Venezuela vs ExxonMobile

[Tatar Khan]

PROFITS OF DOOM: EXXON MOBIL CAUSES UPROAR

UNITED STATES

Gas complaint: Exxon Mobil says growing consumption is pumping up its profits.

A long-simmering debate boiled over last month after Exxon Mobil reported the highest earnings ever by an American corporation, topping its own record set the year before. Most Americans were paying substantially more than $3 a gallon for gasoline and worrying about a possible recession when they got the news that the Texas-based oil company earned $40.6 billion in 2007. Chevron, the number-two US oil company, also reported a big rise in earnings.

In Washington, Democratic Sen. Charles Schumer of New York, chairman of the Joint Economic Committee, summed up the widely expressed outrage, saying,

[Sneakgab]

Surprised at the low amount of interest in this topic. Sure they could buy it but that wouldn't cost much $ and also presume that Exxon are selling?

[Tatar Khan]

You can force them to sell, and in that case at least Exxon would have less of a case to complain about.

[Anathema]

To be honest I haven't been following this very well. I've only just digged up some old news articles.

The ruling in the UK has been overturned a couple of weeks ago:

""In the absence of any exceptional feature such as fraud, and in the absence of substantial assets of PDV located here, the fact that the seat of abritration is not here makes it inappropriate to grant an order,"

If anything, it should be interesting to see how this plays out. Apparently Venezuela doesn't deny that they should compensate Exxonmobil for their loss, but that they dispute the number of $12 bil.

[Sneakgab]

''You can force them to sell''

Oh, of course, the same way they forceably acquired Exxons assets. Silly me. :-[

So basically the UK court (presumably, since the qoute speaks of rulings) is pretty much going ''no comment'' due to absence of seats. As for the absence of PDV assets, is that basically to say that they don't care enough because of this? Otherwise I don't see why the location of an international crime (in British eyes) would make any difference to the council? Whether they're seizing things in Britain or in Venuezela wouldn't it be considered the same in British law. Unless perhaps they're just saying that it's out of the legal zone in which their laws apply and therefore they cannot claim it illegal via their constitution?

''If anything, it should be interesting to see how this plays out. Apparently Venezuela doesn't deny that they should compensate Exxonmobil for their loss, but that they dispute the number of $12 bil.''

I don't really feel much pity for the company with the highest earnings in the world. From a communist standpoint they have basically profiteered by stealing the excess value of the workers labor. Considering the value of this labor as opposed to the value of the seized assets, Venezuela probably doesn't have that much to justifiably reimburse. It's not like I have the numbers though, and it's not like it would necessarily be practical for Venezuela to not give any reimbursement at all. Ideology aside, there may be practical benefit to the reimbursement.

[Anathema]

I don't really feel much pity for the company with the highest earnings in the world. From a communist standpoint they have basically profiteered by stealing the excess value of the workers labor. Considering the value of this labor as opposed to the value of the seized assets, Venezuela probably doesn't have that much to justifiably reimburse. It's not like I have the numbers though, and it's not like it would necessarily be practical for Venezuela to not give any reimbursement at all. Ideology aside, there may be practical benefit to the reimbursement.

Did you consider that ExxonMobil is active in many countries, and that a loss of 12 billion to the company may indirectly affect many workers?

[nemafakei]

"Did you consider that ExxonMobil is active in many countries, and that a loss of 12 billion to the company may indirectly affect many workers?"

What is being discussed is essentially an amount of money moving from one investor to another. The issue is therefore which investor do we prefer gets the better deal, if any? We know that more profit goes out the top with Exxon Mobil. What profit the Venezuelan government receives is probably better spent as well.

[Anathema]

"Did you consider that ExxonMobil is active in many countries, and that a loss of 12 billion to the company may indirectly affect many workers?"

What is being discussed is essentially an amount of money moving from one investor to another. The issue is therefore which investor do we prefer gets the better deal, if any? We know that more profit goes out the top with Exxon Mobil. What profit the Venezuelan government receives is probably better spent as well.

Uh...

Seizing assets from another party does not make you an "investor" - investing would mean that you put money to use from your own wallet.

The point is that not just the shareholders are affected by a damaging blow to the company, but also the workers.

Besides, I'm not that certain that the Venezuelan government spends their earnings all that well. Personally I'm of the opinion that a government should primarily act in the interest of their own country and giving low-priced fuel to households in NY city for propaganda purposes or funding the FARC doesn't add anything in that respect.

[nemafakei]

"Besides, I'm not that certain that the Venezuelan government spends their earnings all that well."

Sure, but unless you're contending the owners of ExxonMobil spend their money in more socially beneficial ways, then the point stands.

[Edric O]

Did you consider that ExxonMobil is active in many countries, and that a loss of 12 billion to the company may indirectly affect many workers?

The people who are supposed to bear the burden of a company's losses are the shareholders, not the workers. Of course it rarely works that way in practice, but we can't allow corporations to basically hold their workers hostage and say "do as we tell you or we will make our workers suffer!" That is blackmail, and as difficult as it may be, we cannot give in to blackmail.

[Sneakgab]

''

Did you consider that ExxonMobil is active in many countries, and that a loss of 12 billion to the company may indirectly affect many workers?''

I was under the impression this seizure of assets happened a long time ago. Therefore, the damage to ExxonMobil and whatever lost this has caused for the workers has already happened. Giving Exxon it's assets back won't bring those workers back. On the other hand, Venezuala losing the 12 billion $ worth of assets will probably lead to the loss of a lot of job opportunities in Venezuala. After all, these assets are oil refineries and what not yes? Clearly these facilities provide better work opportunities (production wise). Ie: They provide a facility to invest labor in. I think this is what Nema meant by investor. It's almost as though he is reffering to a hypothetical perspective where via ommission as decider he could decide whether Venezuela keeps the assets or gives them over to Exxon. You could call this an investment.

Also, Exxon is apparently currently enjoying absurdly high profits. If they lost some wealth/earnings they could take it out of their own pockets rather than those of the workers.

