Communism and Capitalism: True Opposites?

[skepticalbip]

... snip ...

Way back in Econ 101 the prof asked 'What is the purpose of capitalism?'. I responded something like to provide the greatest number of goods at the lowest cot for the most people.

He pointed his finger at me and said sharply 'No ! The purpose of capitalism is to make a profit'.

It took years on the job for that to fully sink in.

That is true but simplistic. The way to make a profit is to supply a good or service that the customer wants and at a price the customer is willing to pay. It is a meeting of minds between the producer and consumer. (how much effort and expense are you willing to put in for the price you charge and how much is the consumer willing to pay for the final product? - when these two meet, there is a sale.) Also, since there is competition from other producers, the price and quality needs to be competitive to attract the consumer to your product or service rather than the competitor's.

 

[steve_bank]

... snip ...

Way back in Econ 101 the prof asked 'What is the purpose of capitalism?'. I responded something like to provide the greatest number of goods at the lowest cot for the most people.

He pointed his finger at me and said sharply 'No ! The purpose of capitalism is to make a profit'.

It took years on the job for that to fully sink in.

That is true but simplistic. The way to make a profit is to supply a good or service that the customer wants and at a price the customer is willing to pay. It is a meeting of minds between the producer and consumer. (how much effort and expense are you willing to put in for the price you charge and how much is the consumer willing to pay for the final product? - when these two meet, there is a sale.) Also, since there is competition from other producers, the price and quality needs to be competitive to attract the consumer to your product or service rather than the competitor's.

I was neck deep in it for 30 years designing and manufacturing products.

It is simple, the law of supply and demand. The free market capitalist system dynamically adjusts wages, cost of resources, and prices for goods and services. In Adam Smith's vision everybody has equal access to resources and opportunity but we know that never completely happens., There is always advantages some have and others do not. How much gets made and prices vary with supply and demand.

Supply and demand is often circumvented. Apple makes a number of units each year below demand to keep price up. There is a supply and price point that maximized profit.

In contrast Soviet communism and Mao's communism set prices for everything. What and how much was produced was set by govt.

It is all supply and demand along with maximizing profit. Developing customer relations and the like comes under the heading of business skill. It is what marketing and business students study. Large companies have psychologists on staff to profile customer bases. Before the Nazis the word propaganda was a common term in marketing.

The general term today is 'best practices' which includes custom relations and satisfaction and product quality.

There are a number of legal ways to make a profit. Developing a business to meet a cisuomer base neds and devloping relations with a good product is one.

Another is the fad. Hula hoops and pet rocks. It plays on a human need for newness.Another is hype. Charge triple for shoes with Michael Jordan's name on them.

Aint America great? The land of opportunity.

 

[PyramidHead]

... snip ...

Way back in Econ 101 the prof asked 'What is the purpose of capitalism?'. I responded something like to provide the greatest number of goods at the lowest cot for the most people.

He pointed his finger at me and said sharply 'No ! The purpose of capitalism is to make a profit'.

It took years on the job for that to fully sink in.

That is true but simplistic. The way to make a profit is to supply a good or service that the customer wants and at a price the customer is willing to pay. It is a meeting of minds between the producer and consumer. (how much effort and expense are you willing to put in for the price you charge and how much is the consumer willing to pay for the final product? - when these two meet, there is a sale.) Also, since there is competition from other producers, the price and quality needs to be competitive to attract the consumer to your product or service rather than the competitor's.

When one customer wants something and another one needs it, a sane and compassionate society would prioritize the need over the want. But under capitalism (or any market economy for that matter), the priority goes to whoever has the money to pay for it. The quality of a commodity doesn't need to be actually good, but only good enough to satisfy the desire of whoever has the most disposable money, in an environment where the producers conspire to engineer the desires of their clients through advertising and cultural saturation, and only in a way that will generate the highest likelihood of repeat purchases. E.g. the planned obsolescence of electronics, the addictive nature of cigarettes, the privatization of humanity's biological requirements, and so on.

