[DaveO]

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 5:28 pm  

Sal Paradise wrote:

How do you determine what constitutes super-normal profits and how many businesses fall into that category?

It's a defined term in economics. Normal profit is when enough profit is made to pay the workers and managers a reasonable wage and for the company to remain in the market. Average Revenue = Average Total Cost.

super-normal profit is when Average Revenue > Average Total Cost and economic theory says this should only ever occur temporarily as it means there will be incentive for others to enter this market as it is clearly very profitable.

It is therefore very easy to tell which and how many businesses are making super-normal profits.

The interesting question is how they are doing this.

That is because Economic theory also assumes the super-normal profit is being made while still paying the workers and managers a reasonable wage.

So if we end up with firms making super-normal profits while not paying the workers and managers a reasonable wage i.e. ending up with Average Revenue > Average Total Cost by exploiting the workforce or relying on in work benefits as a subsidy, then any such firm is making super-normal profits is not doing so because they have cornered the market but are doing so at their workers and the taxpayers expense.

Businesses will pay what they have to pay to attract the calibre of labour they require. To pay more would be foolish and render them uncompetitive unless the whole market followed suit. You wouldn't pay over the asking price for anything would you? There are limited things government can do without negatively impacting the competitiveness of individual businesses especially if we want to encourage exports.

The fact John Lewis and Richer Sounds are more successful than many of of their competitors gives lie to what you say above. They value their staff and for example John Lewis are for more successful than M&S who under successive chairmen have abandoned treating their staff as they once did (in a similar way to John Lewis).

Businesses are already paying a 14% tax on employing people - why not simply remove that at lower levels and increase the minimum wage by 14%?

I have no idea what the implications of that would be and neither I suspect do you. Nor do I understand why you mentioned it.

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 5:57 pm  

Dally wrote:

As to sub-prime, the US and later Blair's government encouraged it - as ever when politicians meddle in the economy it ended it tears.

I agree in the USA especially in the Clinton era there was government support for extending the American dream downwards to those on lower incomes by making them have access to credit.

But in the UK the problem was the politicians didn't meddle with it. There was no policy of encouraging subprime lending from the Blair government and if you think there was how about find some policy measures and/or government statements in favour of extending credit to those on the lowest incomes....?

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 7:45 pm  

SmokeyTA wrote:

And plenty of those big businesses are those with many employees being subsidised by in work tax credits.

So?

SmokeyTA wrote:

Too expensive for the level at which I value it. I am forced to pay that amount because there is no realistic alternative.

Clearly not, because you are paying it. You are even using more power to argue with me here.

SmokeyTA wrote:

You are doing nothing here but espousing the free market economic theory that the free market will drive costs down yet where it doesn’t saying the only alternative is for the government to subsidise it or lose that service. If the a company cannot provide a service without government subsidy, it shouldn’t provide that service that is the free market. What certainly cannot be acceptable is that a private company receives government subsidy and makes a profit. That is simply giving money collected by tax to rich individuals.
There is no way that government subsidy can be compatible with a free market. Any market which operates with a government subsidy, cannot even begin to argue that it is in anyway, shape, or form a free one

You're effectively arguing against private hire taxi drivers here. They rely on state infrastructure. Do you propose taxis should be provided by the state?

SmokeyTA wrote:

And if all private enterprise relies on government infrastructure, which belongs to all of us, it should remember that it exists to serve all of us, not to exploit so that a few can live in luxury.

Not happy with hard working taxi drivers then?

SmokeyTA wrote:

Now who is being too absolute? My alternative isnt North Korea, my alternative is do what we do now, but with the over-riding thought that our markets exist to serve us. Not the other way around. the markets are our servants, not our master. They should do what we want, not us what they want. If you think that is how north korea is run then you need to read a book.

You're arguing against a lawless and unregulated free market. Thing is, nobody is arguing for that.
Which particular market do you think you serve?
Which book should I read about North Korea? Was it written by a private enterprise, or a state?

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 8:02 pm  

SmokeyTA wrote:

Too expensive for the level at which I value it. I am forced to pay that amount because there is no realistic alternative.

If you value it as too expensive for you then that only applies to you, not anybody else. What alternative do you want?

Re: What's the alternative to capitalism? : Thu Jan 09, 2014 8:15 pm  

DaveO wrote:

The fact John Lewis and Richer Sounds are more successful than many of of their competitors gives lie to what you say above. They value their staff and for example John Lewis are for more successful than M&S who under successive chairmen have abandoned treating their staff as they once did (in a similar way to John Lewis).

They may well value their staff, but saying they're more successful because Mr Richer lets them have a go in his Rolls Royce every now and then is fanciful.

So, just what the staff at these 2 companies get? Salary? Pension? Bonuses? Private Medical Care? Shares? Holidays etc etc

For comparison, The M&S company pension scheme has 3% employee 6% Employer Contributions for new starters, after 2 years this goes up to 6% and 12%. Which isn't bad.

Re: What's the alternative to capitalism? : Fri Jan 10, 2014 10:08 am  

BobbyD wrote:

They may well value their staff, but saying they're more successful because Mr Richer lets them have a go in his Rolls Royce every now and then is fanciful.

So, just what the staff at these 2 companies get? Salary? Pension? Bonuses? Private Medical Care? Shares? Holidays etc etc

For comparison, The M&S company pension scheme has 3% employee 6% Employer Contributions for new starters, after 2 years this goes up to 6% and 12%. Which isn't bad.

