Open letter to Mr. Warren Buffet by George Reisman
Posted: Sun Jul 29, 2012 3:54 am
Mr. Warren Buffett
3555 Farnam Street
Suite 1440
Omaha, NE 68131
Mr. Buffett:
You have been quoted time and again, without any denial on your part that I am aware of, as having said, "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."
In view of the seriousness of this statement, I have to ask you some questions.
Do you intend to be taken seriously when you speak? Do you know the meaning of the words you use? Do you know the source and implications of the doctrines you espouse?
The doctrine of class warfare is a derivative of the exploitation theory, whose best-known proponent is Karl Marx. According to the exploitation theory, profit and interest, indeed, any income other than wages, is an unjust deduction from what naturally and rightfully should be wages.
What makes possible the existence of incomes other than wages, according to Marx, is the same basic fact that makes it possible for a slave owner to gain by owning a slave. Namely, the fact that a worker is capable of producing the necessities he requires in order to have the strength and energy to work a full working day, in less than a full working day.
To use one of Marx's own examples, a worker is capable of producing in 6 hours the food and other necessities that he requires in order to be able to work 12 hours. The 6 hours, or whatever the number of hours may be that the worker requires to produce his necessities, Marx calls "necessary labor time." The hours that the worker works over and above the necessary labor time, Marx calls "surplus labor time."
Just as surplus labor time is the source of the slave owner's gain, so too, according to Marx, is it the source of the profit and interest of the capitalist. When the worker works 12 hours for a capitalist, his labor, according to Marx, adds a commodity value corresponding to 12 hours of labor to the materials and other physical means of production used up in producing the resulting products. If those materials and other means of production required 48 hours of labor in their own production, the product that results will contain those 48 hours of labor plus the 12 additional hours of fresh labor performed. It will have a value corresponding to 60 hours of labor in all.
Thus, the process of production, according to Marx, has resulted in a value added corresponding to 12 hours of fresh labor time. That value added will be divided between the wage earner and the capitalist in the form of wages on the one side and profit/interest on the other. What the capitalist must pay as wages, says Marx, is determined by the application of an allegedly universal principle of commodity valuation, namely, the labor theory of value. The capitalist will pay the wage earner a wage corresponding to the hours of labor required to produce his necessities, which by assumption is 6 hours, and will pocket the value added by the worker's performance of 12 hours of labor. His profit/interest is what remains after deducting the worker's wages, and corresponds exactly to the worker's surplus labor time.
This example can easily be translated into monetary terms, simply by assuming that to every hour of labor performed in the production of a product there corresponds $1 of product value. Thus the materials and other produced means of production were worth $48 and the products that result from the application of 12 hours of fresh labor are worth $60. The 12 hours of fresh labor adds $12 of new and additional product value.
The capitalist's profit/interest allegedly results from the fact that for the 12 hours of fresh labor added, with its corresponding additional product value of $12, the capitalist pays a wage of only $6, the sum corresponding to the labor time required to produce the necessities that enable the worker to perform his 12 hours of labor. The capitalist's profit/interest thus represents "surplus value," which corresponds to "surplus labor time."
The ratio of surplus value to wages, or of surplus labor time to necessary labor time, Marx calls "the rate of exploitation." In this illustration it is 100 percent, i.e., $6/$6 or 6 hrs./6 hrs.
A combination of greed and of forces otherwise tending to reduce profit/interest relative to capital invested, says Marx, drives the capitalists to step up the rate of exploitation. If the workers are able to work 18 hours a day on the basis of necessities produced in only 6 hours per day, then the working day will be increased to 18 hours. If the wages the capitalists pay their adult male workers are sufficient to enable them to support a wife and two replacement children, the capitalists will reduce those wages and thereby drive women and children into the factories, giving the capitalists the benefit of still more surplus labor time and surplus value. The capitalists will allegedly also strive to cheapen the worker's diet, substituting potatoes or rice for wheat, say, thereby reducing the necessary labor time and increasing the portion of the working day that is surplus labor time. Working conditions, needless to say, will be horrific, since their improvement would generally come at the price of a reduction in surplus value.
This alleged state of affairs of subsistence, indeed, sub-subsistence wages, inhuman hours and working conditions, down to small children laboring in the mines, is the outcome of the operation of capitalism and the profit motive, says Marx, on the basis of his exploitation theory.
Class war is the result of the fact that in the light of the exploitation theory capitalists are to be regarded as the mortal enemies of the overwhelming majority of mankind, deserving to be stood against a wall and shot, which is exactly what has happened time and again, when Marxists have seized power.
Where Does This Put You, Mr. Buffett?
