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Economics of Capitalism

By Punkerslut

Image by Eric Drooker
Image: By Eric Drooker

Start Date: Tuesday, June 24, 2003
Finish Date: Friday, July 4, 2003

Part 1: The Classes

     In a Capitalist economy, there are two classes of individuals. There are the individuals who own wealth, sometimes referred to by Marxist theoreticians as "Bourgeoisie," other times more objectively known as industrialists, proprietors, capitalists, or investors. The second class of individuals are those who are without wealth. It is true that class, or what some may call "social standing," can be further expounded upon. Education, career, and publicity are also factors separating men into different classes. However, the primary two classes that are necessary to a Capitalist economy are those with wealth, and those without wealth. Other classes arising may vary, sometimes existent within Capitalist systems, sometimes non-existent. But Capitalism is predicated upon the existence of two classes, one with wealth, one without it.

     For these statements to have any real meaning, one must understand what is meant by the word "wealth." Wealth, or property, may be divided into different types. Wealth which is to be consumed, or traded for consumables, has sometimes been referred to as a product, or produce, which is accumulated through labor. An example could be subsistence, such as food and clothing, or luxury, such as jewelry and automobiles. Wealth which can be used in the production of produce has been called, by every economist, "capital." It has a productive power, in that it can aid the productive ability of labor. An example of this would be the factories or the farms -- or namely, the machinery in the factories and on the farms. By using tools and machines, laborers are capable of producing a greater amount. This was the essence of the Industrial Revolution. By using machinery, which is just a more complicated and efficient tool, a worker could produce in an hour, what a worker without machinery could produce in several days. However, capital is much more than just machinery. All produce, which is used to employ workers or purchase materials necessary to production, is sometimes referred to as capital. In this sense, money is sometimes referred to as capital, in that it can pay the wages of the workers and purchase the materials required for the production of wealth.

     Thus, in a Capitalist economy, there are two classes of beings: those with wealth, and those without wealth. The type of wealth that the proprietors own is capital, the means of production. The second class, without wealth, may own the produce, from day to day, but once he receives his produce, he consumes it, and it is gone forever. The members of the industrialist class are in competition among each other, each trying to have the best workers at the lowest wages, and the best products at the lowest cost. The members of the propertyless class are also in competition among each other, trying to offer the best quality of work for the least amount of cost.

     The propertyless class and the property-owning class come together, owing to the necessity of one to the other. The propertyless class works. Despite what naive definition may be given by some economists, on the matter of why they work (such absurd answers have been given as "they work for their dignity" or "they work to improve the lot of their fellow men"), the fact remains that the propertyless class works only because of their nature: they have no property, and thus to survive, to get the means of subsistence, they work. More simply reduced: the propertyless class works so they can afford food, clothing, and lodging. The property-owning class does not work; at least, it is not responsible for any real productive labor. A man may labor at the flute, playing a harmonious melody, but he will furnish nothing productive to mankind. He has made no real wealth. The situation is identical with employers -- they may offer labor, in bargaining for the exchange of goods, or bargaining for lower wages, or the allocation of their workers, but this labor is unproductive. What brings the property-owning class to this exchange with the propertyless class, is that they have capital, the means of production, which will produce no wealth without the commodity of labor, which is the only commodity owned by the propertyless class.

     So, these two classes meet together, and in each class, there is competition among the individuals. This competition is always based on trying to offer something better, or at a lower price, or both, so that the individual is exceptional among his class. What brings the propertyless class is easy. If they did not offer their labor for sale, they would starve. What brings the property-owning class is also easy. If they do not have labor, they cannot further their wealth. However, we must understand the nature of the exchange between these two parties. Prior to the Industrial Revolution, if a farmer were to sell his surplus to an artisan, he had means to wager. If the artisan required a lower price for the surplus, the farmer could simply offer his product to another artisan who was willing to pay the higher price of the surplus. The artisan, who may have taken the form of a blacksmith, produced tools which eased the labors of the farmer dramatically. If the farmer wanted a lower price for tools, the artisan could offer them to another farmer who would obligingly pay. Such tools increased the means of production, and a farmer -- with the aid of tools, or "simple machinery" -- may produce in four hours what normally took him eight.

