rylasasin
8th January 2014, 12:06
I got into an argument over the role of banks/bitcoin with (what I thought was) a right-libertarian (now I'm not so sure, starting to think he's a syndicalist or has syndicalist leanings actually.)
He seems to be on the mindset that getting rid of banks will pretty much fix capitalism (and replacing the bigger corporations with smaller worker cooperatives) and I'm not quite sure how to respond to it...
here's the argument:
You honestly took that long to say that little? I would have expected better.
Please don't refer me to any more videos explaining econ 101. I think we're way past that level here. Not to mention, your Brendan buddy makes so many presumptions that, while true for the last century or more, don't have to remain true. More on that later.
Where to start. I didn't expect such a long response. Not that it's bad but I am trying to organize it into a smaller, more focused discussion. Bear with me if the order doesn't make complete sense to you.
You say that bankers/bank expenses/finance expenses/etc are not the problem. I disagree. I think this is the great misconception in capitalism today. When you add up all the embedded expenses that a publicly traded corporation has, you'll find it's well into the 40% of total revenue range. Yes, that's revenue, not profit. I've tracked a few medium companies as well as set up the business plans for some new startups and it's truly shocking what comes off the top for this category and is still considered everyday operating expenses. One startup needed $40k for materials and $120k for labor to get started. They had the shop, the labor, the contracts, the process - everything. By the time we mapped out a plan that the vultures would go for, he was borrowing $2.3M and was forced into hiring a sales and marketing team just to keep his production growing. Had he got the $160k, he could have operated as 6 employees beyond retirement and lived very well... AFTER paying back a 40% ROI in 2 years. I'm not sure why you don't get this, especially when you consider the owner a parasite because he's not producing. So, let's go there.
I fully agree that the owner is a parasite. That's why I suggested getting rid of him first. When I said, "With today's technology, they can start their own businesses which out-compete the existing businesses. ", that's what it means. Those workers can start a business via cooperation, as you put it.
So, you're now grasping both factors of eliminating the bank costs and the owner cost. Just to drive the point home, I'll show you how both can be done now, today, with existing technology. Go to crowd-funding sites like kickstarter, indiegogo or other and see how many people are raising investment capital to start up a business without any long term debt. Gone are the stockholders who chain businesses down via credit ratings and dividends and hyper-inflated buyback prices. Nope, they can start up in the black (providing they satisfy the initial contracts), come out with their entire operation running and begin competition on a much stronger footing than their rivals. If they're also the worker, or they partnered enough with their workers, there is essentially no owner. This yields the exact scenario that you jumped on me for earlier. Cost is way down and accountability is fairly equal.
Ok, granted that isn't all there is to starting a business but that's not relevant to this discussion. Why would you interject it if you don't know the specific individual's abilities and experience? You suggest cooperation after saying you wish you had a dime for every time someone suggested it? Which is it. For what I'm proposing, they're exactly the same.
Time's short so, briefly for now...
I was making the point of non-automated human labor is 1/50th of current rates, so there must have been a theft along the way of 49/50ths of their labor. Yes, lots of it came from your 'falling rate of profit' but a big share went to bank finance expenses. Not that this WAS wrong but more that now it's unnecessary.
You railed against Bitcoin but it does not have the inflation rate of fiat currencies. So, not only can it be (yes - IN THE FUTURE) fully transacted at every level for almost nothing (if staying it BTC only), it holds value over time. This, coupled with the cheaper admin (due to automation and software tools that allow anyone to play any office role or to eliminate it), mean that the small business can do things that the major corporations cannot do. The big guys have overhead, shareholders, legacy systems, entrenched labor levels, standing business contracts and hundreds of other things that stop them from leaning down to the little guy's retail price range. Boom, they're gone.
In short, this flips capitalism on its head. Today we have corporations mandated into growth because of debt, so they exploit labor to the max because profit is king. Tomorrow we could have non-corporation businesses only making what they are willing to work for because they have no debt so they know they can always crank out some more if they retired too early because the workers control the wage negotiations. This makes leisure king over profit. ...eventually.
