Tuesday, September 8, 2015

#0 How Capitalism Robs the Working Class


This is a refutation of an article by Tom DiLorenzo, who certainly should know better, and after this we sincerely hope he will know better, because otherwise Tom has contributed mightily to our understanding of certain critical periods in our past and certain important historical personalities who played crucial roles in the events which have led inexorably to our present place in history. The article appeared on September 7, 2015: his article is reproduced here in blue, with our commentary in black:

In the early days of capitalism there was a mass exodus from farm to factory. No one forced the masses to work in factories; they did so because factory work was better and more profitable than the alternative – sixteen hours a day of backbreaking farm labour for less money. Or begging, prostitution, crime, and starvation.

Two points: 1) Tom uses “the masses” instead of “the people.” Shame on you, Tom! “The masses” is what those who consider themselves better call the rest of us, as to them we aren't even people. Stop using their term! 2) What drove “the people” off their farms was the lure of money, their money thank-you Tom, certainly not money that ever would belong to the people as they had nothing to do with issuing it. If you don't happen to think that single bit of irony is important, may I suggest you start reading this blog beginning with the collected works of E. C. Riegel which appear here. We'd also like to point out that keeping people from begging, prostitution, crime and starvation begins and ends with just whose money we're talking about here or anywhere and how it is issued.

As Ludwig von Mises explained in Human Action (p. 615):

The factory owners did not have the power to compel anybody to take a factory job. They could only hire people who were ready to work for the wages offered to them. Low as these wages were, they were nonetheless much more than these paupers could earn in any other field open to them. It is a distortion of facts to say that the factories carried off the housewives from the nurseries and the kitchens and the children from their play. These women had nothing to cook with and to feed their children. These children were destitute and starving. Their only refuge was the factory. It saved them in the strict sense of the term, from death by starvation.

Ludwig von Mises certainly never bothered to consider just whose money was being discussed either. When push comes to shove, all “Austrians” consider nothing but precious metals to be money anyway and just who is it that controls those? Yes, the precious metals, all of it, is certainly not your money either, never was and never will be. Gold and silver are just other commodities used to price other commodities. No commodity can possibly be money without its own value contributing to the price in a trade. Who controls the relative market prices of silver and gold? Right, it isn't you or me Tom and we made no agreement as to what that value any of it should be, so it never was and never shall be our money Tom. Precious metals aren't even wealth Tom because nothing is wealth that does not produce an income and no gold or silver (despite centuries of alchemy) can ever reproduce more of itself.

The same can be said of the conditions in some of the poorer countries today. Labour unions that complain about “sweatshops” and “child labour” are not concerned about the well-being of Third-World children. Quite the contrary – they see them as competition for unionized labour and want them all thrown out of work and into the streets. Academics and clergy who assist labour unions in these crusades are viewed by the union bosses as useful idiots.

Well Tom, these are the “useful idiots” of one side of their paradigm or dialectic. Remember an idiot is someone who just doesn't know any better and can learn to not to be an idiot. A moron, on the other hand, is someone who it is impossible to teach, train or inform for any number of usually physical reasons. The “useful idiots” on your side of the dialectic Tom are those who still want to accept that their money is the only real money when it clearly is and has always been the biggest SCAM going throughout all of human history. Sorry to inform you but Rothbard was either a liar or woefully uninformed when he made statements to the effect that gold and silver were chosen naturally as best suited to use as money, when it can be asserted with definite historical certainty that both were FORCED into use by despots and trading associations going right back to ancient Babylon. Indeed the banking interests and the military industrial complex have always been closely associated – please read The Babylonian Woe by David Astle.

As capitalism developed, there was an inexorable increase in wages, thanks mostly to capital investment by entrepreneurs. Increased skill, education and experience on the part of the workers themselves (i.e., human capital development) makes them more valuable to employers by making them more productive and hence increases wages, but this is a slow and very incremental process. Capital investment, on the other hand, is capable of producing much larger leaps of productivity. Think of the productivity of a farm worker who plows a field behind a team of horses, compared to performing the same task on a tractor. He is no more skilled or hard working, yet he is infinitely more productive in terms of acres plowed per day.

This is acknowledged, but we will have to make a distinction between capitalism and finance because they are not necessarily the same thing. Also it matters who does the investing in capital improvements; the entrepreneur is usually a single individual who heads a team of workers or supervises or manages them to do something with a useful outcome to him / her. The number of workers is usually no more than a single person can manage, knowing all of the other people involved. But the characteristics of the investment and the organization itself are affected by just who it is that's doing the investing; if it's people outside the group actually engaged in the business, absentee owners, stockholders, “stakeholders,” etc. then these broad statements have a far different meaning.

