Two billion more bourgeois

The Economist, in Two billion more bourgeois, admits that Karl Marx was right:

... But Marx thought “the bourgeoisie…has played a most revolutionary part” in history. And although The Economist rarely sees eye to eye with the father of communism, on this Marx was right.

The definition of the middle class in this article is that it ...consists of people with about a third of their income left for discretionary spending after providing basic food and shelter. Whereas the Marxist definition of the bourgeois is by property relations. The bourgeois own the means of production: factories, farms, mines, etc.

This is a classic case of the Capitalist economists dividing society up by income, whereas the true class divisions are by how people derive that income. The interests of the worker are different from that of the shareholder, bondholder, rentier, farmer, small business owner, etc.

The article goes onto make an important point:

As people emerge into the middle class, they do not merely create a new market. They think and behave differently. They are more open-minded, more concerned about their children’s future, more influenced by abstract values than traditional mores. In the words of David Riesman, an American sociologist, their minds work like radar, taking in signals from near and far, not like a gyroscope, pivoting on a point. Ideologically they lean towards free markets and democracy, which tend to be better than other systems at balancing out varied and conflicting interests. A poll we commissioned for our special report on the middle class in the developing world finds that such people are happier, more optimistic and more supportive of democracy than are the poor.

Emphasis Mine

The bourgeois have a different view of the world by virtue of their property relationships. They own things that make them money. They want to keep those things for themselves and make enough money to survive.

Here democracy is another one of those fluid terms that means different things to different classes. The bourgeois want to make decisions for their own benefit. Since they are a minority, they are not in favour of majority rule. So they continually devise means to keep the rabble under control, and behaving in a manner conducive to the bourgeois making money.

For the rabble (aka the poor), democracy means majority rule to defend their rights against the predations of the bourgeois.

Guess which version of democracy is more acceptable to The Economist?

The article contends that the growth of the bourgeois is a result of the global economic boom, and is rightly worried about the fate of the new members of this class:

Those at the bottom of the ladder do not have far to fall. But what happens if you have clambered up a few rungs, joined the new middle class and now face the prospect of slipping back into poverty? History suggests middle-class people can behave in radically different ways. The rising middle class of 19th-century Britain agitated peacefully for the vote; in Latin America in the 1990s the same sorts of people backed democracy. Yet the middle class also supported fascist governments in Europe in the 1930s and initially backed military juntas in Latin America in the 1980s.

Emphasis Mine

This article suggests that the improvishment of the bourgeois only occurs during economic downturns. Not so! The rate of improvishment merely increases in these times. The bourgeois have their property taken all the time by banks when their businesses fail. This is all part of Capitalism's ruthless efficiency.

How the bourgeois reacts depends on how they see their interests are best served. The petite bourgeois can swing either way: left or right. Despite what The Economist wants us to believe, the Capitalist Revolution in Great Britain was just as violent as elsewhere: the English Civil War, Peterloo, the Highland Clearances, the Irish Occupation, etc. It only appears peaceful in contrast to the energies unleashed by the French Revolution.

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An Engaged Workforce

Ruth Smith ponders whether An Engaged Workforce is ... an unrealistic ideal in the current business climate?

... Polling 23,600 directors, managers, and employees, they found that employee engagement is seen as one of the top three factors that drive an organisation's success (it ranks higher than strategy) and 75% of board members believe that it improves bottom-line performance. In these times, when the news is full of redundancies (layoffs), re-organisations, and failing businesses, I’m not sure if employee engagement is high on the business agenda.

Emphasis Mine

Later on, she muses:

In my work I have seen pockets of excellence where employee engagement seems to be occurring, and many places where it is obviously not! I have been asking questions about what is happening where engagement is prevalent. A pattern appears to be taking shape in the responses I get; engagement is more likely to occur when mangers purposefully include, and share power with, people within the organisation, co-creating a way of working together with their teams. There is a sense that the diverse range of people within the workplace community (not just the managers and leaders) are involved in, and feel accountable for, finding the solutions that are right for them, the business, and the future

Emphasis Mine

Power-sharing does not address the fundamental tenet of Capitalism: the owners of capital make the investment decisions. Power-sharing in this context is merely consultation before a decision is made.

