The Poor Abuse the Rich (not the other way around)

[ben---neb]

In economics there are two common misconceptions about capitalism. First is that the richer get richer while the poor get poorer. Second is that the rich are free to abuse the poor.

First: the richer get richer at the expense of the poor. The root of this argument lies in the fact that people see a trade as a one way experiance. Fred the Poor Man pays £50 for a phone. Fred the Poor Man is now poorer by £50 and Richard Branson of Virgin Mobiles is now richer by the profits from the £50. Fred loses, Richard wins.

What these people fail to see is that the trade of £50 for the phone is a TWO way transaction. Fred pays £50 and gets a new phone. Now Fred is a rational human being able to make logical choices. At the time he bought the phone he valued it at more than £50. Otherwise he would not have bought it. If he valued the phone at less than £50 it would make no sense for him to buy it.

Therefore Fred pays £50 and recieves a phone he valued at more than the £50. The phone brings him more satisfaction (utility) than keeping the £50. Yes, Richard gets richer but in terms of utility (rather than monetary terms) Fred is richer as well. Fred is happier owning a new phone than he would be in keeping the £50. His own valuation of his net worth has increased. If he were not he would not have made the transaction.

This can apply to any situation. The consumer ALWAYS has a choice: to buy or not buy. In the case of neccessities this choice may be harder to make but it is always a choice. Judging wealth purely in terms of money in the bank account is stupid, the net worth of the person has to be taken into account.

Next is the argument that the rich abuse the poor. I say no, take our previous example. As the entreprenur Richard is worth several hundred million yet Fred controls what decisions Richard can and can't make. Richard is shut up to answering Fred's call for cheaper phones, better phones, changing tastes in phones, music players with phones, phones with internet, phones with touchscreens. Fred demands all these things and Richard has to answer. If he doesn't Fred will go to another firm that will listen to him. In other words the Consumer is King. Whether the consumer is rich, poor, black, white, fat, whatever he/she wields control over the Producers of products.

Without their support (in the form of monatary purchases) a Producer can do nothing, an entreprenur can do nothing, they are shut up to the whims and fancies of consumers.

So that's my argument against two common capitalist facilies. Do you agree? Am I right? Got a better argument?

EDIT: A lot of points mention that advertising confuses the masses into valuing products too highly. This does not nagate the fact that an indivdual human will always make a rational choice. In hindsight it might not seem to be rational but at the exact moment of purchase the product they buy is valued higher than the money they spend. Secondly I rather doubt that the vats masses are as stupid as you are protraying them to be in a rather unequal fashion i might add.

EDIT 2: Apologies for defending Wal Mart at one point. I'm British and wasn't fully aware that it was a government sustained monopoly. I admit to being wrong to hold it up as an example of free market competition.

EDIT 3: My thanks for the following:

Rational-

I would like to make a point about the word 'rational'. There seems to be a lot of confusion about what this means. In the context of economics, 'rational' only refers to action and volition. It has nothing to do with intelligence or whether the means you employ actually achieves desired ends. A 'rational actor' in economic terms is not one who is particularly bright, but one who possesses rational agency. In this sense, all humans are rational actors. When I say all humans are rational in this context, I am not saying all humans are smart.

It's just a matter of conflating definitions, and its a very easy mistake to make when you have homonyms representing related concepts.

 

[sneak_copter]

Unfortunately, the consumer is not king. Or at least not treated royally.

 

[Catchy Slogan]

Unfortunately, there has to be poor people for us tohave such cushy lifestyles.

 

[Meangunns]

I think you are missing the point when people say that the rich get richer at the expense of the poor. They mean that the rich use their money to get more money in underhanded ways. It has nothing to do with consumerism.

 

[ben---neb]

Like most arguments around here, its idealic but completely wrong. You are missing so many factors i cant even begin to argue against you. Either way nice try, poor execution.

Please do, although a socialist calling me idealic causes me to chuckle. I'll admit it ain't perfect (nothing is) but it's a damn sight more perfect than any other economic theory.

 

[Legion]

In economics there are two common misconceptions about capitalism. First is that the richer get richer while the poor get poorer. Second is that the rich are free to abuse the poor.