When capital investment increases worker productivity, it means more profits for the capitalists who must them compete for the more skilled labour. They must pay them more or risk losing them to other employers – and losing the revenue that they can help generate as well. Under capitalism there is a strong correlation between the growth in labour productivity and the growth in wages.

Except that there is always the diminishing returns to scale to contend with. All globalists and really big manufacturers and those engaged in corporate farming would really like it if there were no end to their productivity, that all of their products could find a market, that all of their products could sell with a price capable in aggregate of covering the actual costs of production, etc. But as corporations get to be “too big to fail,” and since they are all creatures of states and banks, they will stay in operation whether they are actually profitable above a certain level or not, because certain "special people" matter more than “the masses” do Tom.

In addition to being responsible for higher wages, capitalism produces cheaper products, more products, and better quality products, thanks to the never-ending process of competition. The lowering of prices gives workers an even bigger pay boost with which they can purchase the increased array of products and services produced by capitalism, thereby enhancing their standard of living.

Except we're all supposed to accept that these cheaper products or more products are in fact really better quality which in fact they may not be and all because the capitalists (and the states and banks) must be paid back first. How do you know Tom that an entirely different kind of society with entirely different technical structure might have been possible if their money hadn't been the basis of it all? You don't and neither do I. But there are definite reasons to criticize capitalism on terms of actual quality of products rendered for the prices in any money asked for them.

Nothing benefits “the masses” economically more than the growth of capitalism, for capitalists have always understood that the way to become really wealthy is to provide more value at lower prices to the largest possible customer base. Thus, products like cars and refrigerators that were at first the exclusive province of the wealthy soon became available to everyone.

We'd like everybody to notice how the word “wealthy” is always used to connote those with “more stuff” rather than our narrower view that any and all wealth must produce an income or it is not wealth. Here's a way to render this:

Nothing benefits “the poorer people” economically more than the growth of capitalism, for capitalists have always understood that the way to become really rich is to provide more value at lower prices to the largest possible customer base. Thus, products like cars and refrigerators that were at first the exclusive province of the rich soon became available to everyone.

People with a lot of their money are the rich. Anyone with a useful skill that someone is willing to pay for has natural wealth.  You see how common words are twisted.

Productivity growth spurred by capital investment is also responsible for shortening the work week. The only way workers can work less but get paid more is by being more productive, i.e., producing more revenue per hour or week for their employers. Human capital investment plays a role here, but so does capital investment and risk taking by entrepreneurs. Thanks largely to capital investment, the work week in America is about half of what it was at the advent of what economic historians call “the second industrial revolution” that began at the end of the American Civil War (1865). The shorter work week is the result of capitalism, not lobbying by labour unions or federal legislation that only codified what already existed.

We'll accept most of this except to say that the reason labour unions become necessary is simply because the money in question was and never really is the people's in the first place. You have an artificially scare commodity pretending to be money (whether that be of metal or paper, there is NO difference!) and then you have people fight over how much of it they get in order to live their lives. They barter their labour for their life in terms of what that money will buy.

Capitalism is also responsible for the demise of child labour. Young people originally worked in factories (and still do in many parts of the world) out of economic necessity, for the alternatives were crime, prostitution, begging, or starvation. As workers became more productive and better paid, thanks to capitalism, they were able to take their children out of the factories and send them to school. Legislation banning child labour only codified what capitalism had already been hard at work abolishing. Moreover, such legislation was usually inspired by labour unions who wanted to throw young people, who competed with union labour, out of work. This kind of “child labour” legislation was designed to harm children by depriving them and their families of economic opportunities that they so desperately needed (and need).

None of this would even be necessary under a Valun based monetary system. True, there wouldn't be businesses of gargantuan size capable of putting all competition out of business, and destroying wealth in the process. There would be far more variety as true competition would be enhanced under such a system. There would be far more redundancy but any new idea would soon be taken up and used by more and more entrepreneurs / businesspeople. People would enter or leave business for reasons other than a lack of their money. Finance would likewise be decentralized and in almost as many hands as there are workers. Many things would be different and better Tom.