This is round 3 by the way. Here's his previous two. (Spoilered for space.)
Yes, we live in a world of capitalism but that by itself doesn't mean it can't work. It just hasn't yet. The form of capitalism we've been creating for the last century has had a major flaw that has been covered up by those that seek power and control. That is that it hasn't benefited the worker as much as the employer.
Over this time, productivity has risen over 50 times so we workers SHOULD BE 50 times as wealthy (ability to purchase a higher standard of living). However, we've been robbed of that through various means so that we only get about double the old standard of living. Then we've been coerced into buying our way up to about 4 times through debt. So now we're stuck working 85 hours per family vs. 35 back then and we're over 10 years in debt as opposed to around one... all to get 1/10th of our deserved increase in standard of living.
Seeing this motivates us to compromise all kinds of incremental morals and ethics just to try to keep up. In short, our standing on the ladder of social success has been switched from a measurement of how good of a person we are to how rich we are. These moral failures are the main driver for nearly all current social problems.
So, many problems arise BECAUSE we're not paid wages that increase with technological improvement. In short, we aren't keeping up.
What we need is to take back the proceeds of this advancement from the banks (they are robbing everyone so wealth always migrates up the chain to them). We need to rebuild society in a manner that eliminates them as middlemen in every transaction. After that, we only need to return businesses to the accountability level of smaller and more local organizations. There's no way "the people" can have any power over a global corporation that can move its headquarters to avoid getting convicted of breaking laws. But with local businesses, the owners will be peer pressured into being accountable to their local environment and workers. This, with ending the bank robbery, will completely change the way capitalism works.
When this trend begins, it will not be able to be stopped. People will overwhelmingly begin to focus on worker pay, not company profit. And when they do, the total wages (even for way less workers) will outpace the job losses from technological unemployment. This puts the money back in the workforce to keep people able to earn a good living. After that results in less hours worked per family, we just have to direct it towards working less years, not less hours per week.
When giving free money, like a lottery win, people squander it. When they work to earn it, they usually hoard it. If unemployment is low or non-existent, they know they can easily go back to work for 6 months to boost their retirement back up if they run short so they will not work much more than they need to for the support of their retirement. When wages balance back up to the value they deserve from advancing technology, this early retirement averages around age 30, leaving the job open for the next worker (3 more times because 40 years now equals five 8 year careers). This solves unemployment and social problems that resulted from poverty and overworking parents.
Lastly, with most all the people relatively wealthy, people will begin to lend to each other as freely as they now lend to their close family. Money will increasingly lose its significance in these transactions. Should that continue endlessly, we'd find ourselves in an automatic RBE. Should it end short of that stage, people would just have such access to money that we still lose the related problems.
This time in history is the first time this option has every been open to us. This is because it's only possible if automation can supply all the required work needed to be done. That makes this time in history unprecedented and unique to all that has come before and all the will follow. It is truly an historical paradigm shift!
So, after all this takes place, prices will plummet (due to technology and less advertising push) while wages quintriple (5x), leading to purchases of lasting quality vs. cyclic quantity, leading to less resource waste and less employment per family that also has a higher standard of living. This is how capitalism should have been migrating for a long time. Fortunately, we can redirect it back onto this path. Stop all bank support and start all local business support.
Wow. Congratulations on making the single longest reply to a comment without understanding the basic premise that comment was solely based on. As I see it, that's your single fault because nearly everything else you said was perfect (except the name calling) in summarizing what has happened in economic history up to this point.
Let me attempt to isolate the crux. In a free market, there are two forces working in opposition to set all prices. First is demand and second is supply. If demand rises, price rises. If supply drops, price rises. Agreed?
Ok, if automation reduces the number of jobs, the obvious assumption would be that wages drop because demand dropped. This, I agree with. However, if workers were first reduced, below the demand from businesses, then there would be a shortage and wages would rise. Agree?
