacy of former kings and priests passed on from family to family (old wealth) (2) the Burgher revolution of wily merchants after the middle ages who conspired to gain power against the aristocracy by making money off their ability to sell them stuff.

Consider this: 66% of the human population under Rome were slaves. If you're working class, your ancestors were probably slaves. Greek democracy was only able to exist because of slavery. 33% of the population were slaves many of whom, by the way, lived better than many of us.

We can point and say "oh but what about that brilliant entrepreneur I read about"? Sure, but we have no idea how many working class people had even BETTER ideas. It's an unknown. Moreover, who is that 'humble entrepreneur'? It should be remembered that Bill Gates is from an old banking family. He's not just some middle class kid from bumfhuck. How many of these entrepreneurs are 'the worthy rich'? Or 'a rich person who had an idea in their head'?

The money that fills the banking system isn't from some guy who invented an As Seen on TV widget. Wealth comes from the creation of weaponry, the sale of drugs, major manufacturing, and the development of commodities. Capital takes the profit from other people's work (i.e. what you didn't get paid) and puts it into infrastructure to make more money.

(2) The rich have not given up their wealth and power for millennia. Why would they do so now? Any "third way" request for a "blended economics" will always end up being the rich getting richer unless there is a sudden and massive shift in human nature and the majority of rich people become 'good' In other words: any 'blended system' is utopian. The idea that we can keep a 'check' on the wealthy is impossible. To do so, we would have to have a perfect government without corruption while at the same time having a class of super-powerful industrialists who have all the money in the world to corrupt.

Communism failed because it failed to overthrow capitalism. It didn't fail as an economic system. It was doomed when it gave up the goal of an international working class running the world through workers' councils. Socialism can't exist in 'one country.' Capital won't let it. Capitalism and communism are competing systems.

The third possibility is fascism. (Not the fascism is corporatism stuff. Fascism and capitalism are distinct and 'corporatism' is just a euphemism for capitalism). Everyone likes anarcho-communitarianism, which is really a return to medieval communes and anti-global. It's also absolutely impossible in an age of high technology and communications. What are we all going to sit on our communes whittling and growing herbs? The reality is that one of those "communities" is going to be fascist. Fascism is communitarianism of a mixed economy raised to the level of nationalism. Nobody cared more about the "community" of the German people than Nazis. This is already an issue as communitarians have to deal with "what to do about white separatist groups?" etc. Should we live "peacefully" beside them? They're anti-globalist and anti-corporate too.

In other words, "blending" means that good people let cruel, greedy, supremacists take over--just a little. Unfortunately, they don't stop there and there is no way to make them stop and there will never be away to make them stop. You have to stop them!

[HughBeaumont]

67. Read "The Shock Doctrine". Twice.

All the proof you need right there that Friedman "economics" has essentially failed everywhere it's been instituted.

[ProfessorPlum]

75. Excellent reply

That book should be read by everyone in this country. Twice.

[readmoreoften]

69. Claims can also be supported by empirical evidence.

If you have eyes you can see it. Here's also some evidence: his statement is pure identitarian logic.

A=A

Rich people are Rich

B=B

Poor people are Poor

The only flaw in the analysis is VALUE

In a capitalist society, money may only CIRCULATE among the rich. In fact, it may never touch the poor. However, all VALUE comes from the working class--those who grow and dig for commodities, those who turn deliver commodites, those who turn commodities into products, those who invent ideas for new machines, new products, etc--all the working class. All the value in the world begins with this group of creative people and ends up in banks in the form of SURPLUS VALUE. That surplus value is passed onto another generation through trust funds or ownership of the means of production.

The Rewards of Created Value flow upwards under capitalism. That is what it is BY DEFINITION.

[pinqy]

77. And there's no one in between?

There's a broad spectrum between rich and poor. "Poor" is an ambiguous term as well. Many Americans who we consider poor would be considered rich by the standards of living even 200 years ago.

By Capitalist models, everyone receives value at least equal to what they give, or no exchange would take place. A worker receives pay at least equal to the value of his labor or he wouldn't sell his labor in the first place. While reality doesn't always work that way, it is still true that the value received for labor is greater than what would be received by not selling the labor. So the worker benefits in any case by being better off than not working. At the same time the employer receives more from the labor than he gives in pay or he wouldn't hire the worker in the first place. Simple Utility equations....exchanges of goods and services are not zero some and both parties must benefit or no exchange would take place. If you have $100 and I have none, and you give me $1, you are worse off than before and I am better off than before, even though you are still overall better off. So that is not a fair trade in that one party loses and another gains.

