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Keep socialist blog En Passant going - donate now
If you want to keep a blog that makes the arguments every day against the ravages of capitalism going and keeps alive the flame of democracy and community, make a donation to help cover my costs. And of course keep reading the blog. To donate click here. Keep socialist blog En Passant going. More... (4)

Sprouting sh*t for almost nothing
You can prove my 2 ex-comrades wrong by donating to my blog En Passant at BSB: 062914 Account: 1067 5257, the Commonwealth Bank in Tuggeranong, ACT. More... (12)

My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. http://sharonfirebrace.files.wordpress.com/2014/02/18-2-14-john-passant-aust-national-university-g20-meeting-age-of-enttilement-engineers-attack-of-austerity-hardship-on-civilians.mp3 (0)

My interview Razor Sharp 11 February 2014
Me interviewed by Sharon Firebrace on Razor Sharp this morning. The Royal Commission, car industry and age of entitlement get a lot of the coverage. http://sharonfirebrace.com/2014/02/11/john-passant-aust-national-university-canberra-2/ (0)

Razor Sharp 4 February 2014
Me on 4 February 2014 on Razor Sharp with Sharon Firebrace. http://sharonfirebrace.files.wordpress.com/2014/02/4-2-14-john-passant-aust-national-university-canberra-end-of-the-age-of-entitlement-for-the-needy-but-pandering-to-the-lusts-of-the-greedy.mp3 (0)

Time for a House Un-Australian Activities Committee?
Tony Abbott thinks the Australian Broadcasting Corporation is Un-Australian. I am looking forward to his government setting up the House Un-Australian Activities Committee. (1)

Make Gina Rinehart work for her dole
(0)

Sick kids and paying upfront

(0)

Save Medicare

Demonstrate in defence of Medicare at Sydney Town Hall 1 pm Saturday 4 January (0)

Me on Razor Sharp this morning
Me interviewed by Sharon Firebrace this morning for Razor Sharp. It happens every Tuesday. http://sharonfirebrace.com/2013/12/03/john-passant-australian-national-university-8/ (0)

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Keynes won’t save us

Tess Lee Ack  from Socialist Alternative (www.sa.org.au) argues that it is falling profit rates, not under-spending, that is the problem for capitalism. So Keynesian spending won’t work.  Instead workers need to throw the whole rotten capitalist system overboard. We need a new democratic society where production occurs to satisfy human need, not one based on falling profit rates.

“We start 2009 in the midst of a crisis unlike any we have seen in our lifetime – a crisis that has only deepened over the past few weeks. … If nothing is done, this recession could linger for years. In short, a bad situation could become dramatically worse.”

In this speech to state governors and mayors in early January, Barack Obama was not exaggerating. In 2008 more American jobs were lost than at any time since World War II – the figure is nearly 2 million and rising daily. Millions have lost their homes and shanty towns mushroom on the fringes of the big cities as the ranks of the homeless continue to swell. Many financial institutions have closed their doors, and manufacturing is at a 28-year low, with businesses large and small going to the wall.

Made before his inauguration (such a departure from tradition underlining the gravity of the crisis), Obama’s speech was designed to push the incoming Congress to accept his stimulus package. He plans to spend an ever-increasing sum – $US800 billion at time of writing, but it could well go higher – in an attempt to revive the US economy, and warns that unemployment could soar past 10 per cent if his spending program is rejected.

Obama appealed to Democrats and Republicans alike to “put good ideas ahead of the old ideological battles” and support his program.

But what are Obama’s “good ideas”? Do they really represent an ideological alternative to the disaster that this crisis of capitalism has unleashed on the working class in the US and around the world? And can they work? To answer these questions, we need to review some economic history.

Every time capitalism gets into serious trouble, those who run the world and their apologists thrash around for solutions. The monetarist Milton Friedman was regarded as a crank in the 1960s. But following the onset of world recession in 1974, his ideas found an audience and were widely taken up. Friedman won a Nobel Prize and was feted as a hero by world leaders.

