State Capitalism

[WildspitzE]

Re: State Capitalism

You again attempt to close off the discussion by asserting this supposed natural law - which is one of the neoliberal economics precepts.

The problem is this simplistic and wrong theory excludes everything which is inconvenient:

1) Government policy: subsidies, taxes, embargoes, etc etc
2) Monopolies/oligopolies: supply and/or demand deliberately skewed
3) Wealth: high unemployment skews demand down, bubbles skew demand up

Here are 3 clear categories of examples which invalidate the simplistic statement you've put up. There are many, many more.

Not true. What this highlights is that you're either not reading what I'm saying or perhaps I'm not expressing myself correctly, I even mentioned government interference multiple times (which is your number 1). Labor's valuation can't ultimately escape supply and demand. All of these factors that you offer up as invalidating what I said do nothing but affect where the valuation or pricing ends up in an economy, I said that before too. Heck, you even say that you're not above supply and demand under monopolies, under your #2 above.

http://www.dvorak.org/blog/2011/02/0...n-added-costs/

Here is a clear example: 'supply' of labor and 'demand' for labor were irrelevant. The driving factor in this particular example was Stonecipher's bonus package: by creating projections of cost savings via offshoring, he was able to give Boeing very nice financial results for 2 years at which point he retired (2002) despite unequivocal warnings by technical staff.

Some offshoring is perfectly understandable: moving low time value, high polluting, high unskilled labor, etc jobs to where regulations and/or unskilled labor costs are low.

Much offshoring is done simply to produce better appearing financial performance so that executives can cash in giant pay packages - much as most M & A deals are so executives can argue for bigger pay packages because of 'bigger company' being managed.

I didn't read the whole website you posted. I assume that what this guy did, as it pertains to this conversation, is offshore manufacturing to increase profitability so that he could get a bigger bonus. Not going into all of the bonus and short term gain BS as that is beyond this conversation, net net what you're saying is that the supply of engineers in the US was more expensive than in other countries so this greedy bastard moved the jobs to the cheaper place? Hmmm... and, why is it that jobs are cheaper there than here? When you think through this example you put up, you'll end up talking about the supply and demand conditions in each of the countries -- and they will each have their own specific set of government interference, inflation, subsidies, etc etc etc that affect each of supply and demand. What happens to all of the engineers that didn't get the job on this project? Will they be willing to work for cheaper if all the boeing jobs are off-shored? Will they leave engineering and become bankers? All these things affect supply and demand, which ultimately will value labor, whether you believe it is optimal, fair, what have you.

Happy Easter to you all.

[dcarrigg]

Re: State Capitalism

wow, good to see some debate.

the point of my initial post was to rubbish the production labour price not to invent a new example of economic organisation and by extension, the post above is in my opinion more accurate and representing reality.

the 10 worker economy I described above is only meant to show that labour production is disconnected from wage earnings, and the reality of the real world is much more complicated and complex.

There are transferrable skills and knowledge that all people should have, and there are some jobs in the real world that literally anyone can do, but there is more technical and specialized employment and obviously the skills required are rarer and therefore it could be more difficult to find someone to do the work, therefore a-priori wages would be higher.

I can tell you from my own experience though that having more knowledge, education or experience is only a part of the equation, and that prima-facie, we all know that ones ability to develop relationships with the correct 'economically significant people' will have just as much impact on your earning capability than your CV.

Also, no matter how many degrees or IQ points you have, if there are no jobs, there are no jobs.

And there are no jobs on a dead planet.

Fair enough. It's all good.

I was simply making two points:

1) That as an increasing share of the total value of the system is in debt/credit relationships, the system eventually becomes unstable and can devastate a given area - especially if it is a one-factory town.

2) Even in a situation where there is a labor shortage, wages can still be depressed or reduced if it is required in order to turn a profit because of the credit/debt relationships of a business owner. Simple supply and demand does not account for financial obligations required to run a business. If there is no competition that can receive access to capital at cheaper rates, then labor will receive less money, or the business will fold.

[c1ue]

Re: State Capitalism

Labor's valuation can't ultimately escape supply and demand.

You are confusing price with value.

The point of neoliberal economics is that labor has no inherent value, only a price determined by supply and demand.

