1/30/2007

Can Capitalism Fall?

I am reading a book written by Karl Marx called "Das Kapital". In the past century there has been much debate on Marx’s comments and theory about capitalism. Marxism is based on the belief that capitalism will inevitably fail in any society. He believed that capitalists (business owners) exploited there workers by awarding low wages to maintain a high profit. Furthermore, as competition increases, capitalists are forced to invest in expensive machinery to increase productivity. Consequently, they lower their workers’ wages to maintain their profit margin. Marx believed the workers would eventually revolt due to the decrease in wages.
Today we have proven that Marx’s theory is wrong. America’s version of capitalism has not only survived, but is thriving due to certain factors. These include: the ability to buy stock in companies, formation of unions, government regulated minimum wages, and the development of a middle class. How have these factors helped capitalism survive?
A web page about Karl Marx can be found at http://clsuk.tripod.com/daskapital/

Is a Minimum Wage Increase Beneficial?

I recently read an article in the USA Today (please see the link to the article below) which confirmed that the increase in minimum wage is still being debated by the House and the Senate. However, it seems that it is no longer a question of the $2.10 raise in wages for entry level workers, although that concerns many about price inflation due to employers transferring costs to end consumers, but the debate lies in the uncovering of tax cuts and breaks for small businesses while larger businesses are being stiffled in their ability to make tax deductions. These breaks were apparently put in the bill to draw more Republican votes. Simultaneously the new Democratic platform of paying for tax breaks with someone else's money in order to keep the deficit low is also satisfied. Apparently the purchaser of the recent benefits for small businesses are the large US corporations. I would like to pose a couple of questions about these tax cut policies. First of all if large businesses are pitted against smaller businesses for favor of tax cuts, who will eventually pay for the loss in large business tax deductions? If small businesses are going to pass the increase in wages to the final customer, possibly causing inflation, then how is the large business going to recoupe some of their lost profits? Wouldn't the large businesses try to do the same in passing the buck to end consumers - whether B2B sales or B2C? In the end aren't we all going to pay more for the products we need to resume business, life, etc.? Are these tax breaks and minmum wage increases all an illusion for quality of living and economic benefits? Don't the markets eventually correct and we just end up with an inflated economy? What do you think?
http://www.usatoday.com/money/economy/income/2007-01-30-minwage-taxes_x.htm

1/29/2007

Free to Choose

I am currently reading the book Free to Choose (this links to a website) by Milton and Rose Friedman. I have found it very interesting. In the second chapter, it talks about different currencies across the world. I guess I'm about as dumb as they come when you start talking about Economics, but what would the big problem be to make a worldwide currency? We could commision a group of people to be in charge much like the US has the treasury, and leave them in charge of the distribution of the money. If we switched we could do it for a certain amount of countries each period. It seems that it could be a good solution to foreign exchange, and it would solve alot of the exchange problems discussed in the second chapter. Maybe I am off my rocker and totally naive to the whole concept of economics, but could someone tell me why it wouldn't work?