Without guaranteed contracts or what not for the workers, business labor goes something like this: Ok, lets all get into a co-operative agreement to establish a business here. I run the company (reap profits) and provide my assets and you guys work for less than you're work is worth so I get profit. When things turn bad I get to break this agreement and you guys all rot.

''The people who are supposed to bear the burden of a company's losses are the shareholders, not the workers. Of course it rarely works that way in practice, but we can't allow corporations to basically hold their workers hostage and say "do as we tell you or we will make our workers suffer!" That is blackmail, and as difficult as it may be, we cannot give in to blackmail.''

I definitely agree with that. It's like the thought has been on the tip of my mind/tongue for weeks with the recent economic discussion with people worried about company losses as it affects their workers and adding that as something to consider when opting for decisions against these companies. This basically puts it perfectly. I agree that basically in such fights you have to accept some innocent casualties. The alternative is surrender which will lead to much more loss for the innocents. I use these words in the context of the hostage analogy, though some would have no problem calling victimized workers hostages of the leaders of industry.

[Anathema]

Regardless of wether or not you feel empathy for oil companies (I haven't lost any sleep over it myself), don't you think it's slightly dishonest of governments to welcome investors with open arms, and some years later seize the physical assets they have brought to the country under socialist slogans?

About shareholders taking the burden of losses, well...

The way stock companies are set up is that in the beginning, future stockholders bring the necessary money together to form a viable labour/capital organisation. In EU countries at least such companies' hands and feet are tied, they're unable to pay the shareholders dividend unless the total sum of the company's possessions is more then the share-capital + some legally dictated reserves. Dividend is lunch money compared to what a shareholder can earn by selling his stock as the value of it has increased. The actual risk associated with having stocks is that their value can plummet.

[Edric O]

Regardless of wether or not you feel empathy for oil companies (I haven't lost any sleep over it myself), don't you think it's slightly dishonest of governments to welcome investors with open arms, and some years later seize the physical assets they have brought to the country under socialist slogans?

If the welcoming and the seizing is done by the same administration, then of course it would be dishonest. But Chavez's administration never welcomed Exxon-Mobil. Previous administrations did.

And in any case, I feel under no compulsion to "play nice" with global corporations. They are ruthless in their dealings, so a government is perfectly justified in being ruthless to them.

[Sneakgab]

''If the welcoming and the seizing is done by the same administration, then of course it would be dishonest. But Chavez's administration never welcomed Exxon-Mobil. Previous administrations did.''

Indeed, I think that regardless of how welcoming and ''open'' the arms may be of a socialist/communist country an investor would not frequently invest assets here. Would that even be possible by definition since under communism one cannot gain money from his assets and hence provision of said assets defies meaning of ''investing'' (under socialism this is generally the case as well as the idea is that people cannot generate wealth from others labor). Provision of such assets could only be described as charity or accepting communist economic law (by handing over your capitalist acquired goods). Therefore it is not possible for such ''betrayal'' by a communist country. As for seizing the goods after overthrowing a capitalist government that had received investment in a country... this government has nothing to with the revolutionaries. The revolutionaries seizure of foreign private property is part of their fight against capitalism. Why should it make a difference if this capitalism is owed to a foreign or national source?

''And in any case, I feel under no compulsion to "play nice" with global corporations. They are ruthless in their dealings, so a government is perfectly justified in being ruthless to them.''

Indeed. I doubt these corporations arose through purely honest means to begin with. My feeling is that treachery against a treacherous opponent levels the playing field to fairness and therefore cannot be called dishonorable.

Well, that last line is debatable...:D

[Egeides]

And in any case, I feel under no compulsion to "play nice" with global corporations. They are ruthless in their dealings, so a government is perfectly justified in being ruthless to them.

I feel under no compulsion to "play nice" with violence-accepting revolutionaries. They are ruthless in their dealings, so one is perfectly justified in being ruthless to them. ;)

This ambiguous situation might be that of many corporations as well. If I would myself try to build one, to provide whatever service not present now, I'm sure that it would not always be easy dealing with "what is ethical" when dealing at once with ruthless corporations, ruthless governments, and ruthless lobyists-activists. Now I don't know, ExxonMobile might not be such an angelic case...

[Edric O]

Indeed, I think that regardless of how welcoming and ''open'' the arms may be of a socialist/communist country an investor would not frequently invest assets here.

True. In a socialist or communist economy there is no private property over the means of production, so there can be no investment in the capitalist sense of the word (i.e. some capitalist coming in from outside with his capital and buying assets inside your country).

This of course means that economic relations between capitalist countries and socialist ones will naturally be rather weak - they can still trade in goods, but there will not be much of a capital flow between them. It is therefore important for socialism to establish itself not just in one country, but in a large enough number of countries to create a socialist trading bloc. Alternatively, one really big country would also work; that's why I prefer big countries over small ones - having bigger countries makes it easier to implement socialism).

Would that even be possible by definition since under communism one cannot gain money from his assets and hence provision of said assets defies meaning of ''investing'' (under socialism this is generally the case as well as the idea is that people cannot generate wealth from others labor).

Right. The whole notion of capitalist investment is based on the principle that you have a bunch of money and you use it to buy assets that will give you even more money, without you having to work for it. Socialism and communism are fundamentally opposed to the idea of people enriching themselves without working, so there can be no private investment in socialism or communism. Unless it comes in the form of a charitable donation.

''And in any case, I feel under no compulsion to "play nice" with global corporations. They are ruthless in their dealings, so a government is perfectly justified in being ruthless to them.''

Indeed. I doubt these corporations arose through purely honest means to begin with. My feeling is that treachery against a treacherous opponent levels the playing field to fairness and therefore cannot be called dishonorable.

Well, that last line is debatable...:D

It doesn't matter whether they arose through "honest means" or not, because even the most honest capitalist still has to exploit his workers in order to compete with his rivals and stay in business.

But it is true that large corporations are powerful; much more powerful than, for example, small businesses. This allows large corporations to treat their workers worse than your typical small business, and it also means that corporations can and do throw money around in order to influence decisions in their favour.