Capitalism has also made the workplace safer. In relatively “dangerous,” strenuous, or dirty jobs, employers must pay a wage premium because relatively few people want such jobs. Economists call this a “compensating difference.” The man who rides on the outside of the garbage truck at daybreak, in the winter, in the northern states, does so because he makes a very good salary – better than any of his alternatives. Profit-seeking capitalists have always understood that they need to pay more to get people to perform risky or dangerous work. Therefore, they have also always understood that there is profit in making the work place safer. A safer workplace requires a lesser compensating difference. Lower wages paid to the workers can mean higher profits for the capitalist. Thus, the American workplace had become safer and safer for generations before the Occupational Safety and Health Administration (OSHA) was established in the 1970s. Indeed, OSHA has often reduced workplace safety with its clumsy and stupid workplace rules enforced by government bureaucrats with no knowledge of the specific work that they are regulating.

We are with you concerning OSHA. In fact we include the following as essentially busybody PARASITE organizations that should not have the right to FORCE anyone to do anything: the FDA, the EPA, the DEA, the USDA, the various state organizations performing similar nannying operations. But we are living under a “beast” system, the current arrangement of states and BANKS, and for the time being we must live with it.

Labour unions, on the other hand, have never benefited anyone but the highly-paid union bosses and some of their members, who have never accounted for more than about one-third of the American labour force (less than ten percent today in the private sector). If unions are successful at raising wages above market rates with strikes, strike threats, shut downs, sabotage, or negative smear campaigns against corporate executives (“corporate campaigning”), the laws of economics dictate that some of their members will lose their jobs – usually those with the least skill, experience, and seniority. Employers will not pay workers more than they can produce in revenue for them and still stay in business. Thus, a new hire who can produce say, $500/week in additional revenue, is not employable if the union “succeeds” in negotiating a $700/week wage. This is the “disemployment effect” of unionism.

Again, this all rests on the foundation of their money not yours or mine Tom, and yes it certainly does matter.

In addition, labour unions in America have long been the main source of anti-capitalist propaganda, and of lobbying for anti-capitalist legislation (corporation income taxes, minimum wage laws, labour regulation, etc.). By weakening capitalism in this way, they weaken the main source of productivity growth and hence the main source of wage increases. The union bosses keep their high-paying jobs by benefiting at best a slim majority of their members, while harming the economic prospects of other union members and especially non-unionized workers, whom they demonize and slander by calling them “rats,” “scabs,” and much worse. Indeed, there is a very long history of violence perpetrated against competing, non-union labour by American labour unions, who are celebrated with their own holiday at the end of every summer.

This is all part of their dialectic Tom, don't you see it? They control the money and the size and composition of the organizations within which employment is offered. But there is something else wrong with Tom's analysis right from the beginning and it is capitalism itself.

Capitalism is basically making money on money. It is supposed to be a private matter else the state would be making money on money through running a command economy and that would be called communism, which does not work -except for bankers who make money no matter what the economic system because the money is theirs no matter what the politics or economic order happens to be. Capitalism is the making of money from the lending of money at interest. It is not just, as Tom would believe or have the rest of us believe, that entrepreneurs are the investors. Oh no. It is potentially anyone out there with a little extra cash that can be an investor in any big state sanctioned potential monopoly enterprise (public corporation) by owning stocks (pieces of the ownership in the business) or bonds (pieces of the debt of the businesses). In fact Tom, and you should have told everyone out there in your article, the principal investors have not been entrepreneurs but bankers. So let's get a few things straight.

All the money anyone knows of is their money Tom, not yours or mine. If it is credit as most of it is, then it was issued by a bank as a loan to a government at interest. The borrowed money was created; issued. It was loaned into existence from nothing, but that isn't actually as important as some make it out to be. The key point is that the money with which to pay the interest was never created, therefore no matter how much money any government spends into an economy this way, there is always a scarcity of money and there will be a natural “musical chairs” phenomenon when it comes to businesses; someone must fail – the system is designed to operate that way. In fact Tom, as economies of scale are allowed to grow in this way, with the higher centralization that seems required to manage them, it isn't just small businesses that must fail but whole countries, like Greece. What are they going to do about it? They'll resort to whatever they possibly can to take the heat off themselves; they'll start a war or threaten one, these attempts will generate floods of refugees who will come from wherever they come from into the advanced and developed places on earth and by their sheer presence shall destroy all that the humblest workers of “the masses” in these once advanced countries have managed to procure within a short time. What of the capitalists Tom? They will continue to live better than anyone else because no matter what they must be paid back their money or they shall use the FORCE of the states they have in their thrall to ensure that they do get paid.  Understood?

