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# It’s Not Their Fault

When a laborer goes to work for an eight hour day in our manufacturing sector, it takes the sale of only a portion of what he produces to cover his total compensation for the day. The rest of what he produces belongs to the owner of the business and is called surplus value. From this share the owner must pay his business expenses (less labor costs) and gain his profit.

The market value of what a worker produces in a given amount of time that belongs to the owner divided by what he is paid for that time, is the rate of surplus value. For example, if our laborer is paid a dollar a day, and in that time he makes two widgets worth a dollar each, then the rate of surplus value is (2-1)/1 = 100%. If our owner hires ten workers at a dollar each for a day who together make sixty of the widgets, then the rate is (60-10)/10 = 500%. Since neither the amount that labor is paid nor the market value of what is produced is set in stone, the rate of surplus value varies over time.

Deriving an accurate measure of the rate of surplus value in our economy is no mean feat. It is not something discussed in polite company, and when it is addressed, it usually is couched in terms of the 'increasing productivity of labor'. However, information about trends in the rate for the US manufacturing sector can be gleaned from data collected and aggregated by the US Census Bureau and published in the Annual Survey of Manufacturers. (The data sets for what follows can be found here, here and here.)

The following graph is based on the relationship of production worker wages paid to value added in the production process and shows a rough estimate of how the rate of surplus value has changed in US manufacturing since 1949:

Rate of Surplus Value 1949 through 2006 – wages only

By this estimate, the rate of surplus value has increased several hundred percent over that time. Its corollary, that production workers' share of production has decreased, is shown in the following graph covering the same time period:

Labor's Share

Here the observant reader will object that there is more to production than wage labor and that the rate as represented by the graphs must be inflated. In particular, what of the value added by salaried employees?

The following two graphs are based on the relation of annual payroll to value added:

Just as the earlier graphs overestimate the rate of surplus value, these two underestimate it. They include problematic amounts such as, for example, salaries paid to corporate officers, no matter how inflated or divorced from actual production they might be. Reality must lie somewhere between the two estimates.

There are additional weaknesses with this analysis, perhaps most notable its failure to account for legacy expenses and taxes. As for taxes, and keeping in mind the recent use of tax dollars to bail out and loan to businesses, we must ask ourselves not only who pays them, but also, to whom and in what percentages do their benefits actually flow — owners or workers? And given owners' ability and penchant to renege on legacy commitments when times get tough, as evidenced for example, by Kodak's history, it is not clear how seriously these expenses should be treated. Further complicating the picture is the question of how the money that is supposed to cover them is raised.

In any case, the trend is clear. Overall, owners have taken a steadily increasing share of the value of production; overall, workers have been unable even to hold their own, let alone increase their share over the years.

So does it make sense to blame unions for the sorry state of our now near bankrupt manufacturing industries?

• I hate to get all 1820s on you, but are you familiar with David Ricardo and the Iron Law of Wages? Some of the earliest analysis of the dynamic you’re talking about remains the best, and Ricardo was the best, even if modern liberalism finds his conclusions reprehensible.

From a Ricardian point of view, the inflated wages your charts suggested existed in the post-war period were an undesirable anomaly and a mark of inefficiency and waste in the system. Over time the waste has worked out of the system to move towards a more natural, wage.

The mistake in thinking that the phenomenon you describe is a negative is the assumption that wages should be based on production or on surplus value, or that they are in any way derived from any consideration other than the forces of the labor market. Wages are set by what the labor market demands. If the wages you are paying are too low, you won’t be able to hire workers. Since you CAN hire workers, then you’re paying the proper wage.

What you’re not saying, but are essentially asking for here is an entirely different business model. To get away from market-set wages you need businesses to be organized on a cooperative basis where the workers are all also owners in the company. It’s perfectly reasonable business model and it works well, but it’s not popular because it inhibits growth and expansion.

We have a great example here in Austin. About 30 years ago there were two grocery stores here which specialized in organic produce – pioneers in the field. One of them was organized as a cooperative and the other was organized as a corporation owned by a small group of people. In the first all of the employees and even many of the shoppers were members of the coop. In the other workers were paid a wage slightly above market for their jobs and the profits were managed by the corporate board.

Fast forward 30 years. Whole Foods Market is the most successful nationwide organic food retailer and an enormous success with hundreds of stores nationwide. Wheatsville Coop is still popular, but it operates out of the same building in the same location at about the same volume of sales as 30 years ago. The difference is that Whole Foods was able to take their ‘surplus’ capital and invest it in expanding the business.

But here’s the irony. If a Whole Foods worker took the slight amount he was paid over market and invested it in Whole Foods stock when the company went public about ten years ago – using their generous employee investment plan – he would now be much more wealthy than a Wheatsville Coop member who received dividends at roughly the same rate from the coop for those thirty years. This despite recent stock problems.

The point being that both the corporation and the coop are self-sustaining business models, but the corporate model supports growth and expansion much, much better.

Dave

• Cindy D

Dave,

Rethinking the Social Responsibility of Business
A Reason debate featuring Milton Friedman, Whole Foods’ John Mackey, and Cypress Semiconductor’s T.J. Rodgers.

But, you know what Dave? It turns out he’s almost as much of a shitheel as Friedman, when I do research beyond his article.

If the wages you are paying are too low [compared to what they are paying these days in, say, Hong Kong], you won’t be able to hire workers.

Unless you create a global market [read the aim of neoliberalism] where you can use slaves who will gladly destroy their own health for \$8/day.

• Mark Eden

Dave, thanks for your response. I don’t want to get all 1860s and doctrinaire back on you and reenact an argument that was concluded 150 years ago. Suffice to say that what you propose (essentially repeating Lassalle’s misunderstanding of Ricardo’s ‘natural law’) is answered by the fact that wages are determined politically. If you want to focus on what Ricardo got right, take a look at his theory on the necessity of economic stagnation.

To your discussion of Whole Foods – I’m all for cooperative ‘ownership’. When it penetrates to the farm workers who actually produce the food sold there I will start to be impressed. (I’m looking for a data source with which to analysis the rate of surplus value in US agriculture as I did for manufacturing in the article.)

Mark

• Cindy D

Dear Mark,

I will try reading your article again tomorrow. I hope I will understand it better. It sounds like a thing I want and need to know but just don’t understand.

Oh, I understand the point. I just wish I understood everything in between. This is like when you made me read Marx.

Much like I don’t understand Marx when I read him directly. But, do understand that what he is saying is vitally important to my understanding (when I read him indirectly).

It’s very frustrating to me. I have a fairly high IQ. I graduated Magna Cum Laude from a university that students from Princeton would escape to, thinking it would be easier (and yet they found it more rigorous, to their chagrin). Yet, I have trouble understanding. I need remedial help! I deserve a special class!

