How Capitalism Will Keep a Nation Hungry
Posted by
Kevin
It seems that the best way to feed starving nation is to ignore the free market fundamentalists at the World Bank:
But this year, a nation that has perennially extended a begging bowl to the world is instead feeding its hungry neighbors. It is selling more corn to the World Food Program of the United Nations than any other country in southern Africa and is exporting hundreds of thousands of tons of corn to Zimbabwe.
In Malawi itself, the prevalence of acute child hunger has fallen sharply. In October, the United Nations Children’s Fund sent three tons of powdered milk, stockpiled here to treat severely malnourished children, to Uganda instead. “We will not be able to use it!” Juan Ortiz-Iruri, Unicef’s deputy representative in Malawi, said jubilantly.
Farmers explain Malawi’s extraordinary turnaround — one with broad implications for hunger-fighting methods across Africa — with one word: fertilizer.
Over the past 20 years, the World Bank and some rich nations Malawi depends on for aid have periodically pressed this small, landlocked country to adhere to free market policies and cut back or eliminate fertilizer subsidies, even as the United States and Europe extensively subsidized their own farmers. But after the 2005 harvest, the worst in a decade, Bingu wa Mutharika, Malawi’s newly elected president, decided to follow what the West practiced, not what it preached.
The notion that the free market can solve every problem in the world is idiotic on its face. There has never been and I suspect that there never will be any one tool that is appropriate for every job you might face. It was clear that the soil in Malawi need replenishment, and it was also clear from watching Western countries that technical farming and the use o fertilizers can make an enormous beneficial impact on farm output. It was also clear that a country as poor as Malawi was going to need someone to step in and subsidize at least the first round of funding that would be required to provide poor farmers with fertilizer. It was a role perfectly suited for the government.
The World Bank knew all of this, and yet they still insisted that a hungry country stop growing food and start growing cash crops for export so that it could one day buy food from other countries. It was an insane idea on its face, and yet, because it adhered to the notion of capitalism uber alles, the Word Bank insisted on it. Their free market lead to starvation and privation. The government intervention lead to record crops, and end to famine, and even the growth of the economy driven by an increase in employee wages:
“The government has taken the bull by the horns and done what farmers wanted,” he said. Some economists have questioned whether Malawi’s 2007 bumper harvest should be credited to good rains or subsidies, but an independent evaluation, financed by the United States and Britain, found that the subsidy program accounted for a large share of this year’s increase in corn production.
The harvest also helped the poor by lowering food prices and increasing wages for farm workers. Researchers at Imperial College London and Michigan State University concluded in their preliminary report that a well-run subsidy program in a sensibly managed economy “has the potential to drive growth forward out of the poverty trap in which many Malawians and the Malawian economy are currently caught.”
In a very real sense, the Word Bank’s insistence on a free market and an end to government intervention helped prolong starvation. Governments and free markets are human created tools, nothing more, nothing less. What matters is not which tool is used but rather which tool produces the desired outcome. You forget that and you get the World Bank, an organization religiously wedded to only one tool and insistence on the uses of the one tool in the face of all contrary evidence. You forget that and you get famines and near-famines that last longer than they should and kill people who should have lived.
[…] Kevin at Lean Left shows how free market theory failed Malawi, till its president found a smarter way, […]
Pingback 12/2/2007
Perhaps a more appropriate title would be “how the ideology of large quasi-governmental agencies will keep a country hungry”.
Comment 12/2/2007
Ted, don’t you think the content of the ideology is at all relevant?
Comment 12/2/2007
Dan, of course. But if proposed solutions are dictated by ideology, only in lucky cases will the solutions work.
In any case, Malawi is not out of the woods yet. A year with little rain and the frailty of their situation will be revealed. So many people, so little land and wealth, and so little cushion to absorb another drought.
Comment 12/2/2007
I don’t see how you can claim that the World Bank is pushing ‘free market ideology’. If they were, it would be silly to say they are requiring Malawi to do anything; the World Bank would have no way to punish Malawi for refusing to go along, but that the World Bank themselves routinely interferes with markets itself and uses its ability to do so to force compliance with its plans.
The World Bank is rightly seen not as capitalist, but as mercantilist. Socialist of course love to confuse the two, conflating pro-buisness policies with pro-market policies.