First: the richer get richer at the expense of the poor. The root of this argument lies in the fact that people see a trade as a one way experiance. Fred the Poor Man pays £50 for a phone. Fred the Poor Man is now poorer by £50 and Richard Branson of Virgin Mobiles is now richer by the profits from the £50. Fred loses, Richard wins.

What these people fail to see is that the trade of £50 for the phone is a TWO way transaction. Fred pays £50 and gets a new phone. Now Fred is a rational human being able to make logical choices. At the time he bought the phone he valued it at more than £50. Otherwise he would not have bought it. If he valued the phone at less than £50 it would make no sense for him to buy it.

Therefore Fred pays £50 and recieves a phone he valued at more than the £50. The phone brings him more satisfaction (utility) than keeping the £50. Yes, Richard gets richer but in terms of utility (rather than monetary terms) Fred is richer as well. Fred is happier owning a new phone than he would be in keeping the £50. His own valuation of his net worth has increased. If he were not he would not have made the transaction.

This can apply to any situation. The consumer ALWAYS has a choice: to buy or not buy. In the case of neccessities this choice may be harder to make but it is always a choice. Judging wealth purely in terms of money in the bank account is stupid, the net worth of the person has to be taken into account.

I fail to see how this is a misconception or what it has to do with, the rich abusing the poor. It doesn't have any relevance to that at all. Nobody claims that people buying luxury items are being mistreated by rich companies, who have you been talking to?

The issue is when things such as food and drink become ridiculously expensive because the companies want profit. When poor people struggle to by necessities because of the greediness of corporations.

The other issue is that Capitalism is about profit and being on top. Large companies such as Wal-Mart create a monopoly on shopping that makes smaller (poorer) businesses struggle. There is no "choice" for the smaller company is there?

Next is the argument that the rich abuse the poor. I say no, take our previous example. As the entreprenur Richard is worth several hundred million yet Fred controls what decisions Richard can and can't make. Richard is shut up to answering Fred's call for cheaper phones, better phones, changing tastes in phones, music players with phones, phones with internet, phones with touchscreens. Fred demands all these things and Richard has to answer. If he doesn't Fred will go to another firm that will listen to him. In other words the Consumer is King. Whether the consumer is rich, poor, black, white, fat, whatever he/she wields control over the Producers of products.

Without their support (in the form of monatary purchases) a Producer can do nothing, an entreprenur can do nothing, they are shut up to the whims and fancies of consumers.

So that's my argument against two common capitalist facilies. Do you agree? Am I right? Got a better argument?[/

Again, your point is irrelevant to the argument you are making. Just because an individual can choose to buy elsewhere doesn't mean all will. The producer will cater to the majority not the minority. If the majority are wealthier then they will get the best deal whereas the poorer people will be stuck.

 

[Akai Shizuku]

Like most arguments around here, its idealic but completely wrong. You are missing so many factors i cant even begin to argue against you. Either way nice try, poor execution.

This.

I'd also post communist propaganda to troll you, but I'm not in the mood for another suspension.

 

[Akai Shizuku]

Like most arguments around here, its idealic but completely wrong. You are missing so many factors i cant even begin to argue against you. Either way nice try, poor execution.

Please do, although a socialist calling me idealic causes me to chuckle. I'll admit it ain't perfect (nothing is) but it's a damn sight more perfect than any other economic theory.

Yup, because sitting in your mansion drinking champagne on your king size bed while children starve and die on the other side of the world is damn fine.

 

[Yeq]

First one - if there's a small number of businesses controlling a certain product (I think it's called an oligopoly), like it is in the case of phones, then they can generally keep the price at a higher value than if there's huge amounts of competition. Fred might think that the phone is worth £50, and maybe it is, but maybe he could get it at thirty.

Second - even in this situation, you're making Richard look like a slave, and I suppose to an extent his choices are constrained, but he's still making a killing. He's got the money to do all the market research he wants to find out what people want, and then to make it and sell it. He'd be able to sell it at a higher price, too, since if he does his market research quickly and efficiently enough, with all the resources at his disposal, then he'll get the jump on his competitors and be able to sell it at a higher price than he would if he wasn't so incredibly rich and resourceful.

