Wealth ditribution in stateless societies

[B0b]

How do you think wealth distribution would be in a stateless society? Would poor people tend to be richer and very rich people trend to be less rich, or the opposite?

[shirgall]

How do you think wealth distribution would be in a stateless society? Would poor people tend to be richer and very rich people trend to be less rich, or the opposite?

 

Does your idea of wealth distribution include standard of living? The world's poor today are all materially better off than the poor a hundred years ago...imagine how things could have been without war machines and government waste.

[Torero]

How do you think wealth distribution would be in a stateless society? Would poor people tend to be richer and very rich people trend to be less rich, or the opposite?

 

What a free society in my humble opinion does as opposed to a craptilistic (crony-capitalist) society is that success and failure are both part of the game.

 

So some people who are "poor" but inventive are prospering and people who are "rich" but only reached that position based on violence (essentially the lack of self-knowledge) are "punished" by that.

 

It is not about "the rich" versus "the poor". It's more about "the honest" versus "the abusive".

[dsayers]

How do you think wealth distribution would be in a stateless society?

Define your terms. "Distribution" sounds like an active process. In which case, there would be no distribution since a free society is predicated on not initiating the use of force against others.

[B0b]

Yes, it includes the standard of living, especially since it would be more difficult to assess the monetary wealth of people with all the private currencies.

 

It would definitely be "more about the honest versus the abusive". But my question is still would we see people 10 times richer than Bill Gates since there would be nothing to prevent very talented entrepreneurs to get richer and richer? At the same time, competition would fairer, so maybe more entrepreneurs would go after them.

 

Socialists think that rich people would impose monopolies and turn everyone into slaves. There is no reason to think that this would happen. Can Austrian economics tell us something about this question?

[Matthew Ed Moran]

In a certain fundamental sense there is no such thing as a distribution of wealth. There is a distribution of material goods, but this is different from wealth because of the diminishing value of marginal utility (not all goods are equally valuable from a personal, subjective viewpoint)

 

Some people are extremely wealthy because they own capital, but since they don't consume but a fraction of their capital, their wealth is essentially tied up in producing value for other people.

 

Just think about it, if you were a billionaire, no matter how much you wanted to consume personally, at some point your material wealth would be insignificant towards providing value to you when you consume it. The 400th jet you want to buy isn't going to give you as much marginal value as the first meal you are able to purchase. So, you invest your capital into the future where it has a higher marginal return; and at the same time it will only give you a nice return if it is producing wealth for other people, for whom it is more marginally beneficial to consume.

 

I think I got that right, but it's a bit of a complicated topic. The primary point I think is forgotten by most, is that rich people are actually providing us much more benefit than we are providing them if they are investing their capital to meet our personal desires to consume. Once we can satisfactorily consume, we too can become capitalists to create wealth for others, and the cycle continues. But at every point in the cycle, it is important to remember, someone's needs are being satisfied. That is how wealth is created. Wealth is not created when materials sit stagnant in some miser's basement, so if someone choses to be a miser, the market will punish them in the form of huge lost opportunity.

 

Thanks for reading let me know if you have any questions

[thebeardslastcall]

With no mass inflation hurting the poor and no government monopoly systems (including forced intellectual 'property' rules), as well as a removal of all the insane anti-productive practices inhibiting currently less productive people, I would guess that wealth would be much more evenly spread. The government is not an equalizer and is not helping the poor (far from it). That government agents repeatedly claim to be one should be the first big hint they do otherwise in practice and by unintended consequences. Also stocks are worth nothing until you sell them, which requires someone to buy them. Many common counts of how much wealth rich people have count assets based on a guess of their worth. Also money is no good if you have no where to spend it. There must be people willing and able to provide services and thus people willing and able to earn the money for their services.

[Thomasio]

I believe the distribution of wealth would be far more equal, even though it may take a while for the rich to understand why that's required.

The simple basis of capitalism is, that consumers have to be able to buy what producers produce, therefore at all times, workers have to earn enough income to buy what they produce and their income has to increase same fast as productivity increases.

If too many rich people would invest too much money into increasing production without paying the workers enough to buy the products, they would end up in deflation and depression.

A single country may be able to even out ups and downs through their trade balance with other countries, but on a global scale the above holds true.

 

If we would abolish all laws today, I'm quite sure there would be a lot of rich people not understanding this, trying to cut wages of their workers way below the income needed to buy the products they produce, but without a government that would step in and try to even things out, these ignorants would get wiped out quite quickly, simply because their system would collapse after a short while through the fact, they cannot find buyers for their products.

