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From reading Ayn Rand on Capitalism it would seem that a laissez faire economy "automatically" takes care of wages for factory workers by creating competition between firms for labor. In her time, I believe this was true (The 1950s for example saw a lot of competition between firms for scarce labor) but I wonder if it is really true any more.

As corporate profits have exploded, worker salaries are at historical lows today. It seems that corporations can always outsource to what Ayn Rand would have called foreign "hell holes" (places where people have low wages and few rights) and therefore US workers can expect no bounty from today's version of factory capitalism. Indeed they have seen cut after cut as profits have increased.

One could, of course, tritely say that factory workers should all become hairdressers or artists or consultants but this is patently unrealistic. What is more likely is a gradual rise in unemployment, with attendant demands to "tax the rich" coupled to a steady erosion of manufacturing. This is not good.

What is the Objectivist position on this? Capitalism is supposed to make everyone well off in the long run but for many working stiffs today, the easy ability of companies to hire overseas labor at a fraction of Western wages, plus a focus on shareholder value maximization makes the social selling of Capitalism as a benevolent and desirable system almost impossible. Clearly a Bangladeshi is doing well when a South Carolinian is rendered jobless or has his wages dramatically slashed but why would the South Carolinian think this a desirable state of affairs? I am sure the Bangldeshis would demand some sophisticated goods that Americans could produce relatively efficiently but on the numbers game, US workers lose out since there are fewer highly sophisticated goods and they employer fewer people to make. Look at autos versus silicon chips. The lower skill area employs many times more people. The 3rd world gets employment and US workers see steady declines in opportunities and wages. Is that a desirable state ? What will it lead to?

asked Dec 05 '12 at 00:31

Danneskjold_repo's gravatar image


edited Dec 06 '12 at 15:14

Greg%20Perkins's gravatar image

Greg Perkins ♦♦

A business is 100% responsible for producing things that people want. This could mean changing its line of business, moving to a location where there are customers, etc. It is not the responsibility of the customer to buy from more expensive businesses to keep them afloat.

A worker is a 1-man business.

(Dec 05 '12 at 11:58) Humbug Humbug's gravatar image

Just for clarity: what you are saying is that US workers should migrate elsewhere or all change their professions ?

(Dec 05 '12 at 12:03) Danneskjold_repo Danneskjold_repo's gravatar image

Manufacturing work is low-skill, low-wage jobs. Businesses can sells goods at much better prices by outsourcing, lowering the cost of living here in the U.S.

"Capitalism is supposed to make everyone well off in the long run..." No, it's not. That's an altruistic premise. It's supposed to be an economic system congruent with the rights of man. That Capitalism has lifted the world from poverty is a mere side-effect.

(Dec 05 '12 at 12:23) JK Gregg ♦ JK%20Gregg's gravatar image

JK- good point. Maybe the premise is flawed. But if it is, why would anyone think that capitalism would actually ever be implemented, given that many people (there are more lower skilled folks than higher skilled ones) would suffer? If capitalism is something where only a small segment of the populace can ever really do well, why would it ever be a desirable thing for the many ? Stated otherwise, why would a country as a whole willingly choose capitalism when many people would not benefit? Of course socialism shows an even worse fall in living standards...

(Dec 05 '12 at 13:25) Danneskjold_repo Danneskjold_repo's gravatar image

I think you're speaking from some sort of utilitarian premise. However, capitalism does benefit all people: it ensures their ability to trade with anyone based on mutual consent.

Manufacturing jobs move overseas because it is too expensive to have them here. That is a consequence of rights-violating entitlements here at home (i.e. minimum wage, mandatory minimums in benefits, etc.). I think you are confusing the ideal of Capitalism with the consequences of today's mixed economy.

(Dec 05 '12 at 13:40) JK Gregg ♦ JK%20Gregg's gravatar image

Are you suggesting that US is capitalist? Because it sounds like you do and well, it isn't. And US was never a truly capitalist country. The closer it was to it though may have been in the first 100 years but then it went down. Today it would be really wrong to sy that US, or any other country in the world, is capitalist. If any is some kind of mixture between Keynesianism, corporatism, socialism and maybe some mutilated version of a free market economy.

(Dec 05 '12 at 14:31) Juan Diego dAnconia Juan%20Diego%20dAnconia's gravatar image

There are a lot of issues here. One is that you refer to "places where people have low wages and few rights". In cases where a US company is abusing its foreign workers and violating their rights, the US government should step in.

