Is Capitalism a Ponzi scam?
Liberals and conservatives argue over whether Keynes or Friedman has the right prescription for what ails our capitalist economy. Keynes argued for judicious governemnt intervention to keep the economic "pump" primed, while Friedman argues for free markets and little government intervention. But what about a disconcernting third possibility. That they are both wrong. Did Marx have anything relevant to say?
One of Marx's fundamental critiques of capitalism, which seems logically irrefutable, is simply that workers cannot consume the value of their own production using only their wages. This is a flaw that is only apparent when considering aggregate production versus aggregate consumption, not in any isolated case of someone buying a loaf of bread with cash. In aggregate, workers cannot consume what they produce using only the wages of that production. The truth of that should be obvious, as workers are paid less in wages than the selling price of whatever it is they produced.
Credit (consumer debt) is the only means of making up that difference, hence our exponentially increasing consumer debt load. Of course, the missing value didn't dissappear, it went to the capaitlists owners of the production who do not (and as a pratical matter, cannot) consume all the excess production that workers are unable to. If they could and did, this key flaw in capitalism wouldn't exist.
Does the fact that future wages can never purchase future consumption (as Marx pointed out) make capitalism some giant Ponzi/Pyramid scam? A scam based on the expectation that future earnings will forever finance current consumption? Sooner or later (looks like sooner!) wouldn't the ever growing debt load become so large that the illusion of future earnings ever catching-up be broken, the credit supply choked-off and with it, consumption? Sound familiar?
Workers are not paid the total valute of their production. Instead, the difference is collected by the owners. The total, though, is paid to someone, either worker or owner. The capitalist assumption is that the owner also works, also contributes to the economy. O'Riley would tell us that the owner's contrabution is paid according to the value of his contrabution. O'Riley would say, has said, that the market measures O'Rileys contrabution to the economy and rewards O'Riley to the degree he has increased the economy. Nonesense, but that is what he says.
I don't see the current economic mess as being the natural result of unfettered capitalism. Rome had even more unfettered capitalism for about a thousand years. Captitalism works, the problem is that it keeps most people down and wealthy families eventually own everything. The problem we see today is the result of too many people owing the excessively wealthy too much money. They can't buy much anymore, so the products and services they were buying are going unbought - which makes the rest of us less prosperous, we buy less too, and the situation snowballs.
February 24, 2009 4:46 PM | Reply | Permalink
Is Capitalism a Ponzi scam?
Yes....next question.
C
February 24, 2009 5:41 PM | Reply | Permalink
I have never liked the concept of publicly traded corporations. The stock market assembles huge masses of money, and inevitably most of that money ends up in the pockets of people who provide no useful product or service.
Homo sapiens are not trustworthy. In my opinion, only small communities have any hope of balancing the good and bad.
February 24, 2009 7:37 PM | Reply | Permalink
Liberals and conservatives argue over whether Keynes or Friedman has the right prescription for what ails our capitalist economy.
Keynes and Friedman suck.
Try Ludwig von Mises, Frederic Bastiat, Murray Rothbard, and Carl Menger.
In aggregate, workers cannot consume what they produce using only the wages of that production. The truth of that should be obvious, as workers are paid less in wages than the selling price of whatever it is they produced.
Credit (consumer debt) is the only means of making up that difference, hence our exponentially increasing consumer debt load.
Uh - no. When I produce something of value x, I do not necessarily lose x in the process. If I make 500 loaves of bread in a bread factory in which I am an employee, it does not follow that I have lost 500 loaves worth of resources and so if I am paid with 50 loaves I lost 450 loaves. What it means is that the market determined that my contribution to the making of the bread was worth 10% of the bread's value. Other people in other aspects of production get other percentages of the bread's value, including those who invested in the bread-making factory and those who oversee the production of the bread.
February 25, 2009 1:49 AM | Reply | Permalink
"What it means is that the market determined that my contribution to the making of the bread was worth 10% of the bread's value."
Nonsense. Your employer determined that.
"Other people in other aspects of production get other percentages of the bread's value, including those who invested in the bread-making factory and those who oversee the production of the bread."
Yes, you are making the same point I did. Which is that since you were necessarily paid less than the price of the loaves you just produced, you cannot purchase them using only your wages. Isn't that logic irrefutable?
Someone else may be able to purchase those loaves using only their wages but then who purchases what THAT person produced in THEIR job? That's why I said the problem only becomes apparent when seen in terms of aggregate production and consumption? It doesn't solve the problem, it only pushes it up the pyramid.
Capitalism is not a stable circular system, it instead must grow infinitely (which it can't) to be stable. Doesn't that define a Ponzi/Pyramid scam? Understand. I'm not arguing for Communism (neither did Marx, I believe). I'm just highlighting a key flaw which Marx had identified.
February 25, 2009 9:00 AM | Reply | Permalink
Sure it's a ponzi scheme, but it's even more like plain old theft.
February 25, 2009 3:03 AM | Reply | Permalink
. . . workers cannot consume . . . aggregate consumption . . . consume
. . . (consumer debt) . . . consumer debt load . . . consume . . . .
. . . future consumption . . . current consumption . . . consumption? Sound familiar? new10
It appears you've overlooked the capital in capitalism?
February 25, 2009 3:05 AM | Reply | Permalink
Ellen,
I've missed your point. Will you elaborate some? Thanks.
February 25, 2009 9:02 AM | Reply | Permalink