This is really an argument against socialism as the communists tried to implement it. Where the state nationalizes every industry and all workers become employed by the state which plans everything centrally. Most socialists have moved beyond that model and would instead prefer to see a system of enterprise that uses co-op's instead of privately or publicly owned business. Some industries would probably be nationalized or socialized, but not much more than already is in the best parts of Europe. The main idea is to make the enterprises benefit those who do the actual work and also make them accountable to those people and their communities. The main problem with capitalism is that someone other than the people doing the work get to decide how the work is done and how to spend the surplus of value that work generates. If the workers decided these things they would never vote to outsource their own jobs and would rarely choose to pollute their own communities. They wouldn't vote to reward a tiny minority with a fortune while they pay themselves poverty wages.

> If the workers decided these things they would never vote to outsource their own jobs

This implies they would be making the wrong decisions then, no? There needs to be some mechanism to decide who does what, or otherwise some goods and services will be produced in proportions well exceeding any possible demand.

> The main idea is to make the enterprises benefit those who do the actual work and also make them accountable to those people and their communities.

Once you start introducing multiple contradictory goals like this, you're back to the same problem that centrally planned capitalism and communism have: resolving these conflicts is an extremely difficult problem in an informational/computational sense.

The local blacksmiths are of the opinion that only locally hand-wrought nails make the finest boots. The local bootmakers are of the opinion that the nails they can get for $1000/ton from China will suffice. The bootmakers are convinced that they are being idled by the limited supply of local nails, and that the blacksmiths are able to demand an unreasonable share of the value created from the boots because they have made their contribution to the boot scarce.

Do you sacrifice the supply of boots or outsource the work of the blacksmiths?

In practice, the trouble of resolving supply and demand problems politically have been far more disastrous than the problem of planning supply and demand.

I find the Austrian-influenced critique of communism unconvincing. Many Communist countries chugged right along, growing their economies at a pace that alarmed Western observers, before they sagged and broke down under their increasingly cruel, incompetent, kleptomaniacal, bureaucratic government systems. But before this happened people were afraid Communism could actually win. When Khrushchev said "we will bury you" people took him seriously. But if von Mises was right they should never have gotten anywhere in the first place. Also consider that the internal economy of any real-world corporation is 'centrally planned' in a limited sense. When you call up the HR department or tech support, you don't have to pay them for their labor.

Hayek was the Austrian that got it right--it's not that central planning is inefficient, it's that efficient central planning for a broad market economy can only be accomplished when you begin to devalue the actions of the humans of the world that aren't in line with what the planners want. Eventually, what is lost is all incentives for planners to plan for anyone but themselves. This goes all the way back to Marx, who would talk about things like how capitalists as a social class do not really provide 'labor value'; that the capitalist even makes money at all is an accident of human organization and that they are not really valuable or needed in the world. To the hardcore Marxist, capitalists are not merely overpaid, they are in fact worthless by definition.

Hayek and Mises were in total alignment on this point: economic calculation under socialism is impossible. Without a working price system economic coordination is impossible to sustain. Those communist countries were not growing at all. If you look at actual output compared to capitalist nations at the same time there is no comparison. The case of East vs. West Germany is sufficient to demonstrate this case.

In fact the problem that subsidies create in society is a little window into the problem of socialism that exists on a larger scale.

Hayek would probably agree with the sentiment that you expressed though.

Hayek literally wrote the book on the "sentiment that I expressed", it's called The Road to Serfdom. Hayek's views on the "economic calculation problem" were more subtle than 'it doesn't work' and they needed to be because by the time he wrote the book, communism was a real economic power and it was getting more powerful. I'm not sure how you think Russia went from backwards feudalism to nuclear superpower by "not growing at all".

Hayek is an interesting character because "The Road to Serfdom" is not really his finest or clearest viewpoint on markets at all. I saw a video interview with him (you can find it on youtube if you want) where he just restates what I did that the economic calculation problem renders socialism unable to coordinate production effectively.

Russia as compared to the United States is still a backward country. Their wealth is nowhere near the United States and certainly didn't gain any ground during the Cold War period. It doesn't take much, if any, "growth" to force a nation as large as Russia to build a large military-particularly when you don't actually need to figure out the logistics of that army fighting an actual war (since Russia could never have done such a thing against the United States). Add to that forced labor and the basic confiscation of whatever you need to accomplish your goals and it all is pretty straightforward.

I agree, and you don't even need China in this analogy. Suppose that 5 of the best blacksmiths leave the blacksmith cooperative and start producing custom-made nails for less than the old blacksmith coop, which by the way is now missing their best people. What happens when they take over the market? Will the now-jobless blacksmiths be accepted as members of other cooperatives with full rights, or do they need to sell their labor in the market for whatever someone is willing to pay? The only way so far found to preserve socialist principles in this situation is with regulation which prevents free economic choice - the bootmakers don't get to choose whose nails they buy, you can't quit your job with five of your friends and start a competing concern, and you don't get control over who you let into your cooperative. But having removed this right to dispose of the results of one's own labor (I am not even talking about hired labor), we've created a state-run society in practice if not in theory.

The idea is to retain the good qualities of capitalism which is self-optimization and market-based decision making. The bootmaker and the nailmakers would be autonomous agents making decisions in their best interests. The bootmakers can buy nails from whoever they want, but if the market then rejects their boots because of shoddy nails, they will have to adapt.

Also worth pointing out that in a specialized economy, most companies cooperate instead of competing with each other. The bootmakers likely need nails specifically designed for their boots so buying generic ones from China isn't an option. Instead they need to source a local supplier and tell them how the nails for their boots models need to be made. They enter a symbiotic relationship in which both benefit.

Liberals like to see capitalism as a marathon where the runners compete with each other and the best ones win. But the system works more like the cells in a human body. Companies need to specialize and work together to be successful.

"Liberals like to see capitalism as a marathon where the runners compete with each other and the best ones win. But the system works more like the cells in a human body. Companies need to specialize and work together to be successful."

Be careful of painting with too broad a brush. Different industries operate in vastly different ways to very different outcomes in the long term.

Compare http://en.wikipedia.org/wiki/Natural_monopoly to http://en.wikipedia.org/wiki/Perfect_competition

"The bootmakers likely need nails specifically designed for their boots so buying generic ones from China isn't an option. Instead they need to source a local supplier and tell them how the nails for their boots models need to be made"

That's beautifully conceived, but you conveniently ruled out an option that sly bootmakers could get their hands on a Chinese dictionary and instruct these cheap Chinese suppliers (rather than the supplier next door) on what type of nails exactly they would like to have made for them ;)

Yes, sure. No one said that the nail makers would be guaranteed a market for their nails. However it might be better for the boot makers to renegotiate their contract? And what is the cost of screwing over your local supplier? Maybe local public services will prefer boots entirely made in $your-country? Economy is way more complicated than always chasing after the biggest short term profits.

Of course - maybe they will :) and maybe they won't. Which is way less certain than saying "they [the shoemakers] NEED to source a local supplier", as you wrote.

The key thing here is that if I buy boots cheaper by 1/4 (thanks to partial outsourcing), I will spend the 1/4 I saved by going to a barber. Or a local restaurant. Or by buying doughnuts at a local bakery. So - speaking of economy to which there's more than meets the eye - these are local suppliers too, indirectly benefiting from the fact that local shoemaker imported nails.

Wasn't the superior adaptability of those cheap Chinese suppliers a big part of why Apple moved there?

My understanding was that the supply chain and infrastructure to produce the smart phone simply wasn't available in the US. America had decimated its manufacturing capabilities to the point that there was no other option beside bankrolling an entire industry from scratch.

You're describing syndicalism; it's not true that it was never implemented by the communists. The Soviet Union had a very serious go at it, allowing the artel as an economic unit (essentially a kind of co-op), and allowing people to freely sell products of their own labor. Within months, this led to a renewed stratification of society, the emergence of a nouveau rich class, and something approaching a return to capitalism (some people's labor is more profitable than others'). In the case of the Soviet Union, this led to a crackdown on the labor market. They also made attempts to organize along trade union lines instead - which reduces the stratification problem somewhat since a trade is not a single economic unit - but having the electricians and the mechanics within a factory report to different management was not practicable. The USSR came to its system of government-run conglomerates because it was the only way they found to combine socialism with getting at least something done; it was not their initial intention to have everything run by the government, if only because the didn't really want the management burden.

In other cases, the evolution towards capitalism just ran its course. Israel stumbled into syndicalism by default - its labor unions and cooperatives predate the state. In virtually all cases, the cooperatives did not grant new members the same rights as the founding members. E.g. the bus cooperative - which started out as a free association of owner-drivers - now relies on hired labor for most of the actual driving, with wages the same as any other driving job in the capitalist free market. The final stop for this kind of developments is in the unionized ports, where they have full union members making tens of thousands of dollars a month for sinecure jobs, with a lot of the gruntwork being done by minimum-wage hired labor with no rights. It's nice to talk about how "the workers" will not vote for this or that, but when it comes to voting members - of anything - voting themselves more rights than the people asking to join, they have, they did, and they will vote for that.

