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Was Karl Marx Right After All?

 
Ugly Redneck
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Copied from an Email Thread:


In Das Kapital, Marx proposed that Capitalism contained the seeds of its destruction within itself. The thesis was simple - the only motive recognised by Capitalism is profit. In his endless quest to maximise profits, the capitalist must reduce wages. The problem with this however, is obvious - every wage earning worker is also a consumer, the driving force of Capitalism. If the consumer has no money to spend, the machinery of Capitalism - industrial production - grinds to a halt, leading to even lower wages or mass layoffs, and even less expenditure in turn driving the economy deeper into a hole. Marx saw that this inherent contradiction would inevitably lead to the collapse of the system.
This downward spiral of the economy is starkly revealed today in the US. The quest for higher profit margins is driving more and more jobs - in the millions - abroad. Manufacturing is going to China, while the lower and mid level white collar jobs are going to India and other English speaking third world countries. Unemployment in the US is already affecting private expenditure, causing a recession. The American consumer, that most optimistic of creatures, is being cautious for probably the first time in generations.
One way to cure the recession is to give the people more money to spend. In the absence of wage increases from private employers, the only way to infuse cash in the economy is through tax cuts. This is being done by the current US administration. Tax cuts however, cause deficits. Deficit financing causes mid to long term pressure on interest rates, pushing them higher, thus making capital investment or economic expansion more expensive. So, tax cuts are really only a temporary measure, and risky, because unless the fresh infusion of cash succeeds in kickstarting the economy - a big if - the end result could be a deeper descent down the spiral of recession, coupled with higher cost of funds for industrial recovery through expansion. The result also impacts private spending, because private consumer credit becomes more expensive and thus less attractive. Higher credit rates mean less houses built or purchased, less cars purchased, less large consumer items purchased - more pressure on industry to produce less to match lower demand, and thus more layoffs, and even less consumer spending, etc etc.
Another way, and this has been tried before, is to institute federal command and control to stop profiteering, and create employment scemes for the unemployed. This was essentially what FDR did with his "New Deal" during the Great Depression. In fact, the "New Deal" was nothing more than a food for work labour program, like the Gramin rozgar Yojana, or JRY, or IAY or the scores of other such programs running in India at any given time. There is reason to believe that without the surge in demand created by the Second World War, the New Deal would not really have worked. The problem with this approach is that consumers blaoted on the excess of the 80s and 90s are unlikely to take willingly to such subsistence programs However, this is speculation.
Wars are another way for economic resurgence. However, they are also risky, in terms of unpredicatble outcomes, and nearly always result in increased national debt. The current Iraq and Afghanistan wars are cases in point, where only the defence industry is likely to benefit, but the larger economy remains disrupted because of the threat of terrorism, lowered public morale, and the huge expense of conducting the war adding to the already growing deficit picture.
To summarise, it does seem that Marx's thesis about the inherent contradictions of Capitalism was correct, and despite temporary transfusions by desperate leaders, the collapse of the capitalist economic system of the United States, and the larger world, seems inevitable. This is still a macro-economic overview, which could play out any which way in the end, because of intangibles, but even so, it has exposed the inherent vulnerability of the US economic system, which only a couple of years ago was touted as the world's most vibrant and unassailable.
It is useful to examine the possible effects or consequences for the rest of the world. As the American economy collapses, countries like China, Japan, and India which produce goods and services for American consumption, will also see economic hardship. Countries like the Phillipines, Indonesia, Thailand and Taiwan, which are symbiotically locked into the US economy are likely to see harsher collapses. Social unrest on an organised scale already exists in these countries or in their neighbourhood, and held at bay only by economic prosperity. Economic reverses are likely to make the insurgent movements in these countries stronger. Further, in such a scenario, Europe, which depends to a large extent on America for security, both internal and external, will also suffer destabilisation and unrest. This will further pressure the export oriented economies of South-east and South Asia.
Speculation about the disruptive social impact of such economic hardship in these societies is the stuff of nightmares. I think though, that instead of global chaos, what is more likely to emerge is a reoriented global trade system, focussed on emerging consumer economies in countries like Australia, South Africa and India. One would also like to see emerging trends favoring (a) conservation and (b) sustainable consumption. Whether this will really happen is again conjecture, based largely on the premise that humankind will learn from its mistakes. Our past record however does not favor this.

 
Ranch Hand
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One way to cure the recession is to give the people more money to spend


What about public spending on public services.
Investment in human capital.
Karl Marx was more than a bit short on that aspect of economy - everything was for the state.
His dying words -
"Last words are for fools who haven't said enough" - Karl Marx
doesn't tell much. Funny thing , we've got many memorials to Karl Marx
Karl Marx Memorial Library and at his grave in HighGate cemetry,London.
Ummmm! "Free education for all children in public schools."
---Communist Manifesto, published 1848
Some capitalists have adopted that for the have-nots.
And those schools sometime get the best results.
regards
[ November 02, 2003: Message edited by: HS Thomas ]
 
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Tax cuts however, cause deficits.


That statement is wrong. Spending more than you have causes them. Reduce spending and the deficit goes away. Does anyone really believe that all of the government spending is needed?
Tax cuts by themselves do not cause deficits.
 
Paul McKenna
Ugly Redneck
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Originally posted by Paul Stevens:
Tax cuts by themselves do not cause deficits.


A perfectly valid statement, however ,correct me if I am wrong, a Federal employee never gets laid off. A federal job is forever and I dont see the number of federal employees going down. Infact with homeland security we have another massive federal employment agency. To fund these employees taxes are needed. So if you keep cutting taxes without reducing employees / wages aren't you going to end up with a deficit?
 
mister krabs
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Originally posted by Paul McKenna:
A federal job is forever and I dont see the number of federal employees going down.