The result of this statement is what we see today.

Granted, it isn't that the labor theory of value is perfectly correct. A cogent attack is the difficulty in determining both what this unit of labor is and its precise value.

However, to swing the other way is to both refuse to acknowledge that labor does have inherent value to society, individuals and corporations as well as to overlook the similar flaw under 'supply and demand' neoliberal economics: the impossible to determine 'fair market value'.

I assume that what this guy did, as it pertains to this conversation, is offshore manufacturing to increase profitability so that he could get a bigger bonus.

No, you missed the point again.

What Stonecipher did was not even so straightforward as shifting Boeing production offshore in order to increase profitability and thus pump up his pay package. To do this is basically a cash flow play: if I pay less wages, then my profitability goes up because my cash flow improves.

Shifting manufacturing takes time and effort - especially since manufacturing of airplane parts isn't just monkeys banging on steel.

What Stonecipher did was to create a accounting fiction: the massive capital investment necessary to build a next generation passenger liner normally puts a gigantic millstone onto Boeing in the form of R & D but more importantly preparation for production of said aircraft. By embracing an outsourcing AND offshoring (some work was outsourced in the US, some was offshored but part of Boeing, some was both), Stonecipher was able to paint a glowing picture of 'the new' Boeing because the offshored/outsourced work allowed him to ignore the normal rampup costs for production, in addition to the 'labor' savings.

My view is that he knew full well that this could and likely would be a disaster, but didn't care because he was retiring at the peak.

Why does this matter?

Because this all worked by ignoring the value of existing Boeing labor (coordination, familiarity with process, experience, what have you) and adhering to the 'supply and demand' view of labor (cheaper).

[WildspitzE]

Re: State Capitalism

You are confusing price with value.

No I didn't. I said valuation - the process of assessing value - cannot escape supply and demand. The result of such valuation is a price, for that specific set of circumstances, as a proxy for value at such point in time (and such conditions).

The point of neoliberal economics is that labor has no inherent value, only a price determined by supply and demand.

So, you believe that labor has an instrinsic value? Ok, fine, what is it?

And, as I asked you before: how would you value labor?

Let's use a simple example. If you're correct, then a 3 carat uncut diamond has no value. It would only have value once it is cut, because of the diamond cutter's labor.

Yes, I argue that value is imputed by individuals, and it is not objective in the things valued. That said, price is the objective outcome of a subjective valuation process via the competitive bids of buyers for the things being valued (supply and demand).

The result of this statement is what we see today.

The result of your statements is what we saw in fine examples, such as the Soviet Union. As much as you'd like to hate on what I'm saying, most folks think in terms of cost push and labor theory of value terms.

Granted, it isn't that the labor theory of value is perfectly correct. A cogent attack is the difficulty in determining both what this unit of labor is and its precise value.

Read my first post, on this thread, what is the thing I ridicule? "Difficulty"?? That's an understatement. Like I said above, how would you propose that the valuation be done? If it's intrinsic as you claim, then it should be easy.

However, to swing the other way is to both refuse to acknowledge that labor does have inherent value to society, individuals and corporations as well as to overlook the similar flaw under 'supply and demand' neoliberal economics: the impossible to determine 'fair market value'.

Who said anything about fair? I certainly didn't. Fair has nothing to do with it.

Why does this matter?

Because this all worked by ignoring the value of existing Boeing labor (coordination, familiarity with process, experience, what have you) and adhering to the 'supply and demand' view of labor (cheaper).

Maybe what he did, maliciously or not, was to argue that the supply of both labor pools was virtually the same (the quality of the supply so to speak)? And thus, going with the "cheaper" was justifiable?

[c1ue]

Re: State Capitalism

No I didn't. I said valuation - the process of assessing value - cannot escape supply and demand. The result of such valuation is a price, for that specific set of circumstances, as a proxy for value at such point in time (and such conditions).

Yes, you did. You again assume that valuation can only be determined via price via supply and demand - despite a slew of examples where it does not hold true.

And these examples extend also to the United States: During World War II - there was rationing. Prices were fixed by the government as was supply. Clearly then, supply and demand had no effect whatsoever on prices in this situation in this country.

