Capitalism hits the fan

[The Script]

WW2 was not the cause for the recovery of the US economy. You do not put all your efforts into things that go up in smoke and then economically better your standing. You build things that others need and are willing to exchange for the things they built. If those things don't match you use an intermediary liquid item (money) that allows you to trade that which you do need for what others need from you. This is the only way to progress I've heard of.

He explained it later. War means the production of weapons and other war-related stuff. It's a boost for economy. But after the war soldiers com back and look for job and you don't need to produce that much of war-related stuff anymore. So the government decided to send soldiers to colleges to delay impact of new workforce. One problem solved.
Europe is in ruins, almost every strong nation is in ruins. They need to rebuild it. American economy left unscratched so they start to produce essential goods for Europe and lend money to buy this american stuff. That's why american economy went up. At least that's what he says.
I remember that I learned something similar during history lessons in high-school.

When you build a refrigerator you expend time, money and resources and then someone ends up with an item they can use to store their food and prevent if from spoiling as quickly as it would otherwise.  When you build bombs, you drop them on someone else's refrigerator and you both end up with nothing.  This is why war does not help an economy.  

However, the US economy probably did benefit from being the largest and most advanced, once Europe got back on its feet.  

He needs a new refrigerator, and since you blew up the factory, he has to buy it from you.

Right.  But if he has no money and no job he can't afford to buy my refrigerator.  Once his economy recovers though, he'll start buying my refrigerators.

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[FooDSt4mP]

WW2 was not the cause for the recovery of the US economy. You do not put all your efforts into things that go up in smoke and then economically better your standing. You build things that others need and are willing to exchange for the things they built. If those things don't match you use an intermediary liquid item (money) that allows you to trade that which you do need for what others need from you. This is the only way to progress I've heard of.

He explained it later. War means the production of weapons and other war-related stuff. It's a boost for economy. But after the war soldiers com back and look for job and you don't need to produce that much of war-related stuff anymore. So the government decided to send soldiers to colleges to delay impact of new workforce. One problem solved.
Europe is in ruins, almost every strong nation is in ruins. They need to rebuild it. American economy left unscratched so they start to produce essential goods for Europe and lend money to buy this american stuff. That's why american economy went up. At least that's what he says.
I remember that I learned something similar during history lessons in high-school.

When you build a refrigerator you expend time, money and resources and then someone ends up with an item they can use to store their food and prevent if from spoiling as quickly as it would otherwise.  When you build bombs, you drop them on someone else's refrigerator and you both end up with nothing.  This is why war does not help an economy.  

However, the US economy probably did benefit from being the largest and most advanced, once Europe got back on its feet.  

He needs a new refrigerator, and since you blew up the factory, he has to buy it from you.

Right.  But if he has no money and no job he can't afford to buy my refrigerator.  Once his economy recovers though, he'll start buying my refrigerators.

Unless you lend him the money to buy his fridge.  Then you get to sell a fridge and buy a slave .

[The Script]

WW2 was not the cause for the recovery of the US economy. You do not put all your efforts into things that go up in smoke and then economically better your standing. You build things that others need and are willing to exchange for the things they built. If those things don't match you use an intermediary liquid item (money) that allows you to trade that which you do need for what others need from you. This is the only way to progress I've heard of.

He explained it later. War means the production of weapons and other war-related stuff. It's a boost for economy. But after the war soldiers com back and look for job and you don't need to produce that much of war-related stuff anymore. So the government decided to send soldiers to colleges to delay impact of new workforce. One problem solved.
Europe is in ruins, almost every strong nation is in ruins. They need to rebuild it. American economy left unscratched so they start to produce essential goods for Europe and lend money to buy this american stuff. That's why american economy went up. At least that's what he says.
I remember that I learned something similar during history lessons in high-school.

When you build a refrigerator you expend time, money and resources and then someone ends up with an item they can use to store their food and prevent if from spoiling as quickly as it would otherwise.  When you build bombs, you drop them on someone else's refrigerator and you both end up with nothing.  This is why war does not help an economy.  

However, the US economy probably did benefit from being the largest and most advanced, once Europe got back on its feet.  

He needs a new refrigerator, and since you blew up the factory, he has to buy it from you.

Right.  But if he has no money and no job he can't afford to buy my refrigerator.  Once his economy recovers though, he'll start buying my refrigerators.

Unless you lend him the money to buy his fridge.  Then you get to sell a fridge and buy a slave .

As long as he pays you back.  If he has no job then you just gave him a free fridge.  But my point was simply that war itself does not "boost" an economy, unlike what I was taught in high school.  Economies grow by producing and saving, not by producing and blowing things up.

[FooDSt4mP]

As long as he pays you back.  If he has no job then you just gave him a free fridge.  But my point was simply that war itself does not "boost" an economy, unlike what I was taught in high school.  Economies grow by producing and saving, not by producing and blowing things up.

I agree.  But there can be a temporary boost after the war for those economies that are still stable and fully functioning.  I'm not trying to say it's the best economic strategy, not by far.  Of course, today's wars are completely useless for our economy since we (US) spend way too much on bombs, and we fund the reconstruction efforts instead of lending to the local economy.  Oh, and we choose our contractors based on who has enough connections to get a no bid contract.  But, in the limited example given, I think there is a valid point.

