You Didn't Build That

[Bart]

"If I have seen a little further it is by standing on the shoulders of slave labour."

[youtube]http://www.youtube.com/watch?v=OlTRau_XgGs[/youtube]

 

[Fykus]

I guess this is socialism at its finest. Next thing you know he'll be saying "well you didn't build that business, so you shouldn't be entitled to all those profits that its making". I wonder if those idiots will be agreeing with him and shouting "YEAH!" when that happens....

 

[bordsilver]

"If I have seen a little further it is by standing on the shoulders of slave labour."

Not sure if I'm supposed to be offended by changing my quote but thanks heaps for the Friedman video. I've read Read's essay before but never knew there was a Friedman short version.

 

[Big A.D.]

I think you either do or do not understand thatguy, aquaholic, wrmcad, etc comments regarding the key difference between:
(a) what a government sponsored employee "builds" from resources taken from elsewhere in the economy under the threat of violence
and
(b) what the voluntary private enterprises "build" from resources that they had to save and invest.

It is irrelevant whether the government-sponsored building accidentally happens to have a beneficial outcome (many things clearly are), the point is that it was only accidental and/or achieved by force.

I understand the difference between the two, I just think it shows a remarkable lack of intelligence to pay out on Obama for advocating the same philosophy that some very well known capitalists used to made their fortunes.

The irony of the meme pic with Henry Ford and the Model T is just brilliant.

To start with, Ford's assembly line process was actually borrowed from an abattoir and there were at least a dozen people who helped develop it.

Ford's economic model (Fordism, and yes, that is the term) then went on to rely on paying workers high wages on the basis that if the workers had more money, they'd be able to consume more and that would create more demand. Obviously that worked very well, which is why the Soviets borrowed heavily from those ideas. That thinking found it's way into the development of centrally planned economies (like China) and was the basis for the Regulation school of economics, which sould probably be called the Stabilisation school since it also uses Keynes' ideas about counter-cyclical government spending to explain the difference between cyclical economic patterns and structural issues.

My point is that while we hold people like Henry Ford up as shining examples of what a good capitalist looks like, we're not actually following Ford's way of doing things and we're actively trying to disrupt people who want to.

 

[wrcmad]

I guess this is socialism at its finest. Next thing you know he'll be saying "well you didn't build that business, so you shouldn't be entitled to all those profits that its making". I wonder if those idiots will be agreeing with him and shouting "YEAH!" when that happens....

Well, he can get some lessons from Julia ....... mining tax?

 

[bordsilver]

^^^ Sorry Big A.D. Maybe my brain's switched off but I'm not following.

On one point though "paying workers high wages" NEVER creates supply. Workers producing more (because of an assembly line innovation) does create supply which can then be used to help meet essentially limitless demand.

 

[Bart]

"If I have seen a little further it is by standing on the shoulders of slave labour."

Not sure if I'm supposed to be offended by changing my quote but thanks heaps for the Friedman video. I've read Read's essay before but never knew there was a Friedman short version.

No offence meant to you bordsilver, I was taking the just piss out of the old bloke

 

[boneyard]

All be squat without ELECTRICTY...............

Who has the candles ready?

 

[wrcmad]

Ford's economic model (Fordism, and yes, that is the term) then went on to rely on paying workers high wages on the basis that if the workers had more money, they'd be able to consume more and that would create more demand. Obviously that worked very well, ....

Errr, that is not only illogical, but also questionable...

The mythology around this story holds that Mr. Ford wanted to pay his workers enough so they could afford the products they were making.

In fact, that wasn't his original reasoning.......

Source: http://www.nytimes.com/2006/04/05/business/05leonhardt.html

 

[JulieW]

You're getting upset about something said by a politician attempting to get the dispossessed and self-entitled to vote for him.

 

[bordsilver]

You're getting upset about something said by a politician attempting to get the dispossessed and self-entitled to vote for him.

Don't know about the others, but I'm getting upset about a politician using propaganda and lies to get anyone to vote for him. It's fraudulent and fraud should not be tolerated particularly when he is trying to tell the dispossessed that he'll fix it for them by dispossessing that "undeserving" business person over there (if you simply vote for me).

 

[hawkeye]

You're getting upset about something said by a politician attempting to get the dispossessed and self-entitled to vote for him.

