From the perspective of a single business it makes perfect sense to lower wages to zero if it can be done keeping all things constant. However, there will be less demand from workers and maybe more demand from capital owners and entrepreneurs. Since they save a large share of their income the net effect is very likely a fall in income and this means that the whole idea of lowering the labour share is pretty much self-defeating. If it only were so easy.econoblog101
If wages are falling, who buys the products?
Dirk Ehnts | Berlin School for Economics and Law
So then, why do we have a government-backed credit cartel to allow so-called creditworthy businesses to automate jobs away with the workers' own stolen purchasing power?
ReplyDelete"So then, why do we have a government-backed credit cartel to allow so-called creditworthy businesses to automate jobs away with the workers' own stolen purchasing power?"
ReplyDeleteCurrently this "cartel" is irrelevant…
Further, when they cut wages they cut the income of their customers…their employees and customers are effectively the same people.
Automation only makes things worse if we are under capacity…all they would be doing is creating inventory.
Currently this "cartel" is irrelevant… paul meli
ReplyDeleteMaybe so but the injustice lingers.
And automation need not increase output to be profitable; simply reducing the number or the skills (and thus the pay) of employees required for the same output could be profitable
"reducing the number or the skills (and thus the pay) of employees required for the same output could be profitable"
ReplyDeleteIn doing so you also reduce the discretionary income of your customers.
Thus, in order for your customers to be able to purchase the same or greater output prices would have to decline in amounts proportional to or proportionally greater than your customers loss in income, which then reduces your revenue.
Explain how that leads to increased profitability.
Explain how that leads to increased profitability. paul meli
ReplyDeleteYes, in aggregate, unethical financing of automation is self-defeating, except in the short run where consumption could be maintained with consumer debt.
"Yes, in aggregate, unethical financing of automation is self-defeating, except in the short run where consumption could be maintained with consumer debt."
ReplyDeleteF. Beard, As usual we don't really disagree on much of anything in principle.
The point I'm trying to make re this discussion relative to the other issues is that credit is effectively borrowing against future income or existing savings, both of which are funded by public spending.
So the credit circuit is fully dependent on public spending. If the government is going to encourage us to go into debt (which it has) then it has the obligation to provide the public investment necessary to keep us working and able to make our payments.
I agree with you completely about credit. Funding consumer spending with credit is like handling rattlesnakes for the borrower. It appears the lender has snake-bite-proof clothing (via bailouts).
Credit should only be used for investment spending in cases where paying cash is not a viable option, ie housing and education.
The government should not be encouraging people to go into debt in order to enrich the rich further.
Credit spending for anything that is necessary in a modern world should be provided at near-zero interest through a nationalized banking system.
I include housing and education in the "necessary" category. There are probably others.
Credit should only be used for investment spending in cases where paying cash is not a viable option, ie housing and education. paul meli
ReplyDeleteCash is not a viable option because the population has been cheated of Equity. And when one has been cheated, the proper course is restitution.
So new fiat should just be given to the entire population at least until all deposits are 100% backed by reserves excluding borrowed reserves. The redistribution of the common stock of all large corporations plus land reform (Leviticus 25) may also be justified. Then there'd be little need for borrowing.
As for credit creation by the government that would only be ethical if everyone qualified for the same amount regardless of ability to repay.
Someone has to design and manufacture the machines that are used to automate production. In this way, lower wage assembly line jobs give way to higher paying, higher skilled jobs needed to automate existing production facilities.
ReplyDeleteEd, this is true, but it results in fewer jobs. What do the displaced workers do?
ReplyDeleteWhat do the displaced workers do? paul meli
ReplyDelete1) Return to the family farms the banks stole?
2) Live off the Equity they would have if business did not have the option of stealing purchasing power via a government-backed credit cartel?
The irony is that Equity is backed (like Liabilities) with assets so shares in Equity could have been used instead of a government-backed credit as private money. Then the problem of just distribution would have been solved automatically.