A belief in Capitalism?

Mighty_Mouse

There has been much debate in here recently, in relation to capitalist versus socialist ideals. IMO most capitalist ideals are based on the assumption that free-market solutions are inherently better in terms of service, effectiveness, efficiency etc

I have a real problem with this given the fact that, in its purest terms, a free market doesn't even exist in today’s first world. What is the motivation when deciding whether to privatise Bus, Rail and Air services? Is the objective not to serve the best interest of the country and if so, surely a country’s best interest cannot be measured purely economic terms.

I've recently read Eric Schlosser's "Fast Food Nation" and would recommend it to all. There’s a particularly relevant chapter in his book which might promote some discussion in here.

There is nothing inevitable about the fast food nation that surrounds us - about its marketing strategies, labour policies and agricultural techniques, about its relentless drive for conformity and cheapness. The triumph of McDonalds and its imitators was by no means preordained. During the past two decades, rhetoric about the "free market" has cloaked changes in the nation’s economy that bear little relation to real competition or freedom of choice. From the airline industry to publishing business, from the railroads to telecommunications, American corporations have worked hard to avoid the rigors of the market by eliminating and absorbing their rivals. The strongest engines of American economic growth in the 1990’s – the computer, software, aerospace and satellite industries – have been heavily subsidised by the Pentagon for decades. Indeed, the U.S defence budget has long served as a form of industrial policy, a quasi-socialist system of planning that frequently yields unplanned results. The Internet at the heart of today’s “New Economy” began as the ARPANET, a military communication network created in the late 1970’s. For better or worse, legislation passed by Congress has played a far more important role in shaping the economic history of the post-war era than any free market forces.

The market is a tool, and a useful one. But the worship of this tool is a hollow faith. Far more important than any toll is what you make with it. Many of America’s greatest accomplishments stand in complete defiance of the free market: the prohibition of child labour, the establishment of a minimum wage, the creation of wilderness areas and national parks, the construction of dams, bridges, roads, churches, schools and universities. If all that mattered were the unfettered right to buy and sell, tainted food could not be kept off supermarket shelves, toxic waste could be dumped next door to elementary schools, and every American family could import an indentured servant (or two) paying them with meals instead of money.

Much like the working of the market, technology is just one means towards an end, not something to be celebrated for its own sake. The Titan II missiles built at the Lockheed Martin plant northwest of Colorado Springs were originally designed to carry nuclear warheads. Today they carry weather satellites into orbit. The missiles are equally efficient at both tasks. There is nothing inexorable about the use of such technology. Its value cannot be judged without considering its purpose and likely effects. The launch of a Titan II can be beautiful, or horrific, depending upon the aim of the missile and what it carries. No society in human history worshipped science more devoutly or more blindly that the Soviet Union, where “scientific socialism” was considered the highest truth. And no society has ever suffered so much environmental devastation on such a massive scale.

The history of the 20th century was dominated by the struggle against totalitarian systems of state power. The 21st will no doubt be marked by a struggle to curtail excessive corporate power. The great challenge now facing countries throughout the world is how to find a proper balance between the efficiency and the amorality of the market. Over the past 20 years the United States has swung too far in one direction, weakening the regulations that safe-guard workers, consumers, and the environment. An economic system promising freedom has too often become a means of denying it, as the narrow dictates of the market gain precedence over more important democratic values.

Today’s fast food industry is the culmination of those larger social and economic trends. The low price of fast food hamburgers does not reflect its real cost – and should. The profits of the fast food chains have been made possible by losses imposed on the rest of society. The annual cost of obesity alone is now twice as large as the fast food industry’s total revenues. The environmental movement has forced companies to curtail their pollution, and a similar campaign must induce the fast food chains to assume responsibility for their business practices and minimize their harmful effects.

Sand

I have a real problem with this given the fact that, in its purest terms, a free market doesn't even exist in today’s first world.

Agreed, which is a reason why we should work towards it and is a fine undermining of your criticism of free markets.

Is the objective not to serve the best interest of the country and if so, surely a country’s best interest cannot be measured purely economic terms.

No its to serve the best interests of the individuals within the economy. The country/state is useful only in so far as it serves the interests of the individuals who are citizens of it.

When you get into the best interest of the country, what you really mean is the best interests of the country as politicians see it, which really means the best interests of the country as political lobby groups see it, which really means the best interests of the country as the rather wealthy see it.

"The market is a tool, and a useful one. But the worship of this tool is a hollow faith. Far more important than any toll is what you make with it. Many of America’s greatest accomplishments stand in complete defiance of the free market: the prohibition of child labour, the establishment of a minimum wage, the creation of wilderness areas and national parks, the construction of dams, bridges, roads, churches, schools and universities. If all that mattered were the unfettered right to buy and sell, tainted food could not be kept off supermarket shelves, toxic waste could be dumped next door to elementary schools, and every American family could import an indentured servant (or two) paying them with meals instead of money."

Garbage to be honest. None of the above is dependant on government intervention, but simply on how much individuals value any of the above, and how much theyre willing to protect it.

As an example enviromentalists are trying to protect endangered regions by buying them and asserting property rights over those areas. Theyre combatting elephant poaching by locals in Africa by giving the locals property rights over the elephants so that they can farm the elephants like man has done sheep, cattle and pigs before - how many of those are dying out?

And as for government control being the solution to unfettered markets despoiling the enviroment.....

"No society in human history worshipped science more devoutly or more blindly that the Soviet Union, where “scientific socialism” was considered the highest truth. And no society has ever suffered so much environmental devastation on such a massive scale.

