"You cannot fix capitalism without..."

[Cheese Guevara]

"You cannot fix capitalism without killing the idea of profit, and then it will not be capitalism." - Jose Saramago

I just heard this quote by writer J. Saramago. I have a question:

Assuming someone created a version of capitalism whereby money isn't created at interest and in which every "player" within the system starts off with the same amount of cash, capital and land resources, wouldn't the sheer act of each player "seeking private profit" lead to poverty, inequality, booms, busts, bankrupcy and most of Marx's other contradictions? Profit is beyond "reform"?

[ckaihatsu]

Yes.

[Sinister Intents]

Yes.

Indeed. Simply put, yes. I don't know what else to add at the moment, but as more people post I'll contribute

[ckaihatsu]

[LaborTech] Marx Was Right: Five Surprising Ways Karl Marx Predicted 2014


Marx Was Right: Five Surprising Ways Karl Marx Predicted 2014


http://www.rollingstone.com/music/news/marx-was-right-five-surprising-ways-karl-marx-predicted-2014-20140130


ROLLING STONE
Marx Was Right: Five Surprising Ways Karl Marx Predicted 2014

From the iPhone 5S to corporate globalization, modern life is full of evidence of Marx's foresight

by Sean McElwee

JANUARY 30, 2014

There's a lot of talk of Karl Marx in the air these days - from Rush Limbaugh accusing <http://mediamatters.org/blog/2013/12/15/pope-francis-rebukes-marxist-attack-from-rush-l/197273> Pope Francis of promoting "pure Marxism" to a Washington Times writer claiming <http://communities.washingtontimes.com/neighborhood/judson-phillips-cold-hard-truth/2014/jan/1/new-york-city-comrade-mayor-sworn/> that New York City Mayor Bill de Blasio is an "unrepentant Marxist." But few people actually understand Marx's trenchant critique of capitalism. Most people are vaguely aware of the radical economist's prediction that capitalism would inevitably be replaced by communism, but they often misunderstand why he believed this to be true. And while Marx was wrong about some things, his writings (many of which pre-date the American Civil War) accurately predicted several aspects of contemporary capitalism, from the Great Recession to the iPhone 5S in your pocket.

Here are five facts of life in 2014 that Marx's analysis of capitalism correctly predicted more than a century ago:

1. The Great Recession (Capitalism's Chaotic Nature)

The inherently chaotic, crisis-prone nature of capitalism was a key part of Marx's writings. He argued that the relentless drive for profits would lead companies to mechanize their workplaces, producing more and more goods while squeezing workers' wages until they could no longer purchase the products they created. Sure enough, modern historical events from the Great Depression to the dot-com bubble can be traced back to what Marx termed "fictitious capital" - financial instruments like stocks and credit-default swaps. We produce and produce until there is simply no one left to purchase our goods, no new markets, no new debts. The cycle is still playing out before our eyes: Broadly speaking, it's what made the housing market crash in 2008. Decades of deepening inequality reduced incomes, which led more and more Americans to take on debt. When there were no subprime borrows left to scheme, the whole façade fell apart, just as Marx knew it would.

2. The iPhone 5S (Imaginary Appetites)

Marx warned that capitalism's tendency to concentrate high value on essentially arbitrary products would, over time, lead to what he called "a contriving and ever-calculating subservience to inhuman, sophisticated, unnatural and imaginary appetites." It's a harsh but accurate way of describing contemporary America, where we enjoy incredible luxury and yet are driven by a constant need for more and more stuff to buy. Consider the iPhone 5S you may own. Is it really that much better than the iPhone 5 you had last year, or the iPhone 4S a year before that? Is it a real need, or an invented one? While Chinese families fall sick with cancer from our e-waste, <http://www.eurekalert.org/pub_releases/2013-01/osu-rnc012213.php> megacorporations are creating entire advertising campaigns <http://lazytechguys.com/news/virgin-mobile-wants-you-to-throw-away-your-phone-video/> around the idea that we should destroy perfectly good products <http://www.youtube.com/watch?v=mzjN9QDbUsg> for no reason. If Marx could see this kind of thing, he'd nod in recognition.

3. The IMF (The Globalization of Capitalism)

Marx's ideas about overproduction led him to predict what is now called globalization - the spread of capitalism across the planet in search of new markets. "The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe," he wrote. "It must nestle everywhere, settle everywhere, establish connections everywhere." While this may seem like an obvious point now, Marx wrote those words in 1848, when globalization was over a century away. And he wasn't just right about what ended up happening in the late 20th century - he was right about why it happened: The relentless search for new markets and cheap labor, as well as the incessant demand for more natural resources, are beasts that demand constant feeding.

4. Walmart (Monopoly)

The classical theory of economics assumed that competition was natural and therefore self-sustaining. Marx, however, argued that market power would actually be centralized in large monopoly firms as businesses increasingly preyed upon each other. This might have struck his 19th-century readers as odd: As Richard Hofstadter writes, "Americans came to take it for granted that property would be widely diffused, that economic and political power would decentralized." It was only later, in the 20th century, that the trend Marx foresaw began to accelerate. Today, mom-and-pop shops have been replaced by monolithic big-box stores like Walmart, small community banks have been replaced by global banks like J.P. Morgan Chase and small famers have been replaced by the likes of Archer Daniels Midland. The tech world, too, is already becoming centralized, with big corporations sucking up start-ups as fast as they can. Politicians give lip service to what minimal small-business lobby remains and prosecute the most violent of antitrust abuses - but for the most part, we know big business is here to stay.

5. Low Wages, Big Profits (The Reserve Army of Industrial Labor)

Marx believed that wages would be held down by a "reserve army of labor," which he explained simply using classical economic techniques: Capitalists wish to pay as little as possible for labor, and this is easiest to do when there are too many workers floating around. Thus, after a recession, using a Marxist analysis, we would predict that high unemployment would keep wages stagnant as profits soared, because workers are too scared of unemployment to quit their terrible, exploitative jobs. And what do you know? No less an authority than the Wall Street Journal warns <http://blogs.wsj.com/economics/2010/05/08/number-of-the-week-294-million-in-industrial-reserve-army/http:/blogs.wsj.com/economics/2010/05/08/number-of-the-week-294-million-in-industrial-reserve-army/> , "Lately, the U.S. recovery has been displaying some Marxian traits. Corporate profits are on a tear, and rising productivity has allowed companies to grow without doing much to reduce the vast ranks of the unemployed." That's because workers are terrified to leave their jobs and therefore lack bargaining power. It's no surprise that the best time for equitable growth is during times <http://www.cepr.net/documents/Getting-Back-to-Full-Employment_20131118.pdf> of "full employment," when unemployment is low and workers can threaten to take another job.

