It’s a double coincidence of wants. The workers aren’t able to provide any of the equipment or capital for the business. They would also rather have a steady predictable paycheque rather than jointly own a risky venture. Meanwhile the investor has capital they are willing to risk and are able to provide a steady source of income. The workers can’t make profit on their own without the capital.
Capitalism enables people to become rich yes, but many workers do quite well, amassing large retirement accounts and saving their hard-earned money until they too can invest it in a business. The most wealthy and productive societies with the highest wages all of major aspects of their economies controlled by free markets. It’s not a coincidence.
The workers do the work, yet the owner is the one who gets the money.
Why?
Of course the wealthiest countries have free markets. Why would that be a coincidence? It’s exactly the mechanism I described, but on a global stage. Wealthy people exploit the poorer to become wealthier. Wealthy countries exploit poorer countries to become even wealthier.
This is a cycle that will only end with one person becoming the owner of everything, or revolution to end it.
That’s less than the 100% they deserve for doing 100% of the work.
Please just acknowledge the fact that it’s mathematically impossible for a wage worker to actually receive what they made. The owner has to pay themselves, after all…
Well let’s say you and I start off on a new planet and we both have $10,000 to spend and the aliens of this planet will buy whatever we produce. You and I decide to compete with each other for business in the hole-digging business. You buy a new spade, and also some furnishings for your house and a new TV. I on the other hand stretch my budget and buy a backho and sacrifice some personal luxuries at home.
The going rate for a new hole is $100. We get down to business but despite you working 15 hour days, you’re only able to dig one hole but I am able to produce 4 holes in one day while only working 8 hours. This means I make $100,000 a year while you only make $25,000 a year.
In this hypothetical scenario why am I making more money than you? What is the source of the inequality?
It can’t be that i am exploiting people because we are individual workers in business for ourselves. What’s happening is that some of my profits are yes a result of my labour, but part of the profits that I receive are a return on the capital that i invested in the back-ho.
Listen, i am not trying to say the world is a fair place. There’s a whole colonial system that was set up and abused, inherited wealth and a history of real legal oppression that still persists today. I’d even say that the rich don’t pay enough in taxes and we should push up the capital gains tax rate and close loopholes. But what I won’t say is that the labour theory of value makes any sense at all. It’s pretty discredited among economists and only exists in Marxist literature (which predates the marginal revolution where a lot of our understanding about economics comes from).
Even developing countries or even communist countries need to throw out the labour theory of value in order to maximize their economic output. For example in the Solow-Swan growth model, one of the predictions is that capital is more effectively utilized with labour that doesn’t currently have a lot of capital. Think about this, all output is a mix of capital and labour. If you are a person without a shovel the small amount of money that a shovel costs would make a huge difference in your output. Think about that! Using a neoclassical model you can demonstrate value in redistribution of wealth. Why would you cling to old outdated economics models when the new ones can still prove your point?
I didn’t say anything about labour theory of value. That’s a whole other discussion. And why in that scenario did we not just work together? Why compete?
Well the labour theory of value is where ‘surplus value’ comes from and is the theoretical underpinning of a lot of your argument.
Why didn’t we work together? Maybe we were on different sides of the planet or didn’t enjoy working together for many reasons. The point wasn’t that we weren’t working together. This was a hypothetical scenario to demonstrate that in this specific scenario the excess profits were the result of deploying capital. Even in communist societies part of the output that is generated is not wholly due to labour but due to the allocation of capital by the communist regime. For example in the USSR the mechanization of labour resulted in standard of living increases because labour without capital is of very low value. Capital without labour is also of very low value. A factory without workers would not work very well at all either. It’s the combined utilization of all the factors of production (Total factor productivity) that determines how much income can be generated in the economy. The larger the TFP the higher the wages. Economies with free markets have higher total favor productivity as the individual production decisions are dispersed among many business owners and workers rather than centralized in the hands of a bureaucratic elite.