Basically, corporations will use any means necessary to fight us, so we should use any means necessary to fight them.

I feel under no compulsion to "play nice" with violence-accepting revolutionaries. They are ruthless in their dealings, so one is perfectly justified in being ruthless to them. ;)

Sure. If you're a corporation, that line of thinking makes perfect sense and I would expect nothing less.

This ambiguous situation might be that of many corporations as well. If I would myself try to build one, to provide whatever service not present now, I'm sure that it would not always be easy dealing with "what is ethical" when dealing at once with ruthless corporations, ruthless governments, and ruthless lobyists-activists. Now I don't know, ExxonMobile might not be such an angelic case...

One of the problems with capitalism is that it forces you to take unethical decisions in order to be competitive and stay in business, even if you are a rather ethical person. Capitalism makes good people do bad things.

[Sneakgab]

''One of the problems with capitalism is that it forces you to take unethical decisions in order to be competitive and stay in business, even if you are a rather ethical person. Capitalism makes good people do bad things.''

Not unexpected, as ''staying in business'' in itself is something I personally consider to be generally unethical (obviously a small shop with a worker or two would not be unethical. I see the owner as getting payed for the labor and management of transferring goods to the locality. Big business owners carry out no such physical labor (eg: opening shop and what not) and the management aspect is finite work that does not deserve payment based on a % of income/ business scale. A huge business that is a 100 times larger than a small one does not 100 times as much work put into management which is often partially transferred to others while still maintaining huge profts for the CEO who does LESS than the small business owner) as this profit is just the theft of value of somebody else's labor.

This is what should be kept in mind about capitalism. There is only a finite amount of resources at any one time. For somebody to claim wealth without generating any resource or labor himself, logically means he is drawing it either from somebody else's current resource bank or from their labor as wealth = resources.

''Basically, corporations will use any means necessary to fight us, so we should use any means necessary to fight them.

Yes, it is like agreeing to ''sports man's'' rules in a video game for the sake of fun only to have your opponent break this agreement and break out the fun reducing ''cheese''. You must then break out your own cheese and there is nothing wrong with this... its just a new game/ new playing field/ new tune that may be less attractive. In this case though, I would say that the corps were the ones to force things into this less attractive scenario (violence, strife-inducing, e.t.c.), though I would not be against the socialists if they were the first ones to do this as it would be dragging things into a less attractive scenario for a greater good.

[Tatar Khan]

Did you consider that ExxonMobil is active in many countries, and that a loss of 12 billion to the company may indirectly affect many workers?

Not much of an affect, all other operations would be still running for Exxon Mobile so the affect on workers would be very limited most likely through their pension fund which is invested into Exxon Mobile stock. The most affected would be the foreign specialists that Exxon Mobile brought to Venezuela but they would be employed in some other project quickly if their skills are valuable, otherwise they get they get severance pay and go find a job with another oil company (specialists like that are high in demand right now).

What profit the Venezuelan government receives is probably better spent as well.

Can you prove that?

Sure, but unless you're contending the owners of ExxonMobil spend their money in more socially beneficial ways, then the point stands.

Ok lets check who the owners of Exxon mobile are: 53% of the Exxon Mobile owners are financial institutions and mutual funds. In other words the majority owners of Exxon Mobile are the people who invest into mutual funds and pension funds and segregated funds (usually regular average joe who is saving for retirement or the kids education) I guess they owners of Exxon Mobile are not spending money in socially beneficial ways there is no social benefit in saving for retirement or for education.

I was under the impression this seizure of assets happened a long time ago. Therefore, the damage to ExxonMobil and whatever lost this has caused for the workers has already happened. Giving Exxon it's assets back won't bring those workers back. On the other hand, Venezuala losing the 12 billion $ worth of assets will probably lead to the loss of a lot of job opportunities in Venezuala. After all, these assets are oil refineries and what not yes? Clearly these facilities provide better work opportunities (production wise)

Why do you think the labour is gone or that it will be replaced. The original labour that worked for Exxon mobile is now working for Venuzuela, Exxon Mobile doesn't fly in workforce from western countries it gets it locally with exception of few specialists and management everybody else was local.

This ambiguous situation might be that of many corporations as well. If I would myself try to build one, to provide whatever service not present now, I'm sure that it would not always be easy dealing with "what is ethical" when dealing at once with ruthless corporations, ruthless governments, and ruthless lobyists-activists. Now I don't know, ExxonMobile might not be such an angelic case...

Rule of international business is that you follow the business practices of the country in which you are working and if the local companies are bribing officials than you also do that or otherwise you won't be able to stay competitive. So those companies do engage in unethical practices however, that is only done as long as it is generally accepted practice in the country. Overall stock suffers when companies act unethically in cases where they business practices are otherwise.

As for seizing the goods after overthrowing a capitalist government that had received investment in a country... this government has nothing to with the revolutionaries. The revolutionaries seizure of foreign private property is part of their fight against capitalism. Why should it make a difference if this capitalism is owed to a foreign or national source?

Venezuela is not socialist or communist.

In a socialist or communist economy there is no private property over the means of production, so there can be no investment in the capitalist sense of the word (i.e. some capitalist coming in from outside with his capital and buying assets inside your country).

The whole notion of capitalist investment is based on the principle that you have a bunch of money and you use it to buy assets that will give you even more money, without you having to work for it. Socialism and communism are fundamentally opposed to the idea of people enriching themselves without working, so there can be no private investment in socialism or communism. Unless it comes in the form of a charitable donation.

This would lead to the problems of generating financing for the large projects for the government as the foreign investors would not provide it and local citizens would have no interest to provide it since there is no return to them, leading the government to increase taxation to find that financing or to print money and cause inflation. This case would be very strong for the small countries.

but we can't allow corporations to basically hold their workers hostage and say "do as we tell you or we will make our workers suffer!" That is blackmail, and as difficult as it may be, we cannot give in to blackmail.

A glorious day that would be when governments stop listening to that argument, the progress trade liberalizations would be immense.

One of the problems with capitalism is that it forces you to take unethical decisions in order to be competitive and stay in business, even if you are a rather ethical person. Capitalism makes good people do bad things.