 

[skepticalbip]

... snip ...

Way back in Econ 101 the prof asked 'What is the purpose of capitalism?'. I responded something like to provide the greatest number of goods at the lowest cot for the most people.

He pointed his finger at me and said sharply 'No ! The purpose of capitalism is to make a profit'.

It took years on the job for that to fully sink in.

That is true but simplistic. The way to make a profit is to supply a good or service that the customer wants and at a price the customer is willing to pay. It is a meeting of minds between the producer and consumer. (how much effort and expense are you willing to put in for the price you charge and how much is the consumer willing to pay for the final product? - when these two meet, there is a sale.) Also, since there is competition from other producers, the price and quality needs to be competitive to attract the consumer to your product or service rather than the competitor's.

When one customer wants something and another one needs it, a sane and compassionate society would prioritize the need over the want. But under capitalism (or any market economy for that matter), the priority goes to whoever has the money to pay for it. The quality of a commodity doesn't need to be actually good, but only good enough to satisfy the desire of whoever has the most disposable money, in an environment where the producers conspire to engineer the desires of their clients through advertising and cultural saturation, and only in a way that will generate the highest likelihood of repeat purchases. E.g. the planned obsolescence of electronics, the addictive nature of cigarettes, the privatization of humanity's biological requirements, and so on.

All true but what is your point? Free market capitalism certainly doesn't create a paradise where everyone lives ideal lives. It, however, has proven to provide a better standard of living for all citizens under the system than any other system so far attempted. A centrally planned and controlled economy may could do better if they were ruled by all knowing gods that cared for the common man rather than such a system ruled humans though.

ETA:
Capitalism does not outlaw charity and care for those in need, it just doesn't mandate it. You implying that a capitalist system can not have charitable capitalists is disingenuous.

 

[PyramidHead]

All true but what is your point? Free market capitalism certainly doesn't create a paradise where everyone lives ideal lives. It, however, has proven to provide a better standard of living for all citizens under the system than any other system so far attempted. Centrally planned and controlled economies may could do better if they were ruled by all knowing gods that cared for the common man rather than such a system ruled humans though.

The bolded part is false, and it's followed by the "human nature" argument that has been debunked a thousand times over. Communist states almost without exception presided over dramatic improvements in every aspect of life compared to the societies they replaced. Depending on how you define a standard of living, they regularly outpaced capitalist countries in terms of health care, literacy, employment, homelessness, and nutrition. If your only rebuttal to this is something about gulags, I don't know what to tell you except that you've been lied to all your life. It sounds dramatic, but in this case it's justified if you take the time to investigate primary sources (such as the Soviet archives themselves, which were never intended for outside distribution). That's one point.

Secondly, even if thus far, capitalism and only capitalism had been associated with the best standard of living compared to other economic systems, that wouldn't be indicative of anything more than the same situation for feudalism before the French revolution, or slavery in ancient times. In all such cases, there were times when the prevailing mode of economic organization, the one that tended to be used by the wealthiest societies, was an objectionable one that ought to have been overthrown. The same arguments against overthrowing them are always given by the reactionaries, including "this is the best the human species can do, we are not gods".

Finally, capitalism tends to produce a good standard of living only for people living in imperialist countries, not so much in the countries they loot for materials and cheap labor. What does it say about a high standard of living that rests on a pedestal of millions of impoverished workers in the global south? And for what, another virtually identical consumer commodity that fills a want rather than a need, until the next one takes its place? We can do better.

We have to do better. Capitalism is the only economic system that can be reasonably implicated in a looming mass extinction event.

 

[skepticalbip]

^ ^ ^
Too much nonsense to bother with. I accept that you really, really believe this stuff
but this his last one though is a real mystery.

We have to do better. Capitalism is the only economic system that can be reasonably implicated in a looming mass extinction event.