In Conclusion:

Marx was wrong about many things. Most of his writing focuses on a critique of capitalism rather than a proposal of what to replace it with - which left it open to misinterpretation by madmen like Stalin in the 20th century. But his work still shapes our world in a positive way as well. When he argued for a progressive income tax in theCommunist Manifesto, no country had one. Now, there is scarcely a country without a progressive income tax, and it's one small way that the U.S. tries to fight income inequality. Marx's moral critique of capitalism and his keen insights into its inner workings and historical context are still worth paying attention to. As Robert L. Heilbroner writes, "We turn to Marx, therefore, not because he is infallible, but because he is inescapable." Today, in a world of both unheard-of wealth and abject poverty, where the richest 85 people have more wealth <http://www.oxfam.org/sites/www.oxfam.org/files/bp-working-for-few-political-capture-economic-inequality-200114-en.pdf> than the poorest 3 billion, the famous cry, "Workers of the world unite; you have nothing to lose but your chains," has yet to lose its potency.

http://www.rollingstone.com/music/news/marx-was-right-five-surprising-ways-karl-marx-predicted-2014-20140130

[The Jay]

Capitalism is Capitalism. Besides, you included something about people's mindset and means in the hypothetical which would never happen.

[Cheese Guevara]

Thank you for your blunt replies. I am trying to create a computer simulation mapping money flow under a simple profit based "system", and you are confirming what I personally believe (and am witnessing).

I have more questions:

Our current monetary system, in which cash is issued at interest at debt, is akin to a zero sum relationship. Although the money supply constantly inflates, the amount of debt in the system always outpaces money. In other words, for all the value created, there is a corresponding (plus more) debt. For one person to be X dollars out of debt, another has to be X dollars in proportional debt.

But can we say that all money is inherently zero sum?

If so, is money inherently unethical?

[Cheese Guevara]

Die Neue Zeit has a thread titled "Equity vs. interest/usury: effects of changing the banking system?" In it he muses about the effects of nationalising central banks and so forth.


Ckaihatsu, in the same thread, rightfully points out that this solves nothing. You have simply moved the source of many problems to the state, which now operates as an even larger, parisitic, capitalist body.


But, I wonder if we should nevertheless champion this as a step toward even more radical reforms. With the inevitable failures and cycles of a hypothetical state central bank, perhaps humans will drift toward more radical, and vital, solutions.


The pessimist in me, however, says the opposite will happen. When people grow disillusioned in even a massively regulated state banking system, we are likely to swing back toward our contemporary set-up, and perhaps even worse.

[Trap Queen Voxxy]

But can we say that all money is inherently zero sum?

I would say so, unlike other methods of transaction, under current monetary conditions what's be exchanged between two parties (buyer-sellar) isn't always of equal value and as you described in your post it leads ultimately to gross inequality which you can see most acutely in severe cases of poverty.


If so, is money inherently unethical?

Yes, as Milgram pointed out, "it is not so much the kind of person a man is as the kind of situation in which he finds himself that determines how he will act."

Analyzing capitalism, money, etc. using the Behaviorist model, the inherent pathological nature of money and capital becomes even more clear. Which is to say, if you have a system (monetary/wage/market system) which positively rewards and reinforces socially negative behavior irrespective of social or individual responsibility, what do you think is going to happen?

[ckaihatsu]

Die Neue Zeit has a thread titled "Equity vs. interest/usury: effects of changing the banking system?" In it he muses about the effects of nationalising central banks and so forth.


Ckaihatsu, in the same thread, rightfully points out that this solves nothing. You have simply moved the source of many problems to the state, which now operates as an even larger, parisitic, capitalist body.


I just looked over that 5+ -year-old thread, and your summarization of my comments there is less-than-accurate.

Nonetheless, I don't disagree with your conclusion -- nationalization (or 'socialization') of banking would be a radical *reform*, at best, for a worldwide situation that really calls for a full proletarian revolution and the *liberation* of all assets and resources, and labor.





But, I wonder if we should nevertheless champion this as a step toward even more radical reforms. With the inevitable failures and cycles of a hypothetical state central bank, perhaps humans will drift toward more radical, and vital, solutions.


The pessimist in me, however, says the opposite will happen. When people grow disillusioned in even a massively regulated state banking system, we are likely to swing back toward our contemporary set-up, and perhaps even worse.


While it may be "scientific" to try to predict where political sentiments may drift in the future, I'll remind you, and the reader, that as political people we're *not* academics. Simply studying trends-over-time is far too *passive*, both in approach and method, for what our role *should* be as revolutionaries.

Sure, we can see how many slices we can make from here-to-there, but it's really the *destination*, or 'ends', that counts. I'm pleased to report that since that thread from '08-'09 I've developed a solid framework that addresses the political-logistical question of how a post-capitalist political economy can be -- see my blog entry.

[Jimmie Higgins]

Assuming someone created a version of capitalism whereby money isn't created at interest and in which every "player" within the system starts off with the same amount of cash, capital and land resources, wouldn't the sheer act of each player "seeking private profit" lead to poverty, inequality, booms, busts, bankrupcy and most of Marx's other contradictions? Profit is beyond "reform"?

Yes and basically what Marx tries to do in Capital is to make a sort of abstract, idealized version of capitalism and then show how - left alone - these internal contractions will still cause the system to hit limits and undermine its own foundations.


I have more questions:

Our current monetary system, in which cash is issued at interest at debt, is akin to a zero sum relationship. Although the money supply constantly inflates, the amount of debt in the system always outpaces money. In other words, for all the value created, there is a corresponding (plus more) debt. For one person to be X dollars out of debt, another has to be X dollars in proportional debt.

But can we say that all money is inherently zero sum?

If so, is money inherently unethical? No it's not zero-sum according to the labor theory of value. If you look at financial speculation alone, then values are traded back and forth and investors just try and get a deal. This is a big portion of a modern economy and can be the source of a firm or investor's subjective or personal wealth, but it doesn't create new wealth in an absolute sense. That investment capital being speculated with came from somewhere: exploited labor at some point.

[Cheese Guevara]

"I would say so, unlike other methods of transaction, under current monetary conditions what's be exchanged between two parties (buyer-sellar) isn't always of equal value and as you described in your post it leads ultimately to gross inequality which you can see most acutely in severe cases of poverty."

Who are some philosophers or economists who advocate the abolishment of money on the presumed basis that it is zero sum - ie, that for one to profit, another must go into debt ?


In all my models, there is a clear relationship between "money" and "debt". For one to be X dollars out of debt, someone or someones in the system must be X dollars in debt. In aggregate, debt (money owed) always outpaces value (money in the system).

Capitalism, like a Ponzi scheme, covers this injustice up by growing incessantly - more people enter the system and debts are pushed onto them, who likewise eventually pass the debt onto others.

