From: jwh@citi.umich.edu (Jim Howe)
Subject: Re: Clinton on Economics (transcript of speech)
Date: Fri, 21 Aug 92 15:13:34 EDT
Organization: IFS Project, University of Michigan
Reply-To: jwh@citi.umich.edu

In article <1992Aug21.165652.3018@news.ysu.edu>, ae547@yfn.ysu.edu (Ronda Hauben) writes:
|> 
|> In a previous article, jwh@citi.umich.edu (Jim Howe) says:
|> 
|> >In article <1992Aug19.150321.29646@usenet.ins.cwru.edu>, au329@cleveland.Freenet.Edu (Ronda Hauben) writes:
|> >|> 
|> >|> "Growth" is a false category. So is "investment" . These false
|> >|> categories have led us into the economic mess that the U.S. is currently
|> >|> in.
|> >|> 
|> >|> Growth can mean more yachts or golden staircases are being produced
|> >|> by backward hand labor - and the whole society falls apart as the 
|> >|> wealthy are catered to.
|> >|> 
|> >
|> >In your example, who builds the yachts and the golden staircases?
|> >The wealthy may be catered to but workers are employed to do the
|> >catering.  In your example wealth is being exchanged, the worker
|> >exchanges labor for 'money' and the wealthy exchange money for
|> >some other good.  Society hardly falls apart in this scenario.
|> >
|> But who is the important party in the production of WEALTH is 
|> where we have the difference. One can produce wealth WITHOUT
|> capital or the capitalist. One CANNOT produce WEALTH witout
|> the WORKER. 
|> 
|> Any strike shows that this is true.
|> 

Actually this is a false claim.  It would be feasible to invest
in a machine which produced a product that could be sold, i.e
create wealth.  Take a worker and put him in a desert and how
much wealth will he produce?  In general this is not an either
or situation.  You need *BOTH* labor *AND* capital to produce
wealth.  The application of capital will cause wealth to increase
at a faster rate than simple labor alone.

|> Yet the whole effort in your model is to pretend that Capital
|> is essential and that labor is the beneficiary of Capital, when the
|> opposite is the reality.

The whole point of my example is to show that even luxury purchases
by wealthy people aid the economy.  I made no mention of capital.
The exchange was money for product or service.  One good for another.

|> 
|> For example, John Bellers in 1696 wrote:
|> "For if one had a hundred thousand acres of land and as
|> many pounds in money, and as many cattle, without a labourer,
|> what would the rich man be, but a labourer? And as the 
|> labourers make men rich, so the more labourers there will be, the more 
|> rich men...the labour of the poor being the mines of the rich." 
|>   (from Proposals for Raising a College of Industry of All Useful Trades
|>    and Husbandry, London)
|> 
|> 
|> >|> 
|> >|> This requires figuring out where such wealth comes from. It does 
|> >|> *not* come from *investment* but from *labor* and *nature*, [...]
|> >
|> >This, however, I do disagree with.  Labor and nature can only go
|> >so far.  A farmer may be able to work very hard on fertile ground
|> >and still not be able to produce enough food to provide for all
|> >his needs (food and otherwise).  Making an investment in tools,
|> >such as a tractor, suddenly enables him to make much more productive
|> >use of his time and produce far more than he was previously capable
|> >of.  This is the power of investment.  This is why capital formation
|> >is the key to economic growth.  The key to increasing *wealth*
|> >for all society.
|> >
|> But tools and labor saving devices are not the same as *CAPITAL* or
|> *CAPITAL FORMATION*.

They are *CAPITAL*.  Money is simply an intermediate device.  When
GM spends investors cash on plant and equipment, that is a *CAPITAL*
investment.  Without such investment the company, its workers, and
the economy as a whole are worse off.

|> 
|> A country very rich in CAPITAL like the U.S. has its large corporations
|> constantly favoring backward hand labor NOT investment in labor
|> saving devices. 
|> 

Care to cite any particular examples?  Last time I heard, automakers
weren't building cars by hand, farmers weren't using hand plows, 
etc.

|> Large U.S. corporations are concerned that their RATE OF PROFIT be
|> as high as possible which means that they want to make as large
|> a profit as possible with as little investment in capital as possible.

