Article - Was Marx Right?

[Maj]

China is growing because it completely abandoned Marxist ideals, and is an extremely laisseze-faire capitalist system.

Hi!

[sarcasm]

China believes in the re-employment system. If you create a questionable product the first time, you will be able to make it cheap and sell to people who are more concerned with cost over quality.

Furthermore, when the product turns out to be defective, you can repay people to remake it into a more quality product that you can then sell to people who care more about quality than cost.

This translates into something for everyone, enough work to go around, and the constant look of being busy! And in this economy, you have the added bonus of not having to do much to improve the lives of your workers because, hey... At least they're employed.

[/sarcasm]

[Username17]

China has a complete disregard for the lives and happiness of the individual, but that does not actually mean that they are laisseze-faire capitalists.

-Username17

[Daiba]

As someone who currently lives and works in China, I can attest to the fact that the "free market" aspects of the Chinese economy are greatly exaggerated. While only a small number of companies are still directly owned by the government, there is no law preventing these companies from investing in or creating private companies. For example, a hotel I stay at frequently is owned by the People's Liberation Army - as is everything else in the 4 sq. km. around it, including several other hotels and a Mercedes/Porsche/Audi dealership.

You might think that this would only have a moderate effect (after all, private subsidiaries of public companies still have to compete for survival), but you would be completely wrong, for two reasons:

• If a government owned or controlled entity invests in a private entity, it must maintain a minimum stake of 51%.
• A government official who leaves his post and takes a position in a government owned or controlled company is still considered to be part of the PRC government. He retains his rank and if he decides to return to the government (within certain time limits) he is treated as if he never left. Years spent working for the company count for govt. pension, promotion, etc.

The result of this system is that it is very difficult to compete against semi-private companies and very large portions of the "private sector" are heavily influenced or directly controlled by the government. You will very rarely find major innovative endeavors competing against each other; if two sufficiently similar enterprises start up in different parts of the country, it is not unheard of for the central government to consolidate them.

EDIT: Just wanted to add that it's not laissez-faire, but it works. The economic growth from the hybrid system here is amazing, and the infrastructure investment puts the U.S. to shame. Some of it definitely has to do with career administrators not having to worry about election cycles. 20 years ago, in the area I live in, the city planners decided to make the roads 8 lanes wide (and once you put the buildings down, the streets can't get any bigger). They came under heavy fire for it as wasteful, but they did it anyway because calculations indicated that that's what was needed. Now, the traffic jams here are only 1/10th as bad as Beijing.

[MfA]

China wins the race to the bottom in competing for OPEC's affection, all they have to do for it is suppress the wages of 99.9% of their population. It's a little easier to invest in infrastructure with what China's labour cost.

Now of course the original plan was keep labour costs low for a couple of decade while building up infrastructure and attracting foreign know how and factories before switching to internal consumption ... but China is experiencing the same problem as the US, their political system is being taken over by the rich which the system created by accident ... who kinda like the status quo and the inordinate power it affords them.

As for the topic, Marx and Keynes are still the towering giants in economics (albeit they did not foresee the added complexity of natural resource constraints and overpopulation). Most current economists are idiots at best and cronies for the financial and land owner classes at worst.

[Username17]

As for the topic, Marx and Keynes are still the towering giants in economics (albeit they did not foresee the added complexity of natural resource constraints and overpopulation). Most current economists are idiots at best and cronies for the financial and land owner classes at worst.

Oh definitely. Marx was arguing for increased powers for central banks in the 1850s. He didn't know that having a lender of last resort and a deposit insurance commission could prevent bank runs and bond panics - how could he? He just thought that having a powerful central bank with a mandate to improve capital investment in the country could more efficiently produce economic growth by providing the necessary banking services without taking the wealth away in a santa sack. But the ECB of today is seriously arguing that you don't even need all banking services for their currency area because if they can inspire enough "confidence" that magically capital investment and economic stability will just magically appear. Marx didn't need someone to telegraph him that that was horse shit.