     The basis of bargaining for these classes, for the farmers and the artisans, was not -- as one may be inclined to believe -- that others were willing to pay more. It was, rather, based on the fact that they have their own surplus, which is of value. The farmer produced more food than he needed, thus he traded what he had for luxuries or other necessities, such as clothing or materials. The artisan produced far more clothes than they needed, and thus traded the surplus for food. This was the origin of trade: different parts of society specializing in particular industries, where they were most proficient. However, the basis of bargaining for these individuals, was not necessarily the competition arising from such exchanges, but rather, it was their own surplus value. A farmer, for instance, was not reliant upon his exchanges with an artisan for his own subsistence -- if the artisan, or if all artisans, required a price so ridiculously low, that the farmer was infuriated, and refused to trade, then he could do that. He already had food to feed himself with, though his labors may have been a bit more arduous and his luxuries limited dramatically.

     The situation of the artisans differs somewhat, since food is the only necessity for survival, and it is that which they can only trade for. But still, the basis of bargaining for the artisan was his surplus value. If a farmer rejects his price, he may offer this surplus to another farmer, or a merchant, who would be willing to pay. If the artisan had no surplus value, if he entered into an agreement with the farmer, the farmer would take advantage of this. Since the artisan absolutely needed food for survival, and had nothing to exchange for it, he may offer the surplus value which he was going to create the next season, in exchange for food for today. Thus, the wealth created by the artisan would be exchanged for a meager subsistence. The artisan would consent to this exchange, certainly, but he would do so grudgingly, for he would feel that he is being taken advantage of, that he was being used. The sole reason that he would consent to such an exchange is not difficult to see: it is for the fact that he is human, and like any human being, he needs subsistence daily to keep alive. Since at present he had nothing to keep himself alive, he promised his future accumulated wealth to farmer, on behalf of food. However, this is what the situation would have been degraded to, had the artisan no surplus value. Though this may have happened once or twice, it was the exception and not the rule. Every farmer and artisan (whether he be a clothier, a blacksmith, a potter, or any other) had a surplus value for which to bargain with others. It was this surplus value which formed the basis for all bargaining.

     An analogy may be drawn, between this type of economy and a Chess game. If the black bishop could take the white queen, nobody would argue that this is a good move -- but, if the black bishop leaves the black king susceptible to being taken by the white rook, then the move would not be made. Thus, the attitudes of players in a Chess game are not unlike those in the economy of farmers and artisans. The Chess players know that, if they move a piece, the other player may react to the new set of conditions in a way that is more disadvantageous than when the first move was made. In the primitive economy, of farmers and artisans, the farmer knows that if he offers too low a price for the product of the artisan, that he may respond by refusing -- which he has the very right to do, and then sell to another farmer who is willing to pay more.

     In this more primitive economy, every worker was his own trader and his own manager, and -- if the proper modern terms apply -- his own "CEO." In the rise of Capitalism, though, there became two distinct classes: those with wealth, and those without wealth, which I have defined earlier. The rise of these distinct classes comes from the wealth becoming concentrated into the hands of the few. That is, the productive wealth. Since this is the eventually conclusion of Free Trade, the entire basis of bargaining is overthrown wholly. The propertyless class agrees to give the wealth it produces to the property-owning class. They cannot bargain, because the ability to bargain, in this system, has been deprived from them. They have no surplus value of anything, so they are entirely dependent upon the property-owning class. An artisan, who has no wealth, would promise all of his future produce to a farmer for subsistence. He becomes dependent upon the farmer, because he has no surplus value. But, if he had provisions to keep him alive for a long enough time, the produce of his labor would be at least five times as valuable as the subsistence which he was provided with. Or, in another way of putting it... The produce of an artisan's labor would procure for him at least five times what he needed for food, but if he has no produce at the present to trade with, then he will promise his all of his future produce to a farmer for subsistence. Thus, the farmer is gaining 4/5ths of the fruit of labor of the artisan, and the artisan is gaining only 1/5th of the fruit of his own labor. Had the artisan surplus value, which stands as the basis for bargaining, then he would not be reduced to subsistence living, and would be the receiver of the creation of all his wealth.

