Masaccio: Piketty Shreds Marginal Productivity as Neoclassical Justification for Supersized Pay

Yves Smith comments on Masaccio: Piketty Shreds Marginal Productivity as Neoclassical Justification for Supersized Pay.

One of the main agendas of neoclassical economics is to give Panglossian defenses of the current order a veneer of intellectual legitimacy. If our system is the result of individuals and businesses behaving in logical ways, at least in the minds of economists, surely the outcome is inevitable, and therefore virtuous, or else those operators would do things differently. The Big Lie in all of this is that neoclassical economics takes power completely out of the equation. While it does assume selfishness, in that everyone is out or himself to maximize his utility, it also assumes atomized actors who lack the power to influence markets. …

…

One widely repeated bit of propaganda in the US is that how much people earn reflects their worth in an economic sense. Given how important business is in American society, maintaining this belief is critical to maintaining legitimacy; otherwise, more and more people would see corporate executives not as captain of enterprise but individuals by luck or connivance, got in a position where they could exploit a system that gives them control over assets and cash flows with perilous little in the way of controls over them (there is a vast literature on principal/agent issues in large corporations).

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Masaccio concludes:

Neoliberals have convinced the vast majority of our fellow citizens that they and they alone are responsible for their fates. They took risks and they lost, but it was their choice. I can hear Rick Santelli ranting in the background. At the same time, neoliberals insisted that governments everywhere bail out the filthy rich and their corporations, especially their financial corporations, and governments obliged. So, we screw the productive members of society and reward the slugs, all in line with neoliberal theory.

Neoclassical economics undergirds the neoliberal project. Piketty slashes at a piece of that foundation with his attack on marginal productivity. What now is the justification for the absurd compensation of the filthy rich? Tort law failed to deal with the sins of the bankers. Why aren’t they in jail? One more block pulled from the Jenga pile of vicious ideas so beloved of the rich and their government agents.

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This was all explained by Marx over 160 years ago. The ruling class creates a superstructure to maintain control. And part of that superstructure lies in the sphere of ideas.

One of those ideas is neo-liberalism. It is not the only one maintaining control. There are also ideas about religion, gender, sexuality, the need for a hierarchical society, etc.

And let's not forget that naked force is also part of the superstructure. When ideas fail, the guns come out. Arguments are then won with bullets, not words.

We must tread carefully when confronting the Capitalists. They got where they are by being utterly ruthless. Each bomb dropped in Gaza, Syria, Iraq, Sudan, Somalis, Iran, Afghanistan is a warning to all the subject peoples of the world that they mean to stay in business for as long as possible.

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Aboriginal disadvantage worsens

Peter Boyle writes that Aboriginal disadvantage worsens.

The PM insulted the indigenous people by repeating the lie that Australia was just bush before invasion:

Abbott's insults can be understood as part of a disgusting attempt to justify this deepening racial oppression. It perpetuates the racist idea that Aboriginal people are inconsequential, sub-human and their conditions a result of their supposed inferiority.

Green Left Weekly has explained in some detail how the worsening conditions in Aboriginal communities can be traced back to racist cuts to essential services and the funding of Aboriginal-run community organisations by the Coalition government and its ALP predecessors.

That and the fact that Australian governments have refused to deliver real land rights and impose a strong regime of job quotas on private and public employers to address more than two centuries of racial oppression. That's the truth about the shamefully growing gap.

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Ordinary workers most likely work and travel with indigenous people everyday. Yet the white-fellows still subscribe to the subjective lies about black-fellow inferiority despite on the objective reality they see daily.

It is very hard to break this stranglehold of Capitalist subjectivity. It is being reinforced daily through our culture: portrayals in the media, opinions of the bosses and overseers.

Standing up to this endemic racism can be economically devastating through loss of job and home. It can also be fatal if one confronts a violent racist.

Maybe the solution for the time-being is to be a guerilla anti-racist.

