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Comments about ‘Ends and means: Do we serve the economy, or does it serve us?’

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Published: Friday, April 25 2014 12:00 a.m. MDT

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marxist
Salt Lake City, UT

This article shows how needed Karl Marx is. Marx tried to answer the question "in a system which sees mostly the exchange of equivalents, where do profits come from?" If this seems like a stupid question, just try to answer it.

Marx's answer is that profits come from employers not paying labor for all of the value it adds. Labor gets what it needs to keep going, but the increment on top of that, the surplus value, is pocketed by the employer (capital). This surplus value is the source of profit and ultimately capital itself.

Mainstream economics (neoclassical) says that wage rates are determined by supply and demand, and hence that wage rates are just. But for this to be true a whole host of conditions must be satisfied, which are rarely discussed.

Marx uniquely looks inside of the production process. In his view there is ample collusion among employers in a particular industry to set wages so as to allow for surplus value.

Did any of you note the collusion just litigated among employers in silicon valley. I tell you Marx lives!

marxist
Salt Lake City, UT

Also to answer the question "Do we serve the economy, or does it serve us?"

If you are labor, that is work "9 to 5," you serve the economy. If you are capital, especially the top !% of the top 1%, the economy serves you.

The reason? I tried to explain that in my previous remark. Surplus value is creamed off of the process at every level, and profits soar. That's whats happening now.

happy2bhere
clearfield, UT

Both

10CC
Bountiful, UT

The author's question is one that will arise more often in the future, increasingly by those who would never have complained in the past.

As technology reaches up the economic ladder to displace the professional class, those who invested great amounts of money to cultivate careers in using their minds and creative powers, and their contributions are increasingly seen as unnecessary expenses, THEN we will have a discussion about what the role our economic system plays in our lives, and in society.

There's a term defenders of the system use to discuss the turbulence as jobs are eliminated and new ones form: "creative destruction" The unquestioned faith is that better jobs will come due to technology.

Increasingly, I'm seeing the term reversed, "destructive creation", which emphasizes the pain & suffering that is spreading, as change impacts people at an accelerated rate, even though they may be great and highly productive workers.

Investments in human capital are seen relative to how long those careers may last, and increasingly the investment is seen as being not worth the pay back.

Careers are being pushed aside as more temporary jobs appear, and disappear.

Baron Scarpia
Logan, UT

So to encourage the economy to serve us, government invest and create incentives to create broad wealth for the populace.

Historically, our government has invested into America -- from the Louisiana Purchase, which acquired America's great farmlands of the Midwest, to the building of railroads to the creation of the national highway system to the creation of the Internet -- America's investment into the private sector has created a prosperous America. No private company could have accomplished these great infrastructures -- and yet, they all fostered trillions in economic benefits for our civilization.

Sadly, too many of our policymakers see government as a burden, reducing its effectiveness in creating these great investments into American civilization and our nation lags in energy, transmission development, roads, schools, etc. "Let the market do everything" they say, so that instead to using it as a tool to better our civilization, the market becomes a feared devil that simply lays off workers or moves jobs and manufacturing overseas... to the detriment of people and families.

We can't continue on that path of just "serving" the market. We need to make it a tool to better our nation by investing in America's future.

Thid Barker
Victor, ID

The economy neither serves or is served, its just roughly defines the economic conditions in which we live. It is always changing mostly as the product of economic forces such as supply and demand and is always comparative. For example, if you are, or were, considered middle class economically in America today, your economic conditions are deteriorating rapidly compared to others. Therefore "your" economy is neither serving you nor are you serving it, it just is what it is!

