What is Capitalism?

[9-10ths_Penguin]

No one becomes wealthy by taking their money out of the economy.

Sure they do: stock buybacks.

 

[Kfox]

opps!

 

[ImmortalFlame]

Depends on how the money is spent. If I dig a hole and fill it, and you pay me for that, I'll then spend my money on maybe buying pansies for the yard, thus in this analogy I'm still stimulating the economy. The seller of the pansies to me then will spend the money maybe as part of buying a car. The car dealer will split the cost with the employees, and one of them may hire me to dig another hole. It's the "multiplier effect".

This is true, but in that case it's not the exchange of money or the digging of the hole that is growing the economy, but the way the money is spent. It's possible you may be talking at cross purposes.

 

[metis]

This is true, but in that case it's not the exchange of money or the digging of the hole that is growing the economy, but the way the money is spent. It's possible you may be talking at cross purposes.

It actually more depends on where the money ends up, such as if it just stays at a bank in the Grand Caymans and never ends up affecting our economy-- that's unless that same money works its way back when American products are purchased. Obviously, not all monies spent have exactly the same effect on an economy as a whole.

 

[Stevicus]

Yes, it is certainly not economic growth. It'd be like taking all of your money and stuffing it in your mattress. No one becomes wealthy by taking their money out of the economy. Capitalism requires active participation. Though not quite as bad as causing an imbalance by artificially inflating the money supply.

The money supply can be artificially inflated also through property values. A house which sold for less than $30,000 in 1970 might be worth more than 20x that today - even more than the rate of inflation. Since the square footage and property size is the same, then whichever extra profit by subsequent sellers is like printing extra money and adding to the economy, but adding no intrinsic value. It's still the same house, being sold and resold at a profit each time. But whoever is making the profit is adding no value to the economy, so they are essentially stealing.

 

[Kfox]

The money supply can be artificially inflated also through property values. A house which sold for less than $30,000 in 1970 might be worth more than 20x that today - even more than the rate of inflation. Since the square footage and property size is the same, then whichever extra profit by subsequent sellers is like printing extra money and adding to the economy, but adding no intrinsic value. It's still the same house, being sold and resold at a profit each time. But whoever is making the profit is adding no value to the economy, so they are essentially stealing.

I think it sorta balances out; somebody buys a car for $30,000 in 5 years that same car is only worth a tiny fraction of it's original cost. The same goes for TV's computers, countless other things. Are these people being stolen from? If so, by who?

 

[Nakosis]

Not necessarily -- capitalism isn't concerned with "use," but with value.
The work might be "useless," but it isn't "valueless" because someone's willing to pay them to do it.

It's not "stealing" because the person is being compensated for their voluntary use of time and labor.

Consider:

In the Sherlock Holmes story "The Red-Headed League," Jabez Wilson is hired by the titular "League" to sit in their office every afternoon and do nothing but copy out the Encyclopedia Britannica -- for which he was paid 4 pounds a week (about 500 pounds/week in today's money, or roughly $621 for those of us who live in the colonies)

Wilson goes to Holmes to investigate the League after it suddenly closes one day and permanently disbands. Holmes is quick to note that Mr. Wilson is not the victim of any crime, since he was well-paid for his time, and gained an extensive knowledge of things that begin with the letter A.

Was his time and labor "stolen"? Holmes didn't think so, and neither do I. That's almost $2500/month for what amounts to a no-stress part time job... where do I sign up?

Of course, what might have seemed "useless" to you, I, or Jabez Wilson actually wasn't useless at all:

Spoiler: "The Red-Headed League":

Holmes figures out that the "Red-Headed League" offered Wilson the job just to get him out of his house every day, because the "League" was actually a group of bank robbers using his basement to dig a tunnel to the bank vault across the street.

Back to the point: Economics isn't based on "use," but on "value." And a thing or service is only ever as "valuable" as what you're willing to accept for it.

However I wasn't referring to the hole digger as the victim.
The victim was society/the economy/every tax payer who received nothing in exchange.
Someone else ends up paying the cost. Usually the imbalance is spread through out the economy and if it is slight enough and nobody complains the government can pretend it did something good.

Fortunately, this never happened. Even our government wasn't this stupid. They actually had people doing public works, like roads, dams etc...

The money supply can be artificially inflated also through property values. A house which sold for less than $30,000 in 1970 might be worth more than 20x that today - even more than the rate of inflation. Since the square footage and property size is the same, then whichever extra profit by subsequent sellers is like printing extra money and adding to the economy, but adding no intrinsic value. It's still the same house, being sold and resold at a profit each time. But whoever is making the profit is adding no value to the economy, so they are essentially stealing.