Once the rich learned this lesson, which might have to go through a hard crash of the markets after which it might take a long while to get society back on its feet, the capitalist system would automatically figure out, increasing wealth is possible only, if all people allow all other people to participate in the increasing wealth.

If we wouldn't do the initial step today, but go for a slow transition during which all people including the rich people can learn what's required step by step, we might get to the other end without major crashes.

 

The only thing I'm afraid of is that the current government driven redistribution system, which in fact supports and rewards the greediest corporations, who in fact today on a global scale pay their workers far less than required to buy all the products, won't last long enough, so the big crash (I believe) will come before we even get started with the transition to a free society.

[B0b]

Thomasio, Bill Gates pays his employers well and still make tons. So why would rich people need to understand what they have already understood?

 

Matthew, maybe you prefer the expression "distribution of capital"?

[Matthew Ed Moran]

Sorry I couldn't quite understand that. Are you now asking what the distribution of capital will be like? As in, you're refining what it is you were asking initially? 

 

If that's what you were asking, well, free market economics says that a situation with completely free entry (as in, no aggressive monopolies in the market) will tend to have decentralized profits compared to a situation with a government, which would artificially concentrate capital in the hands of people who are not producing wealth for others. I think in general the trend would absolutely be towards an equalization of capital once government is gone, but the distribution will always be a bell curve. As long as differences in intelligence remain to any significant degree, there will be significant capital tied up in the hands of the highest IQ people on the market. 

[rosencrantz]

but the distribution will always be a bell curve.

 

Wealth in today's (semi)free society is arranged following the power law. https://en.wikipedia.org/wiki/Power_law

 

The difference between a rich and well to do persons is that a rich person has many sources of income and only pays relatively few people (Adele sells a lot of records compared to what she buys) while a well to do person has usually one source of income and pays many other persons / companies compared to that. 

 

Unlike natural attributes there is no natural limit to how rich somebody can become. You don't see a 50 meter tall guy walking around because of this limit while there are a few very rich persons whose wealth makes them the equivalent of a giant compared to most other people. 

[Thomasio]

Thomasio, Bill Gates pays his employers well and still make tons. So why would rich people need to understand what they have already understood?

 

I didn't say all, I said "a lot of".

Even people like Peter Schiff have understood by now that our problem is on the demand side.

[Guest Gee]

Maxwell Boltzmann.

[LovePrevails]

When I look at the economic factors that have contributed the most to retarding an increase in living standards I come to the conclusion that the two biggest factors are

 

A) the printing of money which has absolutely destroyed the purchasing power of cash over 100 years. Between the late 1700s and 1913 the price of all goods came down in America by 20%. Whereas over the last 100 years the vlue of the dollar has declined by 96%. I don't have stats for the UK but they can't be too different! it's hard to imagine how much richer we would be if no money had been printed and this has affected the poor the most. 

 

B) Artificially lowering the interest rates over 50 years or so, because that has drven so much money into the housing market that the prices of houses have multiplied to 10x what they were in the 70s. Imagine if everyone could get a house for a tenth of what it costs now - or pay a tenth of what they pay in rent. how much would that help the poor?

 

 

The funny thing is I NEVER hear left-wingers talk about those two things. Why? Is it ignorance or is because these abuses are in the public sector rather than the private sector and they have trained themselves to look only for abuses in the private sector? 

 

I was a socialist but now that I am a liberal (in the classic sense) it seems the left don't seem to actually care about poor people at all they only want to talk about rich people - they don't want to look at what is actually harming and helping the poor across the world and point to the major causes. Why? 

 

Because FREE MARKETS are helping the poor, in the poorest countries in the world where they are turning to free markets that is where the most progress is being made in terms of lifting the poor out of poverty - 30-40,000 people a year between India and China at the moment! Poverty as it was defined in the 80s, as living on less than a dollar a day, when you adjust for inflation has disappeared from the planet. There is further to go, of course, that is a cause for celebration. But the left don't talk about it - because it's devastating to their case that markets are evil and forcing people - at gunpoint if necessary - to achieve their aims is virtuous.

[Thomasio]

 

The funny thing is I NEVER hear left-wingers talk about those two things. Why?

 

I cannot speak for left wingers in general, but from my personal point of view the two things you mention make a difference exclusively under authoritarian government.

Whether left or right, as long as it is authoritarian, the government can print money into inflation and set interest rates so low that they can afford to pay interest on an otherwise overwhelming national debt.

 

From a libertarian point of view that's all meaningless, simply because the question whether it's left or right libertarian ideas doesn't matter, neither of them has a government that could do any of it.

I believe you're making the mistake of comparing libertarian right to authoritarian left, which could show a wild amount of further nonsense left authoritarians might do, but says nothing about what left libertarians would do.