Keynes had no idea that persistently high inflation rates could lose traction in promoting people to spend money by the mechanism of people having expectations of inflation "baked in" to contracts and banking such that a stable inflation rate of 5%, 10%, or even 100% would eventually seek an equilibrium where wages, prices, and interest rates would all include that and it would be just as hoarding-friendly as a gold standard. Again, how could he possibly know that? But the ECB out does him in ignorance of the modern world by demanding that money remain tight even in the face of a persistently depressed economy.

Yes, Keynes and Marx are dead and many people have discovered real things since they were alive. But there are a lot of very serious people in suits saying some really stupid shit that Marx and Keynes disproved decades before these assholes were even born.

-Username17

[Daiba]

It's a little easier to invest in infrastructure with what China's labour cost.

Wages in China are depressed, but not as much as people think and mostly due to the ridiculous exchange rate. It varies by region, but unskilled labor pays about 1500 RMB/month (factory worker, housekeeping, etc.), which has a buying power in domestic, non-luxury goods similar to $1000-$1200 in the U.S. A bowl of beef noodle soup costs 5 RMB, meat buns are 3 RMB for four, and a cell phone plan is 30 RMB/month. A pair of Levi's, however, will run you as much as 800 RMB and a laptop is about 4000 RMB.

The high infrastructure investment is due, in part, to China having not yet fully developed its highway systems, high speed rail lines, etc. But it's also because there's no crippling ideological opposition to government action.

but China is experiencing the same problem as the US, their political system is being taken over by the rich which the system created by accident

This is very true. I really don't know how this kind of phenomenon can be dealt with, though. The power of the peasantry or the working class has always been the power of revolt, which is only an option when things get really bad. Even in a democracy the rich will slowly leech away the influence of the poor by redistricting, making them work on voting days, consolidating the media, etc.

[Lago PARANOIA]

Although Monetarism turned out to be not worth it in the end (this man deserves a poke in the eye for praising Pinochet of all people), David Friedman did give Neo-Keynesians a few very powerful rheotircal tools. Natural Rate of Unemployment and Permanent Income Hypothesis. Of course his own supporters in the Chicago and worse schools just ignore like over half of what Milton says so whatever.

Just as a quick aside, I don't think that Supply-Side Economics is necessarily full of shit. I think that it's a very powerful tool, but as far as UK/US was concerned it translated to 'tax cuts for the rich'. If Supply-Side Economics was targeted at private entities that actually needed to dump every dollar they had into cutting prices or research (Software, Biomedical research, Alternative Energy, so on) rather than for non-productive/intentionally underproductive entities like oil or movies or if it was used to choke black market economies in the cradle (like the War on Drugs) it'd be badass. But no. We can't have nice things. Thanks, Reagan.

And that's my biggest problem with the 'tax cuts for every corporation'. What the hell is the finance industry going to do with a few dozen billion dollars to play with? If the various Hollywood production agencies got a few billion dollars in tax cuts, exactly how many people would that employ and/or how would it increase the quality of movies*? In my opinion there are a lot of industries that need tax cuts but only those that are chomping at the bit to expand production. For the most part that money should be going towards research industries. Of course they're generally not for-profit anyway. I just think that universities should be getting more money, esp. the history, physics, and biomedical departments.

* That said, if Bollywood or some other nascent industry got that amount of money I think that'd be a huge boon for the industry because it'd introduce some real goddamn competition to the American filmmaking industry. But that's never going to happen.

[Lago PARANOIA]

Now for the second aside, I think that the point of no-return for capitalists looking to depress labor is coming faster than people think. The problem is that productivity and mechanization is increasing so quickly that even if you can find people to work for a can of spam and two loaves of bread a week you only need to hire so many of them. It's been happening for awhile now but the unskilled non-service labor market is really shrinking. Like in the United States, a lot of unskilled labor jobs aren't something you can just outsource like agriculture or mining but are stuff like manning registers at the grocery store or mopping floors. And that leads to the next problem that depressing wages locks out a lot of other service industries. You just can't open up a Borders or a Best Buy in a country where the average income is $2,000 U.S. dollars a year. I'm sure Monsanto and Exxon doesn't really give a shit, but I'll bet that, say, B/Hollywood or Nintendo is chomping at the bit to open new markets. But if you're barely able to afford food, water, and shelter how the hell are you going to be buying the next iPhone? That has to piss a lot of corporations off that industries that are not normally their rivals are fucking them over by trying to keep the Robber Baron gravy train rolling for as long as possible.