     Similarly, if we take the produce that the workers in our factories make -- the millions of workers who produce the goods for society, who harvest the food -- if the workers had the produce of their labors, before entering into any exchanges, their condition would be marginally better. Today, it cannot be argued that at least 9/10ths of a man's labor goes to the industrialist class. The reason for this is obvious: the poor would work for anything, because they need food, from day to day, to survive. Since they have nothing, there is no basis for bargaining, and they are kept in what may justly be called perpetual poverty.

     The principle cause which relegated society to mostly being individuals without any property was the increase in the efficiency of machinery, as well as the increase in its cost. A factory owner could produce in one day what one man could produce in one year. Thus, the competition between sellers went to the factory owners, as they sold a higher quality at a cheaper price. Those small shops, of artisans and farmers, eventually went bankrupt, because they could not compete. Thus, the creation of these two classes, the property-owners and propertyless, commenced. If the workers were to have the produce of their labor, they would only be somewhat better off, because then they could sustain themselves for temporary amount of time. But, perpetual poverty would reoccur again. Since they only have some wealth, they are in a little bit better of a situation than before, because they can hold out longer when bargaining with the property-owning class. However, they are still doomed to misery, because while they are holding out in a bargaining, they are not producing anything. If an artisan's product was rejected by a farmer, that does not stop the artisan from making more products and continuing production. But, if a group of workers has subsistence for a month, and they strike, hoping to return under better conditions, but while they are on strike, they are not producing more subsistence for themselves. The artisan and the farmer, not only did they own their own capital, but they were responsible for all of their wealth. Modern capitalism destroys this entire concept, since workers no longer own capital, and since workers receive only one tenth of the wealth they produce. The rest of such wealth goes to individuals who engage in unproductive labor -- if any labor at all.

     So, now that the conditions of the propertyless class have been expanded upon, it is now safe to take an objective look at the nature of the bargaining of these two classes. Since the propertyless class has no property, no wealth, nothing to subsist upon, it must consent, wholly, to the wage which is given to it. Members of this class have no other option, save starvation (or a revolution in the relation of capital to labor). Thus, we have what may aptly be called a subsistence wage. Workers are given a wage only necessary in keeping them alive and producing a family (to replace themselves once they are deceased). There are few arguments to the truth of a subsistence wage. Whatever the employer decides to pay his employee, he must mark up his product to cover his expenses. The higher he marks up his product, though, the less likely it is to sell, due to the competition among buyers to get the best quality at the cheapest price. Thus, those business which pay highest wages are to go out of business soonest. Here, we have an immutable law: wages stand in opposition to profit, as one rises the other shrinks, and vice versa. Since the industrialists have the sole interest of profit, it is also their interest to keep wages as low as possible.

     It is often asserted that those of the propertyless class may transcend the economic barriers presented to them, and become a part of the property-owning class. Whenever this happens, it is an extreme rarity, and one would be hard-pressed to find workers living a subsistence wage capable of purchasing the capital necessary to become a successful property-owner.

     In short... The economics of Capitalism are predicated upon the idea of a propertyless and a property-owning class. The first has nothing to bargain with, so therefore must consent to a subsistence wage, otherwise it shall starve. The second has the means of production at their disposal, as well as vast sums of wealth -- all of which was produced by the propertyless class. As the industrialists seek out the interests which serve them best, the result is perpetual poverty among the propertyless class.

Part 2: Direction of the Productive Force

     There is still more to consider, however... If a worker is paid one tenth of the wealth he creates -- and he will indignantly accept such a standard, since he is often ignorant and, more importantly, apt to starve -- then what becomes of the ninth tenths of the wealth appropriated by his employer? For instance, if a farm hand can grow and harvest 10,000 crops, the farm hand would typically be given something with a value equivalent to 1,000 of the crops, that he may sustain himself. The other 9,000 crops immediately go to the industrialist, who receives it under the title "profit." Of course, the industrialist will sell this surplus, replacing his product with money. But, essentially, if the work of the farm hand is capable of sustaining himself and nine others, when working a full day, his work may be reduced by 90% and he would still produce enough to sustain himself. If he only worked 1/10th of the amount of time he currently worked, along with everyone else working that same amount of time, they would all be able to support themselves. Essentially, for this one work hand, who is producing food for himself and the rest of the population -- 1/10th of his produce going directly to himself -- what is the other 90% of the population engaged in for employment? After all, the food that the farmer produces goes to the markets, to be sold to others of different trades. To further expound upon this... consider the sole position of the employer of the farm hand. If there was no money, at all, the employer would gain possession of 9,000 crops, most of which he and his family could not possibly consume. Multiply this by the amount of farm hands he employs in working the land, and he will soon find himself in possession of perhaps 100,000 crops, which would be an absurdity to argue that he could consume, and it would be even more absurd to argue that he would want it for its own value. What he wants it for, rather, is for their bargaining value, that he may trade it with others for their produce.

