Tag Archives: Labour Theory of Value

Our Theory of Economic System Fluidity: Marx and Rand together in perfect harmony

10/22/2012 Portland, Oregon – Pop in your mints…

In the realm of economic thought, there are two extremes.  On one end of the spectrum sits the economic equivalent of Karl Marx’s workers’ paradise, known as Socialism.  On the other end sits the economic expression of Ayn Rand’s rugged individualism, known as Capitalism.  As anyone who has studied these philosophical extremes can tell you, the operation of real world seems to constantly fall somewhere in the space between the two, making strict adherence to either an indefensible position.

While apologists for these extreme positions do a wonderful job of explaining why complete adherence to their ideals by all would lead to an utopia on earth, a careful examination of the arguments, along with a quick glance at how things operate in the real world, lead one to conclude thatevidence of both Socialist and Capitalist ideals can be found in nearly any system.

How can this be?  If the extremes are both correct in their reasoning, they msut be mutually exclusive of each other.  However, we look around at the world around us, as well as into the depths of our own souls, and we invariabley find an uncomfortable coexistence of ideals that is difficult, if not impossible, to reconcile.

That is, until today.

Our aim today is to reconcile this age old dilemna.  Fret no more, fellow taxpayer, for the answer is simple:  Socialism works for local systems, while large scale systems are best served by embracing Capitalist ideals.

How can this be?  The answer is simple.

Socialism, with its embrace of community property and centralized decision making, is a superior policy for systems until they reach a critical mass.  Socialism unwittingly provides the framework in which society cares for its economically weaker members.  It is a system which is entered into with the understanding that at least a portion of one’s actions will take the form of altruism, that is, they will work for the benefit of others without the expectation of material compensation.  In fact, socialism is the basis for the family unit into which a great deal of humanity enters the world.

Karl Marx
Karl Marx

Given the barbarities which are justified in the name of profit, it can be said that the basis for morality and human decency most frequently occurs in a Socialist setting.  Given the inherent requirement of altruism, Socialism is the system which asks the individual to look beyond themselves.  However, as we touch on later, Socialism on a large scale tends to bring out the worst in human beings, as the inevitable onset of poverty quickly diminishes any moral advantage that small scale Socialism may enjoy.

We digress on the question of morality for a moment and instead submit to you an insightwith regards to the corporate structure.  It is the revelation that Corporations, entities which are held out as the champions of Capitalism, are, in fact, Socialist institutions (the stunned silence is deafening, please do read on, fellow taxpayer, it will make sense, trust us.)

It is for this reason that wages do not fit well into free market pricing mechanism and instead lend themselves to the “Labour theory of value” which is a base concept of Socialist philosophy.

The logical proof is the following:  The employer, employee relationship is based on a set rate per time period of work.  Once it has been agreed upon, the wage rate ceases to adhere to free market theory and bcomes a component of the Labour theory of value.  The top level managers in corporations that employ persons in an employee capacity become the centralized authorities in what is a socialist realm.

Another proof of this can be found in that property, which is held in the name of the Corporation, is cared for and used by employees.  As such, corporate property, as its name would imply, is held in common by subjects who themselves have no property rights in said property.  They may be offered shares in the corporation themselves, but this does not directly effect their day to day use of the Corporation’s (their employer’s) real and personal property.

A majority of human beings today find themselves as part of a Socialist entity of some sort, be it a family, household, corporation, or governmental employer (which, for purposes of analysis, behaves in a similar fashion to a corporation).  It is within these systems that we have most of our day to day interactions.  It is understandable, then, that most people would see a form of Socialism as the basis for a utopian ideal.

However, the members of these same Socialist organizations, the heads of household, CEOs, heads of government, members of Boards of Directors, salespeople, security personnel, customer service agents, and a host of others, well know that the “esprit de corps” which may exist in their organization is thrown aside in their dealings with the outside world.  The outside world, where individual corporations collide, is marked by brutal self interest and the protection of private property rights which are the hallmarks of Capitalism.