So can we therefore say that money is zero sum only when capitalism is stagnant? Is money "ethical" so long as capitalism is allowed to incessantly grow (which we know is an impossibility)?

"No it's not zero-sum according to the labor theory of value."

Why?

"If you look at financial speculation alone, then values are traded back and forth and investors just try and get a deal."

I am strictly refering to the amount of money in the system, not the subjective value of commodities or the way value is tied to limited or resuable resources.

What I am interested in is whether money in a numerical sense is zero sum.

If, for example, there are ten people in a system and each are given ten dollars, for one to profit, another must lose money. Of course modern society is not this clear cut, and the money supply is always inflating. But if you can prove that this is in essense true, you have a very simple and powerful argument.

Many complex historical forces led to the abolishing of slavery (yes, as we all know, slavey didn't really end; there are more slaves today than the 1850s), but the psychological rejection of slavery - our acceptance of it as being "bad" - is grounded on very simple moral arguments. If you can prove that someone profiting via money harms another, then you have a similarly simple argument.

[Jimmie Higgins]

"No it's not zero-sum according to the labor theory of value."

Why?

"If you look at financial speculation alone, then values are traded back and forth and investors just try and get a deal."

I am strictly refering to the amount of money in the system, not the subjective value of commodities or the way value is tied to limited or resuable resources.

What I am interested in is whether money in a numerical sense is zero sum.

If, for example, there are ten people in a system and each are given ten dollars, for one to profit, another must lose money. Of course modern society is not this clear cut, and the money supply is always inflating. But if you can prove that this is in essense true, you have a very simple and powerful argument.
modern society is not that clear cut because you are only discussing economic circulation, but neglecting the source of the values being circulated: labor. Money is not zero sum because labor creates new value. Investors invest with the assumption they will get a return, so the person receiving the investment, if they are a producing owner, expects to engage in an activity which will create new value... It's labor which allows that producer-owner to end up with more value than the sum of it's parts. The surplus produced by that labor helps pay the rent or return for the investor.

You mistake growth for inflation, but capitalism does grow... And contract... And even destroy it's own surplus. Price fluctuates more freely and sometimes more subjectively, but it's always bouncing higher or lower to some generalized value: price is like waves whereas value is the actual height of the tide.

Your other argument about the necessity of a moral reason to be anti-capitalism: well if that's required, the economic bit you neglect also includes a pretty strong moral rationale for working class revolution. The surplus value created is created through the exploitation of labor. You don't even need much economic or philosophical talk to convince people of that either: most people feel it on some level (though I think most people just don't think there's anything you can do about it). I met an anthropology student one time who talked about studies showing that because people lived in band societies so long it's a widespread and he claimed hard-wired (I am skeptical of supposedly hard-wired behaviors or attitudes) human paranoia of unfairness or selfish behavior. Hard wired aside, in most communal situations there's a lot of social stigma against people who think they are better than others or try and take advantage of others, so I'd imagine if people felt confident that they didn't have to put up with present type work arrangements, then there'd be more attempts to accomplish that.

[Cheese Guevara]

"Money is not zero sum because labor creates new value."
But labour does not create new money. The labour, or the commodity it produces, is purchased by money already existing.

"You mistake growth for inflation, but capitalism does grow... And contract..."

By "growth" I meant 2 things: population growth (more people added to the Ponzi) and transactions continuing (everyone buying and selling). As long as the system expands in this way (more players, more sales, more motion etc), money is not zero sum, or rather it "appears not to be", because there is the illusion that aggregate debts can be paid, if not now, then in the future. You press pause on the system, though, and you suddenly get a game of musical chairs; the realisation that, actually, for someone to have cash, someone must not.

"The surplus value created is created through the exploitation of labor. You don't even need much economic or philosophical talk to convince people of that either: most people feel it on some level (though I think most people just don't think there's anything you can do about it)."

Yes, but most people do not feel this way, I think. Their value systems have been wholly colonized by the logic of capitalism. They feel they sell their time and labour for what their time and labour is worth. They feel they are rightly compensated at best, at worst, willingly and rationally allowing themselves to be exploited.

Regardless, I focus solely on money because it allows you to guilt trip the exploited. As money is zero sum, your profit, payment, "worth" etc, is an act of violence on another human being. You are ten grand out of debt, somewhere else exists ten grand of debt. This forces people to become aware of a certain complicity.

[Creative Destruction]

Marx was wrong about many things.

People who are trying to play ~~both sides~~ always say this, but they rarely ever say what it is, and when they do, it has to do with the falling rate of profit problem... which isn't a problem.


Most of his writing focuses on a critique of capitalism rather than a proposal of what to replace it with - which left it open to misinterpretation by madmen like Stalin in the 20th century.

Why was this his responsibility?

The article was otherwise good, but it really dampens it when people reach these kinds of "conclusion".

[ckaihatsu]

People who are trying to play ~~both sides~~ always say this, but they rarely ever say what it is, and when they do, it has to do with the falling rate of profit problem... which isn't a problem.


To be clear, those aren't *my* words, though you attributed them to me by using them within a quote block with my name on it. Those words are from an article in Rolling Stone magazine.





Why was this his responsibility?


I didn't contend anything myself -- the magazine article is f.y.i.





The article was otherwise good, but it really dampens it when people reach these kinds of "conclusion".

[Jimmie Higgins]

"Money is not zero sum because labor creates new value."
But labour does not create new money. The labour, or the commodity it produces, is purchased by money already existing.If a firm receives an investment, then the assumption by both investor and investee is that the investment will allow for more production which can then return the initial investment and then some. So that new value which becomes represented in a monetary value comes from somewhere... from labor exploitation.


By "growth" I meant 2 things: population growth (more people added to the Ponzi) and transactions continuing (everyone buying and selling). As long as the system expands in this way (more players, more sales, more motion etc), money is not zero sum, or rather it "appears not to be", because there is the illusion that aggregate debts can be paid, if not now, then in the future. You press pause on the system, though, and you suddenly get a game of musical chairs; the realisation that, actually, for someone to have cash, someone must not.This is interesting and I don't know enough about monetary debt specifically to say how population impacts this. Capitalist societies do need population growth for a number of reasons and maintaining the level of personal consumption is part of that, but so too is maintaining a labor pool of people who need work, but I don't think the "debt musical chairs" is really the main thing.


"The surplus value created is created through the exploitation of labor. You don't even need much economic or philosophical talk to convince people of that either: most people feel it on some level (though I think most people just don't think there's anything you can do about it)."

