Insightful article on capitalism (particularly for Belloc)

[Anthem]

Maybe that is because that is because of low wages?  You will have to explain this a little more since there are a variety of things that expand timelines on projects.  Or, are you saying that the people in the country are just lazy?

They tend to be so lazy you want to shoot them at times.  However, this is more of a cultural issue.  They are so used to corruption and government handouts they look surprised when they are expected to work for a living.  25% is a very typical labor factor.  Ask any project planner doing work in the third world.  Also, the fascist cultures tend to breed a cattle mentality.  These cultures are hyper-risk adverse.    Probably because in a fascist country you can't really get rewarded for your efforts, but the government is always looking for scape goats for its failed policies.  So you learn to keep you head down and not take any risks.

Your theory that they are lazy because the Americans and Europeans aren't paying them enough is false.  These workers get 1/3 the rate at other government facilities for the same work.  They are very well off, getting 3 times the pay as their countryman in similar jobs, except in the Gringo plants they are far less likely to be blown up or gassed.

I didn't say that it was my theory, just speculation.  You still didn't explain exactly why it takes so long to get something done.  Motivation surely comes from within an employee, and remuneration may not be the only motivator, but it certainly is effective at least in the short term.  If I have a lazy employee, I get rid of him.  If the pay is good enough, someone will do the work.  If the pay is terrible,  the performance will be terrible.  If the pay is good and the performance is terrible, then the manager is an idiot for keeping the employee.  Paying three times the going rate, a company ought to be able to hire the best out there.  I know I could hire the best in the US if I could pay them three times the average.  What is stopping the same thing in the Third World?  Surely not every qualified person in the country is a bum.  Or is it that three times the average is still a poor wage?

From this, I suspect you are producing a commodity that is not available in the US, or at least, is only available in certain parts of the world.  However, that does not excuse anyone of paying a fair wage, whatever definition you use.  If money is being made on the commodity, based on a free market, then a fair wage ought to be part of the bargain.  Or, do you mean to say since it costs more to produce this commodity in another country, the wages ought to be lower so the profit is the same for the company?

 

These workers are obviously being paid a fair wage.  Three times the going rate in the country is a fair wage by any standard you use.

Again, three times the average is not necessarily "fair".  If a ditch digger in the US makes six dollars an hour and I offer to pay 18 dollars an hour, it is more than fair.  If an average Mexican ditch digger makes one dollar a day, I am not sure that three dollars a day is actually fair, based on how little the average actually is.  I already told you what I thought wages ought to purchase.

As to whether the wage should be lower than a comparable worker in a capitalist country, no it shouldn't be.  However, if the country wants to change that, they need to become capitalist.  This gets back to people who clamor for MORE corporate tax.  They don't realize companies don't pay the tax.  It comes out of the worker's wage and higher prices.

 As far as what constitutes a fair wage, answer my question on the wheat farmer and we'll discuss it.

So, are you saying that the economic system of a country determines the value of a certain amount of work?  That in the US an hour's work is worth one meal but in China it necessarily ought to take, or it is fair that it takes, eight hours to earn a meal, or something of that nature?

[James02]

I didn't say that it was my theory, just speculation.  You still didn't explain exactly why it takes so long to get something done.  Motivation surely comes from within an employee, and remuneration  may not be the only motivator, but it certainly is effective at least in the short term.

I thought I had explained it.  There is a deficiency in their culture.  They have been raised as cattle by their fascist, socialist government.  The idea of bettering yourself is non-existent.  If you take a risk, there is no upside if you succeed.  However, if you take a risk and mess up, you become the scape goat. 

 Another problem that burns many American companies is that these people live in an utter socialist, fascist hell hole.  Once a project finishes up, they may not have work again for 2 years.  So they will try to drag out the job as long as they can.  In sum, they are poor because they are not capitalist.  I found the exact attitude in Eastern Europe as I did in Latin America, a total lack of appreciation for the formation of capital.  Off on a tangent, in the country that I worked, they brought in a Polish labor crew.  I believe the government company was paying the Polish laborers $250 per month.  Anyhow, the Polish crew was an amazing group of craftsman.  They were also hard workers.  If Poland develops a proper government, that country has potential.  They also seem like they would be natural friends with Americans.  We hit it off, even though I could not understand a word they said.  It sounds like a bee hive.  Had to use an interpreter.

