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Can Civilization Survive Capitalism?

#1 Mar 14 2013 at 12:42 PM Rating: Decent
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Again though, it's not done "so your husband's boss can get a bonus". The company doesn't think "we really want to hand this guy a bonus, so let's come up with some way to reduce costs so we can do that". They think: We need to reduce costs. Perhaps if we give management an incentive to reduce overtime in their departments, the cost of that incentive will be outweighed by the savings in labor costs within the department.

The bonus is a "cost" to the business. If the business thought that labor costs relative to labor productivity could be kept low without paying your husband's boss a bonus, they would. Again, those are market forces at work. What I'm trying to get you to understand is that they don't cut labor costs in order to pay the bonus. They pay the bonus in the hopes that labor costs will be cut that will be greater than the cost of the bonus. And they hope that it'll be done in a manner which does not negatively impact productivity/revenue over time. If they're right, they'll make money. If they're wrong, they'll lose money.


This is close enough to correct not to quibble with.

The problem is the logical conclusion of continuing to maximize profits in this way is hollowing out the middle class to the point where aggregate demand falls and, in simple terms, there are no customers for the product or service being provided so cheaply. In extremis this is obvious. A handful of people in charge of a large slave labor force aren't going to do as well as 1000 people in charge of a low wage labor force. Productivity will be higher, as will profits. There's an economic question of what the most efficent distribution of wealth is, and there's a moral question of what the most humane distribution of wealth is. Neither are answered by naked capitalism or "free" markets. The idea that they are is sort of parody of actual economics. "The market solves everything" doesn't work, and never has. It'd be great if it did, but alas, no.
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