Based on this account of the origins and nature of alleged class warfare, I have to ask how you see your place in the world, Mr. Buffett. Are you an exploiter of labor? Has your life's work consisted of the accumulation of wealth in a manner fundamentally indistinguishable from that of a slave owner? Has the accumulation of your billions been the result of your systematic theft of workers' rightful wages? Has your life consisted mainly of efforts tending to impoverish still further the workers you employ, and been prevented from doing so only to the extent of the existence of such measures as pro-union, minimum wage, and maximum-hours legislation?
By your view of things, Mr. Buffett, are you and your fellow capitalists truly enemies of the rest of the human race ? vile, blood-sucking parasites who deserve to be killed for what Marx's exploitation theory claims they have done and every day try to do to an even greater extent? Are you attempting to escape what you implicitly recognize as your just punishment by urging President Obama merely to raise your taxes and parade you before the country as his "house capitalist" as he names an alleged rule of taxation ? "the Buffett rule" ? after you? Have you been running to fetch the whip with which he will beat you, in the hope of avoiding what you regard as the more just punishment of your being shot?
What You Need to Know, Mr. Buffett
I'd like you to know, Mr. Buffett, that what you believe about the nature of capitalism and profit/interest has absolutely no connection with the actual nature of capitalism and profit/interest. Despite all your great accomplishments in the realm of investment, you are as ignorant of these things as the average labor-union member or the average professor of literature.
I hope you are interested in correcting your errors and misconceptions in this vital area. Frankly, I don't see how you can live with yourself in the face of your views about the nature of your economic activity. The fact that, according to your "Giving Pledge," you plan to give away more than 99 percent of your wealth would not atone for your crimes if the exploitation theory and the doctrine of class warfare were correct. There would still be not only the deadweight loss of everything that you and your family have personally consumed over the years that was stolen from others, from the occasional ice cream soda you reportedly like to your private jet. There would also be the fact that whatever you might now give away would not be any compensation to your actual victims, many of whom have passed away by now or are too old to enjoy it as they might have at the time they earned it and you robbed them, and who would receive nothing at all to the extent that you give your wealth away to completely different people.
If, on the other hand, you succeed in correcting your mistakes in this area, then you will almost certainly be able to regard yourself in a strongly positive light, as a highly productive individual, whose self-interested economic activities and resulting great accumulated wealth have served to improve the lives of others rather than harmed them. Someone who has accomplished as much as you actually have, should not have to carry a massive burden of unearned guilt, as you apparently do.
Capitalists, Not Wage Earners, Are the Primary Producers
You do not realize it, Mr. Buffett ? hardly any one does yet ? but the wage earners that you and all the other alleged capitalist exploiters employ are not the primary producers of the products the exploitation theory attributes to them. Just as Columbus was the discoverer of America, not the sailors who manned his ships and who were his helpers in the achievement of his ? Columbus's ? plans and projects, so too, Mr. Buffett, you are the primary producer of the products produced by your firm Berkshire Hathaway and any other firms that you may own and whose actions take place under your initiative and control. Your employees, Mr. Buffett, are accurately described as "the help" in the production of your products. Your profits or interest are not a deduction from what rightfully belongs to them as wages. They are what you have earned, on the basis of your mainly intellectual labor of thinking, planning, and decision making. And the same, of course, applies to all of your fellow alleged capitalist "exploiters," past and present, who are producing their products, albeit with the help of others whose labor they employ for the purpose of implementing their plans and thus producing their products. Thus, for example, old Henry Ford was the primary producer at the Ford Motor Company, Rockefeller, at Standard Oil, and now Gates at Microsoft, and Bezos at Amazon, along with you at Berkshire Hathaway.
Marx had one major idea that in itself was entirely correct and which can shed further light on this discussion. That was his distinction between what he called "capitalistic circulation" and "simple circulation." Marx, unfortunately, completely ignored and contradicted the actual implications of this idea.
What you and all the other alleged capitalist exploiters are engaged in is capitalistic circulation. Capitalistic circulation, as Marx described it, is the expenditure of money, M, for the purchase of commodities, C, which are to be used in producing products that are to be sold for a larger sum of money, M'. Capitalistic circulation, in short, is M-C-M'. If you and all the other alleged capitalist exploiters did not exist, and capitalistic circulation disappeared from the world, what was left of those who now are able to work as wage earners would have to live in a world of simple circulation, i.e., C-M-C. That is, without making any initial outlays of money, they would attempt straightaway to produce commodities, C, which they would sell for money, M, which in turn they would use to purchase other commodities, C.
