When Does Narrow Capitalism Become Re-hashed Feudalism?

 

GK Chesterton once wrote that the problem with capitalism is too few capitalists. I agree with him. I’m a “Distributist” at heart, the greatest failing of which is no decent mechanism by which to implement it. It is more philosophy needing conversion and willing adoption by the masses than government economic policy.

How to get more capitalists, though, is a question worth asking because there are policies we can support in order to increase them. The problem is cronyism is an effective roadblock.

When the conversation gets started, it almost always begins too close to “how much wealth is too much?” Which then stymies the rest of the conversation, and there is a failure to address real problems in the system that do exist.

Maybe we could ask them, at what point does so much wealth/capital disparity shift into neo-feudalism?

After all, feudalism is characterized by all property being owned by very few, with workers working to produce for the property owner, who are then compensated with some percentage of the wealth generated by the workers.

Omg, I sound like a socialist comparing our current state of economics to feudalism, but where did I go wrong? Lords and business owners still have to manage, steward their money, and coordinate and organize for effective and efficient running of estate or business. That IS the defense for this style of capitalism, is it not? That the employers are justified in how the distribution of business wealth plays out because of their effective management skills, without which the business would not exist and all would be worse off?

Except would we be worse off? How many of those workers would start their own business? Would competition increase in the absence of the large business? Would that competition then drive innovation and decreases in price?

In the grand scheme of things, feudalism is better than slavery. After all, it was a feudal Spain that overthrew the Moors. And slavery systems can’t achieve that. But capitalism was supposed to be better than feudalism. The only difference at the moment is we are on the post-capitalism side of things and the first go around was pre-capitalism. We get to benefit from the progress and technology increases.

Did it go wrong? When? And how can it be put back in place?

And if there is a collapse, what could be baked into the cake to prevent the convergence of capital into the hands of only a few through crony capitalist deals with government?

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  1. Chris Hutchinson Coolidge
    Chris Hutchinson
    @chrishutch13

    Excellent thought experiment, Stina!

    • #1
  2. Jerry Giordano (Arizona Patriot) Member
    Jerry Giordano (Arizona Patriot)
    @ArizonaPatriot

    Stina, could you elaborate on your statement about cronyism?  Are you implying some barriers to entry to the ranks of the capitalists?  If so, what barriers do you perceive?

    • #2
  3. GlenEisenhardt Coolidge
    GlenEisenhardt
    @GlenEisenhardt

    I support a 90% tax on corporate profits. Either corporations use the money to pay their workers, R&D, or for the business or it gets taken. The American worker has doubled productivity and their wages stagnate. Corporate America pollutes the culture and buys political favors with the money thus corrupting our system and the market. They need to feel the fire of competition and not have such gigantic coffers to play with. Workers should be seeing a lot of that money. We print money for the banks and corporate America to play with so we can get 2% GDP growth on paper.

    Every single industry is dominated by a few key players. This stifles innovation and competition. The incentives of our market are sick. We need much more competition. A giant use it or lose it tax would push us in that direction. Airlines are terrible, internet service providers are terrible, insurance is terrible, big tech is terrible. We need real competition and wage growth in this country. Tax cuts for the big guys have been a disaster. They haven’t created the jobs that were promised or provided the pay. They do stock buy backs when they aren’t lobbying and engage in financial manipulation. When they aren’t doing that they buy up their competition to give both consumers and workers less choice. They’re all in bed with Washington.

    • #3
  4. Hoyacon Member
    Hoyacon
    @Hoyacon

    In this analogy, do employees = vassals?

    • #4
  5. Stina Member
    Stina
    @CM

    Jerry Giordano (Arizona Patrio… (View Comment):

    Stina, could you elaborate on your statement about cronyism? Are you implying some barriers to entry to the ranks of the capitalists? If so, what barriers do you perceive?

    Licensing, income reporting to the IRS and the hoops to register a business, regulations preventing the where and how of business, rules on hiring and firing, compensation, benefits, and tax reporting. All of these are barriers to entry that increase the cost of start up to the point of unaffordability while being nothing more than an annoyance to large and established businesses (thanks to efficiency of scale). Frequently, these regulations are passed under the consultation of “industry leaders” that benefit from making it harder for competition to their own business from getting off the ground.

