How does capitalism work?

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anna_key
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Feb 22 2006 16:11
How does capitalism work?

ive never really understood it, cant fight what i dont understand

admin update: in addition to the answers below, we have also produced this introduction to capitalism and how it works

Armchair Socialism
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Feb 22 2006 16:27
anna_key wrote:
ive never really understood it, cant fight what i dont understand

What in particular don't you understand?

Anyway, you could always start with wikipedia....

http://en.wikipedia.org/wiki/Capitalism

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Steven.
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Feb 22 2006 16:29

In short - most people do not own the means of our own survival (means to live, eat, etc.). Therefore we are forced to work for a wage for an employer. Employers pay workers less then the value of our labour in wages, and expropriate the rest - for profit, and to re-invest.

From our glossary definition of capital:

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Capital is wealth which is used to create more wealth, where wealth is a description of anything created by human labour. Capital takes the form of money (money capital), which is then invested in the means of production (tools and raw materials; fixed capital) and labour power (wages; variable capital) to produce commodities. Collective production produces a surplus (surplus value, profit), which the capitalist recieves when the commodities are sold.

This can then be added to the original capital to expand it (valorisation, or capital accumulation). Expanded capital is then reinvested into production to create a constantly expanding cycle of both production and capital accumulation.

The working class is forced to work for a wage since they do not own capital themselves (although some people receive income from both sources), and because all the means of life (food, shelter, energy) are sold as commodities. As such, capital, rather than simply being "wealth" or "dead labour" represents the social relationship which makes it impossible for the working class to produce for their own needs without working for a capitalist or the state. Since it is this social relationship that libertarian communists want to replace, rather than specific powerful individuals or companies in control of it, we usually refer to capital, rather than "corporations, capitalists, the ruling class" terms which tend to be either too general or too specific to describe what we mean.

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Steven.
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Feb 23 2006 16:08

this any help?

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Rob Ray
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Feb 23 2006 17:00

Examples:

Under our current system, property ownership is used to 'justify' the most outrageous parasitical behaviour against the working classes by the rich. I earn £13k a year but the profit made from my hard work is around £19k. That's after I and my fellow workers have paid for the running of the business from our labour. So the shareholders, people who have no function except owning the business, take 1.5 times my wages for doing nothing whatsoever.

Comparatively speaking, I'd be able to keep several hobos in bread and water for that money and still have enough left for a better life. As it is, Mr chairman (single biggest shareholder, does 3 days work a week, earns £150k p/a as it is) gets an extra uber-widescreen telly instead and then has the temerity to complain about being asked to help with the welfare system and use twisty accountants to avoid paying tax.

In terms of capital's most recognisable role in exploitation... as a boss you get workers cheaper by creating a jobs 'market' where there are more workers than placements. You then play off your workforce against itself so there is competition for jobs. Thus your ideal situation is one where workers engage in a race to the bottom, attempting to offer better training for lower wages than anyone else. In recent years, capitalists have gone one step further, and engaged with third world countries to make that competition even more fierce.

The best-known way in which workers have fought against that system has been to form unions, which engage in solidarity actions, such as strikes, to inflict monetary loss on corporations which try to do this so they can't afford to.

The traditional ways in which workers have attempted to break the system altogether is via the formation of revolutionary groups, which attempt to organise mass resistance to bring working class power 'to a point' at a time where capital is unable to use its theoretical control of production (as they no longer have enough support to operate and distribute it or crush dissent).

The traditional way in which capital has attempted to stop this is via tactics such as the victimisation of organisers, (cutting the tallest ears of wheat etc), manipulation of information to delegitimise popular dissent, splitting of the working class into competing groups, and eventually, violence backed by whatever technology they have available.

Today, this goes hand-in-hand with monopoly, in which certain capitalist groups own so much stuff that they count as such. In terms of expensive/dodgy goods being sold, the perfect example is Microsoft. The design of it if flawed, its incredibly expensive, and there are far better systems available for free. It remains dominant however. How? Monopoly practice.

If the company has control over a large enough proportion of the market, it can oust potential competitiors before they can make an impact. Control over the source code of their software means it can't be replicated or improved by anyone except them.

Control over the market standards (most PCs run windows/IE) means all other software has to be made to be compatible with them, thus shutting out all competiton as no software is available to potential competitors. This is going the the courts in the EU at the moment, and went throught the US courts a while back as an anti-monopoly suit, but has had little impact on their dominance of the sector.