If, as I assume, this is referring to CO2 emissions then you show absolutely no understanding of the real world. Communist China today releases more CO2 into the atmosphere than both the U.S. and E.U. combined. Also emissions from China are increasing while emissions from U.S. and the E.U. are decreasing.

 

[PyramidHead]

^ ^ ^
Too much nonsense to bother with. I accept that you really, really believe this stuff
but this his last one though is a real mystery.

We have to do better. Capitalism is the only economic system that can be reasonably implicated in a looming mass extinction event.

If, as I assume, this is referring to CO2 emissions then you show absolutely no understanding of the real world. Communist China today releases more CO2 into the atmosphere than both the U.S. and E.U. combined. Also emissions from China are increasing while emissions from U.S. and the E.U. are decreasing.

lol Love how when China is the fastest growing economy in the world it's "but capitalist reforms, now it's not communist anymore" but when it's polluting the atmosphere to catch up with capitalist competitors it's just communist again

 

[rousseau]

... snip ...

Way back in Econ 101 the prof asked 'What is the purpose of capitalism?'. I responded something like to provide the greatest number of goods at the lowest cot for the most people.

He pointed his finger at me and said sharply 'No ! The purpose of capitalism is to make a profit'.

It took years on the job for that to fully sink in.

That is true but simplistic. The way to make a profit is to supply a good or service that the customer wants and at a price the customer is willing to pay. It is a meeting of minds between the producer and consumer. (how much effort and expense are you willing to put in for the price you charge and how much is the consumer willing to pay for the final product? - when these two meet, there is a sale.) Also, since there is competition from other producers, the price and quality needs to be competitive to attract the consumer to your product or service rather than the competitor's.

It's also simplistic because it assumes that there's an economic model called 'capitalism' with an intentional origin, that's separable from human nature. IOW, that humans had anything to do with 'capitalism's'arrival, and the global economy not instead being an emergent property of how we organize ourselves.

'capitalism is to make a profit'?

To be alive is to acquire resources for one's own survival and reproduction. Yes we're a social species and community has become a part of that, but 'profit', or more simply, acquisition of needed goods for survival is inherent in what it means to be alive.

You can try to improve the model, but you can't extract human nature from it. And the model isn't 'capitalism', it's people solving problems for material gain, which has been central to every way of life in history.

 

[skepticalbip]

^ ^ ^
Too much nonsense to bother with. I accept that you really, really believe this stuff
but this his last one though is a real mystery.

We have to do better. Capitalism is the only economic system that can be reasonably implicated in a looming mass extinction event.

If, as I assume, this is referring to CO2 emissions then you show absolutely no understanding of the real world. Communist China today releases more CO2 into the atmosphere than both the U.S. and E.U. combined. Also emissions from China are increasing while emissions from U.S. and the E.U. are decreasing.

lol Love how when China is the fastest growing economy in the world it's "but capitalist reforms, now it's not communist anymore" but when it's polluting the atmosphere to catch up with capitalist competitors it's just communist again

Typical ideologically driven drivel. A "looming mass extinction event" .... but if caused by the centrally planned economy of China then it isn't a problem.

 

[skepticalbip]

... snip ...

Way back in Econ 101 the prof asked 'What is the purpose of capitalism?'. I responded something like to provide the greatest number of goods at the lowest cot for the most people.

He pointed his finger at me and said sharply 'No ! The purpose of capitalism is to make a profit'.

It took years on the job for that to fully sink in.

That is true but simplistic. The way to make a profit is to supply a good or service that the customer wants and at a price the customer is willing to pay. It is a meeting of minds between the producer and consumer. (how much effort and expense are you willing to put in for the price you charge and how much is the consumer willing to pay for the final product? - when these two meet, there is a sale.) Also, since there is competition from other producers, the price and quality needs to be competitive to attract the consumer to your product or service rather than the competitor's.