Proof?

Now to partially deal with the issue of exploiting labour to get profits, or profits from assets.

Example is the following, who is going to dig a bigger ditch a guy with a shovel or a guy with an excavator? They put in the same hours of work but the guy with excavator digs a bigger ditch. Than should not the guy who is providing the excavator get some return for providing the excavator. An argument could be made that the guy with the shovel worked harder than the guy sitting in the excavator. So in this model excavator was what is referred to as capital or assets.

Now to fully address that issue through the economic theory:

For some reason above picture has problems loading so I attached it aswell.

[Sneakgab]

Urgh! the oaf/brute I call my older brother commandeered this PC whilst I was away causing the loss of my entire post. >:( >:(. Anyway

''Can you prove that?

Quote from: Nema Fakei on April 13, 2008, 15:12:58

Sure, but unless you're contending the owners of ExxonMobil spend their money in more socially beneficial ways, then the point stands.

Ok lets check who the owners of Exxon mobile are: 53% of the Exxon Mobile owners are financial institutions and mutual funds. In other words the majority owners of Exxon Mobile are the people who invest into mutual funds and pension funds and segregated funds (usually regular average joe who is saving for retirement or the kids education) I guess they owners of Exxon Mobile are not spending money in socially beneficial ways there is no social benefit in saving for retirement or for education.''

It seems that he can prove that in an ideal scenario. In an ideal scenario the government is supposed to use 100% of taxes, investments, wealth, e.t.c to serve the public as this it it's ultimate role. So all of the excess value of the labor (ie: labor - salary) should be spent by the government on the country. Of course this is only idealistic as much is wasted by corruption. My knowledge of these pension funds is that people give them some money to hold onto which has interest grow on it. This is similar to a bank but clearly bankers are not considered charitable for their ''work''. Of course, by this point it should be clear that I have almost no knowledge of pension and mutual funds (:D). Therefore I will wait to be enlightened by Tatar or to be told off for not checking Wikipedia first :P... whichever comes first:D. However, what I do know is that this is after all, an investment so some return is still expected. Since the investors put in no additional work and did not even provide some form of capital/asset, it can only be concluded that the profit they derive from their pension investments could only have been indirectly drawn from others current wealth or labor (regardless of the direct benefits to the retired.). Even is the profit they gain from these pension investments is -$, the loss is still partially negated by what income do they earn. After all this we must take into account that this 53% of investors probably use their profits from Exxon Mobil on other investments as well. It seems strange to me that they would ONLY invest their profits into Exxon Mobil. In addition to this, before investing at all they also spend considerable amounts of this profit on luxuries (which are probably obscene and wasteful). So, only a portion ( -gain after income of tally) of a portion (total investment of which only some is in pension fund) of a portion (total profit of which only some is used for investment) of a portion (53% owners of Exxon Mobil) of Exxons profits goes towards this purpose of pension funds. Since this is obviously by far the socialistic investment on Exxons part to the extent that others are negligible I have neglected to mention them. If they have other considerable ''charitable'' investments then please correct me on what might be a horrendous oversight.

All this considered, one would neccessarily guess that even with the corruption of government a higher % of the profits (excess labor value) is still dedicated to public use as opposed to the % in case of Exxon Mobil holding these profits.

Anyway you mentioned that the worker's pension fund is drawn from Exxon Mobil profits. This basically sound like they are just providing a perk through indirect means just like any other. Can this be considered charity? Isn't it more part of the job offer (though not in written contract) without which Exxon would face strikes and the like.

''Why do you think the labour is gone or that it will be replaced. The original labour that worked for Exxon mobile is now working for Venuzuela, Exxon Mobile doesn't fly in workforce from western countries it gets it locally with exception of few specialists and management everybody else was local.''

Then either way the facilities provide job opportunities and those job opportunities are used.

All this talk of job losses due to corporate losses of assets caused me to forget that as long as the physical assets remain they will provide jobs. Silly me, as far as I can see you are correct on this point.

''Venezuela is not socialist or communist.''

Really!? :O :O Considering the seizure of Exxon's assets and the way they have been discussed in this thread I thought it safe to assume that were by the least pretending towards socialist ideals? :-[ :-[ Regardless, in the case of a country that really has gone from capitalism to socialism it remains that it would be fine for the new revolutionary run government to seize these assets.

''This would lead to the problems of generating financing for the large projects for the government as the foreign investors would not provide it and local citizens would have no interest to provide it since there is no return to them, leading the government to increase taxation to find that financing or to print money and cause inflation. This case would be very strong for the small countries.''

The excess labor value (labor value - salary) that would normally be put into the hands of investors is instead given to the government via increased taxation or whatever method. This wealth is then used by the government to finance the projects of the country. So basically, the citizenry indirectly spends the full fruits of their labor by keeping a portion of the excess labor value (well, that is the direct part) and giving the rest to government to finance large projects that is in their own interest/use (indirect part). The full excess is used in their interest so basically they enjoy the full fruits of their labor.

On the matter of foreign investment. Theoretically, a country should be able to be fully independent and be just fine. If left to its devices it should grow and develop just fine. However, we often look at independent countries that have a low starting point (eg: just suffered a highly destructive war) and/or have poor natural resources. Communism is not a system that will magically change these two facts. However, neither is capitalism. Capitalism only provides the illusion by building all those refineries that actually belong to foreign investors and hence do not assist the country. Of course, this only show the capitalist part. In reality these projects and facilities are partially owned by the country as well and the seeming advantage of capitalism is allowing otherwise impossible endeavors through partial ownership (where the nation does not have sufficient capital by itself to start such projects). Also, a capitalist government will be able to trade due to better state of foreign affairs.

However, neither of these two advantages are truly exclusive to a capitalist government. A communist government COULD obtain loans and international partnerships with which to complete its projects and it COULD trade as well. The reason it cannot do these things very well is because such a government is unpopular in this mostly capitalist world and these capitalist countries by ommission intentionally sabotage the efforts of communist governments via ommission of trade and partnership where they NORMALLY WOULD provide these things were this country not communist. Obviously, I do not speak of case where they would not for other reasons anyway.