For three decades, the ideology of the market and neoliberalism reigned supreme, as conservative and social-democratic governments alike slashed spending, privatised and deregulated anything that moved and introduced austerity programs to drive down workers’ living standards. This was supposed to restore profitability – which it did, up to a point, and to reward workers for their sacrifices as the wealth “trickled down” to create jobs – which it didn’t. Instead unemployment remained high in many countries and there was a huge transfer of wealth from poor to rich.

Now, with capitalism plunging into another crisis, its worst since the Great Depression of the 1930s, the pendulum has swung again. Now it’s neoliberalism that’s discredited and Keynesianism that’s being touted as the panacea.


Keynesianism

Obama’s stimulus package includes such measures as major infrastructure projects, job creation programs and tax cuts for the less well-off. This is sometimes called “pump-priming” the economy – to get it going again by giving capitalists the confidence to invest and create jobs and ensuring that workers are well-off enough to maintain demand for commodities.

Such programs fall under the umbrella of Keynesianism – named after John Maynard Keynes, one of the most prominent bourgeois economists of the twentieth century. Developed largely in response to the crisis of the 1930s, Keynesianism displaced laissez-faire capitalism (which has much in common with neoliberalism) as the dominant economic orthodoxy in the Western world until the 1970s.

Keynes came from a privileged and wealthy background; he was educated at Eton and became an academic at Cambridge University. In the 1920s, he acquired a reputation as a radical with his critique of the economic establishment. But Keynes was no anti-capitalist; he boasted that he had never read Marx. Rather his purpose was to save capitalism from its own destructive tendencies and make it work. He was a key player in the 1944 Bretton Woods conference that gave us the World Bank, the IMF and the WTO, and he was eventually made a peer for a lifetime of service to the British ruling class.

The publication in 1936 of Keynes’s major work, the General Theory of Employment, Interest and Money, was very timely. It provided a theoretical underpinning for a process that was well underway in the world economy. The Depression had forced governments everywhere to intervene directly in economic life. In the US there was a major program of government spending under Roosevelt’s New Deal.

Keynes argued that an economy based on money and the unregulated anarchy of the market was always liable to break down. When capitalists stopped investing, closures and sackings and a fall in production followed. Workers on the dole – or with no income at all – were often unable to afford even the bare necessities of life. So demand for all sorts of products slumped, leading to more closures and sackings in a vicious downward spiral.

For Keynes this underconsumption was key to the problem, and such crises could be avoided by governments intervening with the right policies. Like all bourgeois economists, he rejected Marx’s argument that this type of crisis is both endemic and necessary to capitalism.

In a recession, some businesses go broke, giving other capitalists the opportunity to buy cheap assets. Mass unemployment allows employers to go on the offensive, cutting wages and conditions. Eventually investment gets going again, workers are employed, demand is stimulated. The more inefficient capitalists are weeded out and profit rates rise. The system is thus cleaned out, laying the basis for a boom.

But this is an anarchic process. As economic signs begin to improve, more capitalists rush to invest, competing for a share of the market. But because no planning goes into production, you soon get overproduction – not in terms of human needs, but because there are too many goods on the market to be profitably sold.

Meanwhile, because of the rise in demand, prices of raw materials start to climb, and workers have more confidence to demand higher wages. Overproduction sparks price wars as big firms try to drive their competitors out of business. Then some of those who’ve borrowed heavily to finance expansion go bankrupt and before you know it we’re in recession again. This cycle is not just a theoretical construct, it has occurred with almost predictable regularity for most of capitalism’s history (the exception is discussed below).

Like all bourgeois economists, Keynes never understood why fluctuations in the level of investment occurred. At one time, he blamed the operations of the financial markets, bankers and speculators for pushing up the rate of interest and thus cost of borrowing. But the Great Depression knocked that theory on the head. No matter how cheap money was, firms would not borrow to invest when faced with stagnant markets and no prospect of making a profit on their extra investment.

Another time he toyed with the ludicrous notion that the captains of industry periodically experience waves of optimism – leading to investment and a boom – or pessimism – leading to contraction and a slump.