It is worth noting that the USSR came into that system for many reasons, but not least because they tried something that Marx had explicitly warned against: Attempting revolution somewhere that was so poor that redistribution would make want for basic necessities universal.

Marx pointed out already in The German Ideology (1845) that this would just cause a return to class struggle, as it creates an immense incentive for people to find ways to accumulate, no matter how much you try to crack down on it.

This was one of many objections to the Bolshevik rush to try to develop socialism, but by the time of the Bolshevik power grab, Lenin had spent 25 years inventing excuses for how Russia could somehow avoid that trap, starting by his fantasy that the Bolshevik would somehow get the support of poor farmers (didn't happen)... Didn't save him from it.

Israel has had several interesting attempts with socialist economic units, most notably the Kibbutzim, whose decline will give economists and social psychologists enough fodder for years. Most of these attempts indeed failed (some more so than others), but they worked quite well for a few decades.

One could argue that an economic structure – any economic structure, including capitalism – cannot survive without a supporting value system. In Israel, all of these attempts took place in a capitalistic environment, both inside Israel and in international markets. It is worth mentioning Max Weber's observations that it took many years for society's value to change enough to support free-market capitalism. For example, he describes how workers traditionally worked less hours when offered a higher wage.

One problem with this is people as a group tend to be stupid. What stops the workforce from voting to reduce their work hours to 30 hours per week?

Take the Automotive unions as an example. Their demands contributed in many ways to the US auto companies nearly going bankrupt and requiring state bailouts.

Moving manufacturing to cheaper places can have a bad local effect in pockets that depend on it, but there is a net gain for us as consumers in an economy to be able to acquire things cheaply.

So our auto manufacturers complained they can't compete against the Japanese imports, we cranked up a bunch of tariffs to artificially increase the cost of foreign produced goods. For consumers that is a net loss as it drives up our prices.

Now, foreign companies produce many of their cars in the united states with union free labor and american companies have started producing cars in mexico so they can pay the pensions for all the retired union employees.

This is a simplification but that's how I understand it.

I'm not arguing that unions are bad. only that they can be very bad. There are benefits when there is an /abusive/ monopoly supplying jobs. (think foxconn), but unions can be just as abusive as employers and literally kill their own employers in the process. The free market is the best solution to the problem which enables a company to hire non-union employees when the union's demands become too great.

My philosophy is that if you can't compete on price you need to compete on quality and offer a superior product. (This is why people still buy German produced cars in other countries regardless of the increased cost in manufacturing).

For clarification sake I'm saying that the mass of people at the bottom of an organization can have demands that conflict with the survival of the business. It's good that there are smart people who fought their way up the bureaucracy through a meritocracy. They generally won't make a decision that will obviously drive a company straight into the dirt while this is distinct risk in unions with entitlement issues.

It's funny you mention Germany there at the end since it undermines your whole argument. German auto workers are all unionized and they earn double what American auto workers do.

It doesn't undermine my argument. I said they compete on quality. Unions can be just as tyrannical as a monopoly. If German companies didn't produce better cars than cheaper countries there would be no reason to buy them and very few people would.

Added to my above comment:

"For clarification sake I'm saying that the mass of people at the bottom of an organization can have demands that conflict with the survival of the business. It's good that there are smart people who fought their way up the bureaucracy through a meritocracy. They generally won't make a decision that will obviously drive a company straight into the dirt while this is distinct risk in unions with entitlement issues."

The problem with this is, that the demands, that can destroy a company, still can be real demands.

The company says, it has to pay you $5 per hour or they couldn't employ you and it isn't even lying.

You say, you can't work for a wage below $10 per hour and your reasons for this are valid, too.

If the company wins, the workers can't live from their wage. If the workers win, the company can't employ enough of them to conduct business.

I fail to see a problem with this at all.

1: The company goes out of business (due to inefficiency and an inability to compete) in which case it was a shitty business and shouldn't exist in the first place.

2: The company hires someone who can do the work for $5 per hour, in which case the worker who needs $10 to live is simply not living within their means.

I equate this to someone earning minimum wage complaining that they can't support their numerous kids. NO SHIT. you are not entitled to a wage capable of supporting other people.

This is what seems logical, but most of the time the second thing will happen, because there are many people who think every job is better than no job.

There are lesser jobs than people, so the companies have the bigger lever.

If the employee possesses desirable skills that are in fact worth $10 they can seek that employment elsewhere. If they cannot offer anything over the $5 employee it's a waste to pay them more.

Before there was minimum wage established in the US there was this job of pump attendant. Pump attendant was someone who would pump your gas into your car. These were jobs that paid next to nothing. These jobs disappeared almost immediately after the minimal wage law was enacted.

Now, think about it. A 16-year old would come to the gas station after school and pump gas for (let's say) 2usd/hour. But he would also learn other skills. At that time there were also body shops/car mechanics at the gas station. Because they could use cheap 2usd/hr labor of this kid. And the kid could learn car mechanics. After finishing school the kid could be actually pretty good mechanic. Go there on the job market nad having this real-life experience demand 7usd/hr job of a car mechanic. That was also a time that unemployment rate among the young was the lowest out of all the age groups. Soon after the minimal wage law was enacted the unemployment rate among the young started to be the highest among all ages group. Not only that, but also there is no one to help you at the gas pump today in the US. There are no car mechanics at the gas stations too. These people are permanently unemployed. Because 16 year old after school isn't worth the current minimal wage. He's worth half of it. He could be worth the minimal wage enacted by the Government after 6 months experience while he would be paid market rate as gas pump attendant. But that's illegal now. It's illegal to hire him, pay him and let him grow to better position. He is permanently unemployed now. Maybe for years. Again, the unemployment rate among the young is the highest among all group ages. Before the minimal wage law it was the lowest. But socialism isn't about letting people who want to work, work. About letting them grow and prosper in their future. It is about permanent ruin. 60% of people below the age of 30 in Spain are unemployed. The country is doomed because of socialism. And doesn't even get it.

Amusingly that job still exists in my neighborhood of Boston for reasons that I cannot explain. I suspect there may be a law about it but I'm not certain.

In New Jersey it is illegal for you to fill up the gas on your own. It has to be done by the pump attendant. That's the law. Not sure about Boston ;-) It might be that it makes business sense for the owner to have pump attendant at the rate or above of the minimal wage. Which is nice.

> So there's 5 pump attendants and one of them has the brains, motivation, luck, family connections, whatever to get promoted to be the next $7 car mechanic.

They all move on. Not necessarily to become car mechanics. The other one could be helping at the cash register at times, yet another one help to put merchandise on the shelves. Yet another one hand-wash cars. The fallacy of socialism is pointed out by you exactly: you think that 80% of people (4 out of 5) are idiots who can't do better in life and need the Government protection. Then Government comes along introduces a law that makes 80% of them unemployed, hence the proof that more Government in needed!

> "It's illegal to hire him, pay him and let him grow to better position." > That's ridiculous. Managers take chances on noobs all the time, especially at the lower levels.

It gets better than that. There are free internships. You can get them for free - 0usd per hour, you can get them for 7usd/hr. But to give them employment at market price? Illegal! Genius!

>"Again, the unemployment rate among the young is the highest among all group ages" >Hello Arab Spring, coming soon to a failed state near you.

Like Spain. Or Greece. Or some other place where socialists Governed for the past 50 years. Like... failed arabian states. Learn your history. They all have been socialist. That's why failing. From Saddam to Mubarak.

>Historically a graph with a y-axis of "desperate angry unemployed young men" tends to peak around revolutions and upheavals. The future is on a path that is aimed much more toward France in the 1790s than USA in the 1950s. There are probably startup implications to this trend toward inequality for awhile, then revolution.

Well, yeah. Guess what. If you forbid people to work, and kill businesses (places where they go to work), all you will end up with is violence.

"can't do better in life and need the Government protection."

I mostly agree with your points, but this one fails. I say there's a pyramid. You say thats a politically incorrect concept to think about from a psuedo-right perspective, therefore it surely doesn't exist and all topic change-y. Bzzt try again. Is there or is there not a pyramid of skills, and if a working definition of the level of civilization is looking at how the downtrodden are treated, what are you proposing?

There is another issue that as a civilization we've decided civilization means citizens will have police, fire, libraries, schools, national defense, unemployment, welfare of some forms, foreign aid, all that stuff (More civilized nations or more civilized people believe health care belongs on this list, and I agree). Anyway it takes $X to provide those services privately or via taxes, or the govt at an overhead cost of Y*$X will provide those services by taking extra money from everyone else and redistributing from each according their ability and to each according to their need. The "welfare queen" in this situation is the service station, getting labor hours at a below civilization market cost. Essentially the welfare queen service station is stealing money from me as a taxpayer rather than paying their employees a legitimate fair wage. This is the well known "walmart effect" where poverty increases when walmart moves in, because the employees are below poverty line so the net effect is negative on .gov and the residents of that .gov who know have to pay higher taxes so Sam Walton's heirs can become richer, all while being told this is fairness, capitalism style. Why should I as a 3rd party be impoverished to make a rich welfare queen business owner richer, because a welfare queen business owner doesn't feel like paying his employees what has been determined to be a fair minimum wage? I legitimately and legally and ethically earn enough income to pay enough taxes to pay my share of national defense; why should I have to chip in more than my share because some welfare queen business owner isn't competent enough to match my level of business skill and pay his fair share of taxes via paying his workers a fair wage?

