Thoughts on socialism, the government, anarchism, nationalization, the market, and "Ethical Capitalism," your mileage may vary.
Socialism, simply, is the idea that the state (government) should own, share ownership, or administrate "the means of production." This can quickly stretch to encompass many other things (like Karl Marx's proposal of a classless society).
Communism is a socioeconomic structure and political ideology that promotes the establishment of an egalitarian, classless, stateless society based on common ownership and control of the means of production and property in general (wikipedia). It is worth noting that there has never been a "communist state" (over ~5,000 people) that has been classless. Or they are as "classless" as their Capitalist counterparts. To be clear, eliminating the word "class" from your system of governance doesn't cause you to be classless.
A word on social classes
I argue that labor is always unequal, but if the situation arises where: labor is equal, or there is no division of labor, no money, and no need for governance, then there will be no classes. Given any one of those four, individually, social classes are inevitable. Social class refers to the hierarchical distinctions (or stratification) between individuals or groups in societies or cultures (wikipedia).
1) Division of labor is unequal labor.
Once any group achieves a population of about 5,000 (and usually sooner) labor specialization is the only feasible methodology for sustainability and continued growth. This is not only due to the economies of scale, finite space, but also personal ability (some people are just better at certain things).
If Walter Hunter is an extraordinary hunter, and Franklin Shoemaker is a relatively poor hunter, it is generally easier for Franklin to get Walter to do his hunting for him in exchange for some other good or service. Franklin is under no obligation to do this, of course, nor is Walter, but both will be generally well served in such an exchange. Perhaps Franklin makes excellent shoes, and rather than Walter spending his time crafting his own shoes he can just have Franklin do it in exchange for some meat. This is called the division of labor.
If the Hunters and Shoemakers are in a small village, the meat the Hunters produce is probably more scarce and the Hunters will be able to ask for more in any "fair exchange." Although the Hunters may forgo this labor premium, almost universally premium labor is provided at a premium price. And as more people start doing fewer things, labor will necessarily be exchanged unequally. This is not to forget that a lot of labor will be exchanged to great mutual benefit, the Shoemaker will likely exchange his shoes for a measure of animal skins from the hunter. Keeping in mind that the relative value of meat, leather, and shoes, fluctuate somewhat independently of each other on an ongoing basis which is inequality be definition.
2) Unequal division of labor creates social classes.
Division of labor is nearly always unequal as the necessity of individual products & services varies, and each individual generally seeks maximal return for his own labors. Such that Walter may be in a village where shoes are in higher demand than meat. If Franklin Shoemaker can get 2 egg laying chickens for one pair of shoes, what can Walter Hunter possibly offer him? Perhaps a 'rare' boar on Franklin's anniversary? That is, Walter needs to produce something of greater value (a premium) in order to equal the value of Franklin's shoes. How many people in the village know how to stitch a grievous wound and keep it from becoming fatal? Perhaps only the medicine man. If you are the grievously injured your argument that your labor is of greater value than the medicine man's is tenuous at best (i.e. the medicine man's labor allows your labor to continue, and without his labor yours will cease).
So the medicine man is now in his own class, and will probably be kept on a "retainer" by everyone in the village likely by being given anything he needs from anyone anytime he needs it and will probably be alone in this privilege. His class is likely higher than the Shoemaker's, since Shoemakers can't have anything they want from anyone at any time. Although the notion of what is "higher" and what is "lower" is rooted in the society itself. The key point is that some labor is seen as more valuable by the consumers of labor than other labor.
The medicine men of the world tend to have fixed costs (generally fairly high) to preform their labor, however how much their labor is valued by others varies. Since the Hunters and Shoemaker's labor is also unequal this causes bartering to become more difficult due to it's imprecision. This will necessarily create proxy bartering and eventually a monetary system, though class already exists without money.
3) The presence of a monetary system creates class.
When bartering is done by proxy, adjudication and accounting will eventually be required. If the division of labor causes specific individuals for this task these people are necessarily in a "ruling class." The presence of a monetary system implies unequal labor, over time anyone with higher valued labor will have larger amounts of money. Indeed if their labor is truly necessary and particularly difficult (or is comprised of skills unknown to others) they may keep increasing their price to match their willingness to provide their labor. This creates an inequality of wealth, and classes based on differences in wealth not just labor as previously described.
4) Need for governance
At some point a group of people will become large enough to need an administrator, particularly if there is division of labor. Those whose labor is governance, are in a separate class. Governance (empowerment by others to preform specific functions/actions, provide oversight, or guiding rules) creates class De facto.
Those aren't hard pressed facts, but I defy you to find a counter example in history for any population greater than 5,000 people (that's not a totally arbitrary number, it's been studied and I believe the actual number is about 4,700 and change but can't cite you the examples). So the above should illustrate why pure socialism is unworkable by definition. Through all this I submit as fact that: an entire society of humans cannot be classless.
Class implies Capitalism
It may be of interest then, that all of the fore going concepts (which I submitted as fact) over time lead to a Capitalist society. Indeed the price paid for labor is a direct endorsement of how much society values a laborer. If some people are paid more for their labor, they may be able to retain more and so the disparity in the value of labor will generally mean that the people with more valuable labor will own more. If that occurs, then those laborer's children will inherit their wealth and frequently continue the labor traditions (lawyer's & doctor's children are more likely to be lawyers & doctors). This perpetuates the family's and individuals wealth, and as long as money is generally finite it will generally concentrate in these dynasties so long as the youth chooses to perpetuate the dyansty. These dynastic forms of labor usually have steep walls to surmount, which are not always artificial. While the labor is mostly valued because not everyone is able to do it (Medicine), occasionally not everyone is permitted to do it (Stone Masonry).
Dynasties of wealth are only as perpetual as the descendants allow them to be. Occasionally a decedent will spend his inheritance "foolishly" and that wealth will be partially redistributed. But more commonly those with things will eventually be offered what they consider lucrative or favorable sums of money for their possessions (land, means of production), though the money they receive will generally only last their life time while the wealthy accumulate assets generationally. The logical extension of this then is that the rich will eventually own everything if the lower classes & short sighted keep selling it to them (particularly as inheritance tax is reduced). "Everything" of course includes the "means of production". Which is any factory, distillery, textile mill, or anything that makes anything is owned by someone and other people (who do not own that means) work there.