Ok, so here's the crux of the solution. Since the "capitalists" will never raise wages unless they had to, you assume there is no way for the workers to make this switch by themselves. This is where your logic fails. With today's technology, they can start their own businesses which outcompete the existing businesses. They can use crowdfunding to obtain financing without offering perpetual stock (which causes an enormous financial burden for multiple reasons). They can use robotics and other automation to eliminate many unnecessary tasks. They can use internet resources for many (most??) of their administrative duties and programming needs. They can use those programming services to create inhouse systems which allow workers to perform built-in admin while they do their work. And lastly, they can keep their businesses local so the market doesn't span beyond the word of mouth reach that comes free with a respected local company. Nutshell version is their costs are now under half of their competitor's.
(PS: I don't care if you want to view the bankers as a corrupt cartel or simply as a result of capitalism's ever-demanding push for more profits. The result is the same - that they end up getting a cut of every stage in the chain and every transaction too. That's the problem, regardless of the reason or the label.)
So, with labor PREVIOUSLY at 11% of total costs and now total costs at 50% of previous total costs, that leaves room for price reductions. However, this is a small businesses that hopes to depend on community support so they recognize that happy employees talk more. They opt for a 25% price cut (to stay well below their competition and hopefully drive them away), a 22% price hike (yes, triple the original) and they keep 3% for the owner (another double situation vs. going public LONG TERM).
So Mr. owner no longer makes $300k, he makes $600k. He's happy with that since his community loves him. These aspects look better long term than going public and getting a short term windfall and tons of negatives down the line. In the real world (not public corporations on Wall St.), businesses run like this ALL THE TIME. They're stable and DO NOT chase increasing profits each year.
(Side note: I know a local hot dog business that made roughly the same profit, paid COL wage increases only, sold around the same volume and had tremendous local appeal for almost 50 years. One would think they were stuck in time but everyone was happy and their dogs were awesome. Then, a university sponsored them for games and they had to grow. They went public, raised a ton and began to grow regionally (to support the new debt load). In 3 years, lost employees (some with 30 years in), cut quality to the CRAP level, raised prices through the roof and sold out to the only bidder. They're just a memory now. Thousands of small town businesses share this story.)
The employees are now comfortable that they are needed and happy that they earn much more. With discretionary income being maybe 20% of average income, a triple in wage results in 11 times the discretionary income had they kept spending flat. Since we know that won't happen, I advocate calling it a 5x rise. Eventually, this can be played out to even higher wages because of what that increased spending money does. Feel free to skip discussing this but the nutshell is that the employee now supports a family of 4-5 instead of just himself. Should he retire early (for many reasons listed above), he now gives his position to another worker to support 4-5 more people. Taken to its ultimate, five 8-year careers could support 25 people total over the time which now only supports one worker (40 year careers).
This "increasingly" places workers in the driver's seat for wage negotiations which is exactly what capitalism has been missing since its inception. Never before have workers had the ability to walk away from a job because they knew there was a better chance of earning MORE by standing firm. Never have we had a shortage of workers which could stand up for their rights and wants. The closest we've come is the beginning of unions but that was just to save training, not a global shortage. This whole system shows the massive difference between a system designed around scarcity and abundance. And to get that abundance, we must first take control of and foster more automation and do so for our own good, not for some 'authority' or 'richer' person who was willing to help at the right time. Those days are gone.
IMHO, this is THE ONLY workable solution, period. I understand what you advocate but that's absolutely not possible. People will never support the state taking control over production because the state simply cannot be efficient. Where is the incentive for the government workers to make anything happen that doesn't just fatten their pockets? They have force, so they just don't NEED any community (or national) support. And the people will rebel. For this solution to work, it only requires a few people to show how profitable a small, local business can be if it only avoids finance games.
Now, regarding your contention that the capitalist MUST pay the employee less than what the good is worth, that's a mistake. With automation or even good machines, each worker can create goods worth over 50 times what their time is worth. You must have skipped right over this point. Mathematically, this means he COULD be 50x as rich if it weren't for other factors. The first being that the owner will take some. Second is that worker will buy more than he did prior to industrialization. Third is that bank expenses will rob both worker and owner of every spare dime they have so savings is no longer possible. When considering these, we're left with less prosperity for our labor than a century ago. When removing only the bank finance costs, we can get back to 4 times as rich, after buying 12 times as much stuff than a century ago.