Comment 12/2/2007
SD
Wait — so you are now claiming that an end to government subsidies for small and poor farmers and an insistence on letting the market and only the market decide who can afford fertilizer are not free market policies? If they aren’t then, as many libertarians are wont to do when confronted with the failures of their approach, you have completely changed the meanings of the words.
Libertarianism/free marketism seems to be more and more like Communism every day. It never fails and if it does, well, then that wasn’t real libertarianism/free marketism.
Ted
The problem is not with the existence of the World Bank. The problem is the solutions they propose. The solutions would be just as bad coming from somewhere else.
Comment 12/3/2007
No, I’m claiming the use of state power to force the end of subsidies by another state is not free market. Mercantilists believe that subsidies help the subsidizer and hurt everyone else. Thus they tend to try to discourage others from using them and tend to look at trade deals from a ‘we’ll drop our subsidies if you drop yours’ viewpoint.
In actuallity, subsidies hurt the subsidizer and help everyone else. So while I oppose the US from subsidizing things as it’s a waste of our tax dollars, I favor other countries subsidizing the crap out of their products as it means their citizens are buying us free stuff.
Comment 12/3/2007
SD
Read the article: a large part of the WB advice was straight out of free market 101: end the subsidies and concentrate on where you have a competitive advantage. You are focusingon only one part of the picture and ignore the largest culprit.
Comment 12/3/2007
If it wasn’t for capitalism in the U.S. there wouldn’t be all the surplus to hand out to poor countries.
Comment 12/3/2007
Would you like to develop that argument beyond a self-righteous platitude, Morris?
The innovations necessary to produce food in mass quantity (and I guess the means to distribute it) would not be possible without American capitalism. Is that your argument?
Out of sympathy, I won’t even insist that you attempt to control for the extent to which American capitalistic foreign policy is responsible for destitution in the developing world in the first place, and therefore having to determine to what extent there would even be a problem in need of being fixed.
Although it doesn’t matter how conciliatory the terms outlined for your argument are - I think we’d all be shocked if you gave a substantive reply of more than one sentence.
Here’s another challenge for you, when crafting that one sentence, try to refrain from the clever elementary school cafeteria tactic of parroting, and beginning it, “I’d be shocked if you…”
Comment 12/3/2007
The World Bank is spreading ‘free market ideology’ in Africa in the same sense that Bush is spreading ‘democratic freedom’ in the Middle East. Going in and FORCING a particular set of policies on someone else, whether those policies are a good idea or not, is not free market by definition.
Comment 12/3/2007
“I won’t even insist that you attempt to control for the extent to which American capitalistic foreign policy is responsible for destitution in the developing world”
I’m glad you won’t insist. Your statement is idiotic enough on its own. The world doesn’t need our help in making poor countries. They do it on their own with the help of socialistic dictators who promise prosperity to their people and take the prosperity for themselves. Then the benevolent people of the U.S. step in to save the lives of the people. There were plenty of poor countries before the U.S. existed. The U.S. has done more to help poor countries than any country has ever done.
I don’t know if the innovations necessary to produce food in mass quantity (and the means to distribute it) would not be possible without American capitalism. I do know that they didn’t happen outside of capitalism. If nothing else, it probably would have taken longer. No telling how many people in the world would have died waiting for some socialistic liberal country to innovate. My personal opinion is that most of the innovations would not have been made.
BTW, the recognition of the good that my country has done is not a self-righteous platitude. I’m not a self-loathing liberal who hates the United States.
Comment 12/3/2007
Why does being critical of one’s country automatically imply that one “hates” one’s country? I don’t think that follows…
Comment 12/3/2007
SD
You wont find me defending the Bank’s motives, far form it. But that does not change the fact that what they recommended was straight out of the free market laissez faire playbook. Even if their motives where mercantilist, their methods were free market — at least in the case of the subsidies and the role of the government.
Comment 12/3/2007
“Why does being critical of one’s country automatically imply that one “hates” one’s country? I don’t think that follows…”
Are you a self-loathing liberal?
Comment 12/4/2007
Morris,
I hate to be a stickler for the immutable laws of physics, but matter can’t be created or destroyed. Wealth comes at the expense of poverty. Much of the developing world is rich in natural resources, those resources have been seized from them via both militaristic and economic imperialism. You can’t seriously pretend to not know this.