[EstimatedProphet]

86. No.

By Capitalist models, everyone receives value at least equal to what they give, or no exchange would take place.

Profit is defined as the difference between the value of a product (in this case, labor) and the lesser amount of money exchanged for it. That statement describes a profitless system. There's no capitalist models that assume that labor is exchanged for its true worth. That system would never get started.

While reality doesn't always work that way, it is still true that the value received for labor is greater than what would be received by not selling the labor.

No. That is not at all always the case. For example, here's a possible case: I have a small farm (~10 ac) on which I raise my own food. On those 10 acres I keep some chickens and raise vegetables. Now, instead of continuing to work on the farm, I decide to take a job working at McDonalds, which happens to be the only business around (rural area) and I work there for 8 hours a day making minimum wage. Until that time, I was able to keep my family fed on those 10 acres (which is enough to raise food for a family of 4 for a year if worked judicially), but now I make a wage which is not enough to keep myself going, let alone my family, for a year. I am now worse off by selling my labor. Although you may think this is a silly comparison, it does get to the heart of the problem we have in this country right now - by manipulating the system, capitalists have shifted the balance between labor and capital towards their own ends. Outsourcing, education costs rising to the point that higher education is impossible for many, "right to work", corporatizing of business, and many other factors have resulted in forcing people into situations where options are too limited to make the best choices for exchanging labor for value. How do you make the best bargain for your labor when the only options for selling that labor are Wal-Mart and McDonalds? This dilemma is all too common today. In the case I described above, the person with the small farm at least has some capital (the farm) which can be used for support, but what about all the people who don't have any capital? They have no choices but to sell their labor, and if there is no one willing to buy their labor for significantly greater amounts, then they don't have the choice to enable them to benefit from the transaction.

[pinqy]

90. You're combining models

"Profit is defined as the difference between the value of a product (in this case, labor) and the lesser amount of money exchanged for it." That's the Marxist view. In Capitalist models, Profit is defined as Revenue minus Costs (or more usually, Marginally Profit =Marginal Revenue - Marginal Costs). Costs are the cost of Capital and Labor. That's not the "value" the product. The "value" of the product is whatever someone is willing to pay for it (regardless of what they actually pay). If you would pay $50 for a good, but the market price is $40, in Capitalist models you have gained $10 of utility, the difference between the value of the good to you ($50) and the amount you paid. Additionally, there is no "true value"...the value of a good or service is the max each individual would pay for it. What's the point of saying something's "true value" is X if no one is willing to pay X for it? "True value" becomes meaningless if it's no different from zero.


" but now I make a wage which is not enough to keep myself going, let alone my family, for a year. I am now worse off by selling my labor." Ok, there was the unstated "or you wouldn't make the exchange" in my statement that you must be better off. In your hypothetical, why would you voluntarily change to the McJob instead of the farm? People don't do that (assuming adequate information..the model assumes perfect information but perfect isn't necessary).

[Tsiyu]

92. The product has no value

as a mere idea, in the end. You may get financing for an idea, but until labor turns raw materials into product, you have no product, you have no value.

Incrementally, the toll on his or her physical body will add up, whether by exposure to chemicals in the workplace or repeated physical activity from making your product. You could call this human, physical investment. The worker who makes your product chooses to stand, sit or drive in order to produce your goods, rather than spending a safer day fishing or working out on the Stairmaster.

You invest dollars. The worker invests his hands, feet, brain. You expose yourself to financial risk; the worker exposes himself to higher stress and likelihood of physical injury.

EVERYONE SACRIFICES TO CREATE VALUE

Even if it were not the more socially progressive choice, it would simply make economic sense for big business to make labor a priority investment. You pay the stockholders who invest, you also amply reward the laborer who has invested. It's fair. It's smart. It's the only rational, just, fair way in a free market.

A healthy, well-educated, well-paid workforce is more productive, able to contribute to community and able to purchase your product. But these days, economists appear to be fools using all sorts of intricate theoretical jargon to explain and excuse mere greed.

