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Thread: Does capitalism need to accept a 'living wage' to survive?

  1. #1 Does capitalism need to accept a 'living wage' to survive? 
    Forum Freshman Citadel's Avatar
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    As workers are also customers their wages are the funds available to buy the goods and services of the capitalist economy. Presently capitalism is enjoying an erosion of wage-rates unprecedented since the destruction of the trade-union movement.This is primarily due to the opening of borders which allowed a seemingly endless pool of cheap, immigrant labour.

    So the capitalist and his political poodles are very pleased with themselves.The artificial crisis created in 2007 has further scared the working class intoaccepting reduction in real-term incomes, allowing ever greater profits for thecorporations that employ them.

    The cost of living increases far in excess of wage increases. Consumers haveless and less disposable income. Demand stagnates and profits fall. This is, at best, the financial ceiling for growth. At worse it's the start of the death-spiral of capitalism which Marxist theory always predicted. Capitalism’s greatest strength, that it appeal to the base greed of the individual, means it need political guidance in order to take coordinated action.

    Does capitalism need to concede that, against its natural instinct, it is in its vital interest to not squeeze the workers until they bleed to death? If so willit happen or will the system collapse under the weight of the fat pigs at thetop of the pile?

    A living wage is simply crumbs off the table but even the richest farmer knowshe has to keep his animals fed to a minimum level.


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    Huh? Consumers have way more money than ever. 1.3 billion Chinese...1.1 billion Indians...250 millions Indonesians...Brazilians....Mexicans, etc. There has never been so many people with disposable income. Capitalism is doing great. 16 million cars sold in china last year. Condos built at record pace in Singapore, Mumbai, and most major cities. An smartphone, TV and other 'stuff' in most homes of the world. The world economy is growing and billions are better off than ever...even formerly malnourished Mexicans are now fatter on average than Americans.


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    As workers are also customers their wages are the funds available to buy the goods and services of the capitalist economy.
    Workers as customers? If you read most standard economics texts, there's a never stated but always there presumption that consumers and workers are two separate groups which rarely overlap. If you read most newspapers for that matter.

    It's absolutely true that individual workers are not likely to purchase railway carriages or elevators or shop display cabinets. But they are guaranteed to be in the market for food and clothing and household goods and cars - but only if they're paid enough to afford them - and they're also, if they are paid enough to afford it, in the market for the rental or the use of cafe and hairdresser and holiday travel and shop equipment.

    The "logic" of moving manufacturing elsewhere or offshore to get cheaper workers can be a bit of a bad bargain for the workers no longer employed in the original location and, especially, for the communities they live in. There's much more to balancing economics, industry, commerce and interests of workers and communities than some people like to think.

    Economic concepts can be perfectly fine until they're wielded in the style of "I have a hammer so everything I see looks like a nail".
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  5. #4  
    Forum Freshman Citadel's Avatar
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    Quote Originally Posted by adelady View Post
    As workers are also customers their wages are the funds available to buy the goods and services of the capitalist economy.
    Workers as customers? If you read most standard economics texts, there's a never stated but always there presumption that consumers and workers are two separate groups which rarely overlap. If you read most newspapers for that matter.

    It's absolutely true that individual workers are not likely to purchase railway carriages or elevators or shop display cabinets. But they are guaranteed to be in the market for food and clothing and household goods and cars - but only if they're paid enough to afford them - and they're also, if they are paid enough to afford it, in the market for the rental or the use of cafe and hairdresser and holiday travel and shop equipment.

    The "logic" of moving manufacturing elsewhere or offshore to get cheaper workers can be a bit of a bad bargain for the workers no longer employed in the original location and, especially, for the communities they live in. There's much more to balancing economics, industry, commerce and interests of workers and communities than some people like to think.

    Economic concepts can be perfectly fine until they're wielded in the style of "I have a hammer so everything I see looks like a nail".
    That may be a problem in most standard economic texts?

    If consumers are not workers then where do they obtain the funds to consume? If, as I think, the vast majority earn it through waged labour then reducing those wages to poverty or sub-living standards must consequently reduce their consumption power?
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    If, as I think, the vast majority earn it through waged labour then reducing those wages to poverty or sub-living standards must consequently reduce their consumption power?
    Remember, it takes a long time, and not just in economics, for old ideas and presumptions underlying accepted practices to work their way out of the system - even if they've been irrelevant for a long time. (The best example of this in Australia is the shift and roster structure in hospitals. Seems to make no sense until you realise that long, looong ago all the nurses and many of the medical staff used to live on site. Still scheduling people to start at 6 am in the morning following a shift ending at 10 pm looks ridiculous until you realise that the staff used to just walk 10 minutes to their dormitory and didn't have to prepare their own meals either. They could do it even if they were a bit tired. Unlike people who won't get to bed until 30 minutes or even an hour or more later and have to prepare their own meal in the morning and get back to the hospital as well. 2 hours less sleep for them than their counterparts 60 years ago.)