• Cindy D

Mark,

Perhaps if you could give me something to read. Even if it’s Marx, I promise I’ll read it.

• Mark Eden

Cindy – keep your eye on the prize which is to figure out how to protect real people from the misery that is built into our present system. The first step is to ‘grok’ why economic crises occur.

Don’t sweat the small stuff as they say. (I’ll try to come up with helpful stuff.)

Mark

But, you know what Dave? It turns out he’s almost as much of a shitheel as Friedman, when I do research beyond his article.

I wouldn’t call Friedman a shitheel. He was a theoretical economist, so he dealt in ideas, not practicalities. He never abused a worker or made a sleazy deal in his life.

And yes, as we all know here in Austin, Mackey aced his original partners out of their share of the company and engaged in a variety of fairly machiavellian business moves (I know one of the small competitors he forced out of business). But he does pay his workers better than average for the industry and offers better benefits than similar businesses. He’s a good businessman and as things go he’s relatively decent to his workers.

Dave

• Dave, thanks for your response. I don’t want to get all 1860s and doctrinaire back on you and reenact an argument that was concluded 150 years ago.

I’m not sure it’s entirely concluded. While Ricardo’s conclusions were certainly questionable, the forces which he identified he did identify quite correctly, and that earns him a permanent spot in our understanding of how markets work.

Suffice to say that what you propose (essentially repeating Lassalle’s misunderstanding of Ricardo’s ‘natural law’) is answered by the fact that wages are determined politically.

I’d like to see an explanation of this and some examples, becuase as far as I can tell it’s absolutely not true. Wages are set by the market as a pure result of supply and demand. Look at the nursing industry if you don’t believe me. Because of the shortage of supply and the growing demand you see wages increasing dramatically, demonstrating how the market works.

To your discussion of Whole Foods – I’m all for cooperative ‘ownership’. When it penetrates to the farm workers who actually produce the food sold there I will start to be impressed.

Wheatsville Coop which I mentioned earlier buys from local sources and Whole Foods also does to some extent. We’ve also seen a real renaissance for farmers markets nationwide. Some of those local farmers around here run their farms as coops, and lots of small family farms belong to organic farming cooperatives so that they can pool their produce and sell it more effectively. I think agriculture is absolutely one of the most viable areas for the cooperative as a business model. Look how well it worked for cotton for so many years. If the Grange hadn’t been so badly mismanaged back in the early 1900s I think it would have provided a real challenge to the massive agrobusinesses. The cooperative business model works particularly well when it’s a cooperative of producers rather than of laborers or consumers. Hell, look at the hundreds of years of success the Amish have had at cooperatively marketing their agricultural surplus outside of their communities.

Dave

• Mark Eden

Dave – no one (that I know of) denies the basic operations of supply and demand. But it is the political landscape which forms the ‘box’ within which it functions. I realize that this will not satisfy you and will try to come up with a less ‘mysterious’ explanation. Alternatively, you can immerse yourself in the zillions of pages Marx devoted to his analysis of wages.

• An example or two would be nice, but if I understand what you’re getting at, I guess I don’t necessarily disagree. I wouldn’t call it the ‘political landscape’, but I acknowledge that the economic environment has set certain parameters within which supply and demand operates. I’d also go farther and say that some of our economic problems are the result of changes in those parameters which are disruptive, either because the new parameters are flawed or because of the instability caused by transition from one system to another, and by the failure of some players in our economy to adjust to changing conditions.

Dave

• Cindy D

Dave,

I wouldn’t call Friedman a shitheel.

It was that article that I linked for you. While I was reading it, I was getting mad at him. I’ve been reading a lot of economic history lately. Friedman and neoliberal ideology figure prominently in that reading. It’s frustrating. It gets to me sometimes.

• Mark Eden

I wouldn’t call Friedman a shitheel. He was a theoretical economist, so he dealt in ideas, not practicalities. He never abused a worker or made a sleazy deal in his life.

Reminiscent of this catchy number.

• A classic song, Bliffle. But remember that it was Werner von Braun and his work on the V2 which became the basis for the US space program and all the great technological advancements which it produced. And just as Friedman knew how economies worked, von Braun certainly knew how to make the rockets go up.

Dave

• Mark Eden

Bliffle?

Ends justifying means…must break a few eggs and all that right Dave? War. Ya gotta love it! Really gets those creative juices flowing.

• bliffle

Mark says:

“Dave – no one (that I know of) denies the basic operations of supply and demand.”

What ARE the basic operations of supply and demand?

I think that most people who talk about supply and demand know little about it, but they often have complex personal theories.

• Mark Eden

Bliffle – My take is that ‘supply’ and ‘demand’ are best viewed as abstract (math) functions relating quantity to price.

Mark

• People want things. Other people make sure they get them. In return they get paid so that they can get things they want. Supply and demand.

Sorry Mark, I sometimes get you and Bliffle confused. Once you put on the Che T-Shirt you all look alike to me.

Dave

• Mark Eden

Che who?

• Got to give the UAW credit. In today’s testimony their top guy is agreeing to making wages and benefits comparable to those at Toyota, Honda, etc.

Dave

• Mark Eden

Thus it looks safe to forecast that the rate of surplus value will continue its upward movement …right into the abyss.

• I must admit to some confusion. According to the article, all proceeds from the sale of manufactured goods over and above labor costs constitute “surplus value.” Although “the owner must pay his business expenses (less labor costs) and gain his profit” from what is left over after labor costs, “surplus value” should apparently be the benchmark in determining what workers should receive. Hence, if manufacture of a widget which sells for \$1.00 involves labor costs of fifteen cents and other costs (e.g., materials, tools, distribution, etc.) of seventy-five cents, “surplus value” equals eighty-five cents and should be the standard for determining the distribution of money between those who toil on the assembly lines and those who don’t.

Presumably, for a large business producing such things as automobiles, the item “business expenses” includes the following costs, among others. Of those listed below, only salaries paid to corporate officers, no matter how inflated or divorced from actual production they might be are mentioned in the article.

materials
equipment
buildings
land
salaries and bonuses for non-production workers
debt service
research and development
taxes
legal and accounting fees
other sales costs

Only after labor costs, as well as these and other pesky expenses, have been taken care of do the owners of the business — the stockholders– get their profits, if any. Use of the phrase “surplus value” to include all business expenses exclusive of labor costs suggests that wicked capitalists are screwing their employees, while unconscionably benefiting from the “surplus value” which they hoard. That may happen, but it seems unlikely that it is a universal or even widespread phenomenon.

“Labor productivity” is another loaded phrase. Productivity increases seem very unlikely to have resulted solely from workers becoming smarter or more industrious. Is it seriously contended that without dramatic improvements in manufacturing processes (another “business expense”) labor would produce more and better widgets now than were produced many years ago? Would U.S. auto makers have survived as long as they have without such improvements? Automobiles lovingly crafted by highly skilled and conscientious craftsmen, one at a time with only hand tools which they themselves own might be very nice, but few could afford them; having non-standard replacement parts hand crafted by other skilled workers would also be tedious.