Another issue is that you seem to be treating employment as a zero-sum. But this is not the case. Money saved by moving jobs overseas doesn't go under the mattress of the company's owner. It gets spent by the company, or spent by the owner, or invested in other companies which spend it, etc. The only limit to jobs is the ability of people to do useful things.

(Dec 05 '12 at 18:38) anthony anthony's gravatar image

And that's a third issue. You say it is unrealistic that factory workers "all become hairdressers or artists or consultants". I'm not sure what you literally mean by this. The number of different jobs we have in this country is virtually limitless. Unless we're talking about someone who is severely mentally or physically disabled, someone who has a really awful criminal history, or a child, the only limitation to them being gainfully employed is the onslaught of rights violating employment and taxation laws.

(Dec 05 '12 at 18:44) anthony anthony's gravatar image

I think your question requires refinement. First, Capitalism promises nothing. It is a socio-economic system and can not act. Second, your use of loose terms such as "takes care of wages for factory workers" prevents anyone from knowing what you mean, and thus impedes appropriate response. Finally, I recommend you seek clarification on your mistaken assumptions such as, "Capitalism is supposed to make everyone well off...". Capitalism serves no such purpose. The only thing that will cause people to be better off than their current state is their own effort. ("well off" is another loose term)

(Dec 07 '12 at 11:19) MarcMercier ♦ MarcMercier's gravatar image

I have been digesting the answers here. I am coming around to the fact that there are no "promises" under capitalism. It is just a system and doesn't promise anything to anybody. I am also, sadly, coming to the conclusion that there will be always be a groundswell against it because many people in the West have come to rely on a mixed economy to redistribute resources and otherwise "help" them.

(Dec 07 '12 at 15:14) Danneskjold_repo Danneskjold_repo's gravatar image

The "promise" of capitalism is that, to the extent it is followed, it recognizes individual rights. It is not "just a system". It is the correct system. It is the proper system. It is "the only moral system". It is "the only system geared to the life of a rational being".

The groundswell against capitalism will end if and when people choose to use reason, rather than the initiation of force, in gaining "help". (This process which will go more quickly, and with a greater chance of success, if people are educated on the power of reason over the power of initiating force.)

(Dec 08 '12 at 08:28) anthony anthony's gravatar image

Reason takes time. Force is quick. People have short attention spans and want results immediately. If you want money properly, you must work hard, strive and take risk over time. If you want it improperly, you can always take it from someone or con someone out of it.

(Dec 11 '12 at 13:43) Danneskjold_repo Danneskjold_repo's gravatar image

BTW-- I just read anthony's "mattress" comment. Yes, of course, money made by the top 1% doesn't go under mattresses but it doesn't go into some job creation scheme either. It can go into Treasury bills, it can go into Chinese derivatives, it can go into a hundred different exotic financial instruments which make money on money and don't really create much in the way of products or jobs. As an example look at CDO swaps: billions were "invested" in these. How much of that resulted in net benefit to mankind?

(Dec 13 '12 at 15:59) Danneskjold_repo Danneskjold_repo's gravatar image

How is one supposed to calculate "net benefit to mankind"?

(Dec 13 '12 at 21:54) anthony anthony's gravatar image

OK. "Net benefit..." was an unfortunate turn of phrase :-) Let me try to clarify. If the idea was that the people benefiting from the current system of globalized industry do deploy money (versus put it under a mattress), then I agree. They probably do deploy money. I can only assume that since you mentioned mattresses what you were trying to say was that the deployed money creates value. That was the point I was trying to argue. I am not sure that CDO swaps created much value for many people other than the ability of certain people to play Vegas with the financial system.

(Dec 13 '12 at 22:01) Danneskjold_repo Danneskjold_repo's gravatar image

My point was, quite simply, that these things are not zero-sum. One person's gain is not necessarily another person's loss.

It's also true that one person's loss is not necessarily another person's gain. You seem to allude to that yourself when bringing up CDO swaps.

(Dec 13 '12 at 22:21) anthony anthony's gravatar image
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This question pertains more to cultural change and what drives it than to economics. The question states: Economic conditions make "the social selling of Capitalism as a benevolent and desirable system almost impossible.... why would the South Carolinian think this [job outsourcing] a desirable state of affairs?"

In a follow-up comment, the questioner reinterates:

...why would anyone think that capitalism would actually ever be implemented, given that many people (there are more lower skilled folks than higher skilled ones) would suffer? If capitalism is something where only a small segment of the populace can ever really do well, why would it ever be a desirable thing for the many ? Stated otherwise, why would a country as a whole willingly choose capitalism when many people would not benefit? Of course socialism shows an even worse fall in living standards...

