Class War: Low Wages and Beggar Thy Neighbor

Yves Smith posts a video by Dr. Heiner Flassbeck (in German) about Class War: Low Wages and Beggar Thy Neighbor.

The interesting point raised by Dr. Flassbeck is that he blames the current European crisis on class warfare: the clash between workers and Capital.

He says that the manisfestation of this is that Germany manipulated the Euro for its own benefit by getting employers to collude with the unions to keep real wages down. This enabled Germany to keep inflation below the target set for the Euro of 2% pa. This allowed German firms to achieve an export miracle at the expense of domestic demand.

The root cause is the victory of Capital over Labour in Germany. The domestic demand has not kept up thereby allowing Germany to run a very current account surplus with other members of the Eurozone. So Greece is unable to pay off its debts by selling things to the Germans because the latter have less real money to consume things with.

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Rogoff: Is Modern Capitalism Sustainable?

Mark Thoma refers via Rogoff: Is Modern Capitalism Sustainable? to Is Modern Capitalism Sustainable?, by Ken Rogoff, Commentary, Project Syndicate.

Rogoff lists five (5) problems with Capitalism:

First, even the leading capitalist economies have failed to price public goods such as clean air and water effectively. … Second, along with great wealth, capitalism has produced extraordinary levels of inequality. … A third problem is the provision and distribution of medical care… Fourth, today’s capitalist systems vastly undervalue the welfare of unborn generations. … Financial crises are of course a fifth problem, perhaps the one that has provoked the most soul-searching of late. …

The first four (4) problems all relate how the market is not calibrated properly. The Capitalist Economist fervently believes that with the correct parameters (aka prices) that the market system will produce the most beneficial outcomes. A much simpler approach would be a law that is unflinchingly enforced to achieve the same result.

Only the fifth problem aligns with Marx's view that crises are endemic to Capitalism. You cannot have Capitalism without periodic crisis.

Rogoff's conclusion is:

Will capitalism be a victim of its own success in producing massive wealth? For now, as fashionable as the topic of capitalism’s demise might be, the possibility seems remote. Nevertheless, as pollution, financial instability, health problems, and inequality continue to grow, and as political systems remain paralyzed, capitalism’s future might not seem so secure in a few decades as it seems now.

As Marx wrote, the future of Capitalism depends on its gravedigger: the proletariat.

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Global business chiefs fear poverty could destroy capitalism

Simon Mann writes that Global business chiefs fear poverty could destroy capitalism.

ncome disparity, resource depletion and potentially cataclysmic climate change were recognised by chief executives in a series of conversations conducted by Harvard [University Business School] as among the potential ‘disrupters’ of global prosperity. The financial meltdown of 2008 and, now, the Occupy movement are clear manifestations of those fears.

“And we'd expect more,” one of the authors, Joseph Bower, told the Herald. “Because people really feel outraged.”

These quotes are from Capitalism at Risk: Rethinking the Role of Business.

Marx saw Capitalism's main problem as the periodic crises. We are lurching from the 2008 GFC into the 2011/12 Euro-crisis. And then there will be the Sino-crisis followed by yet another one. Crisis upon crisis with no end in sight.

Marx says that these crises are unavoidable as they are part of the make-up of Capitalism itself.

To avoid these crises, we need to move to a better economic system: Socialism followed by Communism.

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Preparing for the breakthrough/calamity

Seth Godin says to stop Preparing for the breakthrough/calamity which never occurs, only that:

Products and services succeed one person at a time, as the word slowly spreads. Customers defect one person at a time, as hearts are broken and people are disappointed. Doors open, sure, but not all at once. One at a time.

Leon Trotsky writes, in his History of the Russian Revolution, that, during the build-up to the October Revolution:

At the same time, in the most faraway garrisons and the most remote parts of the front, the soldiers were speaking more and more boldly in the language of Bolshevikism, often enough never guessing it. The Bolsheviks in the regiments were only single individuals, but the Bolshevik slogans were penetrating deeper and deeper. They seemed to be coming up spontaneously in all parts of the country. (p.307)

Emphasis Mine

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Chris Dillow: The Importance of Class

Mark Thoma refers via Chris Dillow: The Importance of Class to Class, power & ideology, Stumbling and Mumbling:

“Nothing makes sense without class” says Owen Jones. He’s right, if we understand “class” in its Marxist sense.

An objective definition of class is given:

To Marx - though the idea was implicit in other classical economists such as Ricardo - class was not about lifestyle, but about one’s relationship to the economy. If your income comes from wages, you’re working class. If it comes from capital, you’re a capitalist.

I believe Marx defined the Proletariat as those can only earn their sustenance by selling their labour power. This allows the inclusion of the unemployed (or “reserve industrial army”) as part of the Proletariat while excluding the criminal elements (“Lumpenproletariat”). Although some Capitalists are wage earners, their major income comes from the return on Capital either through dividends or capital gains.

This objective definition is contrasted with a subjective definition of Middle Class:

You might reply that, by this criterion, we are almost all working class now. True. Even people who think of themselves as “middle class” are in many cases only a P45 away from poverty. They are objectively working class even if they are not subjectively so.

Dillow goes on to describe the distribution of power within a Capitalist economy:

What’s more, class in this sense is correlated with power: capitalists have it, workers don‘t*. This is because economic power flows to scarce resources and capital is scarcer than labor.

