Capitalist Argument For Investment and Profit

[Globalization Resister]

Capitalist Argument:
Let us take a hypothetical example of an engineer: He invents a machine to plough the land more efficently, makes huge profits, reinvests in bigger factories to produce even more tractors hence more farmers work more efficently increase their output, more profits for the engineer, more investnent into research/machinery/etc. for better methods of farming leading to increased quantity and quality of food. Is not the creation of better and more efficent farming not better for the poor and needy. Why should the making of profit necessarily not coincide with the welfare of the weak and poor. Increased efficency of farming should result in more for the weak and poor-and if it means more profit for the original inventor why should that bother the original poor who now also has more.

I think its bullshit but I'm in a debate and some counter thoughts could help me

[JKP]

Improving the means of production is something that communists/anarchists support. However, such an ability is not unique to capitalism. We will do it better and without exploitation.

[ArgueEverything]

Originally posted by Globalization [email protected] 18 2005, 01:30 AM
Capitalist Argument:
Let us take a hypothetical example of an engineer: He invents a machine to plough the land more efficently, makes huge profits, reinvests in bigger factories to produce even more tractors hence more farmers work more efficently increase their output, more profits for the engineer, more investnent into research/machinery/etc. for better methods of farming leading to increased quantity and quality of food. Is not the creation of better and more efficent farming not better for the poor and needy. Why should the making of profit necessarily not coincide with the welfare of the weak and poor. Increased efficency of farming should result in more for the weak and poor-and if it means more profit for the original inventor why should that bother the original poor who now also has more.

I think its bullshit but I'm in a debate and some counter thoughts could help me
A few points:

- According to Marxist economics, there is an inherent tendency for profit rates to decline under capitalism (there is quite a lot of empirical support for this, see the works of Anwar Sheikh). The mechanism through which this works is difficult to explain in a nutshell, but is similar to the Law of Diminishing Returns of conventional neo-classical economics, if you're familiar with that. Because of this tendency, improvements in efficiency (like the type you describe in your example) have less and less of an impact on profit rates, so the ability to re-invest and keep developing production falls, and capitalist crises (recessions, depressions, military adventurism etc) become more frequent.

- even if we accept that capitalism is still capable of huge innovations in the productive forces, we know that the distribution of this knowledge is far from equal. Poor, developing countries are often unable to afford these advanced technologies. Capitalism is inherently unequal in this sense.

- Socialists argue that socialism is even more effective at developing the productive forces than capitalism is, because it harnesses the full potential of human creativity, it directs resources to where they are most needed (based on human need, rather than private profit), and planning is more efficient than markets (this is controversial, though).

[anomaly]

As ArgueEverything mentioned, profit rates decline in capitalism. But this does not please the entrepeneur one bit. And so, to keep up his profts, he will likely raise his prices, expecially when it comes to food production, since demand for this is extremely inelastic. And so, in reality, the poor's purchasing power remains the same (or sometimes even decreases).

With inflation, we will have this endless cycle of prices being raised and the salaries of the rich being raised, while wages of the poor struggle to keep up with this rate. For evidence of this, just look at the 90s. In 1990, the earnings ratio of company executives to workers was around 75 to 1. By 1999, that ratio had increased to 175 to 1. That means that in 1999, company executives made, on average, 175 times more than their workers. And these are American workers about which we are speaking. The ratio of earnings of execs to Mexican workers, for example, was closer to 1,000 to 1. Workers wages have proven rather stagnant, while prices are increasing. That is why we seeing the eroding of the middle class in America. To argue that the rich earning more and more money somehow helps the poor in any material way is sheer lunacy.

[tunes]

How can workers fill capitalist's pockets with more money if they have little to begin with themselves? This example assumes the workers have the money to buy extra food, but it mentions nothing of increased wages.

[Monty Cantsin]

One criticism of neo-liberal globalisation is that it induces a debt/credit -based society. Like criticism of Keynesian economics though shifting debt from government to individual consumers.

The argument is thus

A corporation employs a group of workers at a set wage quite low because it’s in the third world. That means costs are low and the product is cheaply sold to a large distributor like Wal-Mart or Target. This means that throughout the production and distribution process the costs have been reduced by cutting labour costs.

Thus the very consumers of theses products, the workers can’t on the value of their wages afford them because their wages are smaller then that which they produce (cost reduction and surplus value).

But our economy runs of the turnover of volume, high turnover of cheap products means large profits for corporation. Thus workers who cannot afford the western lifestyle promoted in movies incur debt, in Australia every individual on average is in debt $130 for every $100 they earn.

This model is based on a ‘good’ market scenario. If inflation, the problem facing Australia and the product of over consuming, increases then interest rates have to go up and our economy spirals down because people bust under their debts and aggregate demand declines.