Saturday, August 21, 2004

  Fisking: The fallacy of capitalism

A new blogger with very old school ideas (communism is good for blacks folks etc. etc.) has started a new blog "Black Thought and Black Introspection". One of its writers commented on my post about Bush 2 inability to sell out to complete opposite sides of the middle east at the same time. Well Faheem thinks it very possible for Bush to do sell us out to both Israel and Saudi Arabia at the same time (something even Al Jazeera doesn't believe). Anyway I took a look at his blog and read a few of his post a decided to comment on their post the "The fallacy of capitalism".
A great fallacy of our time is born from the propaganda of our economic system. Capitalism is an intrinsically expansion seeking system that markets itself based upon the rewards of profit and a win-win resultant for participants. What makes this marketing fallacious is born from the fact that the concept of profit is an anomaly to nature's laws and the fact that all competition based phenomenon always produces win-lose resultant.

Quick note to all pundits, don't use natural law as your argument. Reason number one most people don't understand natural science well enough to make a reasoned argument. Second reason the natural world is much much stranger than most people believe so you can almost always find a counter example. Some conservatives had to fall on that sword with their silly homosexuality doesn't exist in nature to then be disproven by numerous counter examples.

His argument continues with..
"Capitalism is predicated and motivated by the concept of profit. Profit is not a natural phenomenon in nature. In fact, there never can be profit in nature when everything is summed up. In other words, there is
“no net gain” in nature, because there are no net gains in closed system or virtual closed systems such as the earth, for all intents and purposes. For everything that is gained within a closed system, something else must be lost as the offset. "

This argument like many that people make is true but it is meaningless. First because the only truly closed system is the entire universe. But lets assume a smaller almost closed system like earth. And let us take 2 tons of Iron ore. In the naturalist universe he is using as his model his the 2 tons of iron ore, a two tons of iron tools and two tons of rust are equivalent. That is what is meant by his NO PROFIT i.e. mass is conserved. As you can see it both true and meaningless for a discussion about capitalism, his nature metaphor is wrong.

Now lets use another metaphor for nature but one that actually works for as a metaphor for economic systems, and that is a living eco-system. Living creatures one earth do not live in an "virtually closed system" as he said earth is. In fact earth is an open system thanks to the wonderful energy we receive from the sun. The suns energy is a free ride, something that the earth would receive whether we were here to take it or not. Considering how much of the world wealth is created by the sun the fact that he considers earth a closed system once again shows his misapplication of the laws of thermodynamics to this discussion.

But lets us look at eco-systems. The concept of profit is the key to all living things. When you look at an apple tree, the apples are its expression of profit. A squirrels cache of nuts is an expression of profit. Profit comes from ones labor, the squirrel gets its nuts by working hard to find and collect as many nuts as possible. Apple trees work hard by growing tall to get as much sun as possible and having its roots go as deep as possible to get the water it needs. If you look at the natural world profit is created by hard work. So what does this have to do with capitalism and why it works so well ?

The question comes down to what is the role of profit in the natural world. Why does the tree makes nuts, or apples ? The nuts a tree makes with its profit of energy is of no use to the tree itself. In fact the nut or apple is designed for one purpose only and that is for trade. The apple tree trades its comparative advantage in making tasty food for a mammal's comparative advantage in mobility. Its a win/win situation. I get a tasty apple, the apple tree gets its seeds moved to a new location so its species can go on. The tree makes nuts, so that the squirrel will take the nuts home. Win-Win situation, that in a nut-shell (pun intended) is when an eco-system and when capitalism are working at its best. When there is near infinite variety of niches that are used by different creatures or businesses that all work together though a competitive market for resources.

To conclude his first basic premise that we live in a closed system is wrong, and his second that there are no win-win situations. They are not all win-lose as he has stated. A simple example of win-win is where one woman trades the service of cutting another woman's hair in exchange for baby sitting services on another night.

Are there win-lose situations, of course there are. Two trees next to each other compete for the same sunlight and water. One wins, one loses, but losing is as important to the eco-system as loss is to the capitalist system. Without loss buggy whip makers would still be making buggy whips that no one wanted. Losing makes one adapt and fill a new niche where there is a win-win situations and thus balance. Its has taken nature millions of years to make balanced eco-systems. It will take capitalism many years to make balanced econ-systems.
I Have copied this from the haloscan comments on this post:
Your response is one I know brother Noah will enjoy responding to and since it was his writtings you have responded to I will wait for him to defend his writtings which should be fairly easy. I would love to opine but I think it would be best if he responded to your words first. I look forward to future communications.