Ah yes, the USSR, that bastion of free markets. You know, i think they had something there with heavy government intervention in the economy, for the good of the country of course.

arcadegame2004

Okay here comes my reply to Mighty_Mouse.

While I am generally in favour of free markets, by free I do not mean free from health/safety regulations. I feel that, provided the item is not extremely dangerous, that its sale should not be prohibited. Indeed if I had been an absolutist in supporting the free-market ideology, then I would not have demanded the liquidation of the tobacco industry, which I have already done in a previous thread.

I don't believe there is such thing as a rule that always applies in all cases. I am speaking in generalities then, when I say that I believe in competition and privatisation. Generally speaking, I favour the privatisation of State companies and assets. This does NOT mean that I favour it in EVERY circumstance, e.g. I accept that it would be a bad idea in the rail-industry, simply because I cannot really see how effective competition can be introduced in that sector. The negative experience of the UK in this particular sector of industry after privatisation e.g. the various accidents, bears out what I am saying.

But at the same time, I favour the privatisation of ESB, the VHI, An Post, Aer Rianta, Bus Eireann, Bord na Mona (why is a state-owned peat company essential to the national interest, especially when we are supposed to be trying to reduce greenhouse-gas emissions?), and Aer Lingus. These are sectors of industry where it is feasible to have competition that would likely be in the consumer's interests. By in the consumer's interests I mean it is likely that the privatised semi-state companies will be far more efficient with their revenue because they will no longer be entitled to a State bailout in the event of troubled times. And because this will involve them reducing their costs, this is likely to mean that their prices will fall too, as profitability requires revenue to exceed costs, and thus lower costs means lower prices (provided there is adequate competition and no cartels).

Originally posted by Mighty_mouse[\I]
From the airline industry to publishing business, from the railroads to telecommunications, American corporations have worked hard to avoid the rigors of the market by eliminating and absorbing their rivals. The strongest engines of American economic growth in the 1990’s – the computer, software, aerospace and satellite industries – have been heavily subsidised by the Pentagon for decades. I

My response to this particular section of your post is as follows. Obviously the competition-authorities in the US have not been doing their job properly if this is true. Competition-authorities are supposed to prevent the establishment of cartels, and to break up monopolies. But I doubt such a scenario would happen in Ireland as has happened in the US with respect to some sectors of industry. In Europe including Ireland, we outlaw private-sector bribery of companies. Yet this is NOT illegal in the US, believe it or not! As such, the US becomes a far more fertile ground for kickbacks from politicians to their corporate bankrollers, than Ireland and other EU states.

A vigorous regulatory environment would help to avoid the establishment of cartels and restrictive practices. I regard your post as helping to back up my point - however unintentionally, that true competition needs to be enforced in order to ensure that the benefits of competition are made real for the consumer. The regulatory environment needs to act with vigour to ensure that competition actually happens. But it is hardly going to happen with a state-owned monopoly.

sceptre

Originally posted by arcadegame2004
Obviously the competition-authorities in the US have not been doing their job properly if this is true. Competition-authorities are supposed to prevent the establishment of cartels, and to break up monopolies.

They're essentially limited by the Sherman Act (you could say that it's the Sherman Act that gives them any power at all but it also acts as a power delimiter), which really concentrates on abuse of a monopoly position rather than the mere existence of a monopoly (or at least that's how it's been applied since it was passed).

Manach

Well I've read Eric Schlosser's "Fast Food Nation" but also as well his book "Reefer Madness". In the latter book he does describes a very effecently run capitalist business, run with classic free market principles. Pity it had to be the Porn Industry.

Seriously, Capitalism is not perfect nor does it claim to be. Again in "Reefer Madness" he highlights the awful plight of Mexican migrants, but these same people were fleeing a state which had practiced a form of state Socialist since it's revolution.

DadaKopf

In the latter book he does describes a very effecently run capitalist business, run with classic free market principles. Pity it had to be the Porn Industry.

And the porn industry is an exploitative industry, isn't it?

Schlosser may be able to say it's one of the few examples of a genuinely free market economy in America, but the point he's obviously making is a normative one: does an unrestrained market make people better off as a whole, as human beings and a society?

Raskolnikov

Many of America’s greatest accomplishments stand in complete defiance of the free market: the prohibition of child labour, the establishment of a minimum wage, the creation of wilderness areas and national parks, the construction of dams, bridges, roads, churches, schools and universities.

Prohibition of child labour a defiance of free market principles? Laughable, a more trained and educated work force is one that can produce greater economic wealth.

The establishment of a minimum wage is hardly one of America's greatest achievements, it's simply served to increase unemployment and promote the labour black economy.

Schlosser then throws in a few more untruths based on faulty logic that no one can possibly disagree with.

Meh

Originally posted by DadaKopf
Schlosser may be able to say it's one of the few examples of a genuinely free market economy in America, but the point he's obviously making is a normative one: does an unrestrained market make people better off as a whole, as human beings and a society?

This is a classic fallacy. A free market does not mean a market without any rules or laws. In fact, free markets require government-enforced laws to function properly.

Look at the US stock market; it's the ultimate achievement of free-market capitalism. If that market isn't free, then what market is? Yet the SEC regulations governing its operation are nearly two thousand pages long.

P.S. the porn industry is certainly regulated by the government -- child porn laws, obscenity laws, government-enforced contracts...

shotamoose

Originally posted by Sand
Garbage to be honest. None of the above is dependant on government intervention, but simply on how much individuals value any of the above, and how much theyre willing to protect it.

