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As a quick aside, I don't know that's it's really accurate to say "capitalism" does this. IMO, that's just a function of human nature in any sort of economic system. Every system we've ever tried ultimately includes humans and human choices, and humans are innately greedy. I'd argue that all economic systems involve people attempting to gain as much as possible for themselves or their families while expending the least amount of cost/effort.

Capitalism is more about the idea of utilizing capital investments as a means of increasing total productivity of the economy, thus increasing the total size of the economic pie. It attempts to actually use human "greed" as a means of growing the economy. And yes, as a result "the rich" get richer relative to "the poor". But the poor tend to do better than any alternative system that attempts to ignore human greed when setting the rules. A system based on wishful thinking isn't going to work. It might sound good in some kind of altruistic way to pretend that an entire society of people would just all magically choose of their own free wills to engage in exactly the right ratio of labor needed for society to thrive, but in the real world we live in something has to make people do what is needed. Ultimately there are two ways to do this:

1. Allow the market (and human greed) to solve the problem. If things are needed at a quantity greater than they are available, the price will rise. If a profit motive is allowed and encouraged, this will result in profit seekers filling that demand. Thus, human greed is used to ensure that the needs of the society are met. The same forces work in the labor market. Different types of labor aren't valued differently because there's some evil people making it so, but because the actual ratio of need to availability of that particular labor makes it so. While not perfect, it's much better than the alternative IMO.

2. Force people to do the labor that is needed (command style economy). This is basically the alternative to a free market. You may trick people into adopting this sort of system by making them think that you're eliminating greed/profit/whatever, but someone has to build the houses you live in, and grow the food, stock the shelves, transport the goods, mine the ore, etc, etc, etc. And they have to do that in the correct amounts needed. In the absence of a free market with supply/demand forces incentivizing people to do whatever work is needed you must have an authoritarian system that forces people to do those things.

I tend to prefer option 1. I think most (all?) of us do. But sometimes we get so caught up in demonizing profits and/or greed that we forget that these are not necessarily bad things. We have to compare an imperfect economic system to other equally (more IMO) imperfect ones and make a decision. It's a terrible mistake to only look at the flaws of a free market because you run the risk of choosing the non-free alternative without even realizing that you're making a choice. Don't just fight against something. Fight *for* an alternative. And know what that alternative is.



Yup. I don't want you to think I'm disagreeing with your sentiment here. Just trying to clarify something. Human greed is not a feature of capitalism. It exists just as much in any economic system we might devise. The difference is how that greed manifests, and whether it results in positive or negative outcomes.



I'm well aware of the theory. I just disagree with it vehemently. Actually, it's more than that. It's a theory that is basically a lie. The laborer is *never* the sole determiner of his wages. Ever. It's a lie to think that if we eliminate the employers role in determining wages that this means that the laborer will make that determination. The correct choice is between opposing supply/demand forces of worker and employer in a free labor market on one hand, versus an authoritarian force imposing costs for labor on the other. The worker doesn't set his wages in the second case. The government (or whatever authority we empower to do this) does. The union worker doesn't set his wages. The union does. He's not empowered at all. It's a dreadful mistake (or lie to gain support I suppose) to think or argue differently.


You cannot eliminate the free market method of determining wages and retain the laborers power to influence his own wage. One is part of the other. The laborer is half of the free market methodology. If you eliminate the other half, you must eliminate his power as well. I don't think I can emphasize this enough. You're not fighting to free the workers here (I'm using "you" broadly here btw). You're fighting to eliminate both workers influence and power and the employers and hand that power to some other authority. There's a whole range of different outcomes we can imagine would or could result from that, and I don't want to get bogged down arguing all of those, but specifics aside what you accomplish when you attempt to impose labor costs different than what the market will generate, you are empowering whomever makes that decision and *not* the workers.

So now, instead of the value others place on your labor determining what you get paid, the government makes that decision. It will decide the relative value of a burger flipper and a dressmaker, or a firefighter and a teacher. Nothing in that process results in greater power or freedom for the workers. That's the big lie to this whole thing.