Don't know about the others, but I'm getting upset about a politician using propaganda and lies to get anyone to vote for him.

I thought that was fairly usual. I agree with Julie, it's a good tactic by Obama. Seems very effective.

Blame the system not the player. There's a huge incentive for Obama to come out with all that stuff. Why would he not do it?

Politics in a democracy is, and always will be, lowest common denominator.

 

[Shaddam IV]

"If you are on the dole, YOU didn't pay for it". Someone else did it for you.

 

[bordsilver]

You're getting upset about something said by a politician attempting to get the dispossessed and self-entitled to vote for him.

Don't know about the others, but I'm getting upset about a politician using propaganda and lies to get anyone to vote for him.

I thought that was fairly usual. I agree with Julie, it's a good tactic by Obama. Seems very effective.

Blame the system not the player. There's a huge incentive for Obama to come out with all that stuff. Why would he not do it?

Politics in a democracy is, and always will be, lowest common denominator.

Nuts! You're making me think there isn't any point to venting my spleen on random blogs not read by the powers-that-be (or by the common denominator). Maybe I should write scripts for "the Shire" (although this seems to be waaaaay below the common deonominator )

 

[Big A.D.]

Ford's economic model (Fordism, and yes, that is the term) then went on to rely on paying workers high wages on the basis that if the workers had more money, they'd be able to consume more and that would create more demand. Obviously that worked very well, ....

Errr, that is not only illogical, but also questionable...

Err, the history of Western capitalism over the course of the last century would suggest otherwise, wouldn't it?

The mythology around this story holds that Mr. Ford wanted to pay his workers enough so they could afford the products they were making.

In fact, that wasn't his original reasoning.......

Source: http://www.nytimes.com/2006/04/05/business/05leonhardt.html

So...what was his original reasoning then? It was a cute article, but it didn't actually say what it was.

Okay, I'll save you the trouble: Henry Ford hated unions more than he hated paying his workers more money. He hated unions because they created inefficiency in production. Strikes prevent things being made. Stop-work meetings prevent things being made. Dealing with all that stuff is a pain. While this is completely true, the fact is that unions were originally formed because company owners were exploiting their workers and "the deal" between employers and employees simply wasn't fair. Ford reason that by raising wages by such a huge amount, he would be able to make a pre-emptive strike against any union activity because his workers simply wouldn't have anything to complain about and therefore wouldn't need to form unions. Since he was making shedloads of money through the efficiencies of his assembly line, there wasn't any reason why "the deal" couldn't be better for the workers.

As it turned out, if you don't give workers a reason to complain, they don't and you can make a lot of money, which goes back to the workers who don't complain, etc, etc.

The High Wages = Economic Growth in Fordism is the economic argument for doing what he did because "don't do things that make people hate you" apparently isn't a very good argument to make to an economist. High Wages = Economic Growth is merely descriptive of what occurs. If you want to get all touchy-feely and have someone to tell you why being an a***hole to your employees isn't good for business, hire a $400/hour business coach.

 

[hawkeye]

BULL DUST the government "builds the thing". They build nothing. The Government is nothing more and a coercive guider of available resources, away from where the market would've placed them VOLUNTARILY, TO where the vested interest wants them BY FORCE.

I highly doubt the private sector (which focuses intently on ROI/ROE) would invest in capital intensive and non-profit projects. Do you seriously believe private companies would voluntarily do something which gives them & their shareholders no benefit?

The free market is nice in theory but there are non-profitable things which are beneficial to the society as a whole which need doing.

The government is a perfect candidate to fill this gap, either through 'force' or 'legislation'.

I agree more often than not government spending is inefficient & distorts market forces (ie. waste of money) but there's still a place for them somewhere.

Imagine if private companies could do whatever they wanted, any infrastructure outside of Sydney & Melbourne would not be built because it is cost ineffective. The last mile is expensive and offers low returns.

You would not have internet in Byron Bay because population density is low. You would not have cellular signals in the outskirts of Sydney because it takes too many towers to cover the area and not enough people to justify the cost etc.

Also, governments do make things which other people then go on to use:

http://en.wikipedia.org/wiki/NASA_spin-off_technologies

Apple on the other hand, is suing Samsung for round rectangles. Go figure.

The private sector will meet demand with supply, at the right price.