The Marxist theory of crisis

Marx argued that capitalism goes into crisis because over time, there is a tendency for the rate of profit – the return that capitalists get on their investment – to fall.

Capitalism is a competitive system, with every firm trying to get the edge on its rivals. The capitalists need to be able to undercut their competitors’ prices. To do that, they have to be able to produce more cheaply. Obviously they try to reduce costs wherever possible – mainly by keeping wages down. But major productivity gains only come from investment in technology. A machine that can churn out twice the number of goods with half the number of workers is going to deliver a competitive advantage.

The first to latch onto a new process will make a killing. But then others will be forced to invest in the same process in order to keep up. Before long, everyone has it and the competitive advantage is lost. What’s more, industrial “state of the art” doesn’t last long. Soon someone invents an even more efficient process, forcing everyone to retool and reorganise production.

Because of competition, prices have to be kept as low as possible, so they fail to keep up with the rising costs of investment in raw materials and machinery. And there’s another, deeper problem. It’s only labour that creates new value, so as the proportion of outlay on machinery increasingly outstrips investment in labour, downward pressure is exerted on the rate of profit. A firm may be making megabucks, but if the profits represent only a small return on their investment, the actual amount is irrelevant. Those with money to invest may be able to get a better return on property or share speculation, as we have seen in recent times. This is of course a useless, parasitic activity compared to producing goods that people actually need, but under capitalism it’s profit that matters, not human need.

It’s simple really: capitalists will invest when they think they’ll get a good return, and not otherwise.

Because Keynes didn’t understand that crisis is actually necessary to the system – to clear out the dead wood and restore profit levels – he thought it could be circumvented. When the economy started to slide into recession, Keynes said, governments should intervene, pumping money into the economy to push up demand. This would require deficit financing, but the extra spending would reflate the economy. Rising demand would encourage private capitalists to invest and take on more workers and a slump would be avoided.

There are however several problems with this. Firstly, inefficient capitalists are propped up, acting as a drain on the economy as a whole and putting pressure on profits. Secondly, deficit financing leads to unacceptable levels of government debt if they borrow, or to inflation if they just print money. There’s also the danger that pushing up demand will suck in imports and cause problems with the balance of payments. Thirdly, governments can’t actually force private capitalists to invest. In fact, big business is much more able to exert pressure on government than the other way round. And of course, no individual government can control the world economy, which is divided into competing national chunks. There is no world state which could regulate the system as a whole, so what any individual government can do on the domestic front is limited.

None of this was a problem during the long post-war boom of the 1950s and 1960s. The system was expanding and governments didn’t need deficit financing. But while that unprecedented boom was underpinned by massive government spending, it was a very particular type of spending – arms production.

Though politically necessary, in economic terms arms are a complete waste. This was actually a good thing for capitalism during the post-war boom. Arms spending meant that vast amounts of capital were taken out of circulation, rather than piling up within the system. By diverting resources away from accumulation, arms spending slowed down the tendency of the rate of profit to fall.

No one actually intended this or worked it out as a theory. It was an accidental by-product of the Cold War, but it seemed to confirm the ability of Keynesian policies to avoid slumps.

The failure of Keynesianism

However, the effect of this “permanent arms economy” was temporary. It’s estimated that between the mid-1960s and mid-1970s, profit rates in most countries fell by about half.

Then along came the 1974 recession, and governments automatically started pumping money into the economy. To their dismay, it didn’t work. In fact, things got worse with the appearance of a phenomenon that wasn’t supposed to be possible: stagflation, i.e. stagnation (lack of investment and economic growth), accompanied by rampant inflation.

With inflation and debt going through the roof, governments of all persuasions turned to monetarism: spending programs were slashed and industrial production in the West fell by about 13 per cent. We were back on the boom-slump rollercoaster with a vengeance. The Keynesian mantra of government spending gave way to the neoliberal mantra of government spending cuts.

But despite the apparent differences in the two approaches, they have a common purpose.