So, are you saying that the economic system of a country determines the value of a certain amount of work? 

I've been saying that in every post.

That in the US an hour's work is worth one meal but in China it necessarily ought to take, or it is fair that it takes, eight hours to earn a meal, or something of that nature?

I never called it "fair".  In fact, I said it shouldn't be that way.  What I am telling you is reality.  In a socialist country, workers get screwed big time.  I think every country should follow Chile, throw out the utopians, social "justice" crew, liberation theologists,  socialists, and fascists and adopt capitalism.  Then they will eventually increase their wages as they accumulate capital.

You never answered the question about the wheat farmer.  One answer (ironically the right answer) is "I don't know".

[James02]

Why is  a day laborer in China making less than a day laborer in the USA?  The short answer is because China is fascist.

One aspect of the differential was explained by either Say or Bastiat.  It is called, I believe, the Law of Comparative Advantage.  Let's say you are a great engineer and the market has valued your services at $500 per hour.  Now you have a lawn that needs to be mowed, and other chores.  You can do these chores, and only work 35 hours per week, or you can work 40 hours per week and hire someone to do it for you.

Now what this means is that a day laborer will unlock $2500 a week in additional engineering value by working 5 hours doing lawn chores.  So we get back to the wheat farmer question, what is the day laborer worth?  One thing, and this is the Law of Comparative Advantage, is that the day laborer will get a higher salary then if there was no engineer.  The engineer is making his high salary because there is a huge accumulation of capital to utilize.

Declare war on capital and it all blows up into a huge fascist hell hole.  In the USA we will soon be a third world hell hole.  We have declared war on capital, and capital is leaving.

[James02]

The meaning of the question about the wheat farmer:

Answer:  It is impossible to calculate.  How many "A"'s are there?  How many "B"'s are there?  What is a sack of wheat worth compared to other products?  What other costs does "A" have?  How long does a millstone last?  What else can "A" grow on his land?   What are the government regulations?  How often is all of this changing?  Is the money gold or fiat paper?  Is "A" Catholic?  Is "B" Catholic?  On and on it goes.  The questions are almost infinite.

In a command economy, you depend on a government body, whether a socialist government, or a guild, to magically "know" the answer.  That is why it fails.

In a free market, price answers all of these questions.  Price is either your cost or your revenue.  By pricing flour relative to other goods, the market gives "A" plenty of information to make his decisions.  If you introduce gold money, then the price information becomes even more powerful in allocating resources.  Introduce government fiat paper money, and price lies to you, hence the housing "bubble".

[Anthem]

That in the US an hour's work is worth one meal but in China it necessarily ought to take, or it is fair that it takes, eight hours to earn a meal, or something of that nature?

I never called it "fair".  In fact, I said it shouldn't be that way.  What I am telling you is reality.  In a socialist country, workers get screwed big time.  I think every country should follow Chile, throw out the utopians, social "justice" crew, liberation theologists,  socialists, and fascists and adopt capitalism.  Then they will eventually increase their wages as they accumulate capital.

Yes, you did say fair.  Let us all look back a couple of posts:

These workers are obviously being paid a fair wage.  Three times the going rate in the country is a fair wage by any standard you use.

What say you now?  I disagree there is arbitrary amount that is fair in a particular country.  As I carefully explained above, a fair wage concerns the ability of a person to support himself.  How do you define a fair wage?

You never answered the question about the wheat farmer.  One answer (ironically the right answer) is "I don't know".

  Is it one answer or the right answer?  I suppose "I don't know' could always be defended as one answer.  That gave me a good laugh.  Depending on one's level of knowledge about a topic, "I don't know" might also be the right answer for a certain individual!  But such an answer does not do much to solve a problem, now does it?  Regardless, I did give you my answer but perhaps you missed it.  I asked for additional information, "What does B need to live?"  This was a rhetorical question, but prefaced my answer, which is if he has enough already (just compensation for his labor) he ought to be able to continue as he his.

Now, perhaps you were saying (requiring?) in your scenario that B had no choice but to be hired by A, that A was forcing B out of business.  I addressed that as well.  I said that A would pay B slightly less than 2 bags of flour.  If A is a Catholic, he ought to pay B at least two bags of flour, since that was what B was subsisting on before.  If B was starving (or whatever) A ought to pay him a fair wage.  I explained what I thought was fair and just.  What do you think a fair wage is?