According to the article,

the rate of surplus value has increased several hundred percent [between 1949 and 2006]. . . .Production workers’ share of production has decreased . . ..

It may be accurate to claim that

Overall, owners have taken a steadily increasing share of the value of production; overall, workers have been unable even to hold their own, let alone increase their share over the years. . . .

In addition to the points attempted to be made above, this analysis appears to disregard the substantial increases in non-labor costs during the same period.

Dan(Miller)

• Mark Eden

Dan, surplus value and profit are distinct. I do not address profit in any depth in the article as it is of little relevance in the process of an increasing rate of surplus value. For your widget (100-15)/15=567% = surplus value from which the owner must pay his expenses less labor costs and get his profit.

Concerning ‘business expenses’ and the degree to which they are hidden in my figures, I suggest that you read the definitions of the categories that I used to get the graphs. Most of your concerns are addressed there.

Mark

ps – ‘evil’ has nothing to do with it

• Mark Eden

(actually that % is the rate…actual surplus value is in fact the 85 cents – sorry Dan)

• Mark Eden

In particular, Dan, please note that I used ‘value added’ as the basis of the analysis, not ‘total value of shipments‘.

• Mark, I did read the definitions. However, excluding all business expenses beyond the direct costs of labor from “surplus value,” and then using “surplus value” as the criterion for determining wages, seems strange.

As to the surplus value rate of 576% in your comments #22 and 23 based on my widget example, I don’t understand where you would like a substantial wage increase is to come from. If the entire profit of ten cents were forfeited and wages were thereby to increase to twenty-five cents, by your calculations the surplus value ((100-25)/25)) would be 300% — a facially absurd figure for evaluating appropriate wages and one which would provide no incentive for investment. With no incentive for investment, it seems unlikely that workers would be advantaged in the long run.

Dan(Miller)

• Mark Eden

Dan – You will need to justify your .75 figure that you snatch out of thin air. Why should one accept that that amount of surplus value was necessary to spend as you claim it was (for your example) in production? You seem to be saying something like – ‘what is is what is necessary’.

How about we just cut back on lawyer and lobbying costs if we’re looking for a wage increase?

Mark

• Mark Eden

btw Dan –

– the second set of graphs in the article include figures for all salaried employees

– land, equipment and buildings are assets

Mark

• Mark, whether it’s .01 or .75 or higher or somewhere in between, it doesn’t figure into you analysis at all. Call it x, it’s still important — more so, in many ways, than “surplus value.”

A world in which every product is solely the result of labor plus material is much more simple than today’s world, in which automation, distribution, marketing, and many other factors often serve to make labor costs a very small piece of the pie.

That’s all just theory, however, so examples might help. I’ll wait.

• Mark, How about we just cut back on lawyer and lobbying costs if we’re looking for a wage increase? Sounds good to me — for both employers and unions, of course.

As to the seventy-five cent figure, I pulled it out of the same air from which you pulled your workers making two \$1.00 widgets per day and being paid \$1.00 per day. Why should one accept that that amount of surplus value was necessary to spend as you claim it was (for your example) in production? Why not? A lot probably depends on the nature of the widgets being made: are they simple widgets or complex widgets? Do they require really fine tolerances in manufacture, or can it all be done with a pocket knife beside a pleasant babbling brook? How are they transported to markets where? These questions, and a whole lot of others, suggest to me that the concept of “surplus value,” whatever legitimacy it may have had back in the good old days when Karl Marx was writing, has very little to do with the currently rather more complex industrial situation in which the United States finds herself. Technology, distribution, and a whole lot of other things have changed dramatically since then; the concept of “surplus value,” apparently, has not.

Dan(Miller)

• Mark Eden

Phillip and Dan – while your point is well taken, the purpose of the exercise was to get a picture of trends in the rate of surplus value. A more thorough analysis looking for exact/real annual rates of surplus value would factor in all of the expenses that you and Dan raise and would use the actual full market value of what is produced.

Using ‘value added’ allowed me to limit the problem and loosely factor in your ‘x’ cost. Perhaps I need to take a few years at random, work out such a ‘full’ analysis, and compare the results with what I came up with.

The modern complexity of production doesn’t eliminate surplus value.

Mark

• Mark Eden

(‘Perhaps I need to take a few years at random, work out such a ‘full’ analysis, and compare the results with what I came up with.’ was a joke, of course. But I hear no laughing.)

Phillip – your …today’s world, in which automation, distribution, marketing, and many other factors often serve to make labor costs a very small piece of the pie. is pretty much my point in the article. The trend in surplus value that I point to ‘proves’ what you say true. So I ask again: what sense does it make to blame unions for the sorry state of affairs in manufacturing?

Mark

• Clavos

But I hear no laughing

Probably because pixels have no sense of humor…

• Mark Eden

Beware of prankster pixels, Clavos.

• Mark Eden

Dave, Phillip and Dan – Let me try to be clear about my intent in the article that I clearly have failed to get across. You guys seem to think that I am calling for a wage increase or some kind of a Walmart ‘roll-back’ in the rate of surplus value so that the owner would have less and the worker more. In fact, I am only trying to describe how the system has developed over the past sixty years based on something more than theory and suspicion.

Arguing over where a raise might come from or whether owners are spending their surplus value appropriately misses the point.

Were I to advocate, it would be for a total overthrow of the owner/worker distinction.

I apologize for the confusion.

Mark

• Mark, I don’t think I completely missed your point. What I was trying to suggest in my comments was that the “surplus value” concept which you espouse makes no sense in a complex, industrialized economy such as the U.S. presently has. Using that concept to argue that somehow the system is unfair to workers does not convince me.

As to total overthrow of the owner/worker distinction, that seems utopian and highly counterproductive at best — even though, like Christianity, it has never been seriously attempted on a large scale.

Dan(Miller)

• Mark Eden

Dan – call the amount ((market value) less (labor cost))what you would like to. Calling it ‘surplus value’ makes it no less a real amount than any other name would. Call the percentage ((market value) less (labor cost) divided by (labor cost)) what you would like to. Calling it ‘the rate of surplus value’ makes it no less real a percentage based on real numbers. Are you arguing that ‘market value’ and ‘labor costs’ cannot be figured in our complex economy? That they are somehow imaginary numbers?

Using that concept to argue that somehow the system is unfair to workers does not convince me.

Again you misunderstand me. The only issue of fairness that I argue in the article is that it is unfair to blame workers for the crises that manufacturers are experiencing. ‘Fairness’ as you seem to be using the term is not the issue and plays no part in my analysis. Were I to argue fairness I’d say the system, doomed as it is to repetitive crises, is ‘unfair’ to all.