Faheem | Email | Homepage | 08.22.04 - 12:13 am | #

Someone just pointed something out to me that I did not pay much attention to when I first read your response. The over simplification of the Blog I contribute to as being one with ideas reminiscent of those who believed and professed "communism is good for Black folks" is a great example of the lack of critical thinking that runs rampant on this site. Your attempt to label my site as a communist site is in itself a throw back to a time when simply calling something communism discredited it. Here is an update for you, Communism is no longer the American Boogie man; the new boogie man is Islamo Fascism. So if you want to over simplify my site in the future and discredit it in the process it would be better if you said it is a site that says Islamo fascism is good for Black folks. At least that would raise some alarm.
Faheem | Email | Homepage | 08.22.04 - 2:05 am | #

One needs to ask themselves the question of whether or not “old school” is intrinsically inferior to “new school”. One only needs to take a look back at the “old school” traditions of our parents generation, such as respect for elders, looking out for the communities children, family unity, in order to realize that “old school” does not imply erroneous, or that this “black for Bush” is not properly understanding the term.

Nowhere in my essay did I promote any economic system. The fallacy in the blacks for Bush retort is born from the competition between communism and capitalism and people assuming that If one criticizes on, he or she by default is promoting the others. That is like suggesting that everyone who was against the war in Iraq was actually a supporter of Saddam Hussein. It is the classic attempt at distortion via logical fallacies. continued...
Noah TA | Email | 08.22.04 - 12:14 pm | #

In regards to closed systems, I said that the earth is a virtual closed system, not an absolute closed system. Much of the laws of physics are predicated upon closed systems. The laws of thermodynamics are expressed in terns of closed system, thus, if closed system did not exist upon the many laws of thermodynamics could never be applied successfully upon earth. However, we all know that this is not the case. Also, to say that the universe is the only closed system is contradictory because a closed system needs and alpha and omega or a beginning and end. I have yet to hear the science that bounds the scope of the universe. continued...
Noah TA | 08.22.04 - 12:17 pm | #

The black for Bush also have a very superficial understanding of the eco-system. What he or she failed to note is that the apple from the tree is actually the converted nutrients/energy in the soil, water an energy from the sun. In other words, in our closed system, one for of life or energy is simply converted to another form of life or energy. If that was not the case the total mass of the earth would be in constant expansion. Just think of how human life survives. Human life survives by consuming other human life for sustenance and growth. There is no net gain or profit in ecosystem and the food chain. We, humans, live, because other life dies as we consume them for survival. When we die our body decomposes and becomes nutrients for other living beings and the soil, which in turn counties the cycle and balance.
Noah TA | Email | 08.22.04 - 12:17 pm | #

The food chain of the eco-system actually proves my point concerning capitalism. It is a good analogy because it too is bound by the laws of thermodynamics. The top of the people at the capitalist food chain survive by feeding off the exploited masses who are low in the chain, just like the Lions feed of the Gazelles. If the poor and underclass to the elites did not exist, the elites would eventually die out because most of their income comes from putting the massed to work from them and converting their energy into profit, income and wealth. However, the masses lose out because they are not getting the true value of their energy input back in return. Think of it like this. If I can get enough people to trade me their dollar for my 90 cents, I will eventually become rich as a direct result of their losses. That is what capitalism is…it is simply a system of unequal exchanges.
Noah TA | Email | 08.22.04 - 12:18 pm | #

Compare that with a true barter system. That 10 cent difference in the unequal exchange is then called profit, which comes from expanding the base of workers and consumers to exchange energies with.

Noah TA | Email | 08.22.04 - 12:19 pm | #

Communism is not a boggie man, its an economic system. I don't know if you have read the communist manefesto but your anti capitalism piece which basically says that capitalism is exploitation says the same thing.

I am sorry if calling it as I see it upset you. Communism is a part of America today, graduated income tax, inheritance tax were all part of the Marx's plan.

Before we continue debating economic I ask you this simple question. Does comparative advantage exist ?

The reason I ask is because your reponse seems to miss the point of my post. I admit that there are win-lose senarios but you seem unable to admit there are win-win senarios.

About the eco-system it is totally powered by the sun which is outside the earth environment.

Anyway your retoric "exploited masses" is a nice throw back to classic communistic retoric. Your Gazelles exploit the grasses, by eating them do they not ?
Scott | Email | Homepage | 08.22.04 - 2:59 pm | #

Simply give me an example of win-win in regards to mathematical understanding. Of course, you are free to describe something as win-win subjectively and therefore deny something is not win-win.