Individuals can't set a minimum wage for the economy, and can't set health and safety standards for foods. If they want those things they have to band together with other people and set up a body which has full administrative capability over the territory and the monopoly of force and law-making. They may even call this body 'government'.

Theyre combatting elephant poaching by locals in Africa by giving the locals property rights over the elephants so that they can farm the elephants like man has done sheep, cattle and pigs before - how many of those are dying out?

How many of those are prized for their ivory tusks? Also, have you ever tried elephant meat? One of the reaons elephants are dying out is that they're hard to farm and offer high rewards to anyone who manages to just shoot one and have its tusks off. Nevertheless, property rights are one way of solving this particular problem. But property rights don't mean anything unless you can enforce them. Say someone kills your elephant - standing there saying "what about my property rights????" won't accomplish much. Only with police to police and judges to adjudicate do property rights actually start to mean anything, and for them you need nasty old government. Similarly, property rights over natural resources mean zilch without people to assess infringements, assign monetary values to the losses and ensure charges are paid. Government again.

And as for government control being the solution to unfettered markets despoiling the enviroment.....

"No society in human history worshipped science more devoutly or more blindly that the Soviet Union, where “scientific socialism” was considered the highest truth. And no society has ever suffered so much environmental devastation on such a massive scale.

Ah yes, the USSR, that bastion of free markets. You know, i think they had something there with heavy government intervention in the economy, for the good of the country of course. [/B]

It was the absence of fair government that ensured environmental devastation in the USSR - ordinary people had no way of seeking redress when the state or someone else chose to damage their local environment or plunder natural resources. Exactly the same thing would happen in a free market system where there was no government to fairly represent the interests of the powerless. In fact, that's precisely what did happen during Augusto Pinochet's capitalist dictatorship in Chile - environmental damage and plunder of natural resources.

Without interventionist and democratic government, a capitalist system would have no trouble doing as much damage as the commies.

Sand

Individuals can't set a minimum wage for the economy, and can't set health and safety standards for foods. If they want those things they have to band together with other people and set up a body which has full administrative capability over the territory and the monopoly of force and law-making. They may even call this body 'government'.

Yes they can. They can take better paying jobs so that the lower paying ones have to raise their wages to get in quality employees. They can refuse to buy food that they dont consider to be safe or healthy, forcing manufacturers to improve their standards to compete.

But property rights don't mean anything unless you can enforce them. Say someone kills your elephant - standing there saying "what about my property rights????" won't accomplish much. Only with police to police and judges to adjudicate do property rights actually start to mean anything, and for them you need nasty old government.

Only semi wrong. The governments have been trying the old "police and judges" route to stop poaching and have failed miserably. The fact is, its the locals who were doing the poaching and then selling it off to dealers.

Now the locals have property rights, so *they* protect those property rights themselves, with force if neccessary - and where government fails property rights and self interest succeeds. Which is nice when youre talking about a police beat the size of leinster in many cases.

The same works for gorillas, with locals being convinced that more gorillas=more tourists=more local jobs and investment=more wealth and development for locals. Damn their greed and self interest. Why couldnt they do it for the good of the country?

Similarly, property rights over natural resources mean zilch without people to assess infringements, assign monetary values to the losses and ensure charges are paid. Government again.

No that requires, A) A free market, and A system of law. It doesnt require much else.

Zombrex

Originally posted by Sand
Yes they can. They can take better paying jobs so that the lower paying ones have to raise their wages to get in quality employees.

I think you will find it works in the opposite way Sand, employeers see their rivals lowering wages, increasing profits, and follow suit, downsizing and lowering wages. The workers are then force to take the lower wage, or be unemployed, and with every company in the market downsizing, there is little chance of getting a better paid job.

You statement assumes that there is a market value in paying your employees better than your rivals. There are very very few industries where that is true (possibly some areas of the IT industry). In the vast majority of industries the employeer wants to pay their employees as little as possible to increase profits.

Originally posted by Sand
They can refuse to buy food that they dont consider to be safe or healthy, forcing manufacturers to improve their standards to compete.

But with little government intervention, how do you know that the food is unsafe?

It is assumed that if a company is allowed sell a product, then it has been approve to be safe by the government. But there are plenty of cases where a company has sold a product they know to be unsafe, and the government have missed the danger (cigiretts, and a range of faulty cars, for example). Without any form of government regulation, the consumer will be constantly being sold dangerous products.

Meh

Originally posted by Wicknight
I think you will find it works in the opposite way Sand, employeers see their rivals lowering wages, increasing profits, and follow suit, downsizing and lowering wages. The workers are then force to take the lower wage, or be unemployed, and with every company in the market downsizing, there is little chance of getting a better paid job.

If this argument were true, the vast majority of workers would be on the minimum wage. Instead, the vast majority of workers earn more than minimum wage.

Your statement assumes that there is a market value in paying your employees better than your rivals.

There's quite a lot of value in having lower staff turnover. Ask any supermarket manager.

But with little government intervention, how do you know that the food is unsafe?

The same way Jews know food is kosher. You have a privately owned food standards board test the food, charge the manufacturers €0.02 per item to use their special trademarked/copyrighted "Approved by the Private Food Standards Board" logo. If you get food poisoning after eating food with that logo, you stop buying food with that logo on it, and the PFSB goes out of business. (Disclaimer: I don't think this is necessarily a better way of handling food safety than government intervention. But a system like this has been proven to work on a large scale.)

Sparks

Originally posted by Meh
You have a privately owned food standards board test the food, charge the manufacturers €0.02 per item to use their special trademarked/copyrighted "Approved by the Private Food Standards Board" logo.

