What is Socialism?

[Lexicus]

I agree that the depression was a classic. It was similar in every respect to every recession that came before it, as it was a standard feature of the free market capitalism of the times. It was the final demonstration that free market capitalism doesn't work, in that every one of those recessions was deeper and longer than the one before it, and it was predictable that if the next one followed that pattern and was deeper and longer than the depression of the 1930s it would be fatal.

That pending fatality is what justified the New Deal, which was the first exploration of interventionist capitalism, which has been the economic structure ever since. Trying to equate recessions suffered in a totally different economic structure is a poor effort. A crisis in an intervionist capitalism system needs to be analyzed within the rules of that system, not adjusted to fit the rules of a dead system.

Your notions about "free markets" and "interventionist capitalism" are flawed. The first forays into "interventionist capitalism" (at least in the United States) in fact began in the 1890s with the Progressive period.
Second, what change to the analysis would you suggest? It is simply fact that both the Depression and Great Recession were preceded by years-long period in which rising productivity was accompanied by stagnant or decreasing real wages. In each case the resultant accumulation of financial wealth had no productive investment outlet and thus went into inflating a speculative bubble.
The rules that you are talking about which in fact changed how the financial system worked had been largely discarded by the end of Bill Clinton's administration.

 

[Lexicus]

What else produces value, then?

Well, nature is one important source of use-values, as in fertile land and the like. Next, stuff that Marxists don't consider 'labor' like the skillful management of an enterprise or the discernment of an investor.

The only way to sustain the labor theory of value is ultimately to redefine labor as 'that which produces value' which reduces the theory to a tautological truism.

Wages cannot exceed productivity by definition, because if wages are received, then someone is using the wealth generated from the productivity to pay said wages. Thinking that workers are stealing from bosses because you might think that they have high wages is ludicrous, because the fact that wages exist at all are a testament to the fact that capitalists are stealing from the workers.

It's not a matter of "I might think," if workers are being paid more than their productivity (to the extent their productivity can be quantified), they are arguably stealing from their employers.

Capitalism generates inequality pretty much by definition, and neoliberalism is a reaction by capitalists to undo rights which have been fought for by workers. Wealth inequality in Europe and North America in the mid-late 20th Century was noticeably high, and I wouldn't consider it any sort of golden age of egalitarianism at all.

If you want to deny that wealth and income inequality was markedly lower during that time than at any other time in the last, oh, forty centuries or so, that's fine, but you're factually wrong. This is just subjective fluff: "noticeably high," "golden age" - it has nothing to do with what I'm actually arguing. I don't care if you look at it as a golden age or not. Premodern civilizations were in all cases more unequal than capitalism, and pre-state cultures had more equality because everyone was dirt-poor.

Capitalism is progressive compared to what came before it.

 

[Timsup2nothin]

Those first forays were timid explorations because most people still held out hope that the cyclic nature of the free market would somehow "work out." It didn't. So the New Deal was recognized as necessary.

Look at any economic indicator charted over the history of the United States. If you find one that doesn't illustrate that there is NO similarity between the period 1776-1935 and the period 1935-present, let me know. In the former period there was oscillation, in the latter there is increase and the only variation is in rate of growth. Economic parameters in the former are examined in terms of relative value, in the latter by relative rate of change. People trying to use analysis based on the older model to predict response to stimulus in the latter economy are responsible for the majority of problems in the economy.

 

[Lexicus]

Look at any economic indicator charted over the history of the United States.

There are very few of these. Reliable data only goes back so far.

If you find one that doesn't illustrate that there is NO similarity between the period 1776-1935 and the period 1935-present, let me know.

This periodization is nothing short of ludicrous. The economy of 1920 is far more similar to the economy of today than it is to the economy of 1776. And it is completely wrong to characterize 1935 as some enormous historical watershed with "NO similarity" between what came before and what came after. There are important differences between the pre- and post-new deal era, but there are many more important similarities, at least between the period from ca 1870-1929 and the period 1929-1970.