Basically, companies can offer rubbish service if they have sufficient conrol of the market that better competitors can't get a look in. In our present mode of capital accumulation, this covers almost every market, from bananas to shoes.

petey
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Feb 23 2006 18:50

a very good question. if capitalism is so horrible, how did it come to colonize so much of the world's economic activity? regressing one step, how were the lines of social control so arranged that so many people, who, one would expect, would realize the deficit of their position under capitalism, would still choose to participate in it? regressing another step, how arrogant is it to impute a "lack of class consciousness" or some other kind of brainwashedness to those who qualify as working class but still support or at least choose not to oppose a capitalist set of relations?

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sam sanchez
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Feb 23 2006 19:14

Well, for example, in the UK there were huge peasant land clearances so that people no longer owned land to grow their own food etc, so theyha dvery little choice but to work for an employer. And there was huge resistance at the time, especially during the civil war, from the chartists, the diggers, the luddites and many other unrecorded groups. Once factories were set up, the artisan economy could not compete, because by exploiting workers factories could make things cheaper. So they had to move to the factories in order to live. The industrial revolution was a time of huge repression. And we have to remember that people weren't particularly organised, becauser the transition was not from a non-exploitative anarchistic system, but from feudalism, where people were already greatly oppressed and exploited by te feudal landlords. And culturally, the Church etc. propogated a view that to be ruled over was "God's will". So that's how

Quote:
if capitalism is so horrible, how did it come to colonize so much of the world's economic activity?

Couple that with the fact that European countries colonised huge areas of the world and exported European style states and economic systems, and its perfectly clear that capitalism did not spring up from below through ther will of the people, but was enforced on people.

People do support capitalism, but that deosn't mean it benefits them as much as other systems. A lot of people think its capitalism or leninism, so we shouldn't be surprised they choose capitalism. If your told that "this is just the way things are" for long enough without coming across any evidence that things could be any different, of course you accomodate yourself to capitlalaism, because its psychologically very difficult to keep up opposition to something you feel there is no alternative to.

Its nt patronising to think that culture, the media and so on effect people's views, its a demonstrable (not to say obvious) fact. People are generally intelligent, but you can only be intelligent with the information you have.

cmdrdeathguts
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Feb 24 2006 16:15

capitalism was able to replace what went before it because what went before it was worse, and a less tenable system.

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jef costello
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Feb 25 2006 02:45

capitalism existed alongside feudalism for a long time.

Is this helping Anna Key? I just thought I'd add a few points.

Capital can take many forms but the aim is to use capital to create more than you had. For example You buy something in one place and sell it in another for a higher price. The difference between the price paid for the goods and the price you sell it for is the profit. (less any other costs)

The aim of capitalism is to avoid sharing the profit with those who provide the labour and keeping it for the person who provided the capital.

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Steven.
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Feb 25 2006 10:35
Jef Costello wrote:
The aim of capitalism is to avoid sharing the profit with those who provide the labour and keeping it for the person who provided the capital.

Hmmm don't think I'd agree with that. The "best" capitalists are the ones that don't keep the money for themselves, it's the ones who re-invest it and just help capital keep accumulating. It's not really about private profit.

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Rob Ray
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Feb 25 2006 10:48

That's not really contradicting his point, they might reinvest it but they retain control of it, and use it to obtain more.

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Steven.
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Feb 25 2006 11:49
Saii wrote:
That's not really contradicting his point, they might reinvest it but they retain control of it, and use it to obtain more.

Hmmm not really. I think he's implying the "point" of capitalism is for the capitalist to get rich. Which it's not. Individual intent is superfluous: once the institution of capital - basically the congealed past labour of workers - has been created it perpetuates itself by leeching off the labour of current workers. Thus our own life's activity is alienated from us and then stands above and against us ("Capital is dead labour, which, vampire-like, lives only by sucking living labour, and lives the more, the more labour it sucks" - Marx)

Quote:
Capital can take many forms but the aim is to use capital to create more than you had. For example You buy something in one place and sell it in another for a higher price. The difference between the price paid for the goods and the price you sell it for is the profit. (less any other costs)

I also think this is slightly looking at things the wrong way round - this stuff is basically mercantilism. I think they key thing inherent to capitalism is that those without capital must sell their labour power to those with it. They're then paid less than the value of their labour, and the difference is expropriated. *This* is the kind of profit - surplus value - that's important to capital.

