The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
The Forum - On Line Opinion's article discussion area



Syndicate
RSS/XML


RSS 2.0

Main Articles General

Sign In      Register

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?

  1. Pages:
  2. 1
  3. 2
  4. 3
  5. ...
  6. 5
  7. 6
  8. 7
  9. All
I agree with Sharon that we place far too much faith in the market and that we need strong government leadership and regulation if we are to make the switch to renewable energy. It will never happen in time if left to the market and yet by the same degree I can't imagine us ever having a government with the political will necessary either. Our only hope is a Greens led government and unfortunately I can't see this happening, considering the corporate fire power constantly levelled at the Greens to deliberately discredit them and undermine their influence.

"Nevertheless, there is a limit to what can be achieved in Germany because electricity has been privatised, which precludes direct intervention and investment by government."

We're in exactly the same situation here in Australia. Power companies are driven by the profit motive which means they need to generate as much power as possible and as cheaply and quickly as they can. If we're to cut emissions, they should be aiming to reduce overall consumption of power rather than increase it. There are so many ways we could be doing this which would collectively make a real difference, but it will never be a process led by private providers.

When our electricity provider was privatised, we relunctantly opted out of the Green Choice power we'd been consuming for many years, because the cost to achieve the same level we'd been on was going to double. We're now on the lowest "Green" option there is, but we're paying more overall for our power than we were and we've had to watch our greenhouse gas emissions increase. Instead of encouraging people to switch to renewable power, this company is actively discouraging it, and I can't imagine other private providers being much different.

Part of the government's present predicament is the fact that too much power and freedom has been handed to the market over the last few decades. And now, as Sharon points out, even when government can see what needs to be done, it is powerless to achieve it.
Posted by Bronwyn, Friday, 18 July 2008 11:26:39 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
There’s that ‘faith’ word again. Faith is a word for religionists and other people who believe in the non-existent, and others who believe somebody they don’t know just because they have a degree in science (in relation to climate change). Like religion, one brand is better than the other, they seem to think, totally ignoring contrary opinion from equally qualified scientists.

“There has been no mass shift to public transport”, claims the author. Only last night, the Adelaide news was that there had been a 70% increase in the use of buses, and more buses are being acquired. In this case, the effect of market forces can be proved. The SA government IS intervening, as called for by the author.

Market forces, unlike faith and conflicting scientific opinions do work. Many people are using their cars less; if the price goes higher, more will opt for public transport.

Having been gulled into believing the emissions theory, however, Rudd is hypocritical by softening the blow for motorists. Emissions from cars are either dangerous or they are not. Rudd seems not to be sure of anything with his climate change ‘solutions’.

Sales of large cars HAVE declined, and hybrid cars have proved to be no real alternative to small petrol only cars.

As the author suggests, an emission scheme will NOT work. The idea that it would is another example of ‘faith’ in unproven science.

This paragraph of Professor Beder’s is true:

“An emissions trading scheme will see the price of electricity and manufactured goods go up but that is no guarantee that the market will invest in alternatives, especially if polluters can pass on the extra cost to consumers, buy up environmentally dubious offsets, or be compensated for extra costs that might damage their international competitiveness.”

We will all be paying more for necessary commodities, but there will be no change in the climate until it changes in its own good time, even when market forces work to lower our consumption and living standards.
Posted by Mr. Right, Friday, 18 July 2008 12:25:02 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
The author is economically illiterate.

Firstly, she fails to understand that an emissions trading scheme is BOTH a market mechanism AND a regulatory one. Because it is mandatory it will deliver whatever cuts the government’s cap determines.

Secondly, she assumes only emissions reductions achieved through a carbon price will impose costs on the community. In reality, an emissions trading scheme will deliver our emissions-reductions targets at the least cost. If government mandates that we use more expensive means to achieve our targets then we will be worse off as a community, whether we pay the extra costs in higher taxes or higher fuel prices.

Thirdly, as Mr Right points out, she will not acknowledge that people and businesses can, and do, respond to prices incentives. Behaviour is already changing, and over time will change some more. Why should businesses invest in energy-saving technology because energy prices are rising? Because it’s profitable, just as Britain and Norway invested in North Sea oil production last time there was a serious oil price spike.

Fourth, she claims that “high price for carbon credits has to be stable enough over time to encourage long-term investment in renewables.” In reality the private sector invests every day in things whose long-term price is unpredictable – coal, gas, iron ore, nickel, alumina all have roller-coaster commodity price cycles but no lack of investors.

Finally, the author says that the market will not invest in public transport systems and cycle ways, land-use planning, car emission standards etc. Quite true. But these are all everyday examples of public goods that even the driest economists would agree should be provided by governments. As far as I’m aware no-one has suggested that we should have an emissions trading scheme INSTEAD of these things.

