The Offtopicgrad Soviet: A Place to Discuss All Things Red

[ReindeerThistle]

Even Smith and Ricardo understood that under capitalism, labour received what would "maintain and reproduce labour." With no regard to the labourer. It was Marx who made labour a subject.

 

[Cheezy the Wiz]

You believe that workers should be paid according to their contribution, so you're already in agreement with a lot of capitalist theory.

No, my beliefs align with the propaganda espoused by economo-theologians about what capitalism supposedly does.

Would you also be OK with inequity for the purposes of improving the standard of living of everyone? Is it more important that Tom and Timmy each get paid $30K, or is it OK for Tom to make $900K if Timmy still makes $35K? If such "benevolent inequity" is fine, then you're fine with the goals of capitalist theory.

No, I'm not okay with that, because I'm not a liberal and my issue is not the relative differences in wealth, it is in the estrangement of the worker from control over the value he has created.

You can check out some of Margaret Thatcher's strawman arguments about this. "You'd rather everyone be down here than for some people to be up here".

It's worth it to consider just how much money someone requires when their core needs are met by society.

It's also worth it to consider just how someone gets so much money. Since I don't believe in private property, accumulating that much wealth would be both difficult and unnecessary.

That's a dangerous argument to be making as a communist since the decades of propaganda would turn that right around in your face. Replace "capitalism" with "communism", sprinkle in the godforsaken misunderstanding of the USSR as "communism", and you've lost all your audience.

Oh, you think I defend the Soviet Union as a useful manifestation of socialism. How silly of you.

Understanding all the levels of a system is going to be a worthwhile pursuit.

Not if I seek its wholesale destruction.

Which is why we need to change it, but constructing the "why" and the "how" are still essential. That's why I enjoy the lessons of Das Kapital (which I will admit I have not read fully from the source). I don't want to just point fingers at how the bourgeois are right now and that it's wrong. I want to explore all the intricacies of how this came about and why this system works the way it does, and what it was meant to do, and so on.

Or you could look at the fundamentals and see that the rest is window dressing.

You don't just point at a factory and explain that it isn't making what you need. You go inside and learn what it's trying to do, how it's failing, and why it's failing in contrast to what it's trying to do.

Which Marx did and which communists have been doing for nearly two centuries since. Christ.

That's because you're starting out from a (likely well-researched) position of "you're right" and so all the theory and discussions advocating the opposite are evidently "wrong" and "apologetic". For the people who actually sit down to understand capitalistic theory, that's how it's meant to be.

No, it's because I arrived at a position of "I'm right." I wasn't born a communist. Quite the opposite.

It may not be fair, but it is "correct" for a CEO to be paid $50 million dollars in one year when his plans and strategies make the money $60 million dollars. It is "correct" for an abundant resource such as McDonald's employees to be paid next to nothing. It is "correct" for an abundant resource such as stone to be cheap. And so on.

Of course, this assumes the system is effective at establishing worth. But to show people you know what you're talking about, you really need to understand how the system was intended to work in the first place, not just how it fails.

I do understand how it's intended to work. Because. I've. Read. Marx. I'm not recommending you his books because I'm a fanboi ideologue, it's because he actually addresses these basic concepts in analytic detail, complete with calculations, citations, and analysis.

In fact, you can do what I do: use this theoretical framework as further ammunition. Explaining in detail how capitalism is intended to work and identifying the exact place and methods in which it fails is effective rhetoric.

That is what I do. You're just wrong about what capitalism is intended to do. The only goal of capitalists is to reproduce capital. It's all justified by "utility to society" and "expanding peoples' incomes and livelihoods" and crap like that, but the truth is that it's just a convenient excuse to enrich themselves. For all the supposedly progressive things capitalism has done, it's done far more absolutely horrific, as well as plainly useless, things. Think not just of the wholesale destruction of the environment of the planet, or of the reduction of man to merely an animated machine capable of performing labour. Think also of the wasted productive capacity in the pursuit of nonsense niche markets, of the created demands to make new commodities useful to their producers, of the competition that wastes so much energy and resources in the name of profit for the capitalists. Think of the wholesale rape of the Third World, of the institutionalized exploitation of colonial peoples and the natural resources of their lands. Were capitalists working to benefit everyone as much as possible when they did those things?

