Monday, February 25, 2013

The insanity of the capitalist system

We have three economic problems right now in the industrialized, developed world. First, we have very high unemployment, especially youth unemployment. Second, we are worried in general about automation causing job losses. Third, we face a productivity crisis as the developed world's workforce ages and retires, and we have to support more people with fewer working people.

That all three crises exist is insanity, pure and simple: we have both too many workers and too few workers.

It reminds me of my crazy (and apocryphal) aunt: "I don't have enough money to live on!"

"Why not?" I ask. "You have a good-paying job."

"I have to save all my money, otherwise I won't have enough to live on."


One does not have to have a Ph.D. in economics to see the obvious answer: put people to work, which will increase productivity. We can increase productivity directly by producing more goods and services right now with existing capital. We can indirectly improve productivity by creating more capital (factories, stores, trains, airplanes, etc.), and by improving technological and human-capital productivity with education and training. It's blatantly obvious that we can dramatically increase productivity. If we could not, then it would be true that we are already not only operating our economy at full capacity, but that we are increasing productivity as fast as possible. We are doing neither.

The reason we are in this insane situation is simply this: a prosperous society cannot be controlled, subjugated, and dominated. The capitalist system was created to wrest political power from the feudal, land-owning monarchy. It has stayed in power by keeping the working class dependent and impoverished. The prosperity and improvement of the working class in the late 20th century was due to the temporary ascendance of the professional-managerial class, formerly the middle class under capitalism. But the professional-managerial class has been defeated by the capitalists. The capitalist class objects in principle to a prosperous society: prosperous workers believe that they deserve prosperity, autonomy, dignity, and life itself; prosperous workers believe that they have the right to a good life. The capitalist class believes that life itself is a gift given to the working class, that the working class does not live by right, but by the sufferance, sacrifice, and nobility of the capitalist class. Capitalists are happy enough, I suppose, to give the workers life, but it is insufferable ingratitude and presumption for the working class to demand a gift as a right.

We are not in a real economic crisis. In a real crisis, we would be facing some difficult trade-off imposed by physical circumstances: either trading off consumption now for investment to create consumption later, or trading off consumption by some for consumption by others. But shutting down factories, putting people out of work, and then saying we don't have enough for everyone is insane and immoral. And this is precisely what the capitalist class is doing right now.

We are not in an ordinary political crisis. In an ordinary political crisis, well-intentioned people have sharply differing opinions on public policy.

We are in an ideological crisis. The capitalist class has not only shown itself incapable of creating general prosperity, it has shown itself actively hostile to general prosperity. They are bent on creating conditions of general immiseration, because only a miserable population will be truly grateful to the capitalist class for giving them their lives, however "solitary, poor, nasty, brutish, and short" those lives might be.

It is time for something better.


  1. Wow, that is the quite the lapse in logic. Evidently the PhD in econ would help. The Soviet Union made the same error and we all know how that turned out.
    You totally left out half the equation: demand. You could work all you want, employ all the people you want, produce all you want, build all the infrastructure (you call it capital) you want. Wanting does not create an economy.
    The money will run out if nobody is buying what you are selling.

    1. "Evidently the PhD in econ would help." These seven words provide the only evidence in your reply to indicate that you even read Larry's post. Indeed, this entire entry references the concept of economic demand. Are you implying that there isn't a demand for American labour? Why do you think that is the case? "Wanting does not create an economy." What else is there? I suppose you "need" a computer?

    2. There is never a demand for labor. That is a means, not an end.
      The demand in economics is for products or end services at a given price. The how or who produces the product is not relevant to the model.
      It is important to folks who want to "Buy American first!" and some are willing to pay above the given price level to get it. But there is not enough to keep companies running.
      Outsourcing is proof that there is not a demand American labor because it is too expensive nor is the quality high enough.
      You can't demand that people be put to work, you have to create a product or service that people desire and are willing to pay for.
      That is why Obamanomics is failing to stimulate our economy.

    3. "The demand in economics is for products or end services at a given price." What determines this price? Why do computers cost more than tennis shoes?