Try comparing your ideas to right wing authoritarians and you will find almost the same downsides as you find comparing to the authoritarian left, which should tell you, the main point is being libertarian rather than authoritarian, while left vs right makes a smaller difference in a free society.

[B0b]

Matthew, you said there is no such thing as distribution of wealth, so  I thought maybe the distribution of capital is more meaningful.

 

Thomasio, I thought it was the market that set salaries of employees, not the understanding of employers.

[Thomasio]

Thomasio, I thought it was the market that set salaries of employees, not the understanding of employers.

 

That very much depends on the situation on the market and the way of thinking among the employers.

Fact is, consumers have to be able to buy what manufacturers produce, the sum of all wages in production must match the sum of all products manufactured, or else either prices have to come down or part of the products cannot find buyers.

 

Before anyone comes up with the "service jobs" that create additional wealth:

Service jobs have no influence on the sellability of manufactured products.

If a worker in a factory uses part of his income to buy services, all he does is forward part of his income to other people who then are able to buy the manufactured goods.

The money in circulation may run through 100 hands, letting 100 service jobs participate in the wealth before someone buys the manufactured goods and returns the money to the manufacturer, but the amount of money in circulation isn't increased through service jobs, therefore the wages in manufacturing have to match the sales prices of all manufactured products.

 

In a market that has a lot of competition in ALL sectors, there won't be any problem, because all sectors individually will come to more or less the same results as the overall market and there won't be any kind of problem.

 

In a market that has some branches with only very little competition due to the complexity of its technology, i.e. CPUs for computers, there will always be the temptation to pay workers less than the value they produce, simply because Intel, AMD and Motorola could easily form a cartel that sets consumer prizes independent from wages, expecting that they can sell their products through pulling money out of some other branches of the market, what's known as "begger they neighbor".

In such a market, IFFF some manufacturers would do that and given the fact most people would still buy computers even if they knew workers aren't paid what they are worth, the loss of money in other branches of the market would lead to more and more bankruptcies among fair employers, until only the unfair employers are left, after which those would discover, once they ruined the rest of the market, they cannot sell their own products either anymore.

That's when the system will crash and that's when unfair employers will learn their lesson the hard way.

[Mister Mister]

Thomasio, has anyone ever accused you of being a busy-body?  I just can't put myself in the mindset where I care as much about peoples' mundane business decisions as you do.  I just do what I am good at, make money, and buy the things I need and want.  You call yourself a "left libertarian", but you seem to have as much belief in the competence of free people as your average central planner, so I'm not sure you're really a libertarian at all...

 

One of the things you have to look at about the topic in a larger sense, is the inter-generational factor:  what happens when you stop paying low IQ people to have children, the next generation has fewer low IQ people, which might drive up the price of unskilled labor...you could carry on with this scenario in your head but as you see it starts to get very complicated and is impossible to predict.  The nice thing about a free society is not having to care

[Thomasio]

I've been accused of being lazy, taking things too easy, but I've never been accused of being a busy-body.

I'm known for finding solutions for tricky problems that on start seem so easy that nobody believes it could work, often to the extend that they wouldn't even try.

There are plenty of cases where I don't have a solution, but there isn't one single example where I have a solution, someone tried it and failed.

I'm known for extreme patience, there are cases where between someone coming to me with a problem, me suggesting a solution, him turning that down, me pointing out the consequences of not doing that and me being able to say: "I told you", there were over 20 years.

I'm known for making predictions that nobody believes on start, where not a single one of them has ever failed.

 

Want an example?

I used to be a heavy smoker, until I discovered e-cigarettes 3 years ago and I'm involved deeply into vapers communities who are currently facing upcoming strict regulations from governments almost all over the world.

When the first rumors about regulations came up, prizes for the liquids used in e-cigarettes here in Italy were around $300 per liter and there always was the option to buy the components of the liquids, mixing it yourself and pay only about $50 per liter.

I've predicted back then, prices will move up to at least, most likely above $1500 per liter within 5 years and I've suggested to all those who don't want to quit vaping, since these liquids can be stored in a dark and cool place like a cellar for decades without spoiling, stockpiling supplies while they are still cheap.

I was laughed at and ridiculed, out of some 35000 users in one of the biggest vaper forums less than 5 actually agreed with me, the rest came up with the usual arugments like: "Even though the regulation will bring some increase in prices, even though government hinders the free market a lot, still prices cannot raise THAT high".

Today we're 3/5 into the timeframe I predicted, prices here in Italy have reached $1300 per liter and even the components for mixing it yourself have reached $750 per liter, while the actual regulation isn't even in effect yet (that's coming in may this year and will bring a ban on online sales, meaning users cannot buy vaping stuff anywhere else but local shops anymore).