Your more fundamental failure is not recognizing that when .gov and .com merge, as they've done globally, a marketing game of divide and conquer makes losers out of people fighting on either side. The goal is the destruction of the middle classes globally. They're winning. Some countries are trying a PR campaign where .com and .gov merge and pretend .gov is in the drivers seat of the prison wagon, and some countries have a PR campaign where .com ang .gov merge and pretend .com is in the drivers seat of the prison wagon. However, if you're the guy in the prison wagon at the start of a real world "skyrim" game do you really care about which PR campaign is superior and who's pretending to drive that prison wagon?

> I mostly agree with your points, but this one fails. I say there's a pyramid. You say thats a politically incorrect concept to think about from a psuedo-right perspective, therefore it surely doesn't exist and all topic change-y. Bzzt try again. Is there or is there not a pyramid of skills, and if a working definition of the level of civilization is looking at how the downtrodden are treated, what are you proposing?

Let me put it this way. For the simplicity sake let's present workforce as the pyramid. So you have 1% who enjoy 50%+ or more of the wealth. You have 80% who are doing just fine. And you have 20% who are rock bottom poor and screwed over big time. The problem I have with socialism is that it obsesses about the poorest 20% so much, that is screws it over for the rest, the 80%. And at the end of the day everyone is poor because none of these socialist policies really work well. They just make everyone poorer. Margaret Thatcher is a great example of that on works. When she was the Prime Minister the income of the poorest 20% has been growing the fastest since the end of the WW2. The problem is that the other 80% was getting richer even faster. So poor felt like they are not getting their fair share. Without understanding that if you start introducing policies wealth transfer from 80% to the poor 20%, the poor won't get richer! They'll be still poor. You are so obsessed with this one pump attendant who made it big that by introducing the laws to take some wealth from the rich attendant, you don't see that the same law makes the other 4 attendants poorer too. The problem with socialists is that they want to feel so much, they forget to think.

>There is another issue that as a civilization we've decided civilization means citizens will have police, fire, libraries, schools, national defense, unemployment, welfare of some forms, foreign aid, all that stuff (More civilized nations or more civilized people believe health care belongs on this list, and I agree).

Equaling civilization with socialism doesn't work in my book. What about equaling the amount of freedom and responsibility with being civilized. So, if you - like one of my coworkers - eat, eat, eat and eat all day. She is fat, I tell you. And then - no excercise. Zero. Nada. Nothing. And then cigarettes. And then you go there and tell me it is civilized that I'm taxed higher to pay for her doctor, so I don't have money for my kid's school supplies? Nice. Very civilized. And where is her responsibility here? And where is my freedom to spend money on what I want, not what you want, my coworker wants, or the Government wants? What happened with this in our civilization?

>Anyway it takes $X to provide those services privately or via taxes, or the govt at an overhead cost of Y*$X will provide those services by taking extra money from everyone else and redistributing from each according their ability and to each according to their need.

And we know it doesn't work. 20 years after communism failed there are still people who believe that you can run economy on a premise of Marxist "redistributing from each according their ability and to each according to their need. " Again, go back to your history books. Don't listen to me. Even hard core communists like Slavoj Zizek will tell you that economically that didn't and can't work.

>The "welfare queen" in this situation is the service station, getting labor hours at a below civilization market cost.

And what is "civilization market cost" ? 1usd/hr? 2usd/hr? 50usd/hr? 1000usd/hr ? Can you define this nonsense?

> Essentially the welfare queen service station is stealing money from me as a taxpayer rather than paying their employees a legitimate fair wage.

If there wasn't welfare state, nobody would be taking money from you.

>This is the well known "walmart effect" where poverty increases when walmart moves in, because the employees are below poverty line so the net effect is negative on .gov and the residents of that .gov who know have to pay higher taxes so Sam Walton's heirs can become richer, all while being told this is fairness, capitalism style.

Why these people work at WalMart? Because they couldn't find a better job! So WalMart is doing the a favor because without WalMart they would have ended up at even more shitty job. And shitty jobs are good. I had one - was sorting out garbage. Once you do that type of job, you'll learn how to move up, without any stupid Government program. And if you stay at that level. It's 20% of the poorest. Why would you rather screw it for the 80%, to have it better for 20%. And then the 20% would be still poor too. That's what communism taught us. Everybody became poor. They made everyone equal. In their poverty.

>Why should I as a 3rd party be impoverished to make a rich welfare queen business owner richer, because a welfare queen business owner doesn't feel like paying his employees what has been determined to be a fair minimum wage?

Nobody told you to vote for leftist welfare programs. If you voted for them, yeah, you need to pay for them. I know sucks, to have people voting for that nonsense that cost me money too bro, so we're in it together.

>I legitimately and legally and ethically earn enough income to pay enough taxes to pay my share of national defense; why should I have to chip in more than my share because some welfare queen business owner isn't competent enough to match my level of business skill and pay his fair share of taxes via paying his workers a fair wage?

What is fair wage? 5usd/hr? 10usd/hr? 50usd/hr? Is it fair when a guy cleaning WalMar makes as much as software developer? You think?

>Your more fundamental failure is not recognizing that when .gov and .com merge, as they've done globally, a marketing game of divide and conquer makes losers out of people fighting on either side. The goal is the destruction of the middle classes globally. They're winning. Some countries are trying a PR campaign where .com and .gov merge and pretend .gov is in the drivers seat of the prison wagon, and some countries have a PR campaign where .com ang .gov merge and pretend .com is in the drivers seat of the prison wagon. However, if you're the guy in the prison wagon at the start of a real world "skyrim" game do you really care about which PR campaign is superior and who's pretending to drive that prison wagon?

This what you describe, this merge, is a very fascinating topic indeed. But its proper name is fascism (or corporationism as Duce called it), not capitalism. So, I'm afraid you might be barking at a wrong tree here. Let me give you example here: it were few Republicans, Tea Party sympathizers who voted against big banks bail-outs. All Democrats and rest of the Republicans voted for the fascist state where banks and the Government are in bed together. But not people who are by the left called the 'extreme right'. Tea Party and others, who believe in capitalism, have been and will always be against bank bailouts, or special treatment to big corps. They believe in free market economy and honest competition. If banks have to go bankrupt, let them. That's what capitalist would do. And we all know how left voted on this.

You keep repeating that socialism doesn't work. In the period 1928 - 1934 the socialist USSR went from an agrarian country, devastated by wars to world's second industrial power. Sent the first satellite into space, first man, first space station. To this date the socialist build russian space industry is the best in the world. USSR has made a huge amount of contributions in science as well. Other socialist countries - e.g. Bulgaria - have enjoined rapid increase in industrial output, standard of living and literacy rates when going from capitalism to socialism.

It doesn't work in terms of making live of a regular person better. Your argument is akin to saying North Korea is a better place to live than Germany because North Korea can put satellites on the orbits and develop nuclear weapons. Surely it must be more advanced! In some ways, I'm sure it is, but my question to you is this: at what cost? 30 milion dead to indutrialize USSR. That was the cost. In communism individual is nothing. They will sacrifice millions on the alter of having this industrialization done.

Bulgaria example: all satellite countries in the soviet block, and I underline again all of them, were developing more slowly and had much, much worse living conditions than their Western counter-parts at all time from 1945 forwards. Just compare Eastern to Western Germany. So, don't rewrite history, communism was one that made people sick of the poverty and revolt in Eastern Europe.

On the other hand, I agree with you, that post 1989 Eastern Europe is developing slower than we would have hoped for. However, in mu humble opinion, and that's just opinion, this is because of following still socialism. Free housing, free healthcare, free this and that. People in Eastern Europe live in socialist not capitalist states. Moreover, more often than not, the "capitalization" process done by "liberals" in Eastern Europe was just simply stealing the whole industries by ex-communistic elites together with guys who are currently in power. These are very corrupt states. I like to compare my own country - Poland - to Mexico. You know Mexico has had "capitalism" for a long time. But it is not a real capitalism. People there believe in free stuff, they vote for free stuff, and they don't like or trust free market economy. This causes corruption which in turn makes them permanently poor. I think Eastern Europe is a bit like Latin America. They don't have true capitalism but some kind of a corrupt states that just failed. Adding EU socialism on top of that kind of pushes things in the right direction in my opinion - from post-communistic mentality towards more modern, western, socialists - but it is still socialism.

> The company says, it has to pay you $5 per hour or they couldn't employ you and it isn't even lying. You say, you can't work for a wage below $10 per hour and your reasons for this are valid, too.