Wikipedia really nails this one:
Simply put, Capitalism is the value placed on objects & labor based on their utility (or appeal) to the purchaser, commonly evaluated as Cost vs benefit.
When capitalism "fails" it really doesn't, this is a perceptual error. There is no system that legitimately promises infinite windfall for all, nor one that promises perpetual stasis even though the system over the short term can give that perception. However they are all simply social constructs, and change as quickly as someone changes their mind. Since it is a social construct capitalism necessarily (by nature) does a "boom & bust" cycle where, essentially, in a mad dash for cash things are over valued and then correct to a more realistic price. It's much like an economic game of musical chairs, someone is always left standing.
Some people see money and Capitalism as the social constructs they are, while others apparently think they are magic.
This was in fact the entire point of all the post depression era market reforms, quash the busts and mellow the booms. We appreciated this because while the booms were great, the busts were horrible. There is no question that deregulation provides short term gains, but generally this also leads to troughs of devaluation. Generally what ends up happening is there are a bunch of widgets in the marketplace, everyone wants widgets but the Rockefellers own all the widgets, and they aren't selling them. Then they sell a few, and a few people buy them but also won't sell them... oooh SCARCE! So the price of widgets continues to go up, so the Rockefellers sell a few more. Holy shit, WIDGETS! People buy the widgets. While scarcity can legitimately drive prices up, this is more of a false sacristy. Widgets aren't actually scarse you just can't buy them. This generally causes people to eventually over value the widgets and pay far more then they're worth. This is expected. After some time of this (the music stops and) the price of widgets will undergo a correction. 'What the heck are widgets good for anyway? The real money is in do-dads!'. So all the fools who bought the widgets at a high price, end up selling it at a low price . . . and the Rockefellers see a deal and buy up all the widgets. This is a redistribution of wealth from the, let's say, "stupid" to the "not as stupid". Capitalism works this way in general by proxy. It's a pyramid scheme of sorts and most everyone knows it, but everyone is trying to cheat everyone else, so it's hard to feel bad for people who lose. It's like someone crying foul when you taze them after they try to stab you. The smart get richer, and the stupider and unfortunate get poorer. Sadly the stupid and poor essentially get thrown into the abyss, which is actually bad (if you didn't already think it was), more on that later.
So, if you read the definition/description of capitalism you noticed this very key sentence: "A distinguishing feature of capitalism is that each person owns his or her own labor and therefore is allowed to sell the use of it to employers". Which means that if you're not being fairly compensated, you should quit. Also it puts the burden of wages on the worker. If you're not being paid fairly, you're the one at fault.
The first problem here is that if the Rockefellers control EVERY means of production, they can fuck you with a single stroke. This is one of the reasons why pure capitalism can't work, more on that later. Wiki's definition of Capitalism if fairly liberal since it includes "without force or fraud" contingent with the definition. This is why we have labor unions, and as long as they don't get too crazy they're generally good. Even for the rich (more on that later).
Consider Marxism as the premier counter arguer to pure capitalism/capitalism in general. Karl Marx, who was himself far from working class, asserted that there is such a thing as "Wage slavery" which I will not dispute. So in brief, I'll give you a run down of a few of Marx's premises, but first a word on utilitarianism since Marx hated it.
In the interest of full disclosure, I'm a Social Contractarian, which is philosophically related to Utilitarianism. In brief the "Social contract" is the idea that people give up certain rights to a government in order to maintain social order, that is the right to rule is granted by the consent of the governed. Simply stated, there is nothing, really, that can keep me from killing you or you from killing me if either of us really want to do just that. Fundamentally (some would say, "by nature") we are all completely free all the time. However we choose, by living in our society, not to kill each other (for example). This is a rational abridgment of personal freedom since generally your desire to kill me should generally be less than your desire to die. If you decide to not live by the rules of our society, we as a society can chose to protect ourselves by any means necessary from you. For while we removed this power from ourselves individually, we've granted it in limited form to the government to exercise on our behalf. This is to prevent the "endless war of all against all" (anarchy) and instead we have "mutual coercion, mutually agreed upon". Within the social contract there isn't actually an idea of "Morality" as such, rather the idea is to provide the most benefit to all members within the society and, implicitly, at the least cost to all.
In the words of Bhishma: 'It hath been heard by us that men, in days of old, in consequence of anarchy, met with destruction, devouring one another like stronger fishes devouring the weaker ones in the water. It hath been heard by us that a few amongst them then, assembling together, made certain compacts, saying, "He who becomes harsh in speech, or violent in temper, he who seduces or abducts other people’s wives or robs the wealth that belongs to others, should be cast off by us."
Utilitarianism is entirely about the cost/benefit relationship. Or as some have said, "pleasure versus pain." A rational person acts to maximize his benefit and pleasure. The idea is that a rational society prospers and an irrational society suffers and is weak. Theoretically you can tell who is the most rational by seeing who has the most benefit and the least cost.
To a real extent, at least to Marx, this implied that the poor must be irrational while only the rich could be rational.
So how does this really work? Well Marx argued:
All value comes from human effort - It is only through a human's effort to extract, clean, and set a diamond that makes it valuable.
Capitalism is the rift between the cost to produce a product and the amount charged for the object.
Capitalism devalues the worker - Since money is the means through which the cogs of society functions, laborers are being paid at less then the fair value of the products they create. In a seeming paradox, a worker at a BMW plant (or a Nike factory) might not be able to afford the product that he directly creates.
Since all products come from human effort, the cost of all products must include the wages paid to workers.
Capitalism creates a downward pressure on prices do to competition. Prices can only be reduced if profit or costs are reduced. There are essentially only two ways to reduce costs, reduce the cost of materials or the real wages of workers.
Since workers are the majority of the population, it is generally the working class who consume all created products.
Suppliers create demand that doesn't exist - rather than supplying the market with products it demands, producers create products and then also create demand for those products (Mercedes/Porsche/BMW means success).
If the wages of workers are reduced, their ability to purchase products is also reduced. A company that can't sell it's products will have to layoff workers.
