Archive for the ‘economics’ Category

There are basically two classes of people in this world:
Workers, who create something that has value, and
Grifters, who grift off of the wealth of workers because they claim ownership of the wealth that workers create.
That’s pretty much it. We can use pretty names for the grifter class, like “investors” or “venture capitalists” or “landlords” or “executives” or whatever, but in the end they make their money by claiming ownership of stuff that the worker class created, not by themselves actually creating anything. It’s basically a scam. A *useful* scam in some ways, but still a scam.
– Badtux the Classy Penguin

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May be an image of 5 people and text that says 'I made Twitter Imade Facebook I made Apple That's nice, guys. I made Jimi Hendrix.'

None of those guys made Twitter, Facebook, or Apple. Rather, the thousands of talented engineers that they hired made Twitter, Facebook, and Apple. Jack, Zuck, and Steve were just good at a) scamming investors to give them the money to hire those engineers, and b) scamming the general public into believing that Jack, Zuck, and Steve were anything other than glib scam artists to begin with.

Meanwhile, Jimi’s mom actually *did* make Jimi, with a little help from a sperm donor. Spent nine months baking him in the womb, far more work than any of those scam artists ever did in their entire life.

When it comes to creators, I rank Jimi’s mom way above any of the glib scam artist “tech titans” who’ve managed to convince the world that they did something other than manage to successfully scam people. Hell, Facebook wasn’t even a novel or revolutionary concept, there were thousands of bulletin board systems before it which did much the same thing. The only reason Facebook took off is that MySpace got bought out by a giant corporation that didn’t understand social media and managed to kill it. Otherwise Facebook would have remained Zuck’s “rank the women on campus” web site with no audience and no users.

– Badtux the “Scammers gotta scam I guess” Penguin

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So, what happens if the minimum wage goes from $7.25 to $15 in Bugtussle, Iowa? “The price of a burger will double!” screams people like the National Restaurant Association. Thing is, it won’t be *that* much more for a burger. Labor costs for a typical McDonald’s restaurant, for example, account for 36% of costs. The rest is supplies, raw food, rent, utilities, etc. And McDonald’s actually has high labor costs relative to most restaurants. Restaurants generally aim to have less than 1/3rd of their costs be labor.

So, based on that, what happens if a Quarter Pounder costs $4 at the current $7.25 minimum wage? Well. 6.4% of that is profit, so the Quarter Pounder currently costs them $3.74 to make. Of that $3.74, labor is $1.35. So if you’re going to double the labor component of the burger, labor is going to go from $1.35 to 2.79, or a hike of $1.44. So if you’re wanting to cover the wage hike by raising the price of the burger, it’ll go from $4 to $5.44.

Which granted is a hike, but it didn’t *double* the price of the burger. The price of the burger only went up by 26% even though labor costs more than doubled.

People like the National Restaurant Association try to trick people into thinking that the price of restaurant food will literally double if restaurant workers’ wages are doubled. But most of the costs of a restaurant aren’t labor costs. Restaurants focus on labor costs because they can’t really do anything about the rent or utilities or property taxes or the cost of food inputs that is set by their franchising agreement or SYSCO, but labor costs typically are less than 1/3rd of the costs of a restaurant, meaning that at most doubling labor costs would raise food prices by less than 1/3rd if food prices were raised by only enough to pay the extra labor costs, not double them.

— Badtux the Economics Penguin

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The vast majority of people with money did no work themselves to obtain that money, they simply used the law to claim wealth created by their workers, the people who actually add value to the economy. Most were born relatively aflluent in possession of valuable assets that the workers need in order to produce value, and used that position of ownership to tell the workers “you will work for me and give me ownership of all the wealth you create and I will give some small portion back to you in exchange, or you will die starving on the streets.” Capitalism is, in essence, legalized theft of the output of the workers for the benefit of a relatively few wealthy people who claimed ownership of the means of production and have the guns to back up their claim.

