Conundrums of Capitalism

[bradly1101]

Today the DOW fell on dropping oil prices, which in many ways are bad for the economy, but in one big way is good for the economy since people have more money in their pockets (unless one is in an affected industry). So which is better?

Similarly higher corporate profits are good for the economy and raise stock prices which make people money, but if those higher profits went into wages, then people would have more money to spend, increasing profits and again better for the economy. I know efficiency and productivity are the current prescription for higher profits, but what if consumer spending power via higher wages was given precedence?

 

[Franz316]

Another good one is that companies want to employ the least amount of workers possible to maximize margins. To do this they will use automation, which displaces workers and drives down wages more. But these same workers are also the consumers. So how long can that go on?

Concerning increasing stock prices - the vast majority of them are owned by a small percentage so that money will never make it down to the workers. Higher wages would undoubtedly help more than higher stock prices.

 

[Moonbeam]

http://www.rollingstone.com/politics/news/robert-reich-on-why-capitalism-needs-saving-20151007

 

[BonzaiDuck]

http://www.rollingstone.com/politics/news/robert-reich-on-why-capitalism-needs-saving-20151007

I've really never had any contention with Reich. Nor with Stiglitz. Nor with Krugman.

What has bothered me for years is the naïve understanding of classical market theory by free-market populist adherents.

So I remember somebody locally interviewed a newly-graduated high-school senior, who said "I'm 100% for big business." You can't be 100% for big business if some big businesses are in concentrated industries which have more influence on price than consumers. But those are the old criticisms of monopoly or oligopoly. The newer criticisms deal with them as rent-seekers, who have a vast interest in both foreign policy and domestic policy.

Reich isn't the first, though. Michael Parenti, "Democracy for the Few" -- possibly first published in the 1980s:

http://www.amazon.com/Democracy-Few-Michael-Parenti/dp/0495911267

But, as I already said, some folks don't even grasp an understanding of simple, classic monopoly. When the classic economic model shows how monopolies capture "excess profit" by setting marginal revenue equal to marginal cost, the response is "How can profits be 'excessive'? What's wrong with that?!" And that still ignores the lower output or "Q"-uantity resulting from that calculation.

Perfectly competitive markets provide abundance at the lowest price. If that isn't the result, that's one less argument for free markets.

Also, look into another economist named Richard Wolfe. Moyers had interviewed him over some six hours of episodes.