It’s a double coincidence of wants. The workers aren’t able to provide any of the equipment or capital for the business. They would also rather have a steady predictable paycheque rather than jointly own a risky venture. Meanwhile the investor has capital they are willing to risk and are able to provide a steady source of income. The workers can’t make profit on their own without the capital.
Aw, golly gee, I sure do wonder why they aren’t able to do this.
Because our system is set up that way!! Capitalism!
Our system is set up to enrich owners at the expense of workers. Simple as that.
Capitalism enables people to become rich yes, but many workers do quite well, amassing large retirement accounts and saving their hard-earned money until they too can invest it in a business. The most wealthy and productive societies with the highest wages all of major aspects of their economies controlled by free markets. It’s not a coincidence.
I feel like you’re missing the point on purpose.
The workers do the work, yet the owner is the one who gets the money.
Why?
Of course the wealthiest countries have free markets. Why would that be a coincidence? It’s exactly the mechanism I described, but on a global stage. Wealthy people exploit the poorer to become wealthier. Wealthy countries exploit poorer countries to become even wealthier.
This is a cycle that will only end with one person becoming the owner of everything, or revolution to end it.
The labour share of income is 70% which is the majority of the money a business makes.
That’s less than the 100% they deserve for doing 100% of the work.
Please just acknowledge the fact that it’s mathematically impossible for a wage worker to actually receive what they made. The owner has to pay themselves, after all…
Well let’s say you and I start off on a new planet and we both have $10,000 to spend and the aliens of this planet will buy whatever we produce. You and I decide to compete with each other for business in the hole-digging business. You buy a new spade, and also some furnishings for your house and a new TV. I on the other hand stretch my budget and buy a backho and sacrifice some personal luxuries at home.
The going rate for a new hole is $100. We get down to business but despite you working 15 hour days, you’re only able to dig one hole but I am able to produce 4 holes in one day while only working 8 hours. This means I make $100,000 a year while you only make $25,000 a year.
In this hypothetical scenario why am I making more money than you? What is the source of the inequality?
It can’t be that i am exploiting people because we are individual workers in business for ourselves. What’s happening is that some of my profits are yes a result of my labour, but part of the profits that I receive are a return on the capital that i invested in the back-ho.
Listen, i am not trying to say the world is a fair place. There’s a whole colonial system that was set up and abused, inherited wealth and a history of real legal oppression that still persists today. I’d even say that the rich don’t pay enough in taxes and we should push up the capital gains tax rate and close loopholes. But what I won’t say is that the labour theory of value makes any sense at all. It’s pretty discredited among economists and only exists in Marxist literature (which predates the marginal revolution where a lot of our understanding about economics comes from).
Even developing countries or even communist countries need to throw out the labour theory of value in order to maximize their economic output. For example in the Solow-Swan growth model, one of the predictions is that capital is more effectively utilized with labour that doesn’t currently have a lot of capital. Think about this, all output is a mix of capital and labour. If you are a person without a shovel the small amount of money that a shovel costs would make a huge difference in your output. Think about that! Using a neoclassical model you can demonstrate value in redistribution of wealth. Why would you cling to old outdated economics models when the new ones can still prove your point?
I didn’t say anything about labour theory of value. That’s a whole other discussion. And why in that scenario did we not just work together? Why compete?
Well the labour theory of value is where ‘surplus value’ comes from and is the theoretical underpinning of a lot of your argument.
Why didn’t we work together? Maybe we were on different sides of the planet or didn’t enjoy working together for many reasons. The point wasn’t that we weren’t working together. This was a hypothetical scenario to demonstrate that in this specific scenario the excess profits were the result of deploying capital. Even in communist societies part of the output that is generated is not wholly due to labour but due to the allocation of capital by the communist regime. For example in the USSR the mechanization of labour resulted in standard of living increases because labour without capital is of very low value. Capital without labour is also of very low value. A factory without workers would not work very well at all either. It’s the combined utilization of all the factors of production (Total factor productivity) that determines how much income can be generated in the economy. The larger the TFP the higher the wages. Economies with free markets have higher total favor productivity as the individual production decisions are dispersed among many business owners and workers rather than centralized in the hands of a bureaucratic elite.