Real World Event Discussions

Globalization

POSTED BY: deepgirl187
UPDATED: Tuesday, August 26, 2025 22:20
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FLETCH2

Thursday, October 18, 2007 6:18 PM

Except almost all progress for the last few hundred years has been financed by private investors. If that money didnt accumulate, if folks didnt have excess they pretty much had to invest there would have been no progress, no new industry spurring new jobs.

In addition I don't think anyone really believes that living hand to mouth paycheck to paycheck is the best way to live and yet according to your analogy that would be the most economically efficient. Investment does generate demand eventually because it does buy physical goods. I'm not sure that you can view it as a drag on the economy like Sig seems to suggest.

RUE

Thursday, October 18, 2007 6:33 PM

I'd like to point out some exceptions to your post.

One is that there is a LOT of non-capitalistic investment even in capitalist countries. For instance, government 'invests' in infrastructure, schooling, health, police and research. (And that's just off the top of my head.) And further, without those investments, capitalism itself wouldn't be possible. One could argue that capitalism is best at appropriating socially generated value into private hands.

The second point is that many governments (China and Russia are two large modern examples) created non-capitalist economies that did transition from rural hand-to-mouth economies to modern industrial ones. And also drastically improved living conditions for the vast majority of their people.

You don't actually need capitalism to concentrate, invest and improve.

***************************************************************
"Global warming - it's not just a fact, it's a choice."

SIGNYM

Thursday, October 18, 2007 6:38 PM

Quote:
For the sake of argument lets assume you give out two lots of $10,000, one as a single amount of $10,000 to a rich guy and you give 100 poor people $100 each. The rich guy doesnt really need $10,000 so he banks it or invests it. The 100 poor folks spend theirs straight away.

So far so good.

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The result is that the poor people's $10,000 hits the economy faster, it buys stuff and generates immediate demand in the economy. If you happen to need a shot in the arm for demand this is good news because it's FAST.

With you so far

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The rich guy's money is slower to have an effect and that effect is initially in investment and not in demand. If your aim is to boost investment then this is also a good option.

This is where we part company. Investment does NOT have the same effect. Let's look at his potential investments:

He invests in increased production: Hires more workers, makes more widgets. Great. Stimulous because it's like giving 100 people $100 each.

He invests in research, pays some engineers, improves his product and grabs a greater market share. Stimulous because of the engineers' pay. Its like giving 10 people $1000 each one time, but they'll prolly spend the money anyway. He gains market share and hire more workers, but the follow-on effect on overall employment is zilch.

He buys out a competitor, and gives one guy $10,000. Not necessarily a stimulous. The question of what happens to the money just goes up to the top of this list.

He puts it in a bank account, which is like giving one person $10,00. Question cycles back to the top of the list.

He speculates in gold or foreign currencies. Not a stimulous. He may have well just put his money in a shoebox.

He invests in automation, which is like giving 10 people (the engineers) $1000 each in a one-time payment, but then TAKES AWAY $100 each from 100 people ad infinitum. Automation reduces prices, but not as much as the wages were reduced. Leads to reduced employment and demand ovreall.

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$10,000 bucks into the economy is the same seen from the point of view of the economy in general because ultimately that money does get spent on something it is the short term effect that differs.

I think I've shown this is not the case.

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I think you believe that the invested money generates no demand at all which is wrong.

Not true. But IF the overall effect of investment is to reduce employment (or reduce wages) then the net effect is to reduce economic activity in the long run.

The proof of the pudding, so to speak, is in the real world. Bush has been following "trickle down" theory for almost eight years. All of this "stimulous through investment" has only led to one thing: The biggest disparity in incomes since the 1920s, reduced production, and demand kept afloat only by a housing bubble and cheap interest rates.

---------------------------------
Always look upstream.

FLETCH2

Thursday, October 18, 2007 7:14 PM

Quote:
Originally posted by rue:
I'd like to point out some exceptions to your post.

There are a LOT of exceptions that's why I said "almost." It is perfectly possible for governments to build entire industries from almost nothing (German rocket development during WW2, British Jet development in the same period.) It is also possible for government to finance essentially private R&D to achieve a national aim -- the Apollo program for example. The infrastructure spending is economically important but it's not investment in research and development (well maybe development).

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One could argue that capitalism is best at appropriating socially generated value into private hands.

It does in your country because government choses to pay private companies to do it's research. It's the opposite back home -- we'd all be speaking German if Henry Royce hadn't decided to spend his own companies money on developing a new aero engine the government had no intention of buying.

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The second point is that many governments (China and Russia are two large modern examples) created non-capitalist economies that did transition from rural hand-to-mouth economies to modern industrial ones. And also drastically improved living conditions for the vast majority of their people.