They’re not perfect, but the underlying principles behind both the Garnaut Review and the Green Paper are spot on - let governments do what governments do best (provide public goods and regulate to address market failures) and let the market do what it does best (direct resources to their most productive uses at the least cost).
Posted by Rhian, Friday, 18 July 2008 4:12:45 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
The author wants greater govt intervention and then laments that the ETS in Europe hasn't worked. But isn't the ETS a govt intervention? Given that govt interventions often don't work, or yield perverse outcomes, its not surprising.

"Why do we put so much faith in the market to solve environmental problems? Why do we assume that increasing the cost of fossil fuel emissions will reduce their use rather than just increase everyone’s cost of living?"

To answer the first question: because govt solutions are usually worse than market solutions. And the second: although the price elasticity of demand is low, nonetheless people are beginning to conserve fuel, not only in Australia but in most developed countries (even in the USA). The only countries that are not conserving fuel are those that have govt subsidies - which further proves the point that demand does respond to prices.

Higher prices will eventually reach a tipping point where the cost of alternative energy sources become competitive. The problem is that the cost of those alternatives is so high that it will require much higher fuel prices to match them. So it is not the case that "the market has not been able to provide the alternatives required" but rather that the "alternatives required" are too expensive, relative to what is used now.

I think Prof. Beder understands this as she recognises the lack of political will to push prices up to the tipping point. And "We are fooling ourselves if we think there is a cheap solution to global warming". But how much pain will people endure before they say "enough is enough?"

Australians are being told that the pain of higher prices is worthwhile because it will help to slow climate change. Or as the PM puts it: the cost of inaction is greater than the cost of action.

I am growing increasingly skeptical of this assertion. Exactly what are the costs of action? And what are the costs of inaction? Will the world in 100 years time be really so terrible, just because it is a few degrees warmer?
Posted by bro, Friday, 18 July 2008 5:46:58 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Having just returned from a motoring holiday in the UK, I feel qualified to make some comments.

The Poms are suffering a good deal of pain, with petrol at just under A$2.90 and diesel $A3.10 per litre, in a large part due to the greater excise. At this level of pain, they have switched to smaller capacity diesels as their greater efficiency offsets the higher price. This transition is more noticeable in the cities and I noticed that the faster, apparently well heeled drivers on the motorways still drove larger cars. I suspect that we will probably need a somewhat higher price for petrol than currently obtains, before we see a similar change here.

They also have a much better rail system than we have with really fast , (try 180 kph) high speed trains to regional centres, and much more frequent services on the underground. (two minute intervals).

A similar scenario also seems to apply in France, with even smaller cars such as the Mercedes Smart Car, and an efficient Metro rail system.

I would suggest that it has taken an original government initiative, in the form of even higher excise, to force the market to respond, whereas, the Australian government's plan to ease the motorists pain will actually have a counter productive result to that which is desired.

On the other hand, Dubai, with its petrol at below 50 cents a litre, still has a predominance of larger cars and they have only recently got around to building a monorail system to cope with the ever increasing traffic problems. This project is due to be completed next year. The Emirates seem to be "going to Hell in a hand cart" as far as the environment is concerned, with the advent of high rise air conditioned buildings expected to not reach a peak until next year to cope with the expected throughput of 70 million people each year at Dubai airport.

David
Posted by VK3AUU, Friday, 18 July 2008 6:09:33 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
They were never serious about it, thankfully folks are saying so. As you point out, their scheme has a doubtdul provenance, but they do it anyway.

Economics is the reason they're travelling this path. Govt is working this angle masterfully to expand its cash grabbing tax base. Plus the financial markets always appreciate a new crap-shoot, a bit of dislocation and distortion. It keep their wheels spinnning.

This is the consequence of an electorate that thinks with its heart more than its head. Pretty much anything goes if ya get the narrative right, awash in its self serving contextualisations. Stoked by half truth and liberal dashes of sentiment and afectation.

The truth doesnt seem to interest people. All that matters is how something is said.
Posted by trade215, Friday, 18 July 2008 7:22:20 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
“An emissions trading scheme will see the price of electricity and manufactured goods go up but that is no guarantee that the market will invest in alternatives, especially if polluters can pass on the extra cost to consumers, buy up environmentally dubious offsets, or be compensated for extra costs that might damage their international competitiveness.”
Absolutely true.
When JFK set the -then- impossible goal of a man on the moon within a decade, was this 'government intervention'?
In the 70's, when we finally got sick of too many of our children dying on motorbikes that were simply too powerful for inexperienced drivers, Governments around Aus. responded with a 250cc restriction.
The result? 'The marketplace' responded with predictable turpitude; within just a year or two, the 250's were leading the bigger bikes around the race track.
There is no doubt enlightened legislation can stimulate technological advances; exactly what we need to become -renewably- energy self sufficient.
The marketplace will never do this; not while the biggest players have so much invested in the status quo.
Posted by Grim, Friday, 18 July 2008 10:16:31 PM
Find out more about this user Visit this user's webpage Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Grim thinks "enlightened legislation can stimulate technological advances." This is code for 'picking winners' and govts are notoriously bad at it.

