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Capitalism in an Apocalyptic Mood
Skyrocketing oil prices, a falling dollar, and collapsing financial markets are the key ingredients in an economic brew that could end up in more than just an ordinary recession. The falling dollar and rising oil prices have been rattling the global economy for sometime. But it is the dramatic implosion of financial markets that is driving the financial elite to panic.
And panic there is. Even as it characterized Federal Reserve Board Chairman Ben Bernanke's deep cuts amounting to a 1.25 points off the prime rate in late January as a sign of panic, the Economist admitted that "there is no doubt that this is a frightening moment." The losses stemming from bad securities tied up with defaulted mortgage loans by "subprime" borrowers are now estimated to be in the range of about $400 billion. But as the Financial Times warned, "the big question is what else is out there" at a time that the global financial system "is wide open to a catastrophic failure." In the last few weeks, for instance, several Swiss, Japanese, and Korean banks have owned up to billions of dollars in subprime-related losses. The globalization of finance was, from the beginning, the cutting edge of the globalization process, and it was always an illusion to think that the subprime crisis could be confined to U.S. financial institutions, as some analysts had thought.
Some key movers and shakers sounded less panicky than resigned to some sort of apocalypse. At the global elite's annual week-long party at Davos in late January, George Soros sounded positively necrological, declaring to one and all that the world was witnessing "the end of an era." World Economic Forum host Klaus Schwab spoke of capitalism getting its just desserts, saying, "We have to pay for the sins of the past." He told the press, "It's not that the pendulum is now swinging back to Marxist socialism, but people are asking themselves, 'What are the boundaries of the capitalist system?' They think the market may not always be the best mechanism for providing solutions."
Ruined Reputations and Policy Failures
While some appear to have lost their nerve, others have seen the financial collapse diminish their stature.
As chairman of President Bush's Council of Economic Advisers in 2005, Ben Bernanke attributed the rise in U.S. housing prices to "strong economic fundamentals" instead of speculative activity. So is it any wonder why, as Federal Reserve chairman, he failed to anticipate the housing market's collapse stemming from the subprime mortgage crisis? His predecessor, Alan Greenspan, however, has suffered a bigger hit, moving from iconic status to villain in the eyes of some. They blame the bubble on his aggressively cutting the prime rate to get the United States out of recession in 2003 and restraining it at low levels for over a year. Others say he ignored warnings about aggressive and unscrupulous mortgage originators enticing "subprime" borrowers with mortgage deals they could never afford.
The scrutiny of Greenspan's record and the failure of Bernanke's rate cuts so far to reignite bank lending has raised serious doubts about the effectiveness of monetary policy in warding off a recession that is now seen as all but inevitable. Nor will fiscal policy or putting money into the hands of consumers do the trick, according to some weighty voices. The $156 billion stimulus package recently approved by the White House and Congress consists largely of tax rebates, and most of these, according to New York Times columnist Paul Krugman, will go to those who don't really need them. The tendency will thus be to save rather than spend the rebates in a period of uncertainty, defeating their purpose of stimulating the economy. The specter that now haunts the U.S. economy is Japan's experience of virtually zero annual growth and deflation despite a succession of stimulus packages after Tokyo's great housing bubble deflated in the late 1980s.
The Inevitable Bubble
Even with the finger-pointing in progress, many analysts remind us that if anything, the housing crisis should have been expected all along. The only question was when it would break. As progressive economist Dean Baker of the Center for Economic Policy Research noted in an analysis several years ago, "Like the stock bubble, the housing bubble will burst. Eventually, it must. When it does, the economy will be thrown into a severe recession, and tens of millions of homeowners, who never imagined that house prices could fall, likely will face serious hardship."
The subprime mortgage crisis was not a case of supply outrunning real demand. The "demand" was largely fabricated by speculative mania on the part of developers and financiers that wanted to make great profits from their access to foreign money that flooded the United States in the last decade. Big ticket mortgages were aggressively sold to millions who could not normally afford them by offering low "teaser" interest rates that would later be readjusted to jack up payments from the new homeowners. These assets were then "securitized" with other assets into complex derivative products called "collateralized debt obligations" (CDOs) by the mortgage originators working with different layers of middlemen who understated risk so as to offload them as quickly as possible to other banks and institutional investors. The shooting up of interest rates triggered a wave of defaults, and many of the big name banks and investors - including Merrill Lynch, Citigroup, and Wells Fargo - found themselves with billions of dollars worth of bad assets that had been given the green light by their risk assessment systems.
The Failure of Self-Regulation
The housing bubble is only the latest of some 100 financial crises that have swiftly followed one another ever since the lifting of Depression-era capital controls at the onset of the neoliberal era in the early 1980s. The calls now coming from some quarters for curbs on speculative capital have an air of déjàvu. After the Asian Financial Crisis of 1997, in particular, there was a strong clamor for capital controls, for a "new global financial architecture." The more radical of these called for currency transactions taxes such as the famed Tobin Tax, which would have slowed down capital movements, or for the creation of some kind of global financial authority that would, among other things, regulate relations between northern creditors and indebted developing countries.