Marx argues that all this makes Capitalism unworkable, since it is doomed to cycles of overproduction and under consumption. He argues also that capitalism devalues the worker by not paying him a "fair" amount for his labor (3 above). In Marx's mind the worker should also have control over the creative process and control over the product that is created (in order to be happy). Not being fairly compensated, and having no control over his actions the worker is devalued. As the worker is devalued, he is alienated from himself. In a society, much of the population is comprised of workers, and they are all alienated from themselves by this system. Since they are alienated from themselves, they are alienated from each other. As this alienation expands people develop a sort of commodity fetishism, were people at large value the product more than the work necessary to create the product and begin to believe the products are inherently of value. And it comes to pass that people's value can be shown by their association with objects they possess. Through this and alienation people begin to see each other as commodities: this body part, or that part, their personal property, what is to be gained from them, etc. This is the structure through which the wage slave is created.
In wage slavery workers are paid some money, but not quite enough. They're paid enough to feel as thought they are progressing, and to keep them coming back so they'll work for the rest of their lives. In order to be a wage slave, the work has to devalue you as a human, as described above. The more time you spend doing your wage slave job, the more you are alienated from yourself and the more of your "self" is lost to your job.
Marx argues that eventually, through the methods described above, this system will collapse. And it pretty much comes true. The rich can see the 'writing on the walls' and around the time of the French revolution, as the educated (poor people can't afford his books) watched all of Marx's predictions come true including one they truly feared might come about: the poor people started to kill the rich. Which is a dramatic form of the redistribution of wealth.
Interestingly, there's a period that generally isn't taught in schools called the "the guilded age" around 1870. Essentially there is rampant overproduction and under consumption, a bust period, that leads to bank runs and such in the United States. Oh and a bunch of ridiculously rich guys who you've probably heard of: Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie, and J.P. Morgan.
Thankfully, some rich people thought of a great way to use an existing idea to keep Marx's predictions at bay, CREDIT! Now poor people can spend money they don't have so they can keep consuming in spite of overproduction. As previously asserted, the poor are irrational. Since the price of any product is determined by what the purchaser will pay for it, and the purchasers are irrational, prices hugely exceed the value of objects. Lets take "Rims" for example. You can get some really nice spinning ones for 12k per wheel. You know what the resale on those things is? Comparatively zero. Clean water in the US costs fractions of a cent per gallon, Cocca-Cola company (KO) puts between $0.02 and $0.05 of syrup into that water and charges ~$5 for it.
1000% profit? Well, we're the idiots paying for it why shouldn't they charge that much for it? If some fool wants to eat my toenail clippings and pay me $800 for the privilege, I'm sure as hell going to let him.
Most people don't save any money for their own retirement, so it should come as no surprise that most people's net worth is between -130% and -250% of their income. And the only thing they own of any value is their home. The fact that "Most people's wealth is in their home." is not a statement of the financial stability of housing but the rampant foolishness of the American populous. An "investment" which, if people didn't have so much credit to blow without recourse, wouldn't be worth the millions people seem to have thought that it was. (Incidentally commercial properties, those generally owned by the rich, aren't generally so ludicrously overvalued.) It should be noted however that creating more property isn't as easy as creating more money, and if you run the clock a few thousand years any price paid can be recovered in nominal value (list price) simply not "real" value (adjusted for inflation).
So recently we saw the redistribution of wealth again, to the smart people (selling their homes for inflated prices) from the stupid people (buying them for inflated prices, sometimes two at a time). "This market's got nowhere to go but up!" More on that right now.
The problem with all this is that the poor keep getting poorer, and the rich generally keep getting richer. Eventually the consuming class can't afford anything anymore and there is a "Market correction" where items of value return toward their 'true' value. This tends to make the working class really pissed off (Ta-da!). Eventually they'll get so cheesed off that they'll start killing rich people again.
For whatever reason, people with very little tend to be angry at people who have a lot. To be fair, it isn't the rich people's fault they're rich. The workers want the worthless crap at inflated prices that the rich sell to them. The working class asks them for loans (to help them buy more crap), so naturally the rich give them loans at 9% interest. On top of all that the workers keep working for them. The workers are the ones who wanted all the stuff in the first place, no one forced the workers to buy all that crap at 100 times it's production cost. Do you know how cheap it is to make a loaf of bread from scratch? Maybe twenty to thirty cents per loaf, but the workers choose to spend $3 to get the pre-sliced kind,oooh fancy! And then before long it's Crap, were'd that money go? KILL THE BAKER! But alas, here we are.
It can be argued that everyone should charge a "fair" price for their goods, however when it comes to selling goods everyone wants more than a fair price. Again, the division of labor isn't fair, and everyone has to make enough to continue in their labor. If someone's labor isn't paying them enough to have them continue that labor, then they should (rationally) stop laboring. So if you want your bread from this baker, then you have to pay his price. Or make it your goddamn self, it's not really that hard.
So lets pretend there's a big banquet dinner, and the rich are having a feast. Unfortunately there are all these starving rats at their feet. So the rich are seriously scared they're going to lose all the stuff they and their parents worked so hard to accumulate. But the rich aren't dumb, so they make some shit up to quiet the rats:
Religion: "It's harder for a camel to pass through the eye of a needle then it is for a rich man to enter into heaven." We'll go ahead and watch over all this money, you get on being poor and the invisible man will grant you three wishes or something after you're dead.
Ideology: "I'm living the American dream! I came to this country with nothing, and now I have a car (on credit), a house (on credit), and a wife (on credit?)!"
Government Subsidy: "Please don't get too pissed off poor people, here's some welfare."
Marx didn't really blame the rich fully, but tried to organize labor to revolt against the wage slavery and so was kicked out of a bunch of countries and got his pamphlets banned.
So with capitalism we have boom and bust, how do we fix that? Finding more people to 'exploit' works surprisingly well. There are a bunch of people in other countries who can make products for less including even the cost of shipping. I assert that this fact is the only reason a middle class exists in the U.S, or can exist generally anywhere (a process I call "exporting your serfs"). The very reasons blue collar jobs are outsourced is because blue collar workers buy products from outsourced producers. This can stall the bust for as long as there are available workers in abject poverty. You can also curtail the busts by not letting people or corporations over-leverage . . . although over-leveraging is the only way to allow for over consumption, which is generally what keeps the U.S. economy going since most of the working class has stopped buying from their fellow working class already.
