Thread: Bottleneck Products

I want to discuss economic bottlenecks. But first it is important to make sure to be clear what I mean by "bottleneck".

I'm sure some people here know what it is like to work in a large metropolitan area that has rush hour traffic. For example, I live in Portland, Oregon. There is a city immediately to the North in the next state over, which is Vancouver, Washington. Lots of people prefer to live there and work in Portland for tax reasons (Washington has no income tax).

Unfortunately, Vancouver and Portland are separated by the Columbia River. And there are only two bridges. You may well imagine that, during rush hour, there are quite a lot of people who want to use those two bridges.

Now to relate this to economics. I must ask: would building roads elsewhere in the city ease the traffic on those two bridges? I think most people here would agree that the answer to that question is "no." Building a third bridge across the river might ease some of the traffic, but building additional roads in other areas of the city would probably have zero or nearly zero effect.


Similarly, the economy as a whole faces certain bottlenecks. Energy seems to be a big one right now. Almost all the other stuff we want to make requires energy, but petroleum is perceived as the only reliable source of it (other than nuclear, which is limited by public fear). And the supply of petroleum is lagging far behind demand.


But what other bottlenecks does the economy face? Energy is an easy one because in theory we can build our way out of it (at least wind can be built.) It just requires us to "break the rules", and build it even though it is more expensive and has drawbacks. (Because the scarcity is blocking growth, and growth will enable us to afford the cost further down the road.)

Maybe some other bottlenecks exist that are not so easy to overcome?

The current economic model thrives on continued growth, yet the result of more purchasing by consumers results in more solid waste that needs to be properly managed and disposed of.
Recycling efforts here in the Yukon are challenged in the attempt to keep pace with both an increasing population and increased consumerism and I doubt that we are the only jurisdiction confronting that reality.

It's been said that building more roads (and hence, bridges) to ease traffic congestion is much like having the waistline of your trousers taken out to amend a weight problem.

Originally Posted by kojax

I want to discuss economic bottlenecks. But first it is important to make sure to be clear what I mean by "bottleneck".

I'm sure some people here know what it is like to work in a large metropolitan area that has rush hour traffic. For example, I live in Portland, Oregon. There is a city immediately to the North in the next state over, which is Vancouver, Washington. Lots of people prefer to live there and work in Portland for tax reasons (Washington has no income tax).

Unfortunately, Vancouver and Portland are separated by the Columbia River. And there are only two bridges. You may well imagine that, during rush hour, there are quite a lot of people who want to use those two bridges.

Now to relate this to economics. I must ask: would building roads elsewhere in the city ease the traffic on those two bridges? I think most people here would agree that the answer to that question is "no." Building a third bridge across the river might ease some of the traffic, but building additional roads in other areas of the city would probably have zero or nearly zero effect.


Similarly, the economy as a whole faces certain bottlenecks. Energy seems to be a big one right now. Almost all the other stuff we want to make requires energy, but petroleum is perceived as the only reliable source of it (other than nuclear, which is limited by public fear). And the supply of petroleum is lagging far behind demand.


But what other bottlenecks does the economy face? Energy is an easy one because in theory we can build our way out of it (at least wind can be built.) It just requires us to "break the rules", and build it even though it is more expensive and has drawbacks. (Because the scarcity is blocking growth, and growth will enable us to afford the cost further down the road.)

Maybe some other bottlenecks exist that are not so easy to overcome?

Actually I'm not sure I agree that energy supply is a bottleneck. There is plenty around for anyone prepared to pay the marginal rate for it, which is not currently crucifyingly high. Surely the current bottlenecks are debt overhang and reluctance to lend and (to put the same thing another way, I suppose) lack of confidence in a stable future. And skills shortages, of course.

But these are not "product" bottlenecks of course. On the product side, I think I read somewhere that rare earths are very short and only mined in one or two places. But this only affects IT hardware, I think.

Originally Posted by kojax

Energy is an easy one because in theory we can build our way out of it (at least wind can be built.) It just requires us to "break the rules", and build it even though it is more expensive and has drawbacks. (Because the scarcity is blocking growth, and growth will enable us to afford the cost further down the road.)

This month's Nature has an article about China's investment in renewable energy which surprised me. Economics: Manufacture renewables to build energy security : Nature News & Comment

"China's rise to become the world's largest power producer and source of carbon emissions through burning coal is well recognized. But the nation's renewable-energy systems are expanding even faster than its fossil-fuel and nuclear power. China leads the world in the production and use of wind turbines, solar-photovoltaic cells and smart-grid technologies, generating almost as much water, wind and solar energy as all of France and Germany's power plants combined¹. Production of solar cells in China has expanded 100-fold since 2005.As the scale of Chinese manufacturing has grown, the costs of renewable-energy devices have plummeted². Innovation has played a part³. But the main driver of cost reduction has been market expansion."

This might be an example of the "breaking the rules" you were talking about - biting the bullet, and investing in the technology and better grids before it really makes economic sense, not waiting for the invisible hand of the market to work its magic, and attempting to position yourself at the front of the herd.

Originally Posted by DianeG

This month's Nature has an article about China's investment in renewable energy which surprised me. Economics: Manufacture renewables to build energy security : Nature News & Comment

"China's rise to become the world's largest power producer and source of carbon emissions through burning coal is well recognized. But the nation's renewable-energy systems are expanding even faster than its fossil-fuel and nuclear power. China leads the world in the production and use of wind turbines, solar-photovoltaic cells and smart-grid technologies, generating almost as much water, wind and solar energy as all of France and Germany's power plants combined¹. Production of solar cells in China has expanded 100-fold since 2005.As the scale of Chinese manufacturing has grown, the costs of renewable-energy devices have plummeted². Innovation has played a part³. But the main driver of cost reduction has been market expansion."

This might be an example of the "breaking the rules" you were talking about - biting the bullet, and investing in the technology and better grids before it really makes economic sense, not waiting for the invisible hand of the market to work its magic, and attempting to position yourself at the front of the herd.

You're certainly right about solar power. Just a couple weeks ago I traveled by train over a large swathe of China, a couple thousand kilometers. I could always tell which way was north because of the south-facing solar panels on all the roofs. Virtually every apartment building has them now.

Generally I think if equating economics with traffic flow we have to consider that successfully meeting demand must be the equivalent to a pleasant car journey.

Anything that impedes growth of supply and demand or the balance of supply and demand could really be considered a bottleneck, I don't think we can or will see either supply or demand forever increasing unabated though.

If we are considering the idea that economic growth is our ultimate goal then we will face many potential such bottlenecks over the coming decades, certainly now energy and it's growing cost is restrictive but will probably prove to be less so over time where a shortage and high cost the physical raw materials for manufacturing are likely to prove more problematic. Also and with specific reference to what we are already seeing happening in China rising wage costs and indeed actual labour shortages could prove a real road block to long term significant growth.