It all comes down to how they can justify and defend their self-replication of capital for their own benefit. We. Don't. Matter. Society doesn't matter. It's the means to an end. We're tools to them. Now please get over the idea that capitalism exists for anyone except capitalists, and please understand that all benefits to the rest of society are incidental.

 

[Hygro]

Economics seems like a bit of a strange science to me sometimes. It seems like one of the few disciplines where so many of its adherents tell us NOT to meddle with nature. Rather an "invisible hand" is supposed to make everything go smoothly and messing with this "invisible hand" only messes up the economy. It seems to me like most other sciences try to manipulate nature to better serve human interests. I guess I still believe in a Keynesian approach to economics as opposed to Laissez-faire.

Was Keynes all that wrong about economics? Why have his views become more or less extinct in economics? I mean, didn't a Keynesian approach more or less get us out of the Great Depression?

It was, and Keynes is still considered (or once again considered) Economist #1 by a huge swath in the field.

While Keynesian policies certainly helped reconstruct the American economy and make it provide more for its citizens, it was World War II that got America out of the Great Depression.

World War 2 gave the US the political backbone to continue Keynesian policies to their conclusion-- i.e. allow the US to *cut* government spending and have the economy be fine. But the US was on track to a full recovery before we even began building up for war. In fact had it not been for the 1937 recession (one of the biggest in our history, caused by premature austerity), we would have been back at growth-path Y* by like 1939 or sooner. But we would have had to keep most of the depression-era policies in place to maintain that employment level--the war allowed us more wiggle room afterward. The economy did in fact drop significantly after the war but it dropped to something considered totally fine to most people.

Regardless, assuming they hadn't repeated their "reign in the budget" catastrophe of 1937, we would have been out of the depression in ~1941 or so without the war.

 

[Tahuti]

World War 2 gave the US the political backbone to continue Keynesian policies to their conclusion-- i.e. allow the US to *cut* government spending and have the economy be fine. But the US was on track to a full recovery before we even began building up for war. In fact had it not been for the 1937 recession (one of the biggest in our history, caused by premature austerity), we would have been back at growth-path Y* by like 1939 or sooner. But we would have had to keep most of the depression-era policies in place to maintain that employment level--the war allowed us more wiggle room afterward. The economy did in fact drop significantly after the war but it dropped to something considered totally fine to most people.

Regardless, assuming they hadn't repeated their "reign in the budget" catastrophe of 1937, we would have been out of the depression in ~1941 or so without the war.

Didn't the Republican legislature enact several tax reductions and deregulations during WWII, all the while continuing a generally Keynesian approach to spending?

 

[Hygro]

Didn't the Republican legislature enact several tax reductions and deregulations during WWII, all the while continuing a generally Keynesian approach to spending?

Cutting taxes is definitely a Keynesian recovery approach so that seems reasonable. I don't know the legislative history of during the war. I used to find those things less interesting that during peacetime when choices are made in the face of greater ambiguity. Happy to know more!

 

[Cutlass]

Cutting taxes is definitely a Keynesian recovery approach so that seems reasonable. I don't know the legislative history of during the war. I used to find those things less interesting that during peacetime when choices are made in the face of greater ambiguity. Happy to know more!

Cutting taxes is an approach that Keynesians might use if they feel it appropriate to the situation. A tax cut in and of itself doesn't mean that a Keynesian approach was the intent.

 

[Hygro]

Cutting taxes is an approach that Keynesians might use if they feel it appropriate to the situation. A tax cut in and of itself doesn't mean that a Keynesian approach was the intent.

I have this feeling you're trying to make sure everyone knows that Republicans can only accidentally get it right.

 

[Cutlass]

That wasn't where I was going, no.

 

[Masada]

Capitalism does not prioritize profits over people. It prioritizes profits for the people. If there is rampant competition, production efficiency will rise, products will get cheaper, and consumers will be able to afford more things. Thus, the most ethical thing that anyone can do is to seek profit as much as possible.

Nope, gains for society are incidental to private gains. That's the purpose of the Invisible Hand and why economists care so much about it.

Capitalist theory doesn't try to explain how we really should set up an oligarchy of the bourgeois and how it's better for the common man to be oppressed and powerless. That would be stupid.