Socialists welcome increased government spending on health, education, social welfare, public transport and so on. But this is because we are for raising working class living standards, not because it’s a way of fixing the economy. Similarly, when we support nationalisation of industry and government regulation, it’s because privatisation and deregulation usually lead to cuts in jobs and services, attacks on unions and so on. Moreover, struggles around these issues can build workers’ confidence to challenge the system’s priorities more fundamentally.

Keynesians are coming from a different perspective. To the extent that they appear pro-worker, it’s because impoverished workers are unable to consume enough to stimulate investment and keep the system healthy. They are also acutely aware of the potential for resistance if the working class refuses to make the sacrifices demanded of them. Keynes himself defended his policies as “the only practicable means of avoiding the destruction of existing economic forms in their entirety.”

Keynesianism often gets the credit for ending the Great Depression, but this is a myth. It was the preparations for war that were most important factor in reviving investment, and the destruction of huge swathes of capital during the Depression that laid the basis for the long boom that followed the war.

It is too early to predict how effective Keynesian measures will be in the current crisis. But workers shouldn’t be too optimistic.

Barack Obama has handpicked former champions of neoliberalism – such as Paul Volcker, former head of the Federal Reserve – to oversee the US economy. The fact that these people are now equally vociferously singing the praises of Keynes tells us a lot. Last year’s massive bailouts of banks and businesses indicate where their priorities lie. And for all the gloom, they see a longer-term benefit in using state spending (i.e. workers’ taxes) to lay the groundwork for reindustrialisation, giving US capitalism an opportunity to reclaim its dominant position in the world economy.

We live in a world divided into competing economic blocs and competing interests, therefore by definition a world in which a co-ordinated and co-operative approach to economic crisis is impossible. Keynesianism isn’t an alternative to neoliberalism; it’s just a different strategy for attempting to deal with capitalism’s problems. For workers, the problem is capitalism itself.

This article first appeared in the February 2009 edition of Socialist Alternative (ww.sa.org.au).  The Canberra Branch of Socialist Alternative will be discussing the article  at its branch meeting this Thursday (29 January) from 6 pm in room G 007 of the Moran Building at the ANU.  Email canberra@sa.org.au or visit www.sa.org.au

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Comments

Comment from MC-Shalom
Time January 27, 2009 at 5:50 pm

The People Wants The Credit Free, Free Market Economy

Dear, I should say Expensive Chairman Ben S. Bernanke,

All of Our Economic Problems Find They Root in the Existence of Credit.

Out of the $5,000,000,000,000 bail out money for the banks, that is $1,000 for every inhabitant of this planet, what is it exactly that WE, The People, got?

If my bank doesn’t pay back its credits, how come I still must pay mines?

If my bank gets 0% Loans, how come I don’t?

At the same time, everyday, some of us are losing our home or even our jobs.

Credit discriminates against people of lower economic classes, as such it is unconstitutional, isn’t it? It is an supra national stealth weapon of class struggle.

Credit is a predatory practice. When the predator finishes up the preys he starves to death. What did you expect?

Where are you exactly in that food chain?

Credit gets in the way of All the Principles of Equal Opportunity and Free Market.

Credit is a Stealth Weapon of Mass Destruction.

Credit is Mathematically Inept, Morally Unacceptable.

You Bail Them Out, We Opt Out

President Bush Proposed the TARP, Senator Obama Voted It. Who Roots for US?

We Want Some TARP.

My Solution: The Credit Free, Free Market Economy.

Is Both Dynamic on the Short Run & Stable on the Long Run, The Only Available Short Run Solution.

I Am, Hence, Leading The Exit Out of Credit:

Opting Out Is Both Free and Strictly Anonymous.

Let me Outline for You my Proposed Strategy:

My Prescription to Preserve Our Belongings.

Our Property Title: Our Free, Strictly Anonymous Right to Opt Out of Credit.

Our Credit Free Money: The Dinar-Shekel AKA The DaSh, Symbol: .

Asset Transfer – Our Right Grant Operation – Our Wealth Multiplier – Our Liquidity TARP.