    Add to that the rapid swinging of economic policy that makes investment a higher risk than it normally has been.

    All of these things (and possibly more) make it harder to start a business or grow your own capital.

    • #5
  6. DonG (CAGW is a Scam) Coolidge
    DonG (CAGW is a Scam)
    @DonG

    I think it is always key to define terms.  What is meant by “capitalism”?   What is meant by “free markets”?   What is the value of “competition”? 

     

    A lot of people hate “capitalism” and when asked what they mean they complain about corruption, cronyism, and monopolies.  

    • #6
  7. Stina Member
    Stina
    @CM

    I support a 90% tax on corporate profits. Either corporations use the money to pay their workers, R&D, or for the business or it gets taken. The American worker has doubled productivity and their wages stagnate. Corporate America pollutes the culture and buys political favors with the money thus corrupting our system and the market. They need to feel the fire of competition and not have such gigantic coffers to play with. Workers should be seeing a lot of that money. We print money for the banks and corporate America to play with so we can get 2% GDP growth on paper. 

    I’m in favor of private union contracts with employers to cap salaries of the leadership board of business or corp to a percentage of the employee payroll. To increase their pay, they have to raise wages or hire more people.

    As a contract between private union and business, it can be tailored specifically to the organization of that business, rather than one shoe fits all. 

    • #7
  8. Hoyacon Member
    Hoyacon
    @Hoyacon

    Stina (View Comment):

    I support a 90% tax on corporate profits. Either corporations use the money to pay their workers, R&D, or for the business or it gets taken. The American worker has doubled productivity and their wages stagnate. Corporate America pollutes the culture and buys political favors with the money thus corrupting our system and the market. They need to feel the fire of competition and not have such gigantic coffers to play with. Workers should be seeing a lot of that money. We print money for the banks and corporate America to play with so we can get 2% GDP growth on paper.

    I’m in favor of private union contracts with employers to cap salaries of the leadership board of business or corp to a percentage of the employee payroll. To increase their pay, they have to raise wages or hire more people.

    As a contract between private union and business, it can be tailored specifically to the organization of that business, rather than one shoe fits all.

    Since this type of system is not in place, we don’t know what unintended consequences may result.  I can’t say if it’s a good idea or a poor one without seeing it in practice.  However, I would say that it’s at least a step towards socialism, for better or worse.

    • #8
  9. Stina Member
    Stina
    @CM

    DonG (CAGW is a Scam) (View Comment):

    I think it is always key to define terms. What is meant by “capitalism”? What is meant by “free markets”? What is the value of “competition”?

     

    A lot of people hate “capitalism” and when asked what they mean they complain about corruption, cronyism, and monopolies.

    To me, capitalism is as simple as applying your skills to produce something and trading it for something you lack the skills for in order to make your life more comfortable.

    As simple as baking a cake from scratch and selling, creating a pattern and sewing a dress and selling it, or planting some trees in your hard and making lemonade to sell. All these things can be used, with human action, to build wealth.

    The government standing between the maker and the consumer makes it harder to get things started.

    While I am not opposed to consumer protection, I think regulations intended for that purpose should be enforced based on market share. Where competition is thriving, let that be enough protection for the consumer. It is where competition is nearly non-existent (say a single business has 70% of the market) that consumers need protection.

    • #9
  10. Stina Member
    Stina
    @CM

    Hoyacon (View Comment):

    In this analogy, do employees = vassals?

    Yes.

    Edited to add:

    Instead of taking home a portion of the crops, we are compensated in monetary form.

    • #10
  11. Stina Member
    Stina
    @CM

    Hoyacon (View Comment):

    Stina (View Comment):

    I support a 90% tax on corporate profits. Either corporations use the money to pay their workers, R&D, or for the business or it gets taken. The American worker has doubled productivity and their wages stagnate. Corporate America pollutes the culture and buys political favors with the money thus corrupting our system and the market. They need to feel the fire of competition and not have such gigantic coffers to play with. Workers should be seeing a lot of that money. We print money for the banks and corporate America to play with so we can get 2% GDP growth on paper.

    I’m in favor of private union contracts with employers to cap salaries of the leadership board of business or corp to a percentage of the employee payroll. To increase their pay, they have to raise wages or hire more people.

