Capitalism and Inequality: What the Right and the Left Get Wrong

Jerry Z. Muller writes about Capitalism and Inequality: What the Right and the Left Get Wrong in the March/April 2013 edition of Foreign Affairs.

Muller describes what the acceptable limits of the debate about inequality are:

Recent political debate in the United States and other advanced capitalist democracies has been dominated by two issues: the rise of economic inequality and the scale of government intervention to address it.

Muller seems to be in the managed Capitalism camp.

Muller explains the reason for inequality as:

Inequality is an inevitable product of capitalist activity, and expanding equality of opportunity only increases it — because some individuals and communities are simply better able than others to exploit the opportunities for development and advancement that capitalism affords. (p.30)

So, Muller thinks that failure to achieve is the individual's fault. This is an interesting approach to take, however, because Muller admits that inequality arises naturally in the Capitalism through the inequality of opportunities which individuals are ill-equiped to take advantage of.

Muller is clearly worried that this inequality will lead to mischief caused by those who fail to understand that they are the problem, not the system:

Despite what many on the right think, however, this is a problem for everybody, not just those who are doing poorly or those who are ideologically committed to egalitarianism — because if left unaddressed, rising inequality and economic insecurity can erode social order and generate a populist backlash against the capitalist system at large. (p.30)

What Muller wants is:

Contemporary capitalist politics need to accept that inequality and insecurity will continue to be the inevitable result of market operations and find ways to shield citizens from their consequences — while somehow still preserving the dynamism that produces capitalism's vast economic and cultural benefits in the first place. (p.31)

Emphasis Mine

In Muller's view, there is no longer need to pretend that Capitalism will eventually make everyone better off. That is a myth.

What Muller fails to realise is that such government intervention requires teh exapnsion of the tax base which the rich are resisting. Since the wealth is accumulating at the top end, this means that the tax base is actually shrinking. So, we have the need to increase the tax base to avoid unrest, while those who are in danger refuse to sacrifice more of their wealth to do so.

All we need now is for some silly bitch to say: Let them cake!

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Game of Thrones and Our Scheming Elites

Yves Smith reviews Game of Thrones and Our Scheming Elites.

Smith is reading the series of books for "The Game of Thrones" by Martin:

The perspective in Martin’s books is a medieval reflection of the world envisioned by neoclassical economics, of isolated individuals working for their own self interest. There’s no real community in war-torn Westros, but even before the struggle broke out, the court was a hotbed of plots, spying, and ambition. Given the way, say, the Ptolemys plotted against each other, this isn’t necessarily that far removed from the dynamics of some pre-modern courts. But this is the through line of the series, the juice that carries readers forward. And sadly, this seems to be the juice that drives the world we live in now.

Before you get cynical and say, that’s just the way it is, that’s simply not accurate. The current level of corruption and cynicism is hardly inevitable; it’s a social construct. Look at Linux, where developers collaborated to produce code, for no money, out of pride in craft. Victor Frankl, Holocaust survivor, therapist and author of Man’s Search for Meaning, would often start out by asking patients, “Why haven’t you killed yourself?” His experience was the things that people lived for were either people they loved or creative work (Lambert’s “Do what only you can do”). Similarly, psychology professor Mihaly Csikszentmihalyi, who has made a study of happiness, has concluded it comes through a state he calls flow, where one is deeply engrossed in an activity (for instance, the famed “zone” in sports).

The books and television series are all part of the ideological reproduction of Capitalism. It is necessary to educate humans to be self-centred so as to adjust them to the rampant individualism.

Communism allows people to develop themselves.

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Gradual institutional change

Dan Little investigates Gradual institutional change.

Little considers instiutions to have a degree of plasticity in that:

The basic idea of plasticity is that institutions and organizations are the product of various kinds of structured human action, and that they can change over time. So we shouldn't think of institutions as having fixed characteristics, or as though they were equilibrium systems that tend to return to their original states after perturbances. … And this approach makes plain the high degree of path-dependency that institutions display.

In other words, history explains institutions.

Little cites studies that:

The theory they offer of gradual institutional change is an actor-centered theory. Incremental change occurs as the result of the opportunistic and strategic choices made by a range of actors within the institution.