…total overthrow of the owner/worker distinction…seems utopian and highly counterproductive at best

In my opinion, anything less simply will perpetuate our ongoing dystopia. But that’s a different argument than whether or not the trend in the rate of surplus value is accurately described by my exercise.

Mark

• Doug Hunter

All of the value of an item flows into three categories: Labor, Taxes, and Profit. If the percentage of labor is going down then either taxes or profits are up.

Taxes are indeed going up an average of 7-8% of GDP during the time period of the graph so that could explain some of the discrepancy.

Profits can only go up in the absence of adequate competition. As most humans seek to gain profit and power for themselves at all levels, from employee, to entrepeneur, to businessman and beyond the lack of competition is not a natural problem. Usually a lack of competition is either a sign of low demand or government interference in the marketplace (necessary or otherwise)

The government needs to ensure a competitive marketplace, get back to destroying monopolies instead of handing them out. Any company that is ‘too big to fail’ is too big a liability to exist and needs to be broken up. A special department needs to be set up to identify where the government is interfering with competition and find ways to mitigate or regulate profits if the conflict cannot be avoided (utilities, intellectual property, etc). I’d even go as radically far as suggesting the government actually subsidize or tilt the playing field in favor of new or smaller businesses.

Competition is alot like exercise, no one likes it but in the end it’s good for us. Let’s get back to doing what’s right for society even if it makes some corporate bigwigs have to work a bit harder. In short, capitalism and corporatism aren’t the same thing. Let’s not throw the baby out with the bathwater.

• Were I to advocate, it would be for a total overthrow of the owner/worker distinction.

I actually think I got that – see my earlier discussion of cooperatives. My counter to that would be that it would be wrong to impose such an overthrow by force of government, so it would need to be a grassroots movement of some sort, which started small, proved it could compete in the marketplace and was so successful that the old capitalist model became obsolete. Good luck with that.

Dave

• Cindy D

…it would be wrong to impose such an overthrow by force of government…

It would be insane also. But, what we could be doing is something like requiring that all businesses receiving bailouts be collectivized to the workers–or allowed to collapse.

• Cindy D

Dave,

I consider you an expert and I need some help. Can you give me a very succinct description of what Capitalism is supposed to accomplish? I mean as a basis for freedom and liberty.

• Cindy D

I am working on an argument, which I would like to begin, not with my own conception, but with yours, as a supporter of Capitalism.

Not caring much for it, I might otherwise miss some alleged benefit.

• Cindy, what we talk about when we talk about “capitalism” is probably much broader than the strict definition of capitalism.

At its most basic, capitalism is the system of commerce in which individuals control resources, trade in them or use them in manufacturing goods which are then sold to consumers.

The great irony of capitalism is that as a system it was defined not by capitalists, but anti-capitalists and in particular marxists, so the entire definition is somewhat suspect. Capitalists never defined capitalism themselves, because as far as the early capitalists were concerned it was just the natural state of the free market.

When we talk about capitalism today, we’re really talking about a broad classification which includes a number of different forms of capitalism.

Closest to the original model is “Free Market Capitalism” which is differentiated from other forms of capitalism by the absence of any form of governmental coercion or regulation of trade, though it may allow for regulation of things like workplace and product safety and other aspects of manufacturing not associated with the actual exchange of goods or resources. This is the form of capitalism which I support, because it allows individuals to receive the most possible return on their efforts and investment and the most control over what work they do and how they do it.

IMO (and I’m going into wild personal theories here), most of the capitalism practiced today is some form of what I call Corporatism, which is very close in function to Mercantilism which most economists would say preceded and was replaced by capitalism. But as I see it the way corporatism functions is not a hell of a lot different from how Mercantilism functioned. In a corporatist system the natural push of capitalism to be as efficient as possible in the generation of profit results in the pooling of assets and wealth into corporate entities, because in most industries economy of scale dictates that larger means more efficiency and less overhead. Corporatism becomes like Mercantilism, because once the corporations become large enough their wealth and influence cause the government to become protective of their interests, creating a symbiotic relationship between government and business, to the point where the interests of business and the interests of government become almost indistinguishable. In the bailout we can see where this system ends up when it goes bad.

When I advocate capitalism I am NOT advocating corporatism, but rather free market capitalism, which allows for the pooling of wealth and resources and the creation of corporations, but maintains a strict line of separation between business and government. That separation allows government to fill a regulatory role, but not a protectionist role or to become interdependent with business.

Currently the dominant alternative to corporatism is some form of market socialism, where resources and vital industries are primarily controlled by the state, but a certain amount of entrepreneurism and free trade is allowed within that framework, often under the restrictions of some sort of central economic planning from the government. IMO this is no better than corporatism and ends up with most of the same problems.

Dave

• Mark Eden

Doug – All of the value of an item flows into three categories: Labor, Taxes, and Profit.

This is a reasonable way to view things. For my purposes, though, it has the problem of where to find data that relates these categories in some consistent fashion so that we can see change over time.

Dave – My counter to that would be that it would be wrong to impose such an overthrow by force of government, so it would need to be a grassroots movement of some sort, which started small, proved it could compete in the marketplace and was so successful that the old capitalist model became obsolete.

I agree completely about force of government, and frankly think that the use of force at all (even at the grassroots level) would be disastrous. Any change will have to be based on the development of a new rationalizing principle for the market to replace maximizing profit that doesn’t stifle innovation, etc. This is a tall order that no one has handled well so far imo. But then, crisis does get the creative juices flowing.

Mark

• If you come up with a better business model in these hard times, people will beat a path to your door. I suspect that as things go, the old-fashioned agricultural coops and their members and the guys selling at the farmers market will prosper. The same for those using the internet as their primary mode of business, which is a kind of new business model.

BTW, I’m not sure about Doug’s Labor-Taxes-Profit troika. Where are the costs for materials, facilities, research, etc? Shouldn’t taxes just be replaced with overhead, which includes all of these things and taxes as well?

Dave

• Cindy D

Dave,

Closest to the original model is “Free Market Capitalism” which is differentiated from other forms of capitalism by the absence of any form of governmental coercion or regulation of trade, though it may allow for regulation of things like workplace and product safety and other aspects of manufacturing not associated with the actual exchange of goods or resources.

So, say workplace safety was compromised in a foreign country, how would the U.S. government insure safety in that case without interfering with trade? Would you object to interference here?

…free market capitalism, which allows for the pooling of wealth and resources and the creation of corporations, but maintains a strict line of separation between business and government.

So, are you saying that it’s not really the size of the corporation that’s the real problem, but government protection of corporate interests?

Thanks, that was helpful. Could you give me an idea why you believe this system results in maximum individual freedom and liberty?