Global finance capital, however, resisted any return to state regulation. Nothing came of the proposals for Tobin taxes. The banks killed even a relatively weak "sovereign debt restructuring mechanism" akin to the U.S. Chapter Eleven to provide some maneuvering room to developing countries undergoing debt repayment problems, even though the proposal came from Ann Krueger, the conservative American deputy managing director of the IMF. Instead, finance capital promoted what came to be known as the Basel II process, described by political economist Robert Wade as steps toward global economic standardization that "maximize [global financial firms'] freedom of geographical and sectoral maneuver while setting collective constraints on their competitive strategies." The emphasis was on private sector self-surveillance and self-policing aimed at greater transparency of financial operations and new standards for capital. Despite the fact that it was finance capital from the industrialized countries that triggered the Asian crisis, the Basel process focused on making developing country financial institutions and processes transparent and standardized along the lines of what Wade calls the "Anglo-American" financial model.
Calls to regulate the proliferation of these new, sophisticated financial instruments, such as derivatives placed on the market by developed country financial institutions, went nowhere. Assessment and regulation of derivatives were left to market players who had access to sophisticated quantitative "risk assessment" models.
Focused on disciplining developing countries, the Basel II process accomplished so little in the way of self-regulation of global financial from the North that even Wall Street banker Robert Rubin, former secretary of treasury under President Clinton, warned in 2003 that "future financial crises are almost surely inevitable and could be even more severe."
As for risk assessment of derivatives such as the "collaterized debt obligations" (CDOs) and "structured investment vehicles" (SIVs) - the cutting edge of what the Financial Times has described as "the vastly increased complexity of hyperfinance" - the process collapsed almost completely. The most sophisticated quantitative risk models were left in the dust. The sellers of securities priced risk by one rule only: underestimate the real risk and pass it on to the suckers down the line. In the end, it was difficult to distinguish what was fraudulent, what was poor judgment, what was plain foolish, and what was out of anybody's control. "The U.S. subprime mortgage market was marked by poor underwriting standards and 'some fraudulent practices,'" as one report on the conclusions of a recent meeting of the Group of Seven's Financial Stability Forum put it. "Investors didn't carry out sufficient due diligence when they bought mortgage-backed securities. Banks and other firms managed their financial risks poorly and failed to disclose to the public the dangers on and off their balance sheets. Credit-rating companies did an inadequate job of evaluating the risk of complex securities. And the financial institutions compensated their employees in ways that encouraged excessive risk-taking and insufficient regard to long-term risks."
The Specter of Overproduction
It is not surprising that the G-7 report sounded very much like the post-mortems of the Asian financial crisis and the dot.com bubble. One financial corporation chief writing in the Financial Times captured the basic problem running through these speculative manias, perhaps unwittingly, when he claimed that "there has been an increasing disconnection between the real and financial economies in the past few years. The real economy has grown...but nothing like that of the financial economy, which grew even more rapidly - until it imploded." What his statement does not tell us is that the disconnect between the real and the financial is not accidental, that the financial economy expanded precisely to make up for the stagnation of the real economy.
The stagnation of the real economy stems is related to the condition of overproduction or over-accumulation that has plagued the international economy since the mid-1970s. Stemming from global productive capacity outstripping global demand as a result of deep inequalities, this condition has eroded profitability in the industrial sector. One escape route from this crisis has been "financialization," or the channeling of investment toward financial speculation, where greater profits could be had. This was, however, illusory in the long run since, unlike industry, speculative finance boiled down to an effort to squeeze out more "value" from already created value instead of creating new value.
The disconnect between the real economy and the virtual economy of finance was evident in the dot.com bubble of the 1990s. With profits in the real economy stagnating, the smart money flocked to the financial sector. The workings of this virtual economy were exemplified by the rapid rise in the stock values of Internet firms that, like Amazon.com, had yet to turn a profit. The dot.com phenomenon probably extended the boom of the 1990s by about two years. "Never before in U.S. history," Robert Brenner wrote, "had the stock market played such a direct, and decisive, role in financing non-financial corporations, thereby powering the growth of capital expenditures and in this way the real economy. Never before had a US economic expansion become so dependent upon the stock market's ascent." But the divergence between momentary financial indicators like stock prices and real values could only proceed to a point before reality bit back and enforced a "correction." And the correction came savagely in the dot.com collapse of 2002, which wiped out $7 trillion in investor wealth.
A long recession was avoided, but only because another bubble, the housing bubble, took the place of the dot.com bubble. Here, Greenspan played a key role by cutting the prime rate to a 45-year low of one percent in June 2003, holding it there for a year, then raising it only gradually, in quarter-percentage-increments. As Dean Baker put it, "an unprecedented run-up in the stock market propelled the U.S. economy in the late nineties and now an unprecedented run-up in house prices is propelling the current recovery."