Yes, but most people do not feel this way, I think. Their value systems have been wholly colonized by the logic of capitalism. They feel they sell their time and labour for what their time and labour is worth. They feel they are rightly compensated at best, at worst, willingly and rationally allowing themselves to be exploited. Weather they feel their time and labor is worth what they can sell it for is irrelevant because the fact is that they need to accept that arrangement if they want to have an apartment or buy food or anything else. The fact of capitalist relations means that holding out belief for some other kind of arrangement doesn't change the fact that you have to deal with the system. I think this is where the accommodation comes in, not that people necessarily have to buy into the ideological logic behind it - though many do under present conditions. Believing that either exploitation or a zero-sum money situation is immoral would not change this IMO because either way people have to come to terms with selling their labor. The practical difference is that workers have no real leverage over the monetary system, but any group of workers with a relatively decent level of organization can at least attempt to alter the rate or conditions of exploitation on the job. This then opens up the potential to fight for more and to break away from the logic that capitalist wage-labor is necessary or the only way to organize things. That and I think it's a more theoretically sound understanding of how the system operates in the most general way (whereas there have been all sorts of monetary arrangements and policies and different ways of organizing credit and so on).


Regardless, I focus solely on money because it allows you to guilt trip the exploited. As money is zero sum, your profit, payment, "worth" etc, is an act of violence on another human being. You are ten grand out of debt, somewhere else exists ten grand of debt. This forces people to become aware of a certain complicity.I don't really want to guilt-trip workers, I want people to feel empowered to take control over the conditions of their lives.

[Cheese Guevara]

"If a firm receives an investment, then the assumption by both investor and investee is that the investment will allow for more production which can then return the initial investment and then some. So that new value which becomes represented in a monetary value comes from somewhere... from labor exploitation."

Yes, but this "new value" is paid for by already existing money.

Labour exploitation does not increase the money supply, unless loans are taken out at banks to pay for this "new value" which is created via "new exploitation".

But even still, these loans will be taken out at interest, so you still end up with a zero sum situation. Why? The hypothetical "new value" is paid for by loans which themselves have to be paid for with loans+interest.

This is why thermo-economists say capitalism can only ever increase debt (the US abolished the debt ceiling last week), and that on an aggregate scale, cannot even quite provide "wealth"; the "wealth created" (be it dollars or commodities) is always negated by the aggregate debt owed.

"This is interesting and I don't know enough about monetary debt specifically to say how population impacts this."

Basically, all money enters the system as debt (via governments "buying" money from central banks at interest through a complex government bond system, or, as is the case in over 90 percent of money creation, whenever people take out loans from private commercial banks, again, having to be paid back at interest).

The end result is that there is always less money in the system than there is money (debt) owed. So at any given moment, the system is zero sum; for me to pay my debts, someone must go into debt. You are saying this is not true because people can work and provide "new value" and so "pay debts" and so "value is always created" via exploitation. In effect you are saying capitalism "lifts people out of debt/poverty" via exploitation. I am saying it is always zero sum, because the new value is always paid for by existing money, and all money is always outpaced by what is owed.

I then assume a very reductionist stance and say that it is therefore unethical to use money. For you to be ten dollars out of the red, someone is ten dollars in the red. When you are paid, someone is being robbed. It's not just "bosses" exploiting "worker", but anyone who uses money exploiting a third, fourth, fifth etc party elsewhere.

You say this is "irrelevant because it is more important to make people feel empowered and fight", which is true, but I am arguing that you have to make people understand that by participating, they are complicit in being violent towards others.

[ckaihatsu]

Yes, but this "new value" [from labor exploitation] is paid for by already existing money.




Basically, all money enters the system as debt




The end result is that there is always less money in the system than there is money (debt) owed.


This is ludicrous -- an implication of what you're saying would then be that no nation in history has ever been 'in the black', no matter how much gold and slaves it plunders.





So at any given moment, the system is zero sum; for me to pay my debts, someone must go into debt.


For *this* to be true the size of the economy would have to always be in lockstep with the population and its use of monetary value -- that's the definition of 'zero sum'. This is hardly the case, though:


http://upload.wikimedia.org/wikipedia/commons/thumb/3/36/Federal_Debt_Held_by_the_Public_1790-2013.png/800px-Federal_Debt_Held_by_the_Public_1790-2013.png


http://chartsbin.com/embed/gdn?static=1





You are saying this is not true because people can work and provide "new value" and so "pay debts" and so "value is always created" via exploitation.


Yes, value, including monetary value, *is* newly created through labor exploitation -- the size of the economy, and the value of currencies, reflects this.





In effect you are saying capitalism "lifts people out of debt/poverty" via exploitation.


I assure you, *no one* here is making any pro-capitalist arguments.





I am saying it is always zero sum, because the new value is always paid for by existing money,


This is a *monetarist* contention, implying that deflation (over-valuation through a necessarily constrained money supply) will always result....





and all money is always outpaced by what is owed.


...While *this* is an *anti-monetarist* contention -- that *under*-valuation will always result, due to outstanding and unserviced debts.

You're contradicting yourself and your disinformation-type propaganda is not appreciated.

[Cheese Guevara]

"This is ludicrous -- an implication of what you're saying would then be that no nation in history has ever been 'in the black', no matter how much gold and slaves it plunders."

What is ludicrous? That all money is now issued at interest as debt? This is fairly well known.

And no, the implication is not that "no nation in history has ever been in the black". The implication is that some will be severely impoverished, and some severely wealthy. Beyond this, nations tend to either ignore their debts (which the US is doing now), abolish them (Rome would essentially reset its debt clock), change their currencies when faith in the currency gets low, or sell off chunks of itself as a form of reparation.

"For *this* to be true the size of the economy would have to always be in lockstep with the population and its use of monetary value -- that's the definition of 'zero sum'. This is hardly the case, though:"

Your first graph looks like a debt-to-GDP graph. The aggregate debt graph is an exponential curve resembling your population curve.

But why do you think GDP should be in lockstep with the population? And how can American capitalism be limited to America's populace?

Anyway, this is a simplified version of how Georgescu-Roegen explains it: if the system starts with ten people, and each were issued with ten dollars from a bank (which must be repaid as ten dollars plus 5 dollars interest), then you will have a system in which there exists 100 dollars, but 150 dollars are owed. That 50 can only come from more loans (doesn't solve the problem), or taking it from one of the other ten participants. Such a system will collapse quickly, unless you find new markets to sell to, or the original ten find another ten to exploit and/or shunt their debts onto.

"Yes, value, including monetary value, *is* newly created through labor exploitation -- the size of the economy, and the value of currencies, reflects this."

You seem to be saying that currency fluctuates because the relative values of diffrent commodities fluctuate. My point, though, was that this "new value" is purchased with existing currency. You also seem to be arguing that "new commodities" increase the money supply? My understanding has always been the opposite: that increasing the money supply increases real production.

