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Comment by radmuzom | Hacker News Reader

Great comment. The standard argument given by capitalists is that the "pie" will keep on growing, so while the existing owners of capital will get richer, it will also lift others out of poverty. Why is this not happening any more? Is it because earlier automation used to create "new" jobs which require labour, while now automation is removing the need for labour at all?

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> Why is this not happening any more?

It is happening. The average manufacturing wage in China is up 700% in fourteen years.

It isn't happening in the US and Europe, but that's because the average worker here still makes absurdly more money than the average worker in the developing world. The gap is closing quickly. As it does, we'll be able to see more evenly spread growth again.

But purely from a humanitarian standpoint, it's hard to argue that it's a bad thing for workers who make $7000 a year to be getting bigger raises than workers who make $37000.

From a purely humanitarian standpoint, it's hard to argue that it's a good thing for CEOs who make $9.6 million a year to be getting bigger raises than workers who make $37000.

http://www.csmonitor.com/Business/2014/0527/CEO-pay-hits-10-...

http://www.huffingtonpost.com/2012/05/02/ceo-pay-worker-pay_...

http://www.csmonitor.com/Business/2013/1212/CEO-vs.-worker-p...

http://www.epi.org/publication/ceo-pay-231-times-greater-ave...

Agreed, but that's actually a separate problem. There are so few CEOs relative to average workers that their aggregate pay isn't enough to explain why workers in the west aren't experiencing wage growth.

Actually, in some of the most egregious examples (Walmart), management and/or owners are paid enough to make a real difference in what workers are paid. The six Walton heirs hold as much money as the entire bottom 42% of Americans combined. A pay raise of $2/hour for every non-management Walmart worker (raising hundreds of thousands of people out of poverty), and/or giving them reasonable benefits, would not change that statistic in dramatic fashion.

http://www.motherjones.com/mojo/2012/09/sam-waltons-fortune-...

It's not enough to explain it, but it is a relevant piece of the puzzle.

According to the wikipedia 2013 stats, WMT has 2.2 million employees and and Walmart family owns "over 50%" of Walmart (let's assume 50%). 2014 net was 16 billion but 6 billion was paid in dividends to shareholders. Assuming a 2000 hour work-year, if ALL of the non-dividend was spent on wage increases, that's a $2.27 extra per hour all 2.2 million employees could get.

Well, boards often approve costly "incentive plans" for employees, but would a board approve 10 billion dollars to be distributed to employees every year? What would that mean for the future stock price?

Keep also in mid the other 50% ownership - probably pension plans funds.

You also mention already accrued wealth in form of stock, not income originally. How would distributing that work exactly? Would you add some kind of extraordinary tax on every WMT stakeholder? Their dividend alone (6 billion) is not enough to cover the wage increase.

You don't have to single out Wal-Mart specifically. Just put in sensible inheritance taxes, raise the marginal tax rates on high-income brackets across the board, and raise the capital gains rate.

It would also mean that all of the employees have a lot more money to spend, a part of which they'd spend at Walmart. Wasn't it Ford who back in the early 1900 gave his employees a lot higher wages than other companies so they could spend more and thus raise his own profits?

No, Ford raised wages to curb employee turnover.

That's a nice example! I always thought that it didn't make economic sense to pay people more money just so they could buy stuff from you. But just now I realized that it's actually possible.

Let's say you're selling cars for 100 dollars, and make 10 dollars in profit from each car sold. There's a lot of folks who have only 99 dollars and can't afford a car. If you give such a person one dollar, they will buy your car and you'll be 9 dollars richer.

Now, of course that's just a market segmentation scheme in disguise. If you could identify the folks who have 99 dollars and give them a 1 dollar discount instead, you'd profit even more, because they wouldn't be able to spend it on anything except buying a car from you. That's how companies do it today, they use employee discounts to get all the benefit of raised wages without actually raising wages.

"Assuming a 2000 hour work-year"

That's an incorrect assumption, possibly wildly so. Likely, more than half of Walmart employees are part-time and temporary employees, partly to avoid giving them legally required employee benefits.

http://www.forbes.com/sites/lauraheller/2013/06/14/obamacare...

Also, I appreciate that you've done the math in more detail than I did. I did a quick calculation in my head based on the 2 million employees to come up with $2, but you've been more precise and provided numbers, and I appreciate it. Even though we disagree on what the starting numbers for the calculation should be. Basing the discussion in reality is nice, and what I like about HN.