The result was that real estate prices rose by 50% in real terms, with the run-ups, according to Baker, being close to 80% in the key bubble areas of the West Coast, the East Coast north of Washington, DC, and Florida. Baker estimates that the run-up in house prices "created more than $5 trillion in real estate wealth compared to a scenario where prices follow their normal trend growth path. The wealth effect from house prices is conventionally estimated at five cents to the dollar, which means that annual consumption is approximately $250 billion (2 per cent of gross domestic product [GDP]) higher than it would be in the absence of the housing bubble."
The China Factor
The housing bubble fueled U.S. growth, which was exceptional given the stagnation that has gripped most of the global economy in the last few years. During this period, the global economy has been marked by underinvestment and persistent tendencies toward stagnation in most key economic regions apart from the United States, China, India, and a few other places. Weak growth has marked most other regions, notably Japan, which was locked until very recently into a one percent GDP growth rate, and Europe, which grew annually by 1.45% in the last few years.
With stagnation in most other areas, the United States has pulled in some 70% of all global capital flows. A great deal of this has come from China. Indeed, what marks this current bubble period is the role of China as a source not only of goods for the U.S. market but also capital for speculation. The relationship between the United States and Chinese economies is what I have characterized elsewhere as chain-gang economics. On the one hand, China's economic growth has increasingly depended on the ability of American consumers to continue their debt-financed spending spree to absorb much of the output of China's production. On the other hand, this relationship depends on a massive financial reality: the dependence of U.S. consumption on China's lending the U.S. Treasury and private sector dollars from the reserves it accumulated from its yawning trade surplus with the United States: one trillion dollars so far, according to some estimates. Indeed, a great deal of the tremendous sums China - and other Asian countries - lent to American institutions went to finance middle-class spending on housing and other goods and services, prolonging the fragile U.S. economic growth but only by raising consumer indebtedness to dangerous, record heights.
The China-U.S. coupling has had major consequences for the global economy. The massive new productive capacity by American and other foreign investors moving to China has aggravated the persistent problem of overcapacity and overproduction. One indicator of persistent stagnation in the real economy is the aggregate annual global growth rate, which averaged 1.4% in the 1980s and 1.1% in the 1990s, compared to 3.5% in the 1960s and 2.4% in the 1970s. Moving to China to take advantage of low wages may shore up profit rates in the short term. But as it adds to overcapacity in a world where a rise in global purchasing power is constrained by growing inequalities, such capital flight erodes profits in the long term. And indeed, the profit rate of the largest 500 U.S. transnational corporations fell drastically from 4.9% from 1954-59, to 2.04% from 1960-69, to -5.30% from 1989-89, to -2.64% from 1990-92, and to -1.92% from 2000-2002. Behind these figures, notes Philip O'Hara, was the specter of overproduction: "Oversupply of commodities and inadequate demand are the principal corporate anomalies inhibiting performance in the global economy."
The succession of speculative manias in the United States has had the function of absorbing investment that did not find profitable returns in the real economy and thus not only artificially propping up the U.S. economy but also "holding up the world economy," as one IMF document put it. Thus, with the bursting of the housing bubble and the seizing up of credit in almost the whole financial sector, the threat of a global downturn is very real.
Decoupling Chain-Gang Economics?
In this regard, talk about a process of "decoupling" regional economies, especially the Asian economic region, from the United States has been without substance. True, most of the other economies in East and Southeast Asia have been pulled along by the Chinese locomotive. In the case of Japan, for instance, a decade-long stagnation was broken in 2003 by the country's first sustained recovery, fueled by exports to slake China's thirst for capital and technology-intensive goods. Exports shot up by a record 44%, or $60 billion. Indeed, China became the main destination for Asia's exports, accounting for 31% while Japan's share dropped from 20 to 10%. As one account in the Strait Times in 2004 pointed out, "In country-by-country profiles, China is now the overwhelming driver of export growth in Taiwan and the Philippines, and the majority buyer of products from Japan, South Korea, Malaysia, and Australia."
However, as research by C.P. Chandrasekhar and Jayati Ghosh and has underlined, China is indeed importing intermediate goods and parts from these countries but only to put them together mainly for export as finished goods to the United States and Europe, not for its domestic market. Thus, "if demand for Chinese exports from the United States and the EU slow down, as will be likely with a U.S. recession, this will not only affect Chinese manufacturing production, but also Chinese demand for imports from these Asian developing countries." Perhaps the more accurate image is that of a chain gang linking not only China and the United States but a host of other satellite economies whose fates are all tied up with the now-deflating balloon of debt-financed middle-class spending in the United States.
New Bubbles to the Rescue?
Do not overestimate the resiliency of capitalism. After the collapse of the dot.com boom and the housing boom, a third line of defense against stagnation owing to overcapacity may yet emerge. For instance, the U.S. government might pull the economy out of the jaws of recession through military spending. And, indeed, the military economy did play a role in bringing the United States out of the 2002 recession, with defense spending in 2003 accounting for 14% of GDP growth while representing only 4% of the overall U.S. GDP. According to estimates cited by Chalmers Johnson, defense-related expenditures will exceed $1 trillion for the first time in history in 2008.