Just fall back to the strong will dominate the weak argument, it is cruel, callous, and makes you a baby-killer, but at least it is true to itself. The most frustrating thing about you, Morris, isn’t your views, per se; it’s that you back away from their implications. Just say big fish east little fish, and be done with it - don’t pretend that history says something it doesn’t. The racist troll brigade has more intellectual integrity than you do.
Comment 12/4/2007
“Wealth comes at the expense of poverty.”
That’s absolute garbage and nonsense. You are a nut.
“Much of the developing world is rich in natural resources, those resources have been seized from them via both militaristic and economic imperialism. You can’t seriously pretend to not know this.”
Much of the developing world is developing because of the investment of money and knowledge by the West.
“Just fall back to the strong will dominate the weak argument,”
I can’t fall back on something I’ve never argued. Why do you insist on telling lies?
“most frustrating thing about you, Morris, isn’t your views, per se; it’s that you back away from their implications.”
I don’t back away from the implications of anything I say. I do refuse to accept the premise when you twist, distort, and just plain lie about the implications I don’t make. Your perverted, bigoted inferences don’t equal my implications.
BTW, how did the subject of race get into the discussion.
Comment 12/4/2007
“Wealth comes at the expense of poverty.”
Only if we all chuck our jobs and become pro poker players.
Comment 12/4/2007
“I hate to be a stickler for the immutable laws of physics,”
Wealth has nothing to do with the laws of physics. Wealth is created. Do you believe this country got to be a wealthy nation by accident? Did the country become poorer because Ford got wealthy producing cars? Did the production workers get poorer because Mr. Ford got wealthy. This is not a zero sum game as you believe. This country has a lot of natural resources. They only became valuable as they were used and utilized.
(More later. Leaving now to hunt Bambi’s father.)
Comment 12/4/2007
Are you a self-loathing liberal?
Not at all. In fact, I like me.
digg:
Wealth comes at the expense of poverty.
Not sure I totally agree with that (I’m on the fence about the zero-sum-game idea), but certainly the easiest (and probably most common) way to gain wealth is through the exploitation of others, knowingly or otherwise.
Comment 12/4/2007
Wealth comes at the expense of poverty
consider education, penicillin, refrigeration, democracy, internet, velcro - well maybe not velcro
Comment 12/4/2007
I think Ted is more right here.
In theory, a growing economy can create wealth without exploiting the poor. Now, in practice, it doesn’t often happen that way, but there is nothing that says wealth cannot be acquired without exploiting or stealing form others.
Comment 12/4/2007
“In theory, a growing economy can create wealth”
There’s no theory to it. A growing economy by definition is creating wealth.
Comment 12/4/2007
Morris:
Leave it to you to ignore the “without exploiting the poor” clause, which was clearly the relevant portion in the context. Of course, addressing that part would have kept you on topic for once, which is why it surprises no one that you ignored it.
Comment 12/5/2007
Okay, wealth can be created without exploiting the poor.
Comment 12/5/2007
Not real wealth - just money!
Wealth exists intrinsically in things that are natural and finite - land, resources, etc.
A growing economy is by definition creating money and commerce. Money is entirely arbitrary, your dollars can become fireplace fodder at any given time (almost literally, if China decides so). Only things with inherent value retain wealth outside the glass menagerie of money.
Economic activity is not wealth!
Comment 12/5/2007
Ding ding ding! We have a winner! Digg has successfully gotten Fred to crawl the rest of his way out of his Morris person and resort to his favorite term! Bravo Digg, you are our first new Fred-liar!
I thought Digg’s comment was obvious, despite the miswording: Wealth of natural resources is neither created nor destroyed, because they are physical material, controlled by the laws of physics. Ted pretty clearly agrees with this inasmuch as his list of examples have nothing to do with resources.
Comment 12/5/2007
“Wealth of natural resources is neither created nor destroyed, because they are physical material, controlled by the laws of physics.”
Nice spin. Natural resources are only wealth if they are used. Their value is based upon how people perceive their value. The people of the Middle East were not wealthy in 1900 just because they were sitting on billions of gallons of crude oil. The wealth was created when western oil companies drilled for it and the oil was used.