Another example: Medicare supported health care.

Infinite supply, demand theoretically only a function of need.

Yet prices are not only not falling, they are rising faster than inflation.

You keep on trying to fit a square block in your ideological round hole, and it keeps bouncing.

So, you believe that labor has an instrinsic value? Ok, fine, what is it?

And, as I asked you before: how would you value labor?

Let's use a simple example. If you're correct, then a 3 carat uncut diamond has no value. It would only have value once it is cut, because of the diamond cutter's labor.

Yes, I argue that value is imputed by individuals, and it is not objective in the things valued. That said, price is the objective outcome of a subjective valuation process via the competitive bids of buyers for the things being valued (supply and demand).

Read my first post, on this thread, what is the thing I ridicule? "Difficulty"?? That's an understatement. Like I said above, how would you propose that the valuation be done? If it's intrinsic as you claim, then it should be easy.

The inability to precisely determine value does not automatically mean value doesn't exist.

For example: define precisely the value of a human life.

If you cannot, then does a human life hold no value?

Human labor is a subset of this equation - as it is the means by which human beings survive and form the basis of society.

As for your example - again you choose poorly. A 3 carat diamond has value. It required labor to find it and bring it to market. As was noted in "Treasure of the Sierra Madre", the value of gold isn't just the value of gold, it is the labor of all those who tried and failed to find it as well as those who did.

As for what the precise value of a unit of human labor should be:

I'm not a theoretical economist, but I do believe that the first step to quantifying this value is to first be able to identify what value a civil member of society presents.

It is more than the contribution or extraction of money at a microeconomic level. There may be a cultural aspect to this, but equally it might simply be a function of relative prosperity over time.

Unfortunately there seems to be a notable lack of work being done in this area - there is far more money to be made trying to find the next Black-Scholes equation.

Be that as it may, the reality is that there is a value to labor performed in the United States as opposed to labor performed in China or any other outside nation.

That value may be simply a multiplier effects of wages for labor being cycled through the economy.

It might be a social component - the sense of well being conveyed by being able to be a contributing member of society (as opposed to a benefiting member).

It might be a synergistic effect of the above plus others.

Whatever it is, it is not nonexistent.

Your ongoing tunnel vision view of labor as a pure function of supply and demand specifically excludes this value no different than mortgage brokers shoving people into homes and loans ignored external values or banksters destroying market trust in search of a trading edge.

The result of your statements is what we saw in fine examples, such as the Soviet Union.

Indeed. The Soviet Union went from a bottom of the barrel European power to become a superpower.

It eventually collapsed due to bureaucratic sclerosis, even as the United States is collapsing now due to bankster sclerosis.

Not sure what message you're trying to convey.

Who said anything about fair? I certainly didn't. Fair has nothing to do with it.

Again, you seem to be reading some other post. Fair market value is as much a fiction as any other supposed objective measurement of anything which cannot be directly measured.

Was the price of a residential home in 2006 in the United States fair? Why then did it change in 2007? And prior to that in 2003?

Every change was due to circumstances not solely dependent on supply and demand, in fact arguably primarily due to other factors like government policies, availability of credit and lack of regulation.

Maybe what he did, maliciously or not, was to argue that the supply of both labor pools was virtually the same (the quality of the supply so to speak)? And thus, going with the "cheaper" was justifiable?

Maybe he saw gigantic dollar signs and chose to ignore what his own people were saying.

In fact, almost certainly this.

[WildspitzE]

Re: State Capitalism

Yes, you did. You again assume that valuation can only be determined via price via supply and demand - despite a slew of examples where it does not hold true.

unfortunately, i didn't think that your "slew of examples" was convincing; and while you can keep on calling me ideological as a way to undermine my comments, you have offered nothing more than ideology yourself. heck, you can't even provide a viable way to actually put these ideals of yours to use.

