by Neil Wilson posted the following at Bill Mitchell’s today. My point is that, under capitalism, if you can’t pay your costs from your income you go bust – which releases your market space for somebody who is either more productive, or more realistic in their pricing. Cheap labour and a systemic lack of jobs encourages undercutting – the parasite businesses Nick Hanaeur speaks of. “It is appealing to believe that the parasite economy will eventually correct itself. Or that a few high-road employers will set an example that will eliminate it. But trust me when I tell you: This is wishful thinking. I know because I am one of those employers. People, like me, when faced with brutal competitive dynamics, will not pay workers a living wage unless all of our competitors do the same. And the only
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My point is that, under capitalism, if you can’t pay your costs from your income you go bust – which releases your market space for somebody who is either more productive, or more realistic in their pricing.
Cheap labour and a systemic lack of jobs encourages undercutting – the parasite businesses Nick Hanaeur speaks of.From some reason my comment in response was rejected as looking like spam, so I am posting it here instead. I have also added to the original comment:“It is appealing to believe that the parasite economy will eventually correct itself. Or that a few high-road employers will set an example that will eliminate it. But trust me when I tell you: This is wishful thinking. I know because I am one of those employers. People, like me, when faced with brutal competitive dynamics, will not pay workers a living wage unless all of our competitors do the same. And the only way that will happen is if citizens like you require employers like us to do it. Until then, corporate America will continue to build its record profits on the backs of cheap labor.
Nick Hanaeur is correct, but he doesn't go far enough. It's not just the wage bill, but everything that can contribute to profit, including the environment.
CORPORATIONS: SOCIALIZATION OF COST AND CAPITALIZATION OF PROFIT
The essence of capitalism is captured in the name. Capitalism is about prioritizing capital as ownership over labor as people and land as the environment because it is assumed that capital formation leads to growth, which makes all better off from trickle down — "A rising tide lifts all boats."
Note that this is different from economic liberalism as laissez-faire," because it assumes that government should favor capital accumulation by preventing obstacles to it. This is the basis of neoliberalism.
The problem with capitalism is capital since ownership's goal is maximizing gain without considering consequences that don't directly affect owners in a relatively short period of time.
As Yanis Varoufakis recently wrote in a piece for the Guardian, "The problem with capitalism is that it is irrational."
Unbridled capitalism is irrational economically since it leads to inefficiency, being based on rent-seeking. It is also socially in damaging both people and the environment, when an economy is the material life-support system for a society and the global economy is the life-support system for the world. That makes capitalism dangerous to boot.
This dynamic unfolds inevitably unless the public acts collectively through government to set rules within which firms are required to operate that protect people and the environment and promote the common good and general welfare as public purpose.