This is probably an over-simplification. The workers do have the power—mainly through the strike. The withdrawal of labour power inhibits the reproduction of capital. This is the reason that the Capitalist has to so restrict or even outlaw strikes. Collective bargaining is just too powerful to be allowed to be unchecked by the ruling class. It has the potential to bring the Capitalist order.

Dillow asks the question about the invisibility of class:

This raises the question. If class is so central to an understanding of the economy, why is it so little discussed?

The answer lies in another of Marx’s insights - that false consciousness prevents people from seeing how capitalist power operates. In this sense, the cognitive biases research program throws up some new theories that vindicate Marx. For example:

• the illusion of control causes people to over-estimate the chances of them escaping the working class through their own efforts, and so under-estimate the importance of collective class action .
• the in-group heterogeneity bias (which is the flipside of the out-group homogeneity bias) causes people in similar economic positions to exaggerate the differences between themselves and so fail to see their common class position.
• the just world effect causes people to think that victims are to blame for their fate - so, for example, the poor are thought to be stupid and feckless even if the cause of their poverty lies elsewhere.
• the optimism bias leads people to think they will succeed if only they work hard enough, and so blinds them to the possibility that their class position will prevent them getting the full fruits of their labour.

Dillow completely misses the importance of the ideological and coercive superstructures that exist to prevent workers from overcoming their exploitation. The ideological superstructure includes:

• Religion that tells workers that their reward lies in the afterlife and that God gives wealth to the rich because they are more deserving;
• Educational institutions that inculturate obedience and compliance;
• The Mass Media who hides protests by workers or casts them in a bad light.

The coercive superstructure includes the police (secret and not so-secret), criminal justice system.

Dillow concludes with:

And here, I part company with Owen. We cannot have a reasonable debate about class, because cognitive biases such as these are ubiquitous. Successful power structures persist in large part because the way in which power is exercised is hidden from us. The importance of class and the lack of discussion of it are two sides of the same fact.

The Capitalist system cannot admit that class exists unless the Capitalists are threatened with a tax increase. Then it is class warfare. As Warren Buffett says, “It is class warfare and my class is winning.”

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Inside the Trillion-Dollar Underground Economy Keeping Many Americans (Barely) Afloat in Desperate Times

Yves Smith refers to Inside the Trillion-Dollar Underground Economy Keeping Many Americans (Barely) Afloat in Desperate Times by Sarah Jaffe. This part of the US economy is estimated to be growing at 5% p.a..

Millions have dropped out of the job hunt and are trying to find other ways to sustain their families.

That's where the underground economy comes in.…—in 2009, economics professor Friedrich Schneider estimated that it was nearly 8 percent of the US's GDP, somewhere around $1 trillion.…Schneider doesn’t include illegal activities in his count-- he studies legal production of goods and services that are outside of tax and labor laws. And that shadow economy is growing as regular jobs continue to be hard to come by—Schneider estimated 5 percent in '09 alone.

This underground activity is still seen as Capitalist in that the same mode of production is used: people with money hire other people to work for them.

…Lisa Dodson stressed the way communities came together to help one another through tough times, often through off-the-books economic activity, in her book The Moral Underground: How Ordinary Americans Subvert an Unfair Economy.

In one passage, she tells the story of arriving in a small-town farmer's market in Maine, only to overhear a discussion between locals on “neighbors and the market erosion of common fairness.” She wrote:

Just then a middle-aged woman, who had been talking to friends, suddenly turned around to face other shoppers and asked, 'What’s happening to us? Why doesn’t the government do something?' A local farmer, sorting vegetables nearby, responded immediately, 'The government is the same as the oil companies. There’s no difference. We can’t wait for them to do anything.' A young mom holding a baby as she stood in line said, 'So what do we do?' There was no single response, but they were looking at each other to find it.

So, the US workers have a learned helplessness from the Capitalist system. They have been trained to look to the Capitalist class for initiatives. They do not realise that they the power in their hands. That is where wealth comes from—the hands of the workers.

No wonder the Capitalist ideologues ridicule the Labour Theory of Value. They realise that the status quo depends on the workers being aware of their considerable power.

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Why a Working-Class Revolt Might Not Be Unthinkable

Mark Thoma argues Why a Working-Class Revolt Might Not Be Unthinkable.

His conclusion is that:

We need a serious discussion of this issue, followed by changes that shift political power toward the working class. But who will start the conversation? Congress has no interest in doing so; things are quite lucrative as they are. Unions used to have a voice, but they have been all but eliminated as a political force. The press could serve as the gatekeeper, but too many news outlets are controlled by the very interests that the press needs to confront. Presidential leadership could make a difference, but this president does not seem inclined to take a strong stand on behalf of the working class despite the surprising boldness of his job-creation speech.

Another option is that the working class will say enough is enough and demand change. There was a time when I would have scoffed at the idea of a mass revolt against entrenched political interests and the incivility that comes with it. We aren’t there yet – there’s still time for change – but the signs of unrest are growing, and if we continue along a two-tiered path that ignores the needs of such a large proportion of society, it can no longer be ruled out.

Emphasis Mine

For a working-class revolt to occur, there has to be a self-consciousness within the the working class itself. That is, the working class has to be aware that it constitutes a class opposed to the capitalist class. The working class has to place itself within a historical context of a class struggle.

I do see any widespread awareness of the class struggle. The consciousness that exists is mainly based on racism, sexism, xenophobia, and homophobia. These are all devices that preclude the development of a true class consciousness.

I fear that the current economic distress will give rise to fascism instead and this will further consolidate the rule of the Capitalists.

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Was Marx Right?