And these examples extend also to the United States: During World War II - there was rationing. Prices were fixed by the government as was supply. Clearly then, supply and demand had no effect whatsoever on prices in this situation in this country.

there was a supply of labor and a demand for it, even if they were skewed or suppressed via government decree. i'm not going to continue repeating myself again and again. as an aside, these were times of a national emergency, where people were willing to do certain extraordinary things (how many men were offshore fighting [and getting paid to do so as well], and what did that do to local unemployment). how sustainable would this have been in the long run? and, would the supply of labor be there forever at those levels or would they be fleeing to [canada? mexico?] if it weren't temporary / emergency provisions. you seem to think that i'm saying that every time labor is valued and assigned a price it's going to be perfect. that's not what i'm saying.

Another example: Medicare supported health care.

Infinite supply, demand theoretically only a function of need.

Yet prices are not only not falling, they are rising faster than inflation.

not sure what this has to do with labor. however, i find it funny that you accuse me of picking a poor example and then you provide this beauty.

ah, infinite supply of what? as you didn't specify, i assume you meant care. the care isn't infinite, there are a finite amount of suppliers for these goods and services. what's "infinite" (we know it's not, but i'm using your words) here is the funds that backstop the demand side, thus the demand side is not only "infinite" or price insensitive but they have no clue as to what services cost. sounds like a suppliers market to me, and the reason why you see the trend in prices going up. hint hint: the demand side is the side that tries to keep prices down, this all should have been immediately obvious when you were coming up with this example.

The inability to precisely determine value does not automatically mean value doesn't exist.

For example: define precisely the value of a human life.

If you cannot, then does a human life hold no value?

Human labor is a subset of this equation - as it is the means by which human beings survive and form the basis of society.

i didn't say that if you can't determine value it doesn't exist. Iiasked you if you believe that labor has an INTRINSIC value. if so, what is it? or how do you determine its intrinsic value?

i said its subjective, which is not the same as it doesn't have value.

As for your example - again you choose poorly. A 3 carat diamond has value. It required labor to find it and bring it to market. As was noted in "Treasure of the Sierra Madre", the value of gold isn't just the value of gold, it is the labor of all those who tried and failed to find it as well as those who did.

when i wrote that example, i thought of clarifying that piece of information but i figured that we were using a simplified example and that you weren't going to go down that route. Fine: if a person finds the second ever uncut diamond on the side of the road (no mining involved, but a diamond cutter had already produced the fist cut diamond), does it have no value? It would only have value once it is cut, because of the diamond cutter's labor?

As for what the precise value of a unit of human labor should be:

I'm not a theoretical economist, but I do believe that the first step to quantifying this value is to first be able to identify what value a civil member of society presents.

It is more than the contribution or extraction of money at a microeconomic level. There may be a cultural aspect to this, but equally it might simply be a function of relative prosperity over time.

Unfortunately there seems to be a notable lack of work being done in this area - there is far more money to be made trying to find the next Black-Scholes equation.

Be that as it may, the reality is that there is a value to labor performed in the United States as opposed to labor performed in China or any other outside nation.

That value may be simply a multiplier effects of wages for labor being cycled through the economy.

It might be a social component - the sense of well being conveyed by being able to be a contributing member of society (as opposed to a benefiting member).

It might be a synergistic effect of the above plus others.

Whatever it is, it is not nonexistent.

see my first paragraph in this post. nothing practical offered up but an ideal.

Your ongoing tunnel vision view of labor as a pure function of supply and demand specifically excludes this value no different than mortgage brokers shoving people into homes and loans ignored external values or banksters destroying market trust in search of a trading edge.

Indeed. The Soviet Union went from a bottom of the barrel European power to become a superpower.

superpowers can be easily built on the back of unvervalued labor. guess what they used ... labor theory of value.

Again, you seem to be reading some other post. Fair market value is as much a fiction as any other supposed objective measurement of anything which cannot be directly measured.

Was the price of a residential home in 2006 in the United States fair? Why then did it change in 2007? And prior to that in 2003?

Every change was due to circumstances not solely dependent on supply and demand, in fact arguably primarily due to other factors like government policies, availability of credit and lack of regulation.

i didn't bring up fair, you did. my point was that it has nothing to do with the valuation process -- because fairness is a fiction, it's a quaint notion. like I said ad nauseam, government policies, availability of credit, lack of regulation affect and ultimately determine supply and demand.

given that this is just getting repetitive at this point, and the marginal utility of this conversation is diminishing, let's just agree to disagree.