Comment 12/5/2007
Whoa, Morris. Congrats, that was a substantive post that actually made an argument. See how easy that is!
I wouldn’t say that the wealth was “created.” Rather, it was discovered.
The people of the lands to which this wealth “belonged” were denied both self-determination as to how they want to use that wealth and decision making power as to who controls such wealth. For the most part, when wealth is discovered in economically poor nations, rich and strong nations compete with each other for the opportunity to strong arm the nation into relinquishing control of the natural wealth. We, as a country, resent and bastardize any marginal country that insists of keeping control of its own resources. We refuse aid to such countries, we demonize the leadership of a country that makes such a decision.
I’ll certainly grant the fact that the leaders of many economically poor nations are complicit and often willing participants in the looting of their own countries’ resources, so long as they are personally compensated, handsomely. That doesn’t mitigate the fact that what is going on is the looting of wealth from the people of that land.
Comment 12/5/2007
digg, really. You need to rethink your position here. You have developed your own definition of wealth and then built an economic theory on that definition. It really is a bit silly.
For you, wealth exists intrinsically in natural things. For others, it exists in health, or knowledge, or spiritualism, or relationships, or freedom, to name but a few. But when talking economics, there is a generally accepted definition of wealth, and it involves tangible assets such as land and capital and financial assets like money and equities and such.
Comment 12/5/2007
Ted,
I will accept the fact that I’ve sort of based the premise of this argument on the terms of a specific semantic interpretation of the word, “wealth.”
But, that actually changes the underlying argument very little.
Note the examples for which you, suggested as to where “wealth” may lie. None of those ideas are economic. In fact, quite compelling arguments can be made that global capitalism have hindered every one of those notions. Remember, the original argument by Morris was the Western capitalism produced wealth in those countries. Has Western capitalism improved the wealth of the developing world in any of the senses you proposed?
Economically speaking, there is a generally accepted definition of wealth - I think that most would agree that wealth is actually more than money. Wealth relates to economics more in a sense of how one’s economic holdings translate to influence and power. Wealth, in the economic sense, is about being able to buy influence, not items.
To paraphrase Chris Rock.
Shaq is rich; the dud who signs his check is wealthy.
Comment 12/5/2007
“Remember, the original argument by Morris was the Western capitalism produced wealth in those countries.”
In particular, with which of my assertions do you disagree? And please make it MY assertions and not one that you create for me.
Comment 12/5/2007
digg, common economic principles are built on a foundation that explicitly excludes intangibles such as power, influence, and most of the items from my list. So, if you are going to talk economics, you need to keep that in mind.
From a purely economic point of view, wealth is certainly not a zero sum proposition. From a broader, sociological point of view (taking into account intangibles) it is not a zero sum proposition. Only by using a very specific (almost tautological) definition of wealth can wealth be considered zero sum. And even that is difficult to defend because certain physical material, such as lumber livestock and food crops, are renewable and subject to advances in the relevent science.
Comment 12/5/2007
Dang, I was editing that comment and accidentally submitted it… Anyway, I was going to add that none of my comments are intended to imply that I don’t believe that a healthy percentage of wealth (individual or national) is accumulated at the expense of others. I have no idea what that percentage is, but I can rank the perceptions of several of the LL crew. My ranking would be as follows (with magnitude implied by vertical offset).
Morris/Fred
Stormy
Ted
TGirsch
Kevin
KTK
Digglahhh
Comment 12/5/2007
Hi Kevin. Nice post about a country and an episode I knew virtually nothing about. It really does not seem all that complicated. Good weather, good seed, good soil, and good farmers make for good harvests. Improving any one of those factors is likely to have beneficial results.
Comment 12/6/2007
Morris,
Premises I disagree with:
1) Innovations necessary to produce and distribute food on a global scale would have either not occurred without Western capitalism, or occurred at a significantly slower rate.
The capitalism is necessary for innovation argument has been pretty much disproven throughout history. Further, such an economic model has lead to many ills, the solutions thereto are considered innovations via the model, yet without the model the problem to be solved wouldn’t even exist.
2) The wealth was created when western oil companies drilled for it and the oil was used.
My insistence on “discovered” as opposed to “created” is more than just semantic quibbling.
3) A growing economy by definition is creating wealth.
Nope, just increasing economic activity.