In the former period there was oscillation, in the latter there is increase and the only variation is in rate of growth. Economic parameters in the former are examined in terms of relative value, in the latter by relative rate of change.

The reason for this is not any fundamental structural change in how the economy worked, but because of banking regulation and counter-cyclical fiscal policy. The banking system is functionally unregulated today, and counter-cyclical fiscal policy's effectiveness has been hobbled by political opposition to deficit-spending even when it is sorely necessary.

People trying to use analysis based on the older model to predict response to stimulus in the latter economy are responsible for the majority of problems in the economy.

This is the second time you're using 'model' in the singular and it's convinced me even more thoroughly that when it comes to economics you don't really know what you're talking about. I'm not talking about 'models' here but the actual historical causes of the Great Depression and Great Recession, which are in fact highly similar whether you acknowledge it or not. As already noted, you haven't been able to factually refute anything I've said.

Honestly, you should read Marx: he explains the dynamics, albeit in somewhat idealized and simplified form, pretty well. The continuous drive of capitalists to reduce wages and increase productivity so as to employ fewer people means that workers will not be able to consume what they produce, leading to recurring crises to the extent that no countervailing forces are active ensuring that wages keep up with productivity, and that people have enough disposable income to consume. This is a "general theory", if you will (you should read Keynes too, since he arrived at the same insight decades after Marx did) that explains why the economy experienced recurring crises before 1929 (the ones before we had a federal reserve were even worse), explains why there were no serious crises from 1945-1970, and why there have been recurring crises since the stagflation in the '70s.

Now, I agree with you that people using an economic model that applied in the 19th century to try to explain how things are today are the major problem, but that isn't what I'm doing here. I can explain why it is no longer valid to try to spur investment by ensuring a steady flow of business profits (it was in the 19th century, but not anymore). That is why the Bush tax cuts, far from "fixing" anything, in fact contributed to the Great Recession. It's why the general relaxation of tax rates on the highest incomes is linked to the crises that have occurred since the mid-70s.

 

[Timsup2nothin]

This is the second time you're using 'model' in the singular and it's convinced me even more thoroughly that when it comes to economics you don't really know what you're talking about.

We should meet in person. I'll show you my degree, you show me yours. In the meantime I am really tired of trying to be respectful and resisting calling you a punk.

 

[Lexicus]

Yeah because calling me a punk would probably distract everyone from how you can't muster a factual argument to refute anything I've said.

 

[Timsup2nothin]

Yeah because calling me a punk would probably distract everyone from how you can't muster a factual argument to refute anything I've said.

No, it would just make me feel better about wasting my time doing exactly that without you noticing.

 

[Lexicus]

I don't know what to say. You haven't made a factual argument, you made an interpretive claim so sweeping that I dismissed it as a generality. No historian or economist would agree with that claim, either, though many would probably disagree with my explanation on other grounds.

Is it a fact that worker productivity rose tremendously in the 1920s due to technological and organizational changes in the economy? Yes. Is it a fact that the share of national income going to wages decreased while the share of national income going to profits increased? Again, yes.
I mean, just a few posts ago you were explaining to WIM that Keynesian theory now dominates economic policymaking in all the advanced countries (which is true, but only in a qualified sense, although that's a whole other discussion). Keynesian theory explains the Depression in exactly the terms I did: insufficient aggregate demand due to workers lacking the disposable income to consume what they produced.

Questions immediately occur to me namely: do you think Keynesian theory is incapable of explaining anything that occurred before 1935? Do you think Keynesian theory is wrong? Do you think the facts about the economy in the 1920s that I've recounted are wrong?

f you find one that doesn't illustrate that there is NO similarity between the period 1776-1935 and the period 1935-present, let me know.

The very fact that you can take the same kinds of economic measures in both periods is a demonstration of the fundamental similarities between them. Though, of course, that gets less and less true the further back one goes.