[Starving Steve]

Re: State Capitalism

Yes, feudalism.

My savings that are lent-out to the builder of the apartment building do not serve a function? The tenants are not served by my savings in their apartment building? The owner of the apartment building that assumed the risk of owning and managing the apartment building does not serve humanity?

What kind of Marxist nonsense is this? Ofcourse, the saver and the lender and the apartment-building owner serves humanity.

And for state capitalism as with socialism's "state companies" or "crown companies", they limit the choice of the individual to make a decision in the market. So how are these monopolies any different than private monopolies such as Wal-Mart?
In fact, to be truthful, private monopolies usually give the individual more choice in the marketplace for the simple reason that private and corporate monopolies have to compete in order to survive in the marketplace--- something that state or crown companies do not have to do. So prices tend to be lower and selection better in the free-marketplace than in the state-controlled marketplace.

Why is this concept of free-choice and free-market competition so difficult for some here to understand?

[Jay]

Re: State Capitalism

My savings that are lent-out to the builder of the apartment building do not serve a function? The tenants are not served by my savings in their apartment building? The owner of the apartment building that assumed the risk of owning and managing the apartment building does not serve humanity? What kind of nonsense is this? Of course, the saver and the lender and the apartment building owner serves humanity.

If the rentier class wants to rehab its image, they should just take a page from Starving Steve, they do it to serve humanity! Bernays would be proud.

[Starving Steve]

Re: State Capitalism

Would you rather be true to Marxist dogma and let the saver starve with zero interest rates? Then, close the bank or credit union? Then, let the state or crown take-over the apartment building? Then, let the apartment building be energized with solar- energy dreams. Then, let the deadbeats move-in and give them free rent in the apartment building? Then let the management of the apartment building be done co-operatively, maybe by the deadbeats themselves?

Anyone have a few pictures of Detroit in the 1990s to insert here? South Los Angeles? Watts? The old East Berlin under communist rule? Havana after forty years of Castro's communism? Zimbabwe after the hyper-inflation from free-money for everyone economics?

[dcarrigg]

Re: State Capitalism

My savings that are lent-out to the builder of the apartment building do not serve a function?

You are confusing rentiers with landlords here.

The tenants are not served by my savings in their apartment building?

No, they are not.

The owner of the apartment building that assumed the risk of owning and managing the apartment building does not serve humanity?

Okay, managing property is different. It is a service. Work is being done. That is not what is meant by rentier in the classical sense.

ren·tier/räNˈtyā/
Noun: A person living on income from property or investments.

What kind of Marxist nonsense is this? Ofcourse, the saver and the lender and the apartment-building owner serves humanity.

It is pre-Marx. Marx has nothing to do with it. What I am talking about is a fundamental tenant of capitalism. I previously put forth Ricardo and Locke. Here's a quote from Keynes:

"I see, therefore, the rentier aspect of capitalism as a transitional phase which will disappear when it has done its work. And with the disappearance of its rentier aspect much else in it besides will suffer a sea-change. It will be, moreover, a great advantage of the order of events which I am advocating, that the euthanasia of the rentier, of the functionless investor, will be nothing sudden, merely a gradual but prolonged continuance of what we have seen recently in Great Britain, and will need no revolution."

Keynes, Ricardo, & Locke were not Marxists. You can't just throw the 'Marxist' label at everything you don't like and assume it's a valid logical argument.

And for state capitalism as with socialism's "state companies" or "crown companies", they limit the choice of the individual to make a decision in the market. So how are these monopolies any different than private monopolies such as Wal-Mart?
In fact, to be truthful, private monopolies usually give the individual more choice in the marketplace for the simple reason that private and corporate monopolies have to compete in order to survive in the marketplace--- something that state or crown companies do not have to do. So prices tend to be lower and selection better in the free-marketplace than in the state-controlled marketplace.

Why is this concept of free-choice and free-market competition so difficult for some here to understand?

I have no problem with free market competition. I said nothing about state ownership of anything. I simply advocated a tax structure that rewards work and ingenuity over rentiers.

I am sorry that I have offended your noble sensibilities so.

[c1ue]

Re: State Capitalism

given that this is just getting repetitive at this point, and the marginal utility of this conversation is diminishing, let's just agree to disagree.