JQJarvis
SALT LAKE CITY, UT

No better illustration of the failure of market forces exists than the so-called medical market. Care is not a commodity yet we continue to pretend that markets will efficiently distribute medical goods and services. The pretense of markets creates perverse incentives which lead to ridiculous reimbursement for mediocre and inefficient care. For more please join the discussion at the website of the Utah Healthcare Initiative.

red state pride
Cottonwood Heights, UT

"Productivity comes at the cost of people — the people who work but no longer receive a dignified living or who are left behind altogether
Then, the economy no longer serves us, but rather we are sacrificed to the economy. Productivity becomes an end in itself rather than the means for us to live better."
Let's look at agriculture. One man and a tractor are more efficient today than 40 people were in 1920. Has that benefited or harmed society? Is there more or less hunger in America today than in 1920? The better question is what has happened to food prices? They are dramatically lower. The percent of a family's budget that goes to food now is about 20% compared to 40-50% in the 1950's. Is that good or bad for society? I personally kind of like the fact that every grocery store in SLC is stacked to the gills with food. I also like being able to spend more time at other pursuits rather than hunting, gathering, growing food.

Kent C. DeForrest
Provo, UT

"Marx's answer is that profits come from employers not paying labor for all of the value it adds."

Marx's answer came up short, just as Thorstein Veblen's and Joseph Schumpeter's did. None of the great worldly philosophers accounted for how an economy experiences net profit. The question is complex, for every expense, directly or indirectly, becomes someone else's revenue. They perfectly cancel each other out, leaving no surplus. And Marx's theory does not explain this.

But the economy does experience profit, quite a lot, and you have to combine accounting with economics to grasp where this profit comes from. In a nutshell, there are several factors that contribute. First is accrual accounting, which creates a gap between when one company records an expense and when another realizes it as revenue. Second is capitalizing assets instead of expensing them. This has a similar effect of separating revenues and expenses chronologically. As long as we have inflation, these methods work. Purchasing with debt is a third factor, which also separates revenues from expenses. Profit is also influenced by the fact that most debt is borrowed into existence (low or nonexistent reserve ratios), increasing the money supply.

Kent C. DeForrest
Provo, UT

Sorry I ran out of space. Give me 20,000 words, not 200, and I could give a more complete explanation. The point, though, is that profit in the economy is fully dependent on growth. But growth presents its own problems. The only thing in nature that seeks to grow endlessly is cancer, and it eventually kills its host, probably an apt analogy for the capitalist economy. We are seeing the signs of how the system will eventually collapse under the weight of its own excesses.

We could turn this around somewhat by revising the initial distribution of wealth (not redistribution). But that will only delay the inevitable. Any system based upon the process of endlessly turning finite resources into waste will eventually run out of fuel. Time to start thinking about a sustainable economy rather than a growth economy.

2 bits
Cottonwood Heights, UT

Obviously it's both.

But we are the drivers... and it is the vehicle.

Without us... it goes nowhere.

It takes us where we need to go (IF we can be satisfied with what our job pays us, and not just our attention on jealousy of what somebody ELSE makes).

Without an economy we still get where we need to go.. it's just harder (like walking instead of flying). We still get by... we just have to grow our own food, build our own shelter, feed our own kids, etc, without a pay check. People have done it in the past, and some could do it now. But not all of us.

There would be a LOT of societal change (for the worse)... without our economy. We would be a sub 3rd-world country again. Subsisting on what our wits can provide.

Many of us would survive... and I suspect would start us on the path back to where we were before (with an economy to help support our population).

marxist
Salt Lake City, UT

Re: Kent de Forrest " None of the great worldly philosophers accounted for how an economy experiences net profit. The question is complex, for every expense, directly or indirectly, becomes someone else's revenue. They perfectly cancel each other out, leaving no surplus. And Marx's theory does not explain this."

There may be no surplus in the exchange between corporations. Everything may even out there. But that is not Marx's point. Marx looks INSIDE the enterprise. Other economists do not do this - they look at markets between enterprises. Marx perceives that inside of an enterprise a surplus is created by labor.

Here is another approach. Commodities are mostly on an equal footing in the capitalist system. Commodities exchange, value for value. But there is a special commodity and that special commodity is labor, because labor is capable of producing more value than is necessary for its sustenance. Labor gets what it needs, but that's all it gets. The rest of the value it creates is surplus value, which creates profit.

The dispute between neoclassical economics and Marxian economics is focused on the existence of the surplus. This needs to be thoroughly vetted. Thanks, Kent, for helping.

2 bits
Cottonwood Heights, UT

Man... we seem to have a LOT of Marxists in our midst now days. Are they teaching Marxism is the answer in schools now days? I know some were and are teaching that at the University of Chicago...