That's true. Capitalism doesn't tell us to do it. One can argue - and a lot of people do - that oligarchies are antithetical to the free market. The problem is that oligarchies keep being thrown up all the damned time. So unsurprisingly a lot of effort has gone into explaining how the hell this happens. See here for one example.

I have this feeling you're trying to make sure everyone knows that Republicans can only accidentally get it right.

They didn't get it right, so you can rest assured

 

[W|M]

I have this feeling you're trying to make sure everyone knows that Republicans can only accidentally get it right

Well, their main colour is red

 

[Tahuti]

That's true. Capitalism doesn't tell us to do it. One can argue - and a lot of people do - that oligarchies are antithetical to the free market. The problem is that oligarchies keep being thrown up all the damned time. So unsurprisingly a lot of effort has gone into explaining how the hell this happens. See here for one example.

Do you think certain regulatory agencies should never be founded to prevent regulatory capture?

 

[Masada]

Not as a general rule, no. I do believe that regulatory agencies get captured but I'm not sure if it follows that they should be abolished because of that. On the contrary, I think regulatory capture is a good argument for changing how we regulate.

One possible solution to the issue is to limit the points of intersection between banks and banking regulators. This would reduce the often times horrible conflicts of interest going on. For example, the New York Fed being full of Goldmans alumni who are meant to regulate Goldmans. (I'm not suggesting that these people are selling out the government but I do think they're far more likely to look more favorably on the dubious business practices of Goldmans than the banking virgin that is Joe Public.)

How do you do this? I'm not sure. The reason that bank regulators hire bankers is because bankers are usually the only people who understand banking. I think with time and an alternative career path that might involve embedding civil servants in banks for short periods and a lot of professional training... it might be possible to develop non-bankers who are every bit as capable of engaging with the issues.

(If I was offered the job, I'd do it. Nice and safe with a decent wage. Why the hell not?)

 

[Tahuti]

Why not simply increase reserve ratios? You don't need banking experts to enforce that and it's arguably much simpler, while forcing bankers to be more discrete anyhow.

 

[Masada]

How would doing that stop banks from rigging LIBOR, again? Hint: it won't.

Also, its trivially easy to cheat reserve requirements by up-valuing assets, under-declaring losses, operating off the books, manipulating accounting rules, inventing whole new (difficult to classify) asset classes and just generally doing what banks have been doing for the last decade virtually unchecked. Hell part of the reason banks used CDOs (and other exotic asset classes) was to cheat Basil II requirements.

 

[Cutlass]

The problem with regulatory capture, at least in the recent American experience, is that it's actually legislative, even executive, capture. While it is certainly a part of the problem that the regulated have too much access and influence with the regulators, they also have so much access and influence with the bosses of the regulators that the system has been designed from top down to fail. I think the best available solution for regulation is fewer, yet simpler and more absolute rules. Which may occasionally prevent the regulated from doing something positive, but would go a long ways towards blocking them from doing many things negative.

 

[Tahuti]

Also, its trivially easy to cheat reserve requirements by up-valuing assets, under-declaring losses, operating off the books, manipulating accounting rules, inventing whole new (difficult to classify) asset classes and just generally doing what banks have been doing for the last decade virtually unchecked. Hell part of the reason banks used CDOs (and other exotic asset classes) was to cheat Basil II requirements.

Reserve requirements come in many flavours and monetary reserve requirements are quite hard to cheat actually: You either have the money or don't. Unlike capital reserve requirements, which are indeed quite susceptible to cheating, as those that hold the capital can systematically revalue it whenever appropriate.

 

[Antilogic]

There's some truth to what Cutlass said about the multiple avenues that corporate entities use to effect regulatory capture. The executive route can be counteracted by voting in the right people and having them appoint more aggressive heads for the agencies. The legislative route is more tricky and complicated as it would require several votes to change several laws on the books already (and if you have ever sat down to read something like TSCA you would see that it is chock-full of exceptions and pliable language). As for the courts, well, that's another matter entirely.

I'm a fan of something similar to Masada's idea where future regulators are trained up and observe the operations of the industries they are intended to regulate but do not receive any sort of financial compensation from them. Imposing some sort of separation between the personnel of the industry and the agencies could only do good.