It is diminishing because you insist on viewing all terms as supply and demand, when in fact you yourself admit that there are all sorts of ways supply and demand gets distorted.

The basis for your latest statements seems to be that what exists now is the best that can be done, when in fact what exists now is a product of decades of political maneuvering as opposed to some natural law of economics.

As for ways of implementation - I've never said we should become socialist or any other 'ist' or 'ism'.

But I do say - since the situation now is clearly screwed up, and there are clear stages by which this has occurred, that there are strong reasons to revert to at least portions of the previous economic regime: progressive taxation, Glass Steagall, etc etc.

[Starving Steve]

Re: State Capitalism

Before you kids here condemn landlords or rentiers or so-called, "investment vultures", I think you kids need to spend a winter in Winnipeg in order to appreciate the importance of a warm and bright apartment, at a low rent, and with cheap electricity provided by hydro-electric dams on the Nelson River in northern Manitoba. All of this classical (19th C.) rubbish about "the rentier class" and "investment vultures" with to-day's new rubbish about "sustainability", "zero-interest rate plans", and "the new green economy" will assume a different meaning when it is -38F (-39C) with ice-fog outside. The pain of having frostbite in your finger-tips will give you a different perspective on how the world works, on what is important and what is rubbish.

[dcarrigg]

Re: State Capitalism

Before you kids here condemn landlords or rentiers or so-called, "investment vultures", I think you kids need to spend a winter in Winnipeg in order to appreciate the importance of a warm and bright apartment, at a low rent, and with cheap electricity provided by hydro-electric dams on the Nelson River in northern Manitoba. All of this classical (19th C.) rubbish about "the rentier class" and "investment vultures" with to-day's new rubbish about "sustainability", "zero-interest rate plans", and "the new green economy" will assume a different meaning when it is -38F (-39C) with ice-fog outside. The pain of having frostbite in your finger-tips will give you a different perspective on how the world works, on what is important and what is rubbish.

FIRE and ice.

First the capitalist philosophers are "marxist." Now they are "classical (19th C.) rubbish." This including a man who died in 1946. Oh yeah, and solar panels are the devil - we always have to mention that - no matter what the topic at hand.

I get it buddy. It's not a useful way to develop a dialogue, but I get it.

[Jay]

Re: State Capitalism

Before you kids here condemn landlords or rentiers or so-called, "investment vultures", I think you kids need to spend a winter in Winnipeg in order to appreciate the importance of a warm and bright apartment, at a low rent, and with cheap electricity provided by hydro-electric dams on the Nelson River in northern Manitoba. All of this classical (19th C.) rubbish about "the rentier class" and "investment vultures" with to-day's new rubbish about "sustainability", "zero-interest rate plans", and "the new green economy" will assume a different meaning when it is -38F (-39C) with ice-fog outside. The pain of having frostbite in your finger-tips will give you a different perspective on how the world works, on what is important and what is rubbish.

Steve, just because someone points out something about the rentier class, doesn't mean they are also espousing a view on renewable energy. I happen to agree with some of your sentiments about energy, but don't see how they fit here. Also, remember that attempting to describe a process accurately does not assume moral/philosophical agreement or disagreement with that process.

[Jay]

Re: State Capitalism

Before you kids here condemn landlords or rentiers or so-called, "investment vultures", I think you kids need to spend a winter in Winnipeg in order to appreciate the importance of a warm and bright apartment, at a low rent, and with cheap electricity provided by hydro-electric dams on the Nelson River in northern Manitoba. All of this classical (19th C.) rubbish about "the rentier class" and "investment vultures" with to-day's new rubbish about "sustainability", "zero-interest rate plans", and "the new green economy" will assume a different meaning when it is -38F (-39C) with ice-fog outside. The pain of having frostbite in your finger-tips will give you a different perspective on how the world works, on what is important and what is rubbish.

Steve, just because someone points out something about the rentier class, doesn't mean they are also espousing a view on renewable energy. I happen to agree with some of your sentiments about energy, but don't see how they fit here. Also, remember that attempting to describe a process accurately does not assume moral/philosophical agreement or disagreement with that process.