 

[Timsup2nothin]

I can take the same actions in a church in Sun Village as I can take in a bar in Tecate...but to expect similar results would be pretty silly.

 

[Lexicus]

So how does that analogy apply to this situation? Are you saying that increased inequality would have completely different effects in 1929 than it had in 2008?

 

[Timsup2nothin]

The very fact that you can take the same kinds of economic measures in both periods is a demonstration of the fundamental similarities between them. Though, of course, that gets less and less true the further back one goes.

I can take the same actions in a church in Sun Village as I can take in a bar in Tecate...but to expect similar results would be pretty silly.

Seems pretty self evident what was meant there. Assuming that you recognize that there are hardly any similarities between a church in Sun Village and a bar in Tecate.

 

[Lexicus]

This is an example of an awesome miscommunication, that is no one's fault. By 'taking economic measures' there I meant 'collecting statistical information,' not 'taking economic policy measures.'

Does that clear things up some? You said that economic indicators are different pre- and post-New Deal, which is true...but the fact that you can measure the same indicators in both periods is indicative of a deeper fundamental similarity.

 

[Timsup2nothin]

This is an example of an awesome miscommunication, that is no one's fault. By 'taking economic measures' there I meant 'collecting statistical information,' not 'taking economic policy measures.'

Does that clear things up some? You said that economic indicators are different pre- and post-New Deal, which is true...but the fact that you can measure the same indicators in both periods is indicative of a deeper fundamental similarity.

Okay, yeah that does clear things up.

That said, collecting statistical information has to extend beyond the limits of any particular system to be of any use in comparing systems. They are similar on some level, definitely. Calling one free market capitalism and the other interventionist capitalism certainly points to that. The latter having evolved out of the former also points to that. Even more deeply, they are both economic systems so they obviously aren't going to be measured with a scale and a micrometer. But those similarities don't preclude substantial differences, or make using analysis of one to make predictions about the behavior of the other a good idea.

 

[Lexicus]

But those similarities don't preclude substantial differences, or make using analysis of one to make predictions about the behavior of the other a good idea.

I agree with you, but I think I've already explained sufficiently to show that isn't really what I'm doing here.
Factually, the Depression was caused by the things I said it was caused by. Factually, the Great Recession was caused by things that were very similar.
My analysis is not based on "here's what happened in the Depression, so the Recession must have had similar causes." It's "here's what happened in the Depression and the Recession, look how similar they are."
I'm still not wholly clear on what your beef is with my explanation of what caused the Depression. I'm not sure whether it is in fact a beef with that explanation or with my comparison to the Great Recession.

 

[Traitorfish]

I just go off the definition I find on Google; A political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

The only reasonable definition. The ambiguity is only that "socialism" doesn't carry any specific prescriptions vis a vis owning and regulating, so arguments can be made for the permission of private property and market exchange on instrumental grounds, given that the community retains certain fundamental claims on all property and all profit, expressed as taxation, regulation, or whatever. More abstractly, we might call socialism a system which consciously subordinates economic life to social life, where pre-capitalist economic systems did this only unconsciously or at most half-consciously.

Some social democrats stretch this beyond credibility, but it's entirely reasonable to defend markets as a useful mechanism for distribution while identifying as a "socialist", provided one maintains the instrumental view and the affirmation of the primacy of social life.

 

[Timsup2nothin]

I agree with you, but I think I've already explained sufficiently to show that isn't really what I'm doing here.
Factually, the Depression was caused by the things I said it was caused by. Factually, the Great Recession was caused by things that were very similar.
My analysis is not based on "here's what happened in the Depression, so the Recession must have had similar causes." It's "here's what happened in the Depression and the Recession, look how similar they are."
I'm still not wholly clear on what your beef is with my explanation of what caused the Depression. I'm not sure whether it is in fact a beef with that explanation or with my comparison to the Great Recession.