[Lago PARANOIA]

A couple of things to keep in mind. The first thing is that even if an economy or country is rich enough to put 80% of the workers permanently on vacation and funnel them enough money to live comfortably, I don't think that this would actually go over too well. Also, even though it's exactly the same thing, a tax break has fewer psychological barriers than an entitlement. So even though for the most part when you see 'tax break' it could just be read as 'government handout' or whatever, it's there to trick the putrid American voter into thinking that they earned their cash the 'correct' way.

But anywhos, if I had my druthers, here is how I would apply my socialism patch in the future:

[*] Extremely progressive income taxes. I'm talking Eisenhauer-era rates.
[*] Negative income tax to boot.
[*] Worker-owned companies/collectives get a capital gains and corporate income tax break.
[*] Minimum wage much higher than it is.
[*] At least single-payer healthcare.
[*] People get paid to go to college or trade school, which will be cheap-as-free. Foreign students who stay in the whichever country they want to for at least five years after they graduate get complete loan forgiveness.
[*] Graduate students and post-docs who stay with the university and are doing research get paid enough so that they don't need to enter the job market. Like, at all.
[*] Increase the non-mechanized, non-skilled size of the armed services. Yes, I am aware of the fact that all things being equal military employment wastes money. But this is supposed to supposed to trick people with the Protestant work ethic into getting that stupid full work week they want.
[*] Tax breaks such that companies are encouraged to, all other things being equal, hire two 20-hour workers rather than one 40-hour worker.
[*] Social Security age lowered by a fuckton. Getting it at 50 years is too old.
[*] Tax breaks for volunteerism. Whee.

[RadiantPhoenix]

Sounds interesting. In a good way.

[Libertad]

No, Marx wasn't right.

The failure of all the economies that implemented his ideas proves it.

Except China, who is experiencing massive growth while the rest of the world is in decline.

China isn't Communist (not the way Marx intended). It's allowing large corporations to get away with abusing people (such as the liberal use of child labor). That doesn't make them capitalist, just that they failed in being Communist as soon as they stopped caring for the welfare of the workers.

To the main question, Marx was right in some respects, wrong in others. He was right that capitalism encourages a dog-eat-dog race to riches, and that regulation of big business was necessary. He was right about how organized religion was "an opiate of the masses" in that it encouraged people to put up with tyranny if they'd be rewarded with eternal paradise in the afterlife.

Marx was wrong in trying to completely abolish the concept of the family (too hardwired into human nature) and the abolition of all forms of private property (humans like to have ownership over things in some way or another). He was wrong in thinking that a utopian "worker's paradise" was a possibility: utopias just can't exist, given the way human nature works.

Real Communism only works if everyone is smart, rational, reasonable, and can be satisfied and content with doing hard work to benefit their fellows.

[tzor]

Lago, I'm going to take what you said and run with it. I won't agree with the following but I think this is an even better way to get to real progressive socialisism. Bear in mind that the only real way may be to kill all the so called "socialists" because they are actual liars and bastards.

Taxes. Simplify and make really progressive. The more you make the more you pay. Not just a few tax barckets that basically stop at upper middle class. Each additional million you make should be a higher tax bracket until you hit the 100% mark. Eliminate almost all (if not all) deductions because the more you make the more you can take advantage of them and that flattens the curve.

I like the idea of negative income tax; you are folding welfare into the tax structure.