/shrug. I'd say that while there will always be specific anomalies within the economy, when looked at as a whole, the amount businesses pay their workers is exactly the right amount. It has to be. As long as there are market forces pressuring businesses to keep costs down, and forces pressuring workers to attempt to earn as high a wages as possible, the results will on average be correct. Obviously, that doesn't mean that that guy right there is being paid a fair wage. Lots of people are underpaid at any given time, and lots of people are overpaid at any given time. But on balance, the labor market as a whole (actually in any given sector of the market) must be correctly valued. Because a free market automatically accounts for imbalance. A labor sector which is overpaid will result in more workers seeking those jobs. Increased supply of labor in that sector will reduce the wages paid. Similarly, if a sector is underpaid, people will leave it and work in other sectors, resulting in decreased supply and increased wages. If the wages in a given sector settle at a given rate, it's because that's what the market has settled on as the "true relative value" of that labor. That's not wrong. It's exactly right.

And, as I've tried to explain many times, while it's not absolutely perfect in all cases, it is still by far the best way to do this.


Yeah, veered far far off the "contribution to society" bit, but I do feel that this is an important point to make. You can't reject one half of a free market and think that the other half can remain intact and "free". It just doesn't work that way.

You're missing the point. If the shareholders don't profit on their investment, they wont invest. And the workers will earn zero dollars. Thus, the need for workers to earn a higher wage (anyone involved in the process really) has to be balanced against the need for investors to receive a return on their investment (aka: "profit").

No, you are missing the point. There is no requirement for "investment" to exist *at all*. Only labor. In a fair economic system, workers exchange their labor for that of others on an equal basis. In a corrupt economic system, an artificial hierarchy is arbitrarily imposed, allowing the labor of many to benefit one. Not because the one has provided anything of value, but because of a construct. The idea that Bill Gates labor should be valued millions of times that of yours is absurd. You aren't capable of understanding that, because as we all know, you are stupid, but it's a comical idea that Capitalism is somehow "required" for an economy to work. It isn't. It hasn't been in many functioning economies throughout history.

In an unregulated free market, this is simply not true. In an unregulated free market, you end up with a few very powerful people and a whole lot of serfs.

Setting aside the whole issue of dividends, how do you think a company becomes more valuable? This typically happens when it consistently earns more money than it spends on its operation (well, the part of its operation that generates those earnings). This is why things like quarterly earnings reports have a significant affect on share price.

I'm responding to the idea (floated by you I believe) that a company is best run if there is "zero" profit. Meaning that the company increases the wages of its workers or decreases the cost of its product such that the amount of money is has after paying its operating expenses (which includes payroll) is as close to zero as possible. And while I'll agree that this can still represent a potential growth for the company itself (cause part of its expenses can be expansion of the business itself), at that point we're really just splitting hairs over what "profit" is.

If I have a company that spends 10M on operating expenses and have 12M in earnings, does spending an extra 2M on the business really make any difference? Let's assume we're talking about a corporation here. So 2M in the bank versus 2M more dollars invested in the business (which will show up on a balance sheet as assets). You're arguing against something that really doesn't have any meaning. For a corporation, the idea of profit doesn't really exist in the same way that a privately owned business does. There's no rich individual pocketing the extra cash.




Yes, if the employees (their labor really) are actually more valuable to the company. Just paying them more money doesn't make them more valuable. It just makes them more expensive. You have an absolutely valid point but only if the decision to increase wages is a business one (ie: aimed at increasing the value of the corporation as a whole). And, as Cat correctly observes, there's a market force which causes this to happen (underpaid employees leaving to work for the competition). An employer paying more only reflects an increase in value if the employees labor is actually more valuable.

Arguing for any kind of forced wage increases is putting the cart before the horse. And again, ultimately, the best determinants of this sort of decision are those running the business itself. A third party, perhaps more invested in a social agenda than good business, will tend to make poor decisions in this regard.

Edited, Aug 13th 2014 2:21pm by gbaji

I'm not arguing for an unregulated market. I'm arguing against a specific type of regulation.

Oh? What sort of regulation are you in favor of, exactly?

That's not true. The company I work for has increased in value like crazy in the last two years. But the value of the employee labor has not increased much, just the number of employees and jobs available.

So now instead of 300 employees making 10-12 dollars an hour there are 500 employees making 10-12 dollars an hour.

Edited, Aug 13th 2014 8:57pm by TirithRR

The point being... that your statement is only true in a very narrow view of "company" and "value"?

If the labor is more valuable, the employee should get paid more. But just because the company is more valuable, doesn't mean the employee should be paid more.

I work in the Automotive industry. But just because we increased 36 million in sales last year, it's not because the employee's work is more valuable, we just sold more automobile parts last year and had to get more employees to do it. They still created parts at a similar rate, and the value of the parts produced was similar to those the year before, so their wages were similar.

This here has got my vote for Zam Quote of the Month.




Edited, Aug 14th 2014 2:07pm by Elinda