Good debate. You make well reasoned points very clearly. Thnx for keeping it (mostly) civil.
He seems to be on the mindset that getting rid of banks will pretty much fix capitalism (and replacing the bigger corporations with smaller worker cooperatives) and I'm not quite sure how to respond to it...
here's the argument:
You honestly took that long to say that little? I would have expected better.
Please don't refer me to any more videos explaining econ 101. I think we're way past that level here. Not to mention, your Brendan buddy makes so many presumptions that, while true for the last century or more, don't have to remain true. More on that later.
Where to start. I didn't expect such a long response. Not that it's bad but I am trying to organize it into a smaller, more focused discussion. Bear with me if the order doesn't make complete sense to you.
You say that bankers/bank expenses/finance expenses/etc are not the problem. I disagree. I think this is the great misconception in capitalism today. When you add up all the embedded expenses that a publicly traded corporation has, you'll find it's well into the 40% of total revenue range. Yes, that's revenue, not profit. I've tracked a few medium companies as well as set up the business plans for some new startups and it's truly shocking what comes off the top for this category and is still considered everyday operating expenses. One startup needed $40k for materials and $120k for labor to get started. They had the shop, the labor, the contracts, the process - everything. By the time we mapped out a plan that the vultures would go for, he was borrowing $2.3M and was forced into hiring a sales and marketing team just to keep his production growing. Had he got the $160k, he could have operated as 6 employees beyond retirement and lived very well... AFTER paying back a 40% ROI in 2 years. I'm not sure why you don't get this, especially when you consider the owner a parasite because he's not producing. So, let's go there.
I fully agree that the owner is a parasite. That's why I suggested getting rid of him first. When I said, "With today's technology, they can start their own businesses which out-compete the existing businesses. ", that's what it means. Those workers can start a business via cooperation, as you put it.
So, you're now grasping both factors of eliminating the bank costs and the owner cost. Just to drive the point home, I'll show you how both can be done now, today, with existing technology. Go to crowd-funding sites like kickstarter, indiegogo or other and see how many people are raising investment capital to start up a business without any long term debt. Gone are the stockholders who chain businesses down via credit ratings and dividends and hyper-inflated buyback prices. Nope, they can start up in the black (providing they satisfy the initial contracts), come out with their entire operation running and begin competition on a much stronger footing than their rivals. If they're also the worker, or they partnered enough with their workers, there is essentially no owner. This yields the exact scenario that you jumped on me for earlier. Cost is way down and accountability is fairly equal.
Ok, granted that isn't all there is to starting a business but that's not relevant to this discussion. Why would you interject it if you don't know the specific individual's abilities and experience? You suggest cooperation after saying you wish you had a dime for every time someone suggested it? Which is it. For what I'm proposing, they're exactly the same.
Time's short so, briefly for now...
I was making the point of non-automated human labor is 1/50th of current rates, so there must have been a theft along the way of 49/50ths of their labor. Yes, lots of it came from your 'falling rate of profit' but a big share went to bank finance expenses. Not that this WAS wrong but more that now it's unnecessary.
You railed against Bitcoin but it does not have the inflation rate of fiat currencies. So, not only can it be (yes - IN THE FUTURE) fully transacted at every level for almost nothing (if staying it BTC only), it holds value over time. This, coupled with the cheaper admin (due to automation and software tools that allow anyone to play any office role or to eliminate it), mean that the small business can do things that the major corporations cannot do. The big guys have overhead, shareholders, legacy systems, entrenched labor levels, standing business contracts and hundreds of other things that stop them from leaning down to the little guy's retail price range. Boom, they're gone.
In short, this flips capitalism on its head. Today we have corporations mandated into growth because of debt, so they exploit labor to the max because profit is king. Tomorrow we could have non-corporation businesses only making what they are willing to work for because they have no debt so they know they can always crank out some more if they retired too early because the workers control the wage negotiations. This makes leisure king over profit. ...eventually.
This is round 3 by the way. Here's his previous two. (Spoilered for space.)