     Thus, we have commodities, and the exchanges they go through in society. There are two types of commodities in a society: consumables and capital. An example of a consumable would be all means of subsistence, including food, water, clothing, and lodging. An example of a capital would be anything that is used in creating more capital, or creating a consumable. Land would be a variable -- if it is used for lodging, then it is a consumable, but if it is used for a factory, then it is a capital. A part of the population will always be devoted to creating the subsistence used by the working class, such as food, clothes, and housing, all of which are of a certain low quality (when compared to other means of subsistence). So, a small part of the population will create those things which sustain it. But, again, of what good or use are a great quantity of low-quality consumables, to the capitalists? An owner of a textile mill, for instance, may be able to produce at 80% profit. If he produces 10,000 shirts, he himself receives 8,000, 99% of which are completely valueless to him. Since the members of this industrialist class are desirous of purchasing things that are useful to them, and since they have means to do so, industries will rise which accommodate to their tastes -- such is the law of supply and demand, when the demand rises, so does the supply in consequence, and vice versa.

     Once a demand for luxury has been established, by the industrialist class, an individual will decide to operate their capital in a manner to meet these tastes of the industrialist class. For instance, in the case of creating for the capitalists, a factory may be set up in the production of fancy garments. Using intricate and complex patterns, as well as a plethora of dyes, through various techniques and methods, the work of 100 men may created 5 garments in one day -- whereas the same labor employed in creating cheap but durable clothes would be able to create 200 garments. With this new fancy product, which is heralded by the masses as an artwork, the industrialist who owns the farm is willing to part with a portion of his surplus, in exchange for the new product. Thus, the industrialist of the new industry, who himself has a small (though valuable) surplus of products, will find himself selling his products to the elite industrialist class. The industrialists will always seek the more valuable, the more cherished. Because, these industrialists will reason with themselves, what is the purpose of having a surplus of goods (or a surplus of money which can be exchanged for such goods), when these goods are of a common quality, and they cannot all be consumed by the sole proprietor? One intricate garment, adorned with beautiful patterns, will be considered worth more than twenty dull, common clothes. So, those who possess the twenty dull, common clothes will trade them (or sell them, and use the money) to obtain one complex garment. The same will be done with other consumables. Expensive food, expensive housing, expensive luxury, will all become industries, serving the taste of the industrialist class.

     Earlier, in part 1, when I wrote that the propertyless class will be offered and will receive a subsistence wage, this was not entirely true, though it is quite close. There will be a disproportion between the wages of different workers, based on various factors. Workers with an education or training which increase their production will thus have an increase in their wage, as opposed to those without any such advantage. The workers with an education are better capable of augmenting production in favor of the industrialist class. An engineer may be better able to design laborsaving devices, for instance. And increased productivity is an interest furthered by the industrialist class. By this, I mean how much can be produced at so much money. Using machinery and manpower, a textile mill might be able to produce 1,000 shirts at the cost of $200, but with advanced machinery and less manpower; the same amount may be produced at the cost of perhaps $150. One should not argue that, with more productivity, that 1,500 shirts will be made at $200 -- because though the surplus rises, the demand is not altered. So, one must remain with the term "productivity" -- the amount that can be produced at what cost to the industrialist.