Ok. But thinking aloud here, when and how does exchange rate come into play? The only reason I have been lifted out of poverty living in India is because of "Western" consumers - I do work for which my employer gets paid in dollars, and they give me a fraction which is enough for me to lead an upper middle class lifestyle in India. No Indian company will pay, or has the ability to pay, as much money as I am getting now doing the same work for Indian consumers. So if a large percentage of "Western" consumers don't consume as much as they used to, it directly affects my livelihood. Is it a paradoxical situation that I am probably taking away the job of someone in US thereby temporarily improving my livelihood in the short term, whereas I actually don't have a livelihood in the medium / long term?

The hope is that the temporary wealth transfer until you reach equilibrium can fuel your own countries growth to the point where it can self perpetuate the cycle with its own infrastructure.

IE, you built factories and call centers and all manner of things to service western tastes, and even when the western money dries up by then you should have enough in your own little money cycle plus the infrastructure to produce enough to compete globally to maintain equilibrium.

It is an efficiency game. You start out with a farmer who has no tools, but because they live in an impoverished nation he sells his crops for next to nothing and that next to nothing money is considered a lot where he comes from. That money gets him funds to buy tractors and plows and other productivity boosters or maybe self driving combines to just outright replace some of his labor.

Now while a lot of that might come from the same western market, he will still spend some of it locally, and macroeconomically that effect will spread wealth in the local area assuming locals can buy something from each other. As long as the equation has money flowing out of another country into yours you are boosting your economy through your citizens productivity.

By the time the equation equalizes, the farmer should have all the modern tools of the farming trade such that there is price equalization between himself and all other farmers - their countries economic deficit gave him an opportunity to invest in his farming, yielding a more efficient farm that can produce significantly more food and by the time it is done sell it at western market value because their economy has equalized with the first world.

Of course, the farmer could also blow all his temporary profits on drugs and women, and end up screwed when he cannot produce enough crop to sustain himself as the cost of living rises with a modernizing economy.

> that effect will spread wealth in the local area assuming locals can buy

That's the problem you can't be sure once there is no more "western jobs" that they will remain enough money in the country. You are just assuming without proof. The exact thing neocon have been doing for years.

It's because the US is no longer a Capitalist nation; as such it no longer derives the maximum benefits of Capitalism. It was a mixed economy 30 or 40 years ago. Today it's a welfare state that depends on its central bank to remain solvent, with hyper regulation, high levels of debt, and high levels of taxation. The number of economic regulations and general laws passed each year in the US is truly astounding, and literally impossible to either keep up with or manage (this includes the laughable tax code).

A century ago there were hardly any regulations or taxes. Today every segment of the economy is highly regulated outside of tech and nearly everything you can taste, touch, smell, eat or look at is taxed (often multiple times).

Capitalism still works fine, because it's not a designed system, it's not a central plan.

In fact, countries like the USA should give it a try again. It worked quite well for them last time.

> Capitalism still works fine, because it's not a designed system, it's not a central plan.

What logic is this? "Anything which is not a designed system works fine"?

F.A. Hayek wrote in The Fatal Conceit, “the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

We need to be careful that this differs materially from "the curious task of auronautics engineers" circa 1900. One place it surely does differ is that we've quite a few more people on this plane of the economy than on any test flight. We should, indeed, be correspondingly more careful.

That said, "be careful" and "do nothing" are two very different propositions. Being careful may motivate doing nothing, or it may motivate doing quite a lot. While I don't think it was present in Hayek's reasoning, this frequently spills over into something that looks like "We're dealing with people's lives/rights here! How can you be so crass as to talk about numbers and make decisions?" When things are difficult and important, that's precisely the time you need to be most careful in your reasoning.

Abstaining is still an action. Proposals for reduced or constrained intervention are still proposals, and only deserve reduced scrutiny to the degree that they are supported by "we've done that before and it worked out well".

A century ago we had the Great Depression, followed by a major application of regulation, followed by the biggest and longest boom in middle-class history in the US.

In the 80s we started massive deregulation including killing Glass-Steagall, opening up banks to so destroy the global economy that we're having this discussion today.

Your history of regulation and relative wealth is backwards.

Edit: I'll acquiesce that the tax code is laughable, but mostly in how upper-class income tax levels are half what the middle class pays.

I don't know if the pie is growing or not. In my country they are going to include sex trading in the GPD and 23% of the econmy is supposed to be black money (money that don't pay any taxes). Statistics about numbers of jobs are crook because change every day what's mean to be employed so there is no a real historical record to compare or see trends. Also if you pay 50$/moth and you are below 30, you get into the health system and later will receive money for jobless and other resources, so is not clear if there is really creation of jobs or people are paying for themselves to receive more tomorrow from the government.

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