The point being that John Lewis and Richer Sounds are highly successful businesses, which is a very nice illustration of how you do not have to shaft your workforce to be successful and highly profitable.

I'm not personally familiar with Richer Sounds, but I am with John Lewis, and a key reason I go there when I need, say, anything for the flat is because the standard of service is so much better than most other places. And that also means a standard of service that includes honesty and not just an intention of flogging you something come what may. Thus they get my return custom – and my recommendation to other people.

In other words, treat people well and value them and give them a stake in the success of the business and you improve the business because you improve the standard of work.

The fortunes of M&S, on the other hand, are declining.

Re: What's the alternative to capitalism? : Fri Jan 10, 2014 10:19 am  

BobbyD wrote:

If you value it as too expensive for you then that only applies to you, not anybody else. What alternative do you want?

That is the same for anything though isn’t it?

Either a market that actually works, which in this instance likely to be impossible, so failing that a nationalised industry able to supply a necessary utility at an affordable price.

Re: What's the alternative to capitalism? : Fri Jan 10, 2014 10:33 am  

Richie wrote:

So?

I;ve already explained that to you.

Clearly not, because you are paying it. You are even using more power to argue with me here.

Under free market economic theory that would be the case. But those companies aren’t operating in a free market. They are operating in a highly regulated, massively subsidised one using what was nationalised infrastructure where there isn’t a realistic alternative. Your premise here is wrong.

You're effectively arguing against private hire taxi drivers here. They rely on state infrastructure. Do you propose taxis should be provided by the state?

In what way are taxi drivers subsidised by the state? They do use state infrastructure, they do pay towards that infrastructure, they are also highly regulated and often their prices are set at a reasonable level by the local council. I am perfectly comfortable with that.

Not happy with hard working taxi drivers then?

To borrow a tactic from yourself? Why differentiate? Why only hard working ones? Why not lazy ones? Whats the difference?

You're arguing against a lawless and unregulated free market. Thing is, nobody is arguing for that.

Nobody is arguing for that, I accept that. You are however justifying excess using that economic theory. You are using the free market theory, where the capital will find the best product, where people will pay a products worth and that is how it finds its value, and that risk takers and wealth creators should be rewarded for the risk they take and the wealth they create and applying to markets which aren’t free markets, where the wealth created is subsidised by the state and the risks taken are mitigated by the state. You cannot apply free market theory and justifications to a managed and subsidised market

Which particular market do you think you serve?

myself? Media.

Which book should I read about North Korea? Was it written by a private enterprise, or a state?

Any. In fact all. dont limit yourself to one.

Re: What's the alternative to capitalism? : Fri Jan 10, 2014 12:57 pm  

SmokeyTA wrote:

I;ve already explained that to you.

No you haven't

SmokeyTA wrote:

Under free market economic theory that would be the case. But those companies aren’t operating in a free market. They are operating in a highly regulated, massively subsidised one using what was nationalised infrastructure where there isn’t a realistic alternative. Your premise here is wrong.

Why is it wrong?

SmokeyTA wrote:

In what way are taxi drivers subsidised by the state? They do use state infrastructure, they do pay towards that infrastructure, they are also highly regulated and often their prices are set at a reasonable level by the local council. I am perfectly comfortable with that.

Is our road network, traffic police, not provided by the state then? I guess we should shift food distribution from the likes of Asda and Tesco to the state too.

SmokeyTA wrote:

To borrow a tactic from yourself? Why differentiate? Why only hard working ones? Why not lazy ones? Whats the difference?

Just take out the "hard working" then

SmokeyTA wrote:

Nobody is arguing for that, I accept that. You are however justifying excess using that economic theory. You are using the free market theory, where the capital will find the best product, where people will pay a products worth and that is how it finds its value, and that risk takers and wealth creators should be rewarded for the risk they take and the wealth they create and applying to markets which aren’t free markets, where the wealth created is subsidised by the state and the risks taken are mitigated by the state. You cannot apply free market theory and justifications to a managed and subsidised market

Why not? Remember, it's freer market, not free market in your measurements.

SmokeyTA wrote:

myself? Media.

Interesting.....so how do you think the media market exists to make you serve it, and how should it change to serve you instead?

SmokeyTA wrote:

Any. In fact all. dont limit yourself to one.

I should read all the books about North Korea? BRB in a mo then.

Re: What's the alternative to capitalism? : Fri Jan 10, 2014 1:00 pm  

Mintball wrote:

The point being that John Lewis and Richer Sounds are highly successful businesses, which is a very nice illustration of how you do not have to shaft your workforce to be successful and highly profitable.

I'm not personally familiar with Richer Sounds, but I am with John Lewis, and a key reason I go there when I need, say, anything for the flat is because the standard of service is so much better than most other places. And that also means a standard of service that includes honesty and not just an intention of flogging you something come what may. Thus they get my return custom – and my recommendation to other people.

In other words, treat people well and value them and give them a stake in the success of the business and you improve the business because you improve the standard of work.

The fortunes of M&S, on the other hand, are declining.

The likes of JLP certainly have their place. Whilst they might be the preferred retailer for the likes of you (and we got most of our furniture there) there is also a place in the world for "no-frills low cost" retailer who doesn't give good service but is cheap. Some of those will be succesful, and some won't, just like those at the premium end of the market.