Per my initial view, to grow the economy it means either creating jobs or creating product. Otherwise people value whatever the hell they value to however much they are willing to pay. Not really growth IMO, just exchange. I don't have a problem with people setting their own value. Just it's not growth, it is inflation I would say. Inflation is not real growth.

 

[Nakosis]

Sure they do: stock buybacks.

If they are buying back the stock they are spending money to do so.
Lots of reasons a company might do so but how does spending money/losing wealth make them more wealthy.

 

[TLK Valentine]

However I wasn't referring to the hole digger as the victim.
The victim was society/the economy/every tax payer who received nothing in exchange.

They weren't part of the deal; why should they get anything?
Rich man hires poor man to dig a hole, to copy the encyclopedia, to push marbles with a stick. Labor is exchanged for wages. What of it?

Someone else ends up paying the cost. Usually the imbalance is spread through out the economy and if it is slight enough and nobody complains the government can pretend it did something good.

Capitalism is all about private ownership of the means of production -- in a truly free market (which doesn't exist, but let's pretend it does for a moment), nobody gives a rat's whisker what the government pretends.

And something good has been done: the man getting paid is going to spend that money somewhere; circulating it into the local economy.

Fortunately, this never happened. Even our government wasn't this stupid. They actually had people doing public works, like roads, dams etc...

We saw how the US government stepped in as an employer during the Great Depression when private entities found themselves going bankrupt.
And as the employer, the government hired people to do the jobs it wanted done, just like any other employer would -- including the Red-Headed League.

 

[Nakosis]

Not necessarily -- capitalism isn't concerned with "use," but with value.
The work might be "useless," but it isn't "valueless" because someone's willing to pay them to do it.

It's not "stealing" because the person is being compensated for their voluntary use of time and labor.

Consider:

In the Sherlock Holmes story "The Red-Headed League," Jabez Wilson is hired by the titular "League" to sit in their office every afternoon and do nothing but copy out the Encyclopedia Britannica -- for which he was paid 4 pounds a week (about 500 pounds/week in today's money, or roughly $621 for those of us who live in the colonies)

Wilson goes to Holmes to investigate the League after it suddenly closes one day and permanently disbands. Holmes is quick to note that Mr. Wilson is not the victim of any crime, since he was well-paid for his time, and gained an extensive knowledge of things that begin with the letter A.

Was his time and labor "stolen"? Holmes didn't think so, and neither do I. That's almost $2500/month for what amounts to a no-stress part time job... where do I sign up?

Of course, what might have seemed "useless" to you, I, or Jabez Wilson actually wasn't useless at all:

Spoiler: "The Red-Headed League":

Holmes figures out that the "Red-Headed League" offered Wilson the job just to get him out of his house every day, because the "League" was actually a group of bank robbers using his basement to dig a tunnel to the bank vault across the street.

Back to the point: Economics isn't based on "use," but on "value." And a thing or service is only ever as "valuable" as what you're willing to accept for it.

But the point was society was not being compensated.

Kind of a stupid thing to bring up anyway because all Keynes was trying say was doing something is better than doing nothing. Not create sound economic policy. I'd imagine Keynes would be rolling over in his grave if he knew folks took this seriously.

 

[TLK Valentine]

But the point was society was not being compensated.

Jabez Wilson was a member of society; he was compensated just fine.

 

[Nakosis]

They weren't part of the deal; why should they get anything?
Rich man hires poor man to dig a hole, to copy the encyclopedia, to push marbles with a stick. Labor is exchanged for wages. What of it?

We were talking about the government doing this. A individual can burn his own money if he wants.

Capitalism is all about private ownership of the means of production -- in a truly free market (which doesn't exist, but let's pretend it does for a moment), nobody gives a rat's whisker what the government pretends.

And something good has been done: the man getting paid is going to spend that money somewhere; circulating it into the local economy.

The point was this is not economic growth. It's not fixing anything. It is just propping up economic failure.

We saw how the US government stepped in as an employer during the Great Depression when private entities found themselves going bankrupt.
And as the employer, the government hired people to do the jobs it wanted done, just like any other employer would -- including the Red-Headed League.

Yes, so no actual digging and filling holes.
Actual value to the economy was exchange by supporting infrastructure.
Not even the government was actually stupid enough to pay people to dig holes and fill them up again.

 

[Nakosis]

Jabez Wilson was a member of society; he was compensated just fine.