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An Israeli-Arab Spring? 1.6 mn Palestinian-Israelis are Marginalized, Angry and Defiant

Emile Nakhleh ponders An Israeli-Arab Spring? 1.6 mn Palestinian-Israelis are Marginalized, Angry and Defiant.

As Israel moves to exclude Palestinian parties from parliament,

As Israeli politics moves to the right and the state becomes more Jewish and less pluralistic and inclusive, the Palestinian community, which constitutes over one-fifth of the population, feels more marginalised and alienated.

In response to endemic budgetary, economic, political, and social discrimination, the Arab community is becoming assertive, more Palestinian, and more confrontational. Calls for equality, justice, and an end to systemic discrimination by “Israeli Arab” civil society activists are now more vocal and confrontational.

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The Arabs within Israel are now increasingly viewing themselves as an indigenous population rather “Israeli Arab”:

Recent events clearly demonstrate that the Arabs in Israel are no longer a quiescent, cultural minority but an “indigenous national” minority deserving full citizenship rights regarding resources, collective rights, and representation on formal state bodies.

Nakhleh is pessimistic about a peaceful solution:

If violence and continued discrimination are part of Israel’s long-term strategy against its Arab minority to force Arab emigration, it is unlikely that the government would implement tangible initiatives to improve the condition of the Arab minority.

Accordingly, communal violence in Israel would increase, creating negative ramifications for regional peace and stability and for U.S. interests in the eastern Mediterranean.

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Let's call Israel's policies for what they are: genocide. The State of Israel aims for the removal of all indigenous populations from its illegally acquired territories.

That people could think that either Israel or the US would be embarrassed by such a description are sorely mistaken. The US was built through genocide as was any settler society (including Australia). One does not reject the foundations without severely affecting the stability of the whole structure.

It is up to workers to educate themselves on these matters and confront the horrific origins of the current Capitalist society and their place in it. It also means that workers will have to confront their own compliance with and benefiting from this state of affairs.

Guilt and shame can be major road-blocks to reconciliation and redemption.

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Why the big four banks should be nationalised

John Rainford argues Why the big four banks should be nationalised.

Australia managed its way through the GFC in better shape than most countries thanks to the Keynesian counter-cyclical economic policies that were implemented here and in China.

In Australia these included unlimited guarantees of bank deposits and wholesale funding. This led to the big four banks that were too big to fail getting bigger.

One result of the GFC has been that banks around the world have been required to lift their capital adequacy requirements so as to ameliorate the effects of any future economic downturn.

The big four in Australia have resisted this because it takes capital away from their dodgy investments and reserves it as part-insurance against future losses. They have threatened to claw back any increase in money reserves they will be required to hold by raising interest rates.

Several countries are debating the issue of breaking up large banks. A better idea would be to nationalise them.

I am rather embarassed to say that, despite Rainbird's article, the party's policies on Nationalisation are completely lacking. This is worrying because the Socialist Alliance are campaigning, in part. in the Victorian State Elections on Why the car industry should be nationalised.

The tenor of Rainford's article seems to be that the banks are treating the regulators with contempt. Although this is true, I do not see how we can appeal to workers by taking this approach.

Regulation, to most workers (especially in the non-privileged strata), are continually oppressed by regulation. They are hassled by ticket inspectors, parking inspectors, police, HR people, Real Estate agents, local councils, etc. They spend the whole day avoiding breaking some regulation or impost.

Treating regulators with contempt is not a crime with most workers. It is an attitude born of long and frustrating experience.

That people are actively trying to avoid regulations and paying fines is also not seen as a crime. It may unjust that the bigger fish can do this more easily, but the principle is not in question.

I think the question of nationalisation should be approached in a similar way to that made in Why the car industry should be nationalised by emphasising the benefits to workers.

I do not mean just economic benefits but the political and societal benefits of workers controlling their own lives rather than living at the whim of others.