• Mark Eden

If you come up with a better business model in these hard times, people will beat a path to your door.

Dave, I’m still way back at the beginning trying to come up with a clear evidence based explanation of ‘why crises’ and a motivational argument for why these crises cannot be ignored or simply lived with as necessary evils. (Although the latter might well take care of itself as our unemployment rate soars.)

Cindy, re your request for something to read on this, get a hold of Miguel Ramirez’ 1990 paper Keynes Marx and the Business Cycle. It’s a decent portal into the topic.

Mark

• Mark Eden

Concerning Doug’s approach – when he gets it quantified and presented as an argument, then we can argue the specifics. In the meantime, I admire and encourage his attempts to clearly state his case.

Mark

• Doug Hunter

“BTW, I’m not sure about Doug’s Labor-Taxes-Profit troika. Where are the costs for materials, facilities, research, etc?”

Have you ever paid a material to do anything? Materials are priced based on the labor it takes to find, extract, and transport them (with taxes and profits to the middlemen of course). Likewise buildings and research are simply the products of labor, etc.

That being said, overhead is indeed a very important concept. It is a primary barrier to competition. Anything that can be done to reduce or eliminate overhead for new businesses would be a plus and that includes taxes and government red tape in my mind.

• I guess you can reduce some aspects of overhead to labor, but some things DO have intrinsic value independent of labor. Different raw materials have different levels of scarcity. Building widgets from gold is inherently more expensive than building them from clay. And the real estate on which your facility sits has an intrinsic value as well, based primarily on location and that cannot be reduced to labor.

Dave

• Cindy: So, say workplace safety was compromised in a foreign country, how would the U.S. government insure safety in that case without interfering with trade? Would you object to interference here?

I would expect workplace safety in a foreign country to be managed by the government of that country. After all, the safety of their citizens/workers is their responsibility, not the responsibility of a foreign government. Doubly true since in many cases the management of the factory will be local and contracted by a US or international business to work for them on a for hire basis.

Cindy: So, are you saying that it’s not really the size of the corporation that’s the real problem, but government protection of corporate interests?

The size of the corporation is what gives it the clout to influence or control the government and which makes government develop this attitude that the corporation cannot be allowed to fail which we see in great evidence today. Since it’s unfair restraint of trade to tell corporations they have to divest if they get too large (though Teddy Roosevelt did it with great success), the alternative is to put strict restrictions on what role government can play in the economy.

Cindy: Thanks, that was helpful. Could you give me an idea why you believe this system results in maximum individual freedom and liberty?

Because anyone who has the desire and can raise the money can enter into business without the approval of government and with the expectation that no companies will be operating with a priveleged status or advantages granted by government – like the charters of the Mercantilist era – so long as he abides by the rules and regulations that everyone else does.

Mark: Dave, I’m still way back at the beginning trying to come up with a clear evidence based explanation of ‘why crises’ and a motivational argument for why these crises cannot be ignored or simply lived with as necessary evils. (Although the latter might well take care of itself as our unemployment rate soars.)

I’m increasingly convinced you’re right about this. There are cycles in the economy. We were probably due for a downturn. IMO the actions of the government are as likely to make things worse as to make them better and we’d probably do best by letting things run their natural course. I think spending all this money on bailouts is foolish unless they can point to a specific button which they can push with X amount of dollars to produce X specific result.

Frankly, the auto industry bailout makes a hell of a lot more sense than the \$700 billion plus financial bailout, because at least with the auto industry it’s loans for a specific purpose and we know what we’ll be getting for it.

Dave

• Mark Eden

Hell, I’d go with just about anything to keep people in their jobs and homes — even though we’ll probably be screwed even worse when Obama looses his nerve. The piper will be paid…no getting around it.

Mark

• I still think there are some people who would be better off not staying in their homes. As a society why can’t we just accept the idea that some people are better of renting and aren’t ready and don’t need to own a house. Being financially responsible in a rental home within your means is a much better sign of success than temporarily owning property you can’t afford.

Dave

• STM

Dave’s right. If you can’t afford a house, and can’t pay the mortgage, don’t buy it. Also, lenders need to carry the freight here too – if you think people can’t afford to pay you back, why lend in the first place.

The only situation I can see here where I might feel different about that is when a person who was in previously secure employment and has a good record of meeting mortgage payments suddenly loses their job, or suffers some kind of family crisis.

Perhaps then the banks or the non-bank lenders need to cut folks a little bit of slack for a few months until they get back on their feet. It would be better for both parties in the long run anyway.

If they can’t get back on their feet, fair enough … but everyone deserves a go at least.

I’m sure in the US right now people are losing their homes by default when a small amount of extra time would have made the difference.

But this is the big problem with sub-prime lending … and it’s largely what’s pre-empted our current financial crisis.

• Mark Eden

For many (most?), a rented space is home. Where are they to go when they lose their incomes?

Mark

• Doug Hunter

“guess you can reduce some aspects of overhead to labor, but some things DO have intrinsic value independent of labor.”

We’re digressing a bit here but air and water have some of the highest intrinsic values around and one is universally free and the other cost very little (at least in the US). Gold on the other hand is ‘practically’ worthless as you can’t eat it, can’t wear it, or live in it and it has only limited practical use in industry. The high cost of gold is due to the amount of labor necessary to extract it coupled with an odd fascination people have with the shiny metal. Also, you didn’t ask, but I consider debt a form of ownership and lump debt payment into the profit category.

Anyway, the original point and one that I still think is valid, is that people often underestimate the amount of labor when taking a look at these things. Just because you’re paying for a ‘material’ you’re still paying for the labor of the truck driver hauling it to you, the miner working a mile underground and a hundred other people in between.

The ratio mentioned in the original post between labor and profit is important, but if you can’t accurately determine the amount of labor then it renders the comparison meaningless. Things like overhead, outsourcing, taxes and many others if not handled properly could make the data very suspect. Take outsourcing for instance. If a company outsources a part of the process they have reduced their ‘labor’ cost and still should have the same amount of sales skewing the ratio and dropping the percentage of labor. How does the graph above handle this situation? In my view outsourced labor is still labor even if it is in the production of a ‘material’.

• For many (most?), a rented space is home. Where are they to go when they lose their incomes?

When the income goes away they’re not going to be any better off in a home they “own” and can’t pay for than one they rent and can’t pay for.

Dave

• Cindy D

Mark,

Thanks, I have acquired that paper. I am still on the first paragraph since last night. Do you think this paper at socialist.net might help me understand that paper?

Or do you think it’s time for me to simply try this route? 🙂

• Cindy D

Dave,

Thank you. That gives me a starting place for my argument.

• Mark Eden

Doug – The ratio mentioned in the original post between labor and profit is important

The ratio examined here is between labor cost and market value – distinct from profit.

…if you can’t accurately determine the amount of labor then it renders the comparison meaningless.