The reality is that the rich would not be rich if not for government guns backing up their claims of ownership to everything. If the workers at the widget factory went out and sold the widgets themselves, rather than giving them to the “owner” to sell, they would be prosecuted in a government court for theft of what the workers actually created (not the “owner”, who created nothing, merely claimed ownership of what the workers created). It is only by having government guns backing up those claims of ownership that the rich can be rich. Which is why it’s so hilarious that so many of the rich claim to hate government, when they would have nothing if not for government guns backing up their claims of ownership.

Does this mean that I believe in communism? The answer to that is “No.” Thus far, capitalism has proven to be the best system for producing wealth, and wealth has proven to be the best way of improving the life of the public as a whole. It does mean that I have little patience for the owner class crying crocodile tears over the possibility of the working class reclaiming a slightly larger share of what they produce in the form of “free” health care, “free” college, and so forth. Yeah, they’ll be slightly less wealthy if we tax them for some more of the wealth created by the workers in order to benefit the workers. So what? They still have far more than any person could rationally consume in any human lifetime, and they created none of it in the first place. Allowing them to grift seems to have better outcomes than the alternative, but it’s still a grift, and if we let them grift a bit less in order to provide the same damned services to the workers that actually produced the wealth that the rest of the civilized world manages to provide to their citizenry, well, I ain’t gonna cry about that.

– Badtux the No-patience-for-hypocrites Penguin

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Sixty years ago, the city-state of Singapore faced a housing crisis. There was insufficient housing for all its citizens, and much of the housing that did exist was dilapidated and substandard and overcrowded, little more than one-room tar-paper shacks that entire extended families were crammed into.

Singapore’s response was to build massive government housing projects. I mean *MASSIVE* government housing projects, to the point where 80% of Singapore’s population lives in government-built housing. And these housing projects are, like the rest of Singapore, clean, safe, and pleasant places, if a bit bland.

Meanwhile, here in the United States, what government housing projects exist are decrepit, dilapidated, filled with rats and crime and trash, definitely *not* anything like the Singapore projects. So: Why are the Singapore government housing projects so different from the U.S. housing projects?

Well,three reasons:

1) Race. Most residents of Singapore housing projects are ethnic Chinese, just like most residents of Singapore itself, and the racial composition of each housing block is carefully managed to reflect the racial balance of Singapore itself. Meanwhile, most residents of U.S. housing projects are blacks, which are only 12% of the U.S. population and are a hated and discriminated-against minority. The white majority in the U.S. is loath to spend resources on what they view as a disgusting and filthy minority.

2) Income. The Singapore housing projects are open to all Singapore citizens, and the residents of the Singapore housing projects reflect the full range of socioeconomic classes from poor to well-off other than the ultra-rich. Meanwhile, American housing projects are reserved for the most hated and despised minority of all in a land whose real religion is the Almighty Dollar– the utterly impoverished. The not-impoverished majority in the U.S. is loath to spend resources on what they view as a disgusting and filthy minority.

3) Ownership. While technically the flats in a Singapore housing project remain the property of the government, the 99 year leases for those flats are considered property and can be bought and sold with some restrictions (e.g. only citizens can buy a resale flat, and you have to live in it for a certain number of years before you can sell it). Furthermore, the buildings themselves are run by a “town council” comprised of a selection of residents of the buildings comprising a “town”. The result is that people want to keep their properties well maintained and allocate the resources to do so. Thus the government housing projects in Singapore remain clean, safe, and pleasant places.

Now, some of this is unique to Singapore. But other parts of it are not. Any built-out area with a housing crisis could benefit from executing a Singapore-style plan. Not that it would ever happen in the United States, because ideology, not pragmatism, is what rules in the United States. You’d hear GOP shouting “socialism!” You’d see NIMBY’s who worship the Almighty Dollar above all gods shouting “it’ll decrease my property values!” You’d hear liberals saying “it’s a subsidy for the rich!” Ideology would crush it. It could happen in Singapore because Singapore is a Confucian dictatorship run by the members of one family and thus there’s nothing stopping them from taking pragmatic measures to improve their city-state. It would never happen in San Francisco. Ideology would kill it.