And then a second food standards board with a lower service charge is started by a major food manufacturer, with lower standards for food contamination and with "independent" studies showing that their standards are perfectly acceptable. They get a large following because of the lower cost and though they initially make a loss, they're funded by BigFoodCo and so don't mind. Pretty soon, because of their lower cost, they're the dominant quality mark. Now food is produced to a lower quality, but anyone who tries to sue the company for certifying unhealthy food faces an enormous problem with sueing BigFoodCo's legal team who also represent NotBigFoodCoQualityBoardHonest, by a freak coincidence. And since HonestFoodQualityBoard has now gone out of business, you've no way of knowing what food is healthy and what food isn't.

And that's not dystopic speculation, that's just what taking what happened in the software industry and applying it to the food industry.

DadaKopf

No that requires, A) A free market, and A system of law. It doesnt require much else.

Except people. How do you suppose a 'system of law' can operate without some kind of regime of power that with significant legitimacy backing it up?

In your definition, people aren't even involved in the process, it's all about the abstract mechanisms of the market and robotic structures of governance.

Meh

Originally posted by Sparks
And since HonestFoodQualityBoard has now gone out of business, you've no way of knowing what food is healthy and what food isn't.

Why doesn't another honest food certification board start up to compete? If people are unhappy with the current food standards boards, there'll definitely be a gap in the market. And if some food manufacturers get together in a cartel and refuse to use the new honest food standards board, consumers will move to manufacturers who do.

And that's not dystopic speculation, that's just what taking what happened in the software industry and applying it to the food industry.

So why hasn't anything like this happened in the kosher food certification industry? Software and food are very different businesses.

bonkey

Originally posted by Sand
Agreed, which is a reason why we should work towards it and is a fine undermining of your criticism of free markets.

I don't understand this...

You admit we don't have any free markets. I'm pretty sure you'll also admit there never really have been any free markets in the past either.

So exactly why should we be looking for them? What evidence is there to show that free markets are anywhere near as good a thing as we make them out to be?

In fact, surely the opposite is true? Surely, the more we look at the successful markets, the more we see that "somewhat free" is a far better balance, where the market is constrained by laws which take more than the market and capitalism itself as the prime constraints.

None of the above is dependant on government intervention, but simply on how much individuals value any of the above, and how much theyre willing to protect it

So what you're ultimately saying is that we don't need government intervention to stop people doing nasty things...we just need enough people to actually care about others and the well-being of others instead of looking out for themselves and their own gain only.

Strangely, such a logic is the basis behind communism, Sand - that if enough people actually cared enough about the general well-being, that we would all work towards the common good, and not permit the abuses of others (and by others) to take hold.

Funny to see it being used by you as an excuse as to why capitalism doesn't require government intervention, when I'm pretty sure you'll also quite happily point out that the non-existance of such a caring attitude is one of prime reasons why communism is such a non-starter as a realistic idea.

jc

Zombrex

Originally posted by Meh
If this argument were true, the vast majority of workers would be on the minimum wage. Instead, the vast majority of workers earn more than minimum wage.

I am talking about companies within the same market (ie the same skill base).

How many employees earn a lot more than others in the same industry doing the same job. Tescos don't pay a lot more than Superquinn, because they don't care if you leave and go to the other supermarket (or at least the don't care enough to sacrifice their profits). If you work for Ford you probably make pretty much the same as if you did the same job if you work for Toyota.

If Sands argument were true, everyone would be making huge amounts of money because employee migration over the last 50 years, would force employers to raise pay to stop all the employees leave to go to a better paid job doing the same thing. That is certainly not the case.

Employers keep the wages of their employees at the lowest they can while still attracting staff. For high skilled jobs that is indeed a lot higher than minimun wage, but they keep it a the minimum wage for the particaluar industry or skill base.

Originally posted by Meh
There's quite a lot of value in having lower staff turnover. Ask any supermarket manager.

But they don't attempt to stop staff turn over with high pay, they do it with other incentives. The only time pay was used to stop turn over was during the middle of the dot.com boom, and we all know what happened to that.

The point of my post, is that the eutopian free market view that Sands has is not a real world model. It ironically has the same problem exteme socialist models, such as communism, have, in that it assumes things about human nature that aren't present in the real world (ie that employeers will forsake profit for the sake of improving employees pay).

Sparks

Originally posted by Meh
Why doesn't another honest food certification board start up to compete?

Because it's a private service, not a public one, and the defining characteristic of a private company is that it has to make money because if it doesn't, noone else will give it aid and thus it will cease trading.
And if your competition can afford to make a loss for a long period of time just to drive you out of business, because they have another source of income, then you're just not going to be successful.

If people are unhappy with the current food standards boards, there'll definitely be a gap in the market.

That sure sounds sensible. But then again, people still eat fast food, drink alcohol and smoke tobacco...

And if some food manufacturers get together in a cartel and refuse to use the new honest food standards board, consumers will move to manufacturers who do.

Will they? Even if the food costs twice the price because the cartel benefits so much from the economies of scale? I mean, we know that homemade brown bread is healthier for you than processed white bread, and it tastes better, but I don't see Johnson Mooney and O'Brien going out of business anytime soon...
And cartels are often difficult to oppose - I don't know of anyone but De Beers that you can get diamonds from, for example, and OPEC's history speaks for itself, really.

So why hasn't anything like this happened in the kosher food certification industry? Software and food are very different businesses.