There is simply no such thing as "enlightened legislation" for that requires "enlightened politicians" and they do not exist.

A recent example of 'picking a winner' is the Commonwealth and Victorian Govts' gift of $70m of taxpayers' money to the largest (and most profitable) automotive corporation in the world. Toyota had already planned to build the hybrid Camry anyway, and the CEO seemed unsure what to do with the money. The Commonwealth plans to hand out more taxpayer-funded goodies to Ford and GM. But not the Tata?

Or what about the "enlightened legislation" to hand over taxpayer-funded subsidies to farmers to grow grain for fuel instead of food? Result: starvation and food riots.

It is not true that large corporations are not investing in new technology. A recent report in The Economist magazine indicated that global investment in alternative energies has increased from $28bn in 2004 to $71bn in 2006. As oil prices continue to rise, the incentive to invest more will rise also.

In relation to the Apollo program, it was certainly a govt intervention, and an extremely expensive one (not just financially but also in terms of lives lost). Perhaps you think it was justified, and maybe it was. But if so, you need to demonstrate that the benefits outweighed the costs, including the opportunity costs.

Same applies for the ETS (or CPRS). Do the benefits outweigh the costs? The Govt has an economic and moral obligation to demonstrate that they do. After all, they are messing with our money and our lives.
Posted by bro, Friday, 18 July 2008 11:48:11 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
I thank bro for his examples of unenlightened legislation, and I agree the list is endless; most recently the awarding of carbon credits to polluters. I'm sure even bro would not maintain that even a government as unrepresentative as our own get everything wrong.
The CSIRO has a long and distinguished record of developing new technologies and systems, to the point where they can be given away to foreign investors...
Clearly, we need better government. Sadly, we won't get that by simply offering more money to politicians.
Perhaps if pollies wages were geared to productivity? When the median wage rises by $1. pollies get a $1. pay rise.
It would be nice to see a government -especially a labour govt.- which was more interested in thoughts and desires of ordinary people, instead of only elites, and the obscenely rich.
Posted by Grim, Saturday, 19 July 2008 7:16:58 AM
Find out more about this user Visit this user's webpage Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
“The fact that the Rudd Government is pushing forwards with an emissions trading system, despite the evidence that it won’t achieve much apart from higher prices for consumers, shows that it is not really interested in ensuring environmental protection. It is only interested in being seen to be doing something.”

Yes Sharon, Rudd says that he has pressures from the left and the right and that it is his job to strike the right balance. Well, the right balance would be way off to the left. His ‘balance’ between the interests of the business sector and environmental concerns is actually a licence to continue with business as usual.

We can’t leave the issues of climate change, peak oil, the need to find alternative energy sources, implement major lifestyle changes and achieve a sustainable society just up the business sector and market forces. We most definitely need strong governance to implement massive changes well before they would occur if just left up to the market.

That is the main difference between effective government-driven and market-driven change: the former would be strongly pre-emptive while the latter would be reactive and far too late to prevent massive pain.

Unfortunately, we will never have effective governance in this arena, because the soul of government was sold to big business long ago, end of story.
Posted by Ludwig, Saturday, 19 July 2008 9:04:19 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
have a wake up call people
listen to alex jones
for 10 minutes
http://www.youtube.com/watch?v=2etEqpF25eE

or listen to the whole broadcast
http://www.infowars.com/
or just listen to this
http://www.youtube.com/watch?v=iNEamw2ph6Y

anyhow you want it all chewed for you
see big buisness runs govt into active treason

find that hard to believe ?

see your COMPULSORY super contribution
[that goes on stockmarketeers anual bonus]

pumps YOUR WAGE into supporting the FAST FALLING stockmarket
check HOW your INVESTMENT has depriciated!
yet you are legislated to keep supporting it !
its taken out of your wage
COMPOLSORY

JUST like this NEW carbon TAX will be compuslory!
its PRICE wil be set by the market"!
dont believing the lie of 20Dollars a ton[thats just the bait]
its THE next cash cow to support the big buiness
and THE MARKET will set its COST!

our leaders lead us into TREASON

they will bring in the new-age version of the hitler youth
this worst of the commie and natzi system is comming
unless you decide to wake-up or at least hear the facts
do some research on it!

if you refuse to educate your self
why should we bother ?

if you think it wont affect you [it is time to wake up]
before the next cash cow leeches your pay as well as your freedom
Posted by one under god, Saturday, 19 July 2008 9:07:28 AM
Find out more about this user Visit this user's webpage Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
^^^

Ya can always allocate yer super to cash and just earn interest. In fact, given that that there's not that much difference b/w the long term returns between the three main sectors (cash, shares, property), them all being around 7-8%pa, it hardly matters where ya out it... in the long run. If you wanna avoid the heart stopping/starting nature of the schlock market, just put yer dough in cash and forget about it. Oh yeah, and pray that the money lending banksters dont inavertantly collapse the whole game (highly doubtful).