[James02]

As to whether the wage should be lower than a comparable worker in a capitalist country, no it shouldn't be.  However, if the country wants to change that, they need to become capitalist. 

This is my quote I was referring to when I said it wasn't "fair".  Let's get definitions set so we don't confuse things.  When you talk about "Fair" and "Fair Wage", there are different scopes:

1.  Catholic doctrine on Just Wage and Living Wage.  According to this scope, the wage is definitely "fair".

2.  Local scope, in comparison to other workers:  According to this scope, the wage is more than fair, by a factor of "3".

3.  World scope.  In this scope, it is unfair that these poor souls have to suffer under fascist, socialist policies, resulting in low wages compared to capitalist countries.  The answer is to eliminate the socialism.

[Anthem]

In Rerum Novarum, Pope Leo XIII says this:

(from 44) The preservation of life is the bounden duty of one and all, and to be wanting therein is a crime. It necessarily follows that each one has a natural right to procure what is required in order to live, and the poor can procure that in no other way than by what they can earn through their work.

45. Let the working man and the employer make free agreements, and in particular let them agree freely as to the wages; nevertheless, there underlies a dictate of natural justice more imperious and ancient than any bargain between man and man, namely, that wages ought not to be insufficient to support a frugal and well-behaved wage-earner.

46. If a workman's wages be sufficient to enable him comfortably to support himself, his wife, and his children, he will find it easy, if he be a sensible man, to practice thrift, and he will not fail, by cutting down expenses, to put by some little savings and thus secure a modest source of income.

Just as I said in my posts above, there is a means to determine whether one is paying his employees a just wage.  I outlined it fairly well, I think, but the Pope has a bit more elegance in his language than I do. 

James, if you know that three times the going wage in your example accomplishes the things to which Pope Leo exhorted us, why not just say so?  There is no need to go into comparing to what other workers make.  Certainly your company can pay whatever it likes, regardless of what other workers make.  Your company has a responsibility to pay a living wage to its employees.  If that is 100 times the going average, regardless of whether the economy is capitalistic or socialistic, that is what you are morally obligated to pay.

[James02]

Regardless, I did give you my answer but perhaps you missed it.  I asked for additional information, "What does B need to live?"  This was a rhetorical question, but prefaced my answer, which is if he has enough already (just compensation for his labor) he ought to be able to continue as he his.

Now, perhaps you were saying (requiring?) in your scenario that B had no choice but to be hired by A, that A was forcing B out of business.  I addressed that as well.  I said that A would pay B slightly less than 2 bags of flour.  If A is a Catholic, he ought to pay B at least two bags of flour, since that was what B was subsisting on before.  If B was starving (or whatever) A ought to pay him a fair wage.  I explained what I thought was fair and just.  What do you think a fair wage is?

I blew it.  Sorry for the confusion. I see your reply on the bottom of page 4.  The answer is that it is impossible for an individual to come up with the answer.  There are thousands of parameters, which I listed a few.  Throw in the ages of "A" and "B", etc... etc...  Now to your comments:

What does B need to live?  If he has enough producing his own, the Catholic answer is that he ought to be able to continue on as he is.  Of course, he has the choice to enter into a bargain with A, but who would advise that?  Only someone who wanted A to produce more. 

The Catholic answer only sets a minimum payment, that is all.

Once in the bargain with A, B has much less chance of doing better than he already is, save by the benevelonce of A. 

Suppose A and B settle on 25 sacks of flour, and B works 5 hours less per week?  More family time and more pay?  A is richer by 25 sacks of flour, so this outcome is possible.

What would A actually pay B?  I submit it would be slightly less than 2 bags of flour.  All A has to do is to lower his price by 4% for a time and B is out of business. 

What price is "A" lowering?  I specifically made this a barter economy.  "A" produces and trades 100 sacks of flour a day.  "B" produces and trades 2 sacks of flour a day.  That is the starting point.  But if you want to introduce gold, fine.  We will also suppose that "B" advertises that his flour is higher in nutrition since he uses wild wheat berries.  Also, since his flour is hand ground, it is produced with lower heat so the nutrition and taste are of higher quality.  So "B"'s flour commands a higher barter demand or a higher quantity of gold from his customers.  Go back to square 1.  It is impossible for a person, or a socialist government, or a guild, to determine what "B" should be paid.