That's not entirely true. China spends a lot of money on infrastructure and education that private companies can then take advantage of.

I would argue as you seem to that government sets up the physical conditions that establishes a market that capitalism then exploits. If there was running gun battles in the streets and nobody could get safely to work there would be economic costs to business. If a business had to pay the actual cost of the education of it's employees from kindergarden to the point where they could do practical work it would be an enormous burden (like healthcare is.) So yes governments set up a friendly economic environment for business, which is why business taxation is not "unfair" a service has been provided that makes your business possible.

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You don't actually need capitalism to concentrate, invest and improve.

"

I don't recall that I ever claimed you did. All I said was that most inovation has come from private investment and it has. The CD in your music player comes from Sony and Phillips not from the Dutch and Japanese governments, the solid state laser that plays it comes from (I believe) Bell Labs as does the transistors and chips that make it operate. Could a government like Chana have ordered the R&D, mandated production and distribution of such a device? Of course, but the point is they DIDNT.

And BTW that was Phillips and Sony's money not funds paid for by the left hand of DARPA.

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SIGNYM

Thursday, October 18, 2007 7:30 PM

So, to continue:

Capitalism is very good at one thing. (Which BTW is not research. I can point to a number of critical discoveries... ancient and modern...that had nothing to do with capitalism.)

The thing that capitalism is very good at is using its accumulated money to reduce the amount of labor that goes into a product and relocating that technology to where labor is cheap (and productivity is low).

Now, I have no particular interest is sweating things out the old-fashioned way. Given the choice between picking out cotton seeds by hand and the cotton gin, I'll choose the cotton gin. The PROBLEM with capitalism is that it ties the distribution of money to labor. To illustrate the conundrum with an extreme example: if you automate all production and put everyone out of work, even if the products are very very cheap they'd still cost too much for people who have no income whatsoever. (I realize it's an extreme, but that problem occurrs in diluted form everywhere.)

So you have the problem: How do you balance production and consumption while STILL being able to accumulate enough money to invest in better production techniques?

---------------------------------
Always look upstream.

RUE

Thursday, October 18, 2007 7:51 PM

Fletch

I just have to joke around a bit - "It does in your country". :folds arms, taps foot: So now it's my country. Well as long as you live here it's your country, too mister.

Anyway ...

"because government chooses to pay private companies to do it's research"
"All I said was that most innovation has come from private investment and it has."

Government gives grants to universities and researchers for - as it's sometimes called - 'blue sky' research, and also for applied research. The government doesn't give grants to private companies for that, so your first statement is wrong. As to the process of public research (innovation) followed on by private appropriation -

It was publicly funded researchers who figured out how to sequence DNA. Craig Venter used that (publicly) created science to try to sequence the human genome first in order to privately patent it. In other words, he intended to expropriate publicly created value into private hands - his. (And then government researchers raced Venter to sequence the human genome - and won - b/c the idea of a private patent on the human genome so offended them. Those same researchers put the genome in the public domain where it has a greater multiplying effect on further innovation.)

Anyway, there are lots of examples of direct conversion of publicly create value expropriated into private hands.

And as we seem to agree on, the indirect things that make capitalism at all possible are socially created.

So what I see is that capitalism is in fact parasitical on society, and not beneficial. And that research and development (a public concentration of wealth), and investment and production for discrete goods (currently private) can both be done publicly.

(I had to caveat 'discrete goods' b/c there are in fact 'public goods' which private investment and production don't address.)

***************************************************************
"Global warming - it's not just a fact, it's a choice."

FLETCH2

Thursday, October 18, 2007 8:35 PM

Quote:
Originally posted by rue:
Fletch

I just have to joke around a bit - "It does in your country". :folds arms, taps foot: So now it's my country. Well as long as you live here it's your country, too mister.

."

I dont get to vote, I get no say on policy decisions or the use of my tax dollars. Your government can chose not to renew my Greencard or indeed throw me out for almost any reason as long as they can prove due process. Should I leave I get no immediate right to readmission (though I have a reasonable expectation given the Green card.) If for example I worked abroad for over a year my immigration status would lapse and I would have to start the process over.

I get no protection from the US embassy when travelling abroad (my wife does and I suppose they may look after me by association but it is not a requirement.)

So no it's not "my country" I just happen to live here.

FLETCH2

Thursday, October 18, 2007 8:54 PM

Quote:
Originally posted by rue:
Fletch

I just have to joke around a bit - "It does in your country". :folds arms, taps foot: So now it's my country. Well as long as you live here it's your country, too mister.