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What It Would Really Take to Reverse Climate Change

What It Would Really Take to Reverse Climate Change.

Two (2) of the engineers who worked on Google's RE<C project write that:

As we reflected on the project, we came to the conclusion that even if Google and others had led the way toward a wholesale adoption of renewable energy, that switch would not have resulted in significant reductions of carbon dioxide emissions. Trying to combat climate change exclusively with today’s renewable energy technologies simply won’t work; we need a fundamentally different approach. So we’re issuing a call to action. There’s hope to avert disaster if our society takes a hard look at the true scale of the problem and uses that reckoning to shape its priorities.

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They had realised that even if the project had succeeded, it would not be enough to stop global warming as we have already passed the safety limit of 350ppm of CO₂. The amount of CO₂ in the atmosphere means that the Earth will keep warming for the next 100 years.

That realization prompted us to reconsider the economics of energy. What’s needed, we concluded, are reliable zero-carbon energy sources so cheap that the operators of power plants and industrial facilities alike have an economic rationale for switching over soon—say, within the next 40 years. Let’s face it, businesses won’t make sacrifices and pay more for clean energy based on altruism alone. Instead, we need solutions that appeal to their profit motives. RE<C’s stated goal was to make renewable energy cheaper than coal, but clearly that wouldn’t have been sufficient to spur a complete infrastructure changeover. So what price should we be aiming for?

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What a damming indictment of Capitalism? The survival of the human race is not profitable!

The real problem is how to convince workers that Capitalism needs to be overthrown. Even if workers could understand all of the scientific and engineering papers, they would still be reluctant to take action because they feel safer in what they know than with what might be. This is only natural.

It does not help that these pleas for action are coming from the privileged stratum of society. The workers are right to mistrust these collaborators. Past experience in various struggles has shown where the interests of these collaborators lie.

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Mike Treen: A critique of crisis theory

Mike Treen has A critique of crisis theory.

There is no natural end to Capitalism:

But there is no final crisis in this system — other than a descent into nuclear war, or barbarism arising from the sort of ecological winter or runaway ecological collapse that capitalism appears to be preparing for us. Short of such a disastrous outcome, the system will continue to carry on with its booms and busts until it is overthrown and replaced.

That can only be carried out by a conscious social and political force, by a class that is not bound to the system by material interest. That is why the working class is the only class that can overthrow this system. It is the only class not bound by property and profit to its perpetuation. It is the only class with the numbers and social power, if organised, if conscious enough, to effect this outcome and bring about real majority rule.

Feudalism had to end because the Capitalists needed the Serfs to become Workers. Otherwise Capitalist expansion could not take place.

The ruling class of a Socialist society already exists: the Proletariat. There is no need to transform the workers into something else. They only need to seize power.

As for crises, Treen remarks that:

Marx had identified the essence of the periodic crises of capitalism as crises of overproduction very early on, even in the Communist Manifesto in 1848.

Treen contrasts this idea of Marx with two (2) competing theories of Capitalist crises: tendency of the rate of profit to fall (TROPF); and the Keynesian idea of under-consumption.

I have fallen into the trap of treating over-production and under-consumption as being synonomous.

Treen rejects the idea of a fiat currency:

I think that is a big mistake. Ultimately, all non-commodity money — that is, token money and credit money — must have a relationship to a real money commodity like gold. This is true whether a formal gold standard exists or not. This lawful economic relationship still exists and therefore continues to be the underlying cause of crises of overproduction.

This is because the exchange of commodities is the basis of all Capitalist economic activity. When the exchange happens, the commodities have equal value. Because real money commodity can be exchanged for all other commodities, it because the basis of universal valuation.

Treen encourages all of us to study Marxist Crisis Theory:

I think we all should pay respect to the founders of scientific socialism and give this issue of crisis theory the attention and importance it deserves. We cannot leave it to others, to so-called experts.