     Now, there will be a new range of classes in society, though every person still a part of either the propertyless or the proprietors. There are those who have no real education, earning a subsistence wage. Then there are those with a trade degree, who earn slightly more. Then those who have a two-year college degree, who still earn more. And then those with a four-year college degree, and a six-year college degree, and so on. Now, though, we find that there are individuals who have a taste between the subsistence workers and the industrialist class. These educated individuals, since they have a higher income, will purchase something more fancy than the common clothes, more appetizing than the common food, but nothing that exceeds their own income. Here we have the Middle class -- that is to say, the class of individuals between subsistence workers and capitalists, who through their education -- or other advantageous factors -- have procured above-subsistence work. Thus, we have society as it exists: the subsistence workers, without a formal education, who are responsible for the labor that creates wealth. One may be a farmer, whose labor creates the food of all the laboring class. But one may work in a business which produces caviar, or some other select food of the rich -- and, he labors so that another person may become indulge in the fruits of his creation. Then there may be a textile mill operator, who guides the machinery to sew the proper seems. But another worker, in a different textile mill, may do the exact same process, except on a fancier piece of cloth, which is destined to be used by the middle or upper class. Then, we have the middle class of individuals, who sometimes engage in productive labor, and apply it to the industries, that the industries gain productivity. These individuals enjoy a more liberal wage. Finally, there are the industrialists, who own the means of production, and direct productivity as they see fit. This may be viewed as a fairly accurate analysis of the classes developed in a Capitalist economy.

Part 3: The Effect of Competition Upon Labor

     There is no doubt that competition exists. An economist may argue that competition can only bear the fruits of wealth, of a good condition of economy. It may be reasoned, for instance, "when industrialists compete with each other to offer the lowest price possible, the consumer wins," and "when workers compete with each other to offer the lowest possible wage, the industrialist wins." This is true to some extent, and my hesitation to wholly confirm it is that it does not show the entire view of competition -- it withholds intrinsic truths which, when ignored, a person cannot be known as aware of economics.

     Competition may be properly defined as individuals each giving an offer of their product, each trying to be better so that the consumer will make the decision to purchase their product. Ultimately, a business's success lies in its ability to convince the consumer to buy its product. Thus, with this motive in mind, the modern economy has created jobs with this specific ideal in mind. Many of them may be labeled as "Advertising" jobs, or marketers, but it goes far beyond that. If 95% of the clerks and salesmen were removed from distributor chains, they products they offer would not lose any value. Quite the contrary... Their products would have the same value, and since fewer people were employed, the price could be diminished. However, by having clerks and salesmen, a business is capable of success, not because of the value of its product. The opposite is true: because they can convince the consumer that the product has some certain value. As a business employs individuals with the sole intent of their efforts being the molding of public opinion, in a manner that is beneficial to their employer, labor is rendered which is wholly unproductive, and to a certain degree, counterproductive. When a salesman labors with a customer, trying to have the customer purchase some unnecessary product, and if he succeeds, what has he managed to accomplish? He produced nothing, but he managed to have a valueless item circulating in the economy. The same can be said of almost all clerks. Consider most fast-food outlets. Once they have food, which in our economy is relatively cheap, they prepare it and sell it at a price at least quadruple what they paid in expenses. It is by enticing individuals, by convincing them that they need it or that they want it, that they make their business, that they make their revenue, and consequently, that they make their profit. I am not arguing against any industry which employs cookery, but I am only using the modern industry of fast food as an example, that Capitalism eventually leads to counterproductive labor.

     If those individuals, who were salesmen and clerks, had resigned their positions, and had taken up the position of farmers or manufacturers, society would be greatly benefited in one of two ways: (1) the labor required by others would be diminished, (2) the products that everyone receives would be increased. Or, perhaps, a combination of both of these. Even if all of the clerks and salesmen were to become farmers tomorrow, and were to produce only 500 crops between the 5 million of them, they would still be doing something better than they are now. Since they are farming, they are kept away from the counterproductive labor of advertising, which is responsible for eating up the wealth of nation, and replacing it with useless objects. The advertising has various stages... First, the product is designed in a manner that it is made fashionable or desirable. Second, the product is advertised, highlighting this feature of it, even though its use may not be in such a feature. This sort of advertising can be as simple as lucrative designs on the package of the product. Third, the product is sold, by salesmen and clerks working at distribution chains. This is all done according to the law of Supply and Demand, but the supplier has thus found it more profitable not to supply anything of use; instead, they augment and control the demand of their products. That is the effect of Capitalism upon labor: it creates a counterproductive labor.