How did a CEO make 50 million U.S.D. in bonuses last year? Because people borrowed a bunch of money to buy his (probably worthless) product. The CEO was smart enough to get the 50 mil, and the people were dumb enough to pay him. The workers got a cup of coffee and T-Shirt with a fancy stamp on it out of the deal, sweet!
A pure capitalist would say: No one should have bailed out AIG, or the banks, or the home owners. Everyone who is stupid should be poor. A fool and his money are soon parted. All that. Bottom line, if you're going to let poor people get poorer, you need to let rich people get poorer too. The repercussion of actions is a key concept of capitalism, and life in general. Have sex with a 100 hookers, get 40 STDs. They don't make a government bail out for that either. Now I'm not saying execution should be on the table, but seriously, WTF? How is that when the rich need a bail out the government hands them the money, if anything the government would've added more stability to the system if it directly gave $700 billion to the human citizens ($2,820 each) or 5,900 to each house hold making less than $75,000/year. That would have kept economic wheels turning much more efficiently then bailing out financial institutions who contribute virtually nothing to those same house holds, which are the driving force of our economy as described above.
Socialism, is pretty much a fantasy, and not worth discussing. Essentially in it's raw form it demands "From each according to his ability, to each according to his need." However, since all labor is unequal, equal compensation will cause the free worker to adjust his labor. Why bust your ass when you can receive the same reward for 1/3 or 1/16 the effort? Which is not to say it can't work in a small group of ideologues, but it's not a form of government that can be taken seriously.
If we all woke up tomorrow morning and the global prices of pharmaceuticals were fixed to what Canada or Sweden has fixed them at, there would be a global health care crisis since free market countries are currently paying for the reduced costs of the regulated countries. Much like Medicare and Medicaid don't pay their own bills in the US, and never have, leaving the insured to pick up the cost. Which means that everyone who has health insurance is silently paying for everyone who doesn't, plus whatever profit the health insurance industry makes. Ditto for global pharmaceuticals.
So what would my solution to America's economic troubles be, not that it matters?
Free education with stipends for good students from birth until age 24, with minimal cost there after. However I'd stop grade inflation and this idea that more than 50-75% of people should pass. Grade inflation is making degrees as worthless as the dollar (I also love the, "This professor is easy, you won't learn shit!" mentality). Education is also one of the only ways to get a skilled job, which can't be taken by unskilled labor. This is the only way to allow the smart poor people to advance into the world, and provide a sustainability to the U.S economy that it currently doesn't have.
Pay for it by giving universities a 5-10% cut of the salaries of all of working graduates. Divert military funding.
Mandatory media / anti-propaganda education. It might be interesting to provide warning labels ala cigarettes on things like cola & spinning rims: "Warning, the governor general has determined that this product is a worthless hunk of shit, and you shouldn't buy it." It'd be nice if during each commercial break there'd be a "commercial" from the Ad Council that went something like, "All the commercials in this broadcast are for shit you don't need, please just save your money."
Mandatory language training beginning in second grade. Everyone would be required to learn at least one tongue which is not native to them of the following, by full immersion: Mandarin (chinese), English (American), Hindi, Spanish, Arabic. Why these? They're the most spoken languages on Earth in order of the number of people who speak them. (French, Japanese, German, and Persan are 10-13.) So if your native language is American English you might start learning Mandarin in 2nd grade and by 5th grade all your classes would be taught in Mandarin. By 12th grade a third language should would be added.
Mandatory economics education including Capitalism, Laissez-faire, options pricing, hedge funds, leveraging, accounting 101, Marxism, and the history of socioeconomics.
Mandatory logic, ethics, health maintenance, scientific method, and basic physics.
Nationalized health insurance - insurance run on a not for profit basis by the government, subsidized by businesses at a level that they currently pay for heath care benefits. Low-ish co-payment doctor visits and pharmaceuticals. Supplemental insurance should still be available. Oh, and screw world wide healthcare, we'll all have to pay our own way.
Credit - No bail outs or rescue packages for over leveraged entities, the penalty for making bad decisions in a capitalist economy is the poor house. Limit the ability of all entities to borrow over 150% of it's net worth (the U.S. government's debt well exceeds the book value of all of the assets of our nation by about 9 fold).
Inflation control - Since most prices are artificially high, deflation should remain as an accepted market force. One of the ways the market used to correct itself was deflation (the natural lowering the value of products based on demand), the Fed has decided to eliminate that by printing extra money and putting it into circulation (inflation). I propose that the government not be allowed to print additional money for any reason. In fact, a global or PanAmerican currency would be nice since clearly the Fed cannot be trusted. Inflation reduces real wages, and devalues savings and fixed incomes. Thus it is a way to reduce the real cost of labor and perpetuate the system in favor the more exploitive facets of the free market..
Patent and Copyright reform - Reduction of copyright from what is essentially forever (life time of author +70 years, or 120 years) to 25 years. Patents are currently a minimum of 20 years, I propose that the maximum be 20-25 years. Also subtle refinement of a work doesn't cause a new term to commence on the work if it only creates a subtle difference. This has a lot of subtle impacts, for instance if you have a drug called Omeprazole which is a combination of Esomeprazole and Romeprazole, you can't get a new patent on Esomeprazole (trade named Nexium) simply so you can charge a (and this in an arbitrary number) 400% premium on something that is less than 5% more effective (not an arbitrary number). On the other hand if you carboxilate morphine into heroin (which is 100 times stronger per unit dose) you can certainly get a patent on that even though it has a nearly identical effect.
American companies are advised to neither produce stupid shit, nor budget products. Both of which can clearly (and should) be outsourced to other countries.
Social service - I'm pretty sure that in order to receive voting rights you should have to complete 2 to 4 years of military service or 6 years of social service.
Legalize recreational drugs, apply 400 to 5,000% taxes to their real cost. This will assist in the redistribution of wealth, pay for the social programs I've proposed, and really should be part of a free society anyway.
Force products to be sold for their real cost. So if 1 gallon of gasoline causes $2 of environmental damage, add two dollars to the sale price of gasoline. This applies everything from fish sticks to cigarettes and electricity.
