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On September 19 2019 12:15 Nebuchad wrote:Show nested quote +On September 19 2019 11:39 ZerOCoolSC2 wrote:
Is it not the mill owner who has to maintain the mill? So he pays himself more for upkeep, marketing, etc. I think the wage itself is fine. I really don't see an issue with this setup. Even if you take out costs of maintenance and the other factors, 30/hr isn't bad. This isn't taking into account cost of living, which still would be pretty well for most parts of the contiguous US. But he isn't paying himself more for upkeep and marketing, he's paying himself more because he owns the means of production and he's exploiting that.
How is he exploiting what he owns? He's paying the worker an initial fair wage for working for him. We don't know if the mill owner got more employees and decided to share profits. We only know how the hypothetical starts. And starting out, this is a fair transaction between two people. You all are looking at it as if this is a megacorporation when in fact, it's one guy running a mill who took his money (and most likely a loan), and started a business. Why should he, initially starting out, give this one worker half of the profits? This business will be gone in no time unless the volume of his mill is phenomenal. To add to this: the owner is still doing manual labor with the one employee and the entirety of the business side of things, including finding new customers. Because he owns the means of production doesn't mean he's exploiting the worker. He's paying himself more because he is objectively doing more. You can bump the wage up higher if it makes you happier, but the owner still has to make more for actually doing more.
On September 19 2019 12:11 KwarK wrote:Show nested quote +On September 19 2019 11:39 ZerOCoolSC2 wrote:
Is it not the mill owner who has to maintain the mill? So he pays himself more for upkeep, marketing, etc. I think the wage itself is fine. I really don't see an issue with this setup. Even if you take out costs of maintenance and the other factors, 30/hr isn't bad. This isn't taking into account cost of living, which still would be pretty well for most parts of the contiguous US. $30/hr isn't objectively anything. It could represent a reasonable share of the profits or it could not. That's part of the problem. People in the US are relatively well off but have an objectively low and decreasing portion of the proceeds of their labour.
But we're only assuming that, aren't we? In this hypothetical, it is a one person operation, expanded to two. Now that person, should he stay for a length of time, will more than likely see his portion grow. It is insane to think that a startup mill should be splitting profits right off the bat so to assuage any anti-capitalist fears. If the business grows, then sure, the one employee can talk to the boss about profit sharing since he's doing half of the manual labor. If the business tanks or is bought out, then sure, talk about splitting the money with the one employee. Otherwise, it is a two person operation.
I'm going to assume that the owner is using the profits and putting it back into the business through upkeep and marketing, and not just hoarding it. The business wouldn't last long without it.
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On September 19 2019 12:21 ZerOCoolSC2 wrote:Show nested quote +On September 19 2019 12:15 Nebuchad wrote:On September 19 2019 11:39 ZerOCoolSC2 wrote:
Is it not the mill owner who has to maintain the mill? So he pays himself more for upkeep, marketing, etc. I think the wage itself is fine. I really don't see an issue with this setup. Even if you take out costs of maintenance and the other factors, 30/hr isn't bad. This isn't taking into account cost of living, which still would be pretty well for most parts of the contiguous US. But he isn't paying himself more for upkeep and marketing, he's paying himself more because he owns the means of production and he's exploiting that. How is he exploiting what he owns? He's paying the worker an initial fair wage for working for him. We don't know if the mill owner got more employees and decided to share profits. We only know how the hypothetical starts. And starting out, this is a fair transaction between two people. You all are looking at it as if this is a megacorporation when in fact, it's one guy running a mill who took his money (and most likely a loan), and started a business. Why should he, initially starting out, give this one worker half of the profits? This business will be gone in no time unless the volume of his mill is phenomenal.
I have a funny way of ignoring it, it's literally the first thing I said about this example, that it wasn't good in the context of capitalism vs socialism because most of the revenue of the owner was still derived from his labor. But hey, whatever.
There is exploitation happening because he has hired another person to do the same thing he does and he has decided that he was worth 4 times what the other dude is making for the same work, by virtue of owning the means of production. The other worker isn't working 1/4th of what the owner is working, therefore the owner is deriving some value from the worker's work, on top of the value he gets from his own work; therefore he is exploiting him.
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United States42959 Posts
I think of this as the Bill Gates problem.
Bill Gates has an insane amount of money but who did he harm to get it? Surely it must have been someone but his customers were all willing participants in a relatively open market (let's ignore the monopoly stuff for now because this is a simplification) to whom what he was offering represented positive value.