If we were look at it from a slightly different perspective and decide that a harmonious economic balance was our goal then we might actually find some rather different challenges as our economic road blocks. These challenges might include how we meet the demands of developing nations for consumer or even luxury products without sufficient economic resources to pay for them.

This is actually already a reality facing many companies doing business in some of the world's poorer countries, how to make things cheaper and more accessible.

The more successfully this is resolved the more quickly and easily the demands of these nations can met with suitable amount of supply, thus opening up perhaps one of this biggest bottlenecks currently proving restrictive to a healthy global economic balance.

With the bridge analogy, is it truly a bottleneck? There must be some reason why people are trying to get from point a to point B. Why do people want to live in one place and work in another, resulting in those morning and afternoon lineups at the bridge? How can you motivate more of them to drive in a different direction - by, say, providing more housing or employment options in both areas. It would only be a bottleneck if the number of bridges was simply inadequate for any random movement of traffic.


To me, problems with an economy based on growth resemble a pyramid scam more than they are bottlenecks.

Originally Posted by DianeG

With the bridge analogy, is it truly a bottleneck? There must be some reason why people are trying to get from point a to point B. Why do people want to live in one place and work in another, resulting in those morning and afternoon lineups at the bridge? How can you motivate more of them to drive in a different direction - by, say, providing more housing or employment options in both areas. It would only be a bottleneck if the number of bridges was simply inadequate for any random movement of traffic.


To me, problems with an economy based on growth resemble a pyramid scam more than they are bottlenecks.

Re your last sentence, I find my self unsure as to your meaning. It is certainly the case that economies can contain "fake" growth, as in the last boom before the crash, in which the growth numbers turn out to have borrowed from the future, so to speak, hence the ensuing crash, while we all pay off our debts.

But the idea that economies should always be able to grow is not in itself a pyramid scam delusion. If it were, we would all still be living in caves. Human effort, over time, makes us all richer, which is fundamentally what is (imperfectly) captured in economic growth numbers.

Originally Posted by exchemist

Re your last sentence, I find my self unsure as to your meaning. It is certainly the case that economies can contain "fake" growth, as in the last boom before the crash, in which the growth numbers turn out to have borrowed from the future, so to speak, hence the ensuing crash, while we all pay off our debts.

But the idea that economies should always be able to grow is not in itself a pyramid scam delusion. If it were, we would all still be living in caves. Human effort, over time, makes us all richer, which is fundamentally what is (imperfectly) captured in economic growth numbers.

An article in Scientific American describes it this way:

"The defenders of the capitalist Ponzi scheme can turn themselves inside out in an effort to explain and defend the indefensible, but in the end, the essence of the scam comes down to the following: the capitalist schemers who pay wages to the workers when they are producers are the same schemers who charge the workers when they become consumers, and they charge them more when they consume a product than they pay them when they produce the same product, the difference being a little something called profit.

In 2013, gross domestic product in the United States was valued at $16.8 trillion. Of that amount, $14.1 trillion (or 85 percent) went to the workers who created it, while corporations who produced nothing of life-sustaining value themselves skimmed $2.7 trillion (or 15 percent) off the top. In other words, workers are paid $8.50 to make a widget and then charged $10 to buy the widget they themselves produced."
The Whole Economy Is Rife with Ponzi Schemes - Scientific American

Of course if the people at the top, actually take the profits and reinvest it in new businesses, over all growth can continue, and it's not necessarily unsustainable to contribute more than youre getting back, as long as you get back "enough" to reproduce your standard of living and education in the next generation. But that's the sticking point.

The article also mentions other ponzi like elements in the economy - speculation, the boom and bust cycles that leave some people holding the bag, or the awarding of stock options. And what happens when an aging, shrinking population consumes less? As one economist said "We don't know, because it's never happened before."

Originally Posted by DianeG

And what happens when an aging, shrinking population consumes less? As one economist said "We don't know, because it's never happened before."

Or when a younger, more environmentally sustainable concerned population opts out of the consumer mentality for a variety of reasons?

Consumption is the backbone of the current system and we have been hyped into consuming far more than we need or than is sustainable in the developed countries, while pillaging the less developed countries for cheap labor, and more lax regulations.

Originally Posted by DianeG

Originally Posted by exchemist

Re your last sentence, I find my self unsure as to your meaning. It is certainly the case that economies can contain "fake" growth, as in the last boom before the crash, in which the growth numbers turn out to have borrowed from the future, so to speak, hence the ensuing crash, while we all pay off our debts.

But the idea that economies should always be able to grow is not in itself a pyramid scam delusion. If it were, we would all still be living in caves. Human effort, over time, makes us all richer, which is fundamentally what is (imperfectly) captured in economic growth numbers.

An article in Scientific American describes it this way:

"The defenders of the capitalist Ponzi scheme can turn themselves inside out in an effort to explain and defend the indefensible, but in the end, the essence of the scam comes down to the following: the capitalist schemers who pay wages to the workers when they are producers are the same schemers who charge the workers when they become consumers, and they charge them more when they consume a product than they pay them when they produce the same product, the difference being a little something called profit.

In 2013, gross domestic product in the United States was valued at $16.8 trillion. Of that amount, $14.1 trillion (or 85 percent) went to the workers who created it, while corporations who produced nothing of life-sustaining value themselves skimmed $2.7 trillion (or 15 percent) off the top. In other words, workers are paid $8.50 to make a widget and then charged $10 to buy the widget they themselves produced."
The Whole Economy Is Rife with Ponzi Schemes - Scientific American

Of course if the people at the top, actually take the profits and reinvest it in new businesses, over all growth can continue, and it's not necessarily unsustainable to contribute more than youre getting back, as long as you get back "enough" to reproduce your standard of living and education in the next generation. But that's the sticking point.

The article also mentions other ponzi like elements in the economy - speculation, the boom and bust cycles that leave some people holding the bag, or the awarding of stock options. And what happens when an aging, shrinking population consumes less? As one economist said "We don't know, because it's never happened before."

Golly, was this in "Scientific American"? It sounds more like Dave Spart, writing in the "Socialist Worker"!

The danger with this sort of polemic (I can't really call it anything else) is that people use the undoubted examples of Ponzi type elements of capitalist societies to cast doubt on the whole thing in a way that does not follow. For example, if workers are paid $8.50 to make a widget but have to buy it for $10, so what? They do not live on widgets alone. And it may well be that those widgets used to cost $30 until the factory they work in opened. Do people have flat screen TVs today that they did not have 20 years ago, yes or no?

And the way the author speaks about "the capitalist Ponzi scheme" is an example of this eliding of the discrete Ponzi type schemes that do exist with the whole enterprise. It's dishonest.

The simple, empirical fact is we have all got enormously wealthier since the industrial revolution and well before that, as a result of the buying and selling of goods, services and labour, based on agreements for the lending of money to start businesses, which is all that capitalism is. We live longer lives, are better educated, have far better housing, clothing, transport, entertainment…..the list goes on and on. Only a fool would attempt to deny it.