    As a contract between private union and business, it can be tailored specifically to the organization of that business, rather than one shoe fits all.

    Since this type of system is not in place, we don’t know what unintended consequences may result. I can’t say if it’s a good idea or a poor one without seeing it in practice. However, I would say that it’s at least a step towards socialism, for better or worse.

    The private aspect of it relying on contracts and not government law, I think, removes a critical ingredient of it being socialism.

    • #11
  12. Jerry Giordano (Arizona Patriot) Member
    Jerry Giordano (Arizona Patriot)
    @ArizonaPatriot

    GlenEisenhardt (View Comment):

    I support a 90% tax on corporate profits. Either corporations use the money to pay their workers, R&D, or for the business or it gets taken. The American worker has doubled productivity and their wages stagnate. Corporate America pollutes the culture and buys political favors with the money thus corrupting our system and the market. They need to feel the fire of competition and not have such gigantic coffers to play with. Workers should be seeing a lot of that money. We print money for the banks and corporate America to play with so we can get 2% GDP growth on paper.

    Every single industry is dominated by a few key players. This stifles innovation and competition. The incentives of our market are sick. We need much more competition. A giant use it or lose it tax would push us in that direction. Airlines are terrible, internet service providers are terrible, insurance is terrible, big tech is terrible. We need real competition and wage growth in this country. Tax cuts for the big guys have been a disaster. They haven’t created the jobs that were promised or provided the pay. They do stock buy backs when they aren’t lobbying and engage in financial manipulation. When they aren’t doing that they buy up their competition to give both consumers and workers less choice. They’re all in bed with Washington.

    I think that a 90% corporate tax is a very bad idea.

    Why would anyone invest in a business, if the investor bears the risk of 100% of the loss, but only gets 10% of the profit if the business is successful?

    I also think that you are empirically incorrect in claiming that every single industry is dominated by a few key players.  Some are, some aren’t.

    • #12
  13. Hoyacon Member
    Hoyacon
    @Hoyacon

    Stina (View Comment):

    Hoyacon (View Comment):

    Stina (View Comment):

    I support a 90% tax on corporate profits. Either corporations use the money to pay their workers, R&D, or for the business or it gets taken. The American worker has doubled productivity and their wages stagnate. Corporate America pollutes the culture and buys political favors with the money thus corrupting our system and the market. They need to feel the fire of competition and not have such gigantic coffers to play with. Workers should be seeing a lot of that money. We print money for the banks and corporate America to play with so we can get 2% GDP growth on paper.

    I’m in favor of private union contracts with employers to cap salaries of the leadership board of business or corp to a percentage of the employee payroll. To increase their pay, they have to raise wages or hire more people.

    As a contract between private union and business, it can be tailored specifically to the organization of that business, rather than one shoe fits all.

    Since this type of system is not in place, we don’t know what unintended consequences may result. I can’t say if it’s a good idea or a poor one without seeing it in practice. However, I would say that it’s at least a step towards socialism, for better or worse.

    The private aspect of it relying on contracts and not government law, I think, removes a critical ingredient of it being socialism.

    My guess is the this would not be implemented in a vacuum due to union involvement, but I agree that it’s not truly socialism.  There would almost certainly be other matters raised by the union as part of the package that could be problematic.

    I am a believer in shareholder activism and wish that there was more of it.  A large business that overpays its execs and underpays its rank and file will not achieve adequate shareholder return and should lead to scrutiny by its owner/ shareholders.  This does happen but not enough.

    • #13
  14. Raxxalan Member
    Raxxalan
    @Raxxalan

    GlenEisenhardt (View Comment):

    I support a 90% tax on corporate profits. Either corporations use the money to pay their workers, R&D, or for the business or it gets taken. The American worker has doubled productivity and their wages stagnate. Corporate America pollutes the culture and buys political favors with the money thus corrupting our system and the market. They need to feel the fire of competition and not have such gigantic coffers to play with. Workers should be seeing a lot of that money. We print money for the banks and corporate America to play with so we can get 2% GDP growth on paper.