Read the full article here:
http://mises.org/daily/6134/An-Open-Let ... 0CS-s.link
3555 Farnam Street
Suite 1440
Omaha, NE 68131
Mr. Buffett:
You have been quoted time and again, without any denial on your part that I am aware of, as having said, "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."
In view of the seriousness of this statement, I have to ask you some questions.
Do you intend to be taken seriously when you speak? Do you know the meaning of the words you use? Do you know the source and implications of the doctrines you espouse?
The doctrine of class warfare is a derivative of the exploitation theory, whose best-known proponent is Karl Marx. According to the exploitation theory, profit and interest, indeed, any income other than wages, is an unjust deduction from what naturally and rightfully should be wages.
What makes possible the existence of incomes other than wages, according to Marx, is the same basic fact that makes it possible for a slave owner to gain by owning a slave. Namely, the fact that a worker is capable of producing the necessities he requires in order to have the strength and energy to work a full working day, in less than a full working day.
To use one of Marx's own examples, a worker is capable of producing in 6 hours the food and other necessities that he requires in order to be able to work 12 hours. The 6 hours, or whatever the number of hours may be that the worker requires to produce his necessities, Marx calls "necessary labor time." The hours that the worker works over and above the necessary labor time, Marx calls "surplus labor time."
Just as surplus labor time is the source of the slave owner's gain, so too, according to Marx, is it the source of the profit and interest of the capitalist. When the worker works 12 hours for a capitalist, his labor, according to Marx, adds a commodity value corresponding to 12 hours of labor to the materials and other physical means of production used up in producing the resulting products. If those materials and other means of production required 48 hours of labor in their own production, the product that results will contain those 48 hours of labor plus the 12 additional hours of fresh labor performed. It will have a value corresponding to 60 hours of labor in all.
Thus, the process of production, according to Marx, has resulted in a value added corresponding to 12 hours of fresh labor time. That value added will be divided between the wage earner and the capitalist in the form of wages on the one side and profit/interest on the other. What the capitalist must pay as wages, says Marx, is determined by the application of an allegedly universal principle of commodity valuation, namely, the labor theory of value. The capitalist will pay the wage earner a wage corresponding to the hours of labor required to produce his necessities, which by assumption is 6 hours, and will pocket the value added by the worker's performance of 12 hours of labor. His profit/interest is what remains after deducting the worker's wages, and corresponds exactly to the worker's surplus labor time.
This example can easily be translated into monetary terms, simply by assuming that to every hour of labor performed in the production of a product there corresponds $1 of product value. Thus the materials and other produced means of production were worth $48 and the products that result from the application of 12 hours of fresh labor are worth $60. The 12 hours of fresh labor adds $12 of new and additional product value.
The capitalist's profit/interest allegedly results from the fact that for the 12 hours of fresh labor added, with its corresponding additional product value of $12, the capitalist pays a wage of only $6, the sum corresponding to the labor time required to produce the necessities that enable the worker to perform his 12 hours of labor. The capitalist's profit/interest thus represents "surplus value," which corresponds to "surplus labor time."
The ratio of surplus value to wages, or of surplus labor time to necessary labor time, Marx calls "the rate of exploitation." In this illustration it is 100 percent, i.e., $6/$6 or 6 hrs./6 hrs.
A combination of greed and of forces otherwise tending to reduce profit/interest relative to capital invested, says Marx, drives the capitalists to step up the rate of exploitation. If the workers are able to work 18 hours a day on the basis of necessities produced in only 6 hours per day, then the working day will be increased to 18 hours. If the wages the capitalists pay their adult male workers are sufficient to enable them to support a wife and two replacement children, the capitalists will reduce those wages and thereby drive women and children into the factories, giving the capitalists the benefit of still more surplus labor time and surplus value. The capitalists will allegedly also strive to cheapen the worker's diet, substituting potatoes or rice for wheat, say, thereby reducing the necessary labor time and increasing the portion of the working day that is surplus labor time. Working conditions, needless to say, will be horrific, since their improvement would generally come at the price of a reduction in surplus value.
This alleged state of affairs of subsistence, indeed, sub-subsistence wages, inhuman hours and working conditions, down to small children laboring in the mines, is the outcome of the operation of capitalism and the profit motive, says Marx, on the basis of his exploitation theory.
Class war is the result of the fact that in the light of the exploitation theory capitalists are to be regarded as the mortal enemies of the overwhelming majority of mankind, deserving to be stood against a wall and shot, which is exactly what has happened time and again, when Marxists have seized power.
Where Does This Put You, Mr. Buffett?