Communism is a socioeconomic structure and political ideology that promotes the establishment of an egalitarian, classless, stateless society based on common ownership and control of the means of production and property in general (wikipedia). It is worth noting that there has never been a "communist state" (over ~5,000 people) that has been classless. Or they are as "classless" as their Capitalist counterparts. To be clear, eliminating the word "class" from your system of governance doesn't cause you to be classless.
A word on social classes
I argue that labor is always unequal, but if the situation arises where: labor is equal, or there is no division of labor, no money, and no need for governance, then there will be no classes. Given any one of those four, individually, social classes are inevitable. Social class refers to the hierarchical distinctions (or stratification) between individuals or groups in societies or cultures (wikipedia).
1) Division of labor is unequal labor.
Once any group achieves a population of about 5,000 (and usually sooner) labor specialization is the only feasible methodology for sustainability and continued growth. This is not only due to the economies of scale, finite space, but also personal ability (some people are just better at certain things).
If Walter Hunter is an extraordinary hunter, and Franklin Shoemaker is a relatively poor hunter, it is generally easier for Franklin to get Walter to do his hunting for him in exchange for some other good or service. Franklin is under no obligation to do this, of course, nor is Walter, but both will be generally well served in such an exchange. Perhaps Franklin makes excellent shoes, and rather than Walter spending his time crafting his own shoes he can just have Franklin do it in exchange for some meat. This is called the division of labor.
If the Hunters and Shoemakers are in a small village, the meat the Hunters produce is probably more scarce and the Hunters will be able to ask for more in any "fair exchange." Although the Hunters may forgo this labor premium, almost universally premium labor is provided at a premium price. And as more people start doing fewer things, labor will necessarily be exchanged unequally. This is not to forget that a lot of labor will be exchanged to great mutual benefit, the Shoemaker will likely exchange his shoes for a measure of animal skins from the hunter. Keeping in mind that the relative value of meat, leather, and shoes, fluctuate somewhat independently of each other on an ongoing basis which is inequality be definition.
2) Unequal division of labor creates social classes.
Division of labor is nearly always unequal as the necessity of individual products & services varies, and each individual generally seeks maximal return for his own labors. Such that Walter may be in a village where shoes are in higher demand than meat. If Franklin Shoemaker can get 2 egg laying chickens for one pair of shoes, what can Walter Hunter possibly offer him? Perhaps a 'rare' boar on Franklin's anniversary? That is, Walter needs to produce something of greater value (a premium) in order to equal the value of Franklin's shoes. How many people in the village know how to stitch a grievous wound and keep it from becoming fatal? Perhaps only the medicine man. If you are the grievously injured your argument that your labor is of greater value than the medicine man's is tenuous at best (i.e. the medicine man's labor allows your labor to continue, and without his labor yours will cease).
So the medicine man is now in his own class, and will probably be kept on a "retainer" by everyone in the village likely by being given anything he needs from anyone anytime he needs it and will probably be alone in this privilege. His class is likely higher than the Shoemaker's, since Shoemakers can't have anything they want from anyone at any time. Although the notion of what is "higher" and what is "lower" is rooted in the society itself. The key point is that some labor is seen as more valuable by the consumers of labor than other labor.
The medicine men of the world tend to have fixed costs (generally fairly high) to preform their labor, however how much their labor is valued by others varies. Since the Hunters and Shoemaker's labor is also unequal this causes bartering to become more difficult due to it's imprecision. This will necessarily create proxy bartering and eventually a monetary system, though class already exists without money.
3) The presence of a monetary system creates class.
When bartering is done by proxy, adjudication and accounting will eventually be required. If the division of labor causes specific individuals for this task these people are necessarily in a "ruling class." The presence of a monetary system implies unequal labor, over time anyone with higher valued labor will have larger amounts of money. Indeed if their labor is truly necessary and particularly difficult (or is comprised of skills unknown to others) they may keep increasing their price to match their willingness to provide their labor. This creates an inequality of wealth, and classes based on differences in wealth not just labor as previously described.
4) Need for governance
At some point a group of people will become large enough to need an administrator, particularly if there is division of labor. Those whose labor is governance, are in a separate class. Governance (empowerment by others to preform specific functions/actions, provide oversight, or guiding rules) creates class De facto.
Those aren't hard pressed facts, but I defy you to find a counter example in history for any population greater than 5,000 people (that's not a totally arbitrary number, it's been studied and I believe the actual number is about 4,700 and change but can't cite you the examples). So the above should illustrate why pure socialism is unworkable by definition. Through all this I submit as fact that: an entire society of humans cannot be classless.
Class implies Capitalism
It may be of interest then, that all of the fore going concepts (which I submitted as fact) over time lead to a Capitalist society. Indeed the price paid for labor is a direct endorsement of how much society values a laborer. If some people are paid more for their labor, they may be able to retain more and so the disparity in the value of labor will generally mean that the people with more valuable labor will own more. If that occurs, then those laborer's children will inherit their wealth and frequently continue the labor traditions (lawyer's & doctor's children are more likely to be lawyers & doctors). This perpetuates the family's and individuals wealth, and as long as money is generally finite it will generally concentrate in these dynasties so long as the youth chooses to perpetuate the dyansty. These dynastic forms of labor usually have steep walls to surmount, which are not always artificial. While the labor is mostly valued because not everyone is able to do it (Medicine), occasionally not everyone is permitted to do it (Stone Masonry).
Dynasties of wealth are only as perpetual as the descendants allow them to be. Occasionally a decedent will spend his inheritance "foolishly" and that wealth will be partially redistributed. But more commonly those with things will eventually be offered what they consider lucrative or favorable sums of money for their possessions (land, means of production), though the money they receive will generally only last their life time while the wealthy accumulate assets generationally. The logical extension of this then is that the rich will eventually own everything if the lower classes & short sighted keep selling it to them (particularly as inheritance tax is reduced). "Everything" of course includes the "means of production". Which is any factory, distillery, textile mill, or anything that makes anything is owned by someone and other people (who do not own that means) work there.
Wikipedia really nails this one:
Capitalism is an economic system in which wealth, and the means of producing wealth, are privately owned. Through capitalism, the land, labor, and capital are owned, operated, and traded for the purpose of generating profits, without force or fraud, by private individuals either singly or jointly, and investments, distribution, income, production, pricing and supply of goods, commodities and services are determined by voluntary private decision in a market economy. A distinguishing feature of capitalism is that each person owns his or her own labor and therefore is allowed to sell the use of it to employers. In a "capitalist state", private rights and property relations are protected by the rule of law of a limited regulatory framework.