    Workers in factories and mines a century or more ago may not have lived on site as domestic and farm workers did (many do in China and other low wage places now you might note) but many of them lived in employer provided or subsidised housing and "the company store" was their main, or only, source of food and other goods because many were paid in tokens rather than real, universally negotiable cash. Regardless of the housing and pay arrangements, it was more likely than not that workers lived within walking distance of their place of work. Where a provided house included some land, many workers fed themselves largely from vegetable gardens and chickens kept in the backyard. If your academic, middle class, mental picture of workers has this kind of arrangement in mind (if you have any idea of their lives at all), it's very easy to see how you might disregard their role - or their potential - as consumers when thinking about "how things work". And remember academic "scholarship" relies heavily on undergraduates and candidates for higher degrees showing that they've absorbed all of the well-known writings and concepts in their field. All too easy for assumptions and presumptions to keep on influencing people's thinking long after they were not thought through in the first place.

    Things are more sophisticated once you get past Eco 101, but introductory texts can be quite an eye-opener. If you're a bit oblivious or non-analytical it's a bit too easy for beginners to not notice the gaps in these notions.
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    Eco 101 and introductory textbooks create great distortion. Of course, someone may read whatever he wants- Mankiw, Varian, etc- they are all well written. But, neoclassical economics are rather incoherent (individualism, maximization, S=D and other core neoclassical concepts have several fallacies).
    IMO, classical political economy provides a better analytical framework. Indeed, economics should examine economic phenomena by using social classes, not just random individuals-consumers, producers, etc.

    In a 1 sector economy,

    c+v+s= w

    Aggregate demand is c+v+s, since v is wage then of course workers contribute to demand.

    In a multisector economy though, wages reflects demand only for these sectors which produce goods aimed for workers (eg mass consumption goods & services etc).

    In short, it depends. Lack of efficient demand may occur when growth rate is constant/descending. As it can be shown, when growth rate is constant/descending then demand growth lacks compared to means of production growth thus an underconsumption crisis can occur.

    IMO, the most important variable is profitability, not demand. In reality, financial system can provide enough credit to keep demand high enough. The only prerequisite is that it's paid by a % of the total produced surplus value.

    Also, I think capitalism will never collapse on its own. There's need for political movements, even though crises will always occur this is not necessary and sufficient condition of collapse.

    Btw, @Fossilborealis if we calculate wages/GDP then it's not that great. Wages have been stagnant in major capitalist countries for decades. Also, since 2007, growth is rather anemic. If we exclude Russia, China, India and Brazil, growth is almost 0.
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    Short answer: Yes.

    Yes, the fall in wages is due to outsourcing of jobs. What's less clear to many is that the cost of living in the US is moving toward being delusional as these wages fall, when compared to cost of living for lower paid workers in places like China ($0.50 for mocha, $300 a month for nice apartment, $15 bus pass) What this means is the slow collapse of US businesses that must cater to lower paid workers, but this hasn't set in yet.

    You couldn't plan a better collapse scenario if you tried, especially with the "to big to fail" policies that hide the dire need for change under bailouts and debt, so the markets can't adapt to the new realities, which would get us in time back on our feet. Also, the quantitative easing, which has made bankers richer and everyone else poorer (as inflation draws the value of our stagnant wages down more) Quantitative easing 'is good for the rich, bad for the poor' | Business | The Observer

    I'm telling you man, its a good time to learn Chinese. They seem to have rested their hopes on the idea that tangible wealth blossoms from factories, while America seems invested in the idea that wealth blossoms from a bankers wallet. They (China) are currently quietly offloading their US debt Foreigners Sold U.S. Assets as China Reduces Treasuries - Bloomberg citing these "philosophical differences". My concern is that they may have the right philosophy here though, and the paper in that bankers wallet isn't that powerful without a real production machine backing it up. America is still doing a lot of things right, but there are challenges ahead if something doesn't give.
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    Quote Originally Posted by Citadel View Post
    At worse it's the start of the death-spiral of capitalism which Marxist theory always predicted.

    It may be. The fastest way to accelerate that is to greatly increase minimum wage. Result - more jobs move to China, and the remaining workers have to support more and more people. Thus you have to raise the minimum wage again and again, each time causing more unemployment. The end of this death spiral is massive unemployment and a collapse of the tradition of working for a living in the US.
    Does capitalism need to concede that, against its natural instinct, it is in its vital interest to not squeeze the workers until they bleed to death?
    Definitely! Similarly, socialists have to concede that, contrary their desires, they must not be allowed to squeeze employers to death.
    but even the richest farmer knowshe has to keep his animals fed to a minimum level.
    I think a little more highly of US workers than "farm animals." I think this attitude is a big part of the problem - that they are just dumb farm animals to be managed per some feeding schedule ("$X an hour and they are well fed") not people with the freedom to do what they choose.
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    Back to he question.Again, capitalism is doing fine. Never stronger around the world...most of the world has transformed from subsistence agrarian lives or state run socialism capitalism in the last 35 years. Nigerians now communicate via cell phone instead of walking 15 kms to the next village and many in Shanghai hop in a car rather than on a bicycle to go shopping.