Ok, so put the tea cup down, storms' over.
Posted by trade215, Saturday, 19 July 2008 10:09:37 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
David Pope had a good cartoon in the Canberra Times a few days ago of a polar bear and penguin floating down a street full of water. The penguin says words to the effet that the new ETS will save them and the bear remarks that it's good to know stockbrokers will rescue the world.

I can't help but look at how the market has "saved" billions from starvation or undernourishment and think we are on our way to hell ina handcart. In fact te recent food price rises ahve wiped out the amrket gains of the last 20 years almost overnight.

The incease in prices for fuel and food will mean lower living standards for workers. This will impact on the economy. And while Australia's emissions may in the long term reduce, the market solutions based on price don't address falling living standards. They create them. Only putting the burden on the polluting industries and not allowing them to pass it on to consumers can do that, ie cut profits, not wages. Cetainly since the bosses have benefited from hudnreds of years of cost free polluting, the capitalist class globally should now pay recompense for the free lunch they have received since capitalism began.
Posted by Passy, Saturday, 19 July 2008 10:50:38 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
*Only putting the burden on the polluting industries and not allowing them to pass it on to consumers can do that, ie cut profits, not wages.*

Funnily enough Passy, when you go and look up the share registaries
of these companies, you find that nearly all the top 20 shareholders
are superannuation funds. In fact the 1 trillion $ held in super
funds on behalf of workers, is worth as much as the whole ASX combined.

So as workers in fact own most of these companies, in then end
it is they who will pay. Companies are there for the benefit of
people who own them
Posted by Yabby, Saturday, 19 July 2008 11:41:09 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Free markets are great tools for delivering products and services efficiently, but the zeitgeist of free market fundamentalism which has gripped the west for the last few decades is inimical to a civil society.

As the father of economic theory, John Maynard Keynes, said, "Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone". Sounds like unfettered free trade in a nutshell.
Posted by Sancho, Saturday, 19 July 2008 1:23:37 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
One can say about the free market what Churchill allegedly said about democracy -- it is the worst way of achieving economic goals, except for all the other ways that have been tried. At least it is responsive to opinion change. Unlike ideologically-driven government policy, which has to put off its U-turns until the facts have sunk in to a sufficiently large segment of the population, the free market is very quick to detect and respond to inefficient and expensive wastage. It will be the market which takes the lead in killing off global warming hysteria, not government policy.
Posted by Jon J, Saturday, 19 July 2008 1:32:07 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Sancho “As the father of economic theory, John Maynard Keynes,”

Economic theory is a bastard, father unknown.

His mother ain’t saying and any one who claims to know the Sire is a liar.

I concur with Jon J what is the nearest truth to market economics for some simple reasons

The ideal is a market where the numbers of buyers and sellers are so many that no one controls the ‘price’

The idea of different large corporations controlling price should be balanced by government regulation anti-competitive legislation through agencies like ACCC and trade agreements like GATT and its successors.

The idea that governments control the price is worse than leaving it in the hands of corporations, regulated by government; otherwise who is there to regulate the government?

Now emissions trading – has not worked in Europe – unlikely to work here but who will bear the cost – You and Me that is who.

Governments are appointed to reflect the will of the electorate. Governments are not there to shape the will of the electorate

Taxes are there to fund the legitimate work of government

If you have governments creating artificial costs through emissions trading imposts, they have moved from reflecting the will of the electorate and funding the legitimate works of government to shaping the will of the electorate through manipulation of an unnecessary tax impost.

The unrepresentative and politically motivated (GW and environmental opinions are political issues afterall) seeks to limit the electorates discretionary purchasing ability, through excessive taxation above and beyond the level of taxes needed to fund the legitimate works of government.

I have used a term for some months now which, I believe, adequately describes the result and the intent of carbon taxes and emissions trading.

Socialism by Stealth.

And similar to what Jon J said

Ultimately it comes to this, the market is imperfect but it is less imperfect than any other suggestions or proposals.

And fake taxes are no solution
Posted by Col Rouge, Saturday, 19 July 2008 2:39:45 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Passy:
"Cetainly since the bosses have benefited from hudnreds of years of cost free polluting, the capitalist class globally should now pay recompense for the free lunch they have received since capitalism began."

As we (should) know, there is no such thing as a free lunch. While its true that industry has benefitted from polluting the atmosphere, so have we. You claim to be concerned about low living standards, but they would be much lower without electricity and coal exports.