     Furthermore, one must take into consideration the draining effects of this facet of Capitalism. By manipulating demand, an industrialist is capable of selling more, thus arriving at a higher profit. The truth of this statement can hardly be denied. It may be bad enough on the economy that this trade goes on, but to compound it, it drains on those resources which would have otherwise been spent on useful objects or productive labor. Junk mail, for instances, is thrown out, at most, by 98% of the receivers. How many trees are destroyed, how many lumberjacks employed, how much machinery used, how many workers to produce the machinery, how many miners to extract the ores to make the machinery, how many lives lost in that mining operation, how much coal and oil are burnt, how much electricity is used, how much land is used? -- All for the sake, that advertising may go on. The electricity used may have, instead, gone to supporting a factory or a farm, or conserved for future use. The land may have been used for hundreds of homes for the families. The machinery could have been used to produce useful products. The men who died in the mineshafts could still be with their loved ones. The coal and oil burnt could have been conserved, and could have conserved our atmosphere. Essentially, not only is advertising counterproductive in that it causes us to support valueless objects, but it drains on everything that is of value.

Part 4: The Dynamics of a Capitalist Economy

     The primary question of all economics is to understand the vested private interests of individuals, no matter what class they belong to, no matter what property they have. Not only is it to understand this interest, but to understand the general responses to such interest. A person, for instance, desirous of food, will sell their labor power in exchange for an amount of money (or the local currency) that is equal to their subsistence. An employer, in possession of capital, will desire those willing to work with such capital, that they may sell the product, to gain a profit themselves. There will be other considerations, beyond those of just a laborer and a capitalist. For instance, what is the law regulating the rent of land? Typically, in nations of opulence and wealth, rent is high, because the produce of land is high. In those nations where a man will seldom find work, where unemployment is high, where the people struggle to obtain food -- essentially, in a nation full of want and misery -- the rent will be low. Similarly, what can be said of interest, or the rate of payment on loans? A rate of interest will typically be high, when there is a high risk, but a rate of interest will typically be low when said risk is equally low. But this cannot be guaranteed. Perhaps the loan officer has a grudge against his client, and has decided on other motives to issue a high interest. The fact is, economics is not a truly concrete field of study -- but do not allow this to deter study in it, for what the study of economics provides, though not concrete, is certainly helpful in understanding political economy.

     As I stated in the beginning of this section, the primary question of all economics is to understand the vested private interests of individuals, and their general responses to such interest. A capitalist, desirous of obtaining wealth -- and understanding that they can only obtain wealth through successfully beating their competitors -- will respond in a relatively rational way. Either they will lower their price to that of their competitors, or even lower. Or they will increase the quality of their goods, or simply attempt advertising to convince the public of the higher quality of their goods. Economics is the study of the typical responses of an individual of a certain wealth, in response to certain conditions. A Capitalist engaged in a monopoly with other Capitalists, for instance, will typically have an extremely low wage or an extremely high cost. Economics is the study of how likely a Capitalist will engage in a monopoly. Skilled workers, who are fewer than those in demand, will typically have a higher amount of payment than any other worker. The reason for this is due to the obvious law of Supply and Demand -- that the higher the supply the lower the cost, and the higher the demand the higher the cost, and vice versa to both rules.

     Thus, we have the study of economics, attempting to understand the motives and the response of individuals in a society of perfect liberty, in matters of economics anyway. This is perhaps the cause of the greatest difficulty of promoting legislation which regulates, limits, or prohibits, certain actions of the private sector. For instance, if a minimum wage law were passed, forcing all industries to pay at least $10.00 per hour, there can be no guaranteed response from the private sector. The law may have been passed in good faith, that the industries would take a loss in their profit, instead of increasing the cost of their product, so that the producers of wealth become somewhat richer. However, the only guarantee that can be obtained from passing such a law is that Capitalists would offer $10.00 an hour, and that there may even be an amount of illegal trading, where workers were hired at $5.00, or anything less than the regulating amount. In response to such a law, Capitalists (legitimate ones, anyway) would be forced to rearrange their payroll, or their methods of employment. For instance, they may respond by requiring a greater amount of work per hour, or perhaps they may respond by implementing machines in place of the lowest of workers as a method of cheapness, or perhaps they may respond by firing half of the work force. Based upon the immutable premise that all rational individuals in a free economy work wholly to their own self interest, we can only be sure of one thing: a Capitalist will respond to such legislation in a manner that, (1) ensures them a decent profit, (2) keeps them in fair competition with others of the economy, so that they can be sure of a decent profit for years to come.