I don't really know to what extent capitalism is exploitative, but I really do think that being rich is key to getting richer. When you consider the political clout a rich business has - just look at the healthcare debate in America, now and the early nineties, and see how much the private medical companies *****-slapped the government with advertising and political lobbying - then really a huge business gets a chokehold in a capitalist society.

This post is far too long, isn't it?

 

[themanwithsauce]

I think the base idea has some truth to it but there are too many factors to take into effect. Like how Richard branson can say "But fred, Bob over there has my phone and he's twice as cool as you are because of it" thus influencing Fred's decision in which phone is the most valuable. Richard's phone might normally only be worth 25$ since sony makes a phone with twice as many features that also costs the same 50$ needed to buy the virgin mobile phone. But since Richard said fred should buy the virgin mobile phone to make himself cooler, richard has influenced fred's decision on values. So in this case, the rich has controlled the poor.


Never underestimate the susceptibility of the masses to succumb to advertisements

And this is just one of the many more factors to take into effect

*Edited due to a copy/paste editing mistake in my original post

 

[Rooster Cogburn]

ben--neb, I think your arguments are sound but we need to examine other factors that effect these sorts of exchanges in the real world. Namely, the government. The term 'capitalism' is highly muddled and can refer to many economic models, just like 'socialism'. I recommend abandoning both as useful descriptors. Early use of the word 'capitalism' referred to a system of private property artificially protected and concentrated by the state. That is the system we currently labor under. More and more, the term is being used to refer to a free market, which is creating serious confusion.

Your analysis is only applicable to a free market- not the Republican kind, the left libertarian kind. In the real world, there are artificial barriers to entry, tax barriers, charter, license, regulation, etc. ad infinitum which hurt the poor by either robbing or restricting them in some way.

Your analysis only applies to free markets, not to the system we currently live under.

 

[ben---neb]

The issue is when things such as food and drink become ridiculously expensive because the companies want profit. When poor people struggle to by necessities because of the greediness of corporations.

The other issue is that Capitalism is about profit and being on top. Large companies such as Wal-Mart create a monopoly on shopping that makes smaller (poorer) businesses struggle. There is no "choice" for the smaller company is there?

First of all food and drink can be expensive thanks to government subsides, trade barriers and intervention. Not only does the poor man pay in terms of the incresed cost of food due to poor competition but also through the taxes needed to be raised to pay for subsidies.

Secondly who really cares about the smaller company that say only employs a hundred people? Millions and millions of people benefit from the monoploy Wal-Mart has, indeed it provides a solution to your first point as it provides cheap goods to the masses. I said the consumer was King and they have chosen Wal-Mart. Small companies could still compete with Wal-mart they'd just have to be really really good. Just because a company is small does not make it worth saving.

I can't believe Wal-Mart gets criticised for helping consumers by selling goods at ridoclously cheap prices.

 

[Nickolai77]

Your first point- Richard at the end of the day, due to having more cash, is still going to be able to afford more material wealth than Fred. While it is true that the poor do benefit as because they can buy material wealth, Richard will benefit the most as they make the money. And then use that money to be much more material wealth than their typical consumers ever could.

Second point- I think it is more two-way power game. The consumer sets demand and the supplier sells, but the seller has the most control as they directly make and sell the product. The consumers want say smaller mobile phones, the seller will make them smaller, but choose other aspects such as design style and slip in extra features like new digital accessories so they can charge more, which the consumer did not specifically ask for. The consumer sets rough demand, the seller then provides and fine-tunes it to their own ends.

 

[Legion]

Secondly who really cares about the smaller company that say only employs a hundred people?

Exactly the kind of attitude which makes people hate Capitalism.

"Who cares if a hard working business person is out of a job? I get something cheap!"

In other words: "Fuck everyone else. I Benefit."

 

[Malekkai]

Where the poor person gets his money is from a rich man, the amount he gets isn't seemingly dependent on how difficult the job is.