4)If it wasn’t for capitalism in the U.S. there wouldn’t be all the surplus to hand out to poor countries.
The developing world as a whole would be better off if the U.S. did not exist.
Comment 12/6/2007
Ted,
Thanks, I’m proud to rank ahead of KTK, even if distance from the media can also be interpreted as degree of lunacy.
Comment 12/6/2007
“The developing world as a whole would be better off if the U.S. did not exist.”
That says it all. You are an ignorant nut.
Comment 12/6/2007
Digg, you can insist that a growing economy is “just” increased economic activity, but those on the unemployment lines during severe downturns in the economy probably would probably offer a different opinion. When millions of people lose their jobs, their homes, and the ability to feed their families, I call that a loss of wealth.
And I wouldn’t say you rank ahead of KTK, but rather beyond him. No doubt Fred’s pride matches yours.
Comment 12/6/2007
Them problem with Digg’s definition of wealth is that assumes the value is inherent in the resources used to make something and has nothing to do with what is done with them. By his logic, there’s no difference between owning the Mona Lisa and owning a blank canvas and a paint set, since they both use the same materials.
Comment 12/6/2007
Actually, the Mona Lisa would be rich in artistic and cultural wealth…
But, seriously, if we take a step back and make this more of a philosophical discussion, as opposed to a dissection of semantics, I my point is rather relevant - even if, like almost all views, it falls apart at the level of absolutism.
Even accepting the idea that an assembly line workers menial wages can be defined as wealth, the question remains whether the company doling the wages is actually creating wealth or redistributing it. Basically all these economic activities are just redistributions of wealth through commerce. If I give you something of mine, you now have it and you didn’t have it previously, but nothing was created that did not exist prior to the transaction.
Even as a business grows, and it appears to increase its wealth it is really just annexing wealth that previously existed and was controlled by others. The business is acquiring land that was controlled by somebody else or another business previously. It is increasing profit because people are investing their existing assets into the company. It is taking in revenue because people are giving them their money for the service or product the business is providing. Where’s the “new,” where’s the CREATION? What was will always be.
When a person loses their home (more fundamentally, their land), they lose wealth personally - but it does not disappear. The control of that wealth is transfered to a bank or whatever. And when they acquired it in the first place, it had been under the control of somebody or something else. They didn’t create the wealth when they bought the home, and the didn’t destroy when they defaulted on their loan.
Tangential question, if wealth is basically just a practical economic concept, what is the difference between being rich and being wealthy - is it simply a distinction of magnitude then?
Comment 12/7/2007
Digg, let me test your commitment to your philosophy. I will use land as the example, because you used it above.
Your choice: 5 acres of land in downtown Manhattan or five acres of land on the Outer Banks of NC. You can have either to do with as you choose. The quantity of land is the same, so the wealth you receive will be the same, so you should be neutral as to which parcel you receive. Are you? Now, turn back the clock 500 years and evaluate the same offer.
As for your assembly line analysis, you are leaving out the most important part. That being the value of the inputs before they are assembled compared to the value of the outputs after assembly. That is where the wealth creation occurs. It is not in the payment of wages, ehich obviously is merely a transfer of wealth.
Comment 12/7/2007
Here, you want the Fred-like answer - five acres of land anywhere is way more than any man needs!
Why would you assume I’d take Manhattan? Because of how much the land is worth? If it’s for me, and I’m not going to sell it, who cares what its market value is? If I’m going to live on the land, I’d choose whichever plot I liked better, whichever one I felt was more scenic, whichever had a more desirable climate.
That’s like me telling you that you have a choice between two suits, one made by Armani and the other made by some department store brand. Would you just choose the Armani before even looking at the two suits - doesn’t your personal preference matter? You might end up looking like Walt Clyde Frazier!
The hypothetical you raise tells the others reading this exchange more about your values than my answer tells them about mine.
You want a better one - here how ’bout this. Do I want an acre of land in West Bubbafuck, or 10,000 shares of Bechtel? Yes, I’ll take the land!
Comment 12/7/2007
“If it’s for me, and I’m not going to sell it”
a non-real world restriction. Remove it and give me an honest answer.
Also, any response to assembly line comment?