"This is a *monetarist* contention, implying that deflation (over-valuation through a necessarily constrained money supply) will always result...."

Yes, but as we know, the money supply inflates, people take out loans, and capitalism expands into new markets, countries and so forth.

"You're contradicting yourself"

You say a "constrained money supply leads to over-valuation" and that "outstanding debts will lead to under valuation". I am saying the money supply must inflate, and this inflation is always outpaced by debt; the increasing debt requires an inflating money supply. I thought all Marxists believe this. I know some post neo classical economists and some old timers (Peter Victor, Tim Jackson, Adrian Dragulescu, Soddy, Jesus de Soto, Geoffrey Ingham, Satyajit Das etc) have said it before. The only thing I added was the "money is therefore unethical" angle. Incidentally, my dad got deported for saying something similar. In the 1960s, the West Indies islands were gaining independence and the British governors were putting in place new local currencies, controlled by republic banks (the islands buying currency via a bond system). My dad was a microbiologist and he and others ran articles in the paper saying that this could only lead to more debt, poverty and Britain siphoning the island's wealth from afar. In those days many were advocating a kind of union between all the Caribbean islands - a movement he temporarily jumped onto - but instead lots of coups took place and the Federation never happened.

"your disinformation-type propaganda is not appreciated."

If I am "disinforming", it's not intentional.

[Jimmie Higgins]

Anyway, this is a simplified version of how Georgescu-Roegen explains it: if the system starts with ten people, and each were issued with ten dollars from a bank (which must be repaid as ten dollars plus 5 dollars interest), then you will have a system in which there exists 100 dollars, but 150 dollars are owed. That 50 can only come from more loans (doesn't solve the problem), or taking it from one of the other ten participants. Such a system will collapse quickly, unless you find new markets to sell to, or the original ten find another ten to exploit and/or shunt their debts onto.But capitalism is not just monetary exchange. If the economy was only what happens on Wall Street, if that's how we look at money, then it can seem like people are just buying low and selling high - and they often do this with "potential money" or money that's credit, not actual currency. But the monetary system can continue to inflate like that, can have flexibility in investments, create derivatives and all these side-bets essentially as long as there is still new value being created and coming into the system. But the problem becomes when the investing doesn't match the actual new values being created and a bubble forms and bursts and then investment stops because commodities can no longer be produced and sold at the same rate that investments have happened and so good investments suddenly become bad and people stop investing or pull their money out... eventually impacting other firms and other sectors of the economy.

Exploitation of labor as the source of new values and then new wealth in capitalism is probably the most basic and important thing that distinguishes Marxism from other forms of socialism - what Capital is all about is going below the surface of capitalist economics (which more or less works how they describe it... buy low sell high, market demands etc) to uncover the hidden exploitation that makes profits, investing, fluid financial trading, all possible.


"Yes, value, including monetary value, *is* newly created through labor exploitation -- the size of the economy, and the value of currencies, reflects this."

You seem to be saying that currency fluctuates because the relative values of diffrent commodities fluctuate. My point, though, was that this "new value" is purchased with existing currency. You also seem to be arguing that "new commodities" increase the money supply? My understanding has always been the opposite: that increasing the money supply increases real production.No, price fluctuates according to market conditions and so on - more or less like the capitalists describe when not trying to make an explicit ideological argument - but value in the sense I think we are using it means a value of a commodity relative to other commodities. So a pencil takes less labor and less production cost than a pen and so pencils have a value, let's just say, of five pencils for every pen. Well it would be hard to trade on that basis, so money becomes the mediating vehicle for trade.

Low interest rates or loose investment rules or an influx of new capital might cause increased investing, the search for new places to put capital into in hopes of a return, but this is not always the case. In a downturn you can throw money at investors but if they don't think they can get a good return, they'll just sit on it or put it into areas where there is little fluctuation. It's the ability to produce profitably, to achieve a good exchange value, that influences investment or production. The monetary system can tweak this or that to try and create a more favorable investment atmosphere, but it will not solve the underlying problem itself, if there is a significant crisis, and it may actually compound the problems and lead to other economic problems for capitalists (and always for workers on some level). This has been the neoliberal orthodoxy, supply-side economics. But Keynsianism also tries to approach similar problems of overproduction, not by freeing up ways to invest but by using capital by the state to create new infrastructure and so on that keeps increasing economic value. Neither can solve the underlying problems though because it stems from unplanned, competitive production based on exploiting labor. Specifically, manipulating finances can't solve the problem of over-production and in fact monetary flexibility and credit can hold off on a crisis, but then causes the crash to be much worse because people have been playing with "potential capital". If the economy could always keep growing, then credit could just expand and new values (through production) would be entering the system to fill some of the gap. But because the system has booms and busts, capitalists must take advantage of bubbles and then tend to pull their money out, call in debts, and close excess production.

Debt and credit and so on play important parts of modern capitalist economies. I think where I disagree with you is in their "fundamental" nature and how debt/credit play into the system as a whole. In terms of where money comes from, where new monitary values and capitalist growth come from, is fundamentally the exploitation of labor. That's the "real" growth, whereas the monetary system can inflate or deflate, but the axis on which they fluctuate is new wealth created through the exploitation of labor.

What do you think of the basic M-C-M1 explanation for capital circulation and profit? Does your monetary formulation work fit with that or are they sort of parallel (or even contradicting understandings?). This formulation suggests that new values are created (M1) through the exploitation of labor. A commodity is the value of the materials plus the general value of the labor, but the laborer is not paid equal to their actual labor power and so just a part of their actual labor output is paid back while the rest goes into profits.

To me the M-C-M1 formulation is like saying that bi-pedal locomotion is based on falling forward, stopping yourself, and falling forward again. Of course this doesn't explain why or how people skip, shuffle, run, walk, skank, or shimmy etc (which would be like the specifics of economic policy) but the basis for all the rest of these is the same interrupted falling forward motion. So monetary policies or debt policies might be possible variations or outgrowths of the system, but they are not the fundamental way the system operates.

[tallguy]

"You cannot fix capitalism without killing the idea of profit, and then it will not be capitalism." - Jose Saramago

I just heard this quote by writer J. Saramago. I have a question:

Assuming someone created a version of capitalism whereby money isn't created at interest and in which every "player" within the system starts off with the same amount of cash, capital and land resources, wouldn't the sheer act of each player "seeking private profit" lead to poverty, inequality, booms, busts, bankrupcy and most of Marx's other contradictions? Profit is beyond "reform"?
Yes, profit is the problem.

All economic exchanges should be equitable, at least on the average. If that is not ensured, then eventually you get a concentration of wealth and power in fewer hands. In turn leading to corruption and monopolies.

[reb]

Yes, profit is the problem.