There is nobody anymore who would still contest my prediction, but there are PLENTY of vapers who now have to pay the high prices, because they don't want to quit and haven't listened to me in time.

There's a gigantic rush of people who now want to stockpile before prices raise even higher, who could all have saved 1000s if they had listened to me.

[B0b]

Thomasio, employers pay employees less than they produce otherwise the companies go bankrupt. If an employer does not pay his employees well, they look for better paid jobs elsewhere. I don't think you can expect employers to think about the buying power of their employees when setting their salaries. What set salaries is competition, even these days.

 

Besides, what makes you think that if the employers started paying their employees more, prices of manufactured goods and services would not go up?

[Thomasio]

 

...  when you stop paying low IQ people to have children, ...

 

The very first thing required to do that would be figuring out, how do you prevent them from getting those children?

Stop paying doesn't mean they stop having sex and being poor often means they cannot afford contraception.

Furthermore poor people as well as those with low IQ are on average more religious than rich and/or intelligent people, therefore religious reasons make them refuse contraception.

So if you stop paying, you either have to sterilize them, or you will get to literally BILLIONS of starving people all over the world, where you have to be willing to watch them die in order to reduce their numbers.

The Nazis were on that line, online a few more steps further ahead, actively killing those they believed to be inferior.

 

This is a tricky problem I don't have any solution for either.

Killing them is out of the question, so is sterilizing them against their will, but feeding them allows them to have more children, so no matter how many poor people the world might be able to feed, a few years later their numbers will have increased.

There's a given deadline, from where on the world just can't feed the growing population anymore, even if none of them were poor and/or had a low IQ.

From a humanitarian point of view one tends to help them, even a free society would have charity, but from a logic point of view it's doomed to collapse one day.

The only solution that has worked so far is industrialization, education and increasing wealth to a point where having too many kids doesn't fit into their lifestyle anymore, but that's about the opposite of not paying anymore, because it would mean extremely big investments into poor areas.

I'd love to find a peaceful working solution to this one.

[Torero]

The very first thing required to do that would be figuring out, how do you prevent them from getting those children?

Stop paying doesn't mean they stop having sex and being poor often means they cannot afford contraception.

 

A pack of condoms is some orders of magnitude cheaper than a child, right?

 

So if you stop paying, you either have to sterilize them,

 

  and you were a "left libertarian"??

 

or you will get to literally BILLIONS of starving people all over the world, where you have to be willing to watch them die in order to reduce their numbers.

The Nazis were on that line, online a few more steps further ahead, actively killing those they believed to be inferior.

 

Ferssitar, are you reading along? I would call this pretty manipulative language...

 

The only solution that has worked so far is industrialization, education and increasing wealth to a point where having too many kids doesn't fit into their lifestyle anymore, but that's about the opposite of not paying anymore, because it would mean extremely big investments into poor areas.

 

You keep talking like a utopian statist: "solutions for all", "the whole world needs to...", "investments only by third parties", etc.

 

I'd love to find a peaceful working solution to this one.

 

I think RoseCodex' point is very valid; it will phase itself out. Laissez faire.

[Mister Mister]

The very first thing required to do that would be figuring out, how do you prevent them from getting those children?

Stop paying doesn't mean they stop having sex and being poor often means they cannot afford contraception.

Furthermore poor people as well as those with low IQ are on average more religious than rich and/or intelligent people, therefore religious reasons make them refuse contraception.

So if you stop paying, you either have to sterilize them, or you will get to literally BILLIONS of starving people all over the world, where you have to be willing to watch them die in order to reduce their numbers.

 

Lol, I don't even know how to respond to that.  All you have to do is look at peoples' sexual behavior before the welfare state.  And that was before there were 16+ different kinds of affordable birth control.  Again, I don't know how you can call yourself a libertarian, when you think that a decrease in government power will immediately lead to a catastrophe demanding a giant increase in government power.  Has it ever occurred to you that your ideas about the future could be wrong?

[Thomasio]

Besides, what makes you think that if the employers started paying their employees more, prices of manufactured goods and services would not go up?

 

Of course you cannot just double or triple all wages.

You have to keep up with productivity.

Since the manufacturing industry manages to produce on average roughly 3% more stuff per year with the same amount of workforce, somehow there has to enter 3% new money into circulation as well, or else prices would fall by 3% per year.

Creating more jobs doesn't help, just the opposite, creating more manufacturing jobs, that then all have the increased productivity requires even more money to enter the circulation.

Fairly obvious, there are two ways of putting money into circulation.

1) Government printing

2) Increased wages

The problem is finding the right balance there.

Print too much or increase wages to much, you get inflation.