    Every single industry is dominated by a few key players. This stifles innovation and competition. The incentives of our market are sick. We need much more competition. A giant use it or lose it tax would push us in that direction. Airlines are terrible, internet service providers are terrible, insurance is terrible, big tech is terrible. We need real competition and wage growth in this country. Tax cuts for the big guys have been a disaster. They haven’t created the jobs that were promised or provided the pay. They do stock buy backs when they aren’t lobbying and engage in financial manipulation. When they aren’t doing that they buy up their competition to give both consumers and workers less choice. They’re all in bed with Washington.

    Corporations don’t pay taxes.  Corporations are deathless pieces of paper that sit in a drawer in Delaware.  Corporations can collect taxes and it is a favorite way for politicians to hide taxes on the general populace by “taxing” a corporation.  When you raise corporate taxes you are effectively raising taxes by forcing one of three things and probably all three in some amount.

    1. Passing along the tax to the consumer of the good or service provided by the corporation.
    2. Passing along the tax to the employees of the corporation.
    3. Passing along the tax to the owners (shareholders) of the corporation. 

    To the extend it is possible the corporation will pass along the tax by increasing the price of the good or service it provides.  If it can’t do this it will pass along the tax to its employees in either the form of lower salary growth or direct layoffs.  Only after it has determined it can’t do anymore of the will the corporation’s owners take the hit.   If the corporation can’t make money in that tax environment it ceases to exist, I suspect a 90% corporate tax would have the opposite effect of what you want.  There would be fewer bigger corporations.  Probably all foreign based so that they could shift profits to avoid the taxes. 

    • #14
  15. Raxxalan Member
    Raxxalan
    @Raxxalan

    Stina (View Comment):

    I support a 90% tax on corporate profits. Either corporations use the money to pay their workers, R&D, or for the business or it gets taken. The American worker has doubled productivity and their wages stagnate. Corporate America pollutes the culture and buys political favors with the money thus corrupting our system and the market. They need to feel the fire of competition and not have such gigantic coffers to play with. Workers should be seeing a lot of that money. We print money for the banks and corporate America to play with so we can get 2% GDP growth on paper.

    I’m in favor of private union contracts with employers to cap salaries of the leadership board of business or corp to a percentage of the employee payroll. To increase their pay, they have to raise wages or hire more people.

    As a contract between private union and business, it can be tailored specifically to the organization of that business, rather than one shoe fits all.

    I distrust unions for the same reason I distrust all monopolies and cartels.  They tend to have their own agendas and don’t tend to promote anything that is actually good for their members.   Then again I may be jaded on this point.  

    • #15
  16. Stina Member
    Stina
    @CM

    Raxxalan (View Comment):

    Stina (View Comment):

    I support a 90% tax on corporate profits. Either corporations use the money to pay their workers, R&D, or for the business or it gets taken. The American worker has doubled productivity and their wages stagnate. Corporate America pollutes the culture and buys political favors with the money thus corrupting our system and the market. They need to feel the fire of competition and not have such gigantic coffers to play with. Workers should be seeing a lot of that money. We print money for the banks and corporate America to play with so we can get 2% GDP growth on paper.

    I’m in favor of private union contracts with employers to cap salaries of the leadership board of business or corp to a percentage of the employee payroll. To increase their pay, they have to raise wages or hire more people.

    As a contract between private union and business, it can be tailored specifically to the organization of that business, rather than one shoe fits all.

    I distrust unions for the same reason I distrust all monopolies and cartels. They tend to have their own agendas and don’t tend to promote anything that is actually good for their members. Then again I may be jaded on this point.

    Yes. My idea of a union includes internal employee cooperation. If there’s a different word for that, I’ll use it. My understanding is that Unions do not necessarily need to be orgs that cover entire industries.

    • #16
  17. Raxxalan Member
    Raxxalan
    @Raxxalan

    Stina (View Comment):

    Raxxalan (View Comment):

    Stina (View Comment):

    I support a 90% tax on corporate profits. Either corporations use the money to pay their workers, R&D, or for the business or it gets taken. The American worker has doubled productivity and their wages stagnate. Corporate America pollutes the culture and buys political favors with the money thus corrupting our system and the market. They need to feel the fire of competition and not have such gigantic coffers to play with. Workers should be seeing a lot of that money. We print money for the banks and corporate America to play with so we can get 2% GDP growth on paper.

    I’m in favor of private union contracts with employers to cap salaries of the leadership board of business or corp to a percentage of the employee payroll. To increase their pay, they have to raise wages or hire more people.

