at my college (‘high school’ to Americans, I believe) there is a Marxist teacher who helps to operate a politics society which I frequently speak at. As you can imagine we frequently clash on various issues but yesterday he made the following assertion:
“The Capitalist system is inherently unstable because, even if business produces for the masses, in order to profit it must charge more for these products than the masses are paid to produce them”
Something is clearly wrong with this, not to mention the empirical evidence, but I could not quite see exactly what. Is it the fact that the average worker owns a considerable amount of property, or that not all production produces goods for the masses? Does this mean that sme production will always be unprofitable? What exactly am I missing, could somebody please clarify?
I would guess he is wondering how sales revenues might exceed costs of business(of which wages form a part)., given that he ascribes all sales revenues to have come from the purchasing activities of wage earners. Could that be where he is coming from?
As a general suggestion, I would say that you should focus your argument on destroying the labour theory of value, showing that value is subjective, and from this that in any interpersonal exchange of goods or services, both parties profit in an ex ante sense. From here you can move onto time-preference and show that the ‘worker’ is not ‘exploited’, but in fact profits.
OK, let’s get the Math straight. Bill Gates pays his workers, say, ten dollars to priduce one widget. He sells it for twelve dollars, which they cannot possibly afford. Therefor, Capitalism is doomed.
Well, not exactly. The workers work 40 hours a week. Each one produces many many widgets, and gets paid much more than the cost of one widget. So he buys one, and lives happily ever after.
“Ah,” one may argue. “Who is going to buy all those excess widgets that are produced?”
“People who work at other jobs, like milking cows.”
OK, let’s do the math. 10,000 widgets are produced by 5,000 workers, and 10,000 gallons of milk are produced by 5,000 other workers. The milkmen get paid $2 for every gallon of milk, and milk is sold for $3 a gallon.
Each widget worker gets $20, and each milkman gets $4. To buy a widget and a gallon of milk cost $15. So the widget workers are doing fine. The milkmen buy a gallon of milk, cannot afford the wiget, and have $1 to save. After 12 weeks, they buy the widget from their savings. Capitalism rules.
Thank you, that just about clears it up. I’d already spoken about Labour Theory of Value and the rest, which no Marxist seems to have even half an answer to. I’ll continue the debate in the week coming.
Smiling Dave, that much math will surely confound said teacher.
Using an one-firm model of the economy should be enough to show that the teacher’s reasoning is incorrect (or at least, incomplete in the way he presented it).
I am a capitalist: I have 1 apple. Each apple has 5 seeds. I hire you for 2 apples. My profit is 2 apples (3 apples in revenue - that 1 apple I started with that this investment cost me).
But there are many cases where a worker can scarcely afford one single item that is produced by the firm: think of those who produce luxury cars like Maseratis, and other such items – and probably people working in 3rd world countries to produce western electric appliances or whatever. It’s even possible to have situations where the investor/entrepreneur (what you’d call a capitalist I guess) can’t afford the items he produces either: like some engineer guys in my country who were assembling 2 or 3 very expensive car engine based on designs of theirs.
Anyhow, when talking to the teacher I would correct him on the usage of loaded words like “capitalist”. I wouldn’t correct him outright (you don’t win friends by being that confrontational); what I often do in similar cases is to replace the word “capitalist” by “the investors” or " the entrepreneur" as appropriate, and sometimes I even repeat a re-worded question out loud to myself as I’m considering it. Sometimes when the person snides at “those fat investors” (or whatever) it helps to throw an observations like: everyone who has a single cent in a checking account is an investor.
By the way, is that in college (university, ages 18 and up) or high-school (14-18)? And what class is it?
Assertion: In order to profit, it must charge more for these products than the masses are paid to produce them
Reply: Then how will he profit if he charges more then what the masses are able to pay?
Actually, I think this reply from DD5 is probably the best to make the point across that there’s some problem with the teacher’s reasoning. It’s also non-confrontational, and, if the teacher’s has a philosophical bent, which he probably does, this may lead to an interesting conversation. He will probably try to come up with some convoluted circumstances in which this can supposedly happen, and then you can address those (do lightly point out that he is partially conceding, if he is :-)), and etc.
By the way, if you feel somewhat intimidated or constrained in being in the minority there, you can avoid coming across as some lone reactionary by saying stuff like “I share your concern, but I am not yet convinced by your reasoning because …”.
nirgrahamUK, I read the initial post too quickly and I thought the point the teacher was making was something along the lines of the usual “as profits increase, workers can’t buy what their own firm produces, …”.
I do like stylized illustrations: so, I’d probably come up with two firms producing apples and oranges, or whatever. You don’t need money as such in here.
Anyhow, as I posted afterwards, DD2 is probably the best retort. It’s engaging, and will get people interested: I don’t remember ever being successful at argument by coming up with some numerical analysis (even if I personally do like that sort of thing).
Just playing the devil’s advocate here. He may have a “killer” response here that most in an economically uneducated audience may find appealing:
“He will profit by sucking the masses dry – who apparently have no choice but to buy the products at whatever prices the capitalist demands – until there’s nothing left to suck and pitchforks come out on the streets. Hence, the inherent instability. QED.”
I think the best approach is:
Attack LTV
Attack the capitalist <> worker dichotomy, as most capitalists do work and most workers do invest. So who’s “exploiting” whom?
For one, it sets up a false classification. There are only individuals (one man business entrepreneurs) and they all produce and trade things; and individuals partake in this because it makes them better off according to their own preferences. Nothing unsustainable about that.
Does your Marxist teacher trade his labor voluntarily or is he paid by forcefully extracted resources? There are reasons why some people can’t see simple truths.