Print not enough or increase wages not enough you get deflation.

 

You may print none and increase wages enough, or keep wages flat and print enough, you could even cut wages and print even more, all no problem, but you cannot not print nor increase wages, because that would automatically deflate average prices by 3% per year.

 

What we have seen in the last 3 or 4 decades is flat wages upon increasing productivity, which resulted in todays situation, where many governments all over the world (i.e. Japan) are printing money like mad, but still have deflation and depression, because they can't print new money as fast as productivity increases.

Okok, they could "print" fast enough no matter what, but in our fiat money system all money must be loaned into existence, so to be precise, it would have to read: They can't find debtors as fast as productivity increases.

Again, I don't know how you can call yourself a libertarian, when you think that a decrease in government power will immediately lead to a catastrophe demanding a giant increase in government power.  Has it ever occurred to you that your ideas about the future could be wrong?

 

That's the precise opposite of what I keep saying, therefore no wonder if you call that wrong, I agree that would be wrong, it just isn't what I'm saying.

 

I cannot repeat all I've said about it, even though that might be neccessary right here to avoid further misunderstandings, but I will make it as short as possible, if you can't understand it in this short form, please read through some of my recent postings.

 

I'm saying a free society would be the solution, I only believe we will have to get to that free society fairly soon or else the currently existing authoritarian government, the fiat money, the corruption and all the other bad effects that has on our society will cause a collapse of civilization as we know it, making it literally impossible for humanity to get to a free society for a LOOOOOONG time.

All you have to do is look at peoples' sexual behavior before the welfare state.

 

Ok, let's have a look.

Before the welfare state, the only "pension plan" poor people had was to have enough children, so they would support them at old age.

Up to today that's the common practice in most of the poor countries in Africa.

Before the welfare state, before humanitarian aid, Africans were dying from starvation by the millions, there only was no global news network, meaning we didn't have to see them.

Once humanitarian aid delivered food into countries that couldn't grow enough food for their own population, less people were starving, more people survived and started having children at a rate of about 1 child per every woman between 15 and 40 per year.

So now we have over a billion people living in Africa, where the conditions of the climate there can't even sustain half of them.

If you keep on paying humanitarian aid, you will have 2 billion Africans in a few decades.

If you stop paying that humanitarian aid, you will see half a billion people starve to death near instantly and starvation rates will return to pre humanitarian aid levels, but it won't alter their birthrate of about 1 child per every woman between 15 and 40 per year.

[Matthew Ed Moran]

Wealth in today's (semi)free society is arranged following the power law. https://en.wikipedia.org/wiki/Power_law

 

The difference between a rich and well to do persons is that a rich person has many sources of income and only pays relatively few people (Adele sells a lot of records compared to what she buys) while a well to do person has usually one source of income and pays many other persons / companies compared to that. 

 

Unlike natural attributes there is no natural limit to how rich somebody can become. You don't see a 50 meter tall guy walking around because of this limit while there are a few very rich persons whose wealth makes them the equivalent of a giant compared to most other people. 

 

Thanks, Rosen! It's helpful to have people who are interested and nuanced in areas I may be completely ignorant of

 

Do you have a source for your second claim? I would love to read anything about that, but if it was on the wiki page I must have missed it.

 

Your last point makes sense to me. So it would not make sense to say the distribution of wealth (hey, now I'm using the word) is a bell curve. Thank you for that correction.

[rosencrantz]

Here we go: 

https://en.wikipedia.org/wiki/Pareto_distribution#Applications

 

[Thomasio]

I don't think you can expect employers to think about the buying power of their employees when setting their salaries.

 

I believe you misunderstood.

Of course a bakery cannot pay their shop assistants as much as they sell for bread, that's obvious.

 

First of all you have to consider the owner of a company a receiver of a salary as well, even though the correct word there is profit, but because that owner is a consumer himself, his profit can be considered a salary he pays to himself, meaning as long as he doesn't make more money than he spends, the economy remains in balance.

Second you have to consider the whole chain, from the farmer planting, over the helpers bringing in the harvest, over the truck drivers or trains or ships or whatever that transport the raw material to the mill, over the miller and his employees, and so on, and so on, until you finally get to a loaf of bread sold in a shop.

This whole chain of earners has to earn in total as much as the total of bread sold is worth.

Of course you can shift earnings, let the baker make some more, the harvest helpers less and so on, important is only that the total matches.

 

Of course I am aware that this total today isn't matching, at least not for most of all production and that's precisely why I believe our current authoritarian system will collapse soon.

It's also why I believe a free society that doesn't take it's time to do the transition step by step and learn on the way, that hasn't learned this will on start run into a big crash of the economy, through which manufacturers will learn it the hard way.