Originally Posted by exchemist

The simple, empirical fact is we have all got enormously wealthier since the industrial revolution and well before that, as a result of the buying and selling of goods, services and labour, based on agreements for the lending of money to start businesses, which is all that capitalism is. We live longer lives, are better educated, have far better housing, clothing, transport, entertainment…..the list goes on and on. Only a fool would attempt to deny it.

To this point in our history, that is true for many (but not all) in the developed countries and I cannot speak for conditions in other parts of the world. The problem, looking forward, is that the current rate of utilization and growth is not sustainable. When we use more resources than the planet can replenish, that creates a bottleneck from my perspective.

I am not saying that all is gloom and doom but suggesting that we need to shift our focus to designing technologies that can do more with less and earn our profits in that manner. The challenge seems to be that the current monopolies of essential infrastructure and power have so much invested in the current model that they are not desirous of changing course. If history shows anything about our species, it reveals that our nature is to wait until we are under duress before we will undertake change. We may soon be experiencing challenges to our current complacent capitalist models and it will be very interesting to see where things go from here.

As one who is attempting to plan for retirement within 10 years, and hoping to remain active and earning some coin for a long time beyond that to support my vicarious pleasures, I really don't know what to expect given the rapid pace of change. Just be prepared for anything, I suppose. When there are no resources to purchase, whatever one's means of exchange becomes quite meaningless.

This thread is supposed to be about bottleneck products, but given that currency is a man-made concept product, I think the following item fits.

In World War I, Germany -- like other governments -- borrowed heavily to pay its war costs. This led to inflation, but not much more than in the U.S. during the same period. After the war there was a period of stability, but then the inflation resumed. By 1923, the wildest inflation in history was raging. Often prices doubled in a few hours. A wild stampede developed to buy goods and get rid of money. By late 1923 it took 200 billion marks buy a loaf of bread. Millions of the hard-working, thrifty German people found that their life's savings would not buy a postage stamp. They were penniless. How could this happen in a highly civilized nation run at the time by intelligent, democratically chosen leaders? What happened to business, to wages and employment? How did some people manage to save their capital while a few speculators made fortunes?

Hyperinflation of the Weimar Republic in 1923 Germany

Originally Posted by scheherazade

Originally Posted by exchemist

The simple, empirical fact is we have all got enormously wealthier since the industrial revolution and well before that, as a result of the buying and selling of goods, services and labour, based on agreements for the lending of money to start businesses, which is all that capitalism is. We live longer lives, are better educated, have far better housing, clothing, transport, entertainment…..the list goes on and on. Only a fool would attempt to deny it.

To this point in our history, that is true for many (but not all) in the developed countries and I cannot speak for conditions in other parts of the world. The problem, looking forward, is that the current rate of utilization and growth is not sustainable. When we use more resources than the planet can replenish, that creates a bottleneck from my perspective.

I am not saying that all is gloom and doom but suggesting that we need to shift our focus to designing technologies that can do more with less and earn our profits in that manner. The challenge seems to be that the current monopolies of essential infrastructure and power have so much invested in the current model that they are not desirous of changing course. If history shows anything about our species, it reveals that our nature is to wait until we are under duress before we will undertake change. We may soon be experiencing challenges to our current complacent capitalist models and it will be very interesting to see where things go from here.

As one who is attempting to plan for retirement within 10 years, and hoping to remain active and earning some coin for a long time beyond that to support my vicarious pleasures, I really don't know what to expect given the rapid pace of change. Just be prepared for anything, I suppose. When there are no resources to purchase, whatever one's means of exchange becomes quite meaningless.

This thread is supposed to be about bottleneck products, but given that currency is a man-made concept product, I think the following item fits.

In World War I, Germany -- like other governments -- borrowed heavily to pay its war costs. This led to inflation, but not much more than in the U.S. during the same period. After the war there was a period of stability, but then the inflation resumed. By 1923, the wildest inflation in history was raging. Often prices doubled in a few hours. A wild stampede developed to buy goods and get rid of money. By late 1923 it took 200 billion marks buy a loaf of bread. Millions of the hard-working, thrifty German people found that their life's savings would not buy a postage stamp. They were penniless. How could this happen in a highly civilized nation run at the time by intelligent, democratically chosen leaders? What happened to business, to wages and employment? How did some people manage to save their capital while a few speculators made fortunes?

Hyperinflation of the Weimar Republic in 1923 Germany

Well there you are onto something certainly. But I do not have a solution for it and nor does anybody else. The process of making rules on a global basis to restrict consumption of scarce resources does not have a great track record - just look at fishing for example. I do fervently hope that the threat of climate change may eventually give us a global method of discouraging wasteful use of fossil fuel, but to hope for similar initiatives for other resources seems politically impossible. And do not fool yourself that they way it works today is all due to "monopolies of essential infrastructure and power". It is due to the individual decisions that you and I take daily in our lives. I get sick of people trying to pass off the problem onto some imagined big business bogeyman when it is all their own fault. It's a self-exculpating myth.

But there will not be some cliff edge effect in which we wake up one day to find we've run out of something. What will happen is that we gradually find things we've taken for granted become too expensive, forcing us into changes in behaviour.

Originally Posted by exchemist

Well there you are onto something certainly. But I do not have a solution for it and nor does anybody else. The process of making rules on a global basis to restrict consumption of scarce resources does not have a great track record - just look at fishing for example. I do fervently hope that the threat of climate change may eventually give us a global method of discouraging wasteful use of fossil fuel, but to hope for similar initiatives for other resources seems politically impossible. And do not fool yourself that they way it works today is all due to "monopolies of essential infrastructure and power". It is due to the individual decisions that you and I take daily in our lives. I get sick of people trying to pass off the problem onto some imagined big business bogeyman when it is all their own fault. It's a self-exculpating myth.

But there will not be some cliff edge effect in which we wake up one day to find we've run out of something. What will happen is that we gradually find things we've taken for granted become too expensive, forcing us into changes in behaviour.

I completely accept that each of us has to assume responsibility for our own actions yet I still suggest that our collective will (government, big business) has an impact on the options available to us. My personal contribution has been to reduce my use of many resources by a significant percent each year. This does not seem to gain me any benefit as for every fuel efficient method I implement, the price goes up anyways, due to forces that are beyond my individual reach. Our local power generating corporation increased their production ability against the projected revenues for a mine that never came into production so who did they pass their investment costs on to?

The rest of us have seen costs per kwh rise 20% in 18 months when we had sufficient capacity at the time and for future domestic needs. So much for my investment in CFL light bulbs. This years experiment is to put the hot water on timed use because we do not need hot water available 24/7. According to my research, if done properly, the cost of heating the whole tank 2 times a week (3 hours per time) should be less than keeping the tank heated 24/7. (One thing about having hot water all the time, is that one tends to be constantly running a bit more water here and there simply because it is convenient. A small kettle of hot water is enough to wash up the dishes for a couple and heats in mere minutes. Laundry retains it's color better in cold water wash and it is soap that kills germs. Water needs to be boiling for that function.)