Via Mark Thoma, Umair Haque asks if Was Marx Right?

Haque considers the following areas:

• Immiseration
• Crisis
• Stagnation
• Alienation
• Flase consciousness
• Commodity fetishism

Haque concludes that:

Marx's critiques seem, today, more resonant than we might have guessed. Now, here's what I'm not suggesting: that Marx's prescriptions (you know the score: overthrow, communalize, high-five, live happily ever after) for what to do about the maladies above were desirable, good, or just. History, I'd argue, suggests they were anything but. Yet nothing's black or white — and while Marx's prescriptions were poor, perhaps, if we're prepared to think subtly, it's worthwhile separating his diagnoses from them.

And, as always, the ideologues of Capitalism conclude that the system needs tweaking not replacing. All of the areas investigated by Haque exists because of the class structure of a Capitalist society. It is this exploitation of one class by another that causes these problems. Removing the cause goes a long way to solving the problems.

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Marx an analytical sociologist?

In UnderstandingSociety: Marx an analytical sociologist?, it is argued that Karl Marx built his understanding of society on microfoundations rather than the large scale structures of society.

Marx is often thought to be a "structuralist" thinker, highlighting large social processes and entities such as the mode of production, the economic structure, and social class (for example, by Althusser and Balibar in Reading Capital). However, I argued in The Scientific Marx (1986) that a careful examination of Marx's economic writings reveals something quite different. I argued, first, that Marx embraced the idea that social explanations require microfoundations.

As I read the article, these microfoundations are based in individuals. It is the aggregation of the desires, expectations, and actions that give rise to class interest.

The article also places Marx's theory into rational actions within historically constituted choices, and causal mechanisms within the existing institutions of society.

The subjective view of the world determines what choices are seen to be available, while the restriction on choices determines the objective reality.

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In Praise of Marx

Terry Eagleton writes In Praise of Marx.

The truth is that Marx was no more responsible for the monstrous oppression of the communist world than Jesus was responsible for the Inquisition. For one thing, Marx would have scorned the idea that socialism could take root in desperately impoverished, chronically backward societies like Russia and China.

This is not strictly true. My understanding of Marx is that he appreciated that the rapid industrialisation of Russia under foreign capital may give rise to a socialist revolution. This ambiguity crippled the Bolshevik ideology prior to the April Theses of Lenin in 1917.

Eagleton goes on to write that:

It is not a program by which nations bereft of material resources, a flourishing civic culture, a democratic heritage, a well-evolved technology, enlightened liberal traditions, and a skilled, educated work force might catapult themselves into the modern age.

My understanding is that Lenin hoped that the October Revolution would inspire a successful revolution in a modern Capitalist economy such as Germany. The despair of the failure of the 1918-1919 revolution in Germany eventually led to the theory of Socialism in One Country. This essentially stopped the world-wide communist revolution until 1949.

Eagleton correctly suggests that Marx was an enthusiast of Capitalism:

On the contrary, he was extravagant in his praise for the class that created it, a fact that both his critics and his disciples have conveniently suppressed. No other social system in history, he wrote, had proved so revolutionary. In a mere handful of centuries, the capitalist middle classes had erased almost every trace of their feudal foes from the face of the earth. They had piled up cultural and material treasures, invented human rights, emancipated slaves, toppled autocrats, dismantled empires, fought and died for human freedom, and laid the basis for a truly global civilization. No document lavishes such florid compliments on this mighty historical achievement as The Communist Manifesto, not even The Wall Street Journal.

Emphasis in Original

Eagleton continues:

Socialism, then, does not depend on some miraculous change in human nature. Some of those who defended feudalism against capitalist values in the late Middle Ages preached that capitalism would never work because it was contrary to human nature. Some capitalists now say the same about socialism.

Eagleton concludes:

Why might Marx be back on the agenda? The answer, ironically, is because of capitalism. Whenever you hear capitalists talking about capitalism, you know the system is in trouble.

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Why makers should think a little bit more like managers (and vice versa)

Seth Godin points to the merging of the manager and maker roles in Why makers should think a little bit more like managers (and vice versa):

Managers need to act more like makers, because making is more important than ever before. Even the most Outlook-driven manager can benefit from finding the isolation to do truly challenging work.

Makers need to be disciplined enough to interact like managers, else they will become pawns in a system they don't sufficiently influence. If you're not present when decisions are getting made, my guess is that you won't like what gets decided...

Emphasis Mine

Here we see the flattening of the Department I organisation giving rise to the worker-manager. It is no longer satisfactory for the worker to surrender all decision-making to their bosses, but it is necessary for the worker to take decision-making upon themselves.

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Hundreds of Thousands of Arabs Protest their Governments

Prof Juan Cole makes some bitting comments about Americans while the Arabs are on the move in Hundreds of Thousands of Arabs Protest their Governments:

On Friday, the US Congress endeavored to decide whether American democracy has irretrievably broken down because the representatives of the Billionaires refused to compromise with the representatives of the People (“cutting spending” while “cutting taxes” means “shifting the cost of running society to the middle class from the filthy rich”). The answer was that it had not, as long as the representatives of the People showed sufficient deference to the Billionaires, shuffling, keeping their eyes down, and obediently emptying their pockets. The middle class, successfully distracted by racial and religious hatreds and by attempts to impose patriarchal fundamentalism, was wreathed in vapid smiles as the billionaires sent movers to their homes to pick up the belongings they had just fleeced from them via their enforcers, the tea baggers.

