Tuesday, February 15, 2011

Protecting Profits

Many big companies, facing higher raw material costs, say they cannot hold off any longer and must raise prices to protect profits.
Read the full NYTimes article, of which the above is an excerpt, here.

The above is honest in a way that many discussion of such phenomena are not. We often read about unemployment figures as though they were meteorological ongoings, i.e. as if unemployment just rises in the same way mechanical, impersonal way that the temperature does. But, of course, unemployment literally means that some group of agents (those who do the employing) did something concrete (terminated the employment of some other group of persons). To understand why they did it, one would need to look at the economic system and their role within it.

The above is honest because it says of rising prices that they can be chalked up to a desire to protect profits. The same is true of layoffs, wage cuts, speed-ups, etc. As far as a capitalist firm is concerned, it's basic function is simple: make as much profit as possible. So it doesn't even cross the mind of capitalists to balance employment against quarterly profits, i.e. to allow profits to decrease in the interests of saving jobs. Employees are mere means to the end of profit, so when profit is at stake, there is no problem with dispensing with mere tools that are no longer needed.

This makes clear how disingenuous it is to say that capitalists are "forced" to layoff workers. For example, neo-classical types will say that increasing wages (by means of a minimum wage, say) causes unemployment. This is empirically contestable, but that's beside the point. Saying that such policies "cause" unemployment is a tendentious and confused way of describing what happens. What happens is that certain agents, viz. capitalists, decide that they would rather layoff workers (causing all kinds of economic misery for those laid off) than allow their profits to decrease. They throw their workers under the bus in order to keep their profits as high as possible. So what "causes" them to do it, in effect, isn't the minimum wage ordinance, but their basic goal of maximizing profit at the expense of everyone else. I'd much rather that pundits said that in public, because it makes obvious how odious the system is.

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