Stimulus could also come from the related "disaster capitalism complex" so well studied by Naomi Klein: the "full fledged new economy in home land security, privatized war and disaster reconstruction tasked with nothing less than building and running a privatized security state both at home and abroad." Klein says that, in fact, "the economic stimulus of this sweeping initiative proved enough to pick up the slack where globalization and the dot.com booms had left off. Just as the Internet had launched the dot.-com bubble, 9/11 launched the disaster capitalism bubble." This subsidiary bubble to the real-estate bubble appears to have been relatively unharmed so far by the collapse of the latter.
It is not easy to track the sums circulating in the disaster capitalism complex. But one indication of the sums involved is that InVision, a General Electric affiliate producing high-tech bomb-detection devises used in airports and other public spaces, received an astounding $15 billion in Homeland Security contracts between 2001 and 2006.
Whether or not "military Keynesianism" and the disaster capitalism complex can in fact fill the role played by financial bubbles is open to question. To feed them, at least during the Republican administrations, has meant reducing social expenditures. A Dean Baker study cited by Johnson found that after an initial demand stimulus, by about the sixth year, the effect of increased military spending turns negative. After 10 years of increased defense spending, there would be 464,000 fewer jobs than in a scenario of lower defense spending.
An more important limit to military Keynesianism and disaster capitalism is that the military engagements to which they are bound to lead are likely to create quagmires such as Iraq and Afghanistan. And these disasters could trigger a backlash both abroad and at home. Such a backlash would eventually erode the legitimacy of these enterprises, reduce their access to tax dollars, and erode their viability as sources of economic expansion in a contracting economy. Yes, global capitalism may be resilient. But it looks like its options are increasingly limited. The forces making for the long-term stagnation of the global capitalist economy are now too heavy to be easily shaken off by the economic equivalent of mouth-to-mouth resuscitation.
Sources
Dean Baker, "The Menace of an Unchecked Housing Bubble," in Joseph Stiglitz, Aaron Edlin, and J. Bradford DeLong, eds., The Economists' Voice (New York: Columbia University Press, 2008)
Robert Brenner, The Boom and the Bubble (New York: Verso, 2002.)
"China: the Locomotive," Strait Times, February 23, 2004.
Naomi Klein, The Shock Doctrine (New York: Metropolitan Books, 2007).
Philip Anthony O'Hara, "The Contradictory Dynamics of Globalization," in B.N. Ghosh and Halil Guven, eds., Globalization and the Third World (Basingstoke: Palgrave Macmillan, 2006).
Robert Rubin and Jacob Weisberg, In an Uncertain World (New York: Random House, 2003).
Robert Wade, "The Aftermath of the Asian Financial Crisis," in Bhumika Muchhala, ed., Ten Years After: Revisiting the Asian Financial Crisis (Washington, DC: Woodrow Wilson International Center for Scholars, 2007)
89 Comments so far
Show AllExcellent, Smithers. We've looted it all - and just in time - the silly working class is starting to notice. Let's go make sure there are no crumbs for the fools to salvage. They'll be eating out of our hands in no time.
A key aspect of neoliberalism (rules of the World Bank, IMF, and WTO) is the prevention of nations with weak, less advanced economies from taking steps to protect themselves from the predatory behavior of international corporations. The usual defense of such neoliberal policies is that they are required for a "free market" and "free trade." It is equivalent to allowing rapists into the elementary schools and forbidding the children from joining together to defend themselves because that would be unfair and would be inconsistent with "free association."
A review of some of the usual and expected problems under Capitalism, fine, what is the solution ?
It would be more productive if all the economic experts writing about Capitalism's gloom and doom scenarios spend their energies educating the rest of us on how to get rid of Capitalism's problems.
I see no better way out other than Socialism.
Bush will be making Billions after Jan 2009 from the industries that he has moralessly helped as president.
The whole world will be going pot while he tries to do Laura in Crawfordsville.
Or maybe he will just be watching porn on the internet, as the rest of the world burns.
ragnarok - the solution, as I see it, is law and order applied equally to all. Famously represented by the blindfold that lady justice wears. Wars of aggression should be, and are, illegal. Without them, wars of defence would be obsolete. Packaging up crap as a AAA rated investmet vehicle, lending or promising money that can never be repaid, monetizing debt, even polluting in all it's nasty forms are harmful activities that should be illegal, and the laws should be in force. There is no way out that doesn't involve Socialism. Capitalism, Socialism, and Rule of Law. Pick less than 3 of the 3, and there is no example in all of history that works very well at all.
"Bush will be making Billions after Jan 2009 from the industries that he has moralessly helped as president."
Can you supply any specifics on that please?
"I see no better way out other than Socialism."
How do you answer the charge that there is less of an incentive for individuals to produce in socilaist syustems?