Emphasis Mine

Cole is wrong to assume that there is only party of Billionaires in the USA. Both the Democrats and Republicans both serve the super-rich 1% of the USA. All of this nonsense about the budget showdown is just a horse and pony show to distract people's attention from the huge waste of money spent of the wars that protect the interests of the super-rich.

And, yet, Cole is right to point to the role that racism and religion plays in keeping the people (not just the Middle Class) quiet and distracted. These are masterful in postponing the social crisis that is now developing in the USA. This social crisis revolves around the breaking of the social contract between the petty bourgeoisie and labour aristocracy with the Capitalists: they would subordinate their interests in return for a share of the loot exploited from others.

The rise of the Tea-Baggers as a social protest spans the proto-fascism needed to keep the workers in check to a cry from the down-trodden against the system. This drama is playing out. I think the Tea-Baggers will be subverted into a Fascist organisation to keep the super-rich in power.

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Daniel Pennell: Thoughts on American Homeownership

Yves Smith refers to Daniel Pennell: Thoughts on American Homeownership.

This downturn is leading to more fundamental rethinking of what used to be a mainstay of personal security but increasingly became a consumption item, namely, owning a home. The percentage of Americans who think of homeownership as a good investment has fallen by about 20 points in the last three years, from four fifths to three fifths.

Emphasis Mine

It it interesting to note that people are beginning to realise that home ownership is now a burden to the working class because it impacts job mobility.

I have noted the change of housing from sustenance to consumption elsewhere. But it is nice to see this shift noted by Yves Smith as well.

And it is this shift from sustenance to commodity that powered the latest boom and bust cycle in housing. Too many people had become dependent on the commodity production of housing. And this is causing the distress now.

Daniel Pennell not only puts himself in the camp of housing skeptics, but also highlights the link between the scale of homes and obligatory consumption levels. And I’ve certainly observed the converse. One of the reasons for Japan’s high savings rate is, no joke, their teeny homes.

Daniel Pennell gives the primary reason for home ownership as:

Increasingly I find that a house is a place for your stuff. Not that I am against “Stuff”…capitalism would collapse if people did not buy wasteful stuff.

I think that Smith and Pennell miss the underlying ideological basis for pushing home ownership: it puts more people into the conservative camp through propert ownership. Your ideological outlook is shaped by your material possessions. Those who have want to keep, while those who haven't want to get.

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Posts Noted 2011 April 1

Blogs posts noted on 1 April 2011

• Seth Godin ponders Compared to perfect: the price/value mismatch in content:

Price is often a signalling mechanism, and perhaps nowhere more than in the area of content. Free enables your idea to spread, price, on the other hand, signals individuals and often ends up putting your idea in the right place. Mass shouldn't always be the goal. Impact may matter more.

• Ted Rall writes about The Devils We Don’t Know:

War should be voted upon by the citizenry. After all, we—not Congress—bear the costs. If a president can’t be bothered to explain why we should kill and be killed and spend billions of dollars on a conflict, too bad for him and his pet defense contractors.

• Tax the Super Rich now or face a revolution in the USA:

Yes, tax the Super Rich. Tax them now. Before the other 99% rise up, trigger a new American Revolution, a meltdown and the Great Depression 2.

…

Wake up folks. The Super-Rich Delusion is destroying the American Dream for the rest of us. The Super Rich don’t care about you. They’re already stockpiling for the economic time bomb dead ahead. Don’t say you weren’t warned. Time for you to plan ahead for the coming revolution, for another depression.

• Paul Kedrosky writes about Unearthing America's Past and quotes:

Conventional wisdom has it that invading Europeans simply wiped out the Native way of life. In fact, Richter argues, it's better to think of what happened in terms of historical layers, each new layer inheriting the shape of the previous one. In the fifteenth century, conquistadores brought the European Middle Ages to America, fueled by religious zeal; but, almost at the same time, European traders built a different kind of life, learning to coexist with Native civilization and importing a sensibility we might recognize as modern and capitalistic.

• Walking the Line Between Good and Evil: The Common Thread of Heroes and Villains

Conformity and standardization serves a purpose, but it isn’t universally applicable, and is context-specific. We should question authority. If no one ever broke a rule and unquestionably followed the given outline, there would never be any advancement in this world. Creativity, by definition, is rule-breaking. However, there needs to be a way to recognize rules that are being broken for the sake of doing social good, and those that are broken for illegal or immoral intent.

At any given point in time, there is a significant portion of the population fighting against conformity, refusing to get shoved into a box, breaking rules in order to advance civilization—but what if they all stopped? What if every single person stopped bucking the system, stopped challenging convention, and marched obediently to take their expected place in society?

• Mickey Z gives another reason to go vegan: Peak Dirt (and yours truly on the radio)

It’s been estimated that 75 percent of original US topsoil has already been lost and 4,000,000 acres of US cropland is lost each year to soil erosion (that’s roughly the size of Connecticut). An acre of US trees disappears every eight seconds. Since 85 percent of US topsoil loss is directly associated with livestock raising, there is a good first step we can take to battle Peak Dirt: go vegan.

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Posts Noted 2011 March 31

Blog posts noted on 31 March 2011. Most are comments on John Taylor's post highlighted by Greg Mankiw which was noted yesterday.

• Pincus re-presented ponders how:

Pincus marshalls his evidence to tell a significantly different story from the received one. And as an academic work, it is highly readable and logical. But it is from beginning to end a complex canvas, and it is difficult for a non-specialist reader to keep it all in mind. How might an author -- or a producer -- more fully engage the reader's historical imagination in these complex events? How might the material be presented in a way that gives the reader a more comprehensive apprehension of this history of the English Revolution?