The price of labor just like any other price in the free market economy is determined by supply & demand. So they need you for $5/hour. You know you are worth (i.e. can easily get) the same job for $10/hour. The capitalistic/free market way of this to work out is that you go working for 10usd/hour this way rewarding competent guys who can built cars with profit to pay you your rate and at the same time penalizing incompetent company that can't build cars with profit. At the end this means the incompetent company should go bankrupt and resources it was holding hostage - workers, machinery, real estate, steel that they used, etc, etc. can be bought on cheap via bankruptcy process by competent companies that will put all of that to better use.

That's actually what should happen in 2008 with the banks. The incompetent banks that were lending all this risky money to guys without checking if they can ever repay, should go bankrupt - Citi, GoldMan, you name it. Then via baknruptcy process they would free up a lot of workforce, a lot of bank branches, office space, etc. to be bought by competent banks on the cheap (it's bankruptcy after all) and put it all to better use. 3/4th bank from Ohio - its CEO - knew about the housing bubble in advance. He was cautious. If we allowed the market forces to work he - a competent banker - would be the one who would buy on cheap / take over assets of incompetent morons like Paulson ex-CEO from Goldman. That's how free market economy works. This transition period - when people loose their jobs, etc due to incompetent morons CEOs - is horrible. But the things get reassigned and after some time people find work at competent banks that make sense. Instead, we got Paulson and other incompetent loosers convince the Government that they - incompetent CEOs - should be bailed out by tax-money. They told a few fairies about the end of the world that will happen for sure if they go bankrupt. The same was repeated by politicians and TV talking heads. And here we go - competent banker is taxed to pay to incompetent bankers do they can do the same mistakes all over again. Just one thing - please don't call this motrosity capitalism. It isn't.

I call it corporate socialism.

when rich pay taxes to support poor - socialism. when poor pay taxes to support rich - feudalism.

The monster that is emerging its head worldwide is neo-feudalism, not socialism or capitalism. That's why political parties, or political ideologies lost sense and touch with reality some time ago. They try to explain the world that they have no tools to explain - feudal world.

feudalism was destroyed by capitalistic revolution (French revolution) which in turn was questioned (not destroyed) by socialist revolution called Bolshevik revolution. The cycle begins from the start again, next in turn in morphed feudalism. And this system is to be addressed by the values of the French Revolution AND Capitalistic Ideology. Socialist world of politics that we live in has no good answers to the threat of neo-feudalism. The answer to neo-feudalism is in capitalism.

Just saying. Would love to see a Revolution with people reovolting against their feudal masters (the 1%).

German unions also own stock and sit on the board of their employers, which is the real difference. American unions are much more parasitic as they have zero vested interest in the hosts they infest.

Do the American unions eschew financial interests in their employers out of choice?

Well, the first problem is its not true, or at least badly out of date. The UAW is close to gaining control of Chrysler aka over 50% ownership. Sounds insane, yet its true. Also I think UAW is a hair under 20% stock ownership of GM at this time. Of course there are innumerable smaller unions who own no stock and pretty much have no assets on the balance sheet, which at least makes them judgment proof if nothing else. Another problems is the concept of the local electricians union owning stock in a sole proprietorship small industry where one union card carrying industrial maint electrician works part time, and spends the rest of this time freelancing at residential small jobs, doesn't even make sense.

The fundamental problem is you really can't have two masters. So you work to optimize your stock profits; or employees? You might have to screw over some employees to boost the stock price to pay for health insurance for the retirees? So you want to move into Toyota plants but honestly, frankly, the best thing you could possibly do financially for your GM stock ownership would be to completely screw up the Toyota plant IF you moved in? Are you a non-diversified mutual fund representing the financial security of retirees, or a labor union representing the desires of the workers, or as a major owner you are by definition management representing the interests of management? If unions start owning lots of stock, who exactly is representing who and when? The game is a lot simpler if each player only has one master.

You could probably make an interesting startup game and/or cardboard eurogame of the whole crazy situation where multiple player factions represent multiple other player factions but you never really know who's representing who at what time as the game progresses.

Thanks for the extra info.

As to your point(s) - I get that having two (or more) 'masters' makes things more difficult, but it seems to me to be a pretty desirable state of affairs.

After human decision making, the next major mechanism we have for optimising economic activity is the market, and whilst it seems pretty good in situations where there are a lot of interactions (allowing it to price things effectively from the aggregate behaviour), I'm really not convinced it can handle these more subtle situations, where single big decisions have to be made that can have large, long lasting impacts.

The game sounds fun, you should try to make it!

"it seems to me to be a pretty desirable state of affairs."

Oh I wouldn't put it that way...

One interesting issue/analogy is a lot of lawyers (labor lawyers?) won't take conflict of interest jobs where they financially benefit if their client loses / opponent wins. Too much opportunity for malpractice motive, or appearance of it anyway. If you take it out of labor law, as an analogy, say you were suing a company, you'd never hire a lawyer for "your" side who gets most of his net worth by owning a 20% stake in the company you're suing, would you?

Would a board of director hire a CEO who spends part time at two jobs, both direct competitors of each other in the same field?

While there may be divergent goals between stock holders and employees I think it's incorrect to call all but the worst of them "Conflicts of Interest" (pump and dump situations maybe?). Both the employees and the stockholders rely on their business being successful.

as I posted in another comment:

"I think it's important to consider the rights of the owner as well. If I am a captain on a fishing boat, and I built/paid for the boat, I can then hire fishermen to work on my boat. There are more fishermen than captains, if there is a disagreement between the fishermen and the captain regarding where they should be fishing and it was up to a vote, the fishermen would win.

What incentive does the captain have to invest in his own boat if he has no control over where it goes or how it is run?

Why don't the fisherman go build their own boat if they don't like where the captain is fishing?

The majority in this example microdemocracy is effectively stealing the boat from the owner by using the force of the 'state' to reallocate his resources to themselves."

In this situation it's in everyone's interest to catch more fish. The conflicts will come down to how much of a cut each person gets, who gets the more comfortable cabin etc but these competing goals aren't really conflicts of interest.

The captain is perfectly free to do what he wants how he wants with his property, the boat. His boat is useless without crew. The fishermen crew are not his owned slaves (although there are people working to fix that in the USA in all but name) and if he insists on sailing into hurricanes and killing half the crew, or not providing food/water/fair pay, they're perfectly free to raise hell and refuse to work and encourage everyone else not to work until the captain agrees to reasonable demands. He owns the ship, not the crew. If the captain says "I'm going to be a bit reckless and kill half the crew and pay the other half so low their family starves, but I will make an extra 10%, so you'll like it"... well, no, they won't.

The fisherman can't build their own boat because the captains have added enough rules and regs and .gov payoffs and what boil down to bribes in an effort to reduce competition. Its not a free market and the captains like it that way. No surprise there's a wee bit of backlash. If the captains don't like backlash, try not being a crook, then start complaining.

BTW its OK if the captain is pissed off about people "stealing" his capital even if they aren't. To a first approximation a fair and reasonable deal doesn't require everyone to be perfectly happy, just more or less equally unhappy. I'm sure the union fishermen are about equally pissed off at the captain, seeing as he kills about 2% of them annually by being cheap/risky and half of all captains are of course below the median thus they're jerks to work for.

Sorry to hijack your actual point, but I think the financial investment model of company control does leave something to be desired. In particular, people invest time as well as money into their economic ventures, but this is rarely reflected in the level of control they have. The common retort is that you get paid for your time - but then a lot of people get paid for their money too, often quite handsomely (that's the whole point of investment).

What would be interesting (albeit awkward, perhaps to the point of being unworkable) is if an individual's level of control was equal to the weighted sum of the time and money (or money equivalent) that they had put in. This would mean that early investors would start with a large controlling stake, but it would diminish over time as the effects of the time people spent working at the company started to kick in.

I await the rubbishing of my ideas with moderately bated breath! ;-)

UAW was forced into being vested in Chrysler and GM as a condition of the bailout, and it's a condition that they fought tooth and nail.

Interesting. Apologies for not taking the time to do the research myself, but do you have any idea why they were so reluctant to take a stake in the companies that (I presume) their members work in?

Chrysler has been circling the drain for decades and GM isn't too far behind. Why own stock in them when you can just drain them of their remaining wealth?

I think the point on outsourcing is hinted at I the other story trending highly today about the man living without money.

If you had to look a 9 year old child labourer in the eye each time you were buying your cheaply made T-shirt, or a worker how has just completed a 14hour day making component for your phone, would you still feel as happy with your purchase.

Yes not all outsourcing is negative and not all worker abused, but when you remove visibility of production from people you limit their ability to choose based not only on the quality of the product but also the morals of the producing company.

Perhaps the 9 year old child laborer would otherwise starve. I'll gladly buy the T-shirt every time.

Or think of it like this. If all T-Shirts were required to be made in the US by union laborers working 30 hours per week and each one cost $50, I'd probably buy a heck of a lot less T shirts.

True, but maybe we don't need what we are currently buying, but are because the costs are hidden. How much of the stuff we own do we really need?

I don't understand why necessity even comes into this. We don't need a lot of things. We don't need freedom of speech. We don't need more than 2 pairs of underwear or a car either. I don't need more than 2500 calories but I like being able to go eat a big juicy $50 steak sometimes. In the US it's actually illegal to go faster than 65 mph (75 in some awesome places) so why should we make cars that go faster than that if you obviously don't need it.