Kosher food? You mean a product whose existance depends on religious practises? I mean, you eat a bad burger, you throw up. You eat ham as a hasidic jew and it violates your religious beliefs. People tend to take the latter more seriously, and so all it takes is one message from the pulpit and your company is out of business - and that means that the church is acting as a regulatory body for the market, doens't it?

Meh

Originally posted by Wicknight
If Sands argument were true, everyone would be making huge amounts of money because employee migration over the last 50 years, would force employers to raise pay to stop all the employees leave to go to a better paid job doing the same thing. That is certainly not the case.

Employers keep the wages of their employees at the lowest they can while still attracting staff. For high skilled jobs that is indeed a lot higher than minimun wage, but they keep it a the minimum wage for the particaluar industry or skill base.

And how did the "minimum wage" for that particular industry/skill set get decided? Because if you offered employees less than that, they'd quit. QED.

An employer has to strike a balance between too low wages (can't get any employees to work for them) and too high wages (company goes out of business).

But they don't attempt to stop staff turn over with high pay, they do it with other incentives.

This is absurd. Employers use higher pay as an incentive all the time. Are you telling me you'd never quit your job to move to one with twice the pay?

(ie that employeers will forsake profit for the sake of improving employees pay).

Employers aren't going to be making much profit if they can't find any employees because their wages are too low, now are they?

Originally posted by Sparks:

Because it's a private service, not a public one, and the defining characteristic of a private company is that it has to make money because if it doesn't, noone else will give it aid and thus it will cease trading.
And if your competition can afford to make a loss for a long period of time just to drive you out of business, because they have another source of income, then you're just not going to be successful.

No company can afford to make a loss forever. And people are willing to pay more for food that doesn't give them food poisoning, so any new competitor won't have to compete on price.

Will they? Even if the food costs twice the price because the cartel benefits so much from the economies of scale?

Read my original post. We're talking about a cost of a few cents per item. Food safety certification is not going to double the price of a loaf of bread.

I mean, we know that homemade brown bread is healthier for you than processed white bread, and it tastes better, but I don't see Johnson Mooney and O'Brien going out of business anytime soon...

Irrelevant. White bread is not "unsafe" food -- our existing government food standards board doesn't stop anyone selling it.

Kosher food? You mean a product whose existance depends on religious practises? I mean, you eat a bad burger, you throw up. You eat ham as a hasidic jew and it violates your religious beliefs. People tend to take the latter more seriously, and so all it takes is one message from the pulpit and your company is out of business - and that means that the church is acting as a regulatory body for the market, doens't it?

I don't know about you, but I really don't enjoy food poisoning, and if I eat food from a source that makes me sick, I'm not going to eat from there again. I guess that means my stomach is acting as a regulatory body for the market?

Sparks

Originally posted by Meh
No company can afford to make a loss forever.

Of course not. But you don't have to make a loss forever, just long enough to drive your competitors under. Witness, of course, the "browser wars" in the software world.

And people are willing to pay more for food that doesn't give them food poisoning, so any new competitor won't have to compete on price.

People are assuredly not going to eat food they know will make them sick. However, if you maintain your quality standards while making a loss in your food certification company, at least until your drive your competitors out of business, then you have not only become the only company on the market, you've also captured the "mindshare" in the market and now you can drop your quality standards without fear of competition.

Read my original post. We're talking about a cost of a few cents per item. Food safety certification is not going to double the price of a loaf of bread.

And read my post - I didn't say that certification would double the cost of food, I said that because you're going to smaller manufacturers, who have higher overheads both proportionately because of their size and absolutely because of their higher standards.

Irrelevant. White bread is not "unsafe" food -- our existing government food standards board doesn't stop anyone selling it.

No, it won't kill you. But yes, it is less healthy than homemade brown bread - it has less fibre, more artifical preservatives and other addatives, and it definitely tastes more bland and boring than homemade bread.
And yet, people keep on buying it, because it's cheap and easy compared to baking your own. And it's that principle - buying an inferior product because it's cheaper and more convienent - that's the fly in the ointment of self-regulating markets.

I don't know about you, but I really don't enjoy food poisoning, and if I eat food from a source that makes me sick, I'm not going to eat from there again. I guess that means my stomach is acting as a regulatory body for the market?

Nope, it's operating as a regulatory body for you alone. You have one bad burger and never eat at the hypothetical fast food restaurant McD's again. They lose one occasional customer, total value approximately 70 euros per annum.
Now imagine KosherFoodCertificationCo. They let standards slip and certify a sausage roll which uses pork sausage. The rabbi announces this in the synagoge that saturday and the next thing you know, they've lost all their customers from that synagoge, and then more when the story is repeated in other synagogues. Total value, approximately everything - all from one group's statements.
That's the difference between your stomach and a market's regulatory body ...

Meh

Originally posted by Sparks
Of course not. But you don't have to make a loss forever, just long enough to drive your competitors under. Witness, of course, the "browser wars" in the software world.

Again, software and food are very different markets. I can't copyright a loaf of bread. I can't bake a cake that can only be iced with my special own-brand cream.

People are assuredly not going to eat food they know will make them sick. However, if you maintain your quality standards while making a loss in your food certification company, at least until your drive your competitors out of business, then you have not only become the only company on the market, you've also captured the "mindshare" in the market and now you can drop your quality standards without fear of competition.

How? Once I've driven my competition out of business then dropped my standards, what exactly is stopping a new honest food certification company from starting up? Mindshare doesn't count for anything -- once my logo has become associated with poor-quality food, it's not worth much any more.