    As a contract between private union and business, it can be tailored specifically to the organization of that business, rather than one shoe fits all.

    I distrust unions for the same reason I distrust all monopolies and cartels. They tend to have their own agendas and don’t tend to promote anything that is actually good for their members. Then again I may be jaded on this point.

    Yes. My idea of a union includes internal employee cooperation. If there’s a different word for that, I’ll use it. My understanding is that Unions do not necessarily need to be orgs that cover entire industries.

    That is true and as I understand it how it works in parts of Europe.  I am just wary of them because I have seen them up close an personal.  Of course most of my experience with the Unions were state and local public sector so not the same thing really.

    • #17
  18. Mark Camp Member
    Mark Camp
    @MarkCamp

    Stina,

    What do you mean by “capitalism” in your post?

    • #18
  19. Stina Member
    Stina
    @CM

    Mark Camp (View Comment):

    Stina,

    What do you mean by “capitalism” in your post?

    See comment #9

    • #19
  20. Mark Camp Member
    Mark Camp
    @MarkCamp

    Stina (View Comment):

    Mark Camp (View Comment):

    Stina,

    What do you mean by “capitalism” in your post?

    See comment #9

    Good definition!

    You are a fellow Austrian economist, and I never realized it.

    So by our definition, “capitalist” is a category of combined action, involving two voluntary cooperative individual actions.  Each individual action is directed toward a goal of satisfying the individual’s felt wants or needs.

    Some might protest, “But capitalism is usually used as the name of a category of economic system…never as a category of individual action.”

    I would answer, that is fine.  An economic system is a capitalist system to the extent that production and consumption are controlled by capitalist actions of the society’s individuals.

    • #20
  21. DonG (CAGW is a Scam) Coolidge
    DonG (CAGW is a Scam)
    @DonG

    Mark Camp (View Comment):

    Stina (View Comment):

    Mark Camp (View Comment):

    Stina,

    What do you mean by “capitalism” in your post?

    See comment #9

    Good definition!

    You are a fellow Austrian economist, and I never realized it.

    So by our definition, “capitalist” is a category of combined action, involving two voluntary cooperative individual actions. Each individual action is directed toward a goal of satisfying the individual’s felt wants or needs.

    Some might protest, “But capitalism is usually used as the name of a category of economic system…never as a category of individual action.”

    I would answer, that is fine. An economic system is a capitalist system to the extent that production and consumption are controlled by capitalist actions of the society’s individuals.

    For me, “capitalism” is a system where individuals have strong property rights and private citizens generally own the means of production.

    The system of voluntary exchange goods and services for a negotiated price is a “free market”.   

    This is why we must define our terms.  

    I think the correct tax rate of corporations is zero.   Corporations exist to share risks and returns among shareholders.  Tax the heck out of them if you wish.  Wages, dividends and capital gains are equal forms of income.

    • #21
  22. Stina Member
    Stina
    @CM

    DonG (CAGW is a Scam) (View Comment):

    Mark Camp (View Comment):

    Stina (View Comment):

    Mark Camp (View Comment):

    Stina,

    What do you mean by “capitalism” in your post?

    See comment #9

    Good definition!

    You are a fellow Austrian economist, and I never realized it.

    So by our definition, “capitalist” is a category of combined action, involving two voluntary cooperative individual actions. Each individual action is directed toward a goal of satisfying the individual’s felt wants or needs.

    Some might protest, “But capitalism is usually used as the name of a category of economic system…never as a category of individual action.”

    I would answer, that is fine. An economic system is a capitalist system to the extent that production and consumption are controlled by capitalist actions of the society’s individuals.

    For me, “capitalism” is a system where individuals have strong property rights and private citizens generally own the means of production.

    The system of voluntary exchange goods and services for a negotiated price is a “free market”.

    This is why we must define our terms.

    I think the correct tax rate of corporations is zero. Corporations exist to share risks and returns among shareholders. Tax the heck out of them if you wish. Wages, dividends and capital gains are equal forms of income.

    The strong property rights and means of production means nothing without the ability to sell it. I think free market is a key ingredient in capitalism. I don’t want to get in the weeds of tax structures beyond the fact that they impede creative entrepreneurship.

    Though I have no issues with removing income tax in general.

