Book review: "Capitalism's global slump"

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http://socialistworker.org/2011/03/07/capitalisms-global-slump

A new book provides a framework for understanding the worst economic crisis since the Great Depression

Canadian socialist David McNally's new book Global Slump: The Economics and Politics of Crisis and Resistance, brilliantly explains the roots and nature of this new epoch of crisis, capitalist austerity and working-class resistance.

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wjkolar
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Unfortunately, since the author is a self-described "socialist", many probably won't bother reading the book. Pity. The review shows it explains a lot..

People equate socialism with the state capitalist Soviet Union.and a workers democracy with a dictatorship. Nope.

"The Soviet leadership thus portrays itself as socialist to protect its right to wield the club, and Western ideologists adopt the same pretense in order to forestall the threat of a more free and just society. This joint attack on socialism has been highly effective in undermining it in the modern period." Noam Chomsky http://www.chomsky.info/articles/1986----.htm

Chomsky video: http://www.bing.com/videos/watch/video/chomsky-on-socialism/a65218e8619ea36156eda65218e8619ea36156ed-420126131179?q=Noam+Chomsky+on+socialism&FORM=VIRE5

Say's Law:(non-Marxist)

Production cost - wages - money supply = aggregate. Balance. The sum of the economy. All that is produced can be bought. Profit extractions above the costs to maintain/expand production upset the equation. What's produced can't be bought. Wages are insufficient due to the profit extractions. Excess capacity develops.(an inability to purchase what's capable of being produced.)

The book seems to explain the process of how the excess profit is utilized to undermine the whole system. The system itself requires it. Its own undermining is a part of the contradictions within it..

Retired Monk - "Ideology is a disease"

polycarp2
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Quote polycarp2:

Say's Law:(non-Marxist)

Production cost - wages - money supply = aggregate.

Polycarp2 - I've not seen this formula before. Could you please provide a reference?

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Azog
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Jan. 3, 2011 3:42 pm

Sa's Law boils down to one good MUST be exchanged for another good. When there is an inability to do that, economies go splat.

References abound on the internet. Ditto many conflicting views on it. Neo-liberal twits like the current Head of the Fed have, as world class economist Michael Hudson notes, "turned the economic language into double-think".

Hudson gives a good example of Say's Law here:

."The traditional textbook meaning has referred to the circulation between producers and consumers, from wage payments by industrial companies to their employees, who use their wages to buy what they produce. This is why Henry Ford famously paid his workers the then-towering $5 a day. This was Say’s law: Income paid for production finds its counterpart in consumption to maintain equilibrium in a way that enables the economy to keep on growing. The new circular flow runs from the Fed and Treasury to Wall Street in the form of bailouts, and then back to Republicans in Washington in the form of campaign contributions. The money circulates without having to go through the “real” economy of production and consumption at all. http://www.counterpunch.org/hudson09222008.html

I'd suggest reading Say's treatise if your truely interested. As in all theory, the treatise can be reduced to an equation: prod. cost - wages - money supply = aggregate. Balance. Equalibrium. It's imbedded in the treatise and is often used by economists..

Retired Monk - "Ideology is a disease".

polycarp2
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Jul. 31, 2007 4:01 pm

Where has this model been successful poly?

How does this fundamentally differ from the "socialism" that was practiced by the Soviet Union?

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Mr.Burns
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Quote polycarp2:

'd suggest reading Say's treatise if your truely interested. As in all theory, the treatise can be reduced to an equation: prod. cost - wages - money supply = aggregate. Balance. Equalibrium. It's imbedded in the treatise and is often used by economists..

Is that equation your own invention?

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Azog
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Jan. 3, 2011 3:42 pm

Nope, It's in any basic economics textbook.

For Mr. Burns. The Soviets violated Say's Law in one manner, we do it in another. They ignored production costs and often sold goods for less than the costs of production. Can't do that.

That isn't much different than using 1 1/2 gallons of oil to produce a gallon of ethanol.

The phrase "supply creates its own demand" was a statement of Keynes, not Says. Keynes attacked his own interpretation!