After all this we should see that we should look at the growth of independent (not using foreign countries trade, assistance,e.t.c. Ie: economically isolated) countries and compare that to the typical growth of a country in a similar scenario. If we look at its current level of development then countries that have simply been around for longer will seem to be better run. I think that after an independent country is on its two feet fully utilizing it's resources through fully developed facilities then it will be comparable to dependent countries. The missing factor would be trade. Add that, but without adding financial assistance/partnership via foreign investment and I think that this country will be on par with countries that depended on others for investment. As a matter of fact, after sufficient time they should be better off as they do not need to pay dividends who helped them to physically develop (ie: build refineries, saw mills , provide machinery, e.t.c).

That last point you mention I am sure Edrico has a link for.:D. I responded to it earlier before the loss of my original post. I would respond to but why bother (no offence) when I am sure that Edrico has a link or will post with a similar response? Besides, I am under the impression that the length of my posts is testing to the patience of some as is. Still, if his post is not forthcoming or if his answer does not contain everything I would have mentioned I will respond. As a matter of fact, pending the reparation to my patience and will power after the deletion of this original post I might still post before him.

(edit)... kind of... didn't really edit but actually mustered will power after leaving from post for a duration.

btw, please excuse the text space text format. This is a result of my comp and software being stupid $h!t. I will edit later.

''Proof?

Now to partially deal with the issue of exploiting labour to get profits, or

profits from assets.

Example is the following, who is going to dig a bigger ditch a guy with a shovelor a guy with an excavator? They put in the same hours of work but the guy with excavator digs a bigger ditch. Than should not the guy who is providing the excavator get some return for providing the excavator. An argument could be made that the guy with the shovel worked harder than the guy sitting in the excavator. So in this model excavator was what is referred to as capital or assets.''

''Than should not the guy who is providing the excavator get some return for providing the excavator''

No. The investor should get the value of his excavator returned to him. This

could even generously be the original cost at which he procured the excavator as

opposed to its current value. He should not get a % of the laborers value until

either of them cease to exist.There is no reason why a % based return is

magically more justifiable than a solid one time amount return. So, if the

excavator was valued at 500$ he should get 500$. Even then, that is only in the

case that he paid for the excavator from his OWN labor or wealth (which came

from his OWN labor).

If somebody gains wealth, there are only a few possibilities as the resources

that make $ meaningful and provide wealth are own finite.

1:He overall drew wealth from somebody else (stealing).

2:He overall drew wealth from somebody else's labor (stealing).

3:He drew wealth from his own labor/generation of value/resources/wealth.

4:He changed the system configuration to increase wealth generation without

additional work from anybody.

Since this excavator provider did not put in any labor of his own, 3 is ruled

out. 1 and 2 are obviously not justified. This leads us to situation 4. Why

should he be the sole benefactor of the additional wealth? Obviously, given the

chance, the laborer would have purchased his excavator and brought about this

situation himself. It is not as though the excavator provider has come up with

some idea to make things more efficient. Since there has been an increase in

wealth without an increased input from anybody (the excavator owner did not do

or create anything, he just allowed his excavator to be used) then shouldn't

this additional wealth be evenly distributed throughout society? No one earned

it.

However, remember that our idea of justified earnings and deserving are

subjective. The same amount of labor (eg: miner in middle ages compared to miner

today) produce different amounts and are paid different amounts. Our idea of

''deserving'' seems to be a relative concept only. If one laborer works twice as

hard as the other and produces twice as much as we can say is that he

''deserves'' twice as much. We cannot say how much he deserves explicitly

without first deciding how much the worker who did half as much deserves. This

value can only be decided subjectively and basically we decide that he deserves

the full fruit of his labor.

This full fruit of labor is defined by the tech and tools at hand. Ie: the full

fruit of the laborer should be whatever he managed to create with the use of the

excavator. Of course, IMO, both the worker who used the excavator and the one

who found himself without should be paid the same as obviously the latter worker

would glady work with an excavator given the choice.

So, we can come two conclusions:

1:That the workers fruits are defined by his produced value in which case he

should not have to give any of it to anyone.

2:That the workers frutis should be defined by labor, and the inclusion of this

excavator in this system does not increase his amount of labor. Therefore he

should not earn more. However, there is now an amount of unearned wealth. Since

all deserve this wealth as much as the next (as no one did anything to earn it),

then the wealth MIGHT AS WELL be divided equally amonst all individuals.

Of course, if we track everything back to its source, then we see that this

excavator did not pop out of thin air. First it was invented and then it was

produced. The excavator provider did not take part in ANY of these actions. And

so there was increased labor in this system. However, the amount deserved of

this labor is not necessarily = to the additional value provided by the system.

That deals with case 2. In case 1, all additional value would go to the inventor

and the laborers who produced the item. Of course, this would mean that there

would effectively be no benefit to anyone else. While they did not labor to

produce these excavators, if the additional value generated is infinity $, would

this mean that producers of these excavators DESERVE inifity $ for their labor?

Of course not, it is impossible to deserve infinity. Of course it is also

impossible to generate infinity. Then let us simply say that the amount gained

was an amount they could not deserve considering the labor put in. What if they

simply got lucky and the value increase from their machines (excavators) is only

more so than from similarly invented and produced machine (tractors) via sheer

dumb luck? Eg: The world is physically changed by a comet to make excavators

more valuable than tractors? Should the work of this comet somehow make the

excavator producers more deserving than the tractor producers? Of course not.

For this reason, scenario 1 seems absurd. So we only left with scenario 2.However, this is also not perfect. Obviously the excavator designers and producers should gain more than other individuals who had nothing to do with it.For this reason they would be paid extra as according to their labor and then would also enjoy their dividend of the wealth generated that is in excess to the labor required to create it. So, basically, the inventor and producers would definitely be paid for thier work but not so much so that the increased resources/wealth produced from millions of laborers all over the world using their devices would ALL be paid to them making the instant millionares whilst the laborers feel no benefit. Instead some of this wealth would be provided to the laborers.