Whatever you do, don’t mention gun control or we will be buried by an avalanche of comments…
Comment 12/7/2007
In almost all cases, I’m a proponent of free market economics, but I believe that Morris is confusing several things here…
1.) Being critical of American policies is not the same as “hating America.” If you hate the Constitution and the ideals it stands for, then yes, you hate America. However, if you don’t like specific policies that the (completely fallible) government is implementing at a particular time, you’re not anti-American, an America-hater, or anything of the sort. If you’re quite vocal about it, that means you’re an honest person using your right to free speech for the precise purpose for which it was intended (criticizing the government!). Incidentally, you also happen to be sensitive enough to recognize the wisdom of the following passage:
)
“Why do you look at the speck that is in your brother’s eye, but do not notice the log that is in your own eye?” - Matthew 7:3, New American Standard Bible (For the record, I’m not trying to push religion into this discussion - I’m not even a Christian anyway - I just think Jesus was a swell dude with some relevant insights
2.) Morris is also confusing the generosity of the American people themselves with the disgusting, corrupt, and exploitative practices of the marble-palace power elite in control of the World Bank and IMF. They literally and purposefully act as loan sharks to impoverished countries. They convince these countries to sign onto loans the World Bank / IMF KNOW they can’t pay off, and there are a lot of nasty hooks and “if you don’t pay this off…” clauses in the contracts that allow the World Bank / IMF to take control of the nation’s economy once the country predictably defaults on its payments. They pretty much plunder the whole country, hollow out the economy, etc. with no regard to the well-being of anyone living in said countries. They give bad advice on purpose, and it’s all just “good business” for them. You have to understand that these organizations are run by stakeholders who are not like ordinary generous middle-class Americans: With very few exceptions, they’re power elite who were born into prominent families with a lot of money and a lot of power. In short, they’re so aloof and disconnected from the realities ordinary people face that they are able to justify utterly evil practices to themselves.
Anyway, free market capitalism is a great thing when it’s done right (no corporate welfare or excessive regulation, no special interests lobbying for favorable legislation, etc.), but it is not always easy to get the ball rolling smoothly in an undeveloped country. I believe this is particularly relevant to the situation in Malawi: *You cannot convert another economic system into a free market overnight and expect anything but disaster.* In order for it to actually work, there are certain prerequisite conditions which are sometimes easier-met by other means, such as temporary subsidization. The seeds have to be planted first, and if you implement free market policies too forcefully, too quickly, or in the incorrect order (which may differ depending on the current strengths and weaknesses of a particular country), the result will not be pretty.
Comment 12/8/2007
Actually, I think I may have misrepresented my view up there: I should say that, with several important caveats (prerequisites) and exceptions, I’m a proponent of free market economics
Comment 12/8/2007
“Morris is also confusing the generosity of the American people themselves with the disgusting, corrupt, and exploitative practices of the marble-palace power elite in control of the World Bank and IMF.”
Don’t flatter yourself. I haven’t confused the American people with the world bank or IMF. In fact, I don’t think I’ve commented on the World Bank or IMF. The American people are generous and that generosity is exhibited over and over.
Comment 12/9/2007
Digg “five acres of land anywhere is way more than any man needs!”
Great liberal answer. You won’t find a conservative saying that.
Comment 12/9/2007
[…] Some good conversation on that topic, mainly between frequent commenters digglahhh and Ted, here. […]
Pingback 12/10/2007
Ted,
The reason why I dodged the real world answer is that it would be really complicated to answer, raise a whole bunch of questions that would render the hypothetical more trouble than it’s worth, and force me to at some point type the phrase, “I’d probably take Downtown Manhattan because I would rather it didn’t exist (despite the fact that my place of employment is located there), and I could then demolish it.” I wanted to avoid typing that sentence, because of the interpretations it invites in the post-9/11 world. I thought it might throw the discussion off track.
Can I get rid of the buildings? What about the land designated for public use? If i decided to keep the land and the businesses, I would then have to form a company to oversee my management of the properties, etc. In short, it is ridiculous to come up with a farcical hypothetical of some genie in a lamp granting me ownership of downtown New York, and then insist I’m entirely bound to real world issues when I tell you what I’d do with it.