Capital gains and corporate taxes are complex because I'm not sure if my conservative nature is slipping through. I would lock box capital gains, so that they don't get taxed at all as long as they are in the investment lock box but when they are drawn out they are treated as regular income.

I'm almost tempted to say eliminate all coorporate taxes. I mean if we did that would happen to the money? It's not like it's going to vanish into thin air; it's going to land into the hands of people who are now paying a real progressive tax system. I think that's a new gain for the government.

Minimum wage? You have to be kidding there; your negative income tax already places significant wage inflation because there is a good incentive not to be "underemployed" if the levels and percentages are set right.

Single payer healthcare is a progressive socialist thing so I'll grant you that one.

Student loans should be given out by the government. They should have a zero percent interest rate but their payments are based on a parallel progressive system just like taxes. So the government takes money out of your income (just as they do taxes) to repay the loan based on the amount of money you are making at the time.

Forget the non skilled armed serives - that no longer exists. Your average army mechanic needs a computer degree to fix the equipment these days. But you can have an infrastructure repair and maintainence system that could use such a level of workers.

If you do have the corporate gains lock box, you may have a way of privitising social secutiry which may be a progressive bad thing, but then again, it might also encourage people to invest in government level bonds so they can be guarenteed a safe rate.

I don't think you shold get any deductions, but tax breaks for volunteerism might be a good thing. It means the governent is indirectly paying you to volunteer but whatever.

[Whatever]

A 100% marginal rate is a little high. Not because it destroys some nebulous incentive to earn, but because it will divert huge amounts of wealth into tax evasion. Capping at 90% or 95% gets the government about as much money, but keeps people from switching to black market deals or offshore tax shelters or whatever.

[Vnonymous]

Technology isn't exactly going to go away anytime soon(or at least I hope it doesn't), and it isn't going to be "changing employment". I actually work in a steel factory, and robots are replacing workers. A robot does the same job as a person much better than that person ever could, and the number of positions that are getting replaced by robots is just growing and growing. While there are going to be jobs for people who keep the robots going, robots are just so much better at these jobs than people are.

I really do hope that this leads to a society where everyone gets a bigger share of the pie and you only need to really work for one day a week, but I just don't see that happening. I think its' far more likely, based on the course of history, that we're going to end up with a small class of capitalists who own everything and get all the money, and a gigantic underclass of people who get nothing.

[Username17]

Since 1973, almost all of the gains in income have gone to the top. The median income has risen only about 20% even as total wealth has doubled.

As countries become more unequal, they have less intergenerational social mobility. The US is not only the least socially mobile and most unequal of first world countries, but it's also more unequal now than it was a generation ago. By a lot. The American Dream may be dead, but we have every reason to believe it will be even more dead in the future. There is no reason to believe our children will have even as much social mobility as we had with respect to our parents - which in turn is of course measurably less than what we had with respect to our parents.


-Username17

[Lago PARANOIA]

I hate the focus on 'income mobility'.

Not in of itself, but because it has become a sacred cow and a distraction from the real question of 'how bad off is the lower class doing?'

If the lowest rung of society could be afforded a safe living environment, decent house, medical care, a varied and balanced food budget, several forms of entertainment, a means of transportation and travel, access to intellectually-stimulating outputs like the library and/or Internet, decent educational prospects, and can afford these comfortably to themselves and their family, is it really that big of a crime if they don't have much of a chance of moving to the upper quintiles?

I mean, I would rather that be the current state of affairs then guarantee that entire population gets to live like millionaires for 50% of their lives and like medieval peasants for the other half.

Now, granted, it really isn't that big of a deal, since game theory and iterative advantage makes it damn near impossible to have high income mobility and high income inequality (and vice versa); so in practice the solutions for increasing income mobility are practically the same as decreasing income inequality. But it just irks me on principle.

[LargePrime]

is it really that big of a crime if they don't have much of a chance of moving to the upper quintiles?

Yes.

Firstly it suggests a rigged game. Secondly the lack of potential movement/risk of loss quashes effort. Thirdly it leads to 'calcification' of the upper classes/power structure, making it less able to address changing needs.