• Debt: The first five thousand years is introduced as:

Throughout its 5000 year history, debt has always involved institutions – whether Mesopotamian sacred kingship, Mosaic jubilees, Sharia or Canon Law – that place controls on debt's potentially catastrophic social consequences. It is only in the current era, writes anthropologist David Graeber, that we have begun to see the creation of the first effective planetary administrative system largely in order to protect the interests of creditors.

• Paul Krugman notes in What’s Behind Low Investment? that:

What the data actually say is that we had a catastrophic housing bust and consumer pullback, and that businesses have, predictably, cut back on investment in the face of excess capacity. The rest is just politically motivated mythology.

• Paul Krugman notes in More on Unemployment and Investment that:

Investment is low as a share of GDP; well, that’s no surprise given how depressed the economy is. And if anything investment is a bit stronger than you might have expected from past behavior.

• Noahpinion says that John Taylor draws a Phillips Curve:

To reiterate, Taylor's graph is perfectly consistent with a world in which demand shocks drive the business cycle and demand-side policy is the key to stabilizing investment. His supply-side conclusions are purely a function of his assumption that we live in an RBC-type world. But there are good reasons to think he's wrong. For an argument as to why New Keynesian models are better than RBC models, see this 1989 paper by...Greg Mankiw.

• Mark Thoma points to some more remarks about About That Striking Graph from John Taylor including Paul Krugman's one listed above.

I still think that the time span is important: 1990 to the present. It was during this time that housing became a commodity. Thus, housing should now be included in the overall investment cycle.

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Posts Noted 30 March 2011

Blog posts noted on 30 March 2011

• Mark Thoma reposts an interesting graph from Greg Mankiw: A Striking Scatterplot at Striking Scatterplot: Unemployment and Investment.

As we move into an economy dominated by Department I, this correlation will continue to strengthen. The countervailing trend of a decrease in importance of Department II means that corporate profit rates must continue to decrease.

• Yves Smith publishes Zeitgeist Watch: Art Critic Questions Winner Take All Society. His comment is:

The fact that a member of a world that has always depended on discretionary spending by the well heeled is raising questions like this is striking. Is this a sign that those at the top have become so isolated and increasingly irresponsible that even support personnel are wondering about the true costs of their allegiance? One of the fundamental assumptions of the new world order is that everyone has a price. Yet social animals of all sorts have developed what looks like a sense of fairness and reciprocity in their dealings, and will incur personal costs to punish cheaters. The wealthy may err in assuming loyalty can be bought.

• Paul Krugman notes in Road to Appomattox Blogging that:

It was, in a very real sense, the victory of modern America — of a democratic nation, in manners as well as politics — over an aristocratic ideal.

And the way modern America won was characteristic. Southerners were better warriors — man for man, they almost always outperformed Union armies, although the gap narrowed over time. But the North excelled at the arts of peace — that is, in industry and ability to get things done. The North couldn’t stop Bedford Forrest from raiding supply lines; but it could repair track incredibly fast. And it was that Northern superiority in logistics, in production, that eventually proved decisive.

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Noahpinion: Libertarianism is a "low-end" strategy of state formation

The basic theory behind Noahpinion: Libertarianism is a "low-end" strategy of state formation ignores the social surplus production of differing societies.

The article assumes that societies have a choice in the amount of surplus production that they surrender to the state. This choice is presented as a difference between “low-end” of minimal surplus to “high-end” of a centralised bureaucracy.

My understanding of Marxist economic theory is that a particular mode of production has a certain ratio of surplus social production. The minimal amount is the primitive communist society ranging to high in the capitalist society. It is the social organisation that determines the amount of surplus production.

In all societies, the ruling class expropriates the surplus production to itself. It will spend this surplus in order to maintain its rule. The more that is expropriated, the greater the cost.

The existence of the State is not an optional extra—the State is the visible manifestation of class rule. The State exists solely to keep the subject classes in their place. This is done through naked force such as the army and the police as well the crimminal justice system, and the ideology promulgated through the mass media, educational system, and the bureaucracy. These things costs money.

The Libertarians want to expropiate the surplus production without paying for the protection of their theft.

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Market Democracies and Inequality

Mark Thoma reposts Basic institutions and democratic equality, by Dan Little at Market Democracies and Inequality.

The conclusion seems to be:

…market and electoral institutions both create and reproduce social inequalities even when they are working correctly; inequality is built into them at a very basic level. The institutions are tilted in favor of privileged groups, and it is no surprise when corporations wield substantial influence in Washington and Paris and tax policies are enacted that favor the richest percent of American income earners. These aren't abnormal anomalies; they are instead precisely what we should expect when we analyze the basic institutions carefully.

In other words, Capitalism creates inequality through the ongoing concentration of wealth just as Karl Marx said it would do.

These basic institutions are all part of the state apparatus. And the state exists to serve the interests of the ruling class.

It is only through the mystification of the burgeois state by Capitalist ideologues that we think of the state as a separate entity outside of the class war. The state is the fundamental tool of oppression of the working class.

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Posts Noted 2011 March 13

Blog posts noted on 13 March 2011

• Mark Thoma reposts on The End of the 'Washington Consensus' part of The end of the 'Washington consensus', by Kevin Gallagher. A premature celebration, perhaps, as the iron fist of the US military is not alluded to at all. These things are not mentioned in polite company.