     This may be the one underlining flaw of Socialist legislation. The interests of the Capitalists remain unchanged: and this will forever remain as long as Free Enterprise reigns. If one country makes it illegal to produce goods in a dangerous workplace, the Capitalist will respond by relocating the factories to another country. If one country makes it illegal to import goods from a country that employs a dangerous workplace, then the Capitalist will respond by exporting to a neutral country, which then exports to the final destination. If one country makes it necessary to pay a worker extra when he works at least eight hours a day, the Capitalist will respond by hiring more workers, each of them working less hours a day. Essentially, the legislation, which has been intended for good, does not improve the situation. And contrary to what many authors may think, it does not worsen the situation -- as they workers and consumers are, statistically, in no better or worse condition than before.

     The essential flaw of Socialist legislation is just that: it sets new ramifications around the business code of the Capitalist, in a manner that they must reorganization partly, or wholly, the means of their selling and buying of labor. The interest of a Capitalist remains wholly unchanged. They still want for themselves the highest amount of money that they can obtain. They still want to compete to guarantee their profit for years to come. No matter what bill the parliament passes into law, the interests of the Capitalist to become excessively wealthy remain unchanged, and there is no law which can be passed to change that. Essentially, the existence of an exploitive Capitalist can only be removed, not by Socialist legislation, but by Communist Revolution. By eliminating the role of the Capitalist, and the production of the economy being directed by the public, only then, is the interest of the Capitalist changed. The transition of a Capitalist society to that without is not much at all different from the transition of a Monarchy to a Democracy. Instead of one person being either the sovereign or the boss, everyone person fulfills that roll. In a Democracy, every citizen has as many rights as any of his fellow citizens. Similarly, in a Communism, every worker has as much right to the wealth he produces as any of his fellow workers. But, much more than that, every worker equally has a right to determine the method of production and the cost. Since the worker is also the boss, they will not agree to a bill that gives 10% of the wealth to the worker, and 90% to a non-worker. They will not sign a bill that states that the working conditions are to be poor, unventilated, and dangerous. Why not? As the precepts of Political Economy are understood, their interest is not much different than that of Capitalist: self-interest. But... one must understand, this is the self-interest of every human being, compared with that of the self-interest of 2% of the human species. When every person consists in creating the self-interest of the community, it is no longer a desire to keep wages low and prices high, because the community consists of workers and consumers. But, when the self-interest of 2% of the individuals only matters in the means of production, it is desirous to keep wages low and prices high. Hence, we have essential differences of a Capitalist and Communist economy. In a Capitalist economy, the interests of the owners of capital (a very small amount), is to keep everyone but themselves in perpetual poverty. In a Communist economy, the interests of the owners of capital (everyone), is to keep everyone in wealth.

A Note on the Study of Economics

     It is rare to find a contemporary volume on economics that does not give a brief defense of the study of economics. It has often been argued that economics is an empty field, without firmness in its postulates. To some extent, this is certainly true. The law of Supply and Demand, for instance, states that when there is a high demand, the creators of that wealth must meet such a demand with a higher surplus. Of course, this is not always true. In some instances, industrialists have gathered together, and decided to form a monopoly, where they cheaply produce a small amount of needed goods and sell them expensively, making more money than they would if they had furnished the economy with a great deal of cheaply produced goods. Or, an industrialist may be irrational, and instead, liquidate his assets at the boom of his industry, and retire. All of the rules of economics are based on two fundamental ideas: (1) that men desire to become wealthy, (2) that men are rational. If men do not desire to become wealthy, or if they are irrational, then they are apt to act without accordance to the theories of economics.


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