Or you could say: the more accurately you determine the amount of labor then the more accurate the comparison.

Take outsourcing for instance. If a company outsources a part of the process they have reduced their ‘labor’ cost and still should have the same amount of sales skewing the ratio and dropping the percentage of labor. How does the graph above handle this situation?

The category ‘value added’ … is derived by subtracting the cost of materials, supplies, containers, fuel, purchased electricity, and contract work from the value of shipments. Labor costs that are embedded in material cost are, thus, subtracted as well. For US made materials, these costs are added back in as the producing companies report their own data. Foreign labor costs hidden in materials are not added back in which allows the estimate to be limited to the rate of surplus value in the US only.

I agree that getting an estimate for the international rate of surplus value and how it has changed over time would be valuable, but this isn’t the data source for such an analysis.

Things like overhead, outsourcing, taxes and many others if not handled properly could make the data very suspect.

I mentioned some of my concerns with taxes and legacy commitments in the article and agree that the better one accounts for these factors the better the estimate that results.

Dave, that there are cycles in the economy is well documented, but there is no general agreement on the ‘why’ of them. Of further interest is the theory that what you’re calling a ‘downturn’ might be a general crisis that will make all post WWII contractions look like good times and will require some destructive process along the lines of war to get out of.

We need another bubble.

When the income goes away they’re not going to be any better off in a home they “own” and can’t pay for than one they rent and can’t pay for.

I agree, which is why I have a hard time understanding your suggestion that we ‘ride it out’. I’m not even sure what that means.

Cindy – I suggest that you sit back and think about our production process from a worker/owner perspective and look for the contradictions that would cause its smooth functioning to get jammed up. Reading doctrinaire Marxists can leave a body pretty cold – so much is assumed to be fact with little other than belief backing it up. As you can see from the reaction to the lingo up thread, we need to update the presentation and base it on evidence. That’s not to say that Brooks’ presentation isn’t worth reading. It’s thorough fer sure.

Mark

• Dave, that there are cycles in the economy is well documented, but there is no general agreement on the ‘why’ of them. Of further interest is the theory that what you’re calling a ‘downturn’ might be a general crisis that will make all post WWII contractions look like good times and will require some destructive process along the lines of war to get out of.

I’m not buying this theory. I don’t see enough strong negatives in enough sectors of the economy for a depression-scale crisis, unless the government somehow manages to precipitate it.

We need another bubble.

All bubbles do is eventually burst.

On the upside, it looks like if I manage to take a trip to Europe next year the dollar will be nice and strong relative to the imploding Euro.

Dave

• Mark Eden

(Raising a mug o’ mead) Here’s to hoping you’re right, Dave.

• Mark Eden

Cindy, since you enjoy reading Marx as you do, I dug up this for you.

• Cindy D

Mark,

Thanks. I actually couldn’t believe I understood the 1st two paragraphs. After the 4th reading of the 4th paragraph (and unable to figure out where the little “c” and the little “v” came from)–I expect my head might explode.

I like to work difficult reading out by going sentence by sentence, rewriting the sentences and rewording them until the author’s point becomes understandable. I find it very worthwhile in many cases.

It will take a while. He explains that s/C. I am feeling happy and confident. Things are looking up. Then out of nowhere there is a freakin’ little c and v? With no explanation at all. What the hell?

Bubu and Kiki or whatever their names were, were more fun.

• Cindy D

But, don’t mind my whining. I will get it. It is worthwhile.

• Cindy D

So for example, let us suppose a worker earns \$100 and consumes \$1000 worth of materials and components to produce a product which is sold for \$1300. This value could be represented as constant capital (\$1000) + variable capital (\$100) + surplus value (\$200). That \$200 of surplus value was added to the product solely by the activity of the worker. That is, of the capitalist’s investment of \$1100, only the variable capital, \$100, expanded.

Marx represented this relation symbolically:

c + v -› c + v + s

What a wonderful thing a simple glossary is.

• Mark Eden

I skated over the important content in Dan Miller’s #25 where he points to a connection between the rate of surplus value and incentive for investment. He and Phillip talk about the costs of business that have grown as our economy has become more complex and (at least seem to) imply that to cover these increases and maintain profitability (and therefore incentive for investment) it is only reasonable that the owner increase his share of the value of what is produced. But there is nothing necessary here. Increasing market value by increasing price and/or the amount of product actually sold is another option. In reality owners go for all of these approaches, but labor’s share of the value of production is negotiable only because of the owners’ relatively strong position of political power.

Mark

(nice Cindy)

• bliffle

the real problem is that as productivity rises the economy must either consume more product, or the work week must be reduced. For 50 years we have increased consumption rather than reduce the work week, and now we pay the price of that poor decision. Partly facilitated by the egregiously high house prices that excess income created.

• Mark Eden

Bliffle – if my graphs reflect the rate of surplus value accurately, I’d look to the drop in the rate that occurred 97 – 01 for the more immediate cause of the investment/credit crisis and contraction.

Mark

• the formula Cindy quotes in #65 shows brilliantly how utterly full of crap Marx’s ideas are.

Where does Marx get off making the assumption that the \$100 investment of labor is worth more in determining the ‘surplus’ value (aka profit) than the \$1000 invested by the capitalist in materials and facilities? That’s an erroneous and biased assumption.

In fact the workers wages are indistinguishable from the cost of materials as just another of the costs of production, and the workers share of the overall cost of production is minuscule compared to the share represented by the capitalist’s investment.

Dave

• Mark Eden

Dave, could you expand on your use of the term ‘determining’ in the above? It’s not clear to me that you are talking about the same process that Marx was trying to describe in ‘c + v -› c + v + s’ and his ‘labor theory’. In any case, I think your question of where he ‘gets off’ is a good one for anybody who is trying to understand his argument to keep in mind.

Mark

• ‘determining’ wasn’t exactly the part of that comment I expected to have questioned. I was using in the sense of making a calculation or finding something out. In this case the calculation of who is really responsible for the surplus value in the production equation.

Dave

• Mark Eden

Concerning responsibility for production and the value that it produces, here’s my supersimplified take on what Marx meant:

While workers could perform the necessary function of accumulating and pooling value without owners, owners could not produce anything without workers.

This little symbol, ‘->’, in the formula that Cindy quoted has an awful lot packed into it.

(and btw, I’ve been waiting for a Marxist like Les Slater to show up and ream me a new one for my oversimplified formulation of ‘surplus value’)

Mark

• Les Slater

(and btw, I’ve been waiting for a Marxist like Les Slater to show up and ream me a new one for my oversimplified formulation of ‘surplus value’)”

I’ve been busy. There is an important development in the class struggle taking place in Chicago, the occupation of the Republic Windows and Doors assembly plant by workers who were laid off without being paid accrued vacation time and other grievances.

