Socialism Is Inevitable

[Toro]

No, that doesn't follow. If it were true what I am saying, then we would see less than one hundred percent match-up between growth in income and growth in consumption -- and we do.

That is incorrect. Savings are deferred consumption. People save to either consume later, in case they need to consume later, or for someone else to consume for them later.

We are obviously using the terms differently. Let me cut through this linguistic knot and simply say that there is an economic philosophy that does aim to maximize capital formation on the theory that what limits economic growth and expansion is the availability of such capital rather than consumer demand, and this is the economic philosophy that has more or less governed America for the past thirty years. Whether it should be called "supply side economics" is not really important.

I think its important to understand the concepts, whatever they are called. What you have been calling "supply side economics" or "capital maximization" or whatever does not preclude increases in demand. Supply siders (or whatever) argue not only do tax cuts increase capital formation but they also increase demand, for which there is empirical evidence. For example, income tax cuts affect demand, capital gains tax cuts affect capital formation. It isn't one or the other.

What they do argue is that increased demand through government spending does not help the economy, not that stimulating demand in itself is useless. According to the theory, demand by consumers is good, and supply side policies which increase demand are also good. We can argue about whether or not government spending is stimulative, but that's a different argument from what we are having.

Can you document this?

Yes. From the graph above.

New technologies represent a constant. In the 1950s and 1960s we saw the widespread introduction of plastics, television, power steering, stereo music recording, commercial jet planes, and many other inventions; in the 1980s and 1990s we saw the personal computer and the Internet. The earlier inventions did not correlate with widening inequality while the later ones did. Let me suggest that a non-consistent correlation argues against causation.

New technologies are not a constant because they affect different parts of the economy. Air conditioning and air travel have a very different effect on the economy than the disintermediation caused by the Internet.

The empirical evidence I refer to regarding the advent of technology on inequality can be found in this post.

http://www.usmessageboard.com/economy/192424-rising-income-inequality-not-3.html#post4371115

 

[expat_panama]

...If all three sectors of the economy, farming, manufacturing, and services, become highly automated, we will see a permanent reduction in the number of paid jobs....

Pure fantasy. In real life the more productive the workforce becomes the more it gets hired. To me it seems obvious and it probably is to anyone who's not married to fantasy. Capital intensive high performance economies are prosperous and booming with lots of high paying jobs.

 

[eots]

the markets will all crash and the whole shit house will go up in flames, so it is all rather irreverent

 

[eots]

our concerns will soon be food ,fresh water, shelter

 

[Valerie]

the markets will all crash and the whole shit house will go up in flames, so it is all rather irreverent

And then what...?

 

[Dragon]

That is incorrect. Savings are deferred consumption. People save to either consume later, in case they need to consume later, or for someone else to consume for them later.

As I pointed out, some savings are deferred consumption, others aren't. Savings towards a specific big-ticket item (a home or car down payment, a major appliance, etc.) fits this category, and so does saving for future emergencies or for retirement. But unspent money may not be intended for consumption at all. A lot of money that's invested is invested because the holder doesn't see anything else to do with it. It's not a sacrifice or discipline, as deferred-consumption saving is, because there is nothing the person wants to buy and is doing without in order to make the investment. Nor does the person need or even really want the money to be earned by the investment. It's just a bean-counter.

This type of investment is of course made only by the very wealthy, who in some extreme cases invest the great majority of their income rather than spending it. This is pretty strong evidence that desire is not unlimited. These are people for whom desire for consumer goods and services has become saturated, and who are investing because they have money left over at that point -- lots of it, sometimes.

I think its important to understand the concepts, whatever they are called. What you have been calling "supply side economics" or "capital maximization" or whatever does not preclude increases in demand.

I didn't say it did. I am referring to which side of the equation is believed to be the limiting factor, and hence which side deserves the attention of government policy.

Supply siders (or whatever) argue not only do tax cuts increase capital formation but they also increase demand, for which there is empirical evidence. For example, income tax cuts affect demand, capital gains tax cuts affect capital formation. It isn't one or the other.

Income tax cuts also affect capital formation, if applied in the upper brackets. But empirical evidence shows that consumer demand is affected more by cuts to taxes on the middle class, while capital formation is affected more by cuts to upper-income taxes.

What they do argue is that increased demand through government spending does not help the economy, not that stimulating demand in itself is useless.