 

[Hygro]

That wasn't where I was going, no.

Ah, then clarifying for anyone who thought tax cuts were only to support a Keynesian agenda. Crisis averted.

They didn't get it right, so you can rest assured

I wouldn't know. What was wrong about it at the time?

I think with time and an alternative career path that might involve embedding civil servants in banks for short periods and a lot of professional training... it might be possible to develop non-bankers who are every bit as capable of engaging with the issues.

(If I was offered the job, I'd do it. Nice and safe with a decent wage. Why the hell not?)

This is literally what I want to do after grad school. Otherwise I have to go work on Wall St etc to get the training for the positions to work in monetary policy.

I'm a fan of something similar to Masada's idea where future regulators are trained up and observe the operations of the industries they are intended to regulate but do not receive any sort of financial compensation from them. Imposing some sort of separation between the personnel of the industry and the agencies could only do good.

It's a bit of a throwback system but it works pretty well. The civil servant and the universalist class.... It's why I'm mad my school is getting increasingly privatized--there really is a mindset that comes with being divorced from a profit-seeking machine that just keeps your work more honest when you champion the work (than championing for-profit).

 

[Masada]

Reserve requirements come in many flavours and monetary reserve requirements are quite hard to cheat actually: You either have the money or don't. Unlike capital reserve requirements, which are indeed quite susceptible to cheating, as those that hold the capital can systematically revalue it whenever appropriate.

I have two issues with the above:

(1) Monetary reserve requirements suffer from all the same issues as capital requirements because the underlying liabilities of banks are manipulable. Another consideration is that this might encourage banks to on-sell more of their 'financial products' (e.g. CDOs) to third parties.
(2) Monetary reserve requirements would not have stopped any of the scandals that banks have been caught up in like HSBC laundering Mexico drug cartel cash. Hell it would have done nothing to address the cause of the current financial crisis: banks unloading AAA rated crap on clients.

The problem with regulatory capture, at least in the recent American experience, is that it's actually legislative, even executive, capture. While it is certainly a part of the problem that the regulated have too much access and influence with the regulators, they also have so much access and influence with the bosses of the regulators that the system has been designed from top down to fail. I think the best available solution for regulation is fewer, yet simpler and more absolute rules. Which may occasionally prevent the regulated from doing something positive, but would go a long ways towards blocking them from doing many things negative.

Yeah, that's another issue. But I'm not sure how to fix America's awful political landscape. I did know a little about how to fix inept regulatory agencies though... so there is that. Having said that, clear rules are not a bad idea. The structural separation of retail and investment banking is something I strongly support for example. Retail banks should be taking deposits and lending for productive purposes. That's their job. It isn't to risk their depositors cash chasing profits from derivatives trading desks. Investment banks on the other hand can risk all the rich people money they want. I also think that pension funds should be barred from investing in risky asset classes. A mixture of government and corporate bonds and blue chips ought to be sufficient. (There's two reasons for this: (1) the commissions and fees paid to hedge funds and the like tend to eat up member profits and (2) the different horizons over which the parties operate: members are in it for the long run, while financial firms are in it for the short haul. There's also the issue that Goldmans among others knowingly sold crap to pension funds while laughing to the bank).

I'm a fan of something similar to Masada's idea where future regulators are trained up and observe the operations of the industries they are intended to regulate but do not receive any sort of financial compensation from them. Imposing some sort of separation between the personnel of the industry and the agencies could only do good.

France has a good model for this kind of thing. French regulators tend to come across as being quite knowledgeable. But I think that's more a feature of French culture (?) which tends to put a lot of value in public service. It's also telling that most of the elite French schools like the École Normale Supérieure, École Nationale d'Administration and the Institut d'études politiques de Paris are geared to preparing people to work in the public service. Harvard on the other hand has seen the lion's share of its graduates in recent years go into finance...

 

[Tahuti]

Hell it would have done nothing to address the cause of the current financial crisis: banks unloading AAA rated crap on clients.

Actually, more reserves make crises less likely as banks are less likely to fail. When banks practice fractional reserve banking, they are essentially indebted to depositors. Having bigger reserves is essentially less debt, and given the financial crisis started in part due to banks failing on their obligations, it is very hard to argue "it would have done nothing to address the cause of the current financial crisis".