Simply put, Capitalism is the value placed on objects & labor based on their utility (or appeal) to the purchaser, commonly evaluated as Cost vs benefit.
When capitalism "fails" it really doesn't, this is a perceptual error. There is no system that legitimately promises infinite windfall for all, nor one that promises perpetual stasis even though the system over the short term can give that perception. However they are all simply social constructs, and change as quickly as someone changes their mind. Since it is a social construct capitalism necessarily (by nature) does a "boom & bust" cycle where, essentially, in a mad dash for cash things are over valued and then correct to a more realistic price. It's much like an economic game of musical chairs, someone is always left standing.
Some people see money and Capitalism as the social constructs they are, while others apparently think they are magic.
This was in fact the entire point of all the post depression era market reforms, quash the busts and mellow the booms. We appreciated this because while the booms were great, the busts were horrible. There is no question that deregulation provides short term gains, but generally this also leads to troughs of devaluation. Generally what ends up happening is there are a bunch of widgets in the marketplace, everyone wants widgets but the Rockefellers own all the widgets, and they aren't selling them. Then they sell a few, and a few people buy them but also won't sell them... oooh SCARCE! So the price of widgets continues to go up, so the Rockefellers sell a few more. Holy shit, WIDGETS! People buy the widgets. While scarcity can legitimately drive prices up, this is more of a false sacristy. Widgets aren't actually scarse you just can't buy them. This generally causes people to eventually over value the widgets and pay far more then they're worth. This is expected. After some time of this (the music stops and) the price of widgets will undergo a correction. 'What the heck are widgets good for anyway? The real money is in do-dads!'. So all the fools who bought the widgets at a high price, end up selling it at a low price . . . and the Rockefellers see a deal and buy up all the widgets. This is a redistribution of wealth from the, let's say, "stupid" to the "not as stupid". Capitalism works this way in general by proxy. It's a pyramid scheme of sorts and most everyone knows it, but everyone is trying to cheat everyone else, so it's hard to feel bad for people who lose. It's like someone crying foul when you taze them after they try to stab you. The smart get richer, and the stupider and unfortunate get poorer. Sadly the stupid and poor essentially get thrown into the abyss, which is actually bad (if you didn't already think it was), more on that later.
So, if you read the definition/description of capitalism you noticed this very key sentence: "A distinguishing feature of capitalism is that each person owns his or her own labor and therefore is allowed to sell the use of it to employers". Which means that if you're not being fairly compensated, you should quit. Also it puts the burden of wages on the worker. If you're not being paid fairly, you're the one at fault.
The first problem here is that if the Rockefellers control EVERY means of production, they can fuck you with a single stroke. This is one of the reasons why pure capitalism can't work, more on that later. Wiki's definition of Capitalism if fairly liberal since it includes "without force or fraud" contingent with the definition. This is why we have labor unions, and as long as they don't get too crazy they're generally good. Even for the rich (more on that later).
Consider Marxism as the premier counter arguer to pure capitalism/capitalism in general. Karl Marx, who was himself far from working class, asserted that there is such a thing as "Wage slavery" which I will not dispute. So in brief, I'll give you a run down of a few of Marx's premises, but first a word on utilitarianism since Marx hated it.
In the interest of full disclosure, I'm a Social Contractarian, which is philosophically related to Utilitarianism. In brief the "Social contract" is the idea that people give up certain rights to a government in order to maintain social order, that is the right to rule is granted by the consent of the governed. Simply stated, there is nothing, really, that can keep me from killing you or you from killing me if either of us really want to do just that. Fundamentally (some would say, "by nature") we are all completely free all the time. However we choose, by living in our society, not to kill each other (for example). This is a rational abridgment of personal freedom since generally your desire to kill me should generally be less than your desire to die. If you decide to not live by the rules of our society, we as a society can chose to protect ourselves by any means necessary from you. For while we removed this power from ourselves individually, we've granted it in limited form to the government to exercise on our behalf. This is to prevent the "endless war of all against all" (anarchy) and instead we have "mutual coercion, mutually agreed upon". Within the social contract there isn't actually an idea of "Morality" as such, rather the idea is to provide the most benefit to all members within the society and, implicitly, at the least cost to all.
In the words of Bhishma: 'It hath been heard by us that men, in days of old, in consequence of anarchy, met with destruction, devouring one another like stronger fishes devouring the weaker ones in the water. It hath been heard by us that a few amongst them then, assembling together, made certain compacts, saying, "He who becomes harsh in speech, or violent in temper, he who seduces or abducts other people’s wives or robs the wealth that belongs to others, should be cast off by us."
Utilitarianism is entirely about the cost/benefit relationship. Or as some have said, "pleasure versus pain." A rational person acts to maximize his benefit and pleasure. The idea is that a rational society prospers and an irrational society suffers and is weak. Theoretically you can tell who is the most rational by seeing who has the most benefit and the least cost.
To a real extent, at least to Marx, this implied that the poor must be irrational while only the rich could be rational.
So how does this really work? Well Marx argued:
All value comes from human effort - It is only through a human's effort to extract, clean, and set a diamond that makes it valuable.
Capitalism is the rift between the cost to produce a product and the amount charged for the object.
Capitalism devalues the worker - Since money is the means through which the cogs of society functions, laborers are being paid at less then the fair value of the products they create. In a seeming paradox, a worker at a BMW plant (or a Nike factory) might not be able to afford the product that he directly creates.
Since all products come from human effort, the cost of all products must include the wages paid to workers.
Capitalism creates a downward pressure on prices do to competition. Prices can only be reduced if profit or costs are reduced. There are essentially only two ways to reduce costs, reduce the cost of materials or the real wages of workers.
Since workers are the majority of the population, it is generally the working class who consume all created products.
Suppliers create demand that doesn't exist - rather than supplying the market with products it demands, producers create products and then also create demand for those products (Mercedes/Porsche/BMW means success).
If the wages of workers are reduced, their ability to purchase products is also reduced. A company that can't sell it's products will have to layoff workers.