  If A can afford to hire B, B will be out of business on his own or will shortly be put out of business.  B already has the means of production, but A has more of the means, ergo the means will become concentrated in A. 

  Wrong.  You are ignoring the increase in production.  The economic problem is how to allocate the increased production between "A" and "B".  It is impossible to calculate that.  In the current scenario "A" has spare capacity with his capacity.

  B has nothing to gain by working for A, but in reality, will eventually have no choice but to work for A.

"B" can choose to continue what he is doing.  He can choose to go work in the barrel business, or he can choose to fish for a living.  He has many alternatives.  The command economy has no knowledge of this, nay it can't have this knowledge, thus the fundamental flaw of socialism.  Suppose "A" really hates the field work.  "A" is delighted to get 50 sacks a day.  Suppose "B" is the only man available.  "A" could cut a deal with "B" where "B" gets 100 sacks of flour if he agrees to work only in the fields and let "A" do the mill work. 

  Since capitalism is without morality, there is no imbedded reason for A to do be generous; in fact, there is a strong incentive not to be generous.  Capitalism, as a philosophy beyond economics, elevates one's self-interest above all else.

Under capitalism, "B" doesn't need "A" to be generous.  "B" can work hard, save, and go into business for himself if he wants.  Or he can cut a deal where he is paid 10 sacks of flour per day and works 1 hour less per day, and be completely satisfied.  But yes capitalism, divorced from Catholicism, will end up destroying itself, just as distributism, fascism, and socialism will.  The Church must be involved, or Original Sin will creep in.

One more question, if "B" is paid more than 2 sacks of flour (ok 3 sacks of flour to compensate for the quality difference), is he exploiting A?

[James02]

James, if you know that three times the going wage in your example accomplishes the things to which Pope Leo exhorted us, why not just say so?

OK.  Your turn.  You missed this:

1.  Catholic doctrine on Just Wage and Living Wage.  According to this scope, the wage is definitely "fair".

In my real life example, the wage is much higher than a Living Wage.  But according to a world wide scope, I think it is unfair for these poor people to have to live under a fascist economy and settle for less.

[Anthem]

What does B need to live?  If he has enough producing his own, the Catholic answer is that he ought to be able to continue on as he is.  Of course, he has the choice to enter into a bargain with A, but who would advise that?  Only someone who wanted A to produce more. 

The Catholic answer only sets a minimum payment, that is all.

I think it would be immoral to drive B out of business.  So, he ought to be able to continue on as he is.

Once in the bargain with A, B has much less chance of doing better than he already is, save by the benevelonce of A. 

Suppose A and B settle on 25 sacks of flour, and B works 5 hours less per week?  More family time and more pay?  A is richer by 25 sacks of flour, so this outcome is possible.

You make my point.  Notice I did not say "no chance", just much less chance.  If A is benevolent, then your scenario is possible.

]What would A actually pay B?  I submit it would be slightly less than 2 bags of flour.  All A has to do is to lower his price by 4% for a time and B is out of business. 

What price is "A" lowering?  I specifically made this a barter economy.  "A" produces and trades 100 sacks of flour a day.  "B" produces and trades 2 sacks of flour a day.  That is the starting point.  But if you want to introduce gold, fine.  We will also suppose that "B" advertises that his flour is higher in nutrition since he uses wild wheat berries.  Also, since his flour is hand ground, it is produced with lower heat so the nutrition and taste are of higher quality.  So "B"'s flour commands a higher barter demand or a higher quantity of gold from his customers.  Go back to square 1.  It is impossible for a person, or a socialist government, or a guild, to determine what "B" should be paid.

I think you are the one that introduced gold, money, etc., into the discussion, but no matter.  My language was inartful.  I should have said that A provides 4% more value in his product.  So, A puts 4% more flour in his sacks than B.  B can advertise whatever he likes, but this does not negate the fact that A has tremendously more ability to direct the market than A has.  A has the ability to put B out of business in very little time.  Surely it is true that B might have the ability to eventually compete successfully against A, but you stacked the odds against it.  Even though it is your scenario, throught things in now about being hand ground, lower heat, etc., is a bit unfair, don't you think?  Also, this is probably beyond your ken, but there really isn't any difference in the flours.  Flour is ground between stones or, now, in steel mills.  "Hand ground" flour would be ground by stones just as flour in a water mill would; these would be equivalent products.