If you don't need the stuff you are currently buying there's nothing stopping you from living in a 4ft high hole in the dirt and eating cereal with water instead of milk and only buying locally produced goods.

Forcing someone else to live up to your definition of necessity is a pretty shitty thing to do though IMO.

Tangent: parts of Utah and Texas have speed limits of 80-85 mph. Their speed limit laws are also prima facie, which means you can get out of a speeding ticket by proving your speed was "reasonable and prudent" even if it was in excess of the limit.

It seems as though this tangent has quickly turned into a discussion about consumerism (and indirectly its relation to capitalism).

I would willingly look a 9 year old child laborer in the eye each time I buy a cheaply made T-shirt, and I would feel good about myself.

Consider: most people in developing countries are able to choose which job they will do. It is true that some (far too many) are held in debt bondage, but the vast majority are not. Therefore, if the 9 year old child laborer is working to make cheap T-shirts, they're doing that because it's the best option available to them. If I refuse to purchase these T-shirts on principle, I'm denying them an income. I would much rather deny the income of first-world manufacturers who don't need my money.

Markets "decide" what is best by responding to price signals. If you buy a cheap T-shirt then you are saying to the market that you value low price over an ethical supply chain.

Buyers from first world countries do not (in general) deal first-hand with the labourers, they deal with factory owners who have the capital equipment necessary to do the manufacturing at the required scale. All the while that there is price pressure from the market (from you), the buyers will be pushing that price pressure onto the factory owners. As long as there is one factory owner who is willing to take that low price then all factory owners who want the same (or similar) contracts have to take that price, otherwise they are out-competed in the free market. They, in turn, push that price pressure onto their workers, preventing increases in wages.

The rest of what you said is correct: the workers take the jobs not because they want to work for such low wages, but because they are the best wages they can obtain given their skill levels. Buying cheap clothes almost directly contributes to the continuation of poverty.

As an aside, you mentioned child labour. A not uncommon strand to discussions on these issues is that people should "act more responsibly" and "choose" to get educated when they are young rather than waste their time for the short-term benefits of working. People send their children to work because they can't bring in enough money themselves, for reasons like disability (there are a lot more workplace accidents in countries with poor labour protections!) or plain poverty. How does the hypothetical 9 year old improve their lot if the best thing they can do at the age of 9 is get a job manufacturing clothes?

Let me respond to your final paragraph first. I actually don't agree with the idea that people should "act more responsibly" and "choose" to get educated. Or rather, I think they are never given the choice. Children working are forced to do so by the poverty of the parent, who were in turn forced into their life path by poverty. Of course this is not always the case, but what I have seen indicates that economic poverty is primarily due to a poverty of choices. Economic poverty flows from that.

That said, I stand by my belief that the free market is an effective way (and perhaps the most effective way) to lift people out of poverty. It's cruel, slow, and painful, but it also produces long-term improvements at a scale that mere charity cannot match. I think targeted aid is great, and I expect that it would be far more effective on a per-dollar basis, but cheap labor has a greater impact simply because the world economy throws a lot of money at it.

I disagree with your assessment that "buying cheap clothes almost directly contributes to the continuation of poverty" (However, see my caveat below). I just had a chat about this with my flatmate, who is an economist and has a much better grasp of the topic than I. He pointed out that, historically, sweatshops are only the first stage of economic development. Sweatshops provide a better (but still bad) income to unskilled laborers, which gives them enough free income to invest in their own human capital. Greater human capital attracts other investors, and the country pulls itself up by the bootstraps. South Korea, Taiwan, and Japan have built developed economies by starting with sweatshops. China is in the process of doing this. In contrast, India has more restrictions against foreign investment and sweatshops, and their economic growth has lagged behind countries with less restrictive laws.

Or, to put it more simply: sweatshops are an important stage on the road to a developed economy, because initially cheap labor is the only thing that an undeveloped country can offer to investors. If you don't allow sweatshops, you don't get any investment, and the development process stops before it truly started. There's a lot of inefficiencies, and a lot of greedy people (including us as consumers) taking bites out of the pie, but it works better than anything else we've tried.

As I mentioned above, my position is tempered by an important caveat. You point out that some countries have an ethical supply chain. I initially discarded this based on the assumption that 'ethical' usually just means 'first world', but I realize now that you are correct. I haven't yet come across a garment manufacturer with a truly ethical supply chain, but that doesn't mean they don't exist. I will make it a priority to search out such a supplier, and provide them with my patronage. If you have any suggestions, I would be happy to hear them.

You've said quite a lot, so please forgive me in advance for any lack of coherence.

I would be slightly wary of making predictions from historical trends, because we don't have a very large sample size, and there are a lot of confounding factors, a good example being cultural differences between countries, by which I mean differences in social organisation rather than what clothes people wear.

Irrespective of those differences, the general idea of an increase in skill level with continued investment has both common sense and, as far as I am aware, theoretical appeal. The issue, however, is really one of degree, and that is important for people at the hard edge of poverty. Whether it is going to take 1, 10, or 100 years for the conditions in a given region to improve matters to people who have so little money to live on that they can't afford to send their children to school, or pay for proper housing. If there is no money left over for workers to improve their lot because they are living at subsistence level, which is distressingly common, then the development process you describe cannot take place.

Distorting the free market in order to temporarily redistribute wealth downwards, with the goal of speeding up the process of improvement, is in my view an ethical action. An example of the kind of distortion that I think could be appropriate is supporting an oversight organisation along the lines of the Forest Stewardship Council. Bodies like that are by no means perfect, and are themselves often subject to market pressures, however they seem to me to be a pretty good balance of economic freedom and social ethics.

A slight aside; it strikes me that a not insignificant proportion of the increase in wealth that we enjoy has come not from people being able to afford more of everything, but rather from technological progress in methods of producing things. So for example the desk on which my computer sits is a fairly cheap affair constructed from what looks to me like veneered MDF. I do not have a nice oak writing desk, because those are still very expensive. The same kind of comparison applies to almost everything I own that has a historical counterpart: food, clothing, furniture, writing materials.

My point is that my increased "apparent" wealth seems to be driven as much by these technical improvements as by an increase in "actual" wealth (I wouldn't dare guess the actual ratio beyond saying that I feel the factors are comparable). Furthermore, I am confident in saying that technological improvement is not predicated on market freedom on the basis that there have, historically, been civilisations who have undergone technological improvement without free markets: the Romans being one example amongst many. I would also point out that we don't have enough data to know whether the current burst of technological improvement was dependent in any way on market freedom, because we only really have one data point: this particular rise of standards.

To return to your question about an ethical supplier: it kind of depends on your taste. My partner is Indian and I seem to end up getting my clothes on visits there these days, mostly as a result of laziness whilst here. Fabindia is one supplier that seems to put quite a lot of effort into ensuring good conditions in their supply chain, though they don't have the range you'd expect from a western supplier (they do seem to ship internationally though, not sure about stores). There are lots of workers cooperatives in Kerala, where my partner is from, so all the stuff they make must get on to the market somehow! Also, I don't know if you're aware but somewhat coincidentally NPR's Planet Money are doing a series of podcasts and associated things on t-shirts, and the economics of the global t-shirt trade, that sounds like it's going to be quite interesting.

Sorry for the long post :-|

>Now, foreign companies produce many of their cars in the united states with union free labor and american companies have started producing cars in mexico so they can pay the pensions for all the retired union employees.

Toyota's plants are UAW who makes the same demands as they do to GM. It's management that failed the US car industry, not the unions.

ehh, I can't find anything about this other than the following article from last year:

"While the UAW continues to represent Detroit’s Big Three manufacturers, it has all but completely failed to gain representation rights for the so-called transplant lines now run by virtually all the major foreign-owned automakers, from BMW to Toyota to Volkswagen. "

http://www.nbcnews.com/business/foreign-automakers-stubbornl...

He's probably thinking of the JAW Japanese auto workers union or the internal-ish toyota union TMWUI or whatever its called in English. Lets think about it, the Japanese unions bargain with a healthier company therefore get a better deal than the UAW gets from the failing companies in Detroit, and Japanese management as a class is superior to American management as a class (just look at the financials?), therefore they keep the unions out in their transplant plants by offering a deal roughly as good as the union deals in Japan. The transplant workers know they'll get a better deal by piggy backing on the JAW workers offer and the transplant management knows keeping the workers slightly better off than they could possibly get under the UAW will keep a lot of hassle out of the plant. So pretty much everyone wins except the JAW and Toyota MotorWorkers Union (or whatever they're called) because everyone in the USA is piggy backing on their bargaining skills.

So there's two forbidden topics that can't be discussed in contemporary American culture which make it really weird when Americans try to talk about the topic, one that management is simply superior at Toyota (It is a much more successful company... wonder why? Hint its not the nuclear radiation, and management holds final responsibility always) and secondly the UAW is failing their members because the JAW can get a better deal (admittedly its easier to get a better deal when the company is successful, not failing). If you censor the forbidden topics from the discussion in the mass media, you get really weird, illogical stories and discussion.