This follows from the supply-side premise. Government spending takes capital from the private economy (through taxes) and invests it in whatever. The demand-side justification for this is that the capital would remain idle (or be invested only in financial shell-games) if left in the private sector, while government can invest it so as to generate real wealth (this argument is made during economic downturns, of course, and does not apply in boom times). The supply-side assumption is that all capital that exists will be properly invested, and so government stimulus is robbing Peter to pay Paul (while inserting the inefficiency that comes with government operations, according to an article of faith among economic conservatives).

Again, the working assumption is that there can never be such a thing as excessive capital formation. This follows logically from Say's Law, or would if Say's Law weren't garbage.

New technologies are not a constant because they affect different parts of the economy. Air conditioning and air travel have a very different effect on the economy than the disintermediation caused by the Internet.

Sure, but the difference you are asserting isn't among them. That is, there is no logical reason why the Internet would promote income inequality while air travel or television would not. Or at least I can't think of any.

I look at the periods when income inequality grew (1900-1929, or 1980 to the present), and I look at periods when it contracted (late 1930s until 1980), and I see high rates of innovation and new technology being introduced in all of those periods. On the other hand, I see government policy as having dramatically shifted during the Great Depression, and almost as dramatically shifted back during the Reagan era. Is it not logical to explain a change in terms of a cause that also changed, rather than in terms of a proposed cause that did not?

The empirical evidence I refer to regarding the advent of technology on inequality can be found in this post.

I glanced at that thread and decided not to participate because it covered only a small fraction of the time over which inequality has increased. Did I misunderstand this?

 

[eots]

The barbarian rebellion....bartertown

 

[eots]

until Jesus or the aliens return to kick our asses

 

[SigTurner]

...If all three sectors of the economy, farming, manufacturing, and services, become highly automated, we will see a permanent reduction in the number of paid jobs....

Pure fantasy. In real life the more productive the workforce becomes the more it gets hired. To me it seems obvious and it probably is to anyone who's not married to fantasy. Capital intensive high performance economies are prosperous and booming with lots of high paying jobs.

It takes considerable will to dismiss the effects that ever sophisticated technology will have on the work force in the not-too-distant future. In the last twenty years, we have witnessed more jobs be made obsolete through technological innovation than at any time in human history, and the process is accelerrating.

By the end of this century, even doctors, lawyers and accountants will be rendered obsolete by software and robotics.

The fantasy is all yours.

 

[expat_panama]

...In the last twenty years, we have witnessed more jobs be made obsolete through technological innovation than at any time in human history, and the process is accelerrating...

Let's agree that over the past 20 years we've had substantial growth in labor productivity that's largely been the result of tech advances. How about we compare the number of people working now to those working 20 years ago, and then also compare real incomes.

I'd argue that more people working with higher incomes mean we're better off with tech advances.

 

[Toro]

...If all three sectors of the economy, farming, manufacturing, and services, become highly automated, we will see a permanent reduction in the number of paid jobs....

Pure fantasy. In real life the more productive the workforce becomes the more it gets hired. To me it seems obvious and it probably is to anyone who's not married to fantasy. Capital intensive high performance economies are prosperous and booming with lots of high paying jobs.

It takes considerable will to dismiss the effects that ever sophisticated technology will have on the work force in the not-too-distant future. In the last twenty years, we have witnessed more jobs be made obsolete through technological innovation than at any time in human history, and the process is accelerrating.

By the end of this century, even doctors, lawyers and accountants will be rendered obsolete by software and robotics.

The fantasy is all yours.

The Industrial Revolution was far more destabilizing than today.

 

[expat_panama]

...The Industrial Revolution was far more destabilizing than today.

Bringing up that view is key to understanding productivity. My take is that arguing which era is "far more destabilizing" is a waste of time, because the dialogue goes on and on, goes nowhere, and most importantly it's not useful. That's why I'm grateful you brought it up because we need to be done with it.

What is useful is increasing productivity because it allows greater prosperity for vast majority.

 

[Flopper]

A simple thought, set out in numbered points.

1) An industrial economy requires broadly dispersed wealth in order to generate the consumer demand necessary for prosperity. Without that, inventory cannot be sold, and the economy breaks down.