I guess things change over time... in the name of "Progress". But not ALL change is "Progress". Marxism has been around a LONG time, and it's been tried many times... and ALWAYS failed. A change to Marxism is NOT "Progress"... IMO. It would be a huge step backwards.

2 bits
Cottonwood Heights, UT

I wouldn't trade my standard of living for the lifestyle of the average family living in any country. Especially in a Marxist economy.

The poor in America live better than the middle-class in most countries.

I don't look forward to standing in lines to get a loaf of bread from the Gov like they did in Russia when I was young.

===

We have it pretty good in America. Even the Occupy people are pretty well fed. The thing that makes spoiled Americans miserable is... jealousy.

I've learned that if I don't focus on what anybody else makes... and just learn to live on what I make... I can be very happy.

Happiness is about contentment.... contentment is based on being happy with whatever you have... not waiting to be happy when you have what someone else has... or they have been knocked down to what you have.

You never become happy that way. That's a bully that draws a line, and says if you cross it you'll be happy, then IF you cross it they draw another line. There's always SOMEBODY who needs to be knocked down for you to be happy.

bandersen
Saint George, UT

I find it ironic and unsettling that someone is allowed to promote Marxist ideology without even a whimper from the crowd of readers, as if the end result of Marxism and death of 40 to 50 million people under its banner was some sort of clerical error, something to not be really evaluated. Inequality is the result of people turning away from God, nothing more, nothing less. However, to tout Marxism as a replacement is so far removed from truth as to strike fear into any free thinking, kind, loving person. Capitalism is the best system devised by man (notice I said man)to help humanity. Socialism and Communism are precursors to decline or death of millions. Anyone that thinks differently hasn't studied history or spent much time around real people. We haven't practiced free market capitalism for 70 years! What we have now is bordering on Corporate Fascism, and a far cry to what capitalism, freedom and a God fearing people could do for this country. The biggest ruse that the progressive liberals espouse now is that things would be different if they were in power. Just gives us a chance and Marxism will have a different result. Right!

patriot
Cedar Hills, UT

with Communism the only one getting served is the corrupt folks at the top of the government - everyone else get's smashed.

10CC
Bountiful, UT

banderson:

The reason there's not much of an uproar is because Marxist is an advocate of Marx, and not of the common misconception that the Soviet Union was what Marx advocated. Karl Marx mostly was an economic thinker and social observer, not a revolutionary.

Certainly, the Soviets and Cubans based their revolutions on Marx, but the vast majority of Marxists I've met are more strident opponents of efforts in his name than the average American.

It's kind of like judging Christians based on the Crusades.

I'm not a Marxist, but I would say Marx's work has inspired reform of our system, particularly when the excesses of capitalism have created great social instability, like the violent labor strikes of the 1800s, children working in factories, the push for a 40 hour work week, etc.

Teddy Roosevelt (a Republican) saw what was going on in Russia, and saw the violent labor strife in the US, and pushed for many of the reforms I mentioned above, along with the notion that Americans deserved a "square deal". Teddy also created the national parks, for the public, among other things.

Marx accurately predicted some of the problems we see today.

Grand Bargain
Salt Lake City, UT

Mary Barker, you are becoming my very favorite writer on these pages. I don't always notice your byline right away. But when I read an interesting and thoughtful piece (like this one) and find your name at the top, I often smile and say, "Of course." Thanks for your ideas.

george of the jungle
goshen, UT

Fallow the money. It the product came from over seas the money will go there. If the labor came from a crossed the borders the money will be going there.

gmlewis
Houston, TX

Where does net profit come from? If you look at the example of a man working for himself, it comes from his own physical exertions. However, his own work may be insufficient without the cooperative work of others, capital, and the tools of his trade. Companies supply those things to a collection of workers, wherein they can create wealth by their cooperative efforts.

I'm a systems analyst, and I could not perform my trade without the building, equipment, and help from peers in the company. It is only fair that the company pays me a little less than I produce, to compensate them for the help they provide me in this work. They have invested in me, and I do not begrudge them their net profit.

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