And read my post - I didn't say that certification would double the cost of food, I said that because you're going to smaller manufacturers, who have higher overheads both proportionately because of their size and absolutely because of their higher standards.

Once they start producing safer food that consumers want but can't get elsewhere, they won't be small for long. And you'll get large manufacturer switching to the new honest food board as well, for the competitive advantage.

No, it won't kill you. But yes, it is less healthy than homemade brown bread - it has less fibre, more artifical preservatives and other addatives, and it definitely tastes more bland and boring than homemade bread.

Taste is a matter of, well, taste. I prefer brown bread too, but there are people in the world who *gasp* prefer the taste white bread. And that doesn't make them bad, or stupid, or irresponsible.

And yet, people keep on buying it, because it's cheap and easy compared to baking your own. And it's that principle - buying an inferior product because it's cheaper and more convienent - that's the fly in the ointment of self-regulating markets.

So you're saying the government should ban white processed bread?

Nope, it's operating as a regulatory body for you alone. You have one bad burger and never eat at the hypothetical fast food restaurant McD's again. They lose one occasional customer, total value approximately 70 euros per annum.
Now imagine KosherFoodCertificationCo. They let standards slip and certify a sausage roll which uses pork sausage. The rabbi announces this in the synagoge that saturday and the next thing you know, they've lost all their customers from that synagoge, and then more when the story is repeated in other synagogues. Total value, approximately everything - all from one group's statements.
That's the difference between your stomach and a market's regulatory body ...

That's not the way the current government regulatory system works. You will not be put out of business if you sell one dodgy sandwich alone.

Sparks

Originally posted by Meh
And you'll get large manufacturer switching to the new honest food board as well, for the competitive advantage.

Just like Ford fixed the problem with the Impala for the competitive advantage that came with building cars that didn't explode on impact?
Just like Microsoft fixed the problems with IE and Windows for the competitive advantage that came with having the best and most reliable software?

Large corporations, Meh, don't tend to do what you expect them to do, unless you expect them to maximise their profit margins in short and then long term views. And they don't tend to put their customers first because their legally defined job is to put their shareholders first.

Victor

You can't have a free market. There can never be "one" set of trading rules. There will always be sentiment.

Over-liberalisation of the market ultimately leads to the position where private power (whether though lawyers or guns) takes over. Private power tends towards the extremes, with no counter balance other than other private power, at which point you end up with cartels that corrupt the market.

One needs to find a balance between capitalism and socialism. That balance will vary from place to place.

Originally posted by bonkey
You admit we don't have any free markets. I'm pretty sure you'll also admit there never really have been any free markets in the past either.

The nearest thing to a "free" market is a wartime black market (the bigger and more oppressive the war, the freer the market is to set prices). Sentiment means nothing. Goods and means of exchange everything.

bonkey

Originally posted by Meh
And how did the "minimum wage" for that particular industry/skill set get decided? Because if you offered employees less than that, they'd quit. QED.

In an employer's market (more worker's than jobs), then the employer will always find someone to work for hem until they reach the point where being unemployed is a perferable option to being employed.

I would point you at - keeping with Schosser's books - the meat-preparation industry în the US in general and the fruit (notably strawberry) industry in California. Here we have two industries where your logic was defeated by finding people from a nearby poorer economy which had even fewer social benefits, and basically paying these people just enough to survive on. The level of subsistence involves living conditions which are often comparable to third-world economies (I believe in Reefer Madness, there is reference to strawberry workers who live in caves.

This is the "natural level" that many markets will sink to given the freedom to do so. Employees will leave, as long as there is somewhere better to go, and typically there isn't. As time progresses, they get paid less and less (in real or just in inflation-adjusted terms), but have no better options. The minimum wage is - in all reality - as little as is needed to pay to keep people alive in the most basic condition of subsistence possible.

An employer has to strike a balance between too low wages (can't get any employees to work for them) and too high wages (company goes out of business).

Sure they do when we look at a nice closed environment like - say - a shop-worker in a shop on a street in Dublin. Bu

t when we disucss something like capitalism, we cannot simply take a single nation with a developed economy as a basis for our logic. In this age of globalisation, issues such as outsourcing, etc. must be considered.

It may be cheaper, for example, to have your material goods produced in China than in Ireland, so the "balance" the employer can reach is based on nothing so simplistic as the wages he charges. He/she must also choose the impact to sales of where their workforce is based, the total-cost-to-point-of-sale (as opposed to just the wage cost), as well as a number of other factors.

And look at what we're seeing... Nike et al led the way in using cheap foreign labour in order to maximise profits. They found a new balance point by ceasing to think about the balance point in national terms. Now, we are seeing a similar possibilty emerging in more skilled markets - software development and its outsourcing, the major automotive manufacturers falling over each other to establish factories in China (initially for the Chinese market, but with a mind to exporting within 5-10 years) and so on.

So, really what we're seeing is - to a large extent - that the minimum wage in many industries is closely related to how little it costs to keep someone alive, plus paying a small surcharge for a particular skillset as we move into more skilled industries.

This model is - of course - unsustainable. As the jobs are stripped from teh western markets, a new challenge will arise - there will be less people able to afford the products. Big business is quite happy to take jobs from the developed markets and replace them with jobs in the developing / undeveloped ones, until such a time as there has been so much displacement that the developed markets can no longer afford their products.

Employers use higher pay as an incentive all the time.