But one thing Little leaves out is how institutions collapse. What happens when the institution is unable to provide answers to the problems that it encounters?

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The Damaging Links Between Food, Fuel and Finance: A Growing Threat to Food Security

Yves Smith is worried about The Damaging Links Between Food, Fuel and Finance: A Growing Threat to Food Security.

Timothy Wise notes that the speculators are moving out of energy and into agricultural products because of the decreased volatilty in the former and the increase for the latter.

However, Wise also notes price movements between the stock market, oil, and commodity have become correlated over the past decade as deregulation has accelerated and energy companies began investing in biofuels.

The biggest losers have been the poor who see more and more of their income eaten up by price increases in foodstuffs. This has, in turn, created great political instability throughout the Third World.

The crisis in Capitalism has arisen because the profits can be more readily realised through speculation rather than through productive investment.

There are not that many technologies that are ready for investment. Green energy could be the exception.

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Margaret Thatcher is Dead, but Thatcherism Lives On

Baroness Thatcher is dead.

The heroine of the class war against the British working class is dead.

The brutalisation of British politics in a new age of Imperialism is her legacy.

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Mexico: Can worker-owners make a big factory run?

Jane Slaughter investigates Mexico: Can worker-owners make a big factory run?

Slaughter asks:

How does a workers' cooperative with 1050 members function? It’s hard enough for workers' ownership to succeed at any size, because any company that competes in a market is subject to the same cost-cutting rat race as a capitalist firm. Workers are impelled to hammer themselves and cut their own pay or be driven out of business. And most workers here have just a middle-school education.

Yet the TRADOC co-op translation: Democratic Workers of the West—is thriving. Enthusiastic worker-owners have modernised their plant, increasing productivity and quality through their skilled work. Those factors together with their admittedly low prices have made it possible for them to compete on the world market.

The workers have done away with foremen because they supervise themselves. The management of the plant is at three (3) levels:

1. “TRADOC holds a general assembly only twice a year, but that assembly holds veto power over important decisions such as selling assets, making investments and buying machinery.”
2. The day-to-day running is handled by an administrative council consisting of:
• Cooper Tyre of Findlay Ohio has four (4) members;
• TRADOC Co-op has three (3) members
3. A general manager who is not a member of the co-op.

Despite what Slaughter portrays, TRADOC is not really a worker-owned factory. The co-op is a minority shareholder with a capitalist firm as the majority shareholder.

Slaughter concludes that:

But once the co-op started: it’s a pleasure to relate that workers really do run a factory better than the bosses. Not only do they control the plant floor, with no need for overseers, they come up with ideas to improve production in both senses: more and better tyres, less scrap — but also fewer backbreaking jobs.

This the same experience as the FASINPAT Zanon plant in Argentina as reported in Argentine Factory Wins Legal Battle. However, the Mexican experience has not exposed the workers to the same political battles as seen in Argentina.

The Argentine experience is more interesting politically because the workers expropriated the property of the Capitalists. They had to be more politically conscious to do this. They were assisted in their struggle with the Capitalists by the local government. So, a true workers' movement has not been born yet. But the workers can reflect upon this experience.

It would be interesting to see how Pope Francis I interprets this Argentine experiences in his teachings.

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The Death of Peak Oil

The Oil Drum considers The Death of Peak Oil.

Although world-wide production was flat for several years leading to the news that "peak-oil" had been reached, changes in technology and inclusion of natural gas into production figures has changed that some what:

Let's start by taking a look at what happened to global oil production in the years since those two very different views were offered. Total world liquids production as reported by the EIA had reached 85.2 million barrels a day at the time Pickens issued his pronouncement. It briefly passed that level again in June 2006 and June 2008, though mostly was flat or down over 2005-2009 before resuming a modest and erratic climb since then. The most recent number (December 2012) was 89.3 million barrels a day, 4 mb/d higher than where it had been in May 2005, and 12 mb/d below the levels that Yergin had expected we'd be capable of by 2010.