A Specific Application of Employment, Interest and Money.
[A Tract Intended For my Fellows Economists].

If Risk Free Interest Rates Are at 0.00% Doesn’t That Mean That Credit is Worthless Already?

Since credit based currencies are managed by setting short-term interest rates, on which you have lost all control, can we still say that are managing?

We Need, Hence, Cancel All Interest Bearing Debt and Abolish Interest Bearing Credit.

In This Age of Turbulence The People Wants an Exit Out of Credit: An Adventure in a New World Economic Order.

The only other option would be to wait till most of the productive assets of the economy get physically destroyed either by war or by rust.

It will be either awfully deadly or dramatically long.

A price none of us can afford to pay.

“The current crisis can be overcome only by developing a sense of common purpose. The alternative to a new international order is chaos.”

– Henry A. Kissinger

What Else?

Until We Succeed the Economy Will Necessarily Keep Sinking Into a Deeper and Deeper Depression

You Bail Them Out, Let’s Opt Out!

Check Out How Many of Us Are Already on Their Way to Opt Out of Credit.

If You Don’t Opt Out Now, Then When Will You?

Let me provide you with a link to my press release of my open letter to you:

Chairman Ben S. Bernanke, Quantitative [Ooops! I Meant Credit] Easing Can’t Work!

I am, Mr Chairman, Yours Sincerely [As if I really had the choice.],

Shalom P. Hamou AKA ‘MCShalom’
Chief Economist – Master Conductor
1 7 7 6 – Annuit Cœptis
Tel: +972 54 441-7640
Fax: +972 3 741-0824
http://edsk.org/

Comment from Brett
Time January 28, 2009 at 9:24 am

John,

I believe that there are a series of occasions in this post where you’ve completely misrepresented, either deliberately or in error, the mechanisms and ideals of capitalism. I hope you’re open to a change of ideas as your post here is not correct in any form.

“Capitalism is a competitive system, with every firm trying to get the edge on its rivals. The capitalists need to be able to undercut their competitors’ prices.”

Sure, that’s one option, but it’s not a very smart option as there’s only so much blood you can squeeze from a stone. The far smarter, more useful and beneficial approach is to innovate as this provides a real edge on their rivals. As an example, look at Apple over the course of the last 5 years: their products have always been priced higher than of the comparable PC (and other) product(s), but yet this hasn’t been a deterrent to the market, and in fact their market share has grown significantly. Products like the iPods, iPhone, iMac, MacBooks etc have allowed the company to increase their market share and revenues significantly.

This simple example demonstrates that you’ve only half (and I would suggest a lot less than half) considered the effects of capitalism – capitalism provides people and companies, who are willing to innovate, with the opportunity to generate (potentially) huge sums of money by improving the variety of what’s on the market and by letting the market choose.

And most importantly of all, it demonstrates how wrong Marx was. Your statement:

“Marx argued that capitalism goes into crisis because over time, there is a tendency for the rate of profit – the return that capitalists get on their investment – to fall.”

is therefore demonstrated not to be the catch all statement that it’s portrayed as. There are large and obvious incentives for market competitors to innovate and to create – this generates new income and so new profit. This is not limited to the technology sphere but can also be applied to a host of other areas: the building industry is one of many examples.

Equally, statements like the following are also demonstrated to not be all-encompassing:

“Obviously they try to reduce costs wherever possible – mainly by keeping wages down”

I’ll concede that there is a level of keeping costs down – as there should be if people and/or processes are not working in something of an efficient way – however more can be made by successful innovation than by excessively streamlining (which in the end, can be a negative process).

However, under socialism, the incentive to innovate is reduced as the creator is not provided with the same incentive to create. This is simply because the reward will not occur. Would Apple have bothered with the cost of industrial design, product development, market research etc if there wasn’t a benefit at the other end? This equation is not limited to the current world: would Columbus have founded America if there wasn’t the carrot of a more direct route to India for valuable spices (even though he ended up being wrong)? There are countless other examples of this throughout history.