Basically, products are paid for with products. An equalibrium with money taking the place of direct barter. Equal value for equal value based on production costs (materials/energy) and /wages. . We don't do it that way. Excess profit extractions upset the apple cart. We don't exchange equal value for equal value.

In theory, a Haitian producing a Disney logo tee shirt should be able to buy it or exchange the value he produced for an equal value produced by someone else.. He can't.

The Soviets upset Say's Law by ignoring production costs. We do it with excessive profit extractions....added to the exchange value and thrown into financial paper. One result of that is periodic collapses.

Retired Monk - "Ideology is a disease"

.

polycarp2
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Jul. 31, 2007 4:01 pm

How is the value of something determined?

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Mr.Burns
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Are you talking price or value? I suggest Raj Patel's THE VALUE OF NOTHING where he talks about the problem of pricing value in this economy.

The point Poly is making has little to do with how value is determined, but it does blow away the silly idea that "market dynamics" result in the common good or a successful exchange of real value behind the money. When you play with the money without creating real value, you disrupt the natural economic flow Says Law states as essential. It is all about the redistribution of the money to match the reality of the basic exchange. You cannot just add money because it is a symbol, not the real economy.

Say describes a healthy economy, a sustainable and even "just" one. It is, of course, not what we deal with. Recognizing the pathology instead of praising it would be a good first step for most economists and nearly all pundits.

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DRC
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Jul. 31, 2007 4:01 pm

Price, value of a given product is relative.

I would suggest that it is the profit motivation that drives innovation and efficiency. A company has to produce a product or service at a price that individuals are willing to pay for it. This is what drives new product development and lower prices.

It is the profit motivation that has lifted billions of people out of abject poverty over the last 130 years.

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Mr.Burns
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A favorite dogma of the old Capitalism v. Communism text book. It is a very reductionist lens and barely adequate for pure economics. When it is applied to political economics and social theory, it really gets it wrong in seriously immoral and unjust ways. It is ideology, Frank.

What would make it philosophy instead would be a serious study of what does motivate people to work and purchase stuff. Why do teachers teach if it is all about profit?

What should we buy and surround ourselves with to be happy? I don't think our totemic materialism of consumer ego displays is about happiness.

The laborer is worthy of his/her hire. But the best philosophy for a successful business is found in the book titled "Don't Go Into Business to Make Money." Make something of value. Do something of value. Be focused on that. Let the money happen. It really does not mean don't pay any attention to the finances, but the point is to put value first and create it. If you think about the money first, you will undercut your value production by cheaping it out.

I would also contend that greed is toxic. The point about being successful or even the drive to be so is that it ought to be more than being "rich." The CEO's I heard complain about being powerless as dino drivers did not find 'satisfaction' in being the boss. We need to get over the idea that life is defined by economics or that the latter is defined by money instead of the society it produces.

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DRC
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I do not disagree that there is too much materialism and our society is too obsessed with the appearance of success instead of finding happiness in what you have.

But who am I to tell others what should make them happy? That is my biggest issue with Liberalism, they seem to dislike the choice that individuals make so they want the government to step in and force decisions upon them.

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Mr.Burns
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Quote polycarp2:
Quote Azog:
Quote polycarp2:

'd suggest reading Say's treatise if your truely interested. As in all theory, the treatise can be reduced to an equation: prod. cost - wages - money supply = aggregate. Balance. Equalibrium. It's imbedded in the treatise and is often used by economists..

Is that equation your own invention?

Nope, It's in any basic economics textbook.

I can't seem to find it anywhere. Can you please provide a reference?

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Azog
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Jan. 3, 2011 3:42 pm

http://www.econlib.org/library/Enc/bios/Say.html James Mill [John Stuart Mill's dad] said the "supply creates demand" phrase first.

French economist J. B. Say is most commonly identified with Say’s Law, which states that supply creates its own demand. Over the years Say’s Law has been embroiled in two kinds of controversy—the first over its authorship, the second over what it means and, given each meaning, whether it is true.

On the first controversy, it is clear that Say did invent something like Say’s Law. But the first person actually to use the words “supply creates its own demand” appears to have been James Mill, the father of john stuart mill.