The bigger point here is that, even if Colombia gets the sorry trade deal it wants and doesn't get a canal, the United States is literally and figuratively bankrupt in its competition with Chinese finance. Literally, because the US has the largest deficit on the planet and owes a big chunk of that to the Chinese. Figuratively, because the economic model that the US has exported to Latin America hasn't worked. China is funding infrastructure, exploration, science and technology, and all the other things that President Obama says we should be spending on here at home.

• Cassandra's legacy: Joseph Tainter: talking about collapse. The complexity overwhelms the ruling class' ability to manage society. The more efficient a society becomes, the smaller the ruling class becomes. This relative smallness reduces the pool of talent able to meet crises.

Tainter's point is that there is a strong relationship between resources and complexity. It is clear that complexity cannot exist without resources - not for a long time, at least. But the relationship is far from being linear: with resources diminishing, complexity does not decrease – on the contrary it keeps increasing. It is the result of the benefits that complexity gives: resource depletion can be counteracted by increasing complexity, but only up to a certain point and with ever-reducing returns. At some moment, returns become negative, society cannot support any longer its complex infrastructures and the result is collapse.

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How socialism can be won

From GLW issue 871, How socialism can be won.

First of all, where are we headed?

To win socialism — a society democratically owned and run by and for the majority of people — we have to get rid of the capitalist system that stands in our way.

Who is going to do it?

It's those who are exploited and oppressed by the system that have an interest in changing it.

How are we going to get there?

Because every reform can be reversed, the struggle for reform as an end in itself is insufficient. Socialists fight for reforms in order to make a revolution.

Every time working people win reforms, they get a glimpse of their power to change society. Every time they occupy an office or factory, they know they don't need a boss to run it.

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Social Justice and Political Stability

Mark Thoma comments on Social Justice and Political Stability (the original paper is Social justice and democratic stability, by Dan Little).

One thing I find interesting about the sustained demonstrations and protests in Madison, Wisconsin is the fact that people on the streets do not seem to be chiefly motivated by personal material interests. Rather, the passion and the sustainability of the protests against Governor Walker's plans seem to derive from an outrage felt by many people in Wisconsin and throughout the country, that the Governor's effort is really an attempt to reduce people's rights…

The same thing is seen in the current Arab Revolt.

This is an insight that James Scott expressed a generation ago in The Moral Economy of the Peasant: Rebellion and Subsistence in Southeast Asia, and E. P. Thompson a generation before that in Customs in Common, in the theory of the moral economy. In its essence, the theory holds that the fact of sustained violation of a person's moral expectations of the society around him or her is a decisive factor in collective mobilization in many historical circumstances. Later theorists of political activism have downplayed the idea of moral outrage, preferring more material motivations based on self-interest. But the current round of activism and protest around the globe seems to point back in the direction of these more normative motivations -- combined, of course, with material interests. So it is worth reexamining the idea that a society that badly offends the sense of justice of segments of its population is likely to stimulate resistance.

Emphasis in original.

What the Capitalists forget is that humans are a social species. This has been proven time after time in scientific experiments. And all social species have moral norms—the primary one being justice.

Despite Capitalism's relentless assault upon our collective sense of justice through the propaganda of the educational system and the mass media, humans still retain this natural sense of justice. We could not survive as a species otherwise—we are too weak physically to compete with other predators.

The atomisation of human society into competing individuals is a doomed project of Capitalism. Either it will succeed and the species dies out; or Capitalism is replaced by a more equitable system. I am aiming for Communisim.

Thoma's conclusion is that:

I would add the powerlessness and frustration that workers feel due to stagnating incomes and high rates of unemployment as motivating factors, and also add the additional frustration that comes from the growing feeling — intensified in Wisconsin — that the political process does not represent workers' interests.

Emphasis mine.

The ideologues of the Capitalist system are openly expressing the forbidden thought that the workers are politically oppressed. Whatever happened to the mystique of the representational Democract?

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Ecological Headstand: The Luddite Question: Rhythm, Rebounds and Elastic...

Ecological Headstand: The Luddite Question: Rhythm, Rebounds and Elastic...: "Paul Krugman, Brad DeLong, Chris Bertram at Crooked Timber and Frances Woolley at Worthwhile Canadian Initiative have all chimed in recently..."

Marx is quoted from Capital, and the conclusion is:

In this account of business cycles, the alternating expansion and contraction has become endogenous, regardless of whatever "accidents" may have engendered them. Moreover, given such periodicity, unemployment -- the production of a relative surplus population, the industrial reserve army -- is not some regrettable side-effect but becomes a necessary condition of modern industry and of the continuing accumulation of capital. Thus the long-run rebound of employment, far from curing unemployment, simply establishes the condition for yet another round of displacement.

The continual submersion of skilled workers into the unskilled is neccessary for Capitalist development.

What is not mentioned in the article is the role of the industrial reserve army in keeping wages down. This alone ensures that there will never be full employment in a Capitalist economy. All benefits of productivity increases have to accrue to the Capitalist.

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Unskilled labor

Seth Godin wants to redefine Unskilled labor.

Unskilled now means not-specially skilled.

What Godin emphasises again and again is that workers have to take control of our future. We can no longer rely on Capitalists to tell us what to do.

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Posts Noted 2011 March 10

Blog posts noted on 10 March 2011

• Tomgram: James Carroll, Where Did All the Fatwas Go? recounts the failure of the discourse that all Arabs are bad.