In summary, there has been bad decision making at many levels and I can only be a responsible user of resources and try to anticipate and plan for the worst while hoping for the best. Thank you for your comments, exchemist. I appreciate the exchanges.

Originally Posted by scheherazade

Originally Posted by exchemist

Well there you are onto something certainly. But I do not have a solution for it and nor does anybody else. The process of making rules on a global basis to restrict consumption of scarce resources does not have a great track record - just look at fishing for example. I do fervently hope that the threat of climate change may eventually give us a global method of discouraging wasteful use of fossil fuel, but to hope for similar initiatives for other resources seems politically impossible. And do not fool yourself that they way it works today is all due to "monopolies of essential infrastructure and power". It is due to the individual decisions that you and I take daily in our lives. I get sick of people trying to pass off the problem onto some imagined big business bogeyman when it is all their own fault. It's a self-exculpating myth.

But there will not be some cliff edge effect in which we wake up one day to find we've run out of something. What will happen is that we gradually find things we've taken for granted become too expensive, forcing us into changes in behaviour.

I completely accept that each of us has to assume responsibility for our own actions yet I still suggest that our collective will (government, big business) has an impact on the options available to us. My personal contribution has been to reduce my use of many resources by a significant percent each year. This does not seem to gain me any benefit as for every fuel efficient method I implement, the price goes up anyways, due to forces that are beyond my individual reach. Our local power generating corporation increased their production ability against the projected revenues for a mine that never came into production so who did they pass their investment costs on to?

The rest of us have seen costs per kwh rise 20% in 18 months when we had sufficient capacity at the time and for future domestic needs. So much for my investment in CFL light bulbs. This years experiment is to put the hot water on timed use because we do not need hot water available 24/7. According to my research, if done properly, the cost of heating the whole tank 2 times a week (3 hours per time) should be less than keeping the tank heated 24/7. (One thing about having hot water all the time, is that one tends to be constantly running a bit more water here and there simply because it is convenient. A small kettle of hot water is enough to wash up the dishes for a couple and heats in mere minutes. Laundry retains it's color better in cold water wash and it is soap that kills germs. Water needs to be boiling for that function.)

In summary, there has been bad decision making at many levels and I can only be a responsible user of resources and try to anticipate and plan for the worst while hoping for the best. Thank you for your comments, exchemist. I appreciate the exchanges.

Yes, I think that the debate over ways to influence society for the better lies squarely in the realm of politics. Political leaders with vision and charisma have the best chance of influencing people to accept policies that hurt them in the short term. Businesses won't do that, because hurting their own customers is hardly a recipe for success and ideological appeals from a profit-making entity will never be taken seriously.

But don't complain about energy prices going up: that is what you and I should cheer to the rafters, because it provides a powerful - market based - incentive to consume less and be more efficient.

Originally Posted by exchemist

Yes, I think that the debate over ways to influence society for the better lies squarely in the realm of politics. Political leaders with vision and charisma have the best chance of influencing people to accept policies that hurt them in the short term. Businesses won't do that, because hurting their own customers is hardly a recipe for success and ideological appeals from a profit-making entity will never be taken seriously.

But don't complain about energy prices going up: that is what you and I should cheer to the rafters, because it provides a powerful - market based - incentive to consume less and be more efficient.

My point is that the corporations are increasing their profits by increasing their prices, while I invest in the market-based incentives, reduce my use, and still pay more. I draw the line at shivering in the dark while individuals are earning more than many small nations. I'm just waiting for the day when they learn that money is of little value when there is nothing on the shelf.



I live at the end of a bottleneck in Whitehorse, Yukon and I do not doubt that today's continuing dump of wet snow is making it very treacherous for all the drivers of the trucks that travel the highway. They are the most vital part of our supply chain as they bring the fuel for our heat and electricity, all food and supplies. I surely wish each and every one of them safe passage this day and everyday.

Originally Posted by exchemist

Golly, was this in "Scientific American"? It sounds more like Dave Spart, writing in the "Socialist Worker"!

Yes, I agree, the language is pretty emotionally loaded for a science magazine (eg "schemers") but I don't think the illustration is completely inaccurate.

...if workers are paid $8.50 to make a widget but have to buy it for $10, so what? They do not live on widgets alone. And it may well be that those widgets used to cost $30 until the factory they work in opened.

Well, yes, that is essentially the deal we all cut. And we don't care if the split is a little unfair, as long as we're better off than we were before, or at least hold our own. But that seems to depend on increasing expansion, increasing numbers of workers and consumers supporting the base of the pyramid and unlimited resources.

The trick in all of this, is that people who want to get rich are going to do it by positioning themselves somewhere they can control a bottleneck product.

If they're really evil, they might deliberately create the bottleneck. Perhaps polluting the natural water wells in an area and then moving in and providing clean water services for a price, for example. I'm sure there are some capitalists who would like to be able to sell us clean air also.

You can't count on the corporate elite to represent your interests in this type of a matter. Bottlenecks hurt the public (as well as the overall economy), but help whoever is producing that particular product.

Originally Posted by DianeG

An article in Scientific American describes it this way:

"The defenders of the capitalist Ponzi scheme can turn themselves inside out in an effort to explain and defend the indefensible, but in the end, the essence of the scam comes down to the following: the capitalist schemers who pay wages to the workers when they are producers are the same schemers who charge the workers when they become consumers, and they charge them more when they consume a product than they pay them when they produce the same product, the difference being a little something called profit.

In 2013, gross domestic product in the United States was valued at $16.8 trillion. Of that amount, $14.1 trillion (or 85 percent) went to the workers who created it, while corporations who produced nothing of life-sustaining value themselves skimmed $2.7 trillion (or 15 percent) off the top. In other words, workers are paid $8.50 to make a widget and then charged $10 to buy the widget they themselves produced."
The Whole Economy Is Rife with Ponzi Schemes - Scientific American

Of course if the people at the top, actually take the profits and reinvest it in new businesses, over all growth can continue, and it's not necessarily unsustainable to contribute more than youre getting back, as long as you get back "enough" to reproduce your standard of living and education in the next generation. But that's the sticking point.

The article also mentions other ponzi like elements in the economy - speculation, the boom and bust cycles that leave some people holding the bag, or the awarding of stock options. And what happens when an aging, shrinking population consumes less? As one economist said "We don't know, because it's never happened before."

15% isn't bad. The problem with our present situation is that quite often the percentage that is taken by management is quite variable, and often gets a lot higher than 15%.

I think the ideal relationship between workers and management would be what we see in Hollywood. Most agents who manage a moviestar's career simply charge a fixed percentage rate. Doing things that way, everyone is able to get rich. Everyone has a profit motive, and everyone wants to do their best.

We should expect that management will want some kind of a cut, because they are actually playing a role in production by coordinating the effort. The problem is trusting them too much to decide what they think a "fair" cut is. Power corrupts, and absolute power corrupts absolutely.