In some markets, and in some industries, yes. But where you have a surplus of menial labour available, then you use higher pay as a means to keep hold of that very low percentage that you want to take on more responsibilty, and you simply rotate through the pool for the rest. Given that comparable industry members have comparable costs in many cases, and have comparable goals (i.e. maximising profit), then often their labour costs reach a balance point - particularly in unskilled markets - which means that there is little attraction in moving to another company in the same industry, and even if the individual changes industry, there are still more workers than jobs, so their position will be filled by someone willing to work for the same pittance from teh unemployed pool.

Are you telling me you'd never quit your job to move to one with twice the pay?

And are you telling me that if there was a surplus of people capable of doing your job for the money you were doing it for that your employer would make a counter-offer to keep you at a higher cost when he could replace you for the same cost as you were at, or possibly less?

A better job may be available to the individual, but it is the ratio of workers to jobs which ultimtely has more relevance to the situation of where the wage-balance-point is across the industry.

Employers aren't going to be making much profit if they can't find any employees because their wages are too low, now are they?

And what are the complaints about migrant workers coming from poorer economies about, if not a direct refutation of the apparent truth of this point. You're right in that they must reach a balance point eventually, but where that balance point in an unregulated system would be is far, far lower than many of us woulf be willing to accept....until such times (as I've already mentioned) as the market is so affected that it can no longer afford to purchse the products, and no new market has emerged in its place.

And people are willing to pay more for food that doesn't give them food poisoning, so any new competitor won't have to compete on price.

I suggest you read Fast Food Nation if you haven't already done so, as it raises many points which seem to show that this is simply not the case.

The public are willing to pay more for food if they can be assured - in the simplest terms possible - that they can have better than what they currently have for a minimum of cost. The thing is that those who supply the "at present" will do their damndest to cast FUD (Fear, Uncertainty and Doubt) on just how better things are that the extra cost is paying for.

The US recently found its first BSE case. The industry tried to say that because they finally found a case, its proof that the system works and how the meat that got through was obviously safe. I hope I don't need to point out how stupid that logic is? Going further - as a result of this case - they decided to take an unprecedented step in safety, and declare that animals which are so ill that they are incapable of walking are no longer to be cxonsidered suitable for human consumption. Look at the measures they required from foreign meat producers in the wake of health scares in those markets and tell me that the consumer is who is being protected here?

The simple truth is that the meat packers are now such a small cartel that the consumer can't even get their "2c for safer beef" option. They'll need a supplier willing to produce meat safely. They'll need producers and other intermediaries willing to use these safer producers. They'll need shops willing to stock from them. And lets remember...as soon as they start doing this, the big players will strong-arm the market and do their utmost to economically wipe out these "safer options" whilst running a parallel marketing strategy to FUD every single reason these people have for claiming to be better.

In the end, even if they get slapped for uunfair competition etc., they will continue to run the market with such a stranglehold that for the consumer to choose a different path will not be a simple "couple of cents" argument, but rather a significant hike in the old shopping bill.

jc

Victor

Originally posted by bonkey
Big business is quite happy to take jobs from the developed markets and replace them with jobs in the developing / undeveloped ones, until such a time as there has been so much displacement that the developed markets can no longer afford their products.

Hmmm, to coin a phrase the undeveloping world.

DadaKopf

I prefer 'maldeveloping world'.

bonkey

[QUOUTE]Once I've driven my competition out of business then dropped my standards, what exactly is stopping a new honest food certification company from starting up? [/B][/QUOTE]

The fact that there's no competition to you? Who, exactly, are they going to provide their certification to in order to yhow you up, if not this competition you've wiped out?

And when they do, whats to stop you wiping this new competition out too? Take a short-term hit - hell, even improve your quality to the required level but without passing on the 2c surcharge, get rid of the competition again, and then stop paying for the certification, let it go out of business, and drop your standards again.

Doesn't sound too difficult to me.

The more interesting cases are when you look at groups like KFC in the states. Animal Rights activists are showing that improving the conditions on their chicken farms, and even offering better terms to those running them could - within two to four years - apparently increase their profits, or at least be profit-neutral.

So why not do it? Simple, because they don't need to. Profits would take a hit for 2 to 4 years, and they have no need to do that right now, and the increased profitability isn't really guaranteed, just probable. They may even make a tiny loss, which would be bad.

But, it gives them a plan that - should they ever need it - they can use to keep their top-dog spot, but there's no point in implementing that now as that would be a tacit admission that things are being done wrong, which could have all sorts of consequences.

So you're saying the government should ban white processed bread?

It never fails to amaze me how people are incapable of understand what an analagy is about.....

The government should ban white bread, or take steps to intervene in bread production if and when the quality of what is available on the market falls below levels which are considered acceptable, and where this is tied to dominant players abusing their dominant position to decrease quality in order to maximise profits.

Look at the Fast Food industry in Ireland. Already, our govt. has started making noises about how "fatty foods" require intervention, because when left to the public, they clearly don't act in their best collective or individual interests. Should we just continue to follow the US trend of obesity becoming more and more prevalent (and costing more and more to the state, and, and, and) or should we accept that there is a problem somewhere that requires attention and external intervention of some sort.

Such external intervention was required to make it necessary to provide nutritional information on foods in the first place, or do you think that this too was a bad idea? We shouldn't make it obligatory to provide nutritional content, we should just let the public decide not to buy the half-as-expensive product who's manufacturers assure us is every bit as healthy as that other one which does print nutritional information.

Sure, there may be some highfalutin studies that those in the upper echelons of society pay attention to which say otherwise, but for the average Joe Bloggs, there will be two sides, saying two different things, and it will impossible to know which is the real honest one....so I'll make up my own mind. And look - this one is half the price.