Once learned, whether knowing it from start or learning it in a crash, afterwards a free society will do just fine.

 

Let me try if I can explain it in short, but I'm afraid it's going to be a long text anyway.

 

Suppose you're in a free society, everyone is getting along just fine, everyone has a job, paid according to his skills, everyone happy.

The money in circulation is rolled over once a month, from the manufacturers to the workers, through several hands selling services, returned to manufaturers through buying their products, who then can pay their workers for another month.

After a year, new developments in technology or anywhere else in the production process manages to produce 3% more stuff.

 

What happens if production increases and the money in circulation doesn't?

Either all products must drop in price by 3% on average, or 3% of all products can't be sold anymore, or 3% of the workers aren't needed anymore.

 

Suppose manufacturers decide to fire 3% of the workers.

What happens the next day?

The fired workers will apply for a job, offer to work for less and replace 3% of the "old" workers.

And so on and so forth, until ALL workers work for 3% less.

Did you follow?

We now have 103% production and 97% wages, meaning the problem is no longer 3% it is 6% now and another round of lowering wages will begin.

The following year production increases again by 3%, and so on and so on, the problem increases exponentially, for the simple reason there isn't any new money added into circulation in the first round, which gives from 2nd round on a spiral downwards.

You'll end up with nobody producing nothing at zero wages.

 

Do you believe that at any given point in this spiral downwards the manufacturer has any kind of reason to invest in more production?

Nope, just the opposite, since production is already increasing without investment, since the manufacturer already cannot sell as much as he is producing, he will more likely cut production than invest in expansion.

Manufacturers can easily calculate, if every investment, every single job created produces 3% more than he can sell, there's no point in investing, because it will be a secure 3% loss.

 

That's why ANY capitalistic organized society requires a continuous addition of new money, so the money supply can keep up with the increase in production or else the prices would fall.

In a stateless society, where there is no state that could print money, the only way how you could get new money into circulation is through increasing wages.

Of course it doesn't matter who gets a raise, it may be the workers or the manufacturer himself or both, important is, whoever makes more actually spends it, because spending it gets it into circulation, putting it in a safe at home doesn't.

 

Now suppose same story as on start, free society, all fine, but one single earner anywhere in the chain of production makes more than he spends.

He saves money, for whatever reason, for pension, for his children, or because he makes so much that he cannot spend it all.

He puts his savings in a safe.

What happens in the overall economy?

The money supply shrinks right there by the saved amount, somewhere in the economy there will be some products that cannot be sold anymore, because there isn't enough money in circulation to buy them.

Right away you get to the same chain of events.

Too much production, no reason to invest in more production, leads to layed off workers, leads to lowered wages leads to closed factories until nobody produces nothing at zero wages.

 

So again, not only does a capitalistic society require a continuous addition of new money to keep up with increased production, it also requires a continuous addition of even more new money to keep up with the savings or else the prices would fall.

 

If you have a fiat currency, the problem is, all money must be loaned into existence, which requires finding ever greater numbers of debtors, which (as you can tell in todays economic situation) at some point isn't possible anymore, because almost all possible debtors are already so deep in debt that creditors do not give them any more credit and public opinion about the exponential increasing debt will sooner or later cause civil unrest.

 

If you have a fixed currency, you have the problem the other way around, a fixed currency that cannot increase the money supply alongside of increased production and savings will experience eternal deflation.

 

Only if you have a kind of currency that does increase the supply in a controlled way, i.e. gold, if miners bring up precisely as much new gold every year as production and savings increase, prices would remain near stable.

Doesn't require a government or anything, the cost of minig gold regulates the amount added into circulation by itself.

 

In todays authoritarian system the two big problems are:

1) The money supply in circulation IS shrinking.

No matter how much money the central banks pump into the markets, they inflate the stock market and real estate, but they do not reach the circulation among the general population and that's why prices for consumer products are falling.

(Here in Italy prices have fallen by about 30% within the last 2 years.)

2) In an attempt to keep the money supply up, while there are almost no new debtors available, governments take on the debt required to loan new money into existence themselves.

In addition with government spendings like military, welfare and stuff that leads to exploding national debt.

 

The ONLY way, how we could get out of the spiral downwards, that for example Japan has experienced for the last 25 years, would be if we find a way other than exponentially increasing debt in the world, how we could keep a sufficient (and increasing) amount of money in circulation and that (to my mind) can only be achieve through increased wages, up to a point where the distribution of income is at least equal enough so nobody makes more than he can spend.