Marx’s Capital is not an easy subject. Marx was not a theoretical accountant nor is Capital a manual for revolutionary accountants. It is was written to develop an understanding of capitalism devoid of undue mystery.

Marx’s own formulas are abstractions and simplifications. They are not meant to be an accounting of the details of the actual workings of capitalism.

One of the main points is to understand Marx’s explanation that the various relationships between capital, labor, money etc. are social relationships. They appear as things but they represent social relationships. That the commodity/capitalist mode of production, like all modes of production, determine the social relationships between people, the methods by which society is organized.

Marx sought a scientific explanation of how, unlike the explicitly enforced social relations of previous systems such as chattel slavery or feudalism, capitalism regulated the distribution of labor.

Marx was a revolutionary. He didn’t seek to understand capitalism in an academic sense, he sought to expose the internal contradictions WITHIN the capitalist mode of production and its necessary social relations. He looked at capitalism as just a transitional system that history had shown all previous systems to be. He logically showed that labor, the working class had to develop numerically as capitalism developed. He understood the developing potential power of the working class and fought for the education and organization of that class to take power.

The understanding of capitalism, not in every detail, but its tendencies, including with the unmasking of its fetishes, its antagonisms, and ultimately the objective weakness of its exploiting layer, and how to rid ourselves of it, are what’s important.

• The understanding of capitalism, not in every detail, but its tendencies, including with the unmasking of its fetishes, its antagonisms, and ultimately the objective weakness of its exploiting layer, and how to rid ourselves of it, are what’s important.

All while ignoring the contradictions, impracticalities and abstraction from reality of any marxist system.

Dave

• It occurs to me that basically Das Kapital is nothing but an incredibly extended example of what we call the “straw man” argument, where Marx himself defines the thing which he is going to criticize and then analyzes and critiques it based on his own definition of its characteristics.

Prior to Marx there was really no definition of “capitalism” as such, and those who preceded him who analyzed the economies of the early industrial era did not define them the same way that he did, nor would most of them have accepted his description and labelling of capitalism. Certainly later writers in the liberal tradition disagreed markedly with Marx’ view of capitalism.

Dave

• Cindy D

RE #69

Dave,

Okay, here is what I understand of what that relationship means.

c + v -› c + v + s

I am a manufacturer I buy chemicals to make my final product. One batch of my product uses:

50 lbs salt/\$25
50 lbs clay/\$50
50 lbs sulfuric acid/\$25

A worker mixes the ingredients, drys them, grinds them into into a powder, which is my final product. Let’s call it Bourgeoisie Face Powder.

It takes one day to make a batch for which I pay a worker \$100.

Bourgeoisie Face Powder Selling Price: \$300-500

(c)Materials cost \$100
(v)Labor \$100
(s)Surplus Value \$100-300

The point, as I understand it is, the only thing that added value was the labor it took to convert those materials into my product.

If there was no labor, I could sell my chemical inventory for roughly what I bought it. The labor that it takes to make the product is what adds the value to the original materials.

So,

Where does Marx get off making the assumption that the \$100 investment of labor is worth more in determining the ‘surplus’ value (aka profit) than the \$1000 invested by the capitalist in materials and facilities? That’s an erroneous and biased assumption.

Marx didn’t use those figures Dave. They’re just an example. If we made sand candles. It might take \$10 worth of materials to \$100 labor to make a final product that has a value of \$10(materials)+ \$100(labor) + s(surplus value).

The point is the materials all by themselves are worth a sum. It’s labor alone that adds value to that sum. Labor creates new value.

• Labor may create the ‘real’ added value. But in the case of ‘bourgeois’ face cream, the marketing done by the capitalist adds a great deal of additional [and possibly entirely imaginary] ‘value,’ allowing Clinique or whoever to charge hundreds of dollars for lotion by calling it an ‘age-defying serum.’

I speak as a ‘marketing professional.’ It’s sometimes silly but lots of fun.

• Cindy D

Handy,

I don’t know what Marx would say about that. It’s interesting. I couldn’t find any related information. Here is what I will say about it. Off the top of my head and angry (again, sigh). So, if it doesn’t flow like good prose, I apologize in advance.

Marketing is what makes capitalism appealing to those outside the bourgeoisie.

Culture begins with indoctrination of the young, wrought with the delicacies of identity and image. It is not a universal phenomenon that youth feel inadequate. But, in Capitalist societies it is requisite. It is a given with TV advertising and the average indoctrination programs present in schools.

This system must first rob youth of its self-confidence so that they can later market it back to them. It must take all their innate largeness and turn it into small squinty-eyed meaness or insecurity–either bullying or asking “Am I okay?”

Our system lies to children. It lies about history and it lies about who they are and what it’s done. It lies to them about what will make them happy. Sometimes we (as complicit slaves) lie out of fear (as parents do)–wanting them to succeed. To succeed–in this place–it’s necessary to make sure they understand what they need to do to “get ahead”.

Once youth is “sold” on the idea that they are “inadequate as designed”, that “anyone can be rich” and the idea of the “work ethic”–there is a fortune to be made in this mine of marketing.

There will always be those who cannot adjust–they question, they develop attention problems, they recognize something is amiss, they rebel. But they are too young to understand what is wrong or they know what is wrong but can’t express it in terms that are illuminating.

The rest will be good workers all supporting the bourgeoisie. Believing this is freedom and that they might get there too. Meantime selling out the real freedom of most of their compatriots–the average (the really beautiful).

• Cindy D

RE #75

Dave,

Try reading The Communist Manifesto (I’ve just finished.). It reads like someone standing in this century, at this date, and watching the neoliberal agenda unfolding.

• Marx didn’t use those figures Dave. They’re just an example.

Yes, obviously the specific figures are irrelevant. It’s the basic paradigm which is flawed.

The point is the materials all by themselves are worth a sum. It’s labor alone that adds value to that sum. Labor creates new value.

What of the value of the intellectual property which is the formula? What of the marketing and sales skills of the manufacturer or his sales staff? What about the overhead of the factory where the work takes place? What – most importantly – about the risk which the capitalist assumes by investing his money in the raw materials and the other aspects of overhead for the period of time between acquisition of materials and sales of the product? Hell, the capitalist probably even fronts the laborer his salary during that period.

The truth is that the one common denominator of all of these things, from acquisition of raw materials to compensation of labor is the capital which is at risk in the enterprise. Without the capital there would be no business and the person whose funds the business assumes all of the risk and should be rewarded proportionately.

Now, ideally the pay of the worker should certainly be proportional to their contribution to the overall process. They should receive a fair market wage for the time and demands of their work. But why should a worker who is selling the commodity of his labor be treated any differently than the quarryman who is selling the stone from his quarry? Both stone and labor are raw materials which go into the production of the final product.