Q - as so many people seem to erroneously say, so I might as well join them - ED.

jc

Sparks

Kindof funny that, in the middle of a thread on food safety, I notice a fingernail clipping in the middle of my chocolate digestive...
*yuch*

Meh

Originally posted by bonkey
The fact that there's no competition to you? Who, exactly, are they going to provide their certification to in order to yhow you up, if not this competition you've wiped out?

And when they do, whats to stop you wiping this new competition out too? Take a short-term hit - hell, even improve your quality to the required level but without passing on the 2c surcharge, get rid of the competition again, and then stop paying for the certification, let it go out of business, and drop your standards again.

So if I'm perpetually making a loss in order to drive out competition, how do I avoid going bust myself? Also remember that a significant number of people are prepared to pay a premium for high-quality food -- see the success of the organic market. So it would actually be quite easy for a higher-priced upstart to grab a chunk of the market.

I would point you at - keeping with Schosser's books - the meat-preparation industry în the US in general and the fruit (notably strawberry) industry in California. Here we have two industries where your logic was defeated by finding people from a nearby poorer economy which had even fewer social benefits, and basically paying these people just enough to survive on. The level of subsistence involves living conditions which are often comparable to third-world economies (I believe in Reefer Madness, there is reference to strawberry workers who live in caves.

This is the "natural level" that many markets will sink to given the freedom to do so.

Your example is anything but a free market. These employees are illegal immigrants who are legally barred from employment. So it's no surprise that they have to take the worst jobs available, because the government has forbidden employers to hire them.

Zombrex

Originally posted by Meh
And how did the "minimum wage" for that particular industry/skill set get decided? Because if you offered employees less than that, they'd quit

No ... the minimum wage is a standard set by government/society of what is the bear minimum need to survive. You might remember that before the wage people worked for a lot less. If the companies set a liviable pay then the minimum wage wouldn't be needed in the first place. The minimum wage forces employers up to a certain standard, that they would otherwise be far below in a non-regulated, "free market" society.

And in countries that have a minimun wage you find companies leaving to start production in non-minimum wage countries. Nike don't pay their workers in Asia enough to live on, but I don't see them all leaving to work for Adidas.

Originally posted by Meh
An employer has to strike a balance between too low wages (can't get any employees to work for them) and too high wages (company goes out of business).

There is no balance

In a free market system the employer will choose the lowest wage that they can get workers at. By the very notion of capitalism, it would be wrong to do otherwise. If Nike can get workers for 50c an hour then they will pay 50c an hour, nothing more. Nike could still be producing its shoes in North America, but they left there because they wanted to pay wages less than it legal in the US. The move didn't damage the company, but it certainly damaged the workers.

Market forces drive wages down, not up. A company to increase its profits will continuously be looking to downsize staff and reduce wages.

Originally posted by Meh
This is absurd. Employers use higher pay as an incentive all the time. Are you telling me you'd never quit your job to move to one with twice the pay?

Yeah I am always moving to a job that pays twice as much :rolleyes:

Very very very rarely is employee retention handled with and increase in pay. The only areas I can think of is in very highly skilled industries which are currently experiencing a boom (like the dot.com boom).

In any company I have worked or heard about for that matter, employee retention is handled in a group manner, with company unique "benefits" being the method to keep employees (eg. good quality staff canteen, discounts on products, improving working enviornment). Why do this? Because group schemes are a hell of a lot cheaper than increasing everyones pay cheque just to keep them at the company. The cost of training new staff is offset against the cost of group retention schemes. They want you to stay, so they don't have to train new staff, but they don't want you to stay that much that they will pay you noticably more than what you would get anywhere else.

Meh

Originally posted by Wicknight
No ... the minimum wage is a standard set by government/society of what is the bear minimum need to survive. You might remember that before the wage people worked for a lot less. If the companies set a liviable pay then the minimum wage wouldn't be needed in the first place. The minimum wage forces employers up to a certain standard, that they would otherwise be far below in a non-regulated, "free market" society.

Now you've changed your mind, in your original post you were talking about some sort of minimum wage level for each skillset/industry. So why do the majority of workers get paid more than the minimum wage? The miniumum wage was only introduced in this country quite recently, why weren't all the workers starving before then?

Market forces drive wages down, not up.

I really can't believe I'm having to explain this, this is absolutely basic economics. The labour market obeys the laws of supply and demand, like every other market. Employees sell labour to their employers. A lower supply of labour (i.e. fewer employees) results in higher prices for labour (i.e. wages increasing) until the market reaches equilibrium. A surplus of labour (i.e. more jobseekers than jobs) results in lower prices for labour (i.e. wages decreasing) until the market reaches equilibrium. I don't mean to be condescending, but it's pretty clear that you've never read even a first-year economics textbook. This is probably a good starting point if you're interested.

A company to increase its profits will continuously be looking to downsize staff and reduce wages.

And its employees will constantly be seeking to increase their wages.

Yeah I am always moving to a job that pays twice as much :rolleyes:

That wasn't what I asked.

In any company I have worked or heard about for that matter, employee retention is handled in a group manner, with company unique "benefits" being the method to keep employees (eg. good quality staff canteen, discounts on products, improving working enviornment). Why do this? Because group schemes are a hell of a lot cheaper than increasing everyones pay cheque just to keep them at the company. The cost of training new staff is offset against the cost of group retention schemes. They want you to stay, so they don't have to train new staff, but they don't want you to stay that much that they will pay you noticably more than what you would get anywhere else.

Higher pay doesn't always have to be in the form of extra cash. Benefit-in-kind like you're describing counts too.