The only thing we can hope for from this evolution in management thinking is the workers may gain in consciousness about their true power in the productive process, especially as other avenues are closed off (strikes, etc).

A truly engaged workforce is one that runs the workplace and employs capital as it sees fit.

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Cactus says' why don't we try a bit of captalism in these times'

Cactus says' why don't we try a bit of captalism in these times'? Catcus gives an example in which certain companies make the wrong technological decisions.

And if these companies go bankrupt, its not the end of the aerospace industry. The parts of these companies that are functional would be scooped up by other companies, provided they were deemed to serve some useful function going forward.

Cactus concludes with

And the solution to the whole financial mess is the same as the solution in my little fable: let the companies that made bad decisions fail, and end the subsidies the industry receives. In other words, let the bad banks die, let their counterparties die as they made equally bad decisions (its not like companies in just about any industry aren't able to figure out in many cases who their riskiest counterparties are, regardless of the industry they're in, as per this piece by Yves Smith), and end the banking industry's monopoly access to the Fed. A lot of banks will go bankrupt - after all, being a middleman is relatively easy work. But a) its unfair and b) inefficient.

Following this approach would lead to some term pain - a lot of it in fact, but that pain is going to be there no matter what approach we take, and that goes doubly so for the silly and counterproductive plan pursued first by the Bush and now Obama administrations. But in the long run, bringing the banking system into some semblance of capitalism will make everyone better off... except the grifters.

Emphasis Mine

The fundamental flaw in Cactus' argument is that the efficient operation of Capitalism leads to a concentration of capital. Cactus assumes in the example given that other firms will enter the market as others go bankrupt. The assumption is one of homeostasis in the Capitalist system.

The reality of Capitalism is different. The efficient operation of Capitalism leads to a monopoly in a technological niche by efficiently removing less able firms and raising the barriers to entry at each iteration of the development of technology. Monopolies are only overthrown when their technological edge becomes obsolete.

We are in this economic depression precisely because of the efficient operation of Capitalism - not the opposite. We need to change the social relations to change the outcomes.

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What’s the Cross-Functional Team, and Why should I have one?

Steve Johnson asks, "What’s the Cross-Functional Team, and Why should I have one?"

First of all, the definition is given as:

The cross-functional team is a group of people who collectively represent the entire organization's interests in a specific product or product family. This team provides benefits for the individuals on the team, the product and its customers, and the organization at large.

This is a counter trend to the proletarization of work, in which work is broken down into rote tasks that are easily learnt. This method of work decomposition allows for the mechanisation of tasks, easy replacement of workers, and downward pressure on wages as less skill is needed to replace a skilled worker.

The cost of this proletarisation has been the alienation of workers from their work. This is now seen as a huge cost in the production of goods.

Instead of having micro-managed workers doing highly defined tasks without reference to what anyone else is doing, the cross-functional team encourages workers to a higher view of the productive process.

A healthy team improves organizational alignment. Members are kept "in the know" regarding product status, including market research, customer feedback, product development progress, product-related financials, and promotional plans and events. Each member is held responsible for bringing that information back to their own department or team. In addition, they feed the team their own department or team's feedback. The cross-functional team allows us to get one representative group aligned; in turn, they exponentially increase organizational awareness and alignment.

What is left unsaid in this article is that Department II workers are being replaced by Department I workers. The latter have to be mananged differently in order to extract value from their labour.

The organisation of work cannot be done by the managers anymore. The work is too fluid to be precisely defined. If it is done so, the job definition is very likely to be obsolete.

The balance of power within the workplace is tipping in favour of the less politically reliable workforce.

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Decisions, decisions

The Economist posits What people can learn from how social animals make collective decisions in Decisions, decisions.

DICTATORS and authoritarians will disagree, but democracies work better. It has long been held that decisions made collectively by large groups of people are more likely to turn out to be accurate than decisions made by individuals. The idea goes back to the “jury theorem” of Nicolas de Condorcet, an 18th-century French philosopher who was one of the first to apply mathematics to the social sciences. Now it is becoming clear that group decisions are also extremely valuable for the success of social animals, such as ants, bees, birds and dolphins. And those animals may have a thing or two to teach people about collective decision-making.