It's also simplistic because it assumes that there's an economic model called 'capitalism' with an intentional origin, that's separable from human nature. IOW, that humans had anything to do with 'capitalism's'arrival, and the global economy not instead being an emergent property of how we organize ourselves.

'capitalism is to make a profit'?

To be alive is to acquire resources for one's own survival and reproduction. Yes we're a social species and community has become a part of that, but 'profit', or more simply, acquisition of needed goods for survival is inherent in what it means to be alive.

You can try to improve the model, but you can't extract human nature from it. And the model isn't 'capitalism', it's people solving problems for material gain, which has been central to every way of life in history.

Good summary... well said.

Capitalism isn't an invented economic system but simply a name given to how independent people naturally live when not having an alternate lifestyle forced on them by some authority.

 

[steve_bank]

Now we are getting into the moral philosohy aspects.

The part myth part reality belief in our modern free market system is that you get in proportion to how hard you work and risks you take. The obvious is the playing field is never even. Being born to money gets you a top education and never having to earn anything, like Trump.

The earnings disparity is a serious problem. There is another aspect to it. When you accumulate money it can not just sit. It looses value. It gets invested in the economy funding busness for one thing through investment.

It is complex but in ways not obvious to the average observed,. We do benift in some ways from accumulation of wealth. It drives investment and innovation.

What is simplistic is making arguments based on the simple top bottom disparity ignoring everything else. Who does not have a wireless device that can communicate globally 24/7? You have to weigh the positives and negatives and that is not trivial. The forum exiasts technologucaly couresy of the free market competition system. Competing ideas and technolgy leading to the current technology. Nothing came out of Russia and China.

Conservatives argue capitalism is more in line with human nature. Soviet communism with its enforced ideological eaquality was a dull, lifeless, dreary society. There was no room for personal initiative, risk, and reward. The result a stagnant society. Maoism failed catastrophically with large scale famine. In the post Cultural Revolution era farmers were allowed to grow and sell excess above the state quotas.Agricultural production began to grow. China evolved to a mixed economy. The overall economy is centrally controlled while there is room for initiative and accumulation of wealth from enterprise.

It seems like us humans seem to need to have a degree of independence.

Capitalism like communism has shades of meaning to different people. Here in the USA it means free enterprise. The media focuses on the giants like MS and Apple. In reality the majority of business is small to medium scale sartted by average people.

I worked for a guy who started a company. He built a business building custom audio and video systems for private high end aircraft owners. He started in his garage. He mortgaged his house and lived at his company for several years doing everything that needed to be done. He employed at the time a handful of engibneers and manufacturing workers. IMO he deserve the profit he made.

Both Apple and the original HP sted in a garge with a couple of guys.

In our large scaly society should someone out of high school with no skills and experince be ‘owed’ anything?

I like the Denmark model. Room for enterprise with a sufficient bottom to live.

 

[rousseau]

The part myth part reality belief in our modern free market system is that you get in proportion to how hard you work and risks you take. The obvious is the playing field is never even. Being born to money gets you a top education and never having to earn anything, like Trump.

The earnings disparity is a serious problem. There is another aspect to it. When you accumulate money it can not just sit. It looses value. It gets invested in the economy funding busness for one thing through investment.

Is the earnings disparity a serious problem?

I don't want to look like I'm not for improving people's quality of life. But I do wonder about this talking point, and how we're supposed to do away with wealth inequality when there is such an obvious disparity in the value of people's natural ability and talent. Genetics would call this phenotypic variation, and this inequality doesn't only predate the modern period, but humans themselves. Even in other primates there is disparity in access to resources / mates because of individual attributes.

Sure, some people are born into large amounts of money, but the overwhelming amount of people in the upper classes are not egregiously rich, they're just people well equipped to make money within the community they live. Their kids have advantages, but these kids are forced to succeed in school / find work just like everybody else. The truth is that people aren't built equally, and this will always be true.