Perhaps the two biggest surprises of all here: out of a culture that has notoriously disempowered women has sprung a protest movement rife with female leadership, while a religion regarded as inherently incompatible with democratic ideals has been the context from which comes an unprecedented outbreak of democratic hope. And make no mistake: the Muslim religion is essential to what has been happening across the Middle East, even without Islamic “fanatics” chanting hate-filled slogans.

• Ted Rall asks Unions? What Unions? (Labor Leaders to Blame for Workers’ Weakness). The labour bureaucracy has failed in its reformist agenda. Class war means there is no common ground with the Capitalists.

Labor is on the ropes. With the economy getting worse, however, there has never been a greater need for union leaders to get smarter and more militant—or a better opportunity to reverse their long slide.

• Noahpinion says In a pinch, upgrade the humans or redistribute the robots. This is a consideration about when Departments I and II are fully mechanised.
• Another species shows that co-operation is natural: Elephants give each other a helping trunk.

The elephants’ success is equally compelling, even though their task was simpler. They clearly knew enough to wait for their partner and to abandon their end of the rope when their partner couldn’t reach theirs. “These results put elephants, at least in terms of how quickly they learn the critical contingencies of cooperation, on a par with apes,” says Plotnik.

• Skeptics will scoff at Polar ice melt raising sea levels rapidly: study.

The pace at which the Greenland and Antarctic ice sheets are melting is "accelerating rapidly" and raising the global sea level, according to findings of a study financed by NASA.

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Posts Noted 2011 March 8

A few posts I found interesting

• Seth Godin has another approach to the commons in A flip side: the asymmetrical gift

The internet makes it easy to give gifts to large numbers of people at very very low cost.

• Juan Cole has Kusha: Iran vs. Egypt: Qualitative Differences in Capabilities: Revolutionary governments are more resilient.
• Naked Capitalism has Guest Post: Head of World’s Largest Asset Manager Says “Markets Like Totalitarian Governments”

Investors can determine whether a nation prospers or starves.

Investors can determine the course of nations, including who gets elected and who gets the boot.

No wonder there are so many totalitarian governments in the Middle East, North Africa and around the world.

No wonder totalitarianism has been creeping into America’s politics and economics.

• Mark Thoma comments on Paul Krugman: Degrees and Dollars. My comment is that this causes problems for Department I as not all Department II can relocate there.
• Seth Godin explores The limits of evidence-based marketing: not all people are convinced by evidence - sometimes an opinion-maker needs to change before others do.
• Mark Thoma agrees with Gramsci that Politics Matters

There are alternatives to helping the well off and hoping it trickles down -- there are trickle up alternatives that help middle and lower class households directly -- but we haven't put enough effort into developing these policies. That needs to change.

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Corporate Solidarity

Paul Krugman notices class solidarity among the rich in Corporate Solidarity.

Matt Yglesias has a post about the remarkable solidarity of corporate executives, who seem to support their class interests even when their individual firms would benefit from the policies they oppose.

The ruling class always knows what is at stake. The working class has to be kept divided through racism, sexism, homophobia, consumerism, etc.

How can the working class ever become the ruling class without emulating the Capitalists by putting class interests ahead of individual interests?

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“The Problem of the Commons: Still Unsettled After 100 Years”

Mark Thoma discusses “The Problem of the Commons: Still Unsettled After 100 Years”.

Thoma quotes Robert Stavins as saying that:

Conventional regulatory policies, which have not accounted for economic responses, have been excessively costly, ineffective, or even counter-productive. The problems behind what Garrett Hardin (1968) characterized as the “tragedy of the commons” might better be described as the “failure of commons regulation.” As our understanding of the commons has become more complex, the design of economic policy instruments has become more sophisticated.

The regulation of the commons is a vital problem for Communism. Since this problem is difficult to solve within Capitalism, can it be any easier in Communism?

For an economic system that is based on property rights (such as Capitalism is), the commons (or unowned property) is a problem because it poses an ideological challenge. The basis of Capitalism is that private property is necessary for wealth production: no private property, no wealth. The existence of unowned property cannot be subsumed into the productive process.

Two (2) avenues are offered by Capitalist economists:

1. Government regulation, or a socialist approach; or
2. Market-based regulation in which the market ensures the efficient use of the commons through pricing.

Both of these approaches takes the management of the commons away from the people where it should be belong. However, in any class society, the commons cannot be fairly managed because people are excluded from it because of their class origins.

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Hope and Change? Not for Americans

Ted Rall asks about Hope and Change? Not for Americans.

He argues that:

Democracy—real democracy, the kind people are fighting for in Bahrain and Madison, is incompatible with free-market capitalism.

What Rall leaves unsaid is that, in a real democracy, people elect everyone who has any authority over them: managers; supervisors; councillers; etc.. And people vote for what things are done and on how they are done.

I call this sort of democracy Communism.

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What Egypt & Tunisia Tell us About Iran

Pouya Alimagham asks What Egypt & Tunisia Tell us About Iran.

His main conclusion is that:

Although it remains uncertain which direction they will eventually take, simply by virtue of having emerged within a secular and nationalist framework, the Tunisian and Egyptian revolutions’ current states of triumph provide an alternative to the Iranian government’s theory of revolution. By doing so, they have inadvertently detracted from the allure of Islamic Revolution, which the Iranian government has long championed. In other words, the Islamic Revolution can no longer claim the mantle of being the only path to popular revolution. This challenge to the Iranian government’s discourse on revolution explains why authorities in Iran, however unconvincingly, are attempting to depict the recent revolutions in Egypt and Tunisia as part of a wider Islamic Awakening.