Originally Posted by DianeG

With the bridge analogy, is it truly a bottleneck? There must be some reason why people are trying to get from point a to point B. Why do people want to live in one place and work in another, resulting in those morning and afternoon lineups at the bridge? How can you motivate more of them to drive in a different direction - by, say, providing more housing or employment options in both areas. It would only be a bottleneck if the number of bridges was simply inadequate for any random movement of traffic.


To me, problems with an economy based on growth resemble a pyramid scam more than they are bottlenecks.

The point I'm making is that the problem can't be solved by building anything except the one thing that is needed. The Total number of roads means nothing.

Just like in the economy, total GDP sometimes means nothing. The bottleneck products within that GDP may be creating a stoppage that holds back the entire economy.

Originally Posted by kojax

The trick in all of this, is that people who want to get rich are going to do it by positioning themselves somewhere they can control a bottleneck product.

If they're really evil, they might deliberately create the bottleneck. Perhaps polluting the natural water wells in an area and then moving in and providing clean water services for a price, for example. I'm sure there are some capitalists who would like to be able to sell us clean air also.

You can't count on the corporate elite to represent your interests in this type of a matter. Bottlenecks hurt the public (as well as the overall economy), but help whoever is producing that particular product.

Originally Posted by DianeG

An article in Scientific American describes it this way:

"The defenders of the capitalist Ponzi scheme can turn themselves inside out in an effort to explain and defend the indefensible, but in the end, the essence of the scam comes down to the following: the capitalist schemers who pay wages to the workers when they are producers are the same schemers who charge the workers when they become consumers, and they charge them more when they consume a product than they pay them when they produce the same product, the difference being a little something called profit.

In 2013, gross domestic product in the United States was valued at $16.8 trillion. Of that amount, $14.1 trillion (or 85 percent) went to the workers who created it, while corporations who produced nothing of life-sustaining value themselves skimmed $2.7 trillion (or 15 percent) off the top. In other words, workers are paid $8.50 to make a widget and then charged $10 to buy the widget they themselves produced."
The Whole Economy Is Rife with Ponzi Schemes - Scientific American

Of course if the people at the top, actually take the profits and reinvest it in new businesses, over all growth can continue, and it's not necessarily unsustainable to contribute more than youre getting back, as long as you get back "enough" to reproduce your standard of living and education in the next generation. But that's the sticking point.

The article also mentions other ponzi like elements in the economy - speculation, the boom and bust cycles that leave some people holding the bag, or the awarding of stock options. And what happens when an aging, shrinking population consumes less? As one economist said "We don't know, because it's never happened before."

15% isn't bad. The problem with our present situation is that quite often the percentage that is taken by management is quite variable, and often gets a lot higher than 15%.

I think the ideal relationship between workers and management would be what we see in Hollywood. Most agents who manage a moviestar's career simply charge a fixed percentage rate. Doing things that way, everyone is able to get rich. Everyone has a profit motive, and everyone wants to do their best.

We should expect that management will want some kind of a cut, because they are actually playing a role in production by coordinating the effort. The problem is trusting them too much to decide what they think a "fair" cut is. Power corrupts, and absolute power corrupts absolutely.

Originally Posted by DianeG

With the bridge analogy, is it truly a bottleneck? There must be some reason why people are trying to get from point a to point B. Why do people want to live in one place and work in another, resulting in those morning and afternoon lineups at the bridge? How can you motivate more of them to drive in a different direction - by, say, providing more housing or employment options in both areas. It would only be a bottleneck if the number of bridges was simply inadequate for any random movement of traffic.


To me, problems with an economy based on growth resemble a pyramid scam more than they are bottlenecks.

The point I'm making is that the problem can't be solved by building anything except the one thing that is needed. The Total number of roads means nothing.

Just like in the economy, total GDP sometimes means nothing. The bottleneck products within that GDP may be creating a stoppage that holds back the entire economy.

I'm not sure who you have in mind by "management". The managers in a company are employees just like the shop floor worker. Profits are not a "take", "skimmed off" by management. The profits are made by, and belong to, the company itself, which either reinvests them or passes them out to shareholders via a dividend. If a manager pockets company profits that is embezzlement and is a criminal offence.

Profit is determined, not by managers deciding what "cut" to impose, but on what the market will bear. A successful company is one which sells something that people are prepared to pay enough for to leave something over, after all the raw material, labour and other expenses have been paid and after allowance for depreciation of capital assets. That something over is the profit, so it the resultant of the other elements. The skill of the management is in holding down the costs while finding opportunities to sell things that are valued by customers.

And before anyone indulges any c.19th notions of shareholders as the baddies (in top hats, smoking cigars at the races, while the workers eke out a miserable existence supplementing their wages by stuffing boys up chimneys, etc etc,) it is worth recalling who these shareholders typically are nowadays - that is, for a large part, pension funds.
These are the pension funds that provide for the workers and managers in retirement, so it is you and me, our friends and relations.

There is plenty wrong with modern capitalism, but it does nobody any favours to stigmatise fictitious stereotypes, when we are all involved, both as "exploited" labour and as beneficiaries, one way or another.

Originally Posted by exchemist

I'm not sure who you have in mind by "management". The managers in a company are employees just like the shop floor worker. Profits are not a "take", "skimmed off" by management. The profits are made by, and belong to, the company itself, which either reinvests them or passes them out to shareholders via a dividend.

Except when AIG executives decide to give themselves their bonuses, but elsewhere Boeing is telling its manufacturing workers they need to take a pay cut.

Since management ultimately gets to decide what everyone's paycheck will be (including their own), there's this huge conflict of interests.

If a manager pockets company profits that is embezzlement and is a criminal offence.

You mean if he pockets company profits without going through the proper channels, right?

If he and the other managers feel they are all entitled to a big bonus, and they vote on it, and agree that they are entitled to it, that's not "embezzlement".

It's basically the exact same thing, but with proper paperwork.

Profit is determined, not by managers deciding what "cut" to impose, but on what the market will bear. A successful company is one which sells something that people are prepared to pay enough for to leave something over, after all the raw material, labour and other expenses have been paid and after allowance for depreciation of capital assets. That something over is the profit, so it the resultant of the other elements. The skill of the management is in holding down the costs while finding opportunities to sell things that are valued by customers.

While the skill/efforts of assembly line workers of holding down costs, or increasing product quality, typically commands no such reward.

I'm not disagreeing that exceptional effort should be rewarded. I think that concept should apply to everyone. Not just a few. And (more importantly) that the reward should in fact depend on how exceptional the effort was.

AIG executives taking a bonus after they've plummeted their company into ruin and had to be bailed out doesn't look to me like an example of rewarding "skill of management at holding down costs while finding opportunities to sell things that are valued by customers."

It looks more to me like an abuse of power. Management simply raiding the company treasury because they can.

And before anyone indulges any c.19th notions of shareholders as the baddies (in top hats, smoking cigars at the races, while the workers eke out a miserable existence supplementing their wages by stuffing boys up chimneys, etc etc,) it is worth recalling who these shareholders typically are nowadays - that is, for a large part, pension funds.
These are the pension funds that provide for the workers and managers in retirement, so it is you and me, our friends and relations.