Nothing intellectual here....

[pinqy]

93. Even then....

The product has no value except to the person who has it and to the person who wants it.
"The worker who makes your product chooses to stand, sit or drive in order to produce your goods, rather than spending a safer day fishing or working out on the Stairmaster." Why? Because the worker receives more utility from his wages than from the other activities.

"Even if it were not the more socially progressive choice, it would simply make economic sense for big business to make labor a priority investment." I agree.

[Tsiyu]

96. Even then...

As to your first point, makes one wonder why corporations have spent so much money and effort to produce goods and services while simultaneously expending money and effort to creat an economy where no one can buy those goods and services...

Because the worker receives more utility from his wages than from the other activities.

Ah, the old "Benevolent Business" myth. "The poor, dear worker is too stupid to increase his wealth by any other means than this paltry job I offer him! He should be HAPPY we don't even pay a living wage. It would be worse for him if he stayed home. We create JOBS!"

Bullshit on so many levels, but this line of crap sure appeals to the Supply Siders.

First off, trout goes for over $20 a plate around here. If I take the day off and go fishing, I can provide $200 worth of meals in one day. Much more utility than working your minimum wage job.

Secondly, if I choose not to deal with the stress of your poorly run business and instead work on my Stairmaster, I will avoid a heart attack that's coming in six months, saving myself a lot of pain and a couple hundred thousand in medical bills.

And the time I spend with my spouse and kids and friends? You can't put a pricetag on the value to the community in that. Which is why value of life isn't factored in an annual report.

You see, the worker takes a hit some days, when he can create utility for himself beyond what the job offers. It is the worker's loyalty to the company which motivates him to clock in on schedule.

The business owner should feel privileged to have the worker, not the other way around.

[pinqy]

97. you're not really arguing against what I've said.

"Ah, the old "Benevolent Business" myth. "The poor, dear worker is too stupid to increase his wealth by any other means than this paltry job I offer him! " Nope. Benevolence has nothing to do with it. Both the Employer and the Employee must benefit, or at least not be worse, or the transaction wouldn't take place. And if the worker could increase his wealth by other means, then why doesn't he? You're making it way too personal. The Business is not thinking anything except getting the most/best labor at the lowest cost. Nothing wrong with that...the worker is trying to get the most pay.
"First off, trout goes for over $20 a plate around here. If I take the day off and go fishing, I can provide $200 worth of meals in one day. Much more utility than working your minimum wage job." Then why don't you? And if someone else is face with that choice, why would they choose the minimum wage job?
"Secondly, if I choose not to deal with the stress of your poorly run business and instead work on my Stairmaster, I will avoid a heart attack that's coming in six months, saving myself a lot of pain and a couple hundred thousand in medical bills.
" Sure, nothing wrong with that...but to do it every day instead of working? How would you live?
"You see, the worker takes a hit some days, when he can create utility for himself beyond what the job offers. " Sure. That's not against anything I said. I was talking about usual activity, not a one day break. No one's going to argue that for a particular day taking a day off instead of working is an increase in utility. Otherwise why do it?

People always do that which they believe is in their best interest, or why would they do it? Sometimes the choices are really crappy, such as work a min wage job or starve, but still, the min wage job would then be in the person's best interest.

[Tsiyu]

99. The point I'm making is that working has NOT offered the

worker the best deal.

Why? The system has been set up to make it a losing game for the worker.

That "take it or leave it" option has been the employment model.

And that is why we are in the mess we are in today.

The current model assumes only the employer takes the risk. This is faulty logic. If so, anyway, why would the business person take that risk?

No, the worker takes the larger risk, working for the corporation, with sub-living wages, no guarantee of a future wage, no health care, etc.

Business has to change the model, factoring in the worker rather than saying, "screw you, I'm gettin' mine and if you're not, tough shit."

[EstimatedProphet]

94. Does it really matter?

Ok, there was the unstated "or you wouldn't make the exchange" in my statement that you must be better off. In your hypothetical, why would you voluntarily change to the McJob instead of the farm? People don't do that (assuming adequate information..the model assumes perfect information but perfect isn't necessary).