2) The main method used in a capitalist economy to distribute wealth is wages paid for work. Although some wealth is dispersed by other methods, wages for work is the way that the vast majority of wealth distribution takes place.

3) As long as production requires full employment, and as long as wages are kept high through such means as labor unions and worker protection laws, distribution of wealth in a capitalist economy works reasonably well.

4) However, over time a capitalist economy shows a trend of replacing labor with automation. We have seen this happen in both the agricultural and manufacturing sectors. As agriculture was mechanized, displaced farm workers moved into the factories. As manufacturing has been mechanized (and outsourced), displaced factory workers have moved into the service industries.

5) With advanced computer and artificial-information technologies, it becomes increasingly possible to automate service industries, too. Already many sales clerks, grocery clerks, legal assistants, typists, bank tellers, and customer-service telephone agents have been replaced by computerized, automated services.

6) If all three sectors of the economy, farming, manufacturing, and services, become highly automated, we will see a permanent reduction in the number of paid jobs. Those three sectors are all of the economy there is. While there will certainly be some jobs that cannot be automated or aren't worth automating, the number of remaining jobs will be drastically reduced.

7) See point number 3. A capitalist economy's way of distributing wealth, wages for work, depends on full employment. If we no longer have full employment due to automation, a capitalist economy will break down in a permanent depression.

8) The only way to restore prosperity under those circumstances when labor has become far less necessary to create wealth, and so no longer serves to distribute wealth, is to render today's privately-owned publicly-traded corporations into publicly-owned operations, and distribute the profits to the people as an owner's share.

Thus: socialism is inevitable.

Good points.

We are rapidly approaching an age when even doctors, lawyers, and accountants will be replaced by software and robotics. We need to prepare for the inevitable.

Sad but true. Factories that once employed thousand are now run by a hand full people. Office buildings filled with thousands of clerks bookkeepers and typist have been replaced by computers and advanced communications systems. The big corporations build non-labor intensive businesses in the US and labor intensive businesses abroad.

Technological advances will continue to increase at a quicken pace as we go through this century. Those advancements are likely to increase jobs at the top and reduce jobs at the bottom. IMHO, there will be a substantial increase in the welfare state. I don't see how it can be avoided.

 

[expat_panama]

...Technological advances will continue to increase at a quicken pace as we go through this century. Those advancements are likely to increase jobs at the top and reduce jobs at the bottom. IMHO, there will be a substantial increase in the welfare state. I don't see how it can be avoided.

Four possible reasons you don't see it. One could be that it actually can't be avoided, while another is that it can but you've made an ideological choice to not see it. Let's explore two other possibilities that you haven't gotten enough info or that you haven't thought it through enough.

We both should know that humankind has had tech advances at a quicken pace through the past two centuries as people in general have increasingly become much more productive. The record shows that the population in general has increased participation in the workforce along with increasing health, education, social interaction, and material well being. People moved from the bottom to the top.

It's a lot easier to believe that things that happen a lot in the past will happen again, and that something that's never happened before will probably not happen tomorrow.

 

[editec]

A simple thought, set out in numbered points.

1) An industrial economy requires broadly dispersed wealth in order to generate the consumer demand necessary for prosperity. Without that, inventory cannot be sold, and the economy breaks down.

2) The main method used in a capitalist economy to distribute wealth is wages paid for work. Although some wealth is dispersed by other methods, wages for work is the way that the vast majority of wealth distribution takes place.

3) As long as production requires full employment, and as long as wages are kept high through such means as labor unions and worker protection laws, distribution of wealth in a capitalist economy works reasonably well.

4) However, over time a capitalist economy shows a trend of replacing labor with automation. We have seen this happen in both the agricultural and manufacturing sectors. As agriculture was mechanized, displaced farm workers moved into the factories. As manufacturing has been mechanized (and outsourced), displaced factory workers have moved into the service industries.

5) With advanced computer and artificial-information technologies, it becomes increasingly possible to automate service industries, too. Already many sales clerks, grocery clerks, legal assistants, typists, bank tellers, and customer-service telephone agents have been replaced by computerized, automated services.

6) If all three sectors of the economy, farming, manufacturing, and services, become highly automated, we will see a permanent reduction in the number of paid jobs. Those three sectors are all of the economy there is. While there will certainly be some jobs that cannot be automated or aren't worth automating, the number of remaining jobs will be drastically reduced.

