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TechnoratiSkyrocketing 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.
Walden Bello is president of the Freedom from Debt Coalition, a senior analyst at Focus on the Global South, and a columnist for Foreign Policy In Focus (www.fpif.org).
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)
Copyright © 2008, Institute for Policy Studies
89 Comments so far
Show AllProfessor Ravi Batra has indictated the emerging trend about the "end of the rule of money" or monopoloy capitalism. Just as the veracity of Communism is in demise, the war aginst muslim fundamentalism and the oil connection and the corruption of greedy loan schemes = subprime+Bonds+ credit demise+escalating oil prices are all signs of a lack of balance in economic activity. Thus the commercialist class, (see warrior, intellelctual and manual working classes or value systems) will lose dominance and people will call for a social revolution if the military don't snatch the government reins on some pretext. There are are no gaurantees when veil democracry no longer serves the current power brokers.....many millions of people will now suffer...
"the only real 'welfare queens' in America are the owners of stocks and bonds and properties, who idly gather what others have labored for: the profits of companies and the taxes of citizens. "
Whithout entreprenuers who take considerable risks with their capital, where would the *opportunity* for laborors to trade their labor come from?
Capitalism will need to be saved from itself again, as it was in the 1930s. And socialism is the answer. As for abuses, the only real 'welfare queens' in America are the owners of stocks and bonds and properties, who idly gather what others have labored for: the profits of companies and the taxes of citizens.
Why is this form of 'socialism' acceptable, even lauded, when more civilized forms are not? Aren't the parallels self-evident?
Communist Red China and the Soviet Union were supposedly economically 'scientific' structures basically conforming to Corporatist/Fascist lines, even down to Mao being named the 'Chairman' of the biggest conglomerate ever.
They are examples not of socialism, but of what goes wrong in monolithic corporate bureaucratic organizations of ANY type. Democracy goes out the window. It is replaced by top-down rule, looting, selfish interest, abuse of power, tyranny, unsustainability, lack of freedom, regimentation. You know, like Wal-Mart.
Capitalism has proven pefectly compatible, in fact even thriving best(see Naomi Klein's SHOCK DOCTRINE) in totalitarian regimes. So Capitalism and Freedom and Democracy are NOT the same things, and may not be able to co-exist at all, if the power of Capitalist/Corporatist entities become very large, as they are in America today. Adam Smith would probably break up every single one of the Fortune 500 as being unethical and immoral for their size alone.
Capitalism has become simple gambling, and the financial operators have a simple credo -whatever you can get away with- in a system of now-unbridled legal embezzlement, fraud and bribery. Adam Smith never dreamed, when he talked about the baker and butcher, that there would be a time when exchanged money could be rendered instantly worthless by a keystroke on the other side of the planet.
In the laissez-faire world, the so-called market equilibrium 'corrections' destroy real people by the millions with its pendulum swings. See the American Great Depression. Milton Friedman would say, "so what, kill 'em all!"
But is this the world you want to live in? That is the dog-eat-dog world. Your neighbor is your competitor, not a friend, and a danger to your very life and well-being. Unknown secret powers determine the fiscal status/viability of your nation, your community, and your money. This is what breaks communities and unions. And nations. And the International Bankers/Capitalists love it. They have no loyalties or nations. Just free-floating greed. Their motto: to own the entire world is not enough.
The Federal Reserve is controlled by these banking interests, and acts only to save these same interests when they are in trouble. Instead it should serve the nation. For example, it could start by buying up every single government and municipal bond, and eliminating all interest payments. This would save taxpayers trillions of dollars that would currently be transferred/re-distributed to the wealthy (those welfare queens). It would also enable collection of more taxes from the wealthy as they would not be getting interest tax-free anymore. And new banking rules are in order, that serve the public good, not just Citibank.
Economics is not a science. It is all voodoo. But it uses numbers to pretend to itself and others that it is real. It is time that money is put in its rightful place, as just another tool towards achieving a just, fair, peaceful society. Not as the all-powerful controller.