What gives?

Capitalism, the system which honors private property rights and glorifies the pursuit of self interest, must be embraced and allowed to operate in an unhindered state as the basis for the interactions between the small scale Socialist systems (families, corporations with employees, and those brave individuals who choose to face the Anarchic system of the world alone.)

Ayn Rand
Ayn Rand

The reason that Capitalism must be embraced by the smaller systems is that its principles, namely the laws of supply and demand and the Golden Rule, must be allowed dictate their day to day activities so that the smaller systems can better adapt and survive in a harsh, unforgiving environment.  To put it another way, Capitalism is a superior response to the Anarchy in which we all find ourselves, whether we are willing to admit it or not.

However, apart from its invaluable contributions to understanding the material world, even hard core Capitalists would agree that blind adherence to the Capitalist creed would not only lead to a trampling of those less fortunate in society, but the potential isolation of the individual from human warmth, feeling, and dare we say, loss of the ability to love.

For all of the virtues of Capitalism, its potential frigidness at the individual level and lack of a clear moral compass make it unpalatable to the majority as an absolute ideal.

So the answer is simple.  Socialism operates on a small scale, Capitalism on a large scale.  Marx asks Rand to dance, she accepts, and the world makes sense.  As the theory of biologos attempts to bring harmony to the polarization of two views of the world’s origins, our theory of economic system fluidity allows the economist and politician to embrace both the virtues of the Socialist ideal as well as the Capitalist economic imperative.

The final question which begs to be asked is the following:  In terms of size, at what point is it appropriate for a system to stop being guided by Socialist principles and to break up into units better able to cope with the Anarchic surroundings, meaning a leap to the Capitalist model, which naturally defines the size limitation of what may be called a functional Socialist system?

While there is no firm answer, it is clear that a Socialist system has reached its limit when it is corporately bankrupt and unable to fulfill its commitments, either morally or financially, to its members.

In the case of the corporation, it must adjust its productive activities and/or release either property or employees into the capitalist system until it finds equilibrium.  The released Employees then find themselves, albeit for a moment, in what may be called the free market for labor.  In it, they will either learn to compete perpetually in the capitalist environment and form their own small scale socialist entity, or link up quickly with another socialist entity, be it another corporation, state welfare, or the generosity of a family unit.

The fact that both families and corporations can accumulate wealth are proof that socialist entities can and do compete and thrive in a world where capitalist thinking and political structures are an imperative.  It is the ability of each unit to adapt to changes and to seize opportunities which makes the difference.

There is much more to say about this but it will have to wait for another day.  We leave you with what should now be obvious.  When Socialism is employed on large scales, it looses both its ability to compete as well as any moral superiority which it may have enjoyed.  When persons are thrust headlong into poverty, which is the logical economic end of large scale Socialism, what were once moral imperatives are tossed aside in pursuit of purely Capitalistic aims in a desperate attempt to eat.

Anyone who has lived such an event will attest that it is in these unfortunate circumstances that the rotten core of humanity is laid bare for all to see.  While unbridled Capitalism has its own faults, which are daily brought to light in the media as a reminder of when it has been allowed to run too far.  It is this consciousness, and the human desire for mercy, which work to keep the evils of Capitalism in check.

The beauty of the theory is that the normal operation of each system keeps the proliferation other in check, any attempts by government or sovereigns to impose or preserve one system over the other will end in disaster.

Rushing to extremes is for fools, for the Kingdom of God is one of perfect balance.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 22, 2012

Copper Price per Lb: $3.64
Oil Price per Barrel:  $89.16
Corn Price per Bushel:  $7.61 
10 Yr US Treasury Bond:  1.80%
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,729 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.8%
Inflation Rate (CPI):  0.6%
Dow Jones Industrial Average:  13,345  
M1 Monetary Base:  $2,334,000,000,000
M2 Monetary Base:  $10,199,400,000,000