There is only one legitimate way to make huge profits in the market place - supply goods and services that consumers desire. So when Tiger Woods makes millions or Pamela Anderson earns $500k for 3 days' 'work' or the CEO of a coal mining company earns millions, it is because we, the consumers, value what they produce. And so we, the consumers, have decided to trade off a polluted atmosphere for a higher standard of living.

Importantly, as our standard of living increases we will have more money to fix up the damage and prevent further damage while continuing to enjoy our prosperity. It is no coincidence that richer countries tend to have lower pollution than poorer countries.

As for the CPRS, it is not a market solution, it is govt intervention.

"in truth, the scheme is an administrative nightmare. This week launches a massive lobbying campaign in Canberra to save jobs, profits, win free permits and obtain financial relief. Special interest politics will be licensed on a frightening scale, the result of a huge government intervention in the economy sanctioned by climate change on policy grounds yet to be exactly defined."
- Paul Kelly
http://www.theaustralian.news.com.au/story/0,25197,24041647-7583,00.html

Like most govt interventions, the CPRS will inevitably fail.
[See how here: http://www.csmonitor.com/2008/0716/p09s02-coop.html]

So please, when this finally happens, don't blame the market!!

Col:
I agree with everything you say except "Socialism by Stealth". It is "Fascism by Stealth" - the difference being that socialism entails govt ownership of the means of production whereas fascism is govt control of the means of production.
Posted by bro, Saturday, 19 July 2008 6:10:03 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
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
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
* 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
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
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
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
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
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
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
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
*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
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
"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"
A very good point. I think most historians would agree that technological innovation throughout history was spurred on very directly by the -Government- military complex.
As yet, even global corporations haven't started to wage war, although it's probably only a matter of time, and many believe the corporate military complex has already had a hand... I digress.
A great many inventions can be attributed to the -government sponsored- space race, including velcro and teflon coating.
In fact, the technologies called for and directly created by Government decree is almost endless; from the English longbow to nuclear weapons, and power, radar, planes, ships...
Posted by Grim, Sunday, 20 July 2008 7:15:16 PM
Find out more about this user Visit this user's webpage Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
The 'market' has shown many of it's flaws in it's current form. Everything from the patent law system in the USA to lack of competition in many sectors and the assumption that consumers are intelligent
Posted by Steel, Sunday, 20 July 2008 7:28:59 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Passy thinks that employees that are paid a lot of money are being "screwed." Go figure!

Passy: "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."

That may be so, but how can class divisions be removed other than by the use of force? Since force is essential in achieving its objectives, it is inevitable that all Marxist societies are violent. In a free society, on the other hand, individuals satisfy their needs through peaceful cooperation.

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

On this point I am in agreement, for two reasons. Firstly, there are no capitalist states in existence anywhere in the world, at best there are mixed economies. Secondly, capitalism is based on the voluntary exchange of private property rights. Given that nobody has private ownership of the atmosphere, no market can arise and therefore capitalism does not apply.

Passy, the labour theory of value was discredited long ago and was replaced by marginal utility theory. The argument that all wealth in society is created by workers is wrong.
Posted by bro, Monday, 21 July 2008 12:05:19 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
bro

The more well paid societies do have the greatest exploitation (in the marxist sense of bosses ripping off the value workers create.)

Marginal utility theory is an alternative to the labour theory of value, adopted by bourgeois economists to explain and justify and hide the fact that workers are exploited systemically.

Your discussion about the state seems misplaced to me. The Government, courts, bureaucracy (and indeed most of civil society) have profit extraction as their grundnorm.

Any modern state is a reflection in some way of that basic building block. A mixed economy is an artifical distinction. The state and the private sector have a common goal - the extraction of surplus value from workers. This was as true of the USSR as it is of the US.

Marx pithily described the state as the executive committee of the bourgeoisie.

Sometimes this requires intervention in the interests of capital in general at the expense of some capitalits in particular. Climate change might be one of those examples. However any solution will be confined to the basic parameters of wage slavery.

Bro, you mention force. As Marx said the history of capitalism is written in blood. The conquest of common land, foreign land, world wars, invasions like Iraq, and the ongoing suppression of working people (police, army etc) means to me that the system is built on and maintained by force.

Of course force will be necessary to move from capitalism to socialism. This force will be an expression of the vast majority in the interests of the vast majority (ie of workers in their own interests). And given the preponderance of workers in our society, this force will be minimal.

Those days are some way off yet. But in my view when we move from a porfit based society to one where production is organised democraticlaly to satisfy human need, only then can the alternative energy sources necessary for our survival begin to be utlised fully enough to save our planet. The present relations of production have become a fetter on the development (and indeed survival) of humanity.
Posted by Passy, Monday, 21 July 2008 8:42:25 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
You raise many points, too many to address in one post so I will limit my remarks.