What I mean by mathematical is to show me how 5 + 5 can ever equal more than 10 in the redisribution between two entities? Profit in the capitalistic system simply works by one getting 4 and the other getting six in the redistribution. Now the fact that both get something that they desired and entered into mutual agreement does not negate the fact of unequal exchange.
Noah TA | Email | 08.22.04 - 3:33 pm | #

Also, in regards to your question about comparitive advantage, you are missing the point. The reason being is that the issue is not advantage or disadvantage, but rather, TAKING ADVANTAGE.

For example, If I run across you and your wife in the desert and you are dying of thirst...I may use your need to maximize profit if I had no moral constraints. If you wife looks good to me..I may trade you water to sleep with her. If you have money, I may then charge you 100 dollars for a $1.00 bottle.

Thus, the issue is not one of comparitive advantage...it one of TAKING ADVANTAGE for profit through unequal exchanges.
Noah TA | Email | 08.22.04 - 6:56 pm | #

Ok let me show you how goods and wealth are created. Lets take a system of a single mother with one child on welfare living in a housing project.

Each month she gets her checks from the government. And then spend all the money and end up in the same place at the start of the next month. No one is exploited and no on is creating wealth.

Then one day the mother realizes I want more out of life. She goes through all of her resources and says how can i get more out of life. She decides to take $10 worth of her food stamps and bakes 4 cakes. She and her child put up a table outside of the playground and sell the 32 slices of cake for 50 cents each. She has now taken $10 of material, and her time and recieved $16. She has $6 more than she has had before and that is her profit.
Scott | Email | Homepage | 08.22.04 - 8:39 pm | #

No one was forced to buy the cake. No one was TAKEN ADVANTAGE OF In fact most people who had the cake believe their life was improved by having that piece of cake.

That is a win-win situtation.

The reason wealth was created is that she took and IDEA (something not in your closed system) and her TIME (also not in your closed system). And with these resources created wealth.
Scott | Email | Homepage | 08.22.04 - 8:41 pm | #

If that is the best that you can do then you have failed to make your case. For starters, Welfare payments are TRANSFER PAYMENTS. These transfer payments are the transfer of tax dollars from working citizens who earned it, to no working citizens. Thus, there is the first loss. Next, when the mother sells those cakes at more than the price that she made it, her gain is the loss of the customer who made a purchase at more than cost. Thus, the customer is out of more money than he should actually have been out of in the creation of profit for the welfare mother. Thus, there is the second loss.

Willful participation or not is not my point. My point is the capitalism mostly comes from unequal exchanges between people, which results ultimately in unequal distribution of income and wealth and social and class stratification.
Noah TA | Email | 08.22.04 - 9:43 pm | #

So in your world the value of an idea is zero and the value of a workers time is zero. That is what you are saying, correct me if i am wrong ?

And her six dollar profit is not from her work but from "the loss of the customer who made a purchase at more than cost. "
Scott | Email | Homepage | 08.22.04 - 10:55 pm | #

Value is a subjective phenomenon. It is ubiquitously the case that when people defend the system they will introduce the concept of value and willful participation to rationalize and obfuscate the equal exchanges taking place. However, people place value upon things that they need but have no other viable way of getting.

It is not fair to focus on the choices people make, without focusing on their array of options. Most people choices are selected from their varying pool of options and when the array of options is constrained then ones freedom of choice is constrained. The way that system works is that it removes options which thus lead people to make the choice to engage in these unequal exchanges.
Noah TA | 08.23.04 - 5:36 pm | #

You didn't answer the question, please try again.
Scott | Email | Homepage | 08.23.04 - 8:35 pm | #

The value of an idea can not be worth more than the energy used to create it. Thus, how can one profit on an idea if all that is returned is the effort put in? No matter how you try to wiggle of the universal laws of nature, such as the laws of thermodynamics, you will find that you are always bound by them. Thus, nothing can gain without something else being diminished. Please show me an example where this is not true and stop all this mumbojumbo obfuscating about the subjective concept of value. I am talking in terms of objective criterion. Value is simply an excuse for taking advantage. For example: I am sure we all know of people who are involved in relationships where one of the parties is in love and the other is not the same degree. What ends up happening is that party that has the advantage uses the fact the other values and needs them more than the opposite. They then up being used, even though they willfully entered into the relationship.
Noah TA | Email | 08.23.04 - 8:57 pm | #

Your argument like many that people make is true but it is meaningless. First because the only truly closed system is the entire universe. But lets assume a smaller almost closed system like earth. And let us take 2 tons of Iron ore. In the naturalist universe he is using as his model his the 2 tons of iron ore, a two tons of iron tools and two tons of rust are equivalent. That is what is meant by his NO PROFIT i.e. mass is conserved. As you can see it both true and meaningless for a discussion about capitalism, his nature metaphor is wrong.