      "The how or who produces the product is not relevant to the model." What model is that?

      "But there is not enough to keep companies running." Enough of what?

      Outsourcing is merely proof that there isn't a demand for American labor to produce certain goods. American labor is alive and well in certain markets. Indeed, companies like Google can't seem to get enough of it.

      "you have to create a product or service that people desire and are willing to pay for." Why is anyone, anywhere willing to pay money for anything?

      "That is why Obamanomics is failing to stimulate our economy." What does 'Obamanomics' mean? Is it, 'Whatever the government does while Barack Obama is president?' cuz, if so, you should go argue with Paul Krugman and his Ph.D.

  2. Bergstrom, you're doing better, but you're still getting your economics education from the back of a cereal box, or, worse, from the Austrians. Tea Party talking points are not a valid basis for a conversation about economics. You need to have at the very least the basic vocabulary (e.g. "demand") to discuss basic economics.

    Buy a used copy of any macroeconomics textbook, any older edition, for under $20. Krugman/Wells (lefty) or Mankiw (rightish), doesn't matter. Read it.

    If you have any questions, I'll be happy to answer them. Otherwise, you're wasting my time and yours.

  3. Fundamentally, Bergstrom (or should it be plural?), you're attributing the current "Lesser Depression" to an increase in structural unemployment. This explanation has several problems, not the least of which is how could millions of people, over the course of at most a year and possibly as quickly as a couple of months, magically lose the skills necessary to be productive, or businesses magically need an array of brand new skills?

    It's also the case that the empirical evidence at best only weakly supports, and probably contradicts, the structural unemployment explanation.

    But most importantly, even if it were true that structural unemployment is the cause of the Lesser Depression, so what? We still have the social problem of a) needing work done and b) having a lot of people wanting to work. Because we have an interdependent society, repairing structural unemployment would therefore become a problem we have a strong social incentive to actually, you know, fix.

    Even if unemployment were 100% structural, and if we were to simply kill all the people who did not presently have the skills to work, we would diminish the social problem (supporting the unemployed) only slightly. Our larger problem, a huge shortage of labor to support the people who did work, who did pay taxes, who were productive for decades, and who are now retired, would remain.

    Whether or not our problems are structural, we have two choices: we find a way to put people to work and support a relatively wealthy society, or we create a society where the vast majority of people work hard, receive only enough in return to survive and reproduce while they're working, and kill them* when they are no longer productive, whether because of skill mismatch, old age, or just because those privileged to consume do not want their labor. That's a moral choice, not an economic choice.

    *It's chancy to just let people starve to death; it's not impossible, but starving people have nothing to lose from rebellion and revolution, and if the non-starving workers believe they could be next, they will join the rebellion, ruining the economy.

  4. I know I started it, but lets do away with the Ad Hominem attacks.

    "the obvious answer: put people to work, which will increase productivity."

    Case in point: GM bailout. Millions of dollars poured into a failing company to save and create jobs and increase productivity.

    People are not buying any more GM products than they were before the government stepped in. More jobs (aka people put to work) and productivity did not solve anything. It created a money pit. Now we have to keep throwing taxpayers money into the pit or let it fail.

    The Villian: The answer to all your questions is The Law of Supply and Demand: Cost of Supply must be less than the Demand to pay for a product or service or there will be no profit.

  5. Insults aside, there is still the real problem of your almost complete ignorance of basic economics concepts and terminology, concepts that can be learned in any sophomore economics class.

    A series of unsupported claims, non sequitur conclusions and simplistic misunderstanding of basic economics do not make an argument. Cite your sources, back up your assertions with facts, and study some basic economics.

    I have been debating religion and science with ideologues for more than ten years. There is nothing more pointless and frustrating than trying to have an intellectual conversation with those intent only on perseverating their preconceived, evidence-immune notions until everyone else gives up in disgust and they can declare victory by default. Intellectual inquiry is not a war of attrition.

    Convince me that you can form and adjust your opinions on the basis of evidence and reason, and I'm happy to talk, no matter what you happen to believe. Otherwise, I would be completely happy if you were to choose to spend all of your time elsewhere.


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