The solution is Free Enterprise; smaller businesses (some might be quite large), far more redundant, all truly privately owned and managed -no absentee owners allowed, truly competitive rather than the managed competition we have now, all of it operating best over much smaller areas. This puts an eventual end to all forms of imperialism as that form is no longer economically viable. Since all the labour (or most of it) and all the money creation in a Valun system is “self financed” the individual labourer become his / her only source of true wealth. The limiting factor is how much the end product or service costs and how much of that product can be produced under real economic accounting, not the inconsistent and frankly misleading accounting tricks used today to attempt to show that a business is or may be profitable when it really isn't. Never assume anything Tom. Just because a prospectus says certain things and would have the potential investor believe certain things does not necessarily make it so.

Capitalism, the making of money on money, never benefits anyone but capitalists. Anyone owning real property or doing any real work is usually impoverished by the practise. Free enterprise is the ability to go out and do what one wants to make a living using one's own wealth which always begins and ends with one's natural or acquired talents or skills, that's right one's own labour is his / her real wealth. Free enterprise presupposes that their money is unsuitable for real freedom. E. C. Riegel had the idea how to get out of it, by starting a parallel system. Until such time as your money is actually yours, you are a slave to capitalism and to capitalists. Everyone must start by accepting reality before one can ever have any ideas how to change it. If one accepts certain presuppositions which are not in fact correct, such as that their money can ever become your money, then you'll never get anywhere. Any money you have or have ever had, whether you willingly worked for it or not, is and was never yours. You just had the use of it while you possessed it, that's all.

PS: Persian rugs, the old fashioned kind, not those made by machines today, were made by children because small hands can tie tighter little knots. Most of those children were paid in their money of course and still lived at or near the poverty level else their rugs would cost far too much to sell to outsiders who would in turn contribute more of their money to the Persian (Iranian) economy. As they grew older they were naturally less fit to do rug making and in any case their hands were ruined to do anything else. Most died young ... and poor. Though I like Persian rugs, I have never been able to look at one the same way since knowing how they were really made.

[9-11-15: So since Riegel was a Democrat and you now have clearly indicated you and your proposal are not Capitalism, you must be Socialism, right?

No. Riegel may have been a Democrat, we don't know what his party affiliation was, though from his writings he seems to favour what most mainstream Democrats believe about social issues; after all, he was among the first consumer advocates, etc. But he was in favour of Free Enterprise which cannot automatically be associated with Capitalism.


We have stated elsewhere on this blog that Socialism is essentially hand outs from states given to those whom the system has sidelined, left behind or more importantly driven out of business through dishonest competition – that's right DISHONEST competition. When a going business fails and its income stream to its managers and workers is no more, wealth has been destroyed. Corporate capitalism, as most know it, destroys wealth, it does not create it.

Two points: 1) If you have a state sanctioned enterprise -a “public” corporation- that wants to be or become a monopoly holder of some commodity, good or service and then you have YOUR small business that's competing against it, who do you suppose is going to win in the struggle (pardon the use of this loaded word)? That's right, the state sanctioned business will win, and it will have the support of every BANK you can think of too because banks make more money on their money dealing with a business that's big vs. one that's small.

And 2) Due to the mathematical certainty of the perpetual scarcity of money that comes from having money created through bank loans whilst the interest to pay the loans back is never created, you produce a “musical chairs” economy whereby certain numbers of businesses must go out of business because they can't pay off their debts.

Now in any national or regional economy, who is the biggest debtor in the room? Who is most in debt to BANKS, particularly the CENTRAL BANKS? That's right, it's the governments. All states in the modern world are debt captives of the money power residing in the CENTRAL BANKS and MUST do their bidding accordingly. Bankers are hence “above the law” when it comes to getting what they want, which is the right to continue their puff and squeeze credit cycles and taking of that which didn't belong to them by having their debt slave states FORCE their other debtors into giving up their real assets to pay back their loans.

Meanwhile, politics is just “smoke and mirrors” to hide the real villains in the piece; the bankers and their insistence on USURY, the loaning of money expecting a return in money that was never created and cannot be generated from nothing because that's a banker privilege. Capitalism -the making of money on money- has been sold to the public as necessary, even considered a patriotic duty to defend, to send your sons and daughters to foreign lands to die for. To die for? What is it about capitalism that's worth dying for? So someone who makes money on money without doing any meaningful work can live better than anyone else while others die? Think about it. Why is there Socialism? To keep “the masses” from revolting, pure and simple. Otherwise everyone would do what they needed to do to make a living using what money? Clearly anything coming from a CENTRAL BANK is their money not yours. States need more of their money in taxes, not to pay off the principal debt as some stooges think, oh no. Your taxes go to pay the INTEREST on the debt the government racks up, never the principal which can literally never be paid off. Remember that interest is paid with money that was never created in the first place so all your taxes are a SCAM to keep the bankers happy. Everything that is a real asset that is surrendered in such a system is STOLEN; so we have today a monetary system that we all must live with and under -since they are the true rulers not the figureheads we elect to office; another SCAM since they are selected and then that's the only choice we get- until it is finally discovered by the majority of the people to be fraudulent and then what? Whose money are they expected to run to? Precious metals of course. Who controls those? The same people! Get it? Capitalism and Socialism are two sides of THEIR coin and neither one is a solution to your problems, your children's problems, your grandchildren's problems, etc. Oh, and by the way these same people have always -going back hundreds if not thousands of years- had control over the military industrial complex, so they have more than enough power to FORCE anyone to do as they say, etc. You are all slaves of their system. All the bromides meant to make you think that little you have any part, any say, and control over any of it are ridiculous and outright lies which nevertheless happen to work pretty well. I once upon a time believed them too.

