Even with a strong recovery from the pandemic, creative destruction is needed to increase profitability of capital investment owing to debt overhang and excessive financialization of the global economy.
Michael Roberts Blog — blogging from a marxist economist
Some notes on the world economy now
Michael Roberts
re: "exploitation" of labor
ReplyDeleteI posted this on David Henderson's blog titled Do Profit Maximizers Leave $4,000 on the Table?
David argued from the point of rising wages, I argued from the point of falling prices. Here is my comment:
I’ve read and argued it in the other direction.
A “greedy capitalist” hires a worker for $8 an hour and sells their output for $12 an hour and makes $4 an hour in the process. A “less-greedy capitalist” hires a worker from the reserve army of the unemployed, pays that worker $8 an hour and sells the output for $11 an hour, making $3 an hour off the worker and capturing market share away from the other capitalist. This competition between capitalists continues until all the excess profit is competed away.
Note that as prices fall, the real wage of the workers is rising.
Exploitation/greed are value judgements.
ReplyDeleteWhat isn't a value judgement is the maximum wage a worker can receive from an employer, while allowing the employer to make a profit and remain in business. In a competitive market, the incentive is to minimize costs, which include labour costs. Value judgement: negative for labour, positive for consumers.
When labour is scarce, a business cannot raise prices in a competitive market. The hit will be taken in the form of reduced profits. Value judgement: positive for labour, neutral for consumers, and negative for business.
In a monopolistic market, a business can hike prices in place of reducing labour costs. Value judgement: positive for labour, negative for consumers.
Increasing the minimum wage helps those receiving the minimum wage, harms workers who earn just above the previous minimum, and is a wash for the economy as a whole. There isn't a consensus one way or the other, which explains why the debate continues.
Profit is the key to the understanding of how the economy works
ReplyDeleteComment on Michael Roberts on ‘Some notes on the world economy now’
Michael Roberts summarizes: “The central argument of Marxian criticism is based on the law of value. This roughly means that companies only invest if they can make a profit. Profit is the centre of their actions and not the needs of the people.” and “For mainstream economists, profit simply does not matter. But even among the left-wing Keynesians, profit hardly appears. For them it is all about ‘demand’, about ‘speculation’ or about ‘financialisation’. These things all play a major role, but profit is the key category for understanding the capitalist process of production and accumulation.”
Yes, profit is the foundational concept of economics and economists get it wrong since Adam Smith/Karl Marx.
The major approaches Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, are mutually contradictory, axiomatically false, materially/formally inconsistent, and ALL get profit wrong. Economic policy guidance NEVER has had sound scientific foundations. To this day, economics is brain-dead political agenda-pushing.
Marx, too, got profit wrong.#1, #2 Because the foundational concept is false the whole analytical superstructure is false. Marx was too stupid for science and this holds for his followers without exception.
To say “I am a Marxist” is to say “I am either stupid or corrupt or both”.
Egmont Kakarot-Handtke
#1 Dear idiots, Marx got profit and exploitation wrong
http://axecorg.blogspot.com/2019/02/dear-idiots-marx-got-profit-and.html
#2 Profit: The most powerful formula of economics
https://axecorg.blogspot.com/2021/05/profit-most-powerful-formula-of.html
And when the household sector cannot go into more debt, it's up to government to keep on spending. No one wants the merry-go-round of profit/growth to end.
ReplyDelete