I always point people to the example of my dad's family. Five children, all with the same opportunities, but a different personality. The life outcomes of the five and their children vary wildly. My brother and I are both successful white-collar professionals in the upper-middle class, some of my cousins are unsuccessful by most normal standards and close to poverty level.

The reality is that if parents don't believe they can provide their kids with an acceptable quality of life they can choose to not have kids, but people don't work that way. People reproduce without moral considerations, and the result is the result. We probably should try to support those people, but that support has obvious limits.. and should probably be set pretty close to where it already is now.

Right now the problem isn't wealth inequality, it's overpopulation. People aren't making money because their skills are redundant.

 

[steve_bank]

Yes it is a problem. Who wants to work hard if there is no level of comfort. Back in the 50s a guy working in a grocery store or a shoe store could afford a small house and family on a single income.

Capitalism requires population growth to increase consumption and providing a return on investment,. Capitalism today is based on a mythical assumption of infinite growth. That is the post war paradigm. People are living longer so more youg pwople are needed to support them. Sooner or later there will be a system failure.

Over here housing and medical costs are outpacing wage growth. We have a term 'working poor'. People who have jobs but can not afford housing.

A good example is Amazon. Obscene profit's but a percentage of their employees are on some form of govt assistance.

The Dallas Cowboys owner built a new stadium for around 1 billion dollars. While our infrastructure decays and we can not pay teachers, police, and fire decent wages.

Eventually the inequities will lead to unrest as it grows. The post war economics is a great experiment that can easily fail if it gets too lopsided.

The system needs to be tweaked so that a percentage excess wealth can be put to use for the common good.

China has gotten good atr executing 5 year infrastrucr-ture plans. Our govr is usweless and our systems allows decay while some make a lot of money.

It is a moral and philosophical issue. If you make a lot of money using roads, infrastructure, and educated people from the system do you owe the country anything? Steve Jobs of Apple said no. All that matters is profit, manufacturing in China and never the USA.

 

[skepticalbip]

Yes it is a problem. Who wants to work hard if there is no level of comfort. Back in the 50s a guy working in a grocery store or a shoe store could afford a small house and family on a single income.

But then in the 50s there were almost no taxes for the average family or businesses compared to today. Today the average family pays out of their income something like 30% as federal income tax, somewhere between 5% to 15% state income tax, state sales tax depending on the state (my state is 7%), some cities and/or counties also levy income tax, then businesses taxes have increased which ends up as rising price of goods they sell to cover their business taxes so it is the final consumer actually pays the business taxes. Where the average family in the 50s paid on the order of 5% to 10% of their income in total taxes, today total tax bite can easily be greater than 50%. And then property taxes have steadily increased to where, in some locations, a family home is now a liability. Today with better than half the family's income going to taxes, the second income is needed to survive for many.

 

[Politesse]

Yes it is a problem. Who wants to work hard if there is no level of comfort. Back in the 50s a guy working in a grocery store or a shoe store could afford a small house and family on a single income.

But then in the 50s there were almost no taxes for the average family or businesses compared to today. Today the average family pays out of their income something like 30% as federal income tax, somewhere between 5% to 15% state income tax, state sales tax depending on the state (my state is 7%), some cities and/or counties also levy income tax, then businesses taxes have increased which ends up as rising price of goods they sell to cover their business taxes so it is the final consumer actually pays the business taxes. Where the average family in the 50s paid on the order of 5% to 10% of their income in total taxes, today total tax bite can easily be greater than 50%. And then property taxes have steadily increased to where, in some locations, a family home is now a liability. Today with better than half the family's income going to taxes, the second income is needed to survive for many.

Where are you getting those numbers??

 

[skepticalbip]

Yes it is a problem. Who wants to work hard if there is no level of comfort. Back in the 50s a guy working in a grocery store or a shoe store could afford a small house and family on a single income.