As I understand it, Marxism is based on the labour theory of value. This was abandoned by economists in the late nineteenth century because marginal utitility was a superior theory, not because of some bizarre conspiracy to exploit the workers.

Can the labour theory explain why a block of land located on the coastline is worth more than a similar block located further inland?

"The conquest of common land, foreign land, world wars, invasions like Iraq, and the ongoing suppression of working people (police, army etc) means to me that the system is built on and maintained by force."

All of these are undertaken by the State and represent the violent powers of the State, which would be accentuated by Marxism, as was apparent in Communist Russia, China, and more recently Zimbabwe (Mugabe is a Marxist).

As a rough rule of thumb, the greater the power held by the State, the greater is its tendency to murder its citizens. Marxism, because it gives full power to the State, is therefore the most evil form of social arrangement imaginable.

On the other hand, capitalism is a social arrangment based on liberty: individual freedom, economic freedom, political freedom, religious freedom, etc. Importantly, a capitalist society is regulated by govt with limited powers.
Posted by bro, Monday, 21 July 2008 9:33:50 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Sharon Beder must be living on a different planet than the rest of us. She states: "petrol usage has not declined significantly. There has been no mass shift to public transport, no major decline in car sales, no flood of affordable hybrid and electric cars onto the market." In fact, she's wrong on all counts. Petrol usage in the USA - the world's highest per capita user - is in decline. There is a mass shift to public transport in WA and Victoria from recent newspaper reports, one of them (sorry, I can't remember which one) stating a 50% increase in public transport passengers in the last 6 months. And there is a flood of diesel and small petrol engine cars on the Australian market at affordable prices, compared to the seriously expensive and not very affordable hybrid cars that are more fashion statements than practical answers to high fossil fuel prices.
And there have been huge reductions in large vehicle, especially petrol 4WD vehicle sales in Australia, with GM in the USA closing 4 SUV plants and laying of 10,000 employees.
Adam Smith's invisible hand is at work and will become even more obvious (and effective) as liquid fossil fuel supplies shrink and prices go higher.
Posted by Bernie Masters, Monday, 21 July 2008 10:31:05 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
*A great many inventions can be attributed to the government sponsored- space race, including velcro and teflon coating.*

Grim, very true Nasa came up with various inventions. Given the
huge amount of funding, one would hope so. After all Thomas
Edison came up with quite a few too and he had no Nasa funds
behind him.

Now take a look at economies where Govts do all the research
and development and what do we have? In the West, most projects
are a combination of Govt basic research and then venture capital
moves in and takes it further. Designing goods by Govt Depts
has really not been a market success, if you check out China,
the USSR, North Korea and other attempts.

At the moment, venture capital in the US is throwing huge amounts
of money at energy solutions. Because so many are trying and risking,
only one of a few needs a breakthrough to get results. Compare
that to a single Govt dept with flawed thinking and you have huge
expenditure with no or little results.

The great thing with private enterprise is that anyone who thinks
that they have aptitude at anything, can have a go. Investors
are around, for those who can make an impression. Do the same
thing at a Govt Dept and no matter how good you are, if the boss
does not like your idea, you are basically stuffed.

Passy, any worker who feels they are being screwed, can start their
own business tomorrow and appeal directly to the consumer, who will
decide how they spend their money. A bucket and a mop is about
all you need to start up "Passy's Cleaning Services" tomorrow,
if you don't want to have a boss. All that changes is that now
the consumer is directly your boss, rather then the bloke at the
company, which you so despise.
Posted by Yabby, Monday, 21 July 2008 6:16:27 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Yabby, bro and others

Amy Leather in this week's Socialist Worker in the UK outlines Marx's idea of exploitation. The link is here:

http://www.socialistworker.co.uk/art.php?id=15481
Posted by Passy, Monday, 21 July 2008 7:08:31 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
You paint a wonderful picture, Yabby, but sadly it's still just a picture.
In truth, although Capitalism is a system based on competition, Capitalists hate competition, and try to stifle it where ever possible.
Equally Capitalists hate innovation. When you have spent billions tooling up to produce one product, it really hurts to dump it in favour of another.
Competition forces companies to innovate, where genuine competition still exists.
Is anyone here old enough to remember that there is actually more than one petrol company?
Remember Ampol, buy Australian? (The first 'colour' advertisement, on black and white TV).
"Buy BP, with Boron!"
"Amoco, with the final filter, for cleaner fuel!"
Does anyone notice, or care which brand of fuel they buy?
The biggest single expense, the one that drives practically all others, and any pretence of competition has left the building.
I fully agree that Governments do most things badly. My point was always, enlightened legislation can stimulate and even force innovation, where genuine competition is lacking.
We have never needed visionaries in government more than now.
Sadly, this Government, like the last one, has all the colour and vision of your stereotype CPA.
Posted by Grim, Monday, 21 July 2008 7:09:34 PM
Find out more about this user Visit this user's webpage Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
*Capitalists hate competition, and try to stifle it where ever possible.
Equally Capitalists hate innovation. When you have spent billions tooling up to produce one product, it really hurts to dump it in favour of another.
Competition forces companies to innovate, where genuine competition still exists.*

Grim, the way I see it is that capitalism accepts that people
act in their own self interest, wheras socialism seems to believe
that people will act in the interests of the greater community
before their own interests. In reality that is seldom the case.
My understanding of evolutionary psychology ties in with the fact
that self interest dominates.