Gee, economics at work.  Why would anyone spend any more than they
had to to maximize their return?  When you go shopping, do you 
deliberately pay more or buy items you don't need to satisify your
wants?

|> 
|> ALL THE INDUCEMENTS IN THE WORLD FOR LARGE CORPORATIONS TO GAIN
|> HIGH PROFITS DO NOT SERVE TO ENCOURAGE LABOR SAVING DEVICES IN 
|> MANUFACTURING.
|> 

And where does this bit of illogic come from?

|> >|> 
|> >|> That means labor legislation at the very minimum which shortens the
|> >|> hours of work and vigorously enforces health and safety regulations,
|> >
|> >How you can think that arbitrarily reducing the number of hours worked
|> >and imposing extra costs on production can lead to increased wealth
|> 
|> I am not proposing *arbitrarily* reducing the number of hours worked -
|> BUT laws reducing the number of hours worked and vigorously enforcing
|> such laws.

Excuse me?  Proposing a law to reduce the number of hours worked is
completely arbitrary.  There is no logical foundation for such an
action and there is no basis for determining how much to reduce
hours worked.  As I said, this is completely arbitrary.

|> 
|> Since it is the workers who produce value and hence wealth - if they
|> are rested they will be more productive. 
|> 

And if they don't work at all they will be completely rested and will
produce infinite amounts of wealth.  Let's try that and see how much
wealth is produced.  Clearly there is a point between not working
at all and working 24 hours a day which will maximize productivity.
This point is dependent on several factors, type of work performed,
type of working conditions, general societal attitudes toward work
and individual characteristics.  It would be impossible for government
to determine the *proper* number of hours which should be worked
by an individual to get maximum productivity.  It is quite possible,
however, for companies (particularly smaller companies) to make
this determination.  Why?  Because the company can see the results
on their bottom line.  The government has no such yardstick.

|> 
|> >is beyond me.  If hours are reduced because of new production techniques
|> >which enable a worker to produce more than they used to then I
|> >would agree with you.  This is what happened during the industrial
|> >revolution and after.  Work weeks were able to be shortened because
|> 
|> No the increased productivity was the result of the shorter hours, 
|> not the cause of the shorter hours.
|> 

Sorry, you have your cause and effect backwards.

|> >
|> >I have no problem with workers joining any organization they wish.  I
|> >only object to special legal treatment granted to labor organizations.
|> >
|> But labor unions now have special legal treatment - and WORKERS have
|> no legal rights. Also, corporations have special legal treatment
|> as they are accorded the right to organize, but workers are denied
|> that right as the trade union leaders have the rights, not the workers.

I have very little respect for current labor law.  However, workers
do have rights.  They could organize themselves into a workers
corporation and sell their labor to any company they saw fit.  Of
course the labor corporation would have to contend with independent
contractors (known as scabs in union parlance) but nobody is preventing
them from forming their own workers corporation.

|> 
|> >|> Only an economic policy of government which enforces high standards in
|> >|> how employers treat their workers can begin to change the economic
|> >|> crisis in the U.S.
|> >
|> >Only an economic policy which rewards capital formation can change
|> >the economic crisis in the U.S.
|> 
|> Clearly this is where we differ. An economic policy which CATERS
|> to CAPITAL FORMATION caters to low wages, backward working conditions, 
|> and to the society going downhill which has such a policy.
|> 
|> Your support of *capital formation* assumes that the interest of 
|> those who own capital is the interest of society.
|> 
|> Adam Smith and I differ with you.
|> 

I disagree.  Adam Smith made it clear that it is from the bakers
own self interest that we get our bread, not because he has some
moral obligation.  People need bread, the baker can satisfy that
need.  He benefits, we benefit.  Note that this has nothing to
do with the baker operating in the interest of society.  Capital
formation is done in the interest of the business enterprise.
However, the business will not succeed if it doesn't supply a
product that meets the needs of those in society.
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