Based on this account of the origins and nature of alleged class warfare, I have to ask how you see your place in the world, Mr. Buffett. Are you an exploiter of labor? Has your life's work consisted of the accumulation of wealth in a manner fundamentally indistinguishable from that of a slave owner? Has the accumulation of your billions been the result of your systematic theft of workers' rightful wages? Has your life consisted mainly of efforts tending to impoverish still further the workers you employ, and been prevented from doing so only to the extent of the existence of such measures as pro-union, minimum wage, and maximum-hours legislation?
By your view of things, Mr. Buffett, are you and your fellow capitalists truly enemies of the rest of the human race ? vile, blood-sucking parasites who deserve to be killed for what Marx's exploitation theory claims they have done and every day try to do to an even greater extent? Are you attempting to escape what you implicitly recognize as your just punishment by urging President Obama merely to raise your taxes and parade you before the country as his "house capitalist" as he names an alleged rule of taxation ? "the Buffett rule" ? after you? Have you been running to fetch the whip with which he will beat you, in the hope of avoiding what you regard as the more just punishment of your being shot?
What You Need to Know, Mr. Buffett
I'd like you to know, Mr. Buffett, that what you believe about the nature of capitalism and profit/interest has absolutely no connection with the actual nature of capitalism and profit/interest. Despite all your great accomplishments in the realm of investment, you are as ignorant of these things as the average labor-union member or the average professor of literature.
I hope you are interested in correcting your errors and misconceptions in this vital area. Frankly, I don't see how you can live with yourself in the face of your views about the nature of your economic activity. The fact that, according to your "Giving Pledge," you plan to give away more than 99 percent of your wealth would not atone for your crimes if the exploitation theory and the doctrine of class warfare were correct. There would still be not only the deadweight loss of everything that you and your family have personally consumed over the years that was stolen from others, from the occasional ice cream soda you reportedly like to your private jet. There would also be the fact that whatever you might now give away would not be any compensation to your actual victims, many of whom have passed away by now or are too old to enjoy it as they might have at the time they earned it and you robbed them, and who would receive nothing at all to the extent that you give your wealth away to completely different people.
If, on the other hand, you succeed in correcting your mistakes in this area, then you will almost certainly be able to regard yourself in a strongly positive light, as a highly productive individual, whose self-interested economic activities and resulting great accumulated wealth have served to improve the lives of others rather than harmed them. Someone who has accomplished as much as you actually have, should not have to carry a massive burden of unearned guilt, as you apparently do.
Capitalists, Not Wage Earners, Are the Primary Producers
You do not realize it, Mr. Buffett ? hardly any one does yet ? but the wage earners that you and all the other alleged capitalist exploiters employ are not the primary producers of the products the exploitation theory attributes to them. Just as Columbus was the discoverer of America, not the sailors who manned his ships and who were his helpers in the achievement of his ? Columbus's ? plans and projects, so too, Mr. Buffett, you are the primary producer of the products produced by your firm Berkshire Hathaway and any other firms that you may own and whose actions take place under your initiative and control. Your employees, Mr. Buffett, are accurately described as "the help" in the production of your products. Your profits or interest are not a deduction from what rightfully belongs to them as wages. They are what you have earned, on the basis of your mainly intellectual labor of thinking, planning, and decision making. And the same, of course, applies to all of your fellow alleged capitalist "exploiters," past and present, who are producing their products, albeit with the help of others whose labor they employ for the purpose of implementing their plans and thus producing their products. Thus, for example, old Henry Ford was the primary producer at the Ford Motor Company, Rockefeller, at Standard Oil, and now Gates at Microsoft, and Bezos at Amazon, along with you at Berkshire Hathaway.
Marx had one major idea that in itself was entirely correct and which can shed further light on this discussion. That was his distinction between what he called "capitalistic circulation" and "simple circulation." Marx, unfortunately, completely ignored and contradicted the actual implications of this idea.
What you and all the other alleged capitalist exploiters are engaged in is capitalistic circulation. Capitalistic circulation, as Marx described it, is the expenditure of money, M, for the purchase of commodities, C, which are to be used in producing products that are to be sold for a larger sum of money, M'. Capitalistic circulation, in short, is M-C-M'. If you and all the other alleged capitalist exploiters did not exist, and capitalistic circulation disappeared from the world, what was left of those who now are able to work as wage earners would have to live in a world of simple circulation, i.e., C-M-C. That is, without making any initial outlays of money, they would attempt straightaway to produce commodities, C, which they would sell for money, M, which in turn they would use to purchase other commodities, C.
Read the full article here:
http://mises.org/daily/6134/An-Open-Let ... 0CS-s.link