Americans should become the 'shareholders' of a new, socialist America. No taxes for simply living. But progressive taxes on doing business in America, with no deductions, just like paying rent to the landlord. These taxes would be progressive to revenues, and would become punitive past a certain super size, to encourage break-up of giant corporations.
Also, to encourage participation, Americans should be paid a small 'citizen dividend' when voting, as the reward system is after all the system we live under. All revenues would be used for government services and recreating the commonwealth for the generations to come. All uses will be reported to the American people in simple personal terms.
The above would make a good start towards human-scale socialism (see the Scandianvian countries), to re-fix capitalism for a democracy, and undo the debt bondage of America and Americans with which they have been yoked by the international bankers, the Federal Reserve, and the amoral, un-loyal transnational corporations.
Otherwise, Neo-Feudalism, here we come!
"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."
Big_Money, I either missed the Brazil oiece of yours or it got held up. Regarding prices for grains, oil, transport, etc., you attribute that to steady or increased demand at least in part. I would also say that most people who put forth worst case doom and gloom situations as what they think will actually happen, and cite current trends, they forget that other factors in the economy will tend to adjust to those trends in a way that will mitigatwe those trends somewhat. Return to the Mean, not Crash and Burn. Over time, people who bet on the worst case scenario developing don't do very well.
"I would say the current fiascos of government using eminent domain to take property of people who don't want to part with their property then turning over that property to developer to use to make their own for profit is akin to stealing, if you ask me…legalized, but stealing."
I tend to agree, there are few exceptions, but it's dubious for the government to claim a higher tax base as public good, at the cost to the owners.
"Standard Oil, "
Um, kind of old, adjudicated long ago.
"Cable service, deregulation of electric services"
Special cases, where they amount to public utilities with right of ways granted. You may have seen old pictures of eliectrical wiring in city streets by many companies, it was a bog mess.
I may have misunderstood what you meant in your rewrites regarding Fiske's models for desacribing transactions. I don't understand the need to rename them each, you would merely have cases as you described for each where you perhaps rightly would not be getting your share of the deal. If that were the case there would be no good reason to continue in transacations such as that.
kivals: It seems absurd to claim that it is theoretically impossible to achieve high motivation in a socialist system. Obviously it would be difficult to achieve, and many technical problems would have to be overcome, with probably the greatest obstacles being the inertia of the current system and the power of the current elite players to protect their own interests
Of course all of the the neoliberal capitalist's claims are absurd, especially that socialist motivation is impossible. Absurd kaka, and the capitalist knows it - just look at the smirk on the capitalist's face that accompanies every claim he makes. This is because hubris is the only buttress to his arguments. He has blocked out of his mind the empirical reinforcement for socialist motivation that he has witnessed. We all witness it in the United States and elsewhere, but the capitalist squelches it. It's most prevalent where economic opportunity is moderate.
Where economic opportunity is too high or too low the connection between industrial activity and social reward is broken, so people cannot believe in it. What we want is to reproduce the scenario of FDR's New Deal when Americans could see in their communities that a middle class living could be had from tending a local small business. This is the equitable scenario that socialism delivers and the general agreement among Americans that this was the best scenario testifies that socialist motivation is possible, so long as it isn't squelched by the capitalists.
When the capitalists, driven by wildly idiotic ideas of Ayn Rand and Milton Friedman, wiped out the New Deal, and pushed Americans (including most women for the first time) into capitalist slavery, the nation was herded into the two corrals of the haves and the have nots - two places where one cannot have any socialist motivation because the socialist scenario, the happy middle class lifestyle with the small business serving the local community, as a goal, was shattered, and replaced with the frantic stampede toward never-ending zero-sum wealth accumulation at the expense of everyone, and everything. Fortunately for the people, we are burying Ayn Rand's and Milton Freidman's kaka-ideas along with them, so they can push daisies ever so much better. Maybe we'll plant some food-bearing trees on their graves.
Kivals: Engels was not an anthropologist, he was the son of a successful "capitalist", a Prussian textile manufacturer who forced him to leave school before his was 18 in order to learn the business. He was strongly interested in philosophy, especially in the works of Hegel, and since he was a talented writer soon began to write poetry and publish articles.In 1842 he was sent to Manchester, the centre of the British (then also global) textile industry because his father hoped this would help to get rid of his "radical ideas". A grave mistake,of course since the terrible working conditions in England convinced Engels even more that the (unfettered) capitalist system was inherently wrong and self-destructive.