All economic exchanges should be equitable, at least on the average. If that is not ensured, then eventually you get a concentration of wealth and power in fewer hands. In turn leading to corruption and monopolies.

All exchanges in capitalism are equal exchanges. The problem isn't with profit, but the conditions that allow for profit. Unless I'm mistaken, you are just arguing for a humane form of capitalism. Maybe if you didn't take a prolier than thou attitude and actually read a book then you might have understood this.

[Cheese Guevara]

"But capitalism is not just monetary exchange."


If you read critiques of capitalism by modern thermoeconomists, they reduce their attacks to only the movement of money. This becomes the essense of the critique; money is a loose avatar of energy, of exploitation, and how does it actually move? That's all they're interested in.


"If the economy was only what happens on Wall Street"

But where is Wall Street in Roegen's ten men on an island example?


"But the monetary system can continue to inflate like that, can have flexibility in investments, create derivatives and all these side-bets essentially as long as there is still new value being created and coming into the system."

While I'm reminded of it, let me urge you to google the term "Galactic scale energy". It will take you to a blog by a physics professor. I think you will find it very interesting. I posted segments of the article on Revleft, but it's better if you read the entire thing on google. He basically attacks the notion that "capitalism can continuously grow and inflate" by mapping its annual energy requirements. You probably know this stuff arleady, but it's an interesting read.

Anyway, I think the system's tendency toward inflation/expansion depends on a variety of things: the ability to find new markets to sell in (local or foreign), an increasing population (to push debt onto, or future generations), war destroying stuff, the ability to take out more loans (increasing the money supply), the ability to exploit new resources and energy supplies etc. My point is, though, today, the ability to exploit people and create "new value" doesn't create new money. The new commodities are purchased by existing money, or money borrowed at interest.


"But the problem becomes when the investing doesn't match the actual new values being created and a bubble forms and bursts and then investment stops because commodities can no longer be produced and sold at the same rate that investments have happened and so good investments suddenly become bad and people stop investing or pull their money out... eventually impacting other firms and other sectors of the economy."


Yeah, I agree with all this, but to me these problems occur a bit further down the causal chain.

"Exploitation of labor as the source of new values and then new wealth in capitalism is probably the most basic and important thing that distinguishes Marxism from other forms of socialism - what Capital is all about is going below the surface of capitalist economics (which more or less works how they describe it... buy low sell high, market demands etc) to uncover the hidden exploitation that makes profits, investing, fluid financial trading, all possible."


“Marx correctly identified the capitalist mode of production’s distinctive Money-Commodity-Money (M-C-M) circuit. But, in common with Adam Smith and most nineteenth century economic thinkers, Marx was less clear about the way in which capitalism is uniquely characterized by a banking/debt system that can create an unlimited amount of credit-money.” - Geoffrey Ingham


I don't disagree with Marx, what I'm saying is that before you get to what you say above, you have a system in which all the players are playing with money issued at debt, and so at any given moment, money is zero sum, and more money is owed in aggregate than there is money in aggregate. The discussion then moved to capitalism's ability to "keep producing" and "keep exploiting". Yes, even a regular Ponzi scheme must expand in a similar way, but it too is a zero sum game, with early players typically profiting at the expense of late joiners.


"What do you think of the basic M-C-M1 explanation for capital circulation and profit? Does your monetary formulation work fit with that or are they sort of parallel (or even contradicting understandings?)."


I think it's correct, but that there is another layer below it. I think we start off with humans exploiting humans to create "stuff". This "stuff" leads to the creation of money, and eventual a banking system and national currencies. We then shift from "exploited labour creates money", to money necessitating the exploiting of labour. Because all money enters the system at interest (via banks who are now capitalists with their own monopolies), each player is required to cook up ways to exploit others to pay back what they owe. All these players exploit others, all attempting to both pay back their debts and profit. But aggregate debts cannot ever be paid - indeed global debts must now exponentially increase - leading to increased expansion, production and (wholly unsustainable) energy consumption in a misguided attempt to "catch up" with debt. Whenever faith that these debts can be paid collapses, the economy crashes, until faith is arbitratily restored and the sham continues running for a few more years. Marx's booms and busts then operate on two levels. The capitalists warring with each other create Marx's usual business cycles, but now on an even more macro scale, the money creation system necessitates similar cycles. Each cycle sees more and more wealth accumulated by old-school capitalists (just as Marx detailed), but also cartels of mega-banks who have now become the source of all capital.


But let me ask you something. Pretend we live in the 1700s on an island populated by ten ultra free market fundamentalists. But unlike Roegen's island, there is no modern banking system and no debt issued currency. Instead, each of the 10 people has ten dollars and each has the same 10x10m plot of land with the same resources. Within swimming distance is another identical island. What do you think happens on the first island and is profit and/or money zero sum?

[ckaihatsu]

This is ludicrous -- an implication of what you're saying would then be that no nation in history has ever been 'in the black', no matter how much gold and slaves it plunders.





What is ludicrous? That all money is now issued at interest as debt? This is fairly well known.


"That all money is *now* issued [...] as debt."

*Historically* this has not always been the case, so my point stands.





And no, the implication is not that "no nation in history has ever been in the black".


Okay.





The implication is that some will be severely impoverished, and some severely wealthy. Beyond this, nations tend to either ignore their debts (which the US is doing now),


The U.S. runs its global protection racket -- it's the definition of 'hegemony'. That's why its currency / debt reigns supreme. See the 'US Dollar is backed by?' thread:

http://www.revleft.com/vb/showpost.php?p=2713047&postcount=1





abolish them (Rome would essentially reset its debt clock), change their currencies when faith in the currency gets low, or sell off chunks of itself as a form of reparation.


---





For *this* to be true the size of the economy would have to always be in lockstep with the population and its use of monetary value -- that's the definition of 'zero sum'. This is hardly the case, though:





Your first graph looks like a debt-to-GDP graph. The aggregate debt graph is an exponential curve resembling your population curve.


Yes.





But why do you think GDP should be in lockstep with the population? And how can American capitalism be limited to America's populace?


I'd really imagine there would have to be *some* kind of correlation between the two, at least a rough one, if not 'lockstep' -- but it's *hardly* 'zero sum'.





Anyway, this is a simplified version of how Georgescu-Roegen explains it: if the system starts with ten people, and each were issued with ten dollars from a bank (which must be repaid as ten dollars plus 5 dollars interest), then you will have a system in which there exists 100 dollars, but 150 dollars are owed. That 50 can only come from more loans (doesn't solve the problem), or taking it from one of the other ten participants. Such a system will collapse quickly, unless you find new markets to sell to, or the original ten find another ten to exploit and/or shunt their debts onto.