One more question, if "B" is paid more than 2 sacks of flour (ok 3 sacks of flour to compensate for the quality difference), is he exploiting A?

Of course not.  A can pay B whatever he wants.  A is in control.  Only the person in power can exploit another.  B can blackmail A, B can defraud or lie to A for more pay, but B cannot exploit A.  If B is paid more than he justly deserves, then A is being generous or benevolent.  When God gives you more than you need to survive, are you exploiting God?

I'll let your other comments stand, though I could say more.  Let me just summarize in saying that capitalism is not just a free market, and even though you want it to behave as the ideal system, it does not.  Capitalism is not Divinely inspired, that is for certain.  I know you, and others, will say, "Well, we really don't have true capitalism today" due to government interference or other factors, and excuse all of the bad in capitalism today.  That has already been done in this thread.  Just remove the government interference and everything will be great!  Idealistic yes, but not realistic at all.  Capitalism was showing rot before the US went quasi-socialist.  Capitalism has bred materialism and greed.  You are correct that it is divorced from Catholic morality.

[Anthem]

James, if you know that three times the going wage in your example accomplishes the things to which Pope Leo exhorted us, why not just say so?

OK.  Your turn.  You missed this:

1.  Catholic doctrine on Just Wage and Living Wage.  According to this scope, the wage is definitely "fair".

In my real life example, the wage is much higher than a Living Wage.  But according to a world wide scope, I think it is unfair for these poor people to have to live under a fascist economy and settle for less.

You just got around to making this point.  Earlier in the thread you seemed hesitant to say as much.  I said this yesterday:

So, I think a just wage is that which provides sufficient food for all members of the family, substantial shelter from the elements, required medical care, appropriate clothing for the family, other things of this sort, and enough excess to provide for those things, after savings, for a year.  So, if a 300% raise give these things to a worker, then it is just.  If not, it is unjust.  The wage should also allow one parent to work while the other stays home to raise any children.  What is your definition of a just wage?

I did not really miss what you said.  I apologize for not altering my post after you posted yours, but I think it is useful to read nonetheless.  Anyway, I do not think it is unfair or unjust that people get paid "less" than I do, because I do not think money is the source of happiness.  I think it is unjust for companies to pay their employees less than a living wage.  A living wage must also include enough money that one parent can stay home with the children.  I also think it is unjust for companies to move their production facilities overseas so they can pay employees less for the same work, even if their foreign employees are being paid a living wage in their own countries. 

[James02]

I think you are the one that introduced gold, money, etc., into the discussion, but no matter.  My language was inartful.  I should have said that A provides 4% more value in his product.  So, A puts 4% more flour in his sacks than B.

  "A" can only produce 100 sacks of flour (I am using a "sack" as a unit of measure).  He can't put 4% more in a sack because he is labor limited.  That is the whole premise, he can only produce 100 sacks.  You are saying he is now producing the equivalent of 104 sacks.  You violate the premise.

B can advertise whatever he likes, but this does not negate the fact that A has tremendously more ability to direct the market than A has.  A has the ability to put B out of business in very little time.

  How can A put B out of business?  In this example, there is a current demand for 102 sacks of flour.  A can only provide 100.  Due to population growth, or changing preferences, there is a potential to sell 150 sacks of flour.  To produce 150 sacks of flour, A needs B.

Of course not.  A can pay B whatever he wants.  A is in control.

Wrong.  A is not in control.  A and B must come to a mutually beneficial agreement.  Suppose A starts by offering a wage of 3 sacks of flour.  B says he wants 10 sacks.  Who is in control?  Worst case for "A" is an increase in 40 sacks of flour.  Will he let "B" walk?  Worst case for "B" is he increases his wage by 50% to 3 sacks of flour.  Will B walk?  Most likely they'll meet somewhere in between 3 and 10.  Where?  It can't be predicted without the market.

  If B is paid more than he justly deserves, then A is being generous or benevolent.