One really weird thing you see is intentionally mixing apples and oranges to get a political outcome. So the UAW has bargained away salaries such that starting is now like $14/hr at a UAW plant, you can do better at a Toyota transplant which averages in the upper 20s. However if you carefully compare faked up total compensation of $73/hr counting all benefits and retiree amortized expenses and taxes and everything, then it looks like Toyota employees are only getting about 1/3 the pay of a UAW employee. Of course the takehome pay on a paycheck for a new Toyota employee is WAY higher than the takehome pay of a new UAW employee and will remain at that ratio, more or less, for the rest of that noobs career (or until GM finally goes out of business or gets bought out)

Here is an article[1] about how the senators and politicians in Tennessee try to avert installing a German-style Betriebsrat (workers' representation) in their Chattanooga plant. The plan is to have it with UAW.

Have this lovely quote from a manager, and not a politican: "In puncto Mitbestimmung muss klar sein: Demokratie endet für uns nicht an Werkszäunen." (Concerning worker's participation it is clear: for us, democracy does not end at factory gates [fences].)

[1]: http://www.sueddeutsche.de/wirtschaft/streit-ueber-vw-betrie...

Sorry that it's in German...

the google translation of that quote is pretty funny:

"Democracy does not end for us to plant fences"

I think it's important to consider the rights of the owner as well. If I am a captain on a fishing boat, and I built/paid for the boat, I can then hire fisherman to work on my boat. There are more fishermen than captains, if there is a disagreement between the fishermen and the captain regarding where they should be fishing and it was up to a vote, the fishermen would win.

What incentive does the captain have to invest in his own boat if he has no control over where it goes or how it is run?

Why don't the fisherman go build their own boat if they don't like where the captain is fishing?

The majority in this example microdemocracy is effectively stealing the boat from the owner by using the force of the 'state' to reallocate his resources to themselves.

I beg your pardon? VW is trying to establish a workers' representation in their plant, with politicians actively working against it because they fear that this will, over time, drive up the general level of income, which, in turn, will lead to other car manufacturers moving to other states.

This has little to do with workers taking over from the owner, and everything with wages kept artificially low in order to attract international companies simply because of these artifically low wages.

> One problem with this is people as a group tend to be stupid. What stops the workforce from voting to reduce their work hours to 30 hours per week?

Seems reasonable to me. How much work (both input and output) is required of humans in a society is that society's choice. Many people think that, e.g., American society has a cultural expectation of working longer and harder than is necessary or appropriate. Especially when you could possibly have rebalancing schemes to employ more people for fewer hours each. shrug

> One problem with this is people as a group tend to be stupid. What stops the workforce from voting to reduce their work hours to 30 hours per week?

What stops them from doing that today?

The fact the company can hire someone else.

That won't help the company if the law has been changed to set a 30 hour maximum, which is my point: Why are you generally not seeing electoral support for 30 hour maximum work weeks?

From my current boss, and sadly repeated by a significant number of coworkers, "Because our competition is working more than we are. If we don't work these crazy hours they win."

To add insult to injury, this particular employer is the least efficient place I've ever worked. I'd estimate the average employee works 70-80 hours a week, but 1/2 to 2/3 of that is simply working around poor management or fixing mistakes that could have been avoided.

So, when I seek to get my fellow employees to consider the possibility of working toward a 30 hour workweek, I get the "our competition" argument. When I try to introduce efficiencies, I get the "we don't have time to learn/employment/etc." arguments.

Sadly, because of the economy and commitments I have, I haven't been able to find another job that I think is enough of a good bet. As soon as I do, I'm outa here!

Under Capitalism, if a worker disagrees with how their boss allocates their time and labor, the worker is free to start a new business just as the founder once had to.

The worker is also free to seek superior employment, if they feel their worth is not being fully appreciated / utilized (and so on and so forth).

Workers aren't appreciated at Business X? Start Business Z that treats its employees better. There are countless examples of this in practice over the last 150 years.

Unions are also properly legal under Capitalism. That is, the free assembly of labor. If employees don't like how they are being treated, they can collectively negotiate to try to acquire more leverage.

That completely removes your complaint about allocation of labor and accountability. Also, your entire premise rests on the notion that people are owed a particular job - just try telling nature it owes you shelter and three meals a day. The reality is, the capital to fund that job comes from someone that had to first create it. The West is losing this century because it has become lazy and hyper-entitled.

"The reality is, the capital to fund that job comes from someone that had to first create it."

...Starting from first principles (i.e. 'try telling nature'), how exactly is capital 'created'?

Capital is stuff people want. It's a warehouse full of couches, or a truck full of iPads. Or, on a desert island, a pile of hand-carved tools. We can trade this "stuff people want" for "stuff we want."

Over time, we've developed abstractions called "dollar bills" that represent stuff people want. This allows me to have a more general form of capital--instead of having to exchange my "stuff people want" for what I want, I simply exchange it for money, and then trade that for what I want. This makes trade much easier--I don't have to find someone who wants 1,000 iPads in exchange for a piece of industrial equipment.

But I repeat--this is just an abstraction. To create $1 or $1,000 or $1,000,000 of capital, resources must first be used to produce things that people want.

Now, in our modern society, there are all sorts of ways to get ahold of these abstractions. Some people work for them. Some people are given them by family members. Some people make bets--at casinos, at horse races, or on the stock market--and win. So it is certainly possible to point at a given possessor of capital and say--"look! he has capital, but has not produced things that people want!" But that's the nature of people who own capital, not of capital itself.

I think that some industries/services would fare much better as co-ops. And you're free to start one and do it that way. I prefer credit-unions to banks. I would love to see more co-op style ISPs.

Complaining that your co-op can't compete with the more private entity and thus must be propped up or the competitor handicapped is very bad though and has a negative results for consumers at large.

When they can compete with privately held monopolies supplying the same service it's a win-win situation for us. Forcing places to be co-ops is not a good idea though and equates to a different kind of tyranny.

Large Companies, Governments, and even Democratic majorities (think racism) can all be tyrannical and there is no silver bullet to eliminating it.

You could say I'm libertarian leaning, but I also acknowledge the reality of large organizations which can be nearly as oppressive as the state and harbor similar levels of inefficiency.

If the workers decided these things they would never vote to outsource their own jobs and would rarely choose to pollute their own communities.

In Communist Yugoslavia we had something like that. There were companies that were managed by their employees, each having one vote. A proposal that would obtain a majority of votes would get to be implemented.

But it turned out that people would rather vote to use surpluses to pay everyone bonuses than to invest back in production and modernization. Many companies got themselves outcompeted this way, especially compared to their Western counterparts.

It is not a bad idea, but for that system to work you need workers that:

1) are educated in at least basics of economics and management, 2) are ready to take advice of someone with more expertise than them in these subjects, 3) are well off enough that they can sacrifice immediate additional income to enhance company's prospects for the future and 4) care enough.

That's not very different from having a company with an incompetent board of directors. In fact, it is exactly the same thing except in the Yugoslavia scenario every worker in the company would have a seat at the board. While it is true that some people could screw up their workplace for short term gains, is it more or less likely than an "investor" milking the company for profits and running the business to the ground?

Who do you think is more likely to be incompetent, the board of directors of McDonald's or 10 employees chosen at random throughout the entire organization?

I believe it would be a wash. Who do you think is more likely to be incompetent, all McDonald's 450k employees or 10 board of directors?

You must not know many typical mcdonalds employees. How many do you think are college educated (let alone educated in the right areas) or even possess a GED? Compared to http://investing.businessweek.com/research/stocks/people/boa...

Sure education isn't everything. The average mcds employee is a good person trying to earn an honest living fit to have a beer with but probably not the best source of sound investment advice.

Put to a vote they would all vote to raise their wages to 15/hr and the vast majority would be unemployed in 6 months because I'd be able to get a better burger somewhere else for less money.

The argument you are making is equivalent to arguing that dictatorship is better than democracy because regular people are too stupid to decide for themselves.

No... If I own something I should get to decide how I use it. To deny me that would be to deny me my private property. Owners have rights to their property. If the employees at my business owned voting stock, that would be different and a vote would be appropriate.

Lets use the fishing boat analogy. So a fisherman fishes for 10 years saving his pennies and investing and builds a fishing boat with his bare hands. He (The captain) then hires 3 hands to help him run the fishing boat. If everything simply came down to a vote there would be no incentive for the captain to save for 10 years and build a boat.

If the 4 fishermen had all saved their money together, and pooled their resources to build the boat equally, then they could have equal say in how the fishing operation is run.

Fine, but that is not relevant to the question about who would provide the most incompetent leadership.

/sarcasm/ Come on! All people are equal! /sarcasm/

I like you. You seem to get it. It's interesting how quickly people forget/ignore what life was like in Warsaw pact countries. Then when presented with one as an example they resort to "they practiced the wrong kind of Socialism" or "it failed because they did or didn't do X."

