Re: 1929 deja vu

From: Michael S. Lorrey (
Date: Wed Apr 26 2000 - 11:13:18 MDT wrote:

> In a message dated 4/26/00 9:02:13 AM Pacific Daylight Time,
> writes:
> "If you magically introduced one of these aircars for a price of about $20,000
> today, with a production capacity of a million units a year, GM, Ford,
> Toyota, Daimler Chrysler, et al would all be declaring bankruptcy in short
> order, and you'd have millions of unionized autoworkers out on the streets
> unemployed. Markets woul crash (all except your AirCar, Inc. stock), wealth
> would evaporate, consumer spending would decrease (all those autoworkers
> unemployed), and you'd get the vicious cycle I described earlier. Those other
> companies could try to introduce similar products, but they can't compete
> being saddled by all those union labor costs, by their outmoded factories,
> and their lack of automation. Are you starting to see what I am getting at?
> Mike"
> Mike
> Isn't this basically the phenomena that Marx saw correctly and then
> described as the weakness of Capitalism

It is a strength, if managed. Marx had very little ability to see systems function
in his mind on a dynamic basis, which you can tell by the 'static' concepts he was
always propounding, which is why so many of his assumptions and conclusions are so

> He thought that because Capitalism was constantly undergoing this sort of
> change and disrupting people and constantly requiring reinvestment that would
> not be required in a planned economy that Capitalism would eventually
> collapse? Is that a fair representation of his position?

Essentially correct, but he, like many before him, lived in an era of little
technological change relative to today, where big changes were seen as very
frightening and world shattering occurences. As it is, each new technological
introduction is rather minute, and affects only a small small sector of the
economy at any given time. The scenario I described above shows what would happen
when some big unexpected change occurs and the parties are not able to adapt.

Marx's idea of a planned economy only works in worlds where there is no increase
in population, no decrease or increase in resource availability or recovery costs,
and no new technological developments. Its perfect for such static economies. Its
pathetic for competing with a dynamic technological world.

> But isn't it also true that while our changes do cause disruptions and
> other economic damage, in the short run, that in the long run those same
> phenomena are what caused Capitalism to thrive and Communism to collapse.

They are what caused communism to collapse, and they are one of the contributors
to unemployment. However seeing the technological dynamism of capitalist economies
as a bad thing rests on one big false assumption: that people can never learn new
skills. You and I know this is totally false, however in the stratified, caste
type world of Germany in the mid 1800's, this was a perfectly valid assumption for
Marx to make.

> Consider what a really accurate watch used to cost. Then along came the
> digital watch and an entire industry disappeared. But today does anyone miss
> them?

Only those that appreciate quality handmade watches, and people like that tend to
be willing to pay for the high cost these days. I'll bet though that there were a
lot of unhappy unemployed watchmakers at one point though. As I said, in the long
run, big changes are not a bad thing. However springing huge new technologies on a
public caught unawares is more likely to cause greater disruption than it has to.

> By the same token the vinyl disk record disappeared; they tell me that
> the CD is going to get its comeuppance also. The record of disappeared
> industries that have been advantageously is so long it would bore you for me
> to tell it. In fact the same auto industry you cited destroyed all sorts of
> industries.

Yup, buggy whips. The Concord Carriage company was one of the biggest horse drawn
carriage companies in the US. Henry Ford's greatest invention wasn't the assembly
line, it was the livable wage (which obviously was possible because of the
assembly line). Enabling your employees to all be able to afford your product is a
genius stroke to build markets and a middle class of consumers. Ford's downfall
will be his grandson's acquiescence to the UAW in limiting automation on the
assembly line.

> Yet, the world gets better.

It does get better because huge changes don't happen all at once, and we can now
see change coming and plan for it accurately with a pretty good degree of
numerical accuracy.

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