Kaili Joy Gray's FP diary led me to read more about Einstein .
I read wikipedia about him. I read the synopsis of his scientific work with interest. However, my interest was piqued by the reference to his socialism. This, in turn, led me to his article, "Why Socialism ?" .
I wondered what his penetrating intellect would contribute to the discussion of economics ?
Here are some snippets of what he wrote :
It is important to understand that even in theory the payment of the worker is not determined by the value of his product. Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development and the increasing division of labor
encourage the formation of larger units of production at the expense of smaller ones. The result of these developments is an oligarchy of private capital the enormous power of which cannot be effectively checked even by a democratically organized political society. This is true since the members of legislative bodies are selected by political parties, largely financed or otherwise influenced by private capitalists who, for all practical purposes, separate the electorate from the legislature. The consequence is that the representatives of the people do not in fact sufficiently protect the interests of the underprivileged sections of the population.
So, let us consider the first statement :
It is important to understand that even in theory the payment of the worker is not determined by the value of his product.
For profit companies are in business to make profit. They do this not only by raising revenue, but by reducing costs. Human labor is a cost. Reducing that to a minimum (providing that adding human labor costs does not increase revenue more than the increases in the labor costs) increases profit. All things being equal, therefore, for profit companies pay the lowest wages they can, without decreasing their revenue.
Now, let us consider a second part :
Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development and the increasing division of labor
encourage the formation of larger units of production at the expense of smaller ones.
Can I get a witness ? The six Walton heirs own more wealth than the bottom 48 million Americans. Wealth is more unequally distributed now in the United States than ever before.
Automation reduces the marginal cost of production. It can also make entrance into a market prohibitively expensive, discouraging competition. Walmart is a prime example of what Einstein wrote about.
Finally, let us consider the third part :
The result of these developments is an oligarchy of private capital the enormous power of which cannot be effectively checked even by a democratically organized political society. This is true since the members of legislative bodies are selected by political parties, largely financed or otherwise influenced by private capitalists who, for all practical purposes, separate the electorate from the legislature. The consequence is that the representatives of the people do not in fact sufficiently
protect the interests of the underprivileged sections of the population.
How else can one rationally, in a fact based way, realistically explain tax law, laws regarding earned benefits, and the acts of the US Congress ?
A tax break of more than $70,000 for Willard's dancing horse ? What ?
Warren Buffet paying a lower tax rate than his secretary ?
Willard paying only 13 % federal income tax rate ?
The proposal by sociopaths like Willard Rmoney and Ryan to end Medicare ?
and replace it with vouchers that will not keep up with the 8% annual increase in health care costs ?
Subsidizing the profits of those who are threatening the ecosystems in the Earth, warming our planet dangerously ?
Privatizing profits but socializing losses ?
Astroturfing by AFP etc
What Einstein wrote is even more true in 2012 than when he wrote it.
Our capitalist economic system is fundamentally flawed.