People do that all the time. It doesn't matter where a need for money comes from, but for sake of argument let's say an illness makes medical expenses unavoidable. The person in the situation I described in that case no longer has a choice as to taking the job that puts them in a worse position. People indeed do that, and have done so in great numbers throughout history - for example, during the Great Depression, and also during the farming crises of the 80's. Your model only works properly so long as the situation remains steady. Once a change is added, how the model performs is shifted.

[pinqy]

95. But they're not worse then..

"It doesn't matter where a need for money comes from, but for sake of argument let's say an illness makes medical expenses unavoidable. The person in the situation I described in that case no longer has a choice as to taking the job that puts them in a worse position. " If an illness makes medical expenses unavoidable, so that the farm work cannot meet those needs, but a job in the city can, then the person is better off with the job in the city. The question is not whether or not they were better on the farm before the medical expenses, but which one they're better off in after the medical expenses. His position is better off taking the job than trying to manage the medical expenses from the farm.

The model adjusts to changes. New equilibriums and best choices are then created. For any exchange, a person must be better off after the exchange or they wouldn't make the exchange. Whether or not they're better off depends on circumstances. In your hypothetical, before the medical expenses the person would be worse off taking a job in the city. So he doesn't. After the medical expenses, he is better off taking the job. Or why else would he take it?

[MellowDem]

47. In reply...

I'm not sure what you are trying to say. That unfettered capitalism is worse than regulated capitalism, which we currently have? I don't think anyone disagrees with you there. Capitalism does not have a "fatal flaw" per se. It's just that it is a much better economic system when it is regulated, which it is. I suppose if you were to theorize why unfettered capitalism would not work, you may be right. But we are not living in such a society, so it makes no sense.

But you are wrong to view the market as an hourglass. It is a cycle, with currency moving from labor to capital and back again. You're analogy is a little too simplistic, and wrong at that.

[ProfessorPlum]

57. I didn't say it was a fatal flaw, I said it was a flaw, and

I am talking about unregulated capitalism, and actually there are lots of people who would disagree that regulation is better. Have you ever heard of Milton Friedman and the Chicago School?

Also, my analogy is too simplistic, but your "cycle with currency moving from labor to capital and back again" captures the nuances of the current system, with all of the greed-induced problems we have?

What is this, take a slow person to DU day?

[MellowDem]

59. I was referring to the DU community...

with regards to regulation. And what's with the "take a slow person to DU day?" Wow, you're a real nice guy. Why don't you spit in the eye of the mentally handicapped while trying to denigrate others?

No reason to get so offended. It's called discussion.

[ProfessorPlum]

61. Ok, don't be slow

apology accepted.

[leftstreet]

60. WOOT! These threads really bring out the Capitalism Cheerleaders

:popcorn:

[HughBeaumont]

68. I love the "Billionaires for Bush".

One of them was telling me how they were in Columbus and a satirically challenged Repuke went up to one of them and told them to "stop, because you're making us Republicans seem like we're a bunch of greedy money-hungry bastards".

:rofl:

[ProfessorPlum]

74. ha ha!!

[unkachuck]

71. K&R....n/t

[Locrian]

78. great post OP

Looking forward to the follow-up.

Trying to figure out a way to add fractional lending and devaluation of the money to your analogy.

K&R

[EstimatedProphet]

89. On devaluation of the money:

Let's say you have 20 billion dollars. what is the difference in you quality of life versus the guy who makes $100,000 per year? You are in effect a god. Whatever you want, you can get almost as easily as just thinking about it. the guy making $100,000 per year probably can lead a comfortable life.

Now, devalue the dollar to half its worth. The guy who makes $100,000 per year now makes $50,000 per year. suddenly his life is not so comfortable anymore. He's been impacted significantly. You however still have in effect 10 billion dollars. your life hasn't been impacted at all.

When someone has so much money that money becomes meaningless as far as quality of life is concerned, what's the point of making more? If someone has billions, another million dollars is chump change. It makes no impact on your life at all, but for the average guy it is a life-changing windfall. How do you keep the rush going that comes from making your quality of life much better, when money no longer matters? The only way is to keep increasing the distance between you and the average person, and that means by making their life worse. Devaluation of money no longer affects you, but devastates everyone else.

[ProfessorPlum]

79. Part II

Post at http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5022209