We can think of this like a math problem. Let's say he invents a machine that saves business owners between $100 and $10,000. It costs $1,000 for him to make it. Let's say business owners are evenly spread in that range, imagine exactly 100 business owners spread at $100 intervals.
The invention has no value for the first 9 owners, they'd get less than it would cost to make it.
The next 91 would collectively realize savings of $500,500 while their 91 machines would cost $91,000 to make for a maximum realizable value of $409,500. So Bill's invention is theoretically worth $409,500 to the market and the reduced costs will result in reduced prices for consumer goods of $409,500.
What pricing strategy does he adopt?
His optimal market price would be $5,500. That would give him 46 customers for a total sales of $253,000 and a profit of $207,000. Any lower or higher and he reduces his overall profit. The total value created by the machine for those 46 is $310,500 of which Bill Gates is keeping $207,000. The others realize profits starting at $0 (for the 46th) and increasing at $100 increments until we hit the 100th who realized profits of $4,500. But we still have 45 other businesses out there who could have really used the machine but who, despite being willing to pay more than it costs Bill to make it, cannot have it due to the optimal pricing strategy. $103,500 of the efficiency gains flow to the consumers in reduced prices, $207,000 go to Bill, $99,000 are lost. That's where it becomes problematic.
We must ask ourselves what adequate compensation for the invention is. How should we allocate the $409,500 of value to achieve the greatest societal good, while still ensuring that we have desirable incentives for advancement and economic activity. The allocation above gives only $103,500 to the people, with $207,000 going to Bill and $99,000 forfeited entirely as part of Bill's profit maximization strategy. This is clearly not optimal.
Consider if instead Bill opted for a flat 100% margin. It costs him $1,000 to make, he sells it for $2,000. Of the total $409,500 in potential value created only $4,500 is forfeited from the pricing strategy, Bill gets $81,000, and $324,000 in greater economic efficiency is realized by society as a whole.
This is the problem with pricing in a capitalist economy. Capitalism says that Bill created the $409,500, he is entitled to maximize his share as he sees fit. He deserves $207,000 and if only $103,500 of the $409,500 goes to making society as a whole richer then who cares, they're still richer than they were before, they freely participated at his prices. All participants may deem this as fair, the buyers buy it because it saves them money. The problem is that the buyers pass the cost on to the consumer in their selling prices, Bill overcharges them for the invention far in excess of what it costs him and they in turn pass that on. The consumer is still saving some money compared to if Bill never invented it, but instead of the price of a widget to the consumer dropping from $5 to $2 it has dropped from $5 to $4 with $2 of that going straight into Bill's pocket. That's who is harmed, that's who is exploited.
A utilitarian perspective might demand seizure and nationalization of his invention to obtain the full $409,500 of potential gains. This would maximize the wealth of society as a whole.
The middle example of 100% margins may seem preferable to both as it almost entirely fixed the issue of forfeited gains while reducing the problem of consumers overpaying for goods so that manufacturers can overpay Bill so he can buy yachts. But that's not what we're doing. We're doing the first one where almost all the gains of improved efficiency and productivity are monopolized by the super rich with only a small fraction flowing to the consumer. And while it may seem that $4 is a good price for a widget, especially when it used to cost $5, consumers can't judge that, they don't know that it could be produced below $2 and that over $2 of each $4 is going to the pockets of the super rich.
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Canada11363 Posts
First, the dude that you describe is primarily a worker, not a capitalist, so this is a pretty bad example in defense of capitalism: most of his revenue is derived from his own labor, not from the exploitation of his employee.
You will note that the quote I was reacting to made no such distinction. There were two posts that simply said that profit = theft. I set out to discover just how this applied to a simplified scenario in a small business I knew somewhat of the ins and outs.
You're not arguing that the exploitation doesn't exist, you're arguing that it's okay, or good. Don't you think a lack of exploitation would be preferable for the $30 guy? Clearly it isn't from the perspective of the $120 guy, but your argument has been focused on the perspective of the $30 guy so far.
I'm arguing that everyone wins in the scenario I described. I don't see theft, and I don't see exploitation. How is that term defined? At least around here, $30.00/ hr is a really good wage (equivalent to an experienced roofer, I think?) and not unfair at all.
There's a distinction between compensated work and profit your not making in your conflation between the two.
So you have a narrower definition of profit? Let's take the first person (who finishes the table) because that has the easiest comparison to a classic understanding of profit. Maybe he bought the rough plank for $400, then finished it and sold it as a table for $800. So his profits would be under $400 (less his materials and time.) Is that profit or compensated work? And in either case, was there theft involved?
I think that when talking about all this you have to consider risk. With capitalism the owner accepts the risk of losing as well that a worker would not.