“The first to latch onto a new process will make a killing. But then others will be forced to invest in the same process in order to keep up. Before long, everyone has it and the competitive advantage is lost. What’s more, industrial “state of the art” doesn’t last long. Soon someone invents an even more efficient process, forcing everyone to retool and reorganise production.”

This is a non argument as surely we would all like to see the bar constantly rising? Or are you suggesting that the bar should not rise? But that’s not really the point: Are you actually suggesting that we should roll back the use of the printing press, computers to manage the accounting of bank accounts, plasma cutters in heavy steel works, no electronic heart monitors in hospitals etc? No, of course you’re not. Technology should be used not only to increase the productivity of the workplace (note, not the singular worker, but the whole operation as a workplace is more than just a single worker), but to increase accuracy, safety and longer/constant support. It’s hard to imagine that Marx would argue against these benefits.

“This is of course a useless, parasitic activity compared to producing goods that people actually need, but under capitalism it’s profit that matters, not human need.”

How do you define ‘need’? I think there are many aspects to ‘need’, one of which is vehicle(s) that can allow people to increase their wealth and allow them to afford better and better things – a new kitchen in the house, replacing the wall paper that’s been in the house for 20 years etc. Investing in some form can allow people to generate income outside of their income from their ‘job’. Are you against that?

“It’s simple really: capitalists will invest when they think they’ll get a good return, and not otherwise.”

Er, well yes. It doesn’t take a rocket scientist to recognise that throwing money at something which is broken makes no sense. Would you bet on a 3 legged horse in the Melbourne Cup? Equally, a company that sells something obsolete (for example, stone chisels) is not going to generate income for itself, let alone it’s owners, and shareholders if the company has been floated.

I won’t go into the rest of the post as I believe that Keynes was mostly a hack – albeit a well intentioned hack – but a hack none the less. However the last paragraph requires attention:

“We live in a world divided into competing economic blocs and competing interests, therefore by definition a world in which a co-ordinated and co-operative approach to economic crisis is impossible.”

I can neither see an alternative to this, nor a reason for an alternative. Put simply, without throwing democracy out the window, there isn’t an alternative. Countries, via their elected officials, should be free to run themselves as they see fit. That last sentence is, of course, the reason why there can’t be an alternative unless, as I said, you remove democracy from the equation. Certianly, if there is a ‘crisis’ then co-ordination should be sought, however not at the barrel of a gun, and not so that the expressed wishes of the constituents are overrulled. Given that the voting bloc does not vote for groups with Marxist leaning policies, this should not be considered in forming co-ordinated responses to ‘crises’.

Comment from John
Time January 28, 2009 at 12:46 pm

Thanks Brett. There’s a lot in your comment. I’m busy at the moment on another article for tomorrow on Afghanistan (and tidying up the garden!) but will get back to you. I think the innovation question is actually dealt with in the article, but I’ll try to make it clearer.

Thanks for the comment, and hopefully in the next day or so I’ll have written a reply.

Comment from John
Time February 2, 2009 at 9:36 pm

Brett

Sorry I have taken so long to get back to you.

The article deals with innovation. In fact I thought it covered it well. But innovation while beneficial for those who innovate succesfully is actually helping dig the grave of the system.

Competition forces capitalists to search for new more mechanised ways to produce their goods more cheaply than their competitors.

So if they develop a new way of doing something, they get the benefits initially. But over time their competitors catch up, so they are back to square one.

Now, because only labour can create value, and the fact that this competition and innovation means more is invested in capital than labour proportionally, the rate of profit falls over time (assuming countervailing tendencies do not kick in like smashing workers’ living standards.)

I don’t follow your Apple argument. All that has happened there is that one variant of computers et al appeals to part of the consuming public. It’s the same with cars for example. While Japanese and South Korean car producers are undercutting US manufacturers (partly because they guessed better on what the market wanted) the essence is that the rate of profit in the car industry worldwide is low. There is a crisis as Marx put it of overproduction. Ten years ago the analysis showed that five cars were produced worldwide for four buyers.

