economic control and human freedom

[lemur]

The term, "capitalism," is sometimes used in a general way to describe systems of economic control that are regulated with the use of money and finance, but in reality economic activities are governed not just by money/finance but also by other methods of exercising power/control. War and civil strife may be extreme example of moments when economic control gets out of hand as people give up on seeking new avenues of productivity and instead choose to fight with the hope of securing compliance with forms of economic mastery that restore economic privileges. Certainly I think this describes the logic of the Nazi movement following the great depression. But it could also be viewed as occurring in numerous other, less remarkable ways when people modify their activities in ways that repress, harm, or even destroy themselves and each other. In more concrete terms, when people struggle and fight over money, they are doing so to restore and gain strength in capitalism but when are those struggles economically constructive, and when are their effects more destructive than they are productive of value?

[Marat]

Capitalism is confronted by an essential paradox. The wealthy buy the means of production so that they can make themselves even more wealthy by employing labor at a wage less than the value of what that labor produces, and then selling products to people for more than they cost to make. This sucks up wealth from those who are first disempowered by having nothing to sell except their labor and who are second disempowered by being in a weak negotiating position with capitalists over the prices charged for commodities.

 

But eventually so much wealth is sucked up to the top by the capitalist straw that it lacks investment opportunities for all the surplus capital. It can buy new factories, employ new workers, and produce more commodities, but then profit margins will shrink, since the workers are being increasingly impoverished by the double theft of producing more by their labor than they are paid and paying more for their consumer goods than these goods are worth. Eventually the profit margins shrink to the point where there will be no new investment, and this state has often precipitated a market crash, especially since it drives capital into extremely risky or artificial investments, such as buying stocks on low margin in 1929 or soaking up excess capital in exotic financial instruments like derivatives in 2008.

 

Fortunately for capitalism, there is another way out of this impasse, which is simply to start a war to destroy capital. With the massive destruction of capital caused by warfare -- in someone else's country, of course -- new investment opportunities are opened up for capital once again to be invested at a profitable rate of return. Changing public tastes through advertising, planned obsolescence built into substandard goods, minor technical changes creating artificial demand for new products (vinyl records become passe so that all their music has to be re-recorded on tapes, computer discs, etc.), are all everyday forms of technically unnecessary destruction to open new opportunities for productive investment.

 

So capitalism is normally simultaneously creative and destructive: It is destructive of the wealth of non-capitalists under normal conditions of operation, since it underpays labor for its productiveness and overcharges consumption for what it gets, and then when capital accumulation outpaces the capacity of the now impoverished laborer-consumers to sustain it, it seeks to destroy capital to open up new spaces once again for investment.

[Edtharan]

I think what most people forget capitalism is about, is "Value" not "Money".

 

Take fro example a simple trade:

 

If I have Widget A and you have Widget B and we wish to trade, then 4 values come into it:

 

The Value I place in Widget A

The Value I place in Widget B

The Value You place in Widget A

The Value You place in Widget B

 

If the value I place in Widget B is greater (or equal to) the Value I place in Widget A, then I am willing to trade.

 

If the value you place in Widget A is greater (or equal to) the Value you place in Widget B, then you are willing to trade.

 

If we are both willing to trade, then a trade can occur. If not, then no trade can occur.

 

IF a trade can take place, then because I value Widget B more than Widget A, my net value goes up. And, because you value Widget A over Widget B, then your net value goes up. This means that because of the trade, the total combined value to us increases.

 

This is the core of what capitalism is abut, that arranging trades where there is a total combined increase in value.

 

However, when you start to put money in the mix, we tend to think it is about the money. Money is just an abstract potential of value. That is, money is not value, but represents it (it is an abstract of it), and it represents the ability to be exchanged for things of value (potential value).

 

For example, I might want your widget B (and want a Widget C), but you might not want my Widget A and want a Widget C instead. You know someone who has a Widget C but does not want your Widget B. How could you get Widget C?

 

Well you could go out and arrange a complex web of exchanges that ends up with everyone getting want they want. But to do this from a top down method as you would have to without money is too complex to be feasible. However, if we introduce something that represents value and can be exchanged for things of value (the abstract potential), then this can allow us to make the trades.

 

You would trade Widget B for some Abstract Potential (money), and then trade that with the Widget C owner who would then go on to trade that for the thing (or service) they value.

 

In that example, it is fairly trivial to work out the trade network that gives the best possible outcome for everyone, but when you get to multiple people wanting the same thing, or long chains of people needing to trade, without an abstract potential object, it becomes completely unmanageable. But, with it, the system self organises and you can get the trades without complex solutions (true, it might not end up being perfect, but it is better and quicker than you would otherwise get).

 

It also shows Marat's solution to the Paradox: That if you have Widget A and want someone to trade for it, then if you destroy their Widget A's, you then have someone wanting to get a Widget A. Or, if you can construct a need for Widget As that didn't exist before, then you can trade your Widget A.