    • #22
  23. Zafar Member
    Zafar
    @Zafar

    Stina: Omg, I sound like a socialist comparing our current state of economics to feudalism, but where did I go wrong?

    From your very own Communist Party’s website:

    Marx saw capitalism as a contradictory stage between two different modes of production. Before capitalism, he argues in the first volume of Capital, individual artisans owned the means to exercise their trade: the spinner her spinning wheel, the weaver his loom, the builder or blacksmith the set of tools appropriate to that job. And each received the value of his or her labor: individual ownership of the means of production, individual appropriation of the wealth created. Capitalism unleashed vastly greater productive forces by “socializing” production, bringing workers together in factories to operate huge and much more efficient machines–but most of the value of the goods produced went to the owners of the factories. Labor was social, but appropriation was private.

    Clearly Marx was wrong about the solution – common ownership of the means of production – but the contradiction articulated here seems similar to the one you’ve articulated in your OP.  ??

    • #23
  24. Stina Member
    Stina
    @CM

    Zafar (View Comment):

    Stina: Omg, I sound like a socialist comparing our current state of economics to feudalism, but where did I go wrong?

    From your very own Communist Party’s website:

    Marx saw capitalism as a contradictory stage between two different modes of production. Before capitalism, he argues in the first volume of Capital, individual artisans owned the means to exercise their trade: the spinner her spinning wheel, the weaver his loom, the builder or blacksmith the set of tools appropriate to that job. And each received the value of his or her labor: individual ownership of the means of production, individual appropriation of the wealth created. Capitalism unleashed vastly greater productive forces by “socializing” production, bringing workers together in factories to operate huge and much more efficient machines–but most of the value of the goods produced went to the owners of the factories. Labor was social, but appropriation was private.

    Clearly Marx was wrong about the solution – common ownership of the means of production – but the contradiction articulated here seems similar to the one you’ve articulated in your OP. ??

    Yeah. I’ve been saying for a while Marx was right on this. Which is why so many keep turning to socialism thinking that will fix it. But to me, the appropriate way to go is back to the first stage of capital.

    The industrial revolution introduced the efficiency of scale which has helped move “capitalism” away from a low and wide, modest production and towards a high and narrow, extravagant production. This is viewed as a good thing as it creates cheaper goods and frees resources for other work. While this is not bad in and of itself, it is if the freed resource of human labor is blocked from participating in the market in their own right due to the corrupt use of the existing market’s greasing of government palms via political donation, lobby power, or outright bribery.

    • #24
  25. Zafar Member
    Zafar
    @Zafar

    Stina (View Comment):

    Clearly Marx was wrong about the solution – common ownership of the means of production – but the contradiction articulated here seems similar to the one you’ve articulated in your OP. ??

    Yeah. I’ve been saying for a while Marx was right on this. Which is why so many keep turning to socialism thinking that will fix it. But to me, the appropriate way to go is back to the first stage of capital.

    How would you describe that, and in what ways would it be different from capitalism today?

    The industrial revolution introduced the efficiency of scale which has helped move “capitalism” away from a low and wide, modest production and towards a high and narrow, extravagant production. This is viewed as a good thing as it creates cheaper goods and frees resources for other work. While this is not bad in and of itself, it is if the freed resource of human labor is blocked from participating in the market in their own right due to the corrupt use of the existing market’s greasing of government palms via political donation, lobby power, or outright bribery.

    Colonialism and the related capital flows and concentration is a relatively recent example of this corruption.  And even today more capital (essentially labor surplus?) flows North than flows South.  We all work in a globalised economy these days.

    How would any solution to this issue address that?  On the face of it if workers got to keep more of the surplus they produce then more money would stay in the Global South at a local level – and how would that impact livelihoods and workers in the Global North (places like the US or Australia)?

    • #25
  26. Mark Camp Member
    Mark Camp
    @MarkCamp

    Zafar (View Comment):

    Stina: Omg, I sound like a socialist comparing our current state of economics to feudalism, but where did I go wrong?

    From your very own Communist Party’s website:

    Marx saw capitalism as a contradictory stage between two different modes of production. Before capitalism, he argues in the first volume of Capital, individual artisans owned the means to exercise their trade: the spinner her spinning wheel, the weaver his loom, the builder or blacksmith the set of tools appropriate to that job. And each received the value of his or her labor: individual ownership of the means of production, individual appropriation of the wealth created. Capitalism unleashed vastly greater productive forces by “socializing” production, bringing workers together in factories to operate huge and much more efficient machines–but most of the value of the goods produced went to the owners of the factories. Labor was social, but appropriation was private.