But more than half of that 4 mb/d increase has come in the form of natural gas liquids-- which can't be used to make gasoline for your car-- and biofuels-- which require a significant energy input themselves to produce. If you look at just field production and lease condensate, the increase since May 2005 has only been 1.7 mb/d.

The biggest technological change has been using horizontal fracking:

The rush to judgment seems to be based on the remarkable recent success from using horizontal fracturing to extract oil from tighter rock formations. Here for example is a graph of production from the state of Texas, one of the areas experiencing the most dramatic growth in tight oil production. In 2012, Texas produced almost 2 million barrels each day, up 800,000 barrels a day from 2010.

I wonder if the horizontal fracturing used in the extraction of oil is as damaging as CSG fracking. The same concerns over earthquakes and contaimination of aquifiers would seem to be the same.

Farida Iqbal reveals in White paper reveals gas industry scared of global protests that enivornmental action is effective in stopping such practices.

The white paper accurately describes the methods that have made the movement so successful. It lists the four effective campaign strategies as “grassroots mobilisation, online and social media, direct action, and networking”.

…

The white paper describes the global diversity of the movement. Anti-fracking movements are driven by such varied concerns as the need to protect farmland, climate change, and a desire to protect local jobs.

Water, however, is a global issue. Around the world, anti-fracking movements are united by their concern for the amount of water extracted and the risk of water contamination.

We face a critical juncture in world history. Our industrial civilization is heavily dependent on oil for farming, transportation, and manufacturing. Yet, to continue economic growth, we must contaiminate our water supply and imperil the climate. The question is no longer about standards of living but of human survival.

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Noisy bigots drown out silent bias

Waleed Aly observes that Noisy bigots drown out silent bias.

Aly writes that:

No, our real problem is the subterranean racism that goes largely unremarked upon and that we seem unable even to detect. Like the racism revealed by an Australian National University study, which found you are significantly less likely to get a job interview if you have a non-European name. The researchers sent fake CVs in response to job advertisements, changing only the name of the applicant. It turns out that if your surname is Chinese, you have to apply for 68 per cent more jobs to get the same number of interviews as an Anglo-Australian. If you are Middle Eastern, it's 64 per cent. If you are indigenous, 35 per cent.

This is the polite racism of the educated middle class. It's not as shocking as the viral racist tirades we've seen lately. No doubt the human resources managers behind these statistics would be genuinely appalled by such acts of brazen, overt racism. Indeed, they probably enforce racial discrimination rules in their workplace and are proud to do so. Nonetheless, theirs is surely a more devastating, enduring racism. There is no event to film, just the daily, invisible operation of a silent, pervasive prejudice. It does not get called out. It's just the way things are; a structure of society.

Emphasis Mine

Malcolm X is reported to have once said that he would rather talk to a red-neck racist than to a liberal because the former is racist to your face, while the latter is racist behind your back. He is reported to have said that you cannot have Capitalism without racism.

The Capitalist needs racism to divide the international working class, and to justify the daily atrocities that it commits through stravation, war, poverty, prisons, and lack of medical care.

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Supply Chain Problems Hitting Hospitals Near You

Yves Smith reports that Supply Chain Problems Hitting Hospitals Near You.

Smith argues that cost-cutting by drug companies have put public-health at risk by reducing inventory costs and keeping demand high:

The reason that it might seem OK to squeeze hospitals is precisely that it’s hard to point a finger at the drug companies. But notice the comment that these shortages can affect people in ICUs. It’s not hard to imagine a hospital having to ration limited supplies, say if some sort of disaster (big explosion, natural disaster) led hospitals in an area to have a flood of emergency room patients.

This looks like a case where the invisible hand of the market leads to a decrease in the well-being of the community.

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Russia: An oligarch’s mistake, an oligarch’s fate

Boris Kagarlitsky writes an obituary for Boris Abramovich Berezovsky who died in London on March 23, 2013 in Russia: An oligarch’s mistake, an oligarch’s fate.