There is plenty wrong with modern capitalism, but it does nobody any favours to stigmatise fictitious stereotypes, when we are all involved, both as "exploited" labour and as beneficiaries, one way or another.

The shareholders are getting screwed in all of this too.

They have barely more control over the company than the assembly line workers do. In theory they have absolute power. But in practice, that power is next to impossible to make practical use of unless someone can organize a vote or something.

I imagine the shareholders of AIG would have liked to have taken back those bonuses and put them in the company treasury.

If you invest in a corporation these days, you're not so much investing in a company as you are investing it in a bunch of managers, who will then do with it whatever they please, and give you back a return on your investment if they feel like it.

Originally Posted by kojax

Originally Posted by exchemist

I'm not sure who you have in mind by "management". The managers in a company are employees just like the shop floor worker. Profits are not a "take", "skimmed off" by management. The profits are made by, and belong to, the company itself, which either reinvests them or passes them out to shareholders via a dividend.

Except when AIG executives decide to give themselves their bonuses, but elsewhere Boeing is telling its manufacturing workers they need to take a pay cut.

Since management ultimately gets to decide what everyone's paycheck will be (including their own), there's this huge conflict of interests.

If a manager pockets company profits that is embezzlement and is a criminal offence.

You mean if he pockets company profits without going through the proper channels, right?

If he and the other managers feel they are all entitled to a big bonus, and they vote on it, and agree that they are entitled to it, that's not "embezzlement".

It's basically the exact same thing, but with proper paperwork.

Profit is determined, not by managers deciding what "cut" to impose, but on what the market will bear. A successful company is one which sells something that people are prepared to pay enough for to leave something over, after all the raw material, labour and other expenses have been paid and after allowance for depreciation of capital assets. That something over is the profit, so it the resultant of the other elements. The skill of the management is in holding down the costs while finding opportunities to sell things that are valued by customers.

While the skill/efforts of assembly line workers of holding down costs, or increasing product quality, typically commands no such reward.

I'm not disagreeing that exceptional effort should be rewarded. I think that concept should apply to everyone. Not just a few. And (more importantly) that the reward should in fact depend on how exceptional the effort was.

AIG executives taking a bonus after they've plummeted their company into ruin and had to be bailed out doesn't look to me like an example of rewarding "skill of management at holding down costs while finding opportunities to sell things that are valued by customers."

It looks more to me like an abuse of power. Management simply raiding the company treasury because they can.

And before anyone indulges any c.19th notions of shareholders as the baddies (in top hats, smoking cigars at the races, while the workers eke out a miserable existence supplementing their wages by stuffing boys up chimneys, etc etc,) it is worth recalling who these shareholders typically are nowadays - that is, for a large part, pension funds.
These are the pension funds that provide for the workers and managers in retirement, so it is you and me, our friends and relations.

There is plenty wrong with modern capitalism, but it does nobody any favours to stigmatise fictitious stereotypes, when we are all involved, both as "exploited" labour and as beneficiaries, one way or another.

The shareholders are getting screwed in all of this too.

They have barely more control over the company than the assembly line workers do. In theory they have absolute power. But in practice, that power is next to impossible to make practical use of unless someone can organize a vote or something.

I imagine the shareholders of AIG would have liked to have taken back those bonuses and put them in the company treasury.

If you invest in a corporation these days, you're not so much investing in a company as you are investing it in a bunch of managers, who will then do with it whatever they please, and give you back a return on your investment if they feel like it.

Like
(I really wish they'd fix that thing)

Originally Posted by kojax

Except when AIG executives decide to give themselves their bonuses, but elsewhere Boeing is telling its manufacturing workers they need to take a pay cut.

Since management ultimately gets to decide what everyone's paycheck will be (including their own), there's this huge conflict of interests.

This is a victim mentality. If you have certain skills, or acquire those skills, then you can be paid a fair market value for your work - if not the company you are working for now, then for some other company, or your own company. That's what the executives did to get into the position they are in.

Originally Posted by kojax

Originally Posted by exchemist

I'm not sure who you have in mind by "management". The managers in a company are employees just like the shop floor worker. Profits are not a "take", "skimmed off" by management. The profits are made by, and belong to, the company itself, which either reinvests them or passes them out to shareholders via a dividend.

Except when AIG executives decide to give themselves their bonuses, but elsewhere Boeing is telling its manufacturing workers they need to take a pay cut.

Since management ultimately gets to decide what everyone's paycheck will be (including their own), there's this huge conflict of interests.

If a manager pockets company profits that is embezzlement and is a criminal offence.

You mean if he pockets company profits without going through the proper channels, right?

If he and the other managers feel they are all entitled to a big bonus, and they vote on it, and agree that they are entitled to it, that's not "embezzlement".

It's basically the exact same thing, but with proper paperwork.

Profit is determined, not by managers deciding what "cut" to impose, but on what the market will bear. A successful company is one which sells something that people are prepared to pay enough for to leave something over, after all the raw material, labour and other expenses have been paid and after allowance for depreciation of capital assets. That something over is the profit, so it the resultant of the other elements. The skill of the management is in holding down the costs while finding opportunities to sell things that are valued by customers.

While the skill/efforts of assembly line workers of holding down costs, or increasing product quality, typically commands no such reward.

I'm not disagreeing that exceptional effort should be rewarded. I think that concept should apply to everyone. Not just a few. And (more importantly) that the reward should in fact depend on how exceptional the effort was.

AIG executives taking a bonus after they've plummeted their company into ruin and had to be bailed out doesn't look to me like an example of rewarding "skill of management at holding down costs while finding opportunities to sell things that are valued by customers."

It looks more to me like an abuse of power. Management simply raiding the company treasury because they can.

And before anyone indulges any c.19th notions of shareholders as the baddies (in top hats, smoking cigars at the races, while the workers eke out a miserable existence supplementing their wages by stuffing boys up chimneys, etc etc,) it is worth recalling who these shareholders typically are nowadays - that is, for a large part, pension funds.
These are the pension funds that provide for the workers and managers in retirement, so it is you and me, our friends and relations.

There is plenty wrong with modern capitalism, but it does nobody any favours to stigmatise fictitious stereotypes, when we are all involved, both as "exploited" labour and as beneficiaries, one way or another.

The shareholders are getting screwed in all of this too.

They have barely more control over the company than the assembly line workers do. In theory they have absolute power. But in practice, that power is next to impossible to make practical use of unless someone can organize a vote or something.

I imagine the shareholders of AIG would have liked to have taken back those bonuses and put them in the company treasury.

If you invest in a corporation these days, you're not so much investing in a company as you are investing it in a bunch of managers, who will then do with it whatever they please, and give you back a return on your investment if they feel like it.

Fair enough Kojax, I may have misunderstood you initially, based on that silly polemic (earlier in the thread) from the Scientific American, which rather got my back up. It seems you are speaking of top management (board level and just below) awarding themselves greedy pay rises.