    Some Americans need to take off the blinkers and emerge from their myopia. Meanwhile. U.S. companies like Boeing, Dow, Google,Microsoft, General Foods, Apple, Ford, Disney, etc. thrive by tapping into a 7 billion person market. They compete with ingenuity and American know-how.
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    Quote Originally Posted by Fossilborealis View Post
    Back to he question.Again, capitalism is doing fine. Never stronger around the world...most of the world has transformed from subsistence agrarian lives or state run socialism capitalism in the last 35 years. Nigerians now communicate via cell phone instead of walking 15 kms to the next village and many in Shanghai hop in a car rather than on a bicycle to go shopping.

    Some Americans need to take off the blinkers and emerge from their myopia. Meanwhile. U.S. companies like Boeing, Dow, Google,Microsoft, General Foods, Apple, Ford, Disney, etc. thrive by tapping into a 7 billion person market. They compete with ingenuity and American know-how.
    Again, you seem to ignore my post. Capitalism is in a globar sort of crisis right now. Why do you argue that it's doing just fine? Nigeria is one of the poorest countries in the world (even though they have petrol oil), US is really strangling to recover, American know-how is important but, profitability in US is rather low (compared to 60s or 70s), please explain why capitalism is at its best.
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    Not understanding your question. Where is capitalism in a crisis? Capitalism thrives quite fine...I think you are confusing an obsolete worker in the USA with capitalism. Capitalism is an economic system, not a measure of human happiness. As an economic system is is far from in crisis but expanding.

    Just today China relaxed state restrictions even more in favour of more free enterprise. Your question is more one...is the American worker in crisis? That's not the same as ....is Capitalism in crisis? Capitalism is based on expanding markets, etc....today around the world.
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  13. #12  
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    I would say that Capitalism is facing a pending crisis unless it stops trying to squeeze every drop of financial reward it can from the workers. The closer to the braed-line you force the workers, the less disposable income they have to purchase anything other than the basic goods. Unless Capitalism shares some of the profits with the workers it will find it is starving itself of consumers.

    I'm very grateful to the contributors of this thread so far. I had no idea that general economic theory is based on the premise that the worker and the consumer are two different groups. I doubt such a premise would ever have gained acceptance if it were not created by elite intellectuals from the early part of the 20th century. Anyone who had actually worked for a living would observe that they earn and spend those earnings on consumable goods.

    The worker is the fuel supply for the Capitalist but it seems they have only ever seen them as a cost per unit calculation. They fuel the production but
    they are also the vast majority of the consumers. If you starve them then you starve your customers of the ability to generate profits for your company.

    I'm a Marxist and I’m the first to concede, as Marx did, that his observations offered no superior alternative to Capitalism. He did however link the workers and consumers in a very logical circle. Perhaps in the desire to discredit him the Capitalist system has overlooked the most obvious, logical, aspect of his argument.

    Capitalism needs to be mitigated by at least a partial acceptance that the worker should have disposable income. It's fallacy to expect a Capitalist to care about his worker on a human level. Humans are just another cost to a Capitalist and he cares more about his shoes than the workforce they walk over. Simply economic self-survival however now cries out for him to cut a tiny slice of his vast profits and share it with those who actually generate them.

    It requires Capitalism to be selfish enough to realise it needs to be less selfish. It needs it to do the exact opposite of what it does by nature - to think of society and the wider world outside of the balance sheet. Only politicians can provide a national or pan-national guide for this but as they are in the pay of the Capitalist how can they tell him what he does not want to hear?

    Real incomes have fallen ever since the trade unions were smashed. The worker was given credit to allow him to consume at the same level, creating a slave-class but at least maintaining the profits of the Capitalist.
    The credit ran out in 2007 and we are told we can never allow it to return to the way it was. The credit crunch happened because the worker finally was unable to repay his credit, squeezed in wages and robbed by cartel-pricing.

    If wages do not return to a fair level and credit is now not able to paper over the widening gap...I think Capitalism will find it impossible to 'kick the problem down the road' again
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    Citadel. To repeat. He world is not the USA and Europe.. You keep taking one piece of the world economy and extrapolating some grand theory. Credit didnt run out in 2007. Since 2007 not billions but TRILLIONS have been invested in Canada, Australia, Dubai, the UAE, Russian Pipelines, Chinese autoProduction, Indian HiTech, Brazilian Mining, etc.This week stocks hit record highs not by magic but investment.
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    Hi Fossil,

    Credit for the personal worker pretty much ran out and it seems that everyone is determined not to let it return to the previous level.

    Forgive me for not making myself clearer. I am, in fact, looking from the worker up and not from the global down. What affect the average worker affects the average consumer. That can be extrapolated to the country or world scale as seems applicable.
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  16. #15  
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    Quote Originally Posted by Fossilborealis View Post
    Not understanding your question. Where is capitalism in a crisis? Capitalism thrives quite fine...I think you are confusing an obsolete worker in the USA with capitalism. Capitalism is an economic system, not a measure of human happiness. As an economic system is is far from in crisis but expanding.

    Just today China relaxed state restrictions even more in favour of more free enterprise. Your question is more one...is the American worker in crisis? That's not the same as ....is Capitalism in crisis? Capitalism is based on expanding markets, etc....today around the world.
    I just meant that in terms of growth is currently underachieving.
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