Besides all this, it is not simply a matter of ''deserving''. It is also a matter of redistributing wealth to put it to better use. Even if the inventor and producers of the excavator somehow deserved ALL additional wealth ever to be gained from use of their invention, there is the matter that already being millionares they have virtually no further personal use of this wealth. Rather than let this wealth go to waste it MIGHT AS WELL be given to those who can CTUALLY USE IT in a WORTHWHILE fashion.Of course, the investor and the producers MIGHT donate this wealth, but why wait or that? Might as well put it to its best use if it makes virtually NO DIFFERENCE to the original possessors of this wealth anyway.

[Tatar Khan]

My knowledge of these pension funds is that people give them some money to hold onto which has interest grow on it. This is similar to a bank but clearly bankers are not considered charitable for their ''work''. Of course, by this point it should be clear that I have almost no knowledge of pension and mutual funds (:D). Therefore I will wait to be enlightened by Tatar or to be told off for not checking Wikipedia first :P... whichever comes first:D.

Unlike the banks which unusually guarantee the amount of return on deposit which usually is very low and most of the time below the inflation. Pension funds and mutual funds do not guarantee the return as their return is linked to performance of the companies and stock markets. So by investing into funds you are taking a risk that you will lose money and not gain. The law of finance state that the higher the risk the higher should be the pay off otherwise people would not take the risk. Even putting money in bank is risky to an extent that bank could go under. Mutual funds and pension funds are large bodies that buy stocks and bonds and hold huge diversified portfolio to reduce risk. Usually the average joe doesn't posses the money to buy such a diversified portfolio so he invests into mutual fund by buying a part of the fund which withing his reach. of purchasing power and thus becomes also the owner of shares held by the fund. His ownership is of course defined by the amount he invested.

However, what I do know is that this is after all, an investment so some return is still expected. Since the investors put in no additional work and did not even provide some form of capital/asset, it can only be concluded that the profit they derive from their pension investments could only have been indirectly drawn from others current wealth or labor (regardless of the direct benefits to the retired.). In addition to this, before investing at all they also spend considerable amounts of this profit on luxuries (which are probably obscene and wasteful).

Stocks are issued to raise money, that sale of stocks raises capital that the company needs for purposes of operations and expansion. Mutual funds and financial institutions are often are the ones who buy the large amounts of stock that companies sell to raise the capital. They draw the money from people who invested in the fund. Thus the people are providing capital to the firms.

Now average joe is not dying in luxury when they are investing in to the mutual fund.

About living in luxury, good example is the Ontario Teachers Pension Plan in Canada. This is pension plan for teachers in Canadian province of Ontario, and the pension plan is currently the owner of NHL team named Maple Leafs, NBA team named Raptors and the Air Canada Centre (place where those teams play). Sounds great right but I don't see teachers living the life of luxury. The reason is that a lot of money is needed to be collected to provide from person's retirement to their death.

Another way to check that luxury argument check with people around you, you will find people who are investing in mutual funds or pension funds and see how much of luxury lifestyle to they lead. Most of the rich people do not use mutual funds or pension funds investment vehicles they have special portfolio managers make them a portfolio they like.

Anyway you mentioned that the worker's pension fund is drawn from Exxon Mobil profits. This basically sound like they are just providing a perk through indirect means just like any other. Can this be considered charity? Isn't it more part of the job offer (though not in written contract) without which Exxon would face strikes and the like.

Not necessarily. Pension plans and stock options are usually given to keep employees loyal. The idea rests that if the workers savings would be tied to the performance of the company they would have a bigger incentive to work harder to keep the performance of the company up. This also done against agency problem that could be present. Management of the company might decide to spend money wastefully for dinners, cars and etc they might not need to spend at all. This would decrease the shareholders wealth. However if the management are the shareholders too, they are less likely to spend wastefully since their wealth would be affected.

''Venezuela is not socialist or communist.''

Really!? :O :O Considering the seizure of Exxon's assets and the way they have been discussed in this thread I thought it safe to assume that were by the least pretending towards socialist ideals? :-[ :-[ Regardless, in the case of a country that really has gone from capitalism to socialism it remains that it would be fine for the new revolutionary run government to seize these assets.

Small move to the left doesn't make the country socialist no matter how much the government wants to scream about it for propaganda purposes. Sweden is more socialist than Venezuela, but EdricO will tell you that Sweden is not socialist, and I would agree.

The excess labor value (labor value - salary) that would normally be put into the hands of investors is instead given to the government via increased taxation or whatever method. This wealth is then used by the government to finance the projects of the country. So basically, the citizenry indirectly spends the full fruits of their labor by keeping a portion of the excess labor value (well, that is the direct part) and giving the rest to government to finance large projects that is in their own interest/use (indirect part). The full excess is used in their interest so basically they enjoy the full fruits of their labor.

I don't think you would find people thrilled about higher taxation. And often even with that there is not enough money to pursue the projects thus the growth would be slow. This is the reason why the governments of developing countries go looking for foreign direct investment and loans. Kazakhstan is going to take a loan from World Bank to build a dam, why? because it just doesn't have the capabilities to draw enough money through taxation or form local investors to do so. Once the dam is built it will pay off (hopefully) but currently it is too expensive for government to undertake it by itself.

Foreign investment also brings in specialist and skills. How long would it take for Sudan to build a factory that can produce analogy to IBM's Pentium 4 processors that would be as fast. Or how long owuld it take for IBM to come in and built the same factory bringing all the expertise together with them. Plus there is beneficial spillovers from foreign specialists as their skills are transfered to domestic specialists. Following studies that confirm this: Aitken, B., Hanson, G. and Harrison, A. (1997)

[Sneakgab]

As often happens, physical constraints prevent me from replying fully. I will answer remaining points and complete my elaboration later.

As always, my stupid comp has messed up my post with line space line space format!  >:( >:( >:( >:( >:( >:( >:( >:(. Yes, I know, it is a result of notepad. Maybe I'll fix it later.