I am not an “expert” on this stuff. It has been a continuing interest of mine, because it is important that we understand it and because it is important we understand who we are, what our role is, what we expect will happen to this system, who the agent of social change is going to be, and what the prospects are for making that happen in the world today. Those are all issues we can begin to address.

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Longest Continuous Period of War In American History

Barry Ritholtz writes about the Longest Continuous Period of War In American History.

Ritholtz writes that this endless war and unceasing alarms is weakening the US Republic through the corrosion of the legal and political system. He writes that it is a cynical attempt to garner power and to distract the populace from the real problems:

But — underneath the ever-changing marketing and branding campaign — it’s really just the good ‘ole military-industrial-and-banking complex consolidating their power and making money hand over fist.

It is in the interests of the Capitalists to preserve their power: both in the objective realm of physical force, and in the subjective realm of ideas. Since they are a minority, they must delude or subject the majority to their whims. They do not rule by consent—but by force and delusion.

The inherent danger of continuous wars, as the Spartans found out, is that your enemies learn how to fight you. Sparta was able to dominate their part of Greece for hundreds of years due to their reputation and mystique—they actually did very little fighting.

It was only with the conquest of Athens that the Spartans entered upon a period of continuous warfare. After a period of time, Sparta's enemies began to lose their fear of her and began to work out how to defeat her.

With defeat came the revolt of the subject peoples and slaves. This further undermined the Spartan war economy. Then Macedonia swept in to conquer all of Greece. Despite attempts to free herself, Sparta became a subject state of Macedonia, then Rome, then Byzantium, then Istanbul.

The three (3) Russian revolutions (1905, February 1917, and November 1917) came on the back of great military defeats. The German revolution of 1919 came with defeat in WWI. Military defeat is sometimes a catalyst for social revolution as the ruling class has lost its mystique of superiority and invincibility.

With this latest Capitalist crisis, war is probably seen as the only way to maintain power. But it is a dangerous one as it can hasten the demise of the ruling class.

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Israel moves to exclude Palestinian parties from parliament

Jonathan Cook reports that Israel moves to exclude Palestinian parties from parliament.

The Israeli parliament has voted overwhelmingly to suspend Haneen Zoabi, a legislator representing the state’s large Palestinian minority, for six months as a campaign to silence political dissent intensified.

Zoabi has not endeared herself to the Hebraic-speaking Israelis. She has criticised the latest assault on Gaza, has called the Israeli Air Force pilots terrorists, and the Israeli Army the equivalent of the violent Islamic State group.

There are other measures being considered to expel Zoabi from parliament and from Israel, as well as excluding Palestinians altogether from parliament. The rabid racism of the Israeli state cannot contemplate the existence and therefore the opinions and feelings of the oppressed Palestinians.

This is all part of the genocidal mind-set that the Zionists now operate under. Since their recent defeats in Gaza and Lebanon, the Zionists must plunge ahead into this madness. There is no way they can admit that they are wrong.

Aeyal Gross, a constitutional law professor at Tel Aviv University, warned that the Knesset’s treatment of Zoabi was “paving the way towards fascism and tyranny”.

The Hebraic-speaking Israelis should remember the Nuremburg Laws that gradually stripped the German Jews of their rights, livelihoods, political representation, among other things. Gross is right to be terrified of what is happening.

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Mumia: Real threat not Ebola, but capitalist health care

Mumia Abu-Jamal argues that the Real threat not Ebola, but capitalist health care.

This is not about the Ebola crisis, it is about the US health care crisis, made possible by a flawed business model that prioritises profit above all other things: even life itself.

Consider this: when [Thomas Eric] Duncan first entered Texas Presbyterian Hospital, he was interviewed by a screener, prescribed antibiotics, and sent home.

The screener was, more likely than not, not a medically-trained health care professional but a receptionist, perhaps armed with a checklist to cover. Chances are, she was perhaps the lowest-paid staff, until one considers the janitorial workers.