Passy, I read your article and its a long time out of date and
full of holes and flaws.

If the cost of a commodity was based on the labour involved, how
come can the Saudi's spend 10$ to pump oil worth 145$?

Perhaps Marx thought of these things in terms of pre industrialisation. Today factories full of machines can churn
out goods with little human input. Innovation is the key for
if I can build a machine that turns out goods twice as cheaply
as you can, then I will win. That has little to do with labour
input, everything to do with ideas.

But Marx might turn in his grave, if he knew that today workers
through their super funds, own the majority of the means of
production. Take a look through the share registery of the
top 200 Australian companies. They are nearly all dominated by
super funds, owned by workers. If they go broke, workers are the
big time losers.

Capitalism today is very much about earning a return for providing
capital, by taking a calculated risk. If there is no return its
a bit like not being paid to go to work, you don't do it. If you
don't do it, then there are no jobs.

The ultimate exploiters and deciders are in fact consumers. They
don't buy your goods if they don't feel like it. They only buy
your goods if they think its of value to them.
Posted by Yabby, Monday, 21 July 2008 10:05:00 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
"Grim, the way I see it is that capitalism accepts that people
act in their own self interest, wheras socialism seems to believe
that people will act in the interests of the greater community
before their own interests. In reality that is seldom the case.
My understanding of evolutionary psychology ties in with the fact
that self interest dominates."
I fully agree. However, you have not addressed my concerns about a lack of real competition in the marketplace, which rather destroys your argument.
Your example of Saudi oil highlights this point. The Saudis -and the rest of the oil producing nations- can sell their oil for 10 times what it costs to produce, because they are not competing with each other.
On the other hand, there is some defense of socialism, in our modern world, largely due to the obscenity of compound interest, and the absurdity of our fractional banking system.
Due to these two devices, real capital (land) has become so expensive that the only way anyone can become a farmer these days, is if one inherits.
We have had hundreds of years to learn that inheritors are rarely the best at their jobs.
From the Crimean War to WW's 1 and 2, we found that Lords and Counts weren't necessarily the best Generals, while humble bakers and tradesmen could be brilliant soldiers.
Inherited wealth is as outmoded a concept as the divine right of kings.
Posted by Grim, Tuesday, 22 July 2008 5:39:50 AM
Find out more about this user Visit this user's webpage Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Passy,

I skimmed the article, but saw nothing that answered my question about the price of land.

It is true that the labour theory was proposed by Smith, Riccardo and other classical liberal economists, but once marginal utility theory was discovered in the late nineteenth century, it was abandoned. Even Karl Marx (correct me if I am wrong!) was unable to refute it.

Labour theory was abandoned because marginal utility theory is a much better theory, e.g. it can answer my land question, but labour theory cannot.

The world has moved on, yet not for Marxists and unionists. This is likely because of the implications of marginalism.

Marginal productivity theory shows that wages are not determined by the employer (as labour theory implies) but rather by the marginal revenue product of the worker. In other words, the more productive workers are paid more than less productive workers.

Grim,

The Saudis can sell oil at any price they want, it is their right. In any case, you are appealing to the 'cost of production fallacy', but prices are not determined in this way, they are determined by the laws of supply and demand.

If you are blaming the central banks for inflation, then I agree with you. We should return to the gold standard and sound money.

I disagree with you on the issue of inheritance. In a free society, people are entitled to earn money any way they can, provided they do not violate the freedoms of others. Inheritors of wealth are just as capable of losing money as anyone else. If you carefully study the BRW's Richest 200 each year, you will notice this.
Posted by bro, Tuesday, 22 July 2008 7:08:27 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Hi bro, I see little difference between socialism and fascism, they are beliefs which put the state above the individuals who populate it.

So socialism or fascism by stealth remains the same.

The only difference, the clothing of the socialists like everything else about them, is mediocre versus the fascists who better dress sense and smarter uniforms : - )

Passy “market and pricing mechanisms to cure all ills (like world hunger and global warming,)”

The goal of socialism (per Lenin), is communism and we know how the communists used starvation to keep their people in check. Regarding environmental degradation, the problems of the Great Lakes and Three Mile Island pale into insignificance compared to Chernobyl and what was left of the Aral Sea before the collapse of communism.