And thus we end up with working people living in cars and vans on the streets, and Singapore… doesn’t. It’s ideology versus pragmatism. For those who claim that Singapore being a dicatorship is why they could do it, there’s no end of dictatorships that have taken the same route as San Francisco, letting people live and die in misery and squalor despite having the resources to do something about it. The difference is that Singapore chose the path of pragmatism rather than clinging to an ideology. The city-state started out as a place of refuge for Malaysia’s Chinese minority and did not have the luxury of ideology at the beginning, when its very survival was iffy. Sticking with pragmatism as its primary guiding principle not only let it survive, but let it become an economic powerhouse in Southeast Asia despite its total lack of resources. As versus, say, Alabama, which sticks to ideology as its guiding principle… and is a total hellhole.

-Badtux the Pragmatic Penguin

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The Internet and all the hardware and servers on the Internet as well as the computer you’re using to read this were created by hundreds of thousands of ordinary middle class engineers and programmers and installers and technicians who wrote the code, designed the computers and routers, and built and installed the hardware all the way out to where you’re typing this. Yet virtually none of these people own any of their work. It almost all belongs to the super-wealthy, because of the divine rights of kings. Or something.

Generations from now, people will look back upon our current gilded age with the same revulsion that people today have when they look back upon the days when kings could behead people just on whim and lived lives of luxury while their people starved in rags.

— Badtux the Democratic Socialist Penguin

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A few days ago I mentioned that centrally planned economies can’t work, but neither can capitalist economies unless there are rules that redistribute the tokens to the consumers and workers who generate wealth rather than allowing them to accumulate unfettered in the hands of owners of capital. At which point someone says, “well, the only way to do that is tyranny!”

What, in the 1950’s the United States was a tyranny? For real?

Then there’s the argument, “the rules will always be hijacked by the rich and powerful. How are you going to prevent that?”

My answer is democracy. The large number of young people looking at democratic socialism as the answer, which is where democracy is used to re-write the rules to favor redistributing the tokens back to the masses rather than letting them accumulate in the hands of a rentier class, shows that democracy can be self-correcting over time. Democracy is not Orwell’s boot pressing the face of man into the ground forever, it has the capacity for change, albeit sometimes the change happens depressingly slow and takes forms at times that are equally depressing. Is democratic socialism “the” answer? Not in its purest form, certainly, but it is a natural reaction to rentier capitalism and is the direction we must go if we don’t want a Mexico North with a huge impoverished class and a tiny but stupidly wealthy upper class and nothing inbetween. Mexico is not a nice place to live for the majority of people there (and the fact that they’re no longer coming to El Norte should tell us something too about where our nation currently is). If democratic socialism takes us away from that, sign me up!

– Badtux the Somewhat-socialist Penguin

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Centrally planned economies in the information age don’t work for the same reason that we don’t write computer programs that detect bombs in luggage — the problem set is so huge that there is no set of heuristics that can cover all the permutations. Instead we set up a system that learns, and some rules to let it know when it’s working right, and then train it in the real world. In the industrial age the Soviets could compete, albeit with significant inefficiencies that I’ll discuss separately if you’re interested. Once we moved into the computer age, economies became too complex to centrally plan. Training them with tokens, a.k.a. money, really is the only way that works with modern economies.

Unfortunately the set of rules has been hijacked by rich jackasses who care only about themselves and not about the health of the economy as a whole. Or as Michael Roberts says, “a rentier economy is a dying economy”. But people continue to think that the set of rules that currently exist, “natural law” rules that are actually “survival of the richest” rules, are the only ones that can exist. Our nation grew its economy best back when the government imposed a set of rules that redistributed money back to the people who actually created wealth (i.e., the workers who actually built Buicks and Chevrolets) rather than allow it to concentrate in the hands of a few rich people, because that allowed the tokens to be used to train the economy to generate wealth that benefited the common folk. Obviously now that money has become magic talismans and “market economies” have congealed rule sets that have become religious in nature rather than practical, we end up with what we observe — an economy that benefits only the few, not the many.

