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Capitalism Response to Marxism

February 3, 2010 - 11:58pm
Nick Coons by Nick Coons

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A video on YouTube was brought to my attention and I was asked to respond to it. If you haven't seen it, please do so before viewing this one, otherwise you won't know what I'm responding to. The link to the video is included in the article.



The video in question is here.

To begin, the gentleman in the original video makes a very solid point near the end, stating that the specifics are not important, it's the principle that's important. I would wholeheartedly agree, though I would offer that we probably disagree on the principle. He believes the principle of majority rule and I believe the principle of non-violence. The two are entirely incompatible. I've gone on ad-nauseum elsewhere about the principle of non-violence, so I won't spend much time on it here. Essentially, democracy is violent because it requires an enforcement arm. The edicts that society democratically votes on don't mean anything if they can't be enforced. The idea, for instance, of a minimum wage means nothing if you don't ultimately have somoene at the end of that edict holding a gun at you requiring that employers pay minimum wage, or else. The important distinction to be made is that defense is perfectly okay. You can defend yourself from violence, and others can defend you. But morally you can't initiate the use of force against anyone else, and democracy ultimately demands that you do.

He makes a couple of other interesting points, with which I'll agree. First, he says that very few people understand how capitalism works. Agreed. He says that there is a difference in what workers produce and what workers are paid. Agreed. He says that the heads of companies like CEOs focus on making profits, not on delivering the best value to the market. I'll sort of agree with that one. Profits are not a means, they're an end. The means to that end is the ability to accurately and consistenty deliver to the market the products and services that consumers demand.

He claims that capitalists, by the Marxist definition, are those that own the means of production. That definition is dubious, because it implies some sort of exclusivity, that if one person owns the means of production, someone else can't. But by his own explanation, competition in a given industry (in his example, it was shoes) can exist, meaning that ownership of the means of production is not exclusive, which means that anyone can pursue those means. So it would be more accurate to say that the capitalist is the one who has done the excruciating work of putting himself in the position to acquire the tools, the work space, the marketing for customers, the human organization in order to produce and deliver goods or services to consumers. And this is excruciating work, even for a small company. It's more than just simply having sufficient capital, which itself is a difficult task to achieve. The reason so few people are in that position is because so few have the desire to invest a relatively large portion of their lives into a risky venture.

Which brings me to my next point. In his video, he uses an example of a shoe factory, where a worker is paid $15 for a day's worth of work, and produces $100 worth of shoes. Let's put aside the overhead involved in making those shoes, such as the rent or mortgage on the factory, the amortized cost of the equipment purchased, the cost of training workers, of maintaining a management staff, which means that the $85 difference quickly shrivels to about $10. I don't know what the profit margin is in the shoe industry, but most manufacturing industries have about a 3% product, so $10 is generous. Let's put all of that aside, because it's details, not principle. The end result is that there is still profit above and beyond what all of the expenses are to make the shoes versus the value of the final product. Marxists generally call this exploitation, because they don't believe that the capitalist is doing anything for the profits. He simply put up the capital. As anyone who's started a business before knows, it's quite a bit more involved than that, but let's stick with the principle. If it were true that the worker was being exploited at $15/day when he's producing $100/day in value, then he would simply go out on his own, make $100/day, and keep it all. The pitfalls in that scenario should be obvious. The worker would have to have a factory, tools, marketing for customers, and all of this would be an up-front expense. So he might invest hundreds of thousands or millions of dollars to get this going, and that's offset by his increased profit, but again, few people are interested in making that sort of investment. It's much easier to go to work eight hours each day, do your job, and get your paycheck than it is to start your own venture, and THAT is the value that capitalists and capitalism provides.

All of this is empirically verifiable as well, which is good because it's sort of pointless to have a theory if it can't be verified. In human civilization, capitalism is a new concept; it's only existed in some form or another over the past few hundred years. Those same few hundred years are where we've made the most human progress. The 21st century looks much better than the 17th century, but the 17th century isn't that much of an improvement over the 13th century even though the same 400 years have passed. The big change was the introduction of capitalism, which came about because prior to that it was considered usury to loan money for interest. There are countries where that's still the case, usually for religious reasons, and they're third-world countries that none of us in the western world would readily trade places with.



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