I am not about throwing democracy out the window – I am about extending into the workplace.

All the major working class revolutions – the Paris commune, the Russian revolution (before its defeat and the rise of the gravedigger Stalin,) the German revolution from 1918 to 1923, the Spanish revolution, the German revolution of 53, Hungary in 56, Poland at various stages in the 70s and 80s, Czechoslovakia, etc, all of them saw workers set up their own democratic organs of rule. This is not because workers are starry eyed idealists but because you have to co-operate to produce things and the only way really to do that and satisfy human need is through democratic decision making in the workplace and across the country and across the globe. (Unlike peasants you can’t divide up the factory into little bits for each worker).

I don’t believe in power growing out of the barrel of a gun. I believe in mass,democratic movements of real social change where workers, the vast majority of society, set up their own organs of rule. This is more democracy, not less.

Not sure that Keynes was ahack, but eh performed an important ideological role for captialism – that it could be reformed and made to work.

Rudd now echoes that.

Comment from Brett
Time February 3, 2009 at 10:56 am

John,

“Competition forces capitalists to search for new more mechanised ways to produce their goods more cheaply than their competitors.

So if they develop a new way of doing something, they get the benefits initially. But over time their competitors catch up, so they are back to square one.”

Again, you’re only looking at half of the equation here. It’s not necessarily about producing goods more cheaply – that was the point of the Apple example: Apples products are consistently more expensive than their competitors. A prime example of this is the iPod, which can retail for inexcess of $450, whereas items that are directly compariable can sell for up to (and probably more than) 30% less than this.

And this has been going on for years now – the iPod has been around for nearly 10 years which is almost unheard of in technology realms, It’s not “get[ting] the benefits initially” and then being “back to square one”.

So it’s not just about the way things are made, but what is made. And your (and Marx’s) arguments miss this point entirely. Producing a superior product (as Apple has consistently done over the last 5-10 years) allows the company (or person) to generate significant additional wealth. Yes, it’s labour that creates that wealth: in this case, it’s the industrial designers, the market researchers, the electronics designers, and most significantly, Steve jobs the CEO who was directly involved, but not the person on the shop floor. The person on the shop floor adds no value to this product.

Now, i’m not going to try suggest that there’s nearly enough innovation to this level within the big (and medium and small) companies of our world, but equally, it’s not an insignificant amount either. The point, however, is that your statement “only labour can create value” is patently incorrect, which demonstrates that Marx’s philosophy (or at least that part of it) is not applicable in this day and age.

Good innovation, within a capitalistic environment allows for the generation of significant wealth. However, in a socialist world, that’s not the case as the incentive is not there. And let’s not beat around the bush – mankind is inherently selfish and loves incentives. So, without an efficient incentive mechanism, Socialism is a path to stagnation.

“I am not about throwing democracy out the window – I am about extending into the workplace. ”

I appreciate that, however that wasn’t the point of the conversation. You were bemoaning the lack of coordination in the response to the world financial mess and were blaming it on capitalism, e.g. “For workers, the problem is capitalism itself.”

The ‘problem’ (and I use that term very loosely) is that within the global democracy, different groups vote for different methods of dealing with any issues, and getting a coordinated response is always going to be an exercise in negotiation and ‘trading’, which in reality, isn’t going to be produce a very satisfactory response. See Climate Change for an example of that. However, whatever response is returned by our elected officials to the current economic mess isn’t going to be an experiment in Marxism or any form of entrenched SOcialism.

So, the problem is not Capitalism. From your perspective, the problem is democracy.

“I don’t believe in power growing out of the barrel of a gun. I believe in mass,democratic movements of real social change where workers, the vast majority of society, set up their own organs of rule. This is more democracy, not less.”

The people have spoken on this topic: Union membership has been in freefall for decades. See http://www.wsws.org/articles/2000/feb2000/tu-f24.shtml and evatt.labor.net.au/news/162.htm. So unless you’re advocating some other form of ‘organ, this line of thinking, is not consistent with what the workers of the world, and in particular Australia, want.