Rich people continue to whine that changing the rules is “Communism”. No, it’s not. They are pushing a religion that contains a rule set designed to enrich the rich, rather than upon the concepts of money and markets as a whole. I am quite capitalist, capitalism is the only proven way of actually encouraging the creation of wealth. What I’m against are rules that benefit only owners of capital, not the workers who generate capital. We’ve had rules that benefited both owners and workers before, and it worked out well for this nation. Saying that this was “Communism” is saying that the entire USA of the 1950’s was Communist — which is patently absurd in every way possible.

– Badtux the Economics Penguin

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Right wingers point at Venezuela when whining about the perils of socialism. Bull. Try Denmark or Sweden if you want a socialist country. The chaos in Venezuela is about racism, not socialism — the Blancos (whites) owned the economy, got kicked out of office by the Indios (brown), and think destroying the economy will get them voted back in. It’s all about “the punishments will continue until you vote us whites back into power!” They would literally rather destroy the country than relinquish economic and political power to people they consider their racial inferiors. The most hilarious thing of all is that if you put the average Blanco and the average Indio side by side, the average white American wouldn’t be able to tell the difference between them!

I boarded with a Blanco when I was in college. He was a racist piece of shit. I’ve heard many of the exact same things out of the mouths of Blancos today that I heard back then from that jerk’s mouth. They are as bad as the old white elites of the American South who were willing to shut down all government services rather than allow blacks equal access to them. Which is where most anti-government sentiment in the United States stems from, BTW — it’s grounded in racism and in utter spite, a willingness to cut off services to themselves rather than share them with people they consider their racial inferiors.

But anyhow: the chaos in Venezuela is basically about a race war between the Blancos and Indios. Socialism is incidental to that, and more about the Indios trying to punish the Blancos for the Blancos torpedoing the economy as the Blancos try to punish the Indios for voting them out of power than about any real ideological convictions. The situation in Venezuela was caused by a civil war between races, not by socialism. Socialism has its own issues and inefficiencies, but it doesn’t cause race wars. That just isn’t a power of any system of economics.

– Badtux the Geopolitics Penguin

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Virtually all economically wealthy people (and I mean people who are millionaires) got there by underpaying their workers. The workers are the people who created their wealth, the workers are the people who created the products and manufactured the products and sold the products to customers and maintain the products, the millionaire owners have simply kept more of the output of the workers than is justified by what they put into the business. If they shared the wealth created by the workers with the workers in proportion to the amount of that wealth that was created by the workers, they wouldn’t be wealthy. Well off, but not buy-a-Lear-jet-to-fly-to-my-vacation-home-in-the-Bahamas wealthy.

So yes, Elon Musk is evil. When his dot-com got sold he got a huge sum of money even though he himself did not create that dot-com, all he did was invest some money in it. The employees who built that dot com should have gotten their fair share of that wealth that they built, they were the ones who built the web site and back end infrastructure and everything, but they didn’t, Elon took a disproportionate amount. That’s what I mean by evil. Elon gets paid in stock grants that workers who created the wealth of Tesla don’t get (while they are otherwise working long hours for low pay in unsafe conditions). The fact that he has a flair for PR and has done some not-evil things with wealth that should have belonged to the workers who created that wealth doesn’t change the fact that Elon Musk is evil. It merely means he’s trying to absolve the stain upon his soul.

As for the PR stunt of promising clean water for Flint, the devil is, of course, in the details. I doubt Musk is going to spend $1.5 billion to rip up all the streets in Flint to put new water mains under them and new non-leaded laterals to houses, which is what would be required to actually fix it. For one thing, he doesn’t actually have $1.5 billion, not without selling all of his stock in his various ventures. My guess is that he’s going to fund some water filters for people’s houses. Yay. Big fucking deal.

A capitalist system with a working banking system doesn’t require oligarchs in order to start businesses and provide a fair return to the owners of capital. That’s what banks are for. Too bad we don’t have a capitalist system with a working banking system…

— Badtux the semi-Communist Penguin

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