You also have a huge ramp up in costs- regular house insurance is null and void. If a customer steps on your property you have to have crazy expensive insurance even if all they are doing is looking at planks and are nowhere near the mill itself. There is an amazing amount of regulatory expenses that government introduces to businesses. As soon as the owner has an employee, he'll have to pay into WCB which is a joke of an organization- over here it has a complete monopoly on worker compensation insurance, and is far more expensive than private insurance and yet pays out a fraction of private insurance, and fights tooth and nail to make sure it never has to actually pay anything. But private insurance is not an option because government.
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Kwark explains well the problem with your position Falling. Gates doesn't invent anything without the society that raised and accommodated him. Instead of getting that value back to the society that invested in him he'd/shareholders rather see it burn and maximize personal profits over social gains (and/or better wages for the workers replicating/maintaining/improving his invention).
The "everybody wins" argument as Kwark points out misses the point. It's a side-effect that corporations buy politicians to minimize, segregate, or eliminate altogether.
This is the immutable flaw of capitalism that regulation can't fix, in part because the regulators often literally work for the corporations or swing through the revolving door in DC. It's true regulation and legislation can shift this balance but it's one capitalism demands be maximized in favor of owners/shareholders, society be damned.
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On September 19 2019 13:29 Falling wrote:Show nested quote +First, the dude that you describe is primarily a worker, not a capitalist, so this is a pretty bad example in defense of capitalism: most of his revenue is derived from his own labor, not from the exploitation of his employee. You will note that the quote I was reacting to made no such distinction. There were two posts that simply said that profit = theft. I set out to discover just how this applied to a simplified scenario in a small business I knew somewhat of the ins and outs. Show nested quote +You're not arguing that the exploitation doesn't exist, you're arguing that it's okay, or good. Don't you think a lack of exploitation would be preferable for the $30 guy? Clearly it isn't from the perspective of the $120 guy, but your argument has been focused on the perspective of the $30 guy so far.
I'm arguing that everyone wins in the scenario I described. I don't see theft, and I don't see exploitation. How is that term defined? At least around here, $30.00/ hr is a really good wage (equivalent to an experienced roofer, I think?) and not unfair at all.
Fair enough on the first point, but it is still quite leading as a simplified scenario because it includes an owner who primarily makes his money from his labor. The average small business owner would be impacted somewhat little by workplace democracy, as most of their income is already derived from their own labor. It's perhaps easier to see the exploitation if you simplify even more, and say that the owner doesn't expand his business, he just hires some dude at 15$/hour to do the same work that he was previously doing, and then he keeps the rest of the profit and he sits around reading some books.
It is exploitation because some of the value that the worker created with his labor ends up in the pocket of the owner instead of the pocket of the worker.
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I think the word "exploit" is either being bandied about too much or needs a definition from those insisting upon using it.
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Just to put a real life example out there, Bezos cut healthcare for 1900 Whole Foods workers to "save" (read: displace expenses off his bottom line) a few hours of what he makes.
Cutting Health Benefits of 1,900 Whole Food Workers Saved World's Richest Man Jeff Bezos What He Makes in Less Than Six Hours
A new analysis finds that the billionaire could provide annual coverage slashed last week with just a fraction of what he makes personally each day.
www.commondreams.org
Considering he's already the wealthiest person on the planet it should be treated like the horrific addiction it is (like socialism suggests) instead of held up as an example to aspire to (as capitalism does) imo.
That's only superficially defensible under capitalism, there's not an explanation for such wickedness that is compatible/consistent with socialism.
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United States42959 Posts
On September 19 2019 14:13 ZerOCoolSC2 wrote:
I think the word "exploit" is either being bandied about too much or needs a definition from those insisting upon using it.
A non equitable division of resources due to a power imbalance.
There’s a classic game theory scenario. A gives B a dollar and tells B to split it with C. B decides the amounts, C must approve the division or both get zero. B should rationally offer $0.01 to C and C should rationally accept it. I would say B I’d exploiting his position there, despite obtaining the consent of C.
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Why are you convinced that we need to eliminate greed in order for socialism to be better than capitalism?
I've made this comparison before but this is like arguing authoritarian systems vs democracy. Sure, democracy looks better than authoritarianism in practice, but people are power hungry, which is why authoritarian systems are so popular. This is an argument against democracy.
Like, no, it's not. Even with power hunger democracy is preferable to authoritarianism. And even with greed socialism is preferable to capitalism.