 

[MusicalFreedom]

Now Fred is a rational human being able to make logical choices.

-

This can apply to any situation. The consumer ALWAYS has a choice: to buy or not buy. In the case of neccessities this choice may be harder to make but it is always a choice. Judging wealth purely in terms of money in the bank account is stupid, the net worth of the person has to be taken into account.

I got a problem with this: the consumer is not always rational. Quite how you're defining rational, I don't know, but I certainly wouldn't consider someone rational if they're influenced by advertising to get a particular product. The average person does NOT weigh up pros and cons - they let the advertisements tell them whatever the company can get away with, and buy into the image that the advertisement sells. I would not consider these consumers rational in any significant way.

I agree that money is not the only definition of worth.

Next is the argument that the rich abuse the poor. I say no, take our previous example. As the entreprenur Richard is worth several hundred million yet Fred controls what decisions Richard can and can't make. Richard is shut up to answering Fred's call for cheaper phones, better phones, changing tastes in phones, music players with phones, phones with internet, phones with touchscreens. Fred demands all these things and Richard has to answer. If he doesn't Fred will go to another firm that will listen to him. In other words the Consumer is King. Whether the consumer is rich, poor, black, white, fat, whatever he/she wields control over the Producers of products.

No, the consumer only thinks they're king. The producers manipulate consumers into buying their product, even if that involves bending the truth - short of outright lying. I don't see how the manipulated can be king - they only think they're on top so that they can brag to their mates about "what a BARGAIN I found". You could give yourself the illusion of choice - perhaps go to one company instead of another, but considering how there would still be millions willing to go for the weaker option (maybe through habit, advertisement, convenience, etc), a bunch of people going "well fuck this shit" is insignificant.

Without their support (in the form of monatary purchases) a Producer can do nothing, an entreprenur can do nothing, they are shut up to the whims and fancies of consumers.

so is this meant to be drumming up support for those poor, downtrodden rich people, or what? what is your motive?

 

[ben---neb]

Like most arguments around here, its idealic but completely wrong. You are missing so many factors i cant even begin to argue against you. Either way nice try, poor execution.

Please do, although a socialist calling me idealic causes me to chuckle. I'll admit it ain't perfect (nothing is) but it's a damn sight more perfect than any other economic theory.

Yup, because sitting in your mansion drinking champagne on your king size bed while children starve and die on the other side of the world is damn fine.

WOOOOAAAAHHHHH! Slow down. Just because I support free markets does not automatically make me a murderous rich bastard. I'm a strong believer in charity but it should be an indivdual choice not one forced on me by the government. Oh, and the reason they are starving in the first place is due to a lack of capitalism (free markets) not because of it. Trade barriers, subsidies in Western countries, quotas, CAP, subsidies for bio fuel. It all distorts the market making food more expensive and less avilable.

 

[Rooster Cogburn]

The issue is when things such as food and drink become ridiculously expensive because the companies want profit. When poor people struggle to by necessities because of the greediness of corporations.

The other issue is that Capitalism is about profit and being on top. Large companies such as Wal-Mart create a monopoly on shopping that makes smaller (poorer) businesses struggle. There is no "choice" for the smaller company is there?

First of all food and drink can be expensive thanks to government subsides, trade barriers and intervention. Not only does the poor man pay in terms of the incresed cost of food due to poor competition but also through the taxes needed to be raised to pay for subsidies.

Secondly who really cares about the smaller company that say only employs a hundred people? Millions and millions of people benefit from the monoploy Wal-Mart has, indeed it provides a solution to your first point as it provides cheap goods to the masses. I said the consumer was King and they have chosen Wal-Mart. Small companies could still compete with Wal-mart they'd just have to be really really good. Just because a company is small does not make it worth saving.

I can't believe Wal-Mart gets criticised for helping consumers by selling goods at ridoclously cheap prices.

ben--neb, I think it is a mistake to defend Wal-mart. Wal-mart relies on the government to sustain its monopoly. The calculation problem alone makes something like Wal-Mart virtually impossible on a left libertarian free market. Wal-mart is a classic case of protectionism, not the result of normal market forces.