As I said before your metaphor is critically flawed.
Scott | Email | Homepage | 08.24.04 - 7:08 pm | #

True but meaningless....what the ____ does that mean? If what I see is true...the ramifications are extrodinary...whether the resultant of this truth has meaning to people or not. The Universe has no Alpha and omega that we know of...so how can you prove that its a closed system?

Well, I think I have beat that dead horse...continue to think that truth is meaningless if it serves your political self interest...knock yourself out.
Noah TA | Email | 08.24.04 - 9:53 pm | #

So basically you never read my post. After 17 comments you bascially are now saying that. Thanks for the discussion. I read your post, took a good amount of time responding to it. And you couldn't have 5 minutes to read my post and think about it. Or even respond to it.

All you have done is repeat what you believe. Open your mind. Maybe you can learn something. I shall keep you on my blog roll, I need to remember this ignorance I am fightint.

Thanks for the reminder.
Scott | Email | Homepage | 08.24.04 - 10:32 pm | #

Scott | Email | Homepage | 08.24.04 - 10:46 pm | #

You need to learn the meaning of ENTROPY. Energy is a package deal with matter. However, evergy comes in to forms...usable and non usable energy. The matter of Iron ore has more useful energy than does the matter of rust, even though they both are mass/matter.

However, you cannot get to rust without getting to the Iron ore first. It is the natural process of decay. It just went from one form of energy to another. Your Iron ore example is what is meaningless. My point is that 1st law of thermodynics says that you can never get more back than what you put in, which defies net gain or profit.
Noah TA | Email | 08.24.04 - 11:44 pm | #

Earth is not a closed system so 1st law does not apply. How can you miss this point. The whole food chain, oil, rain, windpower are all powered by the sun which is outside of earth.

Please stop ignoring this BASIC fact that you are missing.


First Law of Thermodynamics: .. The total amount of energy and matter in the Universe remains constant, merely changing from one form to another. (UNIVERSE)
Scott | Email | Homepage | 08.26.04 - 4:39 pm | #

I stated that the earth was a virtual closed system...check the RECORD. However, you are simply trying to dance around the point. It is not needed for the earth to be an absolutely closed system in order for the laws of thermodynmics to manifest. The suns impact upon the earth is a CONSTANT, at least in our lifetimes. Thus, the effect of the sun never changes is irrelavent, because the heat that radiates out, is always radiating back in, in a constant cycle of no net gain or loss, unless the green house gases, from human industrial activity traps the infrared light in our atmosphere, thus causing the earth to gain in temeperature (other wise known as global warming). Also, meteors often enter our system, thus, impacting the earlth. I know that the system is not absolutely closed, but that does not change the laws of thermodynamics.
Noah TA | 08.26.04 - 5:38 pm | #

One more itty bitty point...You say the universe is closed system and thus I suppose you accept that the first laws applies to the universe...Pssssssssttttttt...come a little closer...listen close....THE EARTH IS PART OF THE UNIVERSE!!!! Duhhhhhhhhhh. So the law STILL IS VALID!!!
Noah TA | Email | 08.26.04 - 10:36 pm | #

Noah you had a really bad science education.
Scott | Email | Homepage | 08.26.04 - 11:03 pm | #
The key flaw in Noah's "Zero Sum Game" theory of Economics, as I have pointed to him in the past, is the fact that he does not make room for the concept of VALUATION.

I can have $10 worth of gasoline and Noah has a pocket full of cash. If we do an exchange of half of my supply in exchange for his cash benefited equally as we have met each other's price point in the market that we have just created. Now we come back a second time and Noah needs the rest of my gasoline to run his car. Next Faheem drives up and he too needs gasoline for his car because his 22"s with spinner rims is gas guzzler. Faheem offers me $7 for this same quantity of gasoline that had sold for $5 perviously.

Can Noah tell me where the $2 spread magically came from in your closed system of "zero sum"?

Money has an abstract value. Currencies are traded on the global markets and each currency has a varying relative value.

Your theory makes no use of the concept of changing value and thus it is not a valid theory.
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