And I have read the Communist Manifesto. It also reads like someone setting up a straw man argument, trying to redefine history into his narrow definition so that he can then argue against the bogeymen he has created himself. The idea of ‘class struggle’ is a reductio ad absurdam and since everything else flows from that idea and is a grand exercise in the self-referential fallacy, it fails on every level.

Dave

• Cindy D

Dave,

You are chock full of self-contradictions. For example, you claim you are opposed to “corporatism”, yet, I find your arguments support it more than denounce it.

• Cindy D

Dave,

In fact, I find your arguments typically support a neoliberal agenda. This is not freedom Dave. Even you can see that.

I understand if you are conflicted. I am often conflicted. But a better person admits their conflicts.

• Cindy, I’m not opposed to corporations, just to ‘corporatism’ where there is too close a relationship between corporations and the state. Huge difference.

As for being a ‘neoliberal’, I think I’m more of a classical liberal. I’m not really on the same page as the Straussians or the Austrians on economics. I tend to side with Friedman on economics and he was increasingly alienated from the neoliberals after the 1970s.

I find the neoliberal position on taxation to be too moderate by far, and certainly don’t agree with them on issues like foreign policy and the relationship between government and business.

And of course I’m not of one uniform mind about all things. What thinking person would be?

Dave

• Mark Eden

I figured that Les might be out at Republic. I’d like to see the demands there expand and the workers get the chance to see if they can run the business at at least the level required to keep themselves fed and housed through these hard times.

Handyguy says, …the marketing done by the capitalist adds a great deal of additional [and possibly entirely imaginary] ‘value’…

There are schools on top of schools of thought that have developed around this notion. Here’s an old primer.

Arguments about Marx and how well his ‘strawman’ describes capitalism are all well and good. In the meantime the boom and bust pattern continues, and real folks are getting hurt. When the bubble that is the public trough bursts, then what?

Mark

• Clavos

I’d like to see the demands there expand and the workers get the chance to see if they can run the business at at least the level required to keep themselves fed and housed through these hard times.

Except that, from news reports, the workers’ demands are much more realistic; they’re simply asking for what they were promised under the company’s work rules.

Workers running the businesses for which they work sounds great and very democratic on paper, but in practice isn’t (and hasn’t been) very practical; committees rarely are able to do anything efficiently, they spend too much time debating instead of making the widgets.

• When the bubble that is the public trough bursts, then what?

Then perhaps businesses will have learned the lesson that they are better off surviving on their own merits and the quality of their products and the work that they do rather than depending on the government and excessive credit to get by.

Dave

• Mark Eden

Clavos, while I appreciate the need for ‘realism, how many months of their mortgages will their vacation pay cover? As businesses across the country start closing their doors because no one wants to invest, workers will need to take action in self defense. Do you expect the government to make them ‘whole’ or provide the necessary support and retraining and relocation funds for that purpose? Good luck with that.

Mark

• Mark, I agree that workers need to look out for their interests, but how do you expect workers to realistically take over most of the businesses which might fail? Can workers put together the resources to reopen a closed GM plant? And if they can, should they, when professional managers couldn’t run the company profitably?

For a lesson of exactly this problem take a look at the history of the Grange movement. When the National Grange of the Patrons of Husbandry tried to move from a very successful history of collectivising farmers into the less familiar business of producing farm equipment and fertilizer for those farmers they bankrupted themselves, because they didn’t have the skills or the facilities to do the job efficiently.

Dave

• Mark Eden

It’s not that the companies cannot be run profitably necessarily. It might be that they can’t be run at the level of return that investors have come to expect and demand.

Mark

• Clavos

That’s not my point, Mark.

Again, in general terms, what makes you think that the workers can do a better job of running a business than those who have been doing so? A bad economy is a bad economy; how are the workers going to save their jobs and incomes by taking over a failing company in a failing economy?

And no, I don’t expect the government to make them whole, just as I don’t expect the government to make me whole if people stop buying boats; I’ll find another way to make a living, and I’ll do whatever it takes to do so (as I have throughout my life), including (but not limited to) relocating (even to another country if necessary), retraining, and changing industries, starting over again at apprentice level, etc.

Why have we become a nation of helpless victims?

• Mark Eden

You should feel free to go on off there and do what you must. I suggest that collective cooperative action is one road for workers to take to avoid becoming helpless victims.

How well they can do remains to be seen.

Mark

• It’s not that the companies cannot be run profitably necessarily. It might be that they can’t be run at the level of return that investors have come to expect and demand.

And if the workers as the new managers cannot satisfy the investors or potential new investors, where is the capital to operate the business to come from?

I do acknowledge that some small number of businesses with unique circumstances could survive such a conversion. Smaller companies with established distribution chains and outstanding orders which they could borrow against could probably make such a change, but most would either shut down or be run into the ground very quickly in a time of a weak economy.

Dave

• bliffle

“Without the capital there would be no business and the person whose funds the business assumes all of the risk and should be rewarded proportionately.”

How are the rewards apportioned? Who decides? When?

• Lumpy

he who takes the risks reaps the rewards.

• Cindy D

Lumpy,

What of the risk a worker takes of losing her/his pension or pay or job late in life?

Does time (often a lifetime)spent working under someone else’s dictatorship have any value when you risk losing your retirement savings?

What “risk” did all the companies we are bailing out take?

It seems more like he who has the power steals the rewards often without the risk.

• Cindy D

“Without the capital there would be no business and the person whose funds the business assumes all of the risk and should be rewarded proportionately.”

The Capitalist does not take “all” the risk. Have a look back at the corporate raiders of the 80s. CEO benefits being met as obligations of worker pension funds. The owners will assure the “risks” are pushed off onto the workers whenever possible. Generally without their knowledge.

• Mark Eden

(For those readers who are interested in what I tried to do in the article, I have discovered this old gem in which Perlo preempts my use of the Annual Survey and its categories to estimate the rate of surplus value and its trend by 35 years. The most that I can say now is that my article brings Perlo’s exercise up to date. Mark)

• Cindy D

Booms and slumps – what causes them?

I found this very illuminating. It is 2 pages and easy to understand for a lightweight on Marx like me.

• bliffle

“Booms and slumps – what causes them?”

Booms and slumps are caused by excessive positive feedback which proceeds at too high speed. Just as in any other complex system.

• Mark Eden

bliffle, we can construct systems that function with some pretty fine margins. You’d think it would be possible to do the same with our system of production that impacts so many liv…oh wait! I have to grab my bucket of blood and grease the cogs again. You’d think that we could come up with a better lubricant.

Mark

• Mark, you’re supposed to render the excess workers down and use their fat for a lubricant. Blood makes everything rust and jam up.

Dave

• Mark Eden

Maybe that’s the problem. Thanks, Dave!

• During this festive holiday season, we must remember those in dire need.

Dan(Miller)