Say’s Law has various interpretations. The long-run version is that there cannot be overproduction of goods in general for a very long time because those who produce the goods, by their act of producing, produce the purchasing power to buy other goods. Say wrote: “How could it be possible that there should now be bought and sold in France five or six times as many commodities as in the miserable reign of Charles VI?”1 With this statement Say had the long run in mind. Certainly the long-run version is correct. Given enough time, supply does create its own demand. There can be no long-run glut of goods.

But Say also said that even in the short run there could be no overproduction of goods relative to demand. It was this short-run version that thomas robert malthus attacked in the nineteenth century and john maynard keynes attacked in the twentieth. They were right to attack it.

Say was the best-known expositor of Adam Smith’s views in Europe and America. His Traité d’économie politique was translated into English and used as a textbook in England and the United States. But Say did not agree with Adam Smith on everything. In particular, he took issue with Smith’s labor theory of value. Say was one of the first economists to have the insight that the value of a good derives from its utility to the user and not from the labor spent in producing it.

http://www.econlib.org/library/Say/sayT.html if you click on any of the items in the column on the left you get the text.

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douglaslee
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Jul. 31, 2007 4:01 pm

Say's views on consumption were interesting

In this point of view, the most judicious kinds of consumption seem to be:—

III.IV.5

1. Such as conduce to the satisfaction of positive wants; by which term I mean those, upon the satisfaction of which depends the existence, the health, and the contentment of the generality of mankind; being the very reverse of such as are generated by refined sensuality, pride, and caprice. Thus, the national consumption will, on the whole, be judicious, if it absorb the articles rather of convenience than of display: the more linen and the less lace; the more plain and wholesome dishes, and the fewer dainties; the more warm clothing, and the less embroidery, the better. In a nation whose consumption is so directed, the public establishments will be remarkable rather for utility than splendour, its hospitals will be less magnificent than salutary and extensive; its roads well furnished with inns, rather than unnecessarily wide and spacious, and its towns well paved, though with few palaces to attract the gaze of strangers.

III.IV.6

The luxury of ostentation affords a much less substantial and solid gratification, than the luxury of comfort, if I may be allowed the expression. Besides, the latter is less costly, that is to say, involves the necessity of a smaller consumption; whereas the former is insatiable; it spreads from one to another, from the mere proneness to imitation; and the extent to which it may reach, is as absolutely unlimited.*11 "Pride," says Franklin, "is a beggar quite as clamorous as want, but infinitely more insatiable."

Ostentation is also a tool, Italian shoes, imported cars, tailored threads, all contribute to image needed to get the mark to trust you, and become more vulnerable to your pitch.

The mark may have a clock on the wall, but time to be offered is from the grifter's Piaget, or Rolex.

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douglaslee
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Jul. 31, 2007 4:01 pm

Another way to create value is to make the alternative to the high yield product so miserable, the customers are forced to pay the higher price.

http://in.reuters.com/article/2011/03/22/us-britain-transport-idINTRE72L3HR20110322 shows how it's done. The business class coach is still available.

A rail company has tried to tackle the problem of overcrowding on its trains by making its seats so narrow that more than half of passengers cannot fit into them while many are left in pain, an MP said.

Penny Mordaunt, Conservative MP for Portsmouth North, told parliament that commuters traveling on South West Trains between London and Portsmouth had to squeeze into hard seats measuring 43 cm (17 inches) with no arm rests or spaces between them.

"It seems that South West Trains expects its passengers not only not to work while traveling in standard class but not to have elbows either," she said, adding that the cramped conditions had forced some passengers to seek medical attention.

A report commissioned by South West Trains found 59 percent of passengers could not fit into the seats on its class-450 carriages when their elbows were taken into account.

The article is also an example of data manipulation. The for profit spokesperson said they're offering 144 extra seats, but in the same statement is the fact that there are two extra cars in their train than the one they are comparing to.

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douglaslee
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Jul. 31, 2007 4:01 pm

It shouldn't be too difficult to understand that if wages aren't sufficient to buy what is produced, production stops.

If production costs aren't recouped. production stops.

It's pretty simple.

pioduction costs/wages/money supply = aggregate.

Withdrawls from the money supply thrown into financial paper disrupt the equalibium.