I do wholeheartedly agree that one thing that is rotten in current Anglo-Saxon corporate capitalism is the runaway expansion of remuneration rewards, for top management specifically, even it seems for fairly average performance. The banks pre-bust were the worst offenders, but it has infected a number of big companies in other spheres. The scam is that these guys all sit on one another's remuneration committees, so there is little effective challenge to these monster payouts - in fact, on the contrary, there is a common interest in inflating the perceived "market rate" for employing these self-designated superstars. Shareholders are finally getting pissed off, since these top awards are pinching profits that would otherwise go to them as dividend. Governments too, ought to be pissed off, because the stated profits are reduced due these monies being deducted as labour costs before profit is calculated, thus reducing corporation tax payable. In some institutions the awards amount to a significant proportion of the annual profit figure.

The practice seems to be worse in the US than in the UK and worse in the UK than in continental Europe.

Interesting. In re-reading this thread I can see that the economic factors may be considerably different in the regions where each of us is posting from. No doubt this will be contributing to different experiences and perceptions.

I work for a union and directly participate in negotiating collective agreements for several different types of business, from hauling dangerous goods to retail grocery and the wages and benefits vary greatly between those agreements. From a minimum wage of $10.72 with no benefits to a high of over $30.00 per hour with benefits equal to 25% of that in addition, the disparity between what people are paid is not directly proportionate to their education or experience in many cases. It comes down to the lowest wage the corporation can get away with paying.

We are constantly working to improve conditions for the workers while maintaining the profitability of the company, for it is in the interests of all parties that the business do well. It's always interesting to hear the company negotiators plead poverty while their own corporate news is posting increased profits and dividends being paid to share-holders. My husband works in management for a corporation so I also have some knowledge of what those salaries and bonuses are as compared to the average hourly wage employee.

That is one benefit of the internet and public access to information...the truth is becoming more transparent.

The fruits of our labor are not fairly distributed.

Originally Posted by scheherazade

Interesting. In re-reading this thread I can see that the economic factors may be considerably different in the regions where each of us is posting from. No doubt this will be contributing to different experiences and perceptions.

I work for a union and directly participate in negotiating collective agreements for several different types of business, from hauling dangerous goods to retail grocery and the wages and benefits vary greatly between those agreements. From a minimum wage of $10.72 with no benefits to a high of over $30.00 per hour with benefits equal to 25% of that in addition, the disparity between what people are paid is not directly proportionate to their education or experience in many cases. It comes down to the lowest wage the corporation can get away with paying.

We are constantly working to improve conditions for the workers while maintaining the profitability of the company, for it is in the interests of all parties that the business do well. It's always interesting to hear the company negotiators plead poverty while their own corporate news is posting increased profits and dividends being paid to share-holders. My husband works in management for a corporation so I also have some knowledge of what those salaries and bonuses are as compared to the average hourly wage employee.

That is one benefit of the internet and public access to information...the truth is becoming more transparent.

The fruits of our labor are not fairly distributed.

Yes it is interesting how this issue varies from country to country. Re your last line, the problem, as always, is what constitutes "fair". There is no unambiguous answer. However it seems to me that in well-run companies and societies, the gap between top and bottom is not allowed to get too big, because this causes a level of resentment which in the end is counterproductive. But I admit I've been lucky, in that my employer was an oil major that only employed fairly skilled people and was willing and able - by and large - to pay appropriately to get them and also treated them generously when redundancies were necessary.

In this connection it seems to me that one aspect of corporate life that is increasingly important is brand reputation. Companies hate bad press from being seen as exploitative of people they employ: generally they want their people to be advocates of the brand. But I suppose there are a lot of businesses that are virtually unbranded and some of these may not care too much about corporate reputation.

I have scratched my head about how to control these mega-bonuses. The threat of course is that any government control would drive the "talent" overseas. I am often tempted to think this bluff could be called to some extent. How many London top bankers, I wonder, would go and live in say, Shanghai (eye-watering pollution, need to send their kids overseas to school, tough for the spouse to get a suitable job, etc) just for enough to buy two luxury yachts instead of one? In the end though I think it will be mostly shareholder pressure and, if we are lucky, a degree of public shaming by the press.

What constitutes 'fair' to me, is that the minimum wage paid should permit for at least a modest lifestyle, because everyone pays the same price for utilities and groceries although even there, many incentives favor those who can buy in volume, but I think you take my point. Many retail corporations here do not offer more than a few full time jobs and limit their part-time jobs to 25 hours a week. With rent in this town now averaging $900.00/month, often before utilities, you can see the issue for someone earning the minimum of $10.72/hr. Even with 40 hours per week, you cannot get by.

Every one of us depends on these people who do the menial tasks of the world, frequently arduous and unpleasant jobs, yet we insist that their 8 hours a day is of less value than academic work. While I can appreciate that wages should be higher for persons who have invested many years and a lot of money in acquiring a highly specialized skill, I do not believe in exploiting those who provide the true backbone of our economy. (At last some of the trades are offering to train people, because skilled tradespeople are in short supply.)

Everyone needs to eat and likewise wants a nice, soft brand of toilet tissue.

The greatest bottleneck in our economy will be coming from a shortage of labor, at least in many parts of North America. With an aging population, and folks living longer, more man-power is needed, not just to back-fill the jobs they retire from but also to provide assisted living and health care. As I live in a territory with a population of approx. 35,000, it is relatively easy to monitor the demographic and economic changes that have occurred here since 1976 when I moved here and joined the wage economy.

From a minimum wage of $10.72 with no benefits to a high of over $30.00 per hour with benefits equal to 25% of that in addition, the disparity between what people are paid is not directly proportionate to their education or experience in many cases. It comes down to the lowest wage the corporation can get away with paying.

That just means they have the wrong kind of education or experience. The company is not paying for people to have education and experience, they are paying for people who have the ability to get done what they need to get done. If there are a lot of people out there who are able and willing to do your job, then yes, you are probably at the mercy of the corporation.

Actually, the point of my example is that every one of us requires those basic services that do not require a great deal of higher education yet we all expect the best product/service for the least price when it comes to buying commodities. Minimum wage for minimum skills is fine by me provided that the minimum wage can buy at least a minimum lifestyle, but it cannot in this part of the world. People have no choice but to work two jobs if they hope to have a roof over their head when corporations are playing the minimum hours/no benefits game.

A great deal of our good fortune in life is determined by birth and many are never granted an opportunity for education or experience.

(Higher education is a topic for an entirely separate thread, and I expect we will see significant change in access to education and it's cost going forward.)

Originally Posted by Harold14370

Originally Posted by kojax

Except when AIG executives decide to give themselves their bonuses, but elsewhere Boeing is telling its manufacturing workers they need to take a pay cut.

Since management ultimately gets to decide what everyone's paycheck will be (including their own), there's this huge conflict of interests.

This is a victim mentality. If you have certain skills, or acquire those skills, then you can be paid a fair market value for your work - if not the company you are working for now, then for some other company, or your own company. That's what the executives did to get into the position they are in.