Marx argues that all this makes Capitalism unworkable, since it is doomed to cycles of overproduction and under consumption. He argues also that capitalism devalues the worker by not paying him a "fair" amount for his labor (3 above). In Marx's mind the worker should also have control over the creative process and control over the product that is created (in order to be happy). Not being fairly compensated, and having no control over his actions the worker is devalued. As the worker is devalued, he is alienated from himself. In a society, much of the population is comprised of workers, and they are all alienated from themselves by this system. Since they are alienated from themselves, they are alienated from each other. As this alienation expands people develop a sort of commodity fetishism, were people at large value the product more than the work necessary to create the product and begin to believe the products are inherently of value. And it comes to pass that people's value can be shown by their association with objects they possess. Through this and alienation people begin to see each other as commodities: this body part, or that part, their personal property, what is to be gained from them, etc. This is the structure through which the wage slave is created.
In wage slavery workers are paid some money, but not quite enough. They're paid enough to feel as thought they are progressing, and to keep them coming back so they'll work for the rest of their lives. In order to be a wage slave, the work has to devalue you as a human, as described above. The more time you spend doing your wage slave job, the more you are alienated from yourself and the more of your "self" is lost to your job.
Marx argues that eventually, through the methods described above, this system will collapse. And it pretty much comes true. The rich can see the 'writing on the walls' and around the time of the French revolution, as the educated (poor people can't afford his books) watched all of Marx's predictions come true including one they truly feared might come about: the poor people started to kill the rich. Which is a dramatic form of the redistribution of wealth.
Interestingly, there's a period that generally isn't taught in schools called the "the guilded age" around 1870. Essentially there is rampant overproduction and under consumption, a bust period, that leads to bank runs and such in the United States. Oh and a bunch of ridiculously rich guys who you've probably heard of: Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie, and J.P. Morgan.
Thankfully, some rich people thought of a great way to use an existing idea to keep Marx's predictions at bay, CREDIT! Now poor people can spend money they don't have so they can keep consuming in spite of overproduction. As previously asserted, the poor are irrational. Since the price of any product is determined by what the purchaser will pay for it, and the purchasers are irrational, prices hugely exceed the value of objects. Lets take "Rims" for example. You can get some really nice spinning ones for 12k per wheel. You know what the resale on those things is? Comparatively zero. Clean water in the US costs fractions of a cent per gallon, Cocca-Cola company (KO) puts between $0.02 and $0.05 of syrup into that water and charges ~$5 for it.
1000% profit? Well, we're the idiots paying for it why shouldn't they charge that much for it? If some fool wants to eat my toenail clippings and pay me $800 for the privilege, I'm sure as hell going to let him.
Most people don't save any money for their own retirement, so it should come as no surprise that most people's net worth is between -130% and -250% of their income. And the only thing they own of any value is their home. The fact that "Most people's wealth is in their home." is not a statement of the financial stability of housing but the rampant foolishness of the American populous. An "investment" which, if people didn't have so much credit to blow without recourse, wouldn't be worth the millions people seem to have thought that it was. (Incidentally commercial properties, those generally owned by the rich, aren't generally so ludicrously overvalued.) It should be noted however that creating more property isn't as easy as creating more money, and if you run the clock a few thousand years any price paid can be recovered in nominal value (list price) simply not "real" value (adjusted for inflation).
So recently we saw the redistribution of wealth again, to the smart people (selling their homes for inflated prices) from the stupid people (buying them for inflated prices, sometimes two at a time). "This market's got nowhere to go but up!" More on that right now.
The problem with all this is that the poor keep getting poorer, and the rich generally keep getting richer. Eventually the consuming class can't afford anything anymore and there is a "Market correction" where items of value return toward their 'true' value. This tends to make the working class really pissed off (Ta-da!). Eventually they'll get so cheesed off that they'll start killing rich people again.
For whatever reason, people with very little tend to be angry at people who have a lot. To be fair, it isn't the rich people's fault they're rich. The workers want the worthless crap at inflated prices that the rich sell to them. The working class asks them for loans (to help them buy more crap), so naturally the rich give them loans at 9% interest. On top of all that the workers keep working for them. The workers are the ones who wanted all the stuff in the first place, no one forced the workers to buy all that crap at 100 times it's production cost. Do you know how cheap it is to make a loaf of bread from scratch? Maybe twenty to thirty cents per loaf, but the workers choose to spend $3 to get the pre-sliced kind,oooh fancy! And then before long it's Crap, were'd that money go? KILL THE BAKER! But alas, here we are.
It can be argued that everyone should charge a "fair" price for their goods, however when it comes to selling goods everyone wants more than a fair price. Again, the division of labor isn't fair, and everyone has to make enough to continue in their labor. If someone's labor isn't paying them enough to have them continue that labor, then they should (rationally) stop laboring. So if you want your bread from this baker, then you have to pay his price. Or make it your goddamn self, it's not really that hard.
So lets pretend there's a big banquet dinner, and the rich are having a feast. Unfortunately there are all these starving rats at their feet. So the rich are seriously scared they're going to lose all the stuff they and their parents worked so hard to accumulate. But the rich aren't dumb, so they make some shit up to quiet the rats:
Religion: "It's harder for a camel to pass through the eye of a needle then it is for a rich man to enter into heaven." We'll go ahead and watch over all this money, you get on being poor and the invisible man will grant you three wishes or something after you're dead.
Ideology: "I'm living the American dream! I came to this country with nothing, and now I have a car (on credit), a house (on credit), and a wife (on credit?)!"
Government Subsidy: "Please don't get too pissed off poor people, here's some welfare."
Marx didn't really blame the rich fully, but tried to organize labor to revolt against the wage slavery and so was kicked out of a bunch of countries and got his pamphlets banned.
So with capitalism we have boom and bust, how do we fix that? Finding more people to 'exploit' works surprisingly well. There are a bunch of people in other countries who can make products for less including even the cost of shipping. I assert that this fact is the only reason a middle class exists in the U.S, or can exist generally anywhere (a process I call "exporting your serfs"). The very reasons blue collar jobs are outsourced is because blue collar workers buy products from outsourced producers. This can stall the bust for as long as there are available workers in abject poverty. You can also curtail the busts by not letting people or corporations over-leverage . . . although over-leveraging is the only way to allow for over consumption, which is generally what keeps the U.S. economy going since most of the working class has stopped buying from their fellow working class already.