England in those days experienced the first test-phase of "laissez-faire" (do-as-you-please)capitalism, based on some absurd 18th/19th century ideologies,e.g. like that of Bernard de Mandeville who thought that moral behaviour ("virtue" or being good)is actually bad for business ("commercial progress")whereas selfish behaviour,greed, etc. would stimulate economic growth and progress. This convenient attitude together with a misinterpretation of Darwin´s alleged "survival of the fittest" is the root of today´s persistent talk about "man´s selfish nature" or our "selfish genes". ADAM SMITH has also been heavily abused by free-market advocates (by cherry-picking quotations from his work) because his concept of "freedom" was based on human morality: He wrote in THE THEORY OF MORAL SENTIMENTS: "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. Of this kind is pity or compassion, the emotion which we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrow of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous and humane, though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it."
So if anyone keeps telling you that all the problems we are facing now are rooted in selfish human nature - pls realize that this is BS. To perpetuate capitalism the economic system needed to generate (encourage) egotism, selfishness and greed in order to function (to ensure ever encreasing consumption and profit) This may lead to material wealth in the short term, but in the long term, this self-damaging behaviour will eventually create a sick society and destroy the environment. The separation of "economic" behaviour from private behaviour (family, friends, etc.)would ensure the total victory of the economic machine, which was supposed to run according to its own laws and without any regulations. We know see that this is a dangerous fantasy: a deregulated, globalized economy beneftis a small corporate / political /military elite but the majority of people are paying the price for it: increased poverty, increased social unrest, increased environmental destruction, increased income disparity, etc.
The irony is, that socialism (and later social democracy) was the product of deregulated markets, of laissez-faire, the social backlash against brutal exploitation of men, women and children. The wave of governmental regulations were provoked by the very liberals who dreaded them so much: The misery, sickness and death this system created became intolerable so the state (Britain) had to intervene and pass hundreds of bills to protect the health and safety of workers.
I grew up in the 1960ies in a social democracy (Austria). My father died when I was two and my mum had very little money and two small kids. Thanks to the social democratic government my sister and I were able to receive a good education, including college with no tuition fees, no expenses for books, etc. We are very grateful for this support which is based on the socialist idea of "equality of opportunity", allowing low income families to give their children a good education, get a good job and be useful for society. All political systems have faults and can be abused but it is wrong to say that socialist ideas create "welfare queens" and leave no incentives to work hard. I think that solidarity and community spirit are much better incentives to build a sustainable, fairly just society than competition and greed ever will be.
Interesting article on all the clever games the criminals in high finance have been playing.
http://www.informationclearinghouse.info/article19401.htm
All the black and white discussion of "socialism" is a bit simple. Several of the Scandinavian systems and others have a social safety net with plenty of room for free enterprise. And if you get terribly rich while at the top of the economic pyramid you give something back. Warren Buffet not long ago mentioned that he pays less in tax than people making far less. And many use offshore accounts to pay no tax. Halliburton is feeding on tax dollars and is now set up in tax-free Dubai. Farm subsidies to multi-millionaire farmers is pure socialism for the rich and corporations. There is plenty of "socialsim" posing as "capitalism" for the wealthy elite and corporations generated in Washington. The scams are endless.
This morning a friend expressed the idea that the current $2 Trillion Iraq war crimes debt is not a big deal, so my thoughts for the day were:
If the total national debt is in the neighborhood of $8 Trillion and the war crimes debt is $2 Trillion and counting, I would not call that a "tiny" factor. And the $3 Billion per week (or more) is borrowed money flying out the window making things worse every day. And the economic impacts of higher fuel prices as well as the decline of the dollar would add a lot to the so-called $2 Trillion current estimate. The ripple effect through the economy is just beginning to be felt which will accelerate the current semi-free fall.
As you may know the dollar started to fall against the EURO just on the