Yes, exactly the point, he was compensated for his time which nobody else received any value from.

 

[9-10ths_Penguin]

If they are buying back the stock they are spending money to do so.
Lots of reasons a company might do so but how does spending money/losing wealth make them more wealthy.

Sure, but it's still taking money out of the economy:

- before the buyback, you have some amount of shareholder's equity and a corresponding amount of cash

- after the buyback, both the debt and cash have effectively disappeared from the economy.

 

[TLK Valentine]

We were talking about the government doing this. A individual can burn his own money if he wants.

In the context of Capitalism, "the government" is just another employer. In their role as employer, they can spend their money as they see fit.

BUT, in that same context, the government is also an employee... of We the People. The idea being that if one of our employees isn't doing their job the way we like, we get to put a pink slip on their desk come election day.

The point was this is not economic growth. It's not fixing anything. It is just propping up economic failure.

...or postponing economic catastrophe.
Might be that the larger problem is beyond fixing; best that can be done is keep the system puttering along just a little while longer.

I'm not saying that's the case here, but it's a possibility. Your car's got a cracked engine block, but I can throw a quart of oil in there and it'll get you work today...

Yes, so no actual digging and filling holes.
Actual value to the economy was exchange by supporting infrastructure.
Not even the government was actually stupid enough to pay people to dig holes and fill them up again.

Don't do that: don't ever say "nobody's THAT stupid"; someone will always rise up to prove you wrong.

 

[Nakosis]

In the context of Capitalism, "the government" is just another employer. In their role as employer, they can spend their money as they see fit.

BUT, in that same context, the government is also an employee... of We the People. The idea being that if one of our employees isn't doing their job the way we like, we get to put a pink slip on their desk come election day.

The difference being that a government has the ability to enforce idealism. That's why we may the effort to separate church an state.
Sure, ideally we have a say, between two political parties. If you don't happen to agree with either one then you don't really have any say.

...or postponing economic catastrophe.
Might be that the larger problem is beyond fixing; best that can be done is keep the system puttering along just a little while longer.

I'm not saying that's the case here, but it's a possibility. Your car's got a cracked engine block, but I can throw a quart of oil in there and it'll get you work today...

Yes I understand the philosophy. I don't really agree with it because it sets up the government to decide what my values are. That is what they are trying to do, manipulate what the consumer values.

Don't do that: don't ever say "nobody's THAT stupid"; someone will always rise up to prove you wrong.

Ok, I'll concede on this point.

 

[TLK Valentine]

The difference being that a government has the ability to enforce idealism. That's why we may the effort to separate church an state.

I'm puzzled: how does one "enforce" idealism?

Sure, ideally we have a say, between two political parties. If you don't happen to agree with either one then you don't really have any say.

You always have a say - just not an ideal one.
As an employer, you've got two people who showed up for the job application. Neither one of them are ideal; they might not even be very good... but you can't let the position remain vacant, so you have to make a choice.

Yes I understand the philosophy. I don't really agree with it because it sets up the government to decide what my values are. That is what they are trying to do, manipulate what the consumer values.

Not at all -- you don't have to agree with (or even particularly like) your employer in order to take his money.
The world's full of people taking lousy jobs from lousy bosses. They're not happy, but at least they're paying the bills...

Ok, I'll concede on this point.

 

[Nakosis]

I'm puzzled: how does one "enforce" idealism?

Usually with a gun, but in general a police force.

You always have a say - just not an ideal one.
As an employer, you've got two people who showed up for the job application. Neither one of them are ideal; they might not even be very good... but you can't let the position remain vacant, so you have to make a choice.

Sure tell that one to the libertarians.

Not at all -- you don't have to agree with (or even particularly like) your employer in order to take his money.
The world's full of people taking lousy jobs from lousy bosses. They're not happy, but at least they're paying the bills...

It's not like I have much of a say anyway.
It's much easier to change jobs than countries.
That's about the only real say anyone gets.

 

[TLK Valentine]

Usually with a gun, but in general a police force.

Guns and police are how governments enforce their will... which is usually a lot different from an ideal...

Sure tell that one to the libertarians.

They get the same choice as anyone else -- the problem is we need more choices; more people have to start applying for the jobs.

 

[Nakosis]

Guns and police are how governments enforce their will... which is usually a lot different from an ideal...

Tomatos tomatoes.

They get the same choice as anyone else -- the problem is we need more choices; more people have to start applying for the jobs.

Yes ultimately they get the same choice as everyone else, that being not much.