Mostly it was the comparison. Because I come from the position I stated earlier, a great many problems have been caused by people using Keynes' model of the free market capitalism economy that effectively no longer exists to predict what would come of actions taken in the interventionist capitalism that took its place, I tend to dispute such comparisons almost reflexively.

Remember, I'm old. I go back to a time when a great many economists genuinely believed that the interventions prescribed by Keynes hadn't really altered the basic fabric of the economy, so they could blithely go along using an economic model that was growing further and further away from reality every day. There wasn't the "sweep of history" to show otherwise.

So, I don't dispute your observations regarding observations prior to the depression of the thirties that are analogous to observations prior to the collapse of 2008. I just urge extreme caution in concluding that similar mechanisms exist connecting those observations to the two outcomes. The longer interventionist capitalism runs the further removed it gets from the free market system from which it sprang, and the more hazardous such comparisons get.

 

[Lexicus]

The only reasonable definition. The ambiguity is only that "socialism" doesn't carry any specific prescriptions vis a vis owning and regulating, so arguments can be made for the permission of private property and market exchange on instrumental grounds, given that the community retains certain fundamental claims on all property and all profit, expressed as taxation, regulation, or whatever. More abstractly, we might call socialism a system which consciously subordinates economic life to social life, where pre-capitalist economic systems did this only unconsciously or at most half-consciously.

Some social democrats stretch this beyond credibility, but it's entirely reasonable to defend markets as a useful mechanism for distribution while identifying as a "socialist", provided one maintains the instrumental view and the affirmation of the primacy of social life.

Hey kind of like, exactly what I've been saying?

 

[Cheezy the Wiz]

Since when did Marxists get to decide what Socialism meant?
I'm pretty sure Julius Nyerere, Patrice Lumumba, or Aneurin Bevan would be a little annoyed that you didn't consider them socialist.

People can call themselves whatever they want, it doesn't change the material fact of what they support. If capitalism is a thing with a definition, then so is socialism. And people who support capitalism aren't socialists because those are two different things. It would be like calling yourself a vegetarian when you clearly have a meat-filled diet: sure, you can call yourself that all you want, but when it comes down to what those things *are, * you are wrong.

Well, nature is one important source of use-values, as in fertile land and the like. Next, stuff that Marxists don't consider 'labor' like the skillful management of an enterprise or the discernment of an investor.

The only way to sustain the labor theory of value is ultimately to redefine labor as 'that which produces value' which reduces the theory to a tautological truism.

None of those things have value until human labor acts upon them. The act of picking a fruit is still labor. And get this: a fruit that only has to be picked to be eaten is going to cost less than a fruit that has to be picked, washed, cut open, and cut into pieces in order to be eaten. That's because it takes more labor to make that into a useful product for someone.

Labor is the manner by which humans turn natural materials into useful products. All products come from nature at some point, and get harvested or processed in some way before they can be used. The more they have to be processed, or the harder it is to obtain them, then more value they have.

 

[Lexicus]

Mostly it was the comparison. Because I come from the position I stated earlier, a great many problems have been caused by people using Keynes' model of the free market capitalism economy that effectively no longer exists to predict what would come of actions taken in the interventionist capitalism that took its place, I tend to dispute such comparisons almost reflexively.

Remember, I'm old. I go back to a time when a great many economists genuinely believed that the interventions prescribed by Keynes hadn't really altered the basic fabric of the economy, so they could blithely go along using an economic model that was growing further and further away from reality every day. There wasn't the "sweep of history" to show otherwise.

So, I don't dispute your observations regarding observations prior to the depression of the thirties that are analogous to observations prior to the collapse of 2008. I just urge extreme caution in concluding that similar mechanisms exist connecting those observations to the two outcomes. The longer interventionist capitalism runs the further removed it gets from the free market system from which it sprang, and the more hazardous such comparisons get.

My response would be that I see the governance of the economy as becoming more similar to the pre-New Deal era after about 1970. Further I would say that the important changes took place before the New Deal, which was a belated and ultimately inadequate response to those changes.