That's like saying that if I joined the US special forces, and became a highly skilled soldier, that would give me the right to take some friends, go into a third world nation, and set up a cartel.

Highly skilled warriors can oppress peasants in basically the same way. Their power to demand a higher percentage of the profits/productivity comes from the ability to deny something, rather than their ability to grant it.

I suppose a "non-victim" would go join an army somewhere and learn soldier skills also, then come back and fight the cartel. Fine, but who's actually producing stuff while these people are all busy fighting? If management skills were the only skill that made any difference to production, I suppose then it would be good for everyone to gain those skills, and nobody anywhere waste time learning other stuff that won't make them rich.


But if we need other skillsets, then the most stupid thing imaginable would be to set up a situation where those other skillsets are unappreciated, and only the one skillset gets a reasonable salary.

There are also lots of examples of corporations playing the victim card - when the free market suddenly isn't dancing to their tune, when all of a sudden employees with a particular skill are in high demand, when unions won't make concessions, when corporations don't like certain taxes and essentially black mail a community into tax rebates by threatening to close a plant or a store that they have no intention of closing. Victim mentality is not unique to one segment of society.
"What the market will bear" sounds like a rational answer to any grievance about unfairness. But the employer who can't afford to pay his employees a living wage, because his company's product isn't in demand, is no different really than the unskilled single mom who says I can't afford daycare because I don't make enough money. Only the single mom generally doesn't claim that the greedy bastards at the day care center are charging too much, the way the business owner says his employees should just accept less and less.

I do understand that profits also go to shareholders and do fund retirements, and kid's educations, etc. Hey, I have mutual funds, too. There may be stereotypes about greedy management and exploited labour, but I also see this weird assumption when I watch Fox news that regardless of "what the market will bear", low income people will just waste their money foolishly, buying stuff they don't need, while the wealthy create jobs and charitable foundations. And of course it is pointless to raise wages, because it just causes inflation, and the poor won't really be any better off. Or even that money or leisure time will corrupt the masses - they will become lazy, unmotivated, addicted to drugs and alcohol.

I suggest that another bottleneck is the very belief that hardship is more motivating that reward, and the lower masses only respond to the lash.

Originally Posted by kojax

That's like saying that if I joined the US special forces, and became a highly skilled soldier, that would give me the right to take some friends, go into a third world nation, and set up a cartel.

Highly skilled warriors can oppress peasants in basically the same way. Their power to demand a higher percentage of the profits/productivity comes from the ability to deny something, rather than their ability to grant it.

I suppose a "non-victim" would go join an army somewhere and learn soldier skills also, then come back and fight the cartel. Fine, but who's actually producing stuff while these people are all busy fighting? If management skills were the only skill that made any difference to production, I suppose then it would be good for everyone to gain those skills, and nobody anywhere waste time learning other stuff that won't make them rich.

I have no idea what you are on about. You are comparing someone who owns a business to a warlord?

But if we need other skillsets, then the most stupid thing imaginable would be to set up a situation where those other skillsets are unappreciated, and only the one skillset gets a reasonable salary.

It is consumers who ultimately set up the situation where some skillsets are rewarded more than others by what they purchase. It's not some nefarious plot.

Originally Posted by Harold14370

Originally Posted by kojax

That's like saying that if I joined the US special forces, and became a highly skilled soldier, that would give me the right to take some friends, go into a third world nation, and set up a cartel.

Highly skilled warriors can oppress peasants in basically the same way. Their power to demand a higher percentage of the profits/productivity comes from the ability to deny something, rather than their ability to grant it.

I suppose a "non-victim" would go join an army somewhere and learn soldier skills also, then come back and fight the cartel. Fine, but who's actually producing stuff while these people are all busy fighting? If management skills were the only skill that made any difference to production, I suppose then it would be good for everyone to gain those skills, and nobody anywhere waste time learning other stuff that won't make them rich.

I have no idea what you are on about. You are comparing someone who owns a business to a warlord?

First off, I wasn't comparing "who owns" with a warlord. I was comparing "who manages". Sometimes the manager is the owner. Sometimes the owner is a billion small stockholders who have no direct dealings with management of the company at all. Owners are utterly irrelevant. Only management matters.

The mechanics of the two situations are identical, even if the morals may differ. Mechanics drive an economy. Morals don't. So if we want to discuss economics, it's good to focus on mechanics.

In a warlord situation, the peasants have no realistic hope of ever benefitting from doing any hard work beyond the minimums. If they did work harder, there would be more production, but the warlord would probably claim it.

The problem with management setting all the payscales at a large company is very similar to this. If profits go up, the workers at the bottom know they won't be getting cut in. If profits go up, management will claim virtually all of the money for themselves. Management will claim to be solely responsible for the new profit, and give themselves a raise (or create new upper management positions with new better salaries and promote themselves into the new positions) Either way, there will be many unnecessary and inefficient new rules and meetings. Many many meetings.

Scott Adams, the guy who writes "Dilbert" comics does a good job of saying the same thing, but in a more humorous manner. I'm certain you must know what I'm talking about.

But if we need other skillsets, then the most stupid thing imaginable would be to set up a situation where those other skillsets are unappreciated, and only the one skillset gets a reasonable salary.

It is consumers who ultimately set up the situation where some skillsets are rewarded more than others by what they purchase. It's not some nefarious plot.

The consumers have no say in the matter of which part of the company will get the reward for a good product. They can only choose which company gets the reward.

And in many cases, it might not be so much about giving a reward for the "best" product, so much as the "least bad" product. The consumer doesn't get to decide what their own options will be. Only which of the options available they will choose.

It is quite possible that a better option would exist if somewhere in the world a company were making sure to reward employees who aren't part of management for their contributions. Walmart rose to power on an ideal similar to that one, but then abandoned it once they had arrived. (And I think the change was also after Sam Walton had died.)

Originally Posted by kojax

First off, I wasn't comparing "who owns" with a warlord. I was comparing "who manages". Sometimes the manager is the owner. Sometimes the owner is a billion small stockholders who have no direct dealings with management of the company at all. Owners are utterly irrelevant. Only management matters.

The mechanics of the two situations are identical, even if the morals may differ. Mechanics drive an economy. Morals don't. So if we want to discuss economics, it's good to focus on mechanics.

In a warlord situation, the peasants have no realistic hope of ever benefitting from doing any hard work beyond the minimums. If they did work harder, there would be more production, but the warlord would probably claim it.

What is your basis for claiming that workers have "no hope" of benefiting from hard work? People do it all the time. They gain marketable skills and earn better salaries.

Originally Posted by Harold14370

What is your basis for claiming that workers have "no hope" of benefiting from hard work? People do it all the time. They gain marketable skills and earn better salaries.

But not generally in their current position. As long as the Walmart employee really does have the option, is young enough, smart enough, has the financial means to go back to school to learn this new skill, and a bunch of other people didn't pick they same one, yeah, there's no problem.