Berevovsky's tragedy was a failure to accept the constraints of capitalist rule in a dependent country:

Most of the oligarchs of the 1990s understood and accepted the new rules, at times helping to draw them up. Berezovsky, however, could not adapt his personal nature to the new regime, and it was this, far more than his political disagreements with President Putin, that sealed his downfall. Worst of all, once the Russian oligarch had arrived in that very same West which he had sincerely viewed as a model and ideal, he turned out to be incapable of fitting in with life there – neither with political life, nor even with business. Unlike his pupil and rival Roman Abramovich, who assimilated perfectly the first rule of successful business – don’t stick your neck out unless you have to – Berezovsky was constantly coming out with one initiative or another, getting involved in political conflicts, declaring his ideas.

Despite a Marxist education, he failed to appreciate the class interests of the Capitalists is about stability for exploitation.

The capitalists live in fear of the masses, and thereby employ a superstructure to keep the masses in their place through docility, bribes, fear, and division. Stirring up the masses is a very dangerous activity.

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The problem of relative privilege in the working class

Chris Slee ponders The problem of relative privilege in the working class.

Slee dislikes the term, “labour aristocracy”, and prefers to use “relative privilege” instead. It is this relative privilege that is the source of division among workers:

Material inequalities between different groups of workers can contribute to conflict between them. Often one group of workers will try to defend their position of relative privilege against other workers who are perceived as threatening it.

Slee argues that, given the global nature of the production process, the government should nationalise any factory is threaten by being moved off-shore:

How should Australian unions react when companies threaten to close a factory in Australia and move production to another country (whether a Third World or another imperialist country)?

We should argue that it is the responsibility of the Australian government to ensure that there are jobs with good pay and conditions for all workers in Australia. This means the government should take over factories threatened with closure and run them as public enterprises, or else provide the sacked workers with alternative work. Public housing, public transport and renewable energy are some of the areas that governments should invest in and create jobs.

Slee proposes that workers should aim for the leveling up of wages for all workers around the world:

One of our long-term goals should be to reduce inequality between workers in different countries, by raising the living standards of those in poorer countries. Pay rates should be leveled up, not leveled down as the capitalists would like.

Slee concludes that:

The struggle between solidarity and the defence of relative privilege is part of the struggle for a socialist world.

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'Is the Demand for Skill Falling?'

Mark thoma notes a reference to 'Is the Demand for Skill Falling?'

The referenced paper suggests that:

…in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together.

This would also run contrary to the narrative that people are not being hired because they are over-qualified.

If this conclusion is true, then we have:

• A stratum of disgruntled workers who are over-qualified for their current jobs and have a large student debt to pay off; and
• A stratum of disgruntled unemployed workers who are experiencing the harshness of being unemployed.

These conditions could lead to a revolt of some sort. It will probably be a fascist one if the first startum revolts first as more educated workers tend to lean towards the conservative end of the political spectrum.

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More on Devolution and the Walmartization of Our Economy

Yves Smith opines More on Devolution and the Walmartization of Our Economy.

Smith notes that Walmart has cut costs so much that they are losing customers because:

• Lines are too long at the checkout; and
• Products are not being stocked on the shelves.

These are all because there are too few employees per store.

The first problem can be overcome with automation through the use of self-checkout counters. But then there is the problem of customer fraud as they scan only some of their goods, or choose cheaper items from the look-up menus.

The second problem is more serious as stock has to be on the shelves in order for it to be sold. Even in Australia, it is not uncommon to see gaps on the shelves where popular products have sold out. Either you can switch brands, defer your purchase, or go elsewhere.

Once a company chooses a path of cost-cutting to achieve results, it is very hard for it to change its direction. Inertia in large organisations is just too great at times.

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Dear Rightwing Catholic Islamophobes: Pope Francis just washed the feet of a Poor Muslim

Juan Cole writes Dear Rightwing Catholic Islamophobes: Pope Francis just washed the feet of a Poor Muslim.

Pope Francis on Maundy Thursday declined to address enormous crowds. Instead he went to a prison to emulate Jesus’s act of humility before his crucifixion in washing the feet of his 12 disciples. The pope washed and kissed the feet of 12 inmates, two of them women and two of them Muslim (one of the women was Muslim). It is reported that some of the prisoners broke down in tears.

This pope is going to be different. But how different?