Quite simply, assuming the land is barren (just practically speaking, there can still be a big difference in the “value” or “worth” of the land), I’d pick the plot I liked better (climate, aesthetics, fertility, etc.). I wouldn’t sell it. I’d live on it and invite all my friends to live on it too - you guys included (I’m undecided about Fred though).
As far as the assembly line question, I don’t see it as all that simple. I don’t want it to look like I’m “revising” my definition of wealth as we go along, but I didn’t think this would get so involved. Perhaps it best describes my position to say that wealth exists in different forms, ecological, cultural, economical, etc. The economical form of wealth, unlike the others, is not inherently virtuous. The production of economical wealth can happen at the expense of other forms of wealth. So…
What’s being produced on the assembly line? Goods that people need, or useless crap we buy as material surrogates for self-esteem? Who are we creating the wealth for? The company makes more profit than the worker, and what does the company do with that profit? Does it behave as a responsible global citizen? Is the assembly line worker just building a product, or are they doing the legwork necessary to keep the cash river flowing that is essential to ensure the continuation of corporate rule? Excuse the grandiose nature of this paragraph, but elementally, I think it is important.
The workers are taking “raw materials” and producing a product, but that product’s place in the global culture partly defines to extent to which its production is a creation of wealth. Not only that, but this could be time wasted, time in which the workers could actually be dedicating themselves to healthier pursuits for all.
Look at the arms industry, it produces great economic wealth - but its purpose is to innovate and advance the methods by which we can kill one another with as little risk and effort as possible. It has produced tools we can use to ostensibly destroy ourselves as a civilization, but it made a lot of people rich. Is that your definition of wealth-creation?
Comment 12/11/2007
“Even accepting the idea that an assembly line workers menial wages can be defined as wealth, the question remains whether the company doling the wages is actually creating wealth or redistributing it. Basically all these economic activities are just redistributions of wealth through commerce. If I give you something of mine, you now have it and you didn’t have it previously, but nothing was created that did not exist prior to the transaction.”
While I’m sure I mostly agree with Digg in general, and maybe even in this debate, it’s hard not to take issue with the above statement.
Let’s compare (as someone else here hinted at) two assembly lines, one idle, the other turning out product. In the one case, potential workers are sitting at home unemployed, in the other, they are working 8-hour shifts and getting paid for them. And let’s suppose, for simplicity’s sake, that the product is solar roof tile panels, which let a homeowner heat water in a renewable and self-sustaining way for warmth, cooking, and cleaning. The basic resources are the same.
Is it really the case that no wealth is created when the factory is active? Both for the factory owners and the workers and, relevantly, the companies that make the photovoltaic cells and the other materials that go into the solar panels.
Generally speaking, wealth is created when two entities exchange goods that each can make better use of than the other. If I don’t know how to fix shoes, and you do, and I have more rice than I need, and you need some, when I give you some rice to fix my shoes, we are both better off. We have not just “redistributed wealth through commerce,” we have increased the value of the items in question. We have, in the understanding of all who disagree with you and probably many who don’t, created wealth.
Comment 12/12/2007
Yes, Meta. I agree. And, that is why I go into the whole what is the assembly line producing question.
But, in the spirit of the debate, your assertion was not the claim I was disputing. Wealth is created in your hypothetical, but not simply because the assembly line workers are on an assembly line earning a paycheck, and not sitting on the couch, That’s how I interpreted the argument I was responding to. The wealth creation comes from (or doesn’t) from the nature of the work being not, not the mere fact that there is work being done. But, it’s not just the mutually beneficial exchange of goods, it’s also about the goods themselves.
If the workers are creating bobblehead dolls or something, I assume they’d rather have a paycheck than the bobblehead dolls. The company would probably rather have the bobblehead dolls, because they will mark them up and sell them for many times the cost of what they paid the worker to produce them. Does that count as wealth creation?
The difference is that what you are really exchanging is your time and labor, and not some tangible good. There’s only so much I can do with extra rice, so anything I trade it for that I use is probably a good deal. But, you can literally do just about anything with your time (productive or destructive), so it makes judging the “winners” of that exchange a unique challenge.
It’s hard to create wealth from an exchange if one or more of the parties is not entering the exchange freely, as is the case with most exchanges surrounding employer/employee.
Comment 12/13/2007
Jack…
Thanks for this, I’m writing an ebook about starting up businesses right now so this post was very informative….
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