Using your Byron Bay example for instance, what is really being said by the people in BB is "we want the internet but we want someone else to pay for it". If you want to live in some really nice place which is quite far from most civilization, presumably for the lifestyle, why should you not have to pay for it?

 

[bordsilver]

The High Wages = Economic Growth in Fordism is the economic argument for doing what he did because "don't do things that make people hate you" apparently isn't a very good argument to make to an economist. High Wages = Economic Growth is merely descriptive of what occurs.

Ummm, no. It's the other way around. FIRST there has to be a "economic rent" that can be shared between the owner of the capital and the employees.

No economic rent = no wage rise.

Excluding Government created monopolies/cartels, then (with the odd exception) economic rent occurs BECAUSE of an increase in productivity (i.e. output per worker) that has been created.

Once the rent has been created, then (and only then) can wages rise. How much wages rise depends on a host of factors, not least of which is how fast competitors are to take up whatever you are doing differently that generated the increased productivity. Hence, unions can only extract rents when there are rents to be had and, in the case of Ford, can only short-circuit the possibility of unionism reducing the amount of rent by passing a portion through as higher wages. Hence, Ford could ONLY offer the higher wages because of the higher productivity not because he was trying to circumvent unions or anything like that.

No matter how much you love your employees (or yourself if a sole business owner) you simply cannot increase wages unless profits increase (which usually only happen when productivity increases).

 

[Big A.D.]

The High Wages = Economic Growth in Fordism is the economic argument for doing what he did because "don't do things that make people hate you" apparently isn't a very good argument to make to an economist. High Wages = Economic Growth is merely descriptive of what occurs.

Ummm, no. It's the other way around. FIRST there has to be a "economic rent" that can be shared between the owner of the capital and the employees.

No economic rent = no wage rise.

Excluding Government created monopolies/cartels, then (with the odd exception) economic rent occurs BECAUSE of an increase in productivity (i.e. output per worker) that has been created.

Once the rent has been created, then (and only then) can wages rise. How much wages rise depends on a host of factors, not least of which is how fast competitors are to take up whatever you are doing differently that generated the increased productivity. Hence, unions can only extract rents when there are rents to be had and, in the case of Ford, can only short-circuit the possibility of unionism reducing the amount of rent by passing a portion through as higher wages. Hence, Ford could ONLY offer the higher wages because of the higher productivity not because he was trying to circumvent unions or anything like that.

No matter how much you love your employees (or yourself if a sole business owner) you simply cannot increase wages unless profits increase (which usually only happen when productivity increases).

Yes, and productivity did increase because of the more efficient assembly line process.

Ford was running a pretty sweet business and didn't want unions to muck things up so he decided not to be greedy and share the benefits with the workers.

This seems to confuse some people because we're told that capitalism is about being greedy and Ford was a very prominent capitalist. This means that either Ford wasn't actually a capitalist or the definition of "capitalism" has changed since Ford's time.

I'm pretty sure Ford was a capitalist because you don't see many socialists making the billions of dollars that he did, so I'd hazard a guess that people have simply forgotten what real capitalism is and what it can achieve.

 

[bordsilver]

Yes, and productivity did increase because of the more efficient assembly line process.

Ford was running a pretty sweet business and didn't want unions to muck things up so he decided not to be greedy and share the benefits with the workers.

This seems to confuse some people because we're told that capitalism is about being greedy and Ford was a very prominent capitalist. This means that either Ford wasn't actually a capitalist or the definition of "capitalism" has changed since Ford's time.

I'm pretty sure Ford was a capitalist because you don't see many socialists making the billions of dollars that he did, so I'd hazard a guess that people have simply forgotten what real capitalism is and what it can achieve.

Phew. We seem to be on the same page after all.

Yes, the handful of bad examples tend to spoil the hundreds of thousands of great examples. Besides those "capitalists" that got rich through the banking system or via other government created cartels/monopolies, I would say that the vast, vast majority of today's capitalists are no different from Henry Ford and his cohort.

As I have said elsewhere, the banking system is a special case and needs to be fully excluded from what we talk about when we discuss the merits of capitalism. The banking system as it has evolved over the past 100 years is (politely) "crony capitalism".

 

[Barbarian At The Gate]

If this snakeoil salesman gets one more term, AMERICA IS DONE FOR.

Got that?

DONE FOR!!!