The key point here is that the changes that took place in the economy from about 1890-1920 changed the game. Traditionally economists believed that growth had to come from investment, and that investment could only come from shifting resources away from consumption.

Ahem. Accumulation of capital happens insofar as any increase in goods production and labor productivity—in a word, growth—requires net additions to the capital stock and the labor force, as in the period 1800-1920. Disaccumulation happens when economic growth occurs without these additions, and indeed proceeds as a function of declining net investment, as in the period 1920-present. There, I said it.

Declining net investment? How so? Gross investment is composed of replacement and maintenance of the existing capital stock, plus net additions to the capital stock. Disaccumulation happens when the mere replacement and maintenance of that capital stock is sufficient to fuel economic growth on an astonishing scale.

Now, the implications are pretty weird. On the one hand, human labor is extricated from the goods-productions process. The horizon of socially necessary labor recedes, and the class position once enacted by the industrial proletariat becomes increasingly difficult to articulate. So class consciousness gives way to other forms of identity in the 1920s and after. On the other hand, the deferral of consumption, which presupposes increased savings, is no longer the condition of increased production—of growth. Consumption now becomes the condition of growth because net investment becomes unnecessary.

And so the deferral of gratification—saving for a rainy day—leads to economic crisis. Uh oh. As Stuart Chase exclaimed in 1934, “a whole moral fabric is thus rent and torn.”

The Great Depression of the 1930s was the first crisis caused by the disaccumulation of capital. In the 1920s, consumer durables—automobiles, sure, but also radios, vacuum cleaners, refrigerators—were already the key to growth, the new “industrial blocs” that substituted for saving and thus offset declining net investment. And already they were financed with the extraordinary novelty of consumer credit, or “installment debt,” which tripled in the decade (consumer debt on car payments meanwhile increased 500%, as individual savings fell by half).

At the same moment, in the industrial sector, capital costs were declining rapidly even as productivity was increasing sharply. Just one example. In oil refining, straight-run distillation of petroleum was replaced by “continuous thermal cracking” in the 1920s. The new process quadrupled the yield of gasoline per barrel of crude, and yet cut refinery construction costs in half.

Similar innovation happened elsewhere in manufacturing, particularly in the automobile industry, with two results. First, the replacement and maintenance of the existing capital stock were more than enough to increase productivity and output; in other words, net investment was unnecessary to fuel fantastic growth (64% increase in output for the decade). Second, the labor force engaged in goods production—manufacturing, construction, transportation—declined absolutely, not relatively, by about 1 million.
- See more at: http://historynewsnetwork.org/article/43038#sthash.AOvTODHA.dpuf

That's the key to understanding both the Depression and the Recession. You're operating on an economic framework that's no longer valid because the ground has shifted under your feet. The poor guys dealing with the Depression had an excuse- they didn't know any better. We lack that excuse.

 

[Timsup2nothin]

That's the key to understanding both the Depression and the Recession. You're operating on an economic framework that's no longer valid because the ground has shifted under your feet. The poor guys dealing with the Depression had an excuse- they didn't know any better. We lack that excuse.

How much stock are you putting into this "key to understanding?" I can certainly recognize it as a key to seeing things your way, but it also contains a number of things I blatantly doubt and some others i would have to examine in more detail before crediting them with the weight they are given. Those things account for me not seeing things your way, which i don't take to mean that you "don't know what you are talking about.".

To me, again, this is an attempt to apply a "we can use lessons learned from the depression" blanket, which is in my opinion more comfortable than useful. For example, the "extraordinary novelty of consumer credit" that "tripled in the decade" isn't extraordinary, or novel, since tripling from insignificant to three times as much but still insignificant just isn't a big deal. Much more significant expansions of consumer debt have happened without causing similar consequences. Picking it out as a similarity between 1929 and 2008 might offer some comfort to those trying to understand 2008, but it seems a false comfort.