The pope is going to cause trouble for the conservatives:

These purveyors of hate speech against Muslims claim to be Catholics, and some of them are annoyingly Ultramontane, insisting on papal infallibility and trying to impose their values on all Americans.

Yet the person they hold to be the vicar of Christ has just given humankind a different charge, of humility and of service to the least in society, many of whom are Muslims.

It will be interesting to see how this pope advances the Catholic social teaching.

However, the main problem for the pope to overcome is to reconcile his actions during the dictatorship in Argentina. As Carlo Sands wrote recently:

Pope Francis is also heavily implicated in the crimes of Argentina's fascist junta — but as Jesus teaches, none of us are without sin. And, really, who among us can honestly say we have not kidnapped and tortured the odd priest?

The mainstream media coverage of world figures has sure been interesting of late. Apparently Pope Francis, who backed a dictatorship that slaughtered thousands, loves the poor. And Hugo Chavez, who redistributed wealth and lowered poverty, was a tyrant. The corporate press might not be much good at depicting reality, but at least its black-is-white message is consistent.

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Corporate Profitability

Mark Thoma notes the historic high levels of Corporate Profitability.

Economy built for profits not prosperity, by Lawrence Mishel, EPI: Newly released data on corporate profitability for 2012 show the continuation of historic levels of profitability despite excessive unemployment and stagnant wages for most workers. Specifically, the share of capital income (such as profits and interest, which are hereafter referred to as ‘profits’) in the corporate sector increased to 25.6 percent in 2012, the highest in any year since 1950-1951 and far higher than the 19.9 percent share prevailing over 1969-2007, the five business cycles preceding the financial crisis. …

Could the US economy be undergoing a fundamental change as it moves resources from Department II to Department I? If so, we should see a greater capital investment.

But the fundamental problem remains: the consumption can only be realised through wages and salaries. Since these, in total, are decreasing, then total consumption must fall as well. This means that profits must eventually decline as well.

Can an economy consist entirely of Department I?

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Michael Mann on power

Dan Little reviews Michael Mann on power.

Little describes Mann's model as follows:

One of the generalizing frameworks that he uses throughout all four volumes is what he refers to as the "IEMP model" of social power: ideological, economic, military, and political. He believes that these aspects of social reality are largely independent sets of institutions and processes, and they create different though complementary sources of power for individuals and groups within a given state of society. Here is the thumbnail he offers for each of these four high-level features of social power in Volume 3:

Ideological Power derives from the human need to find ultimate meaning in life, to share norms and values, and to participate in aesthetic and ritual practices with others. (V3, 6)

Economic Power derives from the human need to extract, transform, distribute, and consume the products of nature. Economic relations are powerful because they combine the intensive mobilization of labor with very extensive circuites of capital, trade, and production chains, providing a combination of intensive and extensive power and normally also of authoritative and diffused power. (V3, 8)

Military Power. Since writing my previous volumes, I have tightened up the definition of military power to "the social organization of concentrated and lethal violence." (V3, 10)

Political Power is the centralized and territorial regulation of social life. The basic function of government is the provision of order over this realm. (V3, 12)

In Marxist terms, economic power would refer to the control of the means of production. The state would encompass both military and political power. While the superstructure would include both the state and institutions of ideological power such as organised relgion, educational institutions, and the mass media.

The superstructure acts to protect the economic power of the ruling class. The material basis for these manisfestations of power is in the control of the means of production.

It is the division of society in classes that drives history. Mann is working at the edges, not at the centre which is class warfare.

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Gays and Lesbians: Sucked in by the Far Right

Ted Rall writes that Gays and Lesbians: Sucked in by the Far Right.

Rall opines that:

The sad truth is that the LGBT movement has abandoned its progressive roots. It has become a conservative movement.

Italics in original

Rall further argues that the LGBT used to challenge marriage, the nuclear family, and militarism:

Back in the 1970s, Michael Warner reminds us in his 1999 book “The Trouble with Normal,” gays weren’t trying to assimilate into the toxic “mainstream” cultures of monogamism and empire. Instead, they were pointing the way toward other ways of life.