I think education would be a big part of a solution. How is it that "millions" of home owners didn't know that the price of their house might decrease? You can teach that in elementary school.
jakenewton, I'll answer that charge. In an anti-capitalist system, there is indeed less of an incentive. In an anti-socialist system, there is poverty, stagnation, and decay. Plenty of nations employ capitalism and socialism in a responsible balance. There is both incentive to produce and a stable society in which to do so. You won't find a way to make civilization really run without a good, responsible dose of both, any more than you'll be able to run away without two healthy legs.
Solutions:
Demand the regulation of the markets
Stop consumerism
Oxymoron of the week:
"The Failure of Self-Regulation"
Can an alcoholic self-regulate? A gambling addict?
Neither can one who suffers from Chronic Greedism Syndrome, especially when all regs and punishments have been eradicated.
There's a big difference between a desire to work hard and make money and an insatiable obsession to accumulate obscene, unspendable wealth without a shred of concern for the amount of pain spread along the way.
Sadly, until "we" are able to "self-regulate," daddy Fed is going to have to reattach the leashes.
"What his statement does not tell us is that the disconnect between the real and the financial is not accidental, that the financial economy expanded precisely to make up for the stagnation of the real economy."
Subprime mortgages were issued precisely for the purpose of advancing to working people, whose incomes have been stagnant for 30 years, the idea that they could better their position not by wage increases, but through the GOP vision of "the ownership society." That the inflation of home values followed on the stifling of interest rates was merely a byproduct of the true purpose of the Fed's action: to make plenty of cash available for George W. Bush's "cakewalk" into the quagmire of Iraq. It is always the plan of capital for others to pay now and then pay later.
Adam Smith was completely wrong about everything because the theory of capital hinges on the violation of the second law of thermodynamics. There is not yet any viable theory of economy because capital cannot justify its existence if a scientific evaluation is brought to bear.
Big_Money, it's so good to see someone else looking at this the way I do. I've always believed a perfect society would run this way, and wondered why the idiots on both sides can't seem to grasp the concept of the equal balance of capitalism and socialism, instead of the total of one or the other.
And Jakenewton hits the nail on the head with the education thing. The pain and confusion of buying a house, except for the lucky few, has always been left up to the real estate agent we believe has the knowledge to take us through the process. Why else are they there?
Unfortunately, we've reached an age when we really can't afford to be uninformed about anything that concerns us any longer. From the state of our health, to buying a house, we have to be informed, and knowledgeable, or we better expect the worst.
I don't know about everyone else, but I find it extremely difficult to have any faith in the quality of anything on the market these days, what with all the deregulation and carelessness when it comes to big business. I buy only fresh food, and reject even most of that if it comes from a questionable country. Maybe there's a lot of people feeling the same way, and this worsing recessions isn't all a matter of the bursting housing bubble.
"In an anti-capitalist system, there is indeed less of an incentive. "
Agreed. That was easy.
"The pain and confusion of buying a house, except for the lucky few, has always been left up to the real estate agent we believe has the knowledge to take us through the process. Why else are they there?"
Right, they do it all the time whereas consumers of housing buy and sell perhaps just a couple times in a life.
"capital cannot justify its existence if a scientific evaluation is brought to bear."
Can you explain this please? Economics is a social science btw, it's always going to be hard to show cause and effect.
Jakenewton asks, "How do you answer the charge that there is less of an incentive for individuals to produce in socilaist syustems?"
The thing missing in all of the socialist programs is rules, regulations, and education. Look at Welfare. It was intended to get people through a rough patch. But there was no timeline, no cut off date, no education for those with no education or skills to get a job. And because of all this, it became a very abused program, with generations using it as their only income.
All of them were good, for what they were originally intended to be. Social Security - saved those who reached old age with nothing -such as wives who'd never worked outside the home, when their husbands died, leaving them virtually penniless, from having to go to the poor farm.
jakenewton said
"How do you answer the charge that there is less of an incentive for individuals to produce in socilaist syustems?"
That assumes that people are best motivated by capitalist ways, which is correct only if the average person does not have real socialist values.
You need really socialist people, motivated by love to their socialist society, not by individualism and consumerism which are alien values in a socialist society.
It is not impossible, I for one have no honest motivation to work under capitalism; but must do it to survive. In a socialist country I would work as hard as possible and be happy doing it.
Also in an advanced industrialized nation most productive activities can be done by machines, where the motivation of people to work physically hard is not that important.
Assuming equally developed countries, why would a Japanese worker watching or monitoring a machine would be less/more productive than a Cuban worker doing exactly the same ?
In Capitalist societies people work hard due to fear and/or greed. I take Socialism without fear and greed any time even if it happens to be less productive; but Socialism can be just as productive as Capitalism.
The historical evidence to the contrary is just that, one or few attempts that failed. After all the Soviet Union became a super power in few years starting from a feudal russia. The motivation was in many cases sheer terror; but it worked. Educate those men to do the same without repression, for love to their familes, communities and a socialist society and you will have a better world without all the inherent and unsolvable problems of capitalism.
wilmoor, yup, and thanks, and I seem to be in the same discussion over on the EvolutionInFloridaSchools article.