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On September 19 2019 14:21 JimmiC wrote:
I wish there was some good examples of the socialism you speak of in the world. Because so far it seems that the ism changes but the greed does not. Instead of the profits flowing to the owners they flow to the government and the workers get screwed even harder.
I don't believe capitalism created greed, I think it works because almost everyone is greedy. That is why I ask the questions about how you are going to guard against greed in the socialist world. And why regulation either way will be required. Functionally I don't see how it would work without some capitalism. Like nebs version has (correct me if I'm wrong) has the workers at each business owning but still competing vs other businesses in the same field. This is interesting but I think how people get hired would be a sticking point, among others.
Since it this is the US thread, I can agree with GH's point that regulation is bought and sold, which is a major problem. It is a problem in other western countries as well, but not in the same way, there is not billions spent on campaigning and lobbying. In many Southern countries it is a major problem as well, we just call it corruption, in the US it should be considered corruption but because it has been legalized it is not.
The fundamental thing you seem to miss entirely is that capitalism elects a billionaire, socialism demands they stop existing. There's nothing inconsistent about capitalism having a billionaire leader, it's fundamentally incongruent with socialism/communism to be led by a billionaire.
Now does that mean it doesn't happen? Of course not. It means that someone is doing socialism poorly (or not at all). Whereas there's nothing inherently about flawed about capitalists rallying behind a billionaire to lead them. Actually, for those that buy into the meritocracy myth, it's one of the best possible choices (this is part of why Trump won btw).
EDIT: Also what Neb said, your response to which is why I won't engage further
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Canada11363 Posts
@Nebuchad
Actually, my scenario is more applicable than you realize now that I've read through Kwark's post because what is true of Bill Gates is literally true of my live edge wood example. (Unless I'm horribly misreading.)
So here's the crazy thing with live edge wood- people are paying premium price for what amounts to junk wood. Some of the stuff was laying on the ground for too long and the owner thought would be bad for firewood. But mill it and dry it and people are willing to pay ridiculous prices for it because the spalting makes amazing features.
The owner could charge half the rate and still be make $60-80 an hour and making ten times what that wood would make if it was straight up logged and put on a logging truck. Is it theft to charge more? For awhile the owner had very low prices, undercutting everyone else that was selling live edge by a mile- but that created more demand than the owner wanted to work, and didn't want to have to keep turning people away because he was sold out. So it was easier to raise the prices to be just lower than everyone else and therefore wouldn't have to cut through his trees as fast (easier to be sustainable in the long run anyways given that trees increase by about 7% per year). Sure people don't realize a higher cost is being passed on to them.
But most people making live edge furniture, etc don't have easy access to trees (or for that matter a mill or a kiln that was designed by the owner as a hybrid from two other kiln designs in the States.) So they just wouldn't have the wood at all. Nobody has a right to those trees- they were just sitting there, passively growing with the few dead ones being picked out for firewood. Then the owner realized there was a niche market for the sort of junk wood that none of the giant industrial mills had any interest in. Which meant all the people making stuff for this live edge fad (pretty sure it's a fad) gained a new and local source, but charged at a price that could be considerably lower. This pretty much matches the Bill Gates scenario, but I fail to see what is wrong with it.
On September 19 2019 13:47 GreenHorizons wrote:
Kwark explains well the problem with your position Falling. Gates doesn't invent anything without the society that raised and accommodated him. Instead of getting that value back to the society that invested in him he'd/shareholders rather see it burn and maximize personal profits over social gains (and/or better wages for the workers replicating/maintaining/improving his invention).
The "everybody wins" argument as Kwark points out misses the point. It's a side-effect that corporations buy politicians to minimize, segregate, or eliminate altogether.
This is the immutable flaw of capitalism that regulation can't fix, in part because the regulators often literally work for the corporations or swing through the revolving door in DC. It's true regulation and legislation can shift this balance but it's one capitalism demands be maximized in favor of owners/shareholders, society be damned.
I really think it doesn't deal with your very broad generalization:
I think the more we look into the negative externalities of capitalism the more we'll discover that "profit" is a euphemism for stolen work and displaced expenses.
Is the finisher stealing when he charges $800 for the finished table when the wood cost him $400? (And is he stealing from the mill owner or the customer or both?) And if it is, where do you draw the line. Is $600 okay, but not $800? Or maybe $500?
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On September 19 2019 14:33 JimmiC wrote:Show nested quote +On September 19 2019 14:30 Nebuchad wrote:
Why are you convinced that we need to eliminate greed in order for socialism to be better than capitalism?
I've made this comparison before but this is like arguing authoritarian systems vs democracy. Sure, democracy looks better than authoritarianism in practice, but people are power hungry, which is why authoritarian systems are so popular. This is an argument against democracy.