Aside from the economic issue of who stands to benefit from capitalism and to what degree, note the issue of cultural change in this formulation. The questioner apparently believes that social change is brought about because a majority of the populace is persuaded that it would be good. But that's not how Ayn Rand viewed the process of cultural change:

...the battle of human history is fought and determined by those who are predominantly consistent, those who, for good or evil, are committed to and motivated by their chosen psycho-epistemology and its corollary view of existence -- with echoes responding to them, in support or opposition, in the switching, flickering souls of the others.

A man's method of using his consciousness determines his method of survival. The three contestants are Attila, the Witch Doctor and the Producer -- or the man of force, the man of feelings, the man of reason -- or the brute, the mystic, the thinker. The rest of mankind calls it expedient to be tossed by the current of events from one of those roles to another, not choosing to identify the fact that those three are the source which determines the current's direction. [FNI p. 16]

Just as a man's actions are preceded and determined by some form of idea in his mind, so a society's existential conditions are preceded and determined by the ascendancy of a certain philosophy among those whose job is to deal with ideas. The events of any given period of history are the result of the thinking of the preceding period. [FNI p. 24]

(Page references are from the Signet paperback edition of FNI.)

More recently, Leonard Peikoff has offered a new theory of cultural change in his book, The DIM Hypothesis: Why the Lights of the West are Going Out. "DIM" stands for the three basic approaches to integration, namely disintegration ('D'), integration ('I'), and misintegration ('M'). There are also two important subdivisions within D and M, defined by how much 'I' they borrow (some or none).

In political theory, Objectivism advocates recognizing and upholding individual rights, first and foremost. Objectivism asks: by what right does an employee propose to restrict where a factory owner can build his factory, whom he can hire, how much he can pay his workers, and so on? If the owner wants to look outside his native country for the lowest cost of qualified labor that he can find, it's his right to do so. If he would rather shut down his factory entirely than put up with an endlessly accelerating burden of government regulation at home (as many did in Atlas Shrugged), it's his right to do so. Reducing the governmental burdens at home would make factory-building at home more economically attractive, although factories at home may still be unable to compete with foreign sources for low-skilled labor. That is an economic reality that cannot be altered by attempting to prohibit American factory owners from producing overseas, or prohibiting the importation of (or heavily taxing) goods made overseas.

There is no such thing as a nameless, faceless "system" which "the people" collectively can choose to adopt or reject. A socio-economic "system" is comprised of people, i.e., individuals, and individuals have rights, including property rights, and property owners include factory owners. A proposal to reject or undermine capitalism is a proposal to reject individual rights and initiate physical force against some individuals for the benefit of others.

Note, also, that the principle of individual rights arose and became widely accepted long before the Industrial Revolution had even begun (and, in fact, was a key step making the Industrial Revolution possible). How was the idea of individual rights explained and justified in the pre-industrial era? It was justified during the Enlightenment on the basis of reason as a cardinal value, with the morality of individualism as a logical consequence. Fortunately, American culture today has not yet entirely lost the esteem it once held for reason and individualism. Americans are not yet ready to dispense with all rights entirely, in the name of a feeble, last-ditch attempt to salvage a rapidly deteriorating society. The potential for that development in future decades is ominously real, but there is still a chance of averting it. The key will be developing a substantial layer of pro-reason intellectuals in the culture, who understand and uphold the philosophical context of individual rights -- intellectuals who can explain the justification of individual rights and persuade others who deal with ideas to produce cultural products embracing it. Dr. Peikoff's DIM book explains this process in more detail. The perspective of reason, egoism, individualism, rights and capitalism won't make many new inroads among "the masses" without knowledgeable, committed intellectuals driving it, tirelessly injecting it into their cultural products -- i.e., into their commentaries, art works, plays, movies, novels, social institutions, political platforms, educational materials, and so on. Metaphorically, it's like maneuvering an oceanliner with tug boats. It takes time, purpose, and consistency, but it can be done.

An observer such as the questioner should ask himself: do you want to participate in driving cultural change, or do you want merely to follow (or resist) cultural change driven by others?

answered Dec 06 '12 at 00:57

Ideas%20for%20Life's gravatar image

Ideas for Life ♦

a good answer and one that will certainly have me thinking about this for a while to come... Thanks.

(Dec 07 '12 at 15:15) Danneskjold_repo Danneskjold_repo's gravatar image

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Asked: Dec 05 '12 at 00:31

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Last updated: Dec 13 '12 at 22:21