"Science is good, therefore religion must be destroyed!"
"Socialism is good, therefore capitalism must be destroyed!"
"Democrats are good, therefore Ron Paul must be destroyed!"
I think it gives rise to, or rises from, that which seems to be constantly hindering civilization:
"Competition is good, therefore cooperation must be destroyed!"
"Look at Welfare. It was intended to get people through a rough patch. But there was no timeline, no cut off date, no education for those with no education or skills to get a job. And because of all this, it became a very abused program, with generations using it as their only income."
Right, and nearly politically impossible to terminate.
"That assumes that people are best motivated by capitalist ways, which is correct only if the average person does not have real socialist values. "
Actually I was assuming that people were motivated for "selfish" ways, not capitalist or socialist ways. I don't buy that socialists are altruistic, they are merely selfish and think they themselves would do better under socialism.
jakenewton
I agree with you that to be selfish is not difficult because it is part of our instinct for survival; however we have brains and souls to control that and become better people.
The same way most of us find having sex with a minor repugnant, regardless of our reptilian instinct for sex, it is due to education and civilization.
The same applies to being selfish or not.
I find capitalism morally repugnant, that is where the socialist values come into play, that trumps the natural selfishness inherited from my reptilian ancestors.
You are "certainly" wrong about thinking that socialist people are not altruistic. I can and have done very well under capitalism; but I dislike it, and would honestly prefer to live in a socialist world where my efforts are shared with all my society.
It is not that difficult to understand if you love you family and share with them without reservations, for a socialist individual the family is the whole society.
jakenewton - "I don't buy that socialists are altruistic, they are merely selfish and think they themselves would do better under socialism."
Is it altruistic to think that you'll be better off living and working in a society that doesn't collapse into corrupt dog-eat-dog serfdom?
"It is not that difficult to understand if you love you family and share with them without reservations, for a socialist individual the family is the whole society."
Your real family and other people close to you are people you know. Contrast with individual people in society at large who are strangers to you, and some of whom individually you would find repugnant. It's one thing to value individuals who you don't know on a generic or theoretical level, but to put an actual stranger an a similar footing as your family is not realistic, and I would be very skeptical of those who claim they do.
"Is it altruistic to think that you'll be better off living and working in a society that doesn't collapse into corrupt dog-eat-dog serfdom?"
No, it's selfish, if you think you will be better off. Although I'm not sure which society specifically you are thinking is at risk to becoming "dog eat dog".
jakenewton
"but to put an actual stranger an a similar footing as your family is not realistic, and I would be very skeptical of those who claim they do."
Yes it is possible, some people are so selfish that they can't even share with their immediate family, but other can transcend that and share with the whole society at large as their immediate family.
Again I agree with you that it seems to go against nature, in part it does; but using the same analogy of sex, which is a potent instinct and drive, most civilized people would not even think to do it with children, because it is truly repugnant once you internalize civilized values.
That is the key, you really have to internalize socialist values, otherwise it is just a theoretical nicety. It has to be for real !
Another example is the bushido code of conduct of the Japanese soldiers in WWII. They truly believed in that, those values were internalized, so it was not a problem to kill themselves in mass for their Emperor, talk about unselfishness now !
It seems we're back to the realization that capitalism has failed, and needs to be radically re-regulated. Start with the premise that money-creation without jobs for people in our own country will always lead to crisis and failure. Regulate and tax the living shit out of corporations and finance companies and make them pay their way. Then dismantle the criminally bloated military-industrial-lobbyist complex. Public financing of elections would help too. The Constitution as we thought we knew it is dead, dead, dead. Time for a new one.
Brazil, jakenewton, who do you think I'm talking about? Look at the devastation caused by the Cruzeiro and Cruzado periods, versus what they have now.
So, it's selfish to seek a system that works and is sustainable? What's altruism, then, seeking one that doesn't? I find that hard to understand.
It is particularly hard for social "sciences" to show cause and effect when theory violates the laws of physics. Capitalism as theorized in Wealth of Nations (published by Adam Smith in 1776) posits the notion of a surplus labor which generates profits that cannot physically exist (denied by the laws of therodynamics promulgated by William Thomson [Lord Kelvin] in 1850-51) and must therefore be extracted socially, via "legal" means from victims.
"Brazil"
I didn't see where you had specified earlier. They have incredible poverty and crime in Brazil. I have a friend who visits regularly, until he got mugged last time. There are places you just don't go there. And there is a huge black market from what he tells me.
"So, it's selfish to seek a system that works and is sustainable? "
Of course, assuming an individual is seeking. Finding or creating the desired result is quite another thing.
"What's altruism,"
Very rare, that's what. Also a trait given to an individual, not a group IMO. Where there is a case of what looks like altruism on the part of an individual, you will often find where the individual would not very well bear to have acted otherwise, in that it would be harder to live with himself.