When I ask my friends who lived there during that period they unanimously proclaim how much better life is now and how the standard of living has dramatically improved. Many more people can afford cars and there is incentive to work hard.

Well, nothing stops anyone from starting a company organized that way. It's called a cooperative.

You will quickly get workers that understand this as long as you allow those companies to fail and force those workers to find work in better managed companies.

Jobs would still move, it's just that an industry in another country owned by someone else would eventually take the business. That is unless the local industry was somehow able to ban foreign competition.

The beauty of capitalism is that it roots out inefficiency. If you take a look at history, state controlled enterprises are the most polluting.

You don't have to ban foreign competition, it just has to be an informed choice.

Why is company x cheaper, what can we do to emulate them (do we want to?). Although we might have higher costs buying locally what other benefits do we have?

you as a consumer are free to make this decision yourself. This is why "Alaska Grown" farmers are still popular and competitive up here.

Exactly. Spend some time in the foreign Soviet Bloc and this is crystal clear.

If all things are equal and the advantage of the foreign competitor is based entirely on cheaper labor and efficient production then fine. Let the market sort it out. There should however be protections against the outsourcing of pollution. You shouldn't be able to undercut local products by dumping your waste stream in a river. Which is often the case. There should also be some basic standards for the foreign workers who produced imported goods.

> The main problem with capitalism is that someone other than the people doing the work get to decide how the work is done and how to spend the surplus of value that work generates.

I think that the main problem with capitalism is that a free market system (assuming it works, though it doesn't in practice because competition doesn't quite behave according to the abstract models) strives to maximize economic output rather than welfare. Some capitalists care enough to hope that a system that maximizes product would also improve welfare, but that is not the goal; at best, it's a desirable side effect. That is why many critics of capitalism point out that under capitalism, people serve the "economy" rather than the other way around.

>someone other than the people doing the work get to decide how the work is done and how to spend the surplus of value that work generates. 

Who do you mean here? Foreman, manager, executive, owner... these are all real jobs that do real work.

Out of interest, what do you think an 'owner' does in an enterprise with an executive branch, apart from supplying passive capital at the start?

Owners ensure the efficient allocation of capital. Their job is to pull investment from unprofitable activities and move it to profitable ones. They may only make one or two decisions a year, but those are weighty decisions with large consequences. With good decisions may come large profits with what looks to an outsider to be little effort, but they may also lose it all with just one mistake... appointing the wrong CEO, or failing to liquidate the company when it ceases to be profitable...

Now there may certainly be issues with corporate governance and conflict with non-financial goals like environmental sustainability, but that's a wholly different complaint to the suggestion that there is a non-working class at the helm.

Cool, that's certainly important. I probably disagree that 1 or 2 decisions a year counts as "real jobs that do real work", though.

Hires and fires the executives. Doing that wrong is catastrophic.

he must mean people like this:

“He eats lunch when he arrives at work at 2 p.m. Then, like clockwork, he goes to sleep with a cup of soda on the table and the straw in it,” said Marvin Robbins, a union vice president.

http://nypost.com/2013/05/28/labor-big-a-real-heavy-sleeper/

"Most socialists have moved beyond that model and would instead prefer to see a system of enterprise that uses co-op's instead of privately or publicly owned business. Some industries would probably be nationalized or socialized..."

One of the earliest (and now largely forgotten) criticisms of Marx came from the American philosopher Benjamin Tucker, who facilely forsaw the rise of the communist implementations as an unavoidable consequence of Marxist socialism. So Tucker might argue that even a socialism as "modern socialists" would inevitably result in the same. Although this argument takes off further along that a partial state socialism, the crux of the idea of state expansionism and its effect on individual rights is salient:

First, then, State Socialism, which may be described as the doctrine that all the affairs of men should be managed by the government, regardless of individual choice. Marx, its founder, concluded that the only way to abolish the class monopolies was to centralize and consolidate all industrial and commercial interests, all productive and distributive agencies, in one vast monopoly in the hands of the State. The government must become banker, manufacturer, farmer, carrier, and merchant, and in these capacities must suffer no competition. Land, tools, and all instruments of production must be wrested from individual hands, and made the property of the collectivity. To the individual can belong only the products to be consumed, not the means of producing them. A man may own his clothes and his food, but not the sewing-machine which makes his shirts or the spade which digs his potatoes. Product and capital are essentially different things; the former belongs to individuals, the latter to society. Society must seize the capital which belongs to it, by the ballot if it can, by revolution if it must. Once in possession of it, it must administer it on the majority principle, though its organ, the State, utilize it in production and distribution, fix all prices by the amount of labor involved, and employ the whole people in its workshops, farms, stores, etc. The nation must be transformed into a vast bureaucracy, and every individual into a State official. Everything must be done on the cost principle, the people having no motive to make a profit out of themselves. Individuals not being allowed to own capital, no one can employ another, or even himself. Every man will be a wage-receiver, and the State the only wage-payer. He who will not work for the State must starve, or, more likely, go to prison. All freedom of trade must disappear. Competition must be utterly wiped out. All industrial and commercial activity must be centered in one vast, enormous, all-inclusive monopoly. The remedy for monopolies is monopoly. Such is the economic programme of State Socialism as adopted from Karl Marx.

He was writing this a full 20 years before the communist states came into existence.

State socialism is arguably not Marxist, but Leninist. Many Marxist will also disagree with the term state socialism (many describe those regimes as state capitalist, on the basis that the organisation of capital remains as it does in market capitalist countries - de facto if not de jure concentrated on the hand of a small upper class that is exploiting the working class for profit).

But the criticism above seems to me to even describe "state socialism" in a way that is even largely incompatible with Leninist theory (though not with Stalinist practice).

keep in mind that Lenin was in his late teens when Tucker wrote this, so Leninism couldn't have existed as a commonly accepted political philosophy. For convenience, I've only taken the end of the Tuckerian analysis, so there are a few steps from Marxism to get to this point. This was a direct extrapolation and direct criticism of Marxism, and unless Tucker was a time traveller, it could not have been anything else (much less Stalinism).

It would be valid to invoke some sort of mechanism that prevents Marxism from getting to the point of state socialism where this quote takes off; but of course, empirically, Tucker's model seems to have been shown true in a few cases, so I would suggest there would need to be a heavier burden on describing exactly what needs to be different, and why.

This is a superb comment. Thank you.

Tucker was way ahead of his time. He was (to what degree of animosity I don't know, but I imagine friendly rivalry) a competitor of the more well-known Lysander Spooner. I think they largely agreed on a lot of things, but there was a major wedge between them; Spooner was for a strong Intellectual Property regime, and Tucker rejected IP altogether. A lot of the open culture/proprietary culture arguments that we see now that have cropped up as extensions of the Open Source movement are basically rehashings of the Tucker-Spooner dialogs.

Plus ca change...

Coops, exactly. These days I'm reading the Mars Trilogy by Kim Stanley Robinson (WARNING: minor spoilers), and he mentions a lot the system of coops in the new Martian economy. One of the examples mentioned is a real-life one: the Mondragón Corporation, the world's largest coop with 80,000 employees and more than 14 billion euros in revenue.

https://en.wikipedia.org/wiki/Mondrag%C3%B3n_Cooperative_Cor...

(For anyone interested in economics, politics, geology and many other topics, this Hugo-winning trilogy is a great read. https://en.wikipedia.org/wiki/Mars_trilogy)

It is an argument against a very specific form of socialism as implemented by marxist-leninists. Already by the end of the 1800's there was a wide schism between left communists/liberalist marxists, anarchist communists, Luxembourgist/Spartakists and a number of other anti-authoritarian communist ideologies on one hand, and Leninists on the other about the role of the state in the socialist transition phase, where the left communists and liberalist marxists have consistently been against the idea of a vanguard party (the leninist party model) and against the idea of a strong state.

"Left communism" is generally defined by being "to the left of Leninism" (EDIT: And many left communists does not consider Leninism a socialist ideology at all), though it is worth pointing out that Leninism in itself is not necessarily authoritarian. The left communist criticism of Leninism initially focused on the (as it turned out) well founded risk that having a vanguard party following a nearly military discipline and that was not intended to include regular people in the party decision making provided a massive potential threat if it were to be abused (as it of course ended up being - it was the ultimate cultist echo-chamber combined with a fair number of power hungry people mixed in with the idealists).

Most socialists have always been against this model, and most communists were arguably also against the leninist model until at least 1920 or so. After the April 1917 revolution, the Bolsheviks was a small-ish minority group even in Russia, next to the Mensheviks, Socialist-Revolutionaries, Left Socialist-Revolutionaries, most of whome were left communists, other forms of socialist revolutionaries, and some reformists.

After the Bolshevik coup (the October Revolution - I don't like calling it a revolution, as it only had the support of a relatively small minority - it succeeded only because the Bolshevik support was largely concentrated in a few of the big cities, giving them the ability to cease control of the still weakened government apparatus), the Leninist model gained a lot of undeserved support, and cemented its position thanks to the combination of the perceived successes of the Bolsheviks (even some fairly right wing writers came back from the Soviet Union impressed with progress in things like electrification and got caught up in it), the civil war and the capitalist countries support for the Whites, which made it easy for the Bolsheviks to excuse pretty much anything they wanted to do by claiming they were fighting foreign funded anti-Russian/anti-Soviet counter-revolutionaries, and where the anti-Bolshevik fervour in the Western press made it impossible for socialists to trust them - even when they were right about the later excesses especially under Stalin.

