What is the difference between a “worker” and a “capitalist”? Isn’t every worker a capitalist, and every capitalist a worker?
The aggregate of all the values being produced simply is always bigger then the aggregate of all wages being paid. Simple as that.
Now, this is (within Marxist theory) labelled as the problem of overproduction.
So it was the last option, a combination. You are saying the dollar amount paid out to workers is less than the price charged for all they produce means there is not enough money to actually buy all the products that were produced. Because workers cant buy all the products produced then too much was produced.
The problem with this is that there is enough money in the entire economy to buy the all goods. It would be held by the capitalists. But you say that the handfull of capitalists could not consume the massive amounts of goods that went unsold. There just arent enough of them.
The problem with this view is that only a portion of what is produced by workers are bought by the workers. The capitalist would buy other things like new industrial ovens to replace the ones that are worn. These would be bought from another capitalist who employ a different group of workers. The industrial ovens, fork lifts, and other capital goods produced not are bought by workers so they dont need enough money to buy them. A huge portion of our economy produces capital goods.
In short workers dont need enough money to purchase everything in produced in an economy. All that other production that a worker produces but does not buy is purchased out of the profits made by the capitalist.
<<< What is the difference between a “worker” and a “capitalist”? Isn’t every worker a capitalist, and every capitalist a worker? >>>
A worker works for a wage. He has no private property or capital, just his personal belongings and must sell his labour to enable him to buy for the things he need to sustain himself. This is dominatly still the case all over the world, although in richer countries, the better paied workers can afford some investments themselves. Moreover, they most likely have pension plans, and that finance capital is a form of capital too of course. But still: most workers, and the makority of people have to work for a living, are dependend in majority on their wages.
Is a capitalist.a worker? Well the position of the owner of the means of production has of course changed, they are for a part of the enterprises owned by the shareholders, while the directors themselves in fact have become employees. Although they have significantly higher wages, it is a form of wage labour. But their subjective position towards capital is no longer that of the vast majority of wage laborers.
I add some more material to this. Here are some videos about prof. Wolff.
http://fora.tv/2010/03/03/Richard_Wolff_Capitalism_Hits_the_Fan
The answer is that all consumer production can be purchased by wage earners. Wage earners include the workers, entrepreneurs and capitalists. The entreprenuers wages are profits, and the capitalists wages are interest.
The main consideraton that you are failing to utilize is that many workers, entreprenuers and capitalists place their efforts into producing capital goods rather than consumer goods. These capital goods are purchased with part of Marx’s surplus. The workers, entrepreneurs and capitalists purchase the consumers goods in their roles as consumers. When productivity increases more goods become available per capita lowering relative prices and allowing individuals to consume more per capita.
The individuals involved in capital goods production use their wages to procure consumer goods and not the capital goods that they personally produce. Failing to realize this fact is the primary error in this particular Marxist fallacy.
<<< In short workers dont need enough money to purchase everything in produced in an economy. All that other production that a worker produces but does not buy is purchased out of the profits made by the capitalist. >>>
Yes but that is not what happens. As was stated, and since the wages of the american worker since the 70-ies has stagnated, this gave rise to the credit economy. But for a further explenation, see the explenation in the videos in the above post.
Rob, could you address my post?
I thought credit expansion gave rise to the credit economy. If people’s standard of living plateaus there’s no reason for them to continue trying to improve it temporarily by using credit.
Regardless, you seem to have abandoned your other thread about capitalism being inherently flawed, leaving behind many good analytical arguments and evidence. You should go back and address them. If you find it too time consuming, you might not want to start so many threads in the future.
Marx’s mistake is to think that only the man on the assembly line contributes to the creation of the product. Utter nonsense. One cannot consume what one has not produced. Assuming no spoilage and accidents, humans can consume what they produce (when and whether they do it is another matter). There are many people - from laborers to managers to truckers to miners to… you get the idea - who participate in the creation of something, but if something is produced then it can be consumed.
As to who gets how much of the pie they all participate in baking is another matter. I think the free, voluntary agreements made between individuals should be honored in making this decision. However, if workers disagree and think that only they contribute to production, they are free, so far as I know, to quit their jobs and return to their living rooms where they may begin once again to assemble, say, automobiles. And if they claim that they are unable to make automobiles by themselves, in their own rooms… well, maybe they need to recheck their belief that only they add anything meaningful to production. And if, in rechecking it, they discover that they need the talents of other individuals to accomplish production, perhaps they will rethink the idea that they, in helping to make five automobiles, ought to be able to buy them all back with their wages.
Okay so there are 2 things I would recommend you look at, say’s law and structure of production theory…
http://mises.org/resources/1082/Man-Economy-and-State-with-Power-and-Market
p. 335 in man economy and state w/ power and market (p399 in the pdf)
p. 369 in mespm (433 in the pdf)
You should see figure 40 and figure 41
Figure 40: C=capital L=land and Labor
|L |
|C |L|
| C | L|
| C | L|
| C | L |
| C | L |
This is a very crude text version of figure 40
So in other words the market prices of consumer goods goes to Capital, labor, natural resources and profit. Profit tends toward the rate of interest or in other words innovation+waiting. This gets into the “self defeating” nature of profits due to competition of capitalists
Capital can be reduced to land, labor, capital and profit as well but if you go back far enough you would see capital goods only being produced by land and labor.