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sam sanchez
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Feb 26 2006 17:37

Arguably power come into it as much as material gain. The control over a focatory or workplace gives the boss power over the workers, and he can tell them what to do and how to do it, and through accumulation can come to have more power over more workers and control over the market. They might not see it quite like that, but the status which eminates from power is a big part of business culture, as is the illusion of moving up the ladder by your own efforts, "hauling" yourself up by your "bootstraps". There are plenty of examples where introducing complete or partial workers self management in capitalist owned industry has increased productivity, but it has been scrapped because the management wanted to defend their "right to manage".

selig
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Feb 27 2006 22:52

I recommend What Keeps Capitalism Going? by Michael A. Lebowitz. It's a very good, basic little text:

http://www.monthlyreview.org/0604lebowitz.htm

Ripper
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Mar 4 2006 12:09
anna_key wrote:
ive never really understood it, cant fight what i dont understand

Capitalist commodity production means that:

The means of production belong to the capitalists.

The procucts are produced by workers who don't own any means of production.

The product belongs to the capitalists.

The labour force is a commodity.

Capital is ackumulated abstract labour for surplus production, and it's formost distinguishing feature is the appropriation of value through the use the commodity labour force, for production of other commodities. Therethrough the creation of a surplus value used to appropriate additional value, unt so weiter. This law is expressed M-C-M'. Money - Commodity - Money', where money' hopefully (for the capitalist) is greater than money.

Our use of the word "private property" means the division between the producers and the means of production. The bourgeoisie economists (and unfortunatly also Lenin) did however understand "private property" as "individual private property". The transformation of the means of production into state property does not abolish private property, or capitalism for that sake. There is no antagonism between capitalism and the state, no matter what the bourgeoisie ideologists claim.

It is also important to notice that the workers and not the capitalists are the core of capitalism. Capitalism is not abolished because we abolish the capialists, to abolish capitalism we have to abolish the workers, the variable capital, the wage labour. State capitalism or self-governed exploitation is not what we want.

We mean that the Soviet Union and the other so called "communist states" in fact where capitalist states. Did not commodity production and wage labour exist in the "communist states"? Did not the law of value operate in the "communist states"?

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Mar 4 2006 13:13

And in layman's terms? I wish people wouldn't use ridiculously overcomplicated language, gives me a headache and I actually know what you're talking about.

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Mar 5 2006 00:44
Saii wrote:
And in layman's terms? I wish people wouldn't use ridiculously overcomplicated language, gives me a headache and I actually know what you're talking about.

ok I'll try.

Th means of production are anything that can produce wealth. this could be a business, factory, call centre, farm whatever. The aim of capitalism is to use your control of the means of production to produce more wealth. Profit is the gap between the cost of making something and the price of selling it, the aim is to increase profit, the best way to do this is to decrease the amount paid for labour. The aim is to deny the workers a share in the profits produced by their labour and to give them simply the minimum needed to survive.

The basic fact of capital is that it only realy allows those who already have capital to get capital. Most of us simply work to cover bills.

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Rob Ray
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Mar 5 2006 10:22

Thas better 8)

Big Brother
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Mar 9 2006 18:21
Quote:
In short - most people do not own the means of our own survival (means to live, eat, etc.). Therefore we are forced to work for a wage for an employer. Employers pay workers less then the value of our labour in wages, and expropriate the rest - for profit, and to re-invest.

I couldn't agree more. Although I had a thought the other day, say somebody has an area of expertise in a particular skill (University educated) and an unskilled labour. How would you fairly distribute “profits” among co-workers in a company that requires a specialist to do the task and a unskilled co-worker actively working to make a profit? Would the expertise be content with equal pay? I would hardy think so.

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Lazy Riser
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Mar 9 2006 18:47

Hi

Depends how high the "equal pay" is. Those highly skilled workers are free to do something less challenging if they wish.

I advocate a big fat universal income, debt free money, whether you can find work or not. Anything extra you make on the open market you keep. People’s courts can fine unscrupulous profiteers for prize money to be handed out to disco dancing competition winners etc.