Left communism was still widespread enough by 1920, with left communist groups in several instances still participating in demonstrations and small scale attempted revolts and armed attacks, to make Lenin publish a pamphlet ridiculing it ("Left Communism: An Infantile Disorder"). A number of prominent left communists who had tried to remain with the Bolsheviks and try to influence the party, and many more outside it, eventually lost their lives over it as especially Stalin dialled up the terror to get full control and left communism was seen as a considerable threat.

Also note that while Haldane later became skeptical about the Soviet Union, when he wrote this article, he was well on his way to becoming a Marxist-Leninist, arguably a Stalinist. As late as 1962 he reiterated his admiration for Stalin....

Anyway, though we agree that the Marxist-Leninist/Stalinist idea of socialism was fundamentally broken, what you describe is a specific type of socialism that is quite far from the mainstream today. Most socialists are social democrats. Within social democratic parties you do find some support for co-ops, but as limited tendencies (e.g. in the UK, the Co-operative Party is in permanent alliance of some sort with the Labour Party). Within most revolutionary socialist organisations finding support for the coop movement is relatively rare, as it is seen as too limited. You do find quite a lot (to the extent you can talk of "a lot" in organisations of this size...) of support for left communist ideologies like council communism and market communism though, which share characteristics similar to those you describe.

> If the workers decided these things they would never vote to outsource their own jobs

That would benefit said workers themselves, but the cost (because there is a cost) will be shouldered by some other people living in the same country. In other words this is protectionism pure and simple, in the long run is detrimental for everyone involved.

What's to stop the type of co-op based company you describe becoming popular in the current market system?

Depends on the particular market and how bloated it's gotten.

Note the recent surge in credit unions.

As opposed to the maximum size I find it more interesting what the minimum size of organisations is (Haldane's example was the mouse's eye):

Can you write viable software with a small team (<5)? Yes

Can you write very complex software like a distributed database or a web browser with a small team (<20)? Maybe, but will already be very difficult for the web browser (assuming not just writing a WebKit wrapper)

Can you develop a CPU with a small team (<10people)? Depends on the complexity, but typically CPU teams are larger for more faster chips.

Can you develop the silicon process needed to make the CPU with a small team? (<100) No

In all of your examples, it depends on the team, their skill level as individuals and how well they communicate... the large the extended teams that have to coordinate, the larger a part communication takes, and the less time each member of a team has to accomplish any work. In software, I've seen this time and again. Adding more people to a team is sometimes a very bad thing.

Relate this to Dunbar's Number and an effective small business. Dunbar says 150 total for a social group. But we operate across multiple social groups, across all realms of life, not just your job.

If you wanted to put together an elite group of excellent professionals, how big do you suspect that could be? In other words, how large should you let your company get before you spit it down the middle into two subsidiaries? My guess: 125

125 = 150 - (5 close family + 5 extended family + 4 close friends + 6 extended friends + 5 extracurricular friends)

Dunbar's number is the number of people in a group in which every individual knows every other individual personally. This is not the same as the number of people an individual can know personally.

The way you can split a company in two is identical to the way our brains already distinguish between social groups. I don't need to remember that John from work doesn't know Mary from the bridge club, only that there is no overlap between the two groups.

Another problem with the maximum company size that you propose is that Dunbar's number is not a hard limit of 150, it depends on the conditions under which such a group forms and operates. The Wikipedia article on it is, as so often, a good primer.

I don't know if I'm ok with using 83% (125/150) of all my Monkeysphere slots on "work".

If you find this article interesting, it's also worth finding and flipping through D'Arcy Wentworth Thompson's classic "On Growth and Form". A copy is available at the Internet Archive: http://archive.org/details/ongrowthform00thom

Same goes for so called 'lifestyle businesses'. I have heard it said that you can run a life style business till about $1 million per year in revenue before you need the systems and processes that only make sense for a $10 million per year business.

There seems to be a chunk missing in the third paragraph: Or it can compress its body and stretch out its [???] these two beasts because they happen to belong to the same order as the gazelle

" legs obliquely to gain stability, like the giraffe. I mention "

https://www.marxists.org/archive/haldane/works/1920s/right-s...

There are no other differences with that version.

As amazing as the article is, i have one confusion. What about dinosaurs?

In the eagle part, he said eagles CAN'T be as big as tigers etc. But what about Pterodactyls? How did they manage to be so big?

Oh and weren't all the dinosaurs cold-blooded? So, if I am not mistaken, didn't the author say that we get over the problem of heat loss by being warm-blooded? Or does that just mean that they had to eat ALOT more? (though i suppose due to frequent volcanic eruptions etc maybe the environment was hot enough to sustain them)

Earth's atmosphere had more oxygen in it back then, which it easier to be big.

The size is not only determined by the underlying physics, but also by the environment. So there can be a arms race of size, the predator needs to be roughly the same size as its pray, so the larger pray has a evolutionary advantage which gives larger predators an evolutionary advantage.

And to stay with the analogy of the article, the same is true for organizations. Some parts of organizations need to be as large as the corresponding parts of competing organizations. For example the legal department and marketing.

I wouldn't say it doesn't depend on the physics. Of course it does. As for my original question, i realize the flying mechanism of an eagle is completely different from that of a Quetzalcoatlus (thank you @sejje). Modern day birds use their feathers to trap air (or somthing like that), no? Where as the Quetzalcoatlus would simply use the surface-area of their leathery wings to glide, like human-made gliders.

Check it out. Six years ago Yahoo! answers had some decent answers:

http://answers.yahoo.com/question/index?qid=20080301144511AA...

Dinosaurs were not cold blooded as it turns out. They live on today as birds.

We don't actually know that. And part of the reason is "dinosaurs" is such a broad term, encompassing so many species of many millions of years. I would think it's mostly likely that some dinosaurs were cold-blooded and some warm-blooded.

I have also attended a talk that suggested that some dinosaurs almost certainly didn't fit the warm-blooded or cold-blooded model, and that despite mechanically being cold-blooded, their large size alone kept them warm. So in many ways those ones were practically warm-blooded.

Pterodactyls were small. They had roughly the same wingspan as the modern bald eagle.

Maybe if bald eagles had 36-foot wingspans: http://en.wikipedia.org/wiki/Quetzalcoatlus

I wasn't intending to be nitpicking or pedantic when I wrote it - it was just something I remembered off the top of my head - but those aren't, strictly speaking, pterodactyls. I hadn't considered that the use was the generic term.

See:

http://en.wikipedia.org/wiki/Pterodactyloidea

http://en.wikipedia.org/wiki/Pterosauria

(Technically correct; the best kind of correct.)

woah! i didnt realize it was a FAMILY of dinosaurs and not just a particular one

Background on the author: http://en.wikipedia.org/wiki/J._B._S._Haldane

the "biological part" in the article is good and seems to be factual. The political conclusion looks however more"cut and paste there".

A decade later, Coase worked out the economic argument in much more detail in "The Nature of the Firm". (The logic works the same for business enterprises in a market economy as it does for nation- or world-sized Communist economies)

http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0335.1937....

The author was an evolutionary biologist who happened to be a Marxist. Apparently, like Ralph Milliband, one of those Marxists who didn't like Russian communism! See the other comments for a link to his wikipedia page.

A great post about the same problem but from a Math/CS perspective, and as fun to read: http://cscs.umich.edu/~crshalizi/weblog/918.html [Cosma Shalizi's "In Soviet Union, Optimization Problem Solves You]

Red Plenty was such a good book. Highly recommended.

The Hutterites have been living communally for about 400 years (I think), and have evolved an ideal size for a "colony" of about 90 people. At about 110 they start getting ready to "hive off". Colonies have been very successful, often pissing off the less organized (and less successful) locals.

http://www.hutterites.org/day-to-day/structure/

http://en.wikipedia.org/wiki/Hutterite

While similar in ways to Amish, Hutterites rather like new technology and put it to good use on their farms.

Another interesting read is the rise and fall of the Kibbutz, possibly the most famous form of a commune.

http://en.wikipedia.org/wiki/Kibbutz

tl;dr http://en.wikipedia.org/wiki/On_Being_the_Right_Size

"[God has] an inordinate fondness for beetles" -- favorite J.B.S. Haldane quote. About 1/4 of all known animal species are beetles.

So, horse sized duck then?

This smells like ad hominem.

It's not ad hominem, it's just that Hacker News is often so (quite rightly, in my view) focused on growth of private industry and tech start-ups. It seems bizarre a Marxist forum crops up, with seemingly swarms of support.

I don't see "swarms of support". I see informed debate and discussion, which is a breath of fresh air compared to the knee-jerk reactionism usually associated with the topic.

And it's the same kind of reactionism that you're illustrating all too perfectly.