But then in the 50s there were almost no taxes for the average family or businesses compared to today. Today the average family pays out of their income something like 30% as federal income tax, somewhere between 5% to 15% state income tax, state sales tax depending on the state (my state is 7%), some cities and/or counties also levy income tax, then businesses taxes have increased which ends up as rising price of goods they sell to cover their business taxes so it is the final consumer actually pays the business taxes. Where the average family in the 50s paid on the order of 5% to 10% of their income in total taxes, today total tax bite can easily be greater than 50%. And then property taxes have steadily increased to where, in some locations, a family home is now a liability. Today with better than half the family's income going to taxes, the second income is needed to survive for many.

Where are you getting those numbers??

I lived those numbers. I am an old fart and have been paying taxes for a hell of a long time. (well actually, I didn't start filling out my federal and state tax returns until the 60s but still do)... so I got those numbers from my tax return forms, property tax payments, and knowing how much sales tax I am paying.

But then in that post I forgot about FICA... that is another about 15% tax, half directly deducted and the other half payed by the employer (who figures that cost in as total cost of hiring you when determining how much to pay so decreases the amount of salary offered by that amount.)

Oops, also forgot about social security tax... a total of another 12.4% and again, like the FICA, half directly deducted and the other half paid by the employer who uses the same calculation to determine how much salary to offer.
Just checked for the 1950s - in 1950 social security tax was 1.5% by 1959 it had risen to 2.5%

 

[Politesse]

Where are you getting those numbers??

I lived those numbers. I am an old fart and have been paying taxes for a hell of a long time.

So, more a subjective appraisal perhaps.

 

[skepticalbip]

Where are you getting those numbers??

I lived those numbers. I am an old fart and have been paying taxes for a hell of a long time.

So, more a subjective appraisal perhaps.

I wouldn't really call the numbers on tax returns subjective.

ETA:
By the way, have you ever examined exactly how much total tax you are paying - not just federal income tax but all taxes?

 

[rousseau]

Yes it is a problem. Who wants to work hard if there is no level of comfort. Back in the 50s a guy working in a grocery store or a shoe store could afford a small house and family on a single income.

Where I'm getting lost is how this is related to capitalism, and not a natural malthusian cycle. In the 50s and 60s there was a post-war boom where people were highly in demand, and could make a decent wage doing work that wasn't overly skilled.

Today that isn't the case because there is an overwhelming amount of people on the planet willing to do unskilled work. It's not something inherent to capitalism, it's basic supply and demand. As soon as our population declines to a level where people are in demand again, wages will go up.

Now I know I'm starting to sound like a conservative, but I really do care about people's well-being. I just don't know that the answer to improve people's well-being is necessarily to give them more money. Because if suddenly an entire population has a completely comfortable wage, they produce more babies, and the supply / demand problem gets worse - we have even more people and fewer jobs and we enter an infinite loop where somehow we need to keep supplying the well-being of more and more people.

Now maybe there is room for some improvement, but at some point we have to face the fact that there are real environmental limitations to our quality of life, and keep at least some of the responsibility on full grown adults to make good decisions about their offspring.

 

[Politesse]

So, more a subjective appraisal perhaps.

I wouldn't really call the numbers on tax returns subjective.

ETA:
By the way, have you ever examined exactly how much total tax you are paying - not just federal income tax but all taxes?

Well, it's just that your numbers don't resemble the actual tax rate. A family of median income pays about 17% in total federal taxes, that's a matter not just of statistics but of law. Very wealthy people are expected to pay closer to 30%. But most people with the kinds of jobs you describe aren't especially wealthy.

It is true that taxes on average family were much lower in the 1950s, because they were being counterbalanced by very high taxes on the wealthiest of citizens. But I don't think we're going back to that area any time soon, whatever the Progressives may promise their voters in primary season. If we tried to slap a 90% tax on the top bracket now, their idiot employees would riot on their behalf.