    Clearly Marx was wrong about the solution – common ownership of the means of production – but the contradiction articulated here seems similar to the one you’ve articulated in your OP. ??

    I don’t see the contradiction.  Could you explain it?  What two facts contradict each other?

    It seems to me that in one production mode, the spinner has made a marginal investment in capital–the spinning wheel.  She applies some amount of labor.  She receives a marginal income for her marginal hours of labor, plus a marginal income for her marginal investment in capital.

    In the other production mode the same relationship holds.   Suppose we track the same spinner.  She has now sold her capital for a return and taken a holiday with the money.  She gets a job as a spinner.  As before, she gets a marginal income for her marginal labor.  She gets no return on her capital because she owns no capital.  The entrepreneur has made a marginal investment in a spinning wheel (which he bought from the spinner), and he gets a marginal return on that marginal investment.

    Where is the contradiction?

    • #26
  27. Zafar Member
    Zafar
    @Zafar

    Mark Camp (View Comment):

    In the other production mode the same relationship holds.   Suppose we track the same spinner.  She has now sold her capital for a return and taken a holiday with the money.

    Or paid for a medical emergency.  Or school fees for her children.  Or for her daugher’s marriage. Or any number of things.  It isn’t always a matter of choosing a consumer product or service for pleasure. Life can be tough.

    She gets a job as a spinner.  As before, she gets a marginal income for her marginal labor.  She gets no return on her capital because she owns no capital.  The entrepreneur has made a marginal investment in a spinning wheel, and he gets a marginal return on that marginal investment.

    Where is the contradiction?

    The return on capital is much higher than the return on labour. But you need both to achieve the significantly higher productivity that industrialisation delivers.  The relative value of labour falls, which in turn influences societies and how they function, including their labour markets, but also in terms of how much power the working class and the capitalist class accrue and how that’s reflected in legislation.

    I am not sure I would call this a “contradiction” – but I believe that’s what they’re speaking about here.  Basically, feudal societies are extremely unequal, and that makes them unstable in the long run.  Because industrialisation (capitalism) is more productive it was thought that would result in flatter, more prosperous societies – and at least initially it does – but the relative strength of capital vs labour, and the increased accrual of power by capital at the expense of labour, is a cause of instability.

    I don’t know if it’s accurate, but from CSNBC:

    Wages in the U.S. have stagnated since the early 1970s. Between 1979 and 2020, workers’ wages grew by 17.5% while productivity grew over three times as fast at 61.8%.

    They have some interesting reasons – ie more than globalisation – but that illustrates the relative power of capital/labour in North America.

     

     

    • #27
  28. Mark Camp Member
    Mark Camp
    @MarkCamp

    Zafar (View Comment):
    The return on capital is much higher than the return on labour.

    I think you are mistaken.

    According to the BEA, in the US the return to capital has always been lower than the return to labor.

     

    • #28
  29. Zafar Member
    Zafar
    @Zafar

    Mark Camp (View Comment):

    Zafar (View Comment):
    The return on capital is much higher than the return on labour.

    I think you are mistaken.

    According to the BEA, in the US the return to capital has always been lower than the return to labor.

     

    So how did productivity grow by 61% and wages only grow by 17%?

    • #29
  30. Zafar Member
    Zafar
    @Zafar

    Oh wait, from BEA:

    The larger portion of labor compensation is employee compensation, which comes directly from the U.S. Bureau of Economic Analysis (BEA) and is a comprehensive measure that includes all forms of pay and benefits:

    • Wages and salaries11
    • Commissions
    • Tips
    • Bonuses
    • Severance payments and early retirement buyout payments
    • Regular supplementary allowances, such as housing allowances
    • The exercising of nonqualified stock options12
    • In-kind earnings such as transit subsidies, meals, and lodging
    • Employer contributions to employee pension and insurance funds and to government social insurance13

    So it depends on where you are in the pecking order, maybe?  Miminum wage/contract workers wouldn’t get most of these.

    • #30
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