You never established what "B" justly deserves.  You can't.  You can set a minimum based on Living Wage doctrine, that is all.  Without market information, you have no idea what "B" should be paid.  The increase is 50 sacks of flour.  Divide that increase between labor and capital without market information.  You can't.

  Let me just summarize in saying that capitalism is not just a free market, and even though you want it to behave as the ideal system, it does not.  Capitalism is not Divinely inspired, that is for certain.

  There are no divinely inspired systems.  That's a red herring.

You are correct that it is divorced from Catholic morality.

You misquote me.  I said if you divorce capitalism from Catholic morality, it ,like distributism, socialism, and fascism, will implode.

[James02]

I also think it is unjust for companies to move their production facilities overseas so they can pay employees less for the same work, even if their foreign employees are being paid a living wage in their own countries.

In my industry, plant location is not based on labor cost.

As far as companies moving production overseas, you have to factor in corporate income tax of 35%, personal income tax of 39%, payroll taxes of 15%, OSHA and EPA inspectors running wild, compliance costs in the billions, Orwellian punitive "damages", class action lawsuits, over reaching labor unions, as well as a host of local fees, taxes, and regulations.  I don't think it is immoral for a company to try to protects its owners from these evils.  In this world you don't get what you want, you get what you deserve.

Here's a quick fix.  Institute the FAIR tax.  Income taxes go away.  A foreign company would be at a major disadvantage to a US company.  Consider British Airways vs. American Airlines in a London route.  British Air will have to pay all sorts of payroll and income taxes on its employees, its British suppliers will have the same cost, plus you would have corporate taxes.  American would have none of these costs.  This one change in the tax code would result in companies lining up to build plants in the US.  It will never happen since the Progressives would lose power over you.  The income tax is a declaration of war against capital.  The Progressive have won, they have driven out capital.  What a happy day that we have killed capitalism.  Now learn to boil your shoes to try to fill your stomach, because we are going to (nay, we are) a third world hell hole.

But none-the-less, there is a lot more to companies moving overseas than just wages.

[GodFirst]

And practice has abundantly proved that markets function better in a free, non-government regulated market. If we agree that the government should not be concerned, what are we arguing about?

This is the problem I have with this whole discussion of capitalism. Christians should not care so much how the market functions or makes a profit but rather how moral the market is. Christian ought to be about morals before they are about profitting from some work. Whatever Capitalism it is, it always leads to primacy of capital over land and labor. Whereas all three are absolutely necessary for the world to function. Labor cannot be neglected to the focus of capital, but that is what happens without just wages. Furthermore justice cannot be maintained ever since Adan's fall without government and authority, and in fact, government and authority was there even before Original Sin but now we can concupiscence, man's greater tendency toward evil than good. Therefore government and law is needed all the more. But we Christian must remember that no lasting solution is possible without the Church for without God we can do nothing.

[James02]

This is the problem I have with this whole discussion of capitalism. Christians should not care so much how the market functions or makes a profit but rather how moral the market is.

  False dichotomy.  Who is advocating ignoring morality in the market?  How can you tell if a market is moral if you don't care much how it functions?

Christian ought to be about morals before they are about profitting from some work.

  True, but they are not mutually exclusive.

Whatever Capitalism it is, it always leads to primacy of capital over land and labor. Whereas all three are absolutely necessary for the world to function.

  What the heck does that mean, anyway?  and always?

Labor cannot be neglected to the focus of capital, but that is what happens without just wages.

  True, I support the Just Wage, though now it seems like it's been cut in half.  Nonetheless, who is calling on labor to be neglected?  Why would you want to do that?

Furthermore justice cannot be maintained ever since Adan's fall without government and authority, and in fact, government and authority was there even before Original Sin but now we can concupiscence, man's greater tendency toward evil than good. Therefore government and law is needed all the more.

  But if man now has a greater tendency toward evil over good, doesn't concentrating power mean that it will be abused?  However, I am not an anarcho-capitalist.  I believe in the need for government, though it needs to be spread out over these 50 States, with a very weak central government.  That will keep Original Sin at bay.

But we Christian must remember that no lasting solution is possible without the Church for without God we can do nothing.

  That is uncharitable and insulting.  You are insinuating that a proponent of capitalism is forgetting that any solution to the plight of mankind must involve the Church.