Once that's achieved there's nothing wrong with expanding production and creating new jobs, even manufacturers cutting back on wages temporarely in order to invest in more production wouldn't be a problem, as long as once the investment is done, wages are increased to compensate for the higher production, because once you made sure all manufactured products can be sold, additional workers producing additional stuff become at same time the consumers that can buy the additional stuff.

[B0b]

Thomsasio, this is not how things work in reality. Employers and employees do not care much about all this. Employers pay employees just enough so that they work enough and don't leave. Employees try to get as much as possible. The system finds an equilibrium in the end.

 

Your analysis is 100% Marxist.

 

Suppose that the state was absent from the game and that money was private, do you think there would still be a problem, and if so, what would it be?

[Thomasio]

Yes, there would still be the very same problem, only without a state that keeps redistributing money, the markets have to and will figure out how it works.

I'm fully aware how wages are set within our current system and I'm fully aware that everyone believes this is how it should be.

Still it doesn't solve the problem and as long as there is a state that tries to fix the broken system the problem will never be solved.

Only after there is no more government, once a market system that expects exponential growth of fiat money without naming the ones who shall be the debtors experiences a big crash, out of the ashes will rise a new free market that has understood how it works.

 

I mean, you may point out things are different in reality as often as you like, it doesn't solve the problem that a system that pays out less than it takes in, while the ones it takes in from are the very same people it pays out to, must collapse as soon as these people are broke.

Take the average American:

The average income in an average state in the US is currently is $51,000.

https://en.wikipedia.org/wiki/List_of_U.S._states_by_income

If someone earning 51K takes no vacations, buys no house, has no car, just by the normal cost of living in an average household he will end up $50 in the red per month.

http://cost-of-living.careertrends.com/l/615/National-Average

How long can you keep an economy going in which the average increases their debt by $600 per year and how many cars can manufacturers sell to people who are already overspending?

[AncapFTW]

Yes, there would still be the very same problem, only without a state that keeps redistributing money, the markets have to and will figure out how it works.

I'm fully aware how wages are set within our current system and I'm fully aware that everyone believes this is how it should be.

Still it doesn't solve the problem and as long as there is a state that tries to fix the broken system the problem will never be solved.

Only after there is no more government, once a market system that expects exponential growth of fiat money without naming the ones who shall be the debtors experiences a big crash, out of the ashes will rise a new free market that has understood how it works.

 

I mean, you may point out things are different in reality as often as you like, it doesn't solve the problem that a system that pays out less than it takes in, while the ones it takes in from are the very same people it pays out to, must collapse as soon as these people are broke.

Take the average American:

The average income in an average state in the US is currently is $51,000.

https://en.wikipedia.org/wiki/List_of_U.S._states_by_income

If someone earning 51K takes no vacations, buys no house, has no car, just by the normal cost of living in an average household he will end up $50 in the red per month.

http://cost-of-living.careertrends.com/l/615/National-Average

How long can you keep an economy going in which the average increases their debt by $600 per year and how many cars can manufacturers sell to people who are already overspending?

51k includes the vacation time, assuming that it effects wages.  Also, buying a house will save them money long term.  So basically all you've managed to show is that the average person lives beyond their means by $50 per month, and doesn't do things like buy a house which would decrease the cost of living.

Cost of living is based on a certain standard of living, and isn't actually the minimum amount they need to spend to meet their needs.

[B0b]

So, not only do you want to get rid of the government but you want every employers to change their attitudes towards salaries. Why not wishing people to have 5 arms?

 

Without a government, talented people will make a lot and very unqualified or lazy people will make very little. This has nothing to do with the average cost of living.

 

If there is not government to impose minimum wages and all kind of regulations, salaries will be set by the market through competition. The rest is wishful thinking.

[Thomasio]

Without a government, talented people will make a lot and very unqualified or lazy people will make very little.

 

And just WHOM do they make that off?

How would the talented make any money, if the poor didn't have any?

 

There's nothing wrong with the talented making more than the lazy, there's also nothing wrong with the overall wealth increasing alongside with technological improvements, but if you don't leave the poor a minimum they will use to buy what the talented produce, the talented won't be able to sell their products, no matter how ingenious their products are.

 

I said it several times above already, let me put it into easier words: If you ruin your customers, you cannot sell anything anymore.

A society that lowers the income of their average earners to a level where they can't afford a car anymore mustn't wonder, when their car manufacturers go belly up.

 

That's why I said several times, if the employers don't have the time during a slow transition into a free society to learn how it works, there will likely be many employers trying to maximize their profits at the expense of their customers, until they discover that they cannot sell a thing once their customers are broke.

Then the system would go through a big crash during which employers would learn their lesson.

Fairly obvious it would be far better, if during a slow transition employers would learn it without going through major crashes, but I'm afraid precisely THIS huge crash is what we are seeing the beginning of since 2008.

