Dear Ed:
As I read your essay, my face blushed and my stomach churned, sure signs of
the flight or fight sydrome. I flew. I had to get some distance from the
logic of your words, for this is truly an impressive essay. It was only
after several hours, that I was able to compose myself and realize that this
would have got you an "A" in Economics 101. That's in the box.
Ed said:
Investment is simply the process of building capital. Capital is built, or
formed, to make us more
productive.
Thomas:
What lovely economic terms. Investment is made to increase capital. That
increase is sometimes caused by Marx's
formula of Capital plus labour plus raw materials = commodities which become
Capital again. I have no problem with that understanding of Capital.
However, investment has come to have a second meaning in which interest is
paid on Capital which is used to speculate on value - not commodities.
According to Joel Smith in The Death of Money, the ratio is now 50 to 1 in
favour of Capital that is used for speculative gains rather than commodity
production. In this sense, we are using one word to cover two meanings. It
is one thing to issue a stock offering to raise a million dollars to
increase real production. It is another thing to invest a million dollars
in a stock with the idea of selling the stock to the next shmuck when the
price of the stock rises. Nothing productive is accomplished, it is a
speculative investment.
As to Capital, it was originally called savings or perhaps in the case of
turning a stone into an arrowhead, added value through the application of
work and knowledge to use modern terms. It becomes Capital as Heilbroner so
eloquently argues when it is used as a tool to increase Capital and a
capitalist is one who uses a saving for no other purpose than to gain
profit. To a capitalist, the use of his capital in whore house is just a
valid as in a food production facility as long as he gets a return on his
capital. Therefore, as a general rule, a capitalist is one who has no
social responsibility except to engage in activities that make him a profit.
Even if that profit has external negative side effects.
Ed said:
This means that we have to continue to build capital and make it more
productive just to support ourselves.
Thomas:
This is where the difficulty begins and ends. If Capital was only used to
increase goods and services that are required because there are more and
more of us to support - fine and good. In reality, Capital is used to make
a profit without the intermediary step of having labour and raw materials to
make a commodity. Consquently, in reality, we have these immense pools of
capital - really immense - having little or nothing to do with enhancing the
human races ability to support itself, rather existing in some kind of weird
monopoly game in which a small number of individuals, (I recently read, 1%
of the population in the US control the equilvalent Capital that is
represented by 40% of the poorest people.) who have no desire to ever make a
product but want to make a profit and thereby increase their Capital.
Ed said:
In your trip across the country, you drove your car (consumers' capital)
powered by gasoline manufactured and distributed using the producers'
capital of an oil company. You stayed in people's houses (their capital,
and partly the mortgage company's). You say your kids swam in lakes
(natural capital? public capital?).
Thomas:
Yep, we can label everything Capital and it has a logic. The Aztecs see
their world in terms of the Sun's blessing and it had it's logic. The Bible
thumper can prove anything because the Bible says, it has it's logic. But
these in a sense are all religous terms used in the current paradigm =
pattern of our culture. They are not universal truths, they are just
representations people in cultures use to describe reality. And some of
them work some of the time but none of them work all of the time - or at
least we haven't as a race yet discoverd one that is universal. Would you h
onestly believe that our current capitalistic model of a market economy is
the going to be here for another thousand years? I give it 10.
Ed said:
Capital is not the only answer, but, since time immemorial, it has been the
means by which people have been able to raise their productivity and build
surpluses which have allowed them more options.
Thomas:
Since time immemorial, people have saved some of their surplus, not to make
profit on it but to carry them through till the next time of harvest or
successful hunt. Capital is a surplus which is used to make more capital -
that is not how savings are used, they are used as a hedge against
shortages. Barter trade, if the guy made an extra arrowhead was an exchange
of equal values between the parties bartering. One does not barter to make
a profit but to exchange. As barter is, in the historical sense not selling
in the modern sense, which is the exchange of goods and services in which
the seller makes a profit and the buyer fulfills a need, often an artificial
one generated by advertising.
Ed said:
Quite apart from these surpluses, the various forms of producers' capital
need people to run them.
This creates jobs. The more capital, the more jobs.
Thomas:
In yesterdays paper, NCR announced that it had developed a customer cashier
service that would eliminate cashiers at grocery stores and other retail
outlets. The customer would enter into a special area and push his products
over a barcode reader while one or more video cameras monitored his
activities. At the end, he would be told the amount to put in a cash
machine or use his interact machine. This is Capital used to eliminate jobs
and so it has been for a considerable period of time. The argument that a
number of factory work jobs are created in some distant low wage country
does not offset the fact that in the city of Ottawa, population one million,
we can suppose a loss of 10,000 full and partime jobs within a several year
period. Therefore one could just as easily make the statement, the more
capital, the fewer jobs.
Ed said:
Capital has recently received a lot of negative publicity because, in the
form of the microchip, it has displaced a lot of labour. But it has done
this throughout human history because this, essentially, is its function.
Those people are then free to take other jobs. If they cannot find them,
that is the fault of the society, not of capital
Thomas:
In actuality it has done just the opposite. We are told by anthropologists
who have studied the hunter gatherer or early agricultural societies, indeed
right up until the Middle Ages that people worked less hours per month for
their survival than we do now. It seems to those who work, and I would
refer you to a recent posting on this list, the more people are working
longer than they did 20 - 30 years ago and yet the amount of Capital in the
world has increased.
To say that this is the fault of society is perhaps the one place we might
have some agreement and my concepts of a Basic Income happen to be my
solution which I wish society would adopt. However, I would not excuse
Capital from all blame for the misery it has caused, the misuse of resources
that actually belong to the future as well as ourselves so easily. Capital
as I have constantly stated exists to make someone more. Money as a medium
of exchange is a way to simpify the barter system so that I don't have drag
my cow 15 miles to the shoemakers. Money is fine, Capital in Marx's terms
is fine, Capital as currently being used for speculation is causing a major
economic distortion.
In summing up this lengthy rebuttal, I have had to do some soul searching
about my concepts. Basically, I believe people come before profit and that
people are more important than profit. We could still have Capital, in
terms of savings, accumulated surplus, which are to be use to make life more
comfortable and more productive, but when we introduce the concept of the
rent of capital for profit, then, in my opinion we start putting profit
ahead of people and that does not fit my philosophy. Money is a tool we
invented to make life easier and more productive. Profit on speculation is
money misused in my opinion.
Respectfully,
Thomas Lunde