This business model, one followed by most institutions in the US, is now exposed as ineffective, dangerous and the least health-conscious.

That was a business decision, driven by the bottom line, of money — not life.

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The US has been lucky so far in that Ebola does not seem to have entered the population at large. As Mumia points out, this luck will not last given that the US health system is driven by profit alone.

Even this scare will not change the stance of the US health providers. Nor can the government force them to change. The bitter resistance to Obamacare is testament to the political power of the US health system.

But an Ebola outbreak is a disaster waiting to happen in the US. The lack of free, universal health-care means that the poor and undocumented will become the most affected because they are effectively denied access to health-care. Thus, Ebola will probably become established in the under-class.

This will lead to more discrimination and harassment of the poor and undocumented as Xenophobia runs amok in the ensuring panic. There will be little challenge to the US health care system despite its obvious failings.

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Opening the way to modernization

Cuba plans to focus on renewable energy sources (RES) as Opening the way to modernization.

Cuba currently produces 96% of its electricity through the use of fossil fuels. This statistic reveals that this is an economy highly dependent on imports with expensive production costs. For this reason, the Council of Ministers approved the Future Development of Renewable Energy Sources and the Efficient Use of Energy Policy on June 21, drawn up by the Governmental Commission charged with this task and responsible for exploiting the full potential of the country’s renewable energy sources.

The gist of the policy is to use alternative sources, such as:

• Sugar Cane biomass
• Wind
• Solar
• Hydropower

Coupled with the development of these alternative sources, there is also a drive to energy efficiency:

The increased use of the RES and the efficient use of energy are as comprehensive and transversal as the main aims of the country’s long term development plans, which are all directly linked.

The aim of this policy is:

The magnitude of this policy can be appreciated in the table of information below, but this is only one element in understanding the scope of the policy. Cuba is planning to generate 24% of its electrical energy, through RES, by 2030, which will result in a saving of more than 1.3 million tones of fossil fuel or approximately 780 million dollars per year.

This also shows the under-development of the Cuban in comparison with an advanced economy such as Germany. The figures quoted in If Germany Drops Coal, can the Industry Survive? are that …about 45% of Germany’s electricity comes from burning coal and for RES to account for around two thirds of supply within two decades.

This disparity will probably mean that Cuban industrial development will be impeded by having a greater reliance on fossil fuels when more advanced economies have substantially lessen theirs. And this will make it more difficult to catch up.

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Why the car industry should be nationalised

The Socialist Alliance gives its reasons on Why the car industry should be nationalised.

The Socialist Alliance calls for the nationalisation of the vehicle industry under worker and community control, to save jobs and to begin the process of converting the industry to make public transport vehicles or other products.

Nationalisations are not likely to happen without significant industrial action and other forms of action from workers and their organisations.

Unions in the manufacturing sector and the union movement generally should take up the nationalisation demand — as a response to economic crises and a step towards a different form of economy — as some unions did in the past.

Here, the Party is using the economic crisis to advance the political consciousness of the workers. The workers need to understand that they can control their own destiny. And, they have the power to do so.

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Michael Hoexter: Naomi Klein's "Hard-Money" Ideas Undermine Her Laudable Climate Action Goals

From Yves Smith, there is a repost of Michael Hoexter: Naomi Klein’s “Hard-Money” Ideas Undermine Her Laudable Climate Action Goals which is a review of This Changes Everything: Capitalism vs. the Climate (TCE).

Hoexter derides Klein's attempt to use the profits from the Carbon-extraction industries (Coal, Oil, Gas, etc):

Of course, this is well-meaning economic freestyling on a number of different levels made to serve Klein’s, all-too-typical Left and liberal, preference to reduce economics to a simple morality play of victimizers and victims. For one, even within the terms of Klein’s stated policy preferences, Klein skims over that what she is proposing is akin to a complicated carbon tax, though Klein seems to think that this will be simply a matter of “taking” the fossil fuel industries’ ill-gotten gains as punishment. Klein seems to believe that fossil fuel companies will still continue to exist and function to a degree, generating profit and revenues, to in turn supply the money for climate action. In reality, not only would there be legal complexities in terms of corporate accounting and governance associated with such government actions but also the economic behavior of these companies and the fossil fuel sector overall after such fining or taxing is not explained in TCE.