7) See point number 3. A capitalist economy's way of distributing wealth, wages for work, depends on full employment. If we no longer have full employment due to automation, a capitalist economy will break down in a permanent depression.

8) The only way to restore prosperity under those circumstances when labor has become far less necessary to create wealth, and so no longer serves to distribute wealth, is to render today's privately-owned publicly-traded corporations into publicly-owned operations, and distribute the profits to the people as an owner's share.

Thus: socialism is inevitable.

Not really.

An alternate approach to dealing with the problem of too many redundant workers is far more likely.

Just Let "market forces" slowly reduce the number of unemployable people....death by poverty


And that is, I think, the plan, assuming that a "plan" can exist with no person or group actually leading it.

 

[expat_panama]

...death by poverty And that is, I think, the plan, assuming that a "plan" can exist with no person or group actually leading it.

'Death by Poverty' is what has happened to a hundred million victims when their leaders took them into a socialist state.

 

[editec]

...death by poverty And that is, I think, the plan, assuming that a "plan" can exist with no person or group actually leading it.

'Death by Poverty' is what has happened to a hundred million victims when their leaders took them into a socialist state.

Yup.

In fact in most socialist states that we've seen the state doesn't wait for their economic system to dispatch their unwanted.

Socialist tyrants like Stalin, Pol Pot etc outright killed millions of their own.

Still, I stand by my prediction.

We going to let market forces do our dirty work for us, I suspect.

We're going to pretend we don't understand why the system we designed not to work isn't working.

 

[SigTurner]

How about we compare the number of people working now to those working 20 years ago, and then also compare real incomes.

How about if we don't and recognize the fact that the world population is increasing logarithmically; therefore, it is moot to compare the number of people working today compared to 20 years ago?

C'mon, man, you've got to do better than that!

The essence of the matter is that technology will eventually displace so many people from employment that the current socioeconomic paradigm will no longer work.

Nevermind the last 20 years. Try and focus on the next 100 years.

 

[Flopper]

...Technological advances will continue to increase at a quicken pace as we go through this century. Those advancements are likely to increase jobs at the top and reduce jobs at the bottom. IMHO, there will be a substantial increase in the welfare state. I don't see how it can be avoided.

Four possible reasons you don't see it. One could be that it actually can't be avoided, while another is that it can but you've made an ideological choice to not see it. Let's explore two other possibilities that you haven't gotten enough info or that you haven't thought it through enough.

We both should know that humankind has had tech advances at a quicken pace through the past two centuries as people in general have increasingly become much more productive. The record shows that the population in general has increased participation in the workforce along with increasing health, education, social interaction, and material well being. People moved from the bottom to the top.

It's a lot easier to believe that things that happen a lot in the past will happen again, and that something that's never happened before will probably not happen tomorrow.

Good Point. True, we've had technological advances for centuries but what you're missing is the fact that technological advancement is not linear but rather exponential. Advancement in technology in the 21st century is likely to be 20,000 years of advancement as compared to advancement in the early 20th century.

Technology advancements are aimed at making us more productive so one person can do the work 2, 5, or 10 people. A factory in the mid 20th century that employed 1,000 workers employs 50 by the end of the century. Factories that can not be automated move to countries with low labor rates. Many factories in the US are moving toward total automation.

Technological advances will create whole new industries, but not necessarily a lot of jobs. The development of human like AI, and androids will replace millions of human workers.

New jobs of tomorrow are likely to be high end jobs requiring not only high end training but more intelligent and capable employees. Neither the increase in human intelligence nor education can keep up with technology. As we go through the century, I believe we will have increasing unemployment a the lower end of the wage scales which will bring on an increase in public support, mandated job sharing and other measures to create low end jobs.

 

[expat_panama]

...compare the number of people working now to those working 20 years ago, and then also compare real incomes.

How about if we don't and recognize the fact that the world population is increasing...

Two realities we're dealing with here, one is that percapita incomes adjusted for inflation are far higher now than 20 years ago, and the other is that no matter what good thing happens there will always be some way you can say it's bad.

...In the last twenty years, we have witnessed more jobs be made obsolete through technological innovation than at any time in human history, and the process is accelerrating...

...Nevermind the last 20 years. Try and focus on the next 100 years.

We can talk about focusing after you've made up your mind on time frames.