''Not necessarily. Pension plans and stock options are usually given to keep

employees loyal. The idea rests that if the workers savings would be tied to the

performance of the company they would have a bigger incentive to work harder to

keep the performance of the company up. This also done against agency problem

that could be present.''

Well then thats just more investment into the business for more profit. The

laborers get their pension but they put in more work to get it. In reality, they

have not gained anything from the company. More likely the additional income

from this labor outweighs the expense of the pension and therefore results in

profit. No labor has been done by the profit gainer, so the old result applies

that he got this profit through others work without doing anything.

'' Management of the company might decide to spend money wastefully for dinners,

cars and etc they might not need to spend at all. This would decrease the

shareholders wealth. However if the management are the shareholders too, they

are less likely to spend wastefully since their wealth would be affected.''

If they don't spend wastefully then where do all these private jets come from?

Obviously, not all of their profit is spent on making further profit and wealth

via investment. There comes a point where this wealth is hoarded and made

useless through inactivity or it is wasted on higher and higher extremes of

extravagence. Besides, even if all the wealth were invested into further

production, then this is something a government can do as well. After all that,

can we even justify endless investment? If thats the case then the best system

would be one that enslave alls humanity getting them to work on making machines

and factories so that their labor hours can be more productive with which they

can make even more machines and factories on an exponential rise of

productiveness per labor hour. There are purposes other than increasing

production per labor hour and increasing the wealth of the investor. Wealth can

and probably should also be used for the greater good of society.

Remember that the original issue is how productively the wealth is spent when

comparing Veneuzelan government and Exxon Mobile. You can mention corruption but

corporations also have their own fraudsters and launderers. The difference is

that, inevitably much of the wealth is wasted in a corporation through the

extravagant interests of said wealth holder. Either that or he simply hangs on

to wealth doing nothing with it forever because he doesn't want to risk all of

it. Also, a government uses wealth on things other than investment, hoarding,

luxuries, and grandiose displays of wealth. I do not see any reason for an

investor to use his wealth for anything other than those reasons. Only if

society gets lucky and the investor decides that charity would bring him

pleasure or that he no longer feels like being selfish does he put money to

other purposes. If the nature of man is truly selfishness then theoretically

this should be unlikely and unfrequent.

''Small move to the left doesn't make the country socialist no matter how much

the government wants to scream about it for propaganda purposes. Sweden is more

socialist than Venezuela, but EdricO will tell you that Sweden is not socialist,

and I would agree.''

I was under the impression that their measure of ''leftism'' was higher. My bad,

I shall take this into account. Still, the argument stands that it would be fine

for a country really gone from capitalism to communism.

''I don't think you would find people thrilled about higher taxation. And often

even with that there is not enough money to pursue the projects thus the growth

would be slow. This is the reason why the governments of developing countries go

looking for foreign direct investment and loans. Kazakhstan is going to take a

loan from World Bank to build a dam, why? because it just doesn't have the

capabilities to draw enough money through taxation or form local investors to do

so. Once the dam is built it will pay off (hopefully) but currently it is too

expensive for government to undertake it by itself.

Foreign investment also brings in specialist and skills. How long would it take

for Sudan to build a factory that can produce analogy to IBM's Pentium 4

processors that would be as fast. Or how long owuld it take for IBM to come in

and built the same factory bringing all the expertise together with them. Plus

there is beneficial spillovers from foreign specialists as their skills are

transfered to domestic specialists. Following studies that confirm this: Aitken,

B., Hanson, G. and Harrison, A. (1997)

[Sneakgab]

Had to split post. Do spaces count as characters... if so... blame my software  :P.

''Why did not he? Any person, especially in western world can go into business

for himself, get a loan from the banks and start something, If the guy is good

his business will grow and than would become bigger and bigger. Example could be

the Baskin and Robbins ice cream shop. Two soldiers came back after the WWII and

opened an ice cream store now it is one of the biggest ice cream companies in

the world. A lot of people don't go into the business due to risk. They are too

afraid and their risk tolerance is not high enough, so they stay as regular

workers.''

Thats ridiculous. Obviously people can't just open up businesses randomly. They

have to compete with people who have more money who can afford to invest more

and therefore make it impossible (well, actually only unlikely) for the guy with

less money to open up business. Why don't you go and open up a computer OS

company to go rival Microsoft? Obviously you cant. Even if you could loan money,

they are able to loan more than you because of the wealth/status they already

have. Their $ for investment will always be > than your $ for investment and

therefore your chance of winning in market will always be < that their chance of

winning. Hence, you will not be able to compete. Obviously, there IS a chance

that your business will survive encounters and prosper and THAT is why sometimes

some small businesses can suceed. But as you can see, small businesses are being

increasingly trounced as in this trend of globalisation. Your ability to make

money is dependent on how much money you have. Small business could compete

before simply because there was less presence of big businesses. As these big

businesses continue to expand the smaller businesses will probably be

elimenated. Besides all that, many people could never be able to open up a small

business anyway. Even if they could, they would hardly be gaining money for

nothing. Instead they would be gaining money for transporting their goods,

manning their till, e.t.c. Basically, they would be gaining money on the value

of their labor that is the physical work of distributing goods. This is opposed

to somebody generating wealth that could not possibly be the value of his labor.

Besides, NONE of that is even the point. The point is that it didn't take a

genius or a huge amount of effort to think: Hey... there's a tractor over

there... lets use it... or lets make one. However, the laborers were obviously

in no position to use the tractors, because it belonged to someone else. They

could not buy the tractor because they did not have enough money. Even if they

did buy the tractor, would anyone let them work their land if they got the full

product of their labor? Yes, land is just another asset. The idea is that the

worker doesn't just require the tractor he requires land to make use of it. Ie:

The total amount of money he needs to make his own investment is large enough

that he cant just use loans. MAYBE, if ALL he needed was a tractor it would be

different. But rarely is such the case that the worker can make minor

investments to his own fortune. The alternative to physically investing and

improving the fruits of one's own labor is business. This can be to any scale,

but as I said before competition makes the sucess of this unlikely for small

businesses. The tractor laborer can decide to set up a hot dog stand instead,

but this is not likely to work.