Love

LR

lukkbox
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Mar 10 2006 02:21
Lazy Riser wrote:
Hi

Depends how high the "equal pay" is. Those highly skilled workers are free to do something less challenging if they wish.

I advocate a big fat universal income, debt free money, whether you can find work or not. Anything extra you make on the open market you keep. People’s courts can fine unscrupulous profiteers for prize money to be handed out to disco dancing competition winners etc.

Love

LR

if you can put a name to that system of governance im all with you .. i can cut a rug and will be wealthy as fook ...

more to the point

in a capitalist society you end up with everything ultimately being owned by 1 big monster company (albeit under a thousand different names) so as to create the illusion of competition (like american wrestling)

unfortunately communism was an idea created by the same people who control the capitalist agenda and in so doing control both sides of the debate, and all talking points both for and against (like american wrestling)

so what hope is there for you guys if the people your for and against are the same entity financing both sides of the coin ....

well me personally, im going fishing and not worrying about anything, i urge you all to do the same grin

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Mar 10 2006 07:32

Capitalism as a system relies upon competition between the various bourgeoisie factions. When a single company rules everything then the only logical choice remaining will be to exterminate the working class, I can't see anything else for them to do.

Communism was not created by people who control the capitalist agenda, partly because there are no such people and partly because they obviously weren't that kind of person.

Communism is not a competing form of capitalism, although it can be derailed into it, so there is hope for freedom, not that I think that they'll ever be a revolution.

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Lazy Riser
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Mar 19 2006 12:12

Hi

Quote:
if you can put a name to that system of governance im all with you

I'm not sure if turning it into an 'ism is in the working class' best interests.

Love

LR

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Mar 19 2006 12:56
Lazy Riser wrote:
Quote:
if you can put a name to that system of governance im all with you

I'm not sure if turning it into an 'ism is in the working class' best interests.

It might be good at achieving this

lukkbox wrote:
unfortunately communism was an idea created by the same people who control the capitalist agenda and in so doing control both sides of the debate, and all talking points both for and against (like american wrestling)
Acto
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Mar 19 2006 17:24

It seems to me that capitalism is grossly misunderstood. You give the impression that you oppose the actions of some capitalists, but define those actions as being essential to the capitalists' success.

Capitalism is about production. You take ore, you produce metal, you sell it to someone who wants metal and has earned enough money to pay a fair price for it. You take some land, you farm it, you sell your crops to someone who is hungry and wants to buy it from you.

The issue, it seems, is the question of whose mine it is, whose land it is. If those who own them do the best that any man can with the resources, then find a reason why they shouldn't use them. If not, however, there is an endless list.

It is not wrong for a capitalist to employ other men, for his work and success gives them a chance to earn and be successful themselves, providing the capitalist pays them for the use of their abilities. It should be in the interest of the capitalist to pay fair wages, for if he does then jobs at his company will be in demand, and he may pick and choose the workers who will be the most productive, thereby increasing profit and sustaining the company.

The problems here lies in need. If a wage, no matter how miserable, is needed to support a person, a family, then the capitalist may be tempted to pay without basing wages on production. Here lies a terrible evil, the slavery of which many anarchists talk. It is also horrifying to the true capitalist, because it is something they fear - something counter-productive. Who can get the best from a slave who is told that he is free, but knows otherwise?

I believe that what you hate is the desire to have what you have not worked for, and that is the antithesis of capitalism.

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Mar 19 2006 18:38

Hi Acto,

Acto wrote:
the desire to have what you have not worked for, and that is the antithesis of capitalism

Anarchists/libertarian communists would argue that private property (as opposed to personal property, or 'usufruct'; 'use rights') does entitle the owner to unearned income - the owner of capital doesn't have to work at all, even though they sometimes do, and sometimes generate useful ideas. Michael Albert discusses remuneration under capitalism in a very accessible fairly jargon-free way here and here.

Acto wrote:
It should be in the interest of the capitalist to pay fair wages

Again, anarchists/libertarian communists would argue that there cannot be a 'fair' exchange under capitalism because of the massive asymmetries of power - consider the consequences of a worker going without income for a month versus a capitalist/employer waiting a month to hire someone, especially in ideal 'free market' capitalism without welfare support.