The article goes on to describe the two types of decisions:

Animals that live in groups make two sorts of choices: consensus decisions in which the group makes a single collective choice, as when house-hunting rock ants decide where to settle; and combined decisions, such as the allocation of jobs among worker bees.

Emphasis Mine

The first type of decision would be called democratic centralism in which everyone abides by the majority decision. This is used to set goals.

The second type of decision is used to implement those goals.

For the consensus decisions, it would appear that bees use an iterative decision making process in which ideas are shared with everybody and independently evaluating that information.

... To find out, Dr List and his colleagues made a computer model of the decision-making process. By tinkering around with it they found that computerised bees that were very good at finding nesting sites but did not share their information dramatically slowed down the migration, leaving the swarm homeless and vulnerable. Conversely, computerised bees that blindly followed the waggle dances of others without first checking whether the site was, in fact, as advertised, led to a swift but mistaken decision. The researchers concluded that the ability of bees to identify quickly the best site depends on the interplay of bees’ interdependence in communicating the whereabouts of the best site and their independence in confirming this information.

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In other words, a robust democracy depends on the free flow of information and the critical analysis of the participants. Everyone needs to be involved in the decision-making process through receiving and evaluating the information.

And there is the importance of cadre development:

Dr Franks and his colleagues identified a type of behaviour called “reverse tandem runs” that makes the process more efficient. During the carrying phase of migration, the scouts lead other scouts back along the quickest route to the old nest so that more scouts become familiar with the route. Thus the dynamics of collective decision-making are closely entwined with the implementation of these decisions. How this might pertain to choices that people might make is, as yet, unclear. But it does indicate the importance of recruiting active leaders to a cause because, as the ants and bees have discovered, the most important thing about collective decision-making is to get others to follow.

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So, we have the intellectual flagship of Capitalism describing Leninist party building theory. The success of this depends on:

• Free flow of information
• Critical analysis of this information
• Participation of everybody in the decision-making
• Development of leaders to implement the decisions of the group

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Cognitive Hierarchy Theory

Mark Thoma posts an excerpt about "Cognitive Hierarchy Theory" from Making a game of economic theory, EurekAlert which quotes Prof. Colin Camerer that instead of:

... "Almost all the analysis, however, assumes people plan ahead and carefully figure out what others will do, which often results in mathematical claims that are highly unrealistic cognitively."

In reality, Camerer says, a key part of strategizing about what other people--or corporations, or countries--will do involves thinking about what they think you will do. "You can also think about what others think you think. . . . It can go on and on."

This multiple steps in thinking ahead is called cognitive hierarchy theory. Camerer goes on to explain that not all people follow the same number of steps:

"The cognitive hierarchy theory finds that people only do a few steps of this kind of iterated thinking," he explains. "Usually, it's just one step: I act as if others are unpredictable. But sometimes it's two steps: I act as if others think *I* am unpredictable. You can think of the number of steps a person takes as their strategic IQ. A higher strategic IQ means you are outthinking a lot of other people."

This theory is a percularity of the Capitalist system in which all individuals have to compete for limited resources. Those who are able to think further ahead will gain more. It is really a justification for elitism: those who think more are rewarded more.

In a Communist economy, the emphasis would be on co-operation and theories like this will no longer be needed.

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Bank Nationalization and the Otto Problem

Paul Kedrosky opines about Bank Nationalization and the Otto Problem:

For all sorts of reasons, some knee-jerk, some nonsensical, and some entirely rational, the word "nationalization" has roughly the same effect on the average American as does the word "stupid" on Otto in the movie A Fish Called Wanda. The typical American could be dangling by a finger from a hot-air balloon and yet at the sound of the word nationalization they'll go off in a red-eyed rage about evil socialists and the end of America.