[The Script]

As long as he pays you back.  If he has no job then you just gave him a free fridge.  But my point was simply that war itself does not "boost" an economy, unlike what I was taught in high school.  Economies grow by producing and saving, not by producing and blowing things up.

I agree.  But there can be a temporary boost after the war for those economies that are still stable and fully functioning.  I'm not trying to say it's the best economic strategy, not by far.  Of course, today's wars are completely useless for our economy since we (US) spend way too much on bombs, and we fund the reconstruction efforts instead of lending to the local economy.  Oh, and we choose our contractors based on who has enough connections to get a no bid contract.  But, in the limited example given, I think there is a valid point.

I completely agree.  I just get tired of hearing the broken window fallacy, over and over and over again.  War and natural disasters do not help economies.

[cdnbcguy]

Marxism is an unethical, envy based belief system with equally flawed economics to explain itself. It ought not be revisited except as a cautionary tale.

Hear hear! Marxism has killed more people than Cholera. About time more people pointed that out.

Economics is not a real science yet (Where there is science there is no argument - DaVinci) but whatever the answer is, it is NOT Marxism.

[benjamindees]

Setting aside his proposed solutions, can anyone refute any specific observation that Prof. Wolff makes?

[JA37]

I just wish to note there is nothing wrong with unions. Problems only show-up with unions on government-empowered steroids.

http://www.inc.com/magazine/20110201/in-norway-start-ups-say-ja-to-socialism.html
Rather strong unions in Norway if I understand things correctly, however most start-ups seems to like it that way. But that isn't what you meant, is it?

[Teazer]

Setting aside his proposed solutions, can anyone refute any specific observation that Prof. Wolff makes?

Well for starters he has a dubious take on the causality between real wages and workers around the 10 minute mark:
It could better be explained by, there is an increase in workers (women, global labour etc) which drives down wages. This makes more sense than real wages reductions driving employment choices. If you look at wage rates for the world as a whole, rather than specifically the US, real wages will have increased.

[benjamindees]

Setting aside his proposed solutions, can anyone refute any specific observation that Prof. Wolff makes?

Well for starters he has a dubious take on the causality between real wages and workers around the 10 minute mark:
It could better be explained by, there is an increase in workers (women, global labour etc) which drives down wages. This makes more sense than real wages reductions driving employment choices. If you look at wage rates for the world as a whole, rather than specifically the US, real wages will have increased.

I see what you're saying.  He implies that women were forced into the workforce.  Many are.  But I think you're right that most would have joined regardless, and this would have affected wages.  But he doesn't really make an assertion as to the causality.  He just notes that American wages stopped rising (for some reason, probably globalism was the largest factor), and that the response of the American worker was to work 20% more hours.  And this is unarguably true.  The US is the only large industrialized nation that embraced global free trade without a viable social safety net.  It makes sense that Americans would choose to work more while Europeans, for instance, would be able to work less.  The US has never shown signs of wanting to evolve beyond the "work or die" culture brought here by settlers.  You see it in the healthcare debate, for instance.

[Sjalq]

@Gladiator

Thanks for the thought out reply. I appreciate when people are willing to do the trouble that I am not

I still hold that he does not link his phenomena in a logical fashion. He attempts a link between wages, earnings and the banking system, but does not understand or explain the banking system. Contrary to the enlightened opinion money does not need to enter the banking system to cause further debt. M3 is a multiple of base money to be sure, but since all money is debt (including base money) all the reserve banks of the world need to do is extend credit to banks to ensure that more debt and hence more money can be created.

His reasons for an oversupply in employees are not valid.
1. Computers diversify the economy, they do not shrink it. They need higher qualified people to program and maintain them. They also increase the amount of opportunities available for a business. Cost to entry in many fields are lowered by computers (take the recent rise amateur film production) and as such creates more employers not fewer. I would in fact argue the exact opposite. Computers and the internet have offset the negative impact government interventions have had on the US economy by increasing the amount of things the economy has to offer.
2. Since Europe's economy was badly damaged, it could not produce all the goods and services it would have if undamaged. This can only have a bad effect on America, not a positive one. Imagine for a moment a 1945-1971 period in which there had been no war and the American economy recovered from the New Deal and 1920s credit bubble by being left alone by the political class. The economy would have done much better than it did if it had a productive Europe to trade goods with that it actually needed. Progress would have been faster, products would be more diverse. From a monopolistic view, being the biggest functioning economy would have helped America for a time, but we would have all been better off if Europe did not need a reset.
3 and 4. More people would cause more competition in a truly free market system. They would on the one hand be additional entrepreneurs, causing and increase in employers. On the other they would initially be less economically empowered and open new opportunities for employers to enter budget markets.

[Bit_Happy]

Wolff traces the source of the economic crisis to the 1970s...

Please tell Mr. Wolff that we do not have actual Capitalism, so he is wrong by definition. 

[em3rgentOrdr]

What I have learned: When Capitalism hits the fan, buy a new refrigerator.

[amincd]

Capitalism has been increasingly marginalized by socialist ideology:



His argument is the status quo one, of blaming economic problems on capitalism, and calling for more of what actually caused the economic decline: government intervention to undermine the free market.

Here's Comrade Wolff pumping his Marxist ideology into the young college minds:

http://video.google.com/videoplay?docid=7382297202053077236&hl=en#

It reminds me of this:

http://youtu.be/zeMZGGQ0ERk