Anyway ...

"because government chooses to pay private companies to do it's research"
"All I said was that most innovation has come from private investment and it has."

Government gives grants to universities and researchers for - as it's sometimes called - 'blue sky' research, and also for applied research. The government doesn't give grants to private companies for that, so your first statement is wrong. As to the process of public research (innovation) followed on by private appropriation -

When the government gave Gruman Aircraft $1B to build a lunar lander do you really believe that Gruman received no business benefits from that money? That the research did not end up in products it sold to the government or other people? Boeings entire passenger jet program sits on the shoulders of work the US government paid for as part of getting jet transports. THAT is the kind of government R&D I'm talking about, the kind done by private corporations with development grants paid for with Tax dollars.

I'm not talking about "Blue sky" because discovering something and industrialising it are two different animals. You might spend $10 Million to find something in a lab and $100M developing that discovery into something you can sell, are you really saying that the guy that spends the $100M is benefiting unfairly?

Quote:

So what I see is that capitalism is in fact parasitical on society, and not beneficial. And that research and development (a public concentration of wealth), and investment and production for discrete goods (currently private) can both be done publicly.

I disagree. What you are describing is a command economy. Things will only get built if it suits government purposes, you will only get to buy what the government says you can buy. Nobody does it that way, not anywhere, the few places that tried it are not around anymore. If capitalism has a "cost" a benefit it gets from society you make capitalistic enterprises pay their own way -- which incidentally most do. Your government doesnt account for even a small fraction of your GDP even it's arms related R&D and blue sky funding is small fry compared to the investment made in private companies and labs. If drug X was developed in a public lab then the government should licence it as a generic and have done with it. It's the fact that neither the gov or the generic companies can afford the extensive human testing to bring drug X to market that prevents that from happening. If I take that blue sky idea and pay to develop it, test it and market it shouldnt I be rewarded for that? Especially as not all promising "Blue Sky" ideas ever make it to usefull products?

SIGNYM

Thursday, October 18, 2007 9:32 PM

So, to reiterate:

Quote:
Capitalism is very good at one thing. (Which BTW is not research. I can point to a number of critical discoveries... ancient and modern...that had nothing to do with capitalism.)

The thing that capitalism is very good at is using its accumulated money to reduce the amount of labor that goes into a product and relocating that technology to where labor is cheap (and productivity is low).

Now, I have no particular interest is sweating things out the old-fashioned way. Given the choice between picking out cotton seeds by hand and the cotton gin, I'll choose the cotton gin. The PROBLEM with capitalism is that it ties the distribution of money to labor. To illustrate the conundrum with an extreme example: if you automate all production and put everyone out of work, even if the products are very very cheap they'd still cost too much for people who have no income whatsoever. (I realize it's an extreme, but that problem occurrs in diluted form everywhere.)

So you have the problem: How do you balance production and consumption while STILL being able to accumulate enough money to invest in better production techniques?

---------------------------------
Always look upstream.

RUE

Thursday, October 18, 2007 9:54 PM

"THAT is the kind of government R&D I'm talking about, the kind done by private corporations with development grants paid for with Tax dollars."

I see. So, are you saying that's a good thing ? Tax dollars going directly to benefit business ? B/c what I have seen is that government subcontracting to private industry often ends up more expensive and less economically beneficial to the populace as a whole than if the work is done directly by government workers. The health care 'industry' is a prime example of that. So, come to think of it is providing 'security' in foreign countries like Iraq.

"I'm not talking about "Blue sky" because discovering something and industrializing it are two different animals."

True, but only artificially and temporarily so. Many governments have government-run corporations to do just that.

"... are you really saying that the guy that spends the $100M is benefiting unfairly?"

The guy who spends $100M is not even beginning to pay for the upfront investment society made - and that includes education, creating and maintaining standards (ie NIST) - AND the 1000 or so $10,000 research projects he didn't perform to find the one that would have an immediate application - and without which he HAS no business.

"If capitalism has a "cost" a benefit it gets from society you make capitalistic enterprises pay their own way -- which incidentally most do."

NO business would be able to repay the full cost of social investment. So yes, they are benefiting unfairly.

"It's the fact that neither the gov or the generic companies can afford the extensive human testing to bring drug X to market that prevents that from happening."

Ahem. Are you saying the government can't afford $500M total development cost for a drug ? When it's spending $177M per day in Iraq ?
It's not that the government can't, it's that it chooses not to. And in fact, business has a cozy deal with government, and select government officials with business. Should the paradigm shift, business would be swept away by the combined economic power of society.

***************************************************************
"Global warming - it's not just a fact, it's a choice."