Supply side ceonomics, as noted by one of the major proponnets of it,, Paul Craig Roberts ("The Supply Side Revolution") was an effort to recoup production costs...NOT TRICKLE DOWN! It has been misapplied. and was never, ever meant to be applied; to financial markets.or as an excuse for outsourcing. "How the Economy Was Lost" -Roberts.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

Mr Burns wrote: "It is the profit motivation that has lifted billions of people out of abject poverty over the last 130 years."

I'd reply: and it's the GREED motivation that drove them into poverty in the 1st place.

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mtdon
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Jul. 31, 2007 4:01 pm
Quote mtdon:

: and it's the GREED motivation that drove them into poverty in the 1st place.

Drove them into poverty? Before capitalism poverty was the norm for %99 of the people.

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Mr.Burns
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Dec. 1, 2010 12:48 pm

Proof? I think you will find that "poverty" is a function of enclosures and labor arbitrage more than the natural state of pre-industrial human life. In other words, the blessings of modern industrial society and capitalism do not occur at the bottom. They were better off without it. The idea that modern capitalism lifts people out of austerity and misery does not compute.

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DRC
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Jul. 31, 2007 4:01 pm
Quote DRC:

Proof? I think you will find that "poverty" is a function of enclosures and labor arbitrage more than the natural state of pre-industrial human life. In other words, the blessings of modern industrial society and capitalism do not occur at the bottom. They were better off without it. The idea that modern capitalism lifts people out of austerity and misery does not compute.

Better off living in a mud hut? Watching their children die before they reach adolescence? Why have millions of Chinese people left that way of life to move to the cities to work for a few dollars a day?

http://www.youtube.com/watch?v=cy4gRGic11k&feature=related

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Mr.Burns
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Dec. 1, 2010 12:48 pm

If the U.S. hadn't bought the Chinese supply on credit, there would have been no few dollars a day Chinese wages.

Supply creates its own demand IF those producing the supply are paid sufficient wages to purchase what they produce. Credit, in place of wages, reaches a dead end.

The far right seems to ignore that.. Periodic economic collapses are a result. Production slows or ceases. A downward spiral ensues until equalibium. is re-established. Usually, that becomes a function of government.

Throwing trililons into finance to provide "liquidity" wasn't the way to deal with that. All it did was inflate the prices of stocks and financial paper..The real economy remains in meltdown.

Retired Monk - "Ideolgy is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

I had read of Liz Warren's meeting at commerce, but this link /love-it-or-hate-it-finance-reform-is-here-to-stay has even more.

ew rules on derivatives are a particular concern of the chamber’s. The chamber wants to make sure that businesses that use derivatives to manage risks, such as spikes in commodity prices, aren’t subject to margin requirements that sideline capital that could be used to create jobs, Donohue said.

Dimon agreed, saying, “You’ve got to very careful in setting these rules.”

American companies could simply move their money to other countries, such as Singapore, if U.S. regulators don’t give end users of derivatives adequate exemptions from margin requirements.

“That’s what happens in the business world,” he said.

Jamie Dimon is going to take his marbles and play somewhere else. How dare they be required to cover their bets. Check kiting is illegal for everyone else.

Read more: http://www.portfolio.com/views/blogs/capital/2011/03/30/love-it-or-hate-it-finance-reform-is-here-to-stay#ixzz1IBMcb0gl

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douglaslee
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Jul. 31, 2007 4:01 pm

http://www.portfolio.com/business-news/reuters/2011/04/01/morgan-stanley-goldman-to-recommend-say-on-pay-report

this sounds like a success, allowing shareholders vote on compensation. However, in a recent Rolling Stone Taibbi article, shareholder equity, voting shares, are often times more shares than have actually been issued or sold. So when a vote is scheduled, trader's positions increase until votes cast, then dumped back to the real number of shares outstanding.

Marriott has some super shares issued [family held], each share having ten votes vs. common shares [the kind in pension/mutual funds].

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douglaslee
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Currently Chatting

Time for America to dump "homeland"...

It’s time to do away with the word “homeland." As the situation with ISIS continues to escalate, and as worries about terrorist attacks on American soil continue to spread, we’re hearing the term “homeland” mentioned more and more.

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