Hoexter is correct in saying that a correct understanding of the role of money in the social-political system is essential for effective political action. This is why Marxist theory (which he also derides) is essential for the growing of the political consciousness of the working class.

This is not an issue to be left to our “betters”. We have to spend the time and effort really understand what Marx was writing about when he described the laws of motion for Capitalism.

My understanding of money is that it is a commodity just like any other. Its value derives from what be exchanged for it. This seems to be in contrast to the fiat currency view expressed by Hoexter.

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The Rojava revolution's radical democracy

A brief interview with Saleh Muslim Mohamed about The Rojava revolution's radical democracy is posted in Links magazine.

We have, in essence, developed a democracy without the state. That is a unique alternative in a region plagued by the internally conflicted Free Syrian Army, the Assad regime and the self-proclaimed Islamic State.

Another way of referring to this concept of democratic confederalism or democratic autonomy is radical democracy: to mobilise people to organise themselves and to defend themselves by means of peoples armies like the Peoples Defence Units (YPG) and Women's Defence Units (YPJ). We are practicing this model of self-rule and self-organisation without the state as we speak. Other people will speak of self-rule in theory, but for us, this search for self-rule is our daily revolution. Women, men, all strands of our society are now organised. The reason why Kobane still stands is because we have built these structures.

This is a different kind of Democracy:

Democratic autonomy is about the long term. It is about people understanding and exercising their rights. To get society to become politicised: that is the core of building democratic autonomy. In Europe you will find a society that is not politicised. Political parties are only about persuasion and individual benefits, not about actual emancipation and politicisation. Real democracy is based on a politicised society.

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For a Socialist Revolution to occur, the workers must be sufficiently polticised. They must that what happens in their daily lives in a political context.

This is very difficult to do in a society where politics is disparaged and derided. Political consciousness is vital to a healthy society. One can not delegate decisions about one's life to others.

And people should realise that all of our social interactions are mediated by politics. How we see and feel about the world influences what we do in the world.

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Michael Hudson: Putin's Pivot to Asia

Yves Smith comments on Michael Hudson: Putin’s Pivot to Asia.

Michael Hudson says that:

The most important way in which they’re coming together is reflected in Mr. Putin’s announcement that Russia is setting up its own bank clearing house system independent of the so-called SWIFT system. When you transfer funds from one bank to another, or when any bank uses U.S. dollars, it has to go through the SWIFT clearing house system in the United States.

Right now the only country that’s not part of this is Iran. To Russia, this has tipped America’s hand. It showed that what U.S. Cold Warriors really want is to break up Russia and China, and to interrupt their financial and banking services to disorient their economies. So Russia, China and Iran — and presumably other Asian countries — are now moving to establish their own currency clearing systems. To be independent of the SWIFT system and the U.S. dollar, Russia and China are denominating their trade and investments in rubles and yuan instead of the dollar. So what you’ve seen in the last few days in Beijing is a rejection of the dollar standard, and a rejection of American foreign policy behind it.

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The actions of the Capitalist State are designed to protect their own Capitalists. In the fierce competition between Capitalists, the politcal reality shapes the economic sphere.

The SWIFT system was originally conceived as a neutral entity. However, the interests of US Capitalists have undermined this neutrality by turning it into a political weapon against the official enemies.

It is this politicisation of the SWIFT system that has prompted the emergence of an economic competitor, not purely economic considerations. Here we the example of how politics and economic decisions are intertwined.

This will not change under a Socialist or Communist system. Then, the political decisions will, openly, drive the economic decisions.

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