"Capitalism as theorized in Wealth of Nations (published by Adam Smith in 1776) posits the notion of a surplus labor which generates profits that cannot physically exist (denied by the laws of therodynamics promulgated by William Thomson [Lord Kelvin] in 1850-51) "
I am not sure, but I think you are alluding to economic activity that produces physical goods as opposed to those that don't. You can profit in trades where new goods are not produced due to the different perceptions of the value of the traded goods. Example, if I have ten apples, you have ten oranges, and we would each hold at greater value a budle of five of each, we would each profit in trading five for five.
Self-regulation is perhaps the worst of all the euphemisms employed to make the unacceptable acceptable ("precision bombing", "eco-friendly development"). How the media has colluded in foisting this nonsense on the public (In Australia it worked like this - http://www.blognow.com.au/mrpickwick/82461/For_richer_for_poorer.html) should be another charge leveled against corporate media for the damage they have done to the world (climate change denial, the Iraq war, the inevitability of capitalism). Say after me "Self-regulation is no regulation".
ClassAct, I've read through this article here, I I don't see the relation to thermodynamics that you claim:
http://en.wikipedia.org/wiki/Surplus_labour
jakenewton and ragnarok: Shouldn't we first attempt to agree on definitions of "socialism" and "capitalism?" Let me try a quick overview:
There's laissez-faire capitalism (the Age of the Robber Barons, and the present day). Then there's regulated capitalism (FDR and the New Deal, through 1980). With the former, the question is -- to paraphrase Grover Norquist -- How quickly can we reduce the government (except for the military) to the size of a flea that can be drowned in the bathtub? With the latter, the question is: How MUCH government regulation of private capitalist activity do we want or need, and how MUCH do we want to use the tax code to make things fairer and keep from becoming what Warren Buffett calls "a sharecropper society?"
There's statist socialism (the Soviet Union, Cuba) where the political system is a dictatorship. Then there's democratic socialism (the Scandinavian countries from the early 1900s through today) with political freedom and clean elections, and where life-and-death issues -- like proper medical care, protection against destitution in old age, disability insurance, heating/cooling subsidies for the poor, and the government as employer of last resort rather than welfare or unemployment insurance -- are paid for by the government from national income taxes.
I'm for either of the following two systems: strongly regulated capitalism, or democratic socialism. And I don't see how anyone who agrees with me can find an accommodation with the Republican Party. At least the Democrats can be harangued into doing the right thing, if we keep after them long enough!
ragnarok, "I see no better way out other than Socialism."
While I really like your answer, another answer would be to regulate, regulate, regulate. Of course for governments to be able to regulate, we would have to make them more powerful than the corporations. There are also somethings that governments can do better than corporations, such as health care.
Well, jakenewton, I'm taking the bait even though my sarcasm is clearly a little on the soft side to make it through.
Brazil suffered through a period where the currency was being debased right out of control. All retail items were re-priced daily. Better buy 10 slices of bread today, tomorrow your cash will only buy 8. Lots of people were hungry. Today they have a currency that works, without which no "-ism" can keep food on the table.
How about Zimbabwe? Yeah, I didn't mention them either. Too much money, ain't worth squat, so no-one will even ship them food.
You wanna know why Capitalism is in a Apocaliptic Mood? Too much money. Too much debt. Too many promises that can't be kept. Too many assets that are marked to model - but are utterly worthless. Every nation in the world is creating too much money, at rates way beyond their economic expansion, to pay for the damage they caused by doing the same thing, to a slightly lesser degree, last year. There's a "supply overhang" of national currencies. When it turns out that the money is rapidly losing value, because of oversupply and price-fixing of the money itself, you need more of it to get actual stuff out of people. If the currencies lose value fast enough, people will stop accepting them. You haven't heard about that? Noticed the prices of grains, oil, transport, etc? Are you going to tell me that this has nothing to do with money losing it's value? Going to tell me that it's okay to increase the money supply, magically, by double-digit percentages every year, and that it's okay that it's still increasing with no remedy or discussion? Gonna tell me it's not all at risk of coming down like (very much like) a great big trans-global ponzi scheme? I bet you are, go for it.
"Dog eat dog" is a reference to unrestrained capitalist competition, the zero-sum game.
When I used to teach economics, I had students look closely at the smallest economic unit, the family, to see how its behavior and goals differed from the larger, atomistic society. Students concluded that if society would operate as a family a lot of pain and suffering would be eliminated. That is the essence of socilaism--the betterment of all at the expense of none, which is exactly how a functional family works. Capitalism, as the dog eat dog quote graphically shows, pits the family members against each other in a neverending war of brutal competition to gain all for one's self. I suggest people here read Leviathan by Hobbes and seek to understand the connection between your existence and the situation he posits.