Emphasis in original

The problem is that the anti-Communist propaganda has been so effective that the American public can only react as it does. Kedrosky decries this as stupidity, but it is not. The brain-washing has been thorough and extremely effective that extreme measures to save the American Capitalist system are imperilled.

Kedrosky has a further problem:

The frustrating thing is that, if it were explained properly, most Americans would likely be demanding nationalization/pre-privatization. ...

Emphasis in original

The unstated reason for this is that people would understand it is in their best interests to nationalise the banks. You cannot have the people deciding what is best for them! Otherwise, there would be no need for the elite to make decisions for people!

And so, Kedrosky is left to fume at the injustice of it all:

So, is nationalization wonderful? Of course not. It's awful and wildly maddening in a capitalist economy. But is it better than the never-ending bailout? Yes. And liking it doesn't mean anyone's being called stupid or a socialist.

Once more, it's Socialism for the Rich while the poor should still think that Socialism is a very, very bad thing.

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Capitalism 3.0

Mark Thoma points to a new, improved version of Capitalism: "Capitalism 3.0":

Dani Rodrik says capitalism must be reinvented to build "a better balance between markets and their supporting institutions at the global level"

This is just an old version of Capitalism with some tweaks to the trimings. The fundamental problem of Capitalism is not addressed nor mentioned.

Dani Rodrik crows that:

Those who predict capitalism’s demise have to contend with one important historical fact: capitalism has an almost unlimited capacity to reinvent itself. Indeed, its malleability is the reason it has overcome periodic crises over the centuries and outlived critics from Karl Marx on. ...

Rodrik goes to write that increasing government intervention helped to stabilise the Capitalist system:

... The new balance that it established between state and market set the stage for an unprecedented period of social cohesion, stability and prosperity in the advanced economies that lasted until the mid-1970s.

This model became frayed from the 1980s on, and now appears to have broken down. The reason can be expressed in one word: globalization.

The postwar mixed economy was built for and operated at the level of nation-states, and required keeping the international economy at bay. ...

Here Rodrik forgets that the current manifestation of Globalisation is not the first one in history. The previous manifestation died at the start of World War I. That one was a more encompassing one in that direct military and political control was imposed by the imperial powers through their empires.

Following World War II, neo-colonialism became the norm in which local elites managed the process on behalf of foreign interests. This meant the system was not as efficient as before but more stable as it required less direct intervention.

However, the increasing confidence and power of these local elites has caused the imperial powers to revert to direct military and political control as seen in the cases of Serbia, Iraq, Chad, Panama, Chechyna, Tibet, Sierra Leone, Solomon Islands, etc.

Under Capitalism, the nation state exists as a protected market for the local Capitalists. Access to this market is of great interest to other Capitalists seeking to offset crises in their own markets.

Rodrik concludes that:

The lesson is not that capitalism is dead. It is that we need to reinvent it for a new century in which the forces of economic globalization are much more powerful than before. ... This means imagining a better balance between markets and their supporting institutions at the global level. Sometimes, this will require ... strengthening global governance. At other times, it will mean preventing markets from expanding beyond the reach of institutions that must remain national. The right approach will differ across country groupings and among issue areas.

Designing the next capitalism will not be easy. But we do have history on our side: capitalism’s saving grace is that it is almost infinitely malleable.

Once again, Rodrik hopes that, by having greater span of government control, the Capitalist crises can be contained. Rodrik wants a supra-national government to manage Capitalism for the Capitalists. In other words, the One World Government is being put forward as the salvation of the Capitalist system. This will not go down well with the petite Bourgeious who passionately believe that government is the cause of their problems.

The central problem of Capitalism is that profit both drives the system and causes it to collapse by reducing consumption. If goods cannot be consumed because of lack of money, then goods cannot be sold. Therefore, unsold goods represent unvalorised capital. Capital that cannot be valorised cannot be turned into profit. No expectation of profit means no investment in either machinery, raw materials, or labour. Thus, the amount of money available for the purchase of goods to be consumed is reduced. And so, the cycle continues.

I suppose Rodrik wants a Keynesian world government to keep consumption up during economic downturns. Government spending requires taxation. And taxation without representation has been the cause of a few revolutions.

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