Well, you're assuming that debt needs to be created from the outset -- that's more a *contemporary* phenomenon, as you've implicitly acknowledged above.





Yes, value, including monetary value, *is* newly created through labor exploitation -- the size of the economy, and the value of currencies, reflects this.





You seem to be saying that currency fluctuates because the relative values of diffrent commodities fluctuate. My point, though, was that this "new value" is purchased with existing currency. You also seem to be arguing that "new commodities" increase the money supply? My understanding has always been the opposite: that increasing the money supply increases real production.


You're putting the cart before the horse, according to a Marxist analysis -- sure, while central banks will alter their monetary policy (fiat currency), such interventionist economic measures only have a *limited* effect on the overall economy, as we're dramatically seeing these days with sustained near-zero interest rates.

New commodities derive their 'new value' from the input of continued labor exploitation.





I am saying it is always zero sum, because the new value is always paid for by existing money,





This is a *monetarist* contention, implying that deflation (over-valuation through a necessarily constrained money supply) will always result....





Yes, but as we know, the money supply inflates, people take out loans, and capitalism expands into new markets, countries and so forth.


Then it's *not* 'zero-sum', as you've been contending.





You're contradicting yourself





You say a "constrained money supply leads to over-valuation" and that "outstanding debts will lead to under valuation". I am saying the money supply must inflate, and this inflation is always outpaced by debt; the increasing debt requires an inflating money supply.


Again, this cuts against your 'zero-sum' assertion, since the money supply is expanding.





I thought all Marxists believe this. I know some post neo classical economists and some old timers (Peter Victor, Tim Jackson, Adrian Dragulescu, Soddy, Jesus de Soto, Geoffrey Ingham, Satyajit Das etc) have said it before. The only thing I added was the "money is therefore unethical" angle.




Incidentally, my dad got deported for saying something similar. In the 1960s, the West Indies islands were gaining independence and the British governors were putting in place new local currencies, controlled by republic banks (the islands buying currency via a bond system). My dad was a microbiologist and he and others ran articles in the paper saying that this could only lead to more debt, poverty and Britain siphoning the island's wealth from afar. In those days many were advocating a kind of union between all the Caribbean islands - a movement he temporarily jumped onto - but instead lots of coups took place and the Federation never happened.


Scotland is in a similar situation today.

[Jimmie Higgins]

"But capitalism is not just monetary exchange."

If you read critiques of capitalism by modern thermoeconomists, they reduce their attacks to only the movement of money. This becomes the essense of the critique; money is a loose avatar of energy, of exploitation, and how does it actually move? That's all they're interested in.Ok, but to me that would be like trying to learn sea travel only by examining waves on the ocean and not the tides or currents. Capital circulation is the "how" of capitalism, but it leaves out the "who" and the "what" of the system. Money is printed but it represents something, some value. Where does that value come from? To find out this we have to look below the waves to see what causes them to splash or rise and fall like they do.



"If the economy was only what happens on Wall Street"

But where is Wall Street in Roegen's ten men on an island example? Again, where is productive labor in that example? It's a zero-sum game if people are not creating any new values, but capitalism produces quite a bit, just erratically and anarchically.



"But the monetary system can continue to inflate like that, can have flexibility in investments, create derivatives and all these side-bets essentially as long as there is still new value being created and coming into the system."

While I'm reminded of it, let me urge you to google the term "Galactic scale energy". It will take you to a blog by a physics professor. I think you will find it very interesting. I posted segments of the article on Revleft, but it's better if you read the entire thing on google. He basically attacks the notion that "capitalism can continuously grow and inflate" by mapping its annual energy requirements. You probably know this stuff arleady, but it's an interesting read.Well I believe that capitalism will lead to either people destroying the system or the system ending up destroying itself and a lot of people with it. So I don't think capitalism can grow indefinitely. But in relative terms, capitalism does grow and it not "new markets" or resource extraction, it's labor exploitation - something that "new markets" and "resource extraction" are actually based on. The US investing in "new markets" because of cheaper labor costs or more desperation for jobs (leading to cheaper labor costs).


“Marx correctly identified the capitalist mode of production’s distinctive Money-Commodity-Money (M-C-M) circuit. But, in common with Adam Smith and most nineteenth century economic thinkers, Marx was less clear about the way in which capitalism is uniquely characterized by a banking/debt system that can create an unlimited amount of credit-money.” - Geoffrey InghamMoney-commodity-Money+. New values are created in this particular circuit. This is what makes new value and what allows for capitalism to grow - it also creates the new value which can then be traded around amongst capitalists, creating pools of "potential" or "Fictitious capital" in which your deed to debt does not represent money, but potential money or a share of something, but the actual money represented is simultaneously being used elsewhere in actual purchases or whatnot.


"What do you think of the basic M-C-M1 explanation for capital circulation and profit? Does your monetary formulation work fit with that or are they sort of parallel (or even contradicting understandings?)."

I think it's correct, but that there is another layer below it. I think we start off with humans exploiting humans to create "stuff". This "stuff" leads to the creation of money, and eventual a banking system and national currencies. This is where the M1 comes in. People are not exploiting by making people create stuff necessarily. In capitalism the exploitation is that money is put into production and labor turns this into commodities, but the exploitation comes from how the value of the commodity incorporates both the materials involved, but also a generalized value of the labor it takes. But a wage is not the same as the value of the labor and so the difference becomes a surplus because a worker creates more value than they receive in return. So the financial markers or amongst capitalists themselves, it's less a ponzi scheme than a poker game, but between capitalists and workers it's more like a short-change con.


Because all money enters the system at interest (via banks who are now capitalists with their own monopolies), each player is required to cook up ways to exploit others to pay back what they owe. All these players exploit others, all attempting to both pay back their debts and profit. But aggregate debts cannot ever be paid - indeed global debts must now exponentially increase - leading to increased expansion, production and (wholly unsustainable) energy consumption in a misguided attempt to "catch up" with debt. I think this plays into it, but I think this is a specific arrangement of capitalism at this time, more fundamental to capitalism is accumulation - capitalist competition demands growth and this pre-dates modern debts. Stagnation causes major problems for capitalism with or without debt (modern debt and credit and finance makes the highs higher for capitalism but the lows lower). The reason for credit and so on is to help facilitate this endless need for growth, I don't think it's the cause of it at all.

Whenever faith that these debts can be paid collapses, the economy crashes, until faith is arbitratily restored and the sham continues running for a few more years. Marx's booms and busts then operate on two levels. The capitalists warring with each other create Marx's usual business cycles, but now on an even more macro scale, the money creation system necessitates similar cycles. Each cycle sees more and more wealth accumulated by old-school capitalists (just as Marx detailed), but also cartels of mega-banks who have now become the source of all capital.