The solution is to set up a parallel system that runs by different rules and uses a different money that is NOT theirs but yours. The more people and businesses that wake up to their true situation, the more that the real future of this world can be decided by the majority of the people rather than a tiny self appointed few. Believe me, when the scales fall from most of the eyes of the people of this world, there will be something different. Doesn't it make sense to start NOW to build something worthwhile for the future? It's long past time to organize and the first step is to set up the proposed International Valun Exchange Society or IVES.

David Burton
venlead2013@aol.com ] 

[9-17-15: Here is a brief conversation between me and someone I'll call Bob. I live within a capitalist system..and without me they wouldn't exist. Marxists & socialists claim that workers are oppressed in capitalist societies. Yet workers in communist societies always try to sneak out into capitalist societies. No one in South Korea is trying to sneak into North Korea. The Berlin Wall was not built to keep West Germans from sneaking into East Germany's collective farms. Cubans in Florida do not steal boats to seek asylum in Cuban collective farms.

Yes, Bob, that is correct, but one is only marginally better than the other and it is all related to their money. Meanwhile anyone living in a Capitalist system is just a free range slave of that system. It's easier and more attractive to the powers that be to run than was Socialism. Neither of them is the correct course for the future and they are both based on the same fraud -usury- and two sides of the same coin -statism.

and yet...i dont feel like a slave...mmmmm guess its a state of mind when ya get down to it....


If you are in any debt or pay taxes then you certainly are a slave. In fact if you do anything against your will because of the fear of FORCE then you are a slave.

taxes & death are the two facts of life....i don't mind taxes long as my government uses them to protect my way of life.......and sadly i have no fear...concern yes but no fear...thats no way to live....

But you ASSUME that your taxes are for something they are not. You do not know what your taxes go for, and nobody does. If they bothered to look they'd discover things like that their taxes are paid back to the Federal Reserve before they are ever given back to the government(s) and why? Because that money goes to pay the INTEREST on money that those governments borrowed from the Fed. The actual "loan" is designed never to be paid off. Why? So THEY can have power over those governments as their debt slaves. Just look around you and see what's happening without anyone's consent. Also having people go around in actual fear is not the best way to get anything out of anyone else. They'd much rather have you feel "free" so they can continue their very long old scam. There's a LOT more to this and yes these ARE genuine conspiracies so anyone saying that I or anyone else are "theorists" is a lying scum! Hope you and yours get it and at least wake up.

I know my taxes go places they shouldn't ..but that's every where around the world......its a given.....but as far as my country goes, its the best place I've been.. I've been to a communist country and witnessed first hand people all dressing the same,all working the fields, all working for the governments elites......all slaves....we are far from slaves...... i dare say if you live in America and consider yourself a slave i would suggest breaking those chains that bind you and find a place that would be more of your liking...you're free to do that.....you're free to do that in this country whereas others places you wouldn't be.....denouncing ones citizenship is just some paper work to do.....

All that is so, and I've been halfway around the world to far worse places too, and certainly want to kiss this ground when I get home, but that does not make this place perfect and it does help them keep us in their slavery.

Then you know where I'm coming from..now just get that slavery thing out of your head and you''ll have more positive things in your life...i cant imagine thinking i was a slave.....live in the state ...of mind.....peace.....

I hope everyone gets the direction this conversation took. This explains better than I could any other way just what we face today. If free range slavery is just a state of mind to most people, then the powers that be can just slowly and surely turn their knobs and have things their way. That slow and steady march - it's called Fabian (cautious) Socialism - is visible around us everywhere as if there is no other possible solution. It was begun over a century ago in England and remains their solution to the problems concerned with governing “the masses.” Nevertheless, the Emperor (and the Empire) has no clothes; it's their money, stupid!]

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