So to answer your question… not everyone produces consumer goods.
Says law basically says you wont get overproduction in an entire economy only in particular industries in which case price can be lowered to clear the market.
Also keep in mind that the value of the factors is determined by the value of the consumer goods they produce.
Yes but that is not what happens.
What does not happen? Capitalists dont buy capital goods? Isnt that the definition of a capitalist?
Workers dont buy the capital goods produced in an economy. If they did they would become a capitalist.
Capitalists have to have the funds to purchase capital goods and workers only need enough to purchase most of the consumer goods. Because the capitalists will use some of thier profit to buy bread too.
‘He has no private property or capital, just his personal belongings and must sell his labour to enable him to buy for the things he need to sustain himself.’
Personal belongings are private property.
Why is it that credit expansion doesn’t correct the failure of capitalism? It makes up the difference in value so it seems, problem solved?
How do you “expand credit” without increasing production or reducing consumption?
Au contraire, it is certainly possible that worker could be able to consume what he produces. For example, a worker could produce a sofa that a capitalist plans to sell for $80 for a wage of $20. Then, the capitalist liquidates the sofa for $15 and, now, the worker has the opportunity buy the sofa for the less than he was paid.
More fundamentally he is arguing for an objective value when one of the most self apparent things around us is that value is subjective. If I’m a worker making sofas that sell for $80 each would I rather be paid in my “produce” of sofas or accept less than those sofas might sell for in “money” which I can exchange for those goods and services which I subjectively value more than the sofas I’m producing. I’ll take the money and leave the risk to the capitalist.
<<<< Au contraire, it is certainly possible that worker could be able to consume what he produces. For example, a worker could produce a sofa that a capitalist plans to sell for $80 for a wage of $20. Then, the capitalist liquidates the sofa for $15 and, now, the worker has the opportunity buy the sofa for the less than he was paid. >>>
You haven’t read the whole article and are citing arbitrarily, as the article stated:
This is a flaw that is only apparent when considering aggregate production versus aggregate consumption, not in any isolated case of someone buying a loaf of bread with cash. [ FOR LOAF OF BREAD; READ: SOFA] In aggregate, workers cannot consume what they produce using only the wages of that production. The truth of that should be obvious, as workers are paid less in wages than the selling price of whatever it is they produced.
<<< Personal belongings are private property. >>
They are not capital and not means of production.
again, I can’t understand why credit expansion doesn’t permanently solve the problems of capitalism and I can’t see it in your original post.
I suppose that interest and unpaid debt is what ruins the system again but if credit infact is enough to close the gap between goods and income, that is, to fully realize the potential of the capitalist economy; then why is an instance of that economy -interest payments, on aggregate unaffordable?
Credit cannot exceed the total amount of savings (unconsumed goods). You can print multiple claims to the same savings, but that isn’t credit expansion. It’s fraud.
“Yes but that is not what happens. As was stated, and since the wages of the american worker since the 70-ies has stagnated, this gave rise to the credit economy. But for a further explenation, see the explenation in the videos in the above post.”
Honestly I don’t understand what the problem is…
Goods are sold. the money goes to Land, Labor and Profit Some of that is consumed some of that is invested, some of that is horded and some of that is saved. Sometimes it is hard to distinguish between some of these
If it is consumed this helps bring the total produced closer to the total consumed
If it is horded, for example money sitting under a mattress for 25 years it causes theoretically causes slight deflation which increases everyone elses purchasing power until it is brought back into the economy.
If it is invested they are giving someone else money, whether it be the people who build the factory and thus investment is either consumed, saved, invested, horded
If it is saved, meaning if it is in a bank account and it is loaned out this is either consumption or investment.
But remember people save/invest to the end of consuming more in the future.
So…
To the extent that people don’t consume all of their earnings now and hold onto it, we cut back on production and this frees up resources to be put into new ventures to the end of future consumption.
So there are wages being paid ie money being spent that isn’t going to present production and much of these wages go into present consumption. Plus people consume their savings.
So theoretically this isn’t even a problem.
There is no reason to suppose the “credit economy” is a necessary stage in capitalism, the “credit economy” is the result of among other things the federal reserve act. Saying that it is a logical and necessary consequence of the arithmetic discrepancy between consumption and production is a non sequitur… In fact there is no reason to believe that their will be an economic catastrophe if some made up equation does not balance out… it has yet to be shown that the economy operates under these parameters in fact I reject the very notion of thinking of “the economy” as some kind of real entity
“In aggregate, workers cannot consume what they produce using only the wages of that production.”
So what? There are other costs to the “capitalist” besides paying workers. The workers are also paying the capitalist (in the form of a reduced wage) to assume risk. Risk can be bought and sold.
“The truth of that should be obvious, as workers are paid less in wages than the selling price of whatever it is they produced.”
So what?