But let me ask you something. Pretend we live in the 1700s on an island populated by ten ultra free market fundamentalists. But unlike Roegen's island, there is no modern banking system and no debt issued currency. Instead, each of the 10 people has ten dollars and each has the same 10x10m plot of land with the same resources. Within swimming distance is another identical island. What do you think happens on the first island and is profit and/or money zero sum?I don't think capitalism as we know it would be possible in such a situation... it would be a collection of yeomen farmers who would probably end up just trading vegetables - maybe they would form something like a midevil commune. Capitalism needs a labor supply and that's why it couldn't develop fully until the peasantry was removed from the land.

[ckaihatsu]

[P]eople are not exploiting by making people create stuff necessarily. In capitalism the exploitation is that money is put into production and labor turns this into commodities, but the exploitation comes from how the value of the commodity incorporates both the materials involved, but also a generalized value of the labor it takes. But a wage is not the same as the value of the labor and so the difference becomes a surplus because a worker creates more value than they receive in return. So the financial markers or amongst capitalists themselves, it's less a ponzi scheme than a poker game, but between capitalists and workers it's more like a short-change con.


[11] Labor & Capital, Wages & Dividends

http://s6.postimage.org/f4h3589gt/11_Labor_Capital_Wages_Dividends.jpg (http://postimage.org/image/f4h3589gt/)

[Slavic]

Money is interchangeable with commodities; money just helps facilitate the trade of commodities. When a naturally occurring commodity is harvested, ie. bushel of wheat, that commodity and its value are instantly apart of the circulation of money and commodities, misers aside.

This bushel of wheat does not cause a debt of money or commodities, it requires the expenditure of labor. The farmer may sell his bushel of wheat priced at the value of his labor in which there is a free exchange of commodities, ie. zero-sum. More the rule then the exception though, the farmer sells his bushel of wheat at a price lower then its value and thus surplus-value enters the circulation without any corresponding debt, ie. not zero-sum.

Capitalism is not zero-sum, capitalism realizes fresh capital by the extraction of surplus-value.

[Cheese Guevara]

"When growth stops, "profit" becomes a zero sum game. That’s ultimately one of the most important reasons why economists/capitalists do everything they can to encourage growth, because growth means that everyone, theoretically, can get a return on their investments and profit. Without growth, however, every person’s profit comes at the expense of someone else." - Prof. Tom Murphy

"Because the money supply increases, it's *not* 'zero-sum', as you've been contending."

No. An expanding money supply is still zero sum. In a debt based system, the debt outpaces the money, and in a hypothetical non-debt based system, you get exactly the same problem. Why? Because of how profit works. That was the original point of the thread: if we abolish our debt based monetary system, the sheer concept of "profit" sets up the same zero sum game which necessitates growth to prevent it collapsing. At any given instant, the system is zero sum.

"Again, where is productive labor in that example? It's a zero-sum game if people are not creating any new values, but capitalism produces quite a bit, just erratically and anarchically."

In his example, each of the ten has ten dollars and each are using his own labour to produce the same commodity on exactly the same plot/type of land. It's a kind of idealized version of Capitalism Ground Zero. The end result is that everyone lowers their prices, some sell, some go bankrupt, the money supply remains the same, and the system expands to find new people to sell to and buy from. As these hypothetical new people enter the system, with their new pools of money, the aggregate money supply remains zero sum.

The point is, though, that creating "new value" via "more exploitation" does not "stop something being zero sum".

Draw a simple diagram of the 10 man island and model it yourself. Open up MS Paint on your computer, perhaps, and model it (I will have some computer simulations on youtube soon, inspired by Peter Victor's models). You will see yourself that the 10 men are forced to create commodities to sell, profit and survive, but producing new value does not change the zero sum nature of their now growing economy. Why? All "new wealth" keeps getting offset by the new players entering the island. If not, the economy collapses.

"But in relative terms, capitalism does grow and it not "new markets" or resource extraction, it's labor exploitation - something that "new markets" and "resource extraction" are actually based on."

Yes. When I say "new markets", I mean more people are extracted from, more are asked to buy and sell, more resources are tapped into etc.

[ckaihatsu]

Technical note, CG -- you may want to click the 'quote' button at the end of someone's post and then use the provided marked-up text as part of your response, as is the convention -- I didn't see my username in any quote blocks as a part of your response, so I haven't gotten back to this thread till now....





"When growth stops, "profit" becomes a zero sum game. That’s ultimately one of the most important reasons why economists/capitalists do everything they can to encourage growth, because growth means that everyone, theoretically, can get a return on their investments and profit. Without growth, however, every person’s profit comes at the expense of someone else." - Prof. Tom Murphy


I think this quote is the best evidence for *my* argument -- that the system is not normally 'zero-sum' because it's (currently) always issuing new debt as a substitute for actual real growth.





[Because the money supply increases] it's *not* 'zero-sum', as you've been contending.





No. An expanding money supply is still zero sum. In a debt based system, the debt outpaces the money, and in a hypothetical non-debt based system, you get exactly the same problem. Why? Because of how profit works. That was the original point of the thread: if we abolish our debt based monetary system, the sheer concept of "profit" sets up the same zero sum game which necessitates growth to prevent it collapsing. At any given instant, the system is zero sum.


But then how do you account for *bad debt* -- ?

You're espousing a positively *positivist* outlook on economic matters, as though everything balances out nicely *and* enjoys growth, to boot -- you're ignoring the economic 'dark side' of junk bonds, lowered credit ratings, war spending, etc., where existing (exchange) value is *destroyed*.

[Loony Le Fist]

It comes down to transactions being zero sum games. There might be some neo-Keynesians or Keynesians that might argue that just because someone profits, doesn't mean that someone else loses. But I just don't see how it's possible. Either the wealth moves from one person to another directly, or inflation is created, which is also a loss (albeit distributed.) Either way wealth is removed, since inflation will disproportionately affect the poor in a capitalist system, considering their limited access to financial instruments having better returns. Having more capital, accelerates your ability to accumulate wealth for that reason.

Using Game Theory we can draw some conclusions. Capitalism can modeled as a game of transactions where there is a winner and a loser. Eventually the total wealth of a society will, through a combination of random chance and other factors, accumulate into a small subset of individuals. Eventually everyone is left poor, and a small subset of individuals are left very wealthy. Even in simulations the empirical data bears this out, including the boom and bust cycles.

In a state where the political system works in the mainstream democratic fashion, votes are practically proportional to the amount of money that a candidate spends. The players that happen to have more wealth can change the rules to benefit them. Also since there is the freedom to donate to candidates, it is not unreasonable to presume that (and multiple studies bear this out) politicians will enact legislation that benefits these donors. In this particular case, it follows that wealth accumulation is accelerated.

Short answer--yes.