Like, no, it's not. Even with power hunger democracy is preferable to authoritarianism. And even with greed socialism is preferable to capitalism. You think the USSR was better for the people than the US?
The USSR had authoritarianism on top of their socialism, which is responsible for most of the problems that you're thinking of right now. I like democracy.
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On September 19 2019 14:40 JimmiC wrote:Show nested quote +On September 19 2019 14:37 Nebuchad wrote:On September 19 2019 14:33 JimmiC wrote:On September 19 2019 14:30 Nebuchad wrote:
Why are you convinced that we need to eliminate greed in order for socialism to be better than capitalism?
I've made this comparison before but this is like arguing authoritarian systems vs democracy. Sure, democracy looks better than authoritarianism in practice, but people are power hungry, which is why authoritarian systems are so popular. This is an argument against democracy.
Like, no, it's not. Even with power hunger democracy is preferable to authoritarianism. And even with greed socialism is preferable to capitalism. You think the USSR was better for the people than the US? The USSR had authoritarianism on top of their socialism, which is responsible for most of the problems that you're thinking of right now. I like democracy. Me too. But so far every country (I can think of) that has done socialism has became authoritarian.
Guess we've come up with an interesting answer for this discussion that you really want to have about what was wrong with the previous attempts at socialism then
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On September 19 2019 14:32 Falling wrote:Actually, my scenario is more applicable than you realize now that I've read through Kwark's post because what is true of Bill Gates is literally true of my live edge wood example. (Unless I'm horribly misreading.) So here's the crazy thing with live edge wood- people are paying premium price for what amounts to junk wood. Some of the stuff was laying on the ground for too long and the owner thought would be bad for firewood. But mill it and dry it and people are willing to pay ridiculous prices for it because the spalting makes amazing features. The owner could charge half the rate and still be make $60-80 an hour and making ten times what that wood would make if it was straight up logged and put on a truck. Is it theft to charge more? For awhile the owner did, undercutting everyone else that was selling live edge but a mile- but that created more demand than the owner wanted to work, so it was easier to raise the prices to be just lower than everyone else and therefore wouldn't have to cut through his trees as fast (easier to be sustainable in the long run anyways given that trees increase by about 7% per year). Sure people don't realize a higher cost is being passed on to them. But most people making live edge furniture, etc don't have easy access to trees (or for that matter a mill or a kiln that was designed by the owner as a hybrid from two other kiln designs in the States.) So they just wouldn't have the wood at all. Nobody has a right to those trees- they were just sitting there, passively growing with the few dead ones being picked out for firewood. Then the owner realized there was a niche market for the sort of junk wood that none of the giant industrial mills had any interest in. Which meant all the people making stuff for this live edge fad (pretty sure it's a fad) gained a new and local source. This pretty much matches the Bill Gates scenario, but I fail to see what is wrong with it. Show nested quote +On September 19 2019 13:47 GreenHorizons wrote:
Kwark explains well the problem with your position Falling. Gates doesn't invent anything without the society that raised and accommodated him. Instead of getting that value back to the society that invested in him he'd/shareholders rather see it burn and maximize personal profits over social gains (and/or better wages for the workers replicating/maintaining/improving his invention).
The "everybody wins" argument as Kwark points out misses the point. It's a side-effect that corporations buy politicians to minimize, segregate, or eliminate altogether.
This is the immutable flaw of capitalism that regulation can't fix, in part because the regulators often literally work for the corporations or swing through the revolving door in DC. It's true regulation and legislation can shift this balance but it's one capitalism demands be maximized in favor of owners/shareholders, society be damned. I really thing it doesn't deal with your very broad generalization: Show nested quote +I think the more we look into the negative externalities of capitalism the more we'll discover that "profit" is a euphemism for stolen work and displaced expenses. Is the finisher stealing when he charges $800 for the finished table when the wood cost $400? (And is he stealing from the mill owner or the customer or both?) And if it is, where do you draw the line. Is $600 okay, but not $800? Or maybe $500?
If they are in the US, the land they are doing it on is most likely stolen. So it's like "finding,modifying, and selling" items of value in a strangers house that your great great... grandparents broke into and started living in, for starters.
Without digging into that aspect there's also the aspect of who has money to spend on overpriced furniture to create it's "value".
Before touching the example itself in any detail, I think it makes more sense to agree on an example that more people are familiar with (can be like a restaurant or something if you want to keep it one where the owner is also a primary worker). Otherwise I'm fine just disagreeing.
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EPT