I'm convinced this crash will continue, it will speed up shortly and it will end up in a complete collaps of all world economy, simply because nobody is willing to see the problem for what it is: Ruined customers who cannot buy what the diligent ones produce.

[AncapFTW]

And just WHOM do they make that off?

How would the talented make any money, if the poor didn't have any?

 

There's nothing wrong with the talented making more than the lazy, there's also nothing wrong with the overall wealth increasing alongside with technological improvements, but if you don't leave the poor a minimum they will use to buy what the talented produce, the talented won't be able to sell their products, no matter how ingenious their products are.

 

I said it several times above already, let me put it into easier words: If you ruin your customers, you cannot sell anything anymore.

A society that lowers the income of their average earners to a level where they can't afford a car anymore mustn't wonder, when their car manufacturers go belly up.

 

That's why I said several times, if the employers don't have the time during a slow transition into a free society to learn how it works, there will likely be many employers trying to maximize their profits at the expense of their customers, until they discover that they cannot sell a thing once their customers are broke.

Then the system would go through a big crash during which employers would learn their lesson.

Fairly obvious it would be far better, if during a slow transition employers would learn it without going through major crashes, but I'm afraid precisely THIS huge crash is what we are seeing the beginning of since 2008.

I'm convinced this crash will continue, it will speed up shortly and it will end up in a complete collaps of all world economy, simply because nobody is willing to see the problem for what it is: Ruined customers who cannot buy what the diligent ones produce.

You seem to think that there is only a set amount of wealth in a society.  The talented can also make money off of the talented.  The poor, if they aren't talented in some way, work for the talented to maximize the amount they can earn, as the talented can create things more efficiently.

 

People are talented in different ways.  Stephen Hawking would still need a cook, or someone who's talented in other ways.  No matter how talented a person is, they can't do everything.

 

If the non-talented people can't earn a living, then the talented people can't either.  Therefore, some sort of equilibrium will occur.  It might even entail the less talented people only dealing with certain talented people because they know they'll get treated better.  If the talented people have any business sense, they won't over-exploit any resource, including employees and customers.

[B0b]

No one needs to learn anything. You see the world in a Marxist way, with two classes, the dominator and the dominated. It does not work like this. Without the government, things will likely get better for the poor.People are not stupid. If they see that they do not get paid well, they will create their own companies. Once there are lots of companies, employees become harder to find, and are therefore more expensive. As for a lazy and unqualified employee, why should his employer care about his salary? The employer is kind enough to give him a job. It is the guy's responsibility to make an effort to become more valuable.

[Thomasio]

Let me see if I got that right.
First you claim what I said is wrong and you contest my claim that the poor will need a sufficient income by:
 

You seem to think that there is only a set amount of wealth in a society.  The talented can also make money off of the talented.

And two sentences later you repeat with slightly different words precisely what I had said, contradicting yourself:
 

If the non-talented people can't earn a living, then the talented people can't either.  Therefore, some sort of equilibrium will occur.

How is that any different from me saying the rich may make more than the poor, but they must leave the poor enough to buy what the rich produce?

 

Same thing with you, @B0b

 

Without the government, things will likely get better for the poor.People are not stupid.

 

No difference to what I said, only different words.

 

So let me put it in different words again:

Today, under an authoritarian government that redistributes income from the middle class to the poor, employers can squeeze down wages and employees are still willing to take the job, because they can rely on welfare to fill up whatever is missing between their salary and their needs.

Without governement BOTH employers as well as employees will have to adjust to the new situation.

Employees will not be able to take jobs that they cannot make a living from, that's quite obvious from start.

Employers will have to learn the lesson that they can no longer squeeze down wages below the basic needs of their workers.

 

All I'm saying is, IFFFFF there was an instant switch from todays authoritarian welfare system to a free society there would be some employers still trying to pay less than required for a living, those would on start still have employees, simply because not all poor people can launch their own business instantly.

These "unfair" employers would outcompete the fair employers and by the time they lose their workers because the workers cannot afford to work for so little money anymore, a great many of fair businesses would have gone bankrupt.

That would cause a huge crash in the markets, before new fair employers can build a new fair free society.

 

IFFFF the switch to a free society comes slow enough, so employers can adjust to the new situation slowly, there wouldn't be much of a problem, except of the fact that during the time of transition we have to keep the old system alive.

If the old system collapses before we're done with the transition, there won't be a transition anymore, but complete collapse with unpredictable consequences.

 

Since I believe our todays corrupt authoritarian system will not survive for long anymore, I'm afraid we do not have the time for a slow transition.

But then a faster transition will cause the huge crash described above.