Yes, we live in a world of capitalism but that by itself doesn't mean it can't work. It just hasn't yet. The form of capitalism we've been creating for the last century has had a major flaw that has been covered up by those that seek power and control. That is that it hasn't benefited the worker as much as the employer.
Over this time, productivity has risen over 50 times so we workers SHOULD BE 50 times as wealthy (ability to purchase a higher standard of living). However, we've been robbed of that through various means so that we only get about double the old standard of living. Then we've been coerced into buying our way up to about 4 times through debt. So now we're stuck working 85 hours per family vs. 35 back then and we're over 10 years in debt as opposed to around one... all to get 1/10th of our deserved increase in standard of living.
Seeing this motivates us to compromise all kinds of incremental morals and ethics just to try to keep up. In short, our standing on the ladder of social success has been switched from a measurement of how good of a person we are to how rich we are. These moral failures are the main driver for nearly all current social problems.
So, many problems arise BECAUSE we're not paid wages that increase with technological improvement. In short, we aren't keeping up.
What we need is to take back the proceeds of this advancement from the banks (they are robbing everyone so wealth always migrates up the chain to them). We need to rebuild society in a manner that eliminates them as middlemen in every transaction. After that, we only need to return businesses to the accountability level of smaller and more local organizations. There's no way "the people" can have any power over a global corporation that can move its headquarters to avoid getting convicted of breaking laws. But with local businesses, the owners will be peer pressured into being accountable to their local environment and workers. This, with ending the bank robbery, will completely change the way capitalism works.
When this trend begins, it will not be able to be stopped. People will overwhelmingly begin to focus on worker pay, not company profit. And when they do, the total wages (even for way less workers) will outpace the job losses from technological unemployment. This puts the money back in the workforce to keep people able to earn a good living. After that results in less hours worked per family, we just have to direct it towards working less years, not less hours per week.
When giving free money, like a lottery win, people squander it. When they work to earn it, they usually hoard it. If unemployment is low or non-existent, they know they can easily go back to work for 6 months to boost their retirement back up if they run short so they will not work much more than they need to for the support of their retirement. When wages balance back up to the value they deserve from advancing technology, this early retirement averages around age 30, leaving the job open for the next worker (3 more times because 40 years now equals five 8 year careers). This solves unemployment and social problems that resulted from poverty and overworking parents.
Lastly, with most all the people relatively wealthy, people will begin to lend to each other as freely as they now lend to their close family. Money will increasingly lose its significance in these transactions. Should that continue endlessly, we'd find ourselves in an automatic RBE. Should it end short of that stage, people would just have such access to money that we still lose the related problems.
This time in history is the first time this option has every been open to us. This is because it's only possible if automation can supply all the required work needed to be done. That makes this time in history unprecedented and unique to all that has come before and all the will follow. It is truly an historical paradigm shift!
So, after all this takes place, prices will plummet (due to technology and less advertising push) while wages quintriple (5x), leading to purchases of lasting quality vs. cyclic quantity, leading to less resource waste and less employment per family that also has a higher standard of living. This is how capitalism should have been migrating for a long time. Fortunately, we can redirect it back onto this path. Stop all bank support and start all local business support.
Wow. Congratulations on making the single longest reply to a comment without understanding the basic premise that comment was solely based on. As I see it, that's your single fault because nearly everything else you said was perfect (except the name calling) in summarizing what has happened in economic history up to this point.
Let me attempt to isolate the crux. In a free market, there are two forces working in opposition to set all prices. First is demand and second is supply. If demand rises, price rises. If supply drops, price rises. Agreed?
Ok, if automation reduces the number of jobs, the obvious assumption would be that wages drop because demand dropped. This, I agree with. However, if workers were first reduced, below the demand from businesses, then there would be a shortage and wages would rise. Agree?
Ok, so here's the crux of the solution. Since the "capitalists" will never raise wages unless they had to, you assume there is no way for the workers to make this switch by themselves. This is where your logic fails. With today's technology, they can start their own businesses which outcompete the existing businesses. They can use crowdfunding to obtain financing without offering perpetual stock (which causes an enormous financial burden for multiple reasons). They can use robotics and other automation to eliminate many unnecessary tasks. They can use internet resources for many (most??) of their administrative duties and programming needs. They can use those programming services to create inhouse systems which allow workers to perform built-in admin while they do their work. And lastly, they can keep their businesses local so the market doesn't span beyond the word of mouth reach that comes free with a respected local company. Nutshell version is their costs are now under half of their competitor's.