How did a CEO make 50 million U.S.D. in bonuses last year? Because people borrowed a bunch of money to buy his (probably worthless) product. The CEO was smart enough to get the 50 mil, and the people were dumb enough to pay him. The workers got a cup of coffee and T-Shirt with a fancy stamp on it out of the deal, sweet!
A pure capitalist would say: No one should have bailed out AIG, or the banks, or the home owners. Everyone who is stupid should be poor. A fool and his money are soon parted. All that. Bottom line, if you're going to let poor people get poorer, you need to let rich people get poorer too. The repercussion of actions is a key concept of capitalism, and life in general. Have sex with a 100 hookers, get 40 STDs. They don't make a government bail out for that either. Now I'm not saying execution should be on the table, but seriously, WTF? How is that when the rich need a bail out the government hands them the money, if anything the government would've added more stability to the system if it directly gave $700 billion to the human citizens ($2,820 each) or 5,900 to each house hold making less than $75,000/year. That would have kept economic wheels turning much more efficiently then bailing out financial institutions who contribute virtually nothing to those same house holds, which are the driving force of our economy as described above.
Socialism, is pretty much a fantasy, and not worth discussing. Essentially in it's raw form it demands "From each according to his ability, to each according to his need." However, since all labor is unequal, equal compensation will cause the free worker to adjust his labor. Why bust your ass when you can receive the same reward for 1/3 or 1/16 the effort? Which is not to say it can't work in a small group of ideologues, but it's not a form of government that can be taken seriously.
If we all woke up tomorrow morning and the global prices of pharmaceuticals were fixed to what Canada or Sweden has fixed them at, there would be a global health care crisis since free market countries are currently paying for the reduced costs of the regulated countries. Much like Medicare and Medicaid don't pay their own bills in the US, and never have, leaving the insured to pick up the cost. Which means that everyone who has health insurance is silently paying for everyone who doesn't, plus whatever profit the health insurance industry makes. Ditto for global pharmaceuticals.
So what would my solution to America's economic troubles be, not that it matters?
Free education with stipends for good students from birth until age 24, with minimal cost there after. However I'd stop grade inflation and this idea that more than 50-75% of people should pass. Grade inflation is making degrees as worthless as the dollar (I also love the, "This professor is easy, you won't learn shit!" mentality). Education is also one of the only ways to get a skilled job, which can't be taken by unskilled labor. This is the only way to allow the smart poor people to advance into the world, and provide a sustainability to the U.S economy that it currently doesn't have.
Pay for it by giving universities a 5-10% cut of the salaries of all of working graduates. Divert military funding.
Mandatory media / anti-propaganda education. It might be interesting to provide warning labels ala cigarettes on things like cola & spinning rims: "Warning, the governor general has determined that this product is a worthless hunk of shit, and you shouldn't buy it." It'd be nice if during each commercial break there'd be a "commercial" from the Ad Council that went something like, "All the commercials in this broadcast are for shit you don't need, please just save your money."
Mandatory language training beginning in second grade. Everyone would be required to learn at least one tongue which is not native to them of the following, by full immersion: Mandarin (chinese), English (American), Hindi, Spanish, Arabic. Why these? They're the most spoken languages on Earth in order of the number of people who speak them. (French, Japanese, German, and Persan are 10-13.) So if your native language is American English you might start learning Mandarin in 2nd grade and by 5th grade all your classes would be taught in Mandarin. By 12th grade a third language should would be added.
Mandatory economics education including Capitalism, Laissez-faire, options pricing, hedge funds, leveraging, accounting 101, Marxism, and the history of socioeconomics.
Mandatory logic, ethics, health maintenance, scientific method, and basic physics.
Nationalized health insurance - insurance run on a not for profit basis by the government, subsidized by businesses at a level that they currently pay for heath care benefits. Low-ish co-payment doctor visits and pharmaceuticals. Supplemental insurance should still be available. Oh, and screw world wide healthcare, we'll all have to pay our own way.
Credit - No bail outs or rescue packages for over leveraged entities, the penalty for making bad decisions in a capitalist economy is the poor house. Limit the ability of all entities to borrow over 150% of it's net worth (the U.S. government's debt well exceeds the book value of all of the assets of our nation by about 9 fold).
Inflation control - Since most prices are artificially high, deflation should remain as an accepted market force. One of the ways the market used to correct itself was deflation (the natural lowering the value of products based on demand), the Fed has decided to eliminate that by printing extra money and putting it into circulation (inflation). I propose that the government not be allowed to print additional money for any reason. In fact, a global or PanAmerican currency would be nice since clearly the Fed cannot be trusted. Inflation reduces real wages, and devalues savings and fixed incomes. Thus it is a way to reduce the real cost of labor and perpetuate the system in favor the more exploitive facets of the free market..
Patent and Copyright reform - Reduction of copyright from what is essentially forever (life time of author +70 years, or 120 years) to 25 years. Patents are currently a minimum of 20 years, I propose that the maximum be 20-25 years. Also subtle refinement of a work doesn't cause a new term to commence on the work if it only creates a subtle difference. This has a lot of subtle impacts, for instance if you have a drug called Omeprazole which is a combination of Esomeprazole and Romeprazole, you can't get a new patent on Esomeprazole (trade named Nexium) simply so you can charge a (and this in an arbitrary number) 400% premium on something that is less than 5% more effective (not an arbitrary number). On the other hand if you carboxilate morphine into heroin (which is 100 times stronger per unit dose) you can certainly get a patent on that even though it has a nearly identical effect.
American companies are advised to neither produce stupid shit, nor budget products. Both of which can clearly (and should) be outsourced to other countries.
Social service - I'm pretty sure that in order to receive voting rights you should have to complete 2 to 4 years of military service or 6 years of social service.
Legalize recreational drugs, apply 400 to 5,000% taxes to their real cost. This will assist in the redistribution of wealth, pay for the social programs I've proposed, and really should be part of a free society anyway.
Force products to be sold for their real cost. So if 1 gallon of gasoline causes $2 of environmental damage, add two dollars to the sale price of gasoline. This applies everything from fish sticks to cigarettes and electricity.
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