[Username17]

The difference between "Equality of Outcome" and "Equality of Opportunity" is pretty large in how people respond to it with their gut. People hate freeloaders getting free pizza even more than they like getting free pizza. People get so irrational about the idea of people getting stuff they didn't work for that they will actually pay more than a dollar to make sure that freeloaders don't get a dollar. This is why Romney is using the "Obama is in favor of Equality of Outcome!" lie as a major talking point. That and because the US press corps are too chicken shit to call him on his bullshit.

The important thing to understand is that there is an actual honest-to-goodness linear relationship between Equality of Outcome and Equality of Opportunity. Every single thing you do to promote equality in opportunity also increases equality of outcome and vice versa. Everything you do to reward the successful also and in equal measure keeps the children of the unsuccessful locked in their social strata.

Anyone who says politically that they are in favor of Equality of Opportunity but not in favor of Equality of Outcome is fucking lying to you. Either that or they are exactly as confused on this issue as the average American voter.

-Username17

[PhoneLobster]

It's not that lack of income mobility is a particular huge crime on it's own, it's that pointing out that it doesn't happen is a way off attacking propaganda.

A lot of idiots buy into bullshit on the promise "you too can be rich!" pointing out "no you can't actually" is about trying to get those idiots not to buy in.

It has not been hugely successful as far as I am aware, but I see the reasoning.

Unfortunately it is not entirely clear if those members of the lower classes who CLAIM to buy into the "I too can be rich!" con are not in fact just the SAME set of self hating morons who just like the whole idea of a deeply divided class based society so much that they don't mind being the abused peasant class, as long as they can worship the aristocrats.

[Lago PARANOIA]

You can have high income mobility while having high income inequality. Just redistribute the wealth randomly at fixed or also random intervals. But there's no one in the world in favor of that.

If you've played any kind of game with asymmetric advantages (min-maxxing is an obvious one, but also simpler things like taking out critical-existence failure) you know that having and keeping advantages allows you to accrue further advantages when repeated. It makes it steadily harder for the underdog to flip his fortunes. In fact unless you have a factor that specifically cockblocks the haves from holding onto their advantage it's impossible to design a system that does otherwise. And of course the way to do this is to call a mulligan between players now and then. Which when we're talking about economies, means wealth distribution.

So fighting income inequality and income immobility requires the same tactics.

[LargePrime]

http://www.ted.com/talks/lang/en/richard_wilkinson.html

Research shows that inequality is so BAD for HUMANKIND it even KILLS THE RICH sooner.

[Username17]

http://www.ted.com/talks/lang/en/richard_wilkinson.html

Research shows that inequality is so BAD for HUMANKIND it even KILLS THE RICH sooner.

Was that seriously in doubt?



-Username17

[LargePrime]

Your point is valid, however "eat the rich" is not a factor in the researchers data, iirc.

That suggests a subtler powerful relationship between humans, no?

[tzor]

A 100% marginal rate is a little high. Not because it destroys some nebulous incentive to earn, but because it will divert huge amounts of wealth into tax evasion. Capping at 90% or 95% gets the government about as much money, but keeps people from switching to black market deals or offshore tax shelters or whatever.

Well it depends. I was advocating using lock boxes to stash away income effectively tax free until you actually use it by taking it out of the lock box. Let's say you start off with (I think it was Wilkow who suggested this as the ideal progressive) a cumulative 1% per million earned. Depending on where the lower brackets were below the 1 million mark this would mean an effective cap of around ... $50M per year. No one sends that kind of money per year. They would probably be putting anything over their normal $20M into a lockbox savings anyway which deffers their taxes.

So it really gets people to divert more of their money into investments, whcih is a good thing.

[LargePrime]

Well it depends. I was advocating using lock boxes to stash away income effectively tax free until you actually use it by taking it out of the lock box.

All this does is allow the tax free accumulation of wealth. And that is the worst kind, the stagnating festering toxic swamp that breeds finance guys.