Emphasis Mine

This emphasis on an Islamic Revolution also served to stifle the arguments about the possibility of a Communist Revolution in the Middle East.

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The economic crisis -- What are the main causes?

Jeyakumar Devaraj (Socialist Party of Malaysia) discusses The economic crisis -- What are the main causes?

He traces the trajectory as follows:

• The collapse of the USSR allowed increased exploitation and increased profits through capital investment in the third world (second globalization);
• The reduction in the manufacturing workforce in the first world lead to a sluggish demand for consumer goods;
• Profits had to be invested somewhere and that in the housing market;
• The expansion of the housing market was a specliative buuble;
• The immediate cause of the housing crisis was the rapid rise of the oil price that caused many defaults;
• The governments intervened to save the financial instutions threatened by these defaults;
• The price of these interventions has been austerity measures that has lead to the popular revolts.

I think this analysis misses the ideological driver behind the push to increase home ownership: the growth in the popular support for Capitalism in the form of property owners. And the increase in wealth generated by 'flipping' homes should not be overlooked.

I think the structure of the mortgages created the defaults rather than the increase in oil prices. The mortgages were written to have low interest honeymoon periods of several years that borrowers relied on before 'flipping'.

There was also a whole new class of people who relied on the housing market to replace the jobs lost in the manufacturing movement to third world countries. These were the realtors, mortgage brokers, builders, etc. As such, the loss of manufacturing was not seen as a loss, but, rather, a door to better job opportunities.

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Thank You, Boeing

Paul Krugman says "Thank You, Boeing" for proving the superiority of central planning in certain situations.

In Boeing’s case, they outsourced far too much, only to find that they were getting parts that didn’t do what they were supposed to — and also to find that the subcontractors were seizing a lot of the rents. They discovered, in effect, that there are times when it’s better to rely on central planning than to leave things up to the market.

Emphasis Mine

The efficient organisation of work requires a command and control model.

What work needs to be done requires a democracy. Capitalism tries to implement this through the market in which every dollar is equal. Communism would try to implement this through the vote in which every worker is equal.

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Personal Wiki

I have a personal wiki at https://sites.google.com/site/vieuxcordelier/.

I am currently reading Trotsky's History of the Russian Revolution and putting my reading notes into the Wiki.

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Is Happiness Conservative?

James Kwak asks if Is Happiness Conservative?. Kwak looks at some happiness research which is seen as a surrogate for economic utility.

The unsurprising thing is that of satiation. Once basic needs are met, there is not much marginal benefit to material things. Kwak calls this adaption:

But you can also draw some conservative implications from the research. For one thing, a central principle of the research is adaptation: people tend to adapt to the situation they’re in. Once you have the basic necessities, if your income goes up, you quickly adapt to it, so the added income doesn’t make you happier.

The important thing to realise that we are social beings. We live in societies. We are not an aggregation of individuals each striving for own sole benefit. Kwak proposes a socialist approach to community building:

Another possible implication is that, if we want to promote happiness, government should encourage the formation and strengthening of community organizations. While this may not necessarily sound conservative today, the conception of society as composed of tightly knit local groups was historically a conservative one, while the progressive movement (formerly known as the workers’ movement) was framed much more in classically economic terms: getting people more money for fewer hours of work.

Kwak assumes that the Capitalist economy exists for the benefit of all. He does not question why communities have been broken down. The ideology of Capitalism blinds him to the atomisation of human society for Capitalist profit.

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Getting It Wrong

Tom Peters publishes a quote by Ralph Waldo Emerson" in Getting It Wrong.

A foolish consistency is the hobgoblins of little minds. Speak what you think today in words as hard as cannonballs, and tomorrow speak what tomorrow thinks in hard words again, though it contradict everything you said today.

This idea is also expressed as Strong Opinions, Weakly Held by Bob Sutton.

This is really good advice for revolutionaries in that we have to keep testing our ideas against reality and change those ideas when needed. Those ideas must be fiercely debated and argued so that they are strongly held “as hard as cannonballs”.

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Drive: The surprising truth about what drives us

Dan Pink has one of his talks about his book, Drive: The surprising truth about what drives us, animated by RSA Animate.

The three key motivators once we have enough money are:

1. Autonomy
2. Mastery
3. Purpose

He does comment that this all sounds like Socialism. Yet, the scientific studies that he quotes all sustain the notion that we can drive ourselves. We do not need management or Capitalists.

He does ignore the political nature of the economy. The economy in a Capitalist society exists to serve the Capitalists. Then why is he surprised that these studies are ignored? Because they do not serve the purpose of the Capitalists which is to acquire more and more money.

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Labelling Kids with Bogus 'Mental Disorders'

Mickey Z pointed to a video called “Psychiatry—Labelling Kids with Bogus ‘Mental Disorders’” in 2011: Coming Attractions?".

Any society that relies on oppression has to label those who do not fit in as suffering from mental disorders.

Anne Applebaum said, in Gulag: A History, that:

In the aftermarth of the Thaw, the authorities began once again to use psychiatric hospitals to incarcerate dissidents - a policy which had many advantages for the KGB. Above all, it helped discredit the dissidents, both in th West and in the USSR, and deflected attention away from them. If these were not serious political opponents of the regime, but merely crazy people, who could object to their hospitalization? (p. 488)

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