Even if that were true, federal employees do eventually retire. We could reduce the work force without firing anyone just by not hiring replacements for retiring workers. But that is not relevant anyway because the number of government employees steadily goes up. We can't even get it to remain level.
 
Ranch Hand
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As an American, this is the scariest thing I've ever read:
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess of the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
The average age of the world's great civilizations has been 200 years. These nations have progressed through this sequence:
from bondage to spiritual faith
from spiritual faith to great courage
from courage to liberty
from liberty to abundance
from abundance to selfishness
from selfishness to complacency
from complacency to apathy
from apathy to dependency
from dependency back again to bondage."
--Sir Alex Fraser Tytler (1742-1813) Scottish jurist and historian.
The quotation has since been discredited - there is no independent record of the man having said any such thing, and the book it supposedly came from doesn't show up on various library searches.
Even so, it's a startling statement if you consider it on its own merits. Federal pork-barrel programs are nothing if not the voters voting largess out of the public treasury. In fact, if I apply it to today's society as if it were true, I think we're somewhere between steps eight and nine, and overdue for an ass-whuppin'.
I hope I'm wrong!
Joe
 
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Quote initial post:
It is useful to examine the possible effects or consequences for the rest of the world. As the American economy collapses, countries like China, Japan, and India which produce goods and services for American consumption, will also see economic hardship. Countries like the Phillipines, Indonesia, Thailand and Taiwan, which are symbiotically locked into the US economy are likely to see harsher collapses. Social unrest on an organised scale already exists in these countries or in their neighbourhood, and held at bay only by economic prosperity. Economic reverses are likely to make the insurgent movements in these countries stronger. Further, in such a scenario, Europe, which depends to a large extent on America for security, both internal and external, will also suffer destabilisation and unrest. This will further pressure the export oriented economies of South-east and South Asia.
----------------------------------------------------------------------
And thus Canada or Australia inherits the Earth.
 
Nick Allen
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To expand on that comment:
You could easily point out that the Canadian economy is largely dependent on American buyers of raw materials. However there is a descending trend in this. For instance the soft-wood lumber tariff (currently in the neighbourhood of 30%) and the lock down on Canadian beef (not to mention pretty much every other livestock sector in Canada). The American Gov't also has several illegal subsidies in various industries, they have been taken to court and told to rescind these several times, never responding however (there is your bravado or courage phase).
------------------------------------------------------------
The dwarf has the best chance to strike the giant,
and compared to America there are a lot of angry little
dwarfs out there.
-Anonymous
 
HS Thomas
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Thinking about what Marxism is all about :

Karl Marx (1818-1883) did not have a theory of morality; he had a theory of history. Thus, Marxism was not about right or wrong but about what will happen in history. Marx was contemptuous of people who judged things in moral terms. When diehards say that Marxism has actually never been "tried" (despite what Lenin, Stalin, Mao, Castro, Ho, and Daniel Ortega thought they were doing), they don't understand that Marxism was not a rule for behavior or a program for action; it was supposed to be the theory of a deterministic mechanism that will produce the future, a theory of actions that will arise spontaneously because of historical circumstances. This was not a theory about "human nature" or "human psychology" [1], but about how the mode of economic production (how goods and services are produced) determines all the other political, social, cultural, and moral structures of a society. The needs of the "English petty bourgeois" are thus not "false needs" [2], however dismissive Marx sounds, but true needs in relation to a capitalistic mode of production -- needs which will change over time, in a historicist sense, as the mode of production changes. As a "science" of history, Marxism would succeed or fail to the extent that it could actually predict the evolution of production and its various effects.


Marxist-Leninist Theory of history
Did Marx have a theory of competition and how to deal with it ?
I suspect Lenin and other approaches to eliminating the competition may not have been a Marxist ideal.

regards
 
High Plains Drifter
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When diehards say that Marxism has actually never been "tried" (despite what Lenin, Stalin, Mao, Castro, Ho, and Daniel Ortega thought they were doing), they don't understand that Marxism was not a rule for behavior or a program for action; it was supposed to be the theory of a deterministic mechanism that will produce the future, a theory of actions that will arise spontaneously because of historical circumstances. This was not a theory about "human nature" or "human psychology" [1], but about how the mode of economic production (how goods and services are produced) determines all the other political, social, cultural, and moral structures of a society.
I like this excerpt and the surrounding quote as a whole. I'd simply replace "Marxism has actually never been 'tried'" with "Marxism has actually never 'worked'" to allow for my own bias.
Marx's issues with capitalism, it seems fair to say, wasn't with the failure of the system, much less some near-term call to action to rise against it. Rather, Marx saw capitalism's inevitable path of decline, inasmuch as it carefully embedded in its own institutional memory many tenets of monarchic and feudal economy, and so followed many of the same tendencies in those systems.
For those of you that have read Asimov's Foundation Trilogy, consider Hari Seldon to be a Marx-like figure, interested in the mechanics of an economic system, albeit equipped with a system large enough to manifest calculable, inexorable tendencies in that system. Seldon wasn't interested in averting the next crisis or even with dismantling capitalism in the revolutionary sense; he was simply interested in calculating the effects of its inevitable downfall and determine how best to minimize the inevitable Dark Age that would follow.
But Asimov gives Seldon this huge unlikely advantage -- people believed in Seldon's movement to such a degree that their transcended their own interests for the sake of people that wouldn't live for hundreds of years. Nice little suspension of reality that science fiction allows itself, no? Marx had exactly the opposite conditions to live in -- people of power less interested in following his ideas than using them as a platform on which to raise themselves and their own ambitions.
 
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