Acto wrote:
It is not wrong for a capitalist to employ other men, for his work and success gives them a chance to earn and be successful themselves

I would use the analogy of comparing wage labourers to gladiators. Gladiators are not slaves, but they are not free. They are given the chance to become free if they successfully compete against their fellow gladiators and rise to the top. Neccessarily, only a minority can ever get free, or even own a gladiator school of their own. Anarchists argue that "my freedom is neccessarily bound up with everyone elses" (Bakunin I think), and so such 'freedom' for one is slavery (or death for Gladiators) for others, and so is not freedom at all.

Anarchists/libertarian communists advocate a freedom that is at once individual and collective, as opposed to the notorious pure 'collective freedom' of 'socialist' States, or the Gladiator-like 'individual freedom' of Capitalist economies.

Acto
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Mar 19 2006 19:44

Good points. Would you define the difference between 'personal' and private property for me though, the meanings are unclear.

Consider capitalism on a small scale. A strike by workers can bring a company to its knees. The workers need not deserve more money in order to strike, only want it or feel that they deserve it. How many companies can survive without workers for a month?

Even if wealthy members of the company further up the heirachy decide to take early retirement, the company is destroyed, and not every capitalist is rich enough to escape a degree of dependency on his own job. A shopkeeper who employs a single person is a capitalist.

I have to ask, what makes you sure that more than a minority deserve to 'get free'? Most companies (I exclude a few, mainly those funded by inheritances and lottery wins) are created by hard work. Why do anarchists not start businesses of their own, pay fair wages and share power?

Something that troubles me is the idea of giving on the basis of need. I have not come across any justification for it so far.

Thanks for the links by the way.

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Mar 19 2006 20:02
Acto wrote:
Most companies (I exclude a few, mainly those funded by inheritances and lottery wins) are created by hard work.

That's an interesting assertion. A completely false and baseless one though of course. How many big companies have been started by people from the refugee camps in Ramallah? Or can they all just not be bothered to work hard?

Quote:
Something that troubles me is the idea of giving on the basis of need. I have not come across any justification for it so far.

Someone is about to die of starvation, someone else has loads of excess food, they can't even eat or give away. The person who needs it shouldn't get it?

If you got cancer, and needed treatment, should you pay the hundreds of thousands of pounds for it? Or just die if you couldn't?

Would you give a mate £1.50 for a bus fare if s/he didn't have it?

Acto
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Mar 19 2006 20:23

One's origins don't guarantee failure. Bill Gates' parents, for example, were not members of the aristocracy. Perhaps if they were more open to negotiation and cooperation, which I think we can both agree are important, then they might have a future.

The food should not be taken from the hand of the man who has it and be given to the man who does not. I should have clarified my point. I would be willing to trade the food in this case, his being alive is what pays for it - I want him to be alive, therefore my food has been traded, not given. However, I believe that what I do with what I own should be my choice, hence, no gifts.

If I get cancer, I do not expect someone to bail me out. If you ask someone for hundreds of thousands of pounds, might they not ask why?

I would give the mate a loan. If I am certain that they could not repay a loan, I will consider why they want to make the journey.

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pingtiao
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Mar 19 2006 20:28
Quote:
However, I believe that what I do with what I own should be my choice, hence, no gifts.

I agree.

What a worker produces with his own hands belongs to him, and so he should have full control of what happens to it.

From your exmaple earlier of the ore refinery: capitalist buys ore and machinery. A worker then uses the ore and machinery to create a refined metal. The difference in the price of these two items- sold at the average market prices- is from the value the worker added to it. Any lesser amount of money he is given is therefore theft.

If the working class as a whole is unable to make any decision other than to enter into relationships like this, the system which reduces the scope of their decision options is based on theft.

'Introductory', I know, but it is the name of the forum.

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Steven.
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Mar 19 2006 20:34
Acto wrote:
One's origins don't guarantee failure. Bill Gates' parents, for example, were not members of the aristocracy.

What aristocracy is there in the US? confused

They were rich though, they gave him half a million dollars - a lot of money at the time - to start up.

Quote:
If I get cancer, I do not expect someone to bail me out.

So you think anyone with cancer who isn't rich should just die?

You think people who can't afford food should starve? People with malaria/diarrhoea/HIV who can't afford the medicine should all just die?

Quote:
If you ask someone for hundreds of thousands of pounds, might they not ask why?

What? confused

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