There's an old maxim--United we stand; divided we fall--that explains our current dilemma quite well. Raw Capitalism has worked very hard to divide, while the Corporate Family has strived to remain united. This was the basic message of David Korten's book When Corporations Rule The World. In a future world of declining energy capacity and thus food production, further burdened by the growing severity of climate change, the only possible route to suvival is cooperation--family. That means shoving the wedges--abortion, immigration, affirmative action, evolution, etc.--aimed at us back in the faces of our real enemies--the "slaveholding" class who attempt to escape the burdens of living by having their lives supported by others doing the work for them without just remuneration.
Those that tend argue that material greed is something "natural" and therefore we must adhere to a dog-eat-dog system since it accords with "human nature' are confusing cause and effect at least and using flawed logic.
This material competetiveness is a consequence of the capitalist society in which we are immersed not it's cause. In a society were a person's status is elevated by sharing and selflessness - such as many tribal societies in the middle east** and elsewhere, people would consider someone crazy if they said greed was human "nature".
**Scratch below the surface of Bin Laden's occasional communique's and you will noticed that behind his ranting is a deep dislike for the acquisitive materialism of so-called modern (i.e capitalist) society.
how come articles like this continue to ignore the tyrannasaurus of peaked worldwide oil production in the romm?
what is the worldwide economic outlook if THAT is taken into account?
inevitable financial armegeddon is my guess.
Hey Big_Money--I'm sure you have your own set of sources, but these Canadians have put together a first-rate financial blog, http://theautomaticearth.blogspot.com/
Your comments about the currency oversupply are well done. Steven Roach of Morgan Stanley for the past several years has warned of unstable "imbalances" in the global financial achitecture that would eventually be "corrected" one way or another.
Try this link instead:
http://en.wikipedia.org/wiki/Labour_theory_of_value
Value inheres in labor, profits inhere in value, therefore profits inhere in labor. Labor is expressed in physical science in the form of thermodynamics. If labor is paid to value, there could be no profits. If I have labor and you have capital, you need only pay as much in wages as you care to part with; the law does not require payment to value. How can one then purchase the product of labor? The laborer must go into debt to survive, et voila, the subprime loans!
How many of you here have read Ann Rand's "Atlas Shrugged," or Terry Goodkind's "Sword of Truth" series?
While I have no idea what Goodkind's politics are, I know where Rand's were, and also that "Atlas Shrugged" is like the Corporatists' bible.
Reading Atlas twice, I put myself on the hard working, "good" side; and in Goodkind's books, I also put myself on the "good" side. While I know where the right would put me in Atlas, I don't know for sure, but in the middle of reading the first nine books, I got the eerie feeling that they'd put me in the bad side there as well.
I've argued many times with people who believe that people with money who start a business, or someone who has created a product, should be able to pay for slave labor to run the business or to develop the product, because, after all, it was their creation, and they should get all the profit!
My argument - if the people refuse to be slave labor, then the business will die, and the creation will be no better than dust. Of course it just takes time for those working the non-paying jobs to find their inner value, and then, watch out.
Thanks for the link, karlof1! I've been wondering when some Canadians would have something to say about this. As a Canadian, I can diss us for being a little too quiet and not raising as much of a ruckus as we might. Of course, our money supply is "only" increasing at 8% a year, so we have less to raise a ruckus about, on that count - and surprise, surprise, our currency has lost much less of it's purchasing power than the currencies that inflate more quickly.
wilmoor, I read and really enjoyed Atlas Shrugged, but I can't agree with the philosophy that it is founded on, that socialism in any measure is sure to creep like a disease through a functional system and bring it to ruin. I still maintain (and history seems to support me on this) that you need both capitalism and socialism, in good measure.
One thing that we should have learned from 1929 is that you do not want to let an economy crash. The U.S. economy took a decade to recover and only did so after huge deficit increasing military spending on the war.
We would rather have investment than spending. If all the extra money that we spent on the military were invested in education, health care, housing and innovation, we would not be discussing recession but how to invest all that money that is in personal savings accounts.
how does the game monopoly end?
"How many of you here have read Ann Rand's "Atlas Shrugged,"
I have. The John Gault speech was agonizing. I liked how she called the socialists "looters" though.
"how does the game monopoly end?"
The problem with Monopoly is that people are *compelled* to pay the rent, weather with house, hotel, or undeveloped, simply by landing there. There is no choice.
andrew.herman, nice question, it ends in bankruptcy for all players, except one. The game still ends for that one player. Of course that player can give $600 to each of the other players so they can go around the board again.
Hey, jakenewton, the problem with the real world is that people are *compelled* to eat.
ClassAct, thanks for the link, how do you respond to the various criticisms of the theory as laid out in the article?
"If I have labor and you have capital, you need only pay as much in wages as you care to part with; "
You state this as if it only goes one way. OTOH, if you have labor and I have capital, you need only pay as much in labor as you care to part with.
If I only care to part with x for labor but the market rate is x+5, I go without labor. I shut down my business.
"Hey, jakenewton, the problem with the real world is that people are *compelled* to eat."
So what's your point?