Besides, even IF the hot dog stand turned into a multi-million dollar business,

that would just mean that the laborer was one of the lucky ones of the many that

tried hot dog stands and got to be the exploiter instead of the exploited. Even

if it was not luck, he could not be so much greater than the other hot dog

vendors and tractor laborers that he could deserve wealth a thousand times

theirs. His labor could not possibly be worth a thousand times more and it

CERTAINLY could not be a thousand times more deserving or a thousand times more

impressive. So, I guess that the exploited can turn into exploiters in rare

lucky situations but what does this help? The situation remains unjust.

''Reminds me of the arguments against merchants during the Middle Ages. back

than the idea was that they don't do any work but charge more for the product.

Took few centuries to realize the fact that merchants moved the product from

abundant areas to less abundant and that such movement had costs. Another

century to realise the fact that merchants had risk of the fact that their

prediction that a certain product would be demanded somewhere might not be true

(still true for import and export businesses and the risk is very high) and they

needed to be compensated for taking on such risk.''

Herein lies something of import. Those merchants CAN justifiably get paid for

the LABOR that is distributing their products. That is why small businesses are

largely justifiable. Those owners are actually performing labor and getting

wealth for it that is line in with their labor. If a merchant however, simply

employed others to move his product, then he should get any reward for doing

nothing. His movement costs would be reimbursed, but the return would not be

greater than the cost. Once again, no loss, no gain, no risk, no profit, no

labor.

''But back to the excavators. The excavator owner did not just got an excavator

out of the blue. He did the research, found that there is a need for excavators

and the not being satisfied currently. Than he acquired the excavator and moved

it the place that it is needed. Of course this is very simple, the reality would

look closer to the following.

A owner of the company that digs ditches among some things. He does research and

sees that by acquiring the excavator he can increase productivity more than by

replacing the older system of shovels. (now this seems to be very simple

logically, so why he did not do it before). Before when he tried to buy

excavator it was too expensive for him and the bank would not grant a loan for

it because his firm was too small and the risk was too high. Now he checks that

he accumulated enough money to finance part of the purchase and get the loan at

the good rate (very rarely companies buy something only using equity, almost

always part of financing comes from loans). He believes that with the increased

productivity his company income would go up (in fancy financial terms it is said

that project has positive NPV or Net Present Value, sum of revenue cash flows

minus the sum of all costs cash flows. While cost cash flows don't need to be

estimated, the revenue cash flows are estimated (this done through the numbers

provided through Econometric research)). No the income would have to compensate

the price of the excavator but that would happen over time slowly through

revenue the main thing the the rate of return on employment of excavator should

be higher than WACC, Weighted Average Cost of Capital. WACC includes in it

drawing capital from equity and loans. Than also the return on excavator must

compensate for the risk that is taken getting it. The risk lies in the fact that

sometime between acquisition and pay off the cost of capital for excavator the

demand for ditches will fall and so excavator would be the loss purchase for the

business. If WACC plus the risk premium (arrived through Financial Econometrics)

is higher than the rate of return expected than the project should not be

undertaken. (now this was Corporate Finance course summarised and without too

many problems that exist in reality.''

That is all just cost-value anaylsis taking into account probability, inflation,

and all the other sub-categories made to take into account the other costs and

gains that accompany the cost and gains of the actual tractor. Basically, if the

tractor is >= to its cost on average it is bought otherwise it is not.

''But this is the reason why we have capital being paid back beyond just the

simple cost of that excavator. Excavator is not going to pay off in one year it

will take some time and by the time it does it will depreciate due to age of

excavator. Than it is sold and just got rid off and the process begins a new

loop.''

The risk of buying the excavator was getting a return that was less than it's

worth. The owner of the excavator is reimbursed for its full worth taking into

account inflation. Therefore, risk is already compensated by doing this as there

can be no risk. So... regardless of the current price and demand of the

excavator, regardless of the increased value/production that excavator will give

off, the owner is reimbursed for its original price. It is like somebody putting

money into a slot machine, and then you go up to the slot machine, take the

money out, and give it back to him. If the demand for the excavator dropped, he

gets his money back. If the demand increases, then he gets the original price

back. This demand could only mean increased value for some reason. This value

would not be gained by him as he did nothing for it. The fortune of this

''luck'' would be spread out amongst all. The original inventors and producers

of the excavator would be entitled to a higher share of this ''good fortune'' as

per the labor they put in and perhaps partially according to the value as well,

however they would not get the full increase in value unless this value was =<

than a set reasonable amount. If excavators were suddenly worth their weight in

gold the creators would not become instant billionaires, though they would be

WELL rewarded... just not so much so that they enjoy wasteful amounts of

resources that could be better utilized.

On the other hand, if the tracter depreciates then the government will pay 500$

for something that is only worth 300$ now. In this case, the misfortune of ''

bad luck'' will also normally be spread amongst all as no one labored towards or

against it and so all are equally deserving. Only in the case that

responsibility can be pinned on someone would the burden be laid more

specifically.

'' Of course the small business doesn't do all those steps above due to the fact

the small business owners lack education in Econometrics to do it. Instead the

small business owners use estimations, often that are wrong and so that is why

more small businesses fail than the large ones. Corporations have statistical

and financial departments that do this analysis. Of course there are rules of

thumb for small things such as buying a new printer to replace the old one,

because if here NPV would be negative it won't affect the income of

corporations.''

Yet another reason why someone can't just open up his own business then. He has

to have money for the various financial experts as well (or rather the lack of

wealth and scale required to make this worthwhile puts him at further relative

disadvantage).  Only if he is a financial expert himself does the opportunity

difference from this dissapear. This cannot be used as justification, as it is

NOT NECESSARILY THE OWNERS of these businesses who have the financial skills.

Besides, should someone be penalized in investing for being educated in

something other than finance? The skill is only rewarded because of the system

it is in. You cannot justify the case by saying... the skill is useful because

capitalism is good, and capitalism is good because the skill is useful

(actually, admittedly not sure of sense of this).