(PS: I don't care if you want to view the bankers as a corrupt cartel or simply as a result of capitalism's ever-demanding push for more profits. The result is the same - that they end up getting a cut of every stage in the chain and every transaction too. That's the problem, regardless of the reason or the label.)
So, with labor PREVIOUSLY at 11% of total costs and now total costs at 50% of previous total costs, that leaves room for price reductions. However, this is a small businesses that hopes to depend on community support so they recognize that happy employees talk more. They opt for a 25% price cut (to stay well below their competition and hopefully drive them away), a 22% price hike (yes, triple the original) and they keep 3% for the owner (another double situation vs. going public LONG TERM).
So Mr. owner no longer makes $300k, he makes $600k. He's happy with that since his community loves him. These aspects look better long term than going public and getting a short term windfall and tons of negatives down the line. In the real world (not public corporations on Wall St.), businesses run like this ALL THE TIME. They're stable and DO NOT chase increasing profits each year.
(Side note: I know a local hot dog business that made roughly the same profit, paid COL wage increases only, sold around the same volume and had tremendous local appeal for almost 50 years. One would think they were stuck in time but everyone was happy and their dogs were awesome. Then, a university sponsored them for games and they had to grow. They went public, raised a ton and began to grow regionally (to support the new debt load). In 3 years, lost employees (some with 30 years in), cut quality to the CRAP level, raised prices through the roof and sold out to the only bidder. They're just a memory now. Thousands of small town businesses share this story.)
The employees are now comfortable that they are needed and happy that they earn much more. With discretionary income being maybe 20% of average income, a triple in wage results in 11 times the discretionary income had they kept spending flat. Since we know that won't happen, I advocate calling it a 5x rise. Eventually, this can be played out to even higher wages because of what that increased spending money does. Feel free to skip discussing this but the nutshell is that the employee now supports a family of 4-5 instead of just himself. Should he retire early (for many reasons listed above), he now gives his position to another worker to support 4-5 more people. Taken to its ultimate, five 8-year careers could support 25 people total over the time which now only supports one worker (40 year careers).
This "increasingly" places workers in the driver's seat for wage negotiations which is exactly what capitalism has been missing since its inception. Never before have workers had the ability to walk away from a job because they knew there was a better chance of earning MORE by standing firm. Never have we had a shortage of workers which could stand up for their rights and wants. The closest we've come is the beginning of unions but that was just to save training, not a global shortage. This whole system shows the massive difference between a system designed around scarcity and abundance. And to get that abundance, we must first take control of and foster more automation and do so for our own good, not for some 'authority' or 'richer' person who was willing to help at the right time. Those days are gone.
IMHO, this is THE ONLY workable solution, period. I understand what you advocate but that's absolutely not possible. People will never support the state taking control over production because the state simply cannot be efficient. Where is the incentive for the government workers to make anything happen that doesn't just fatten their pockets? They have force, so they just don't NEED any community (or national) support. And the people will rebel. For this solution to work, it only requires a few people to show how profitable a small, local business can be if it only avoids finance games.
Now, regarding your contention that the capitalist MUST pay the employee less than what the good is worth, that's a mistake. With automation or even good machines, each worker can create goods worth over 50 times what their time is worth. You must have skipped right over this point. Mathematically, this means he COULD be 50x as rich if it weren't for other factors. The first being that the owner will take some. Second is that worker will buy more than he did prior to industrialization. Third is that bank expenses will rob both worker and owner of every spare dime they have so savings is no longer possible. When considering these, we're left with less prosperity for our labor than a century ago. When removing only the bank finance costs, we can get back to 4 times as rich, after buying 12 times as much stuff than a century ago.
Good debate. You make well reasoned points very clearly. Thnx for keeping it (mostly) civil.