The Socialist Alliance's policy on LGBTI says that:

We live in a society which attempts to dictate sexual preference and gender identity through promoting the gender stereotypes and homophobic attitudes which underpin the heterosexual nuclear family, and by promoting marriage and the nuclear family as the only legitimate model for relationships. Lesbians, gay men, bisexuals, trans people and intersex people suffer oppression because their lives are a challenge to the nuclear family which is an economic cornerstone of capitalism.

The policy on Marriage and Civil Unions says that:

In other countries civil unions have been offered to the LGBTI community to placate the movement for equal marriage rights. This is not the situation in Australia, where even civil unions have been suppressed by the federal government because they “mimic marriage”. It is for this reason that the Socialist Alliance supports civil unions but will continue the campaign for marriage . Civil unions are not a substitute for marriage rights.

Because of the opposition, gay marriage is a progressive issue in Australia. However, as the opposition disappears, and monogamy for LGBTI becomes acceptable, then Rall's arguments about moving the progressive focus back to issues of the mainstream becomes important. It is strange to think that the USA is more progressive than Australia on this issue.

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My Van, My Tardis, My Home

Trevor Brown writes about My Van, My Tardis, My Home (pp.18-19) in The Big Issue #428 (22-28 March 2103).

In this article, Brown laments the detrimental effects of the Occupy Movement on the homeless:

Ripples that spread out from various ‘Occupy’ movements over the past couple of years increased pressure on many of us on the streets. We came under increased attention from law-enforcement personnel who seemed intent on making sure we weren't an advanced guard for groups hoping to take up residence in the middle of cities. The homeless were found ‘guilty by association’; we were caught in the open ground between authorities and Occupiers. The pressure increased: I came under verbal attack by members of the public for the first time. Sadly, activities by the group only disenfranchised the very people they were trying to promote as worthy of help and support.

Emphasis Mine

The backlash against the Occupy Movement has rebounded on the homeless. It has drawn them into a political battle they do not want to be part of. They just want to be able to rejoin society.

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Studying entrepreneurship without doing it

Seth Godin takes a dim view of Studying entrepreneurship without doing it.

Likewise, it is impossible to be a revolutionary without facing the fear and discomfit of belonging to a revolutionary party.

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Why Does No One Speak of America’s Oligarchs?

Yves Smith asks Why Does No One Speak of America’s Oligarchs?

The current narrative about Cyprus portrays the country as a tax-havern for the Russian oligarchs. Smith challenges this narrative.

Smith asks:

…But see another implicit part of the story: that Russia’s oligarchs and “dirty money” are a distinctive national creation. Do you ever hear Carlos Slim or Rupert Murdoch or the Koch Brothers described as oligarchs? To dial the clock back a bit, how about Harold Geneen of ITT, which was widely known to conduct assassinations in Latin America if it couldn’t get its way by less thuggish means? (This is not mere rumor, I’ve had it confirmed by a former ITT executive).

Smith makes the point that the oligarchs in the USA are called elites instead. She writes that Simon Johnson clearly described in his important 2009 Atlantic article, The Quiet Coup, that American was in the hands of oligarchs:

Now Johnson carefully laid the bread crumbs, but so as not to violate the rules of power player discourse, pointedly switched from the banana republic term “oligarch” to the more genteel and encompassing label “elites” when talking about the US (“elites” goes beyond the controlling interests themselves to include their operatives as well as any independent opinion influencers). Yet despite his depiction of extensive parallels between the role played by oligarchs in emerging economies and the overwhelming influence of the financial elite in the US, there’s been a peculiar sanctimonious reluctance to apply the word oligarch to the members of America’s ruling class. Some of that is that we Americans idolize our rich, and the richer the better. No one looks too hard at the fact many of our billionaires started out with a leg up, parlaying a moderate family fortune (for instance, in the case of Donald Trump) into a bigger one, or having one’s success depend on other forms of family help (Bill Gates’ mother having the connection to an IBM executive that enabled Gates to license MS-DOS to them).

Smith concludes:

Confucius said that the beginning of wisdom was learning to call things by their proper names. The time is long past to kid ourselves about the nature of the ruling class in America and start describing it accurately, as an oligarchy.

But the question remains: how does an oligarchy arise from Capitalism?

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