I see the left wing entryists turning the greens to the interests of international socialism, there is only a living hell as the real consequence of forgetting how badly they stuffed up Russia after they stole the chance to exercise power.

Re “profit “, the effort of the “worker” so called, is only deployed by someone risking capital to pay the wages and risk getting a sale from the effort of the workers labour.

The worker is only one link in the supply chain, not the entire supply chain.

Risk, when it is unreturned (and that is not an uncommon event) is a cost born by the entrepreneur and it is reasonable for him to receive rewards from current risks, otherwise he would simply go broke.

The cost of implementing innovation and productivity measures, which Yabby mentioned, represent risks which the entrepreneur undertook, not the labourer.

Certainly, the wealth which USA produces by engaging in entrepreneurial linertarianism produced better overall result than the socialism system of your myths and dreams.

Whilst some are wealthier and some are poorer in USA system, all are equally poorest in the socialist systems, equality of poverty and mediocrity is not something which I want for me or my children.

Yabby “Clearly its innovation that will solve climate change,”

absolutely right,

not socialist carbon taxes
Posted by Col Rouge, Tuesday, 22 July 2008 12:08:24 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
bro

I think there is an answer to your question. I was googling and came across this, a review of a book by Wolff in a paper whose politics i don't actually support, green left.

The review is by Alex Miller

The link is: http://www.greenleft.org.au/2005/628/34615

Here's a snippet.

Wolff goes on to deal with the rejoinder that’s already on your lips: “The obvious reply is that this claim is absurd. All goods contain labour. They don’t contain steel. So how can steel be the source of all value? But, unfortunately, this argument equally condemns the labour theory of value. For ... not all goods do contain labour. Uncultivated land ... [for] example.”

If there are problems for Marx here, Wolff fails to bring them out. For one thing, he describes the labour theory of value in terms that Marx explicitly repudiates. According to Wolff, the theory states that “labour is the source of all value and all profits”, while Marx writes at the opening of the Critique of the Gotha Program: “Labour is not the source of all wealth. Nature is just as much the source of use values (and it is surely of such that material wealth consists!) as labour, which itself is only the manifestation of a force of nature, human labour power.”

Moreover, uncultivated land can hardly be cited as a counter-example to the labour theory of value, since the labour theory of value is a theory about what determines the exchange value of commodities. Commodities are objects produced by human labour for the purposes of exchange, so that uncultivated land simply falls outside the scope of the theory and thus cannot be cited as a counterexample to it. Marx is in fact quite explicit about this in chapter one of the first volume of Capital: “A thing can be a use-value, without having value. This is the case whenever its utility to man is not due to labour. Such are air, virgin soil, natural meadows, etc.”
Posted by Passy, Tuesday, 22 July 2008 4:23:39 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Passy,

OK, so Marx explicitly ruled out "uncultivated" land.

What about a house located on the beachfront, and an exact copy located away from the beach. Why is the beachfront house worth more? Both were built with the same materials and the same amount of labour.
Posted by bro, Tuesday, 22 July 2008 4:53:44 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
*The Saudis -and the rest of the oil producing nations- can sell their oil for 10 times what it costs to produce, because they are not competing with each other.*

Not really. Don't forget that in the late 90s, oil was selling
for 10$ a barrel, so nobody bothered to search for the expensive
to find stuff and invest tens of billions. Along came China-India,
demand took off and the rest is what we see today. The lag
time from deciding to search for oil, until its in your tank, can
be 5-7 years. The easy to find stuff is gone. So its supply and
demand in action. The West can only blame itself for relying
completely on cheap ME oil, with no plan B for energy supplies.

Take a look at iron-ore and coal, both of which have more then
doubled in price this year. Its exactly the same story, only this
time Australia cashes in. That includes you, as a super fund
investor.( well most Australians anyhow)

*Due to these two devices, real capital (land) has become so expensive that the only way anyone can become a farmer these days, is if one inherits.*

The problem for farming is that it is hardly profitable, but there
are people leasing land, doing ok, if they are prepared to take the
risk. Tree farms, hobby farms and other uses for land, have inflated
its value. You can't blame the banks for that. Their spreads today
are narrower then they ever were. Why banks have done so well is
because Aussies are such keen borrowers!
Posted by Yabby, Tuesday, 22 July 2008 9:39:20 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
This says it all:

Modern Epoch Air Trading, by M. Kerjman
http://www.goarticles.com/cgi-bin/showa.cgi?C=1043058
Posted by MichaelK., Monday, 4 August 2008 1:04:17 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
  1. Pages:
  2. 1
  3. 2
  4. 3
  5. ...
  6. 5
  7. 6
  8. 7
  9. All

About Us :: Search :: Discuss :: Feedback :: Legals :: Privacy