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The Forum > Article Comments > Too much faith in the market > Comments

Too much faith in the market : Comments

By Sharon Beder, published 18/7/2008

Why do we put so much faith in the market to solve environmental problems?

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OK, to all those economic rationalists out there who seem to have almost benedictine faith in the market and pricing mechanisms to cure all ills (like world hunger and global warming,) just where do profits come from then? Out of some magic pudding or from the labour of workers?

Adam Smith ventured an answer, Ricardo went further and Marx took their ponderings to a logical conclusion.
Posted by Passy, Saturday, 19 July 2008 6:24:48 PM
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* just where do profits come from then? Out of some magic pudding or from the labour of workers?*

Ok Sassy, I'll try and get you to think about it in another way.

Bill Gates - richest man on the planet. By your deduction, he
must have screwed his workers really badly, to be so rich.

Yet thousands who worked for Microsoft became millionaires,
through their stock options.

So did the consumer pay? Well the consumer managed to buy an
operating system (Windows 3)that was far cheaper then the one that Apple
offered , breaking the Apple monopoly at the time.
Windows 3 cost me 49.50 when I bought it in 1994, cheap as
chips at the time.

So the consumer got a better deal then anyone else could offer,
the employees made millions and so did Bill Gates. Does that
tell you something?

In an efficient market, profits usually come from innovation
and productivity. The easiest way to achieve better productivity
is commonly less waste and better, faster, more efficient machinery.
People can't really compete with efficient machines, for a huge
amount of things.

Now take Coles and Woolies, hated by so many it seems, for
apparently ripping them off. If you look at their annual figures,
if you spend 100$ at Coles, 97$ is costs and 3$ is profits.
If you spend 100$ at Woolies, 95$ is costs and around 5$ is profits.
Woolies is run more efficiently then Coles, so is more profitable.
Waste is the difference
Posted by Yabby, Saturday, 19 July 2008 7:09:59 PM
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Passy

I don't think anyone here is claiming that free markets cure all ills, but I reckon govts create a heck of a lot of ills. On balance, govt interventions seem to create more problems than they fix.

I've already answered your question about the source of profits, it comes from satisfying the needs of consumers.
Posted by bro, Sunday, 20 July 2008 12:16:57 AM
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Yabby I do think that Bill Gates, like all bosses, "screws" his workers.

Under feudalism the exploitation was obvious. A serf worked three days for themselves and three days for their lord. Under capitalism the exploitation is hidden. A worker works some time to renew herself, and the rest of the time to create profit for the boss.

Another question - what determines prices? Explain to me how supply and demand determine prices, rather than the value of labour embodied in each product.

And bro, marxists are actually about the withering away of the State since the State grows out of class divisions in society and is the creature of the dominant class.

I don't see how capitalism (including the capitalist state) can address climate change. If there is a basic conlict between short term profit extraction and long term planning and the only solutions are price ones, then how does that help us since it is precisely these mechanisms that got us here in the first place?

Someone mentioned superannuation. Superannuation is deferred wages. Wages are an expression of the labour theory of value too. Like all commodities the price of labour is determined by the cost of renewing the worker (ie for her to come to work the next day fit and healthy, and for her to create and raise the next generation of wage slaves.) Part of that cost includes provisions for a future when the worker is too old to work "profitably" amymore.

Those costs are themselves determined by the labour that goes into those products.

The fact that workers are tied to a system of exploitation through wages and superannuation does not justify that system. (For those OLO readers with a catholic bent, I quite like the liberation theologists who, using Marx's labour theory of value analysis, describe capitalism as a structure of sin.) But the role of workers - they create all the wealth in society - gives them the power to create a new society, one in which for example man made global warming can be and will be reversed.
Posted by Passy, Sunday, 20 July 2008 1:42:03 PM
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Passy, the only way global warming will be reversed is for your beloved workers to accept the immutable fact that their standard of living is far too high and it must be reduced. The only way it can be maintained, without stuffing the environment, is for the population to be reduced quite significantly, and I can't see that happening.

I suggest that contributors read
http://en.wikipedia.org/wiki/Malthusian_catastrophe
and then come back with some considered contributions.

David
Posted by VK3AUU, Sunday, 20 July 2008 2:16:16 PM
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*Yabby I do think that Bill Gates, like all bosses, "screws" his workers.*

Passy, you might think that, but then you could be wrong. Perhaps the
many millionaire workers that Bill helped to create, would agree with
me and not with you. The ideal in life is always to search for
win-wins, not win-lose. I talk to many mine workers in WA and most
are thrilled right now. 6 figure salaries for driving a truck is
not a bad way to make a quid. The fact that other workers make
profits by owning shares in mining companies, through their super
funds, is even better. Its a win-win!

*Another question - what determines prices? *

Its really up to consumers, to vote with their wallets, as to how
they spend their money. I note that GM are nearly broke and Toyota
are thriving, due to consumers deciding that they prefer Toyota
products.

*I don't see how capitalism (including the capitalist state) can address climate change.*

Clearly its innovation that will solve climate change, through
new technology. Look at history and tell me how much that is new
was created by Govt decree and how much by people and companies being
creative and innovative
Posted by Yabby, Sunday, 20 July 2008 2:51:54 PM
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