- Capitalism and Alternatives -

You know I just have to

Posted by: Gee ( si ) on June 30, 1999 at 16:23:13:

In Reply to: Recapitulation on Crises. posted by Red Deathy on June 30, 1999 at 15:04:34:

OK, a brief run down on the Marxian critique of the Market System, and why it fails to meet
human needs.

1:All firms must pursue growth above all else:

(for companies read owners and other stakeholders)

Growth of what? Total assets? Capital? Profits? Not necesarily. To compete for capital investment a company does well if it has a high return on investment. A huge company may make huge profits of say 10% above costs, but if a smaller company makes a 20% return then it is the better investment (all other factors being equal). A company does not have to grow in any other way to achieve this, infact shrinking is often a better strategy.

Indeed I would be more disposed to the notion that what a fair proportion of 'companies' really want is survival and anything else is a bonus. This theory sits well with protection seeking by companies in running to the whitehouse - such companies are not after the best possible return, but after safety from competition. This is why big companies in what some economists call the 'senile' industries of steel, autos and coal etc are as big as they are - they are protected from the free market to the detriment of consumers.

R&D is increasing outsourced and shared (dare I say co operate?) between companis enganged in joint ventures and cellular networks. Big companies dont have such an advantage as many assume.

There can be no standing still, but 'growth' as such is not the overiding factor.

2:the Law of No Profit, No Production

Yup, pretty much true. I would add an economists joke - two economists walk past a ferrari showroom, one says "I really want a ferrari", they walk by and the other one say "evidently not". this can be seen in two ways -1) the first fellow was excluded by his lack of resource. 2) he didnt want a ferrari more than he wanted his house etc, he didnt want it more than the risk of losing an appropriate odds gamble on a horse, he didnt want it enough to risk being killed by the local loanshark when he cant repay.

In other words 'effective demand' reflects what you are willing to give up in order to pay - also known as opportunity cost. Remember I am not laying down a moral judgement here, or saying anything is 'ok' or not.


Because argument Nr 1 is flawed by being too narrow this one is also. Supplying the best return on capital does not always mean producing more, it can also mean costing less, focussing on niches and staying competetive without growing. Companies which are protected fro the free market can overproduuce - they are getting the wrong information from the market, according to them everything is fine and dandy - hence we see the overproduction of cars recently, with almost all major car companies being protected by their national governments.

Cutting costs in not necessarily an excercise in increasing sales, often the opposite - it is a shrinkage in order to get a better return on capital by being efficient and focussing on what is profitable. Companies that are protected from the free market dont have to do this hence we have companies like Rover in Britain with a history of protection end up being shored up by more protections when they start to fail because of massive costs. In America Chrysler had a similar episode. Capital investors in the car industry would have been shifting some capital into growing industries such as software etc had not the auto industry been so heavily protected.

4:Wages & Workers.

Increasing productivity is essentially achieved by incresing the amount of transformation (from low value to high value) that a person can do. Hence machines, computers etc etc. These tools are also made by other companies. The worker has an increase output, not because he works harder or smarter necessarily, but because his organisational environment and tools are superior.

Cutting wages only works when there are many people seeking work and when prices drop. The idea that increased productivity means job losses (famously espoused by the sabotuers) is refuted - the idea is a flawed static pot idea, it says that is 10 men used to produce what one man can now produce then 9 shall be laid off, what actually happened is more that 10 men produce 10 times as much - hence wealth and abundance grows.

As some industries shrink so others are growing. Studying the coal indusytry then all points in this section appear true, studying the computer industry they appear way out. The ideas a-e fail to apply universally because it doesn represent the entire economy. If it did then the gloabl economy would have sunk soon after the industrial revolution.

Idea f seeks to explain the above, but does not account for growth in other markets wich make diversifying viable (there being more than enough room)

5:All this continues until:

War simply turns the clock back, it does no favors - it destroys capital. It is the fallacious idea that breaking windows is good because glaziers will get mroe work, entirely missing out on the opportunity cost of replacing windows, or bridges in Kossovo.

Global output has grown immensely from the 1700s onward. Every decade people cry "crisis" and it doesnt happen, not because weve been lucky thus far, but because growth neednt stop - abundance isnt measured in tonnes but something more akin to utility.

The declining rate of profit, when it effects an industry does so because consumers have gone elsewhere, by investing in technology a company can make its product of greater utility to consumers. There is no necessary concentration of ownership where wealth is created.

: i)Labour is the only source of value, i.e. only Human labour *adds* value.

And includes the intelligence required in organising labor and other factors, or said production would not occur (i know you perceive this, its more for the 'sweat=value' brigade)
: ii)Machines do *not* add value, they merely transfer value from themselves to the product.
Being made my people though.
: iii)Machines can be though of as i>repositories of dead labour.
Or representing the intelligent productivity of others
: iv)As machines become more complex, the speed up production, but lessen the amount of value *added* to goods in production (Less human labour is added).
In order to buy machines its necessary to spare them a 'wage' which serves machine making workers well.
: v)These machines become more and more expensive, and less and less profit per goood is made.
Doesnt necessarily follow, a machine can make an item more profitable per unit.
Items vi an vii are consequently too narrow to be universally applied.
: ix)This leads to a phenomena of 'Surplus Population'. As workers are replaced by machines, or deskilled, production grows regardless. Economic growth contains no concurrent *need* for emplyment growth any more. nor is economic growth tied to population growth (as once was). If workers cannot be employed, used, to make a profit (Law of no profit no production) then they are not used.

Except 'they' are. not only are the amounts of people employed in high tech groovy industryies increasing, there are also vast amounts of jobs in service industries where people are the value - eg in the professions, even in leisure and entertainment - they are not all McJobs either. i cannot think of a more McJob McJob than being a manual laborer in a factory or field. If machines are damnable then by the same principle all tools are, even hands!

: They have a use, though, in that as a block, they can undermine wages claims, provide scab labour,

I thought they were unskilled and invisible to the labor market, they couldnt make a difference unless they were active. And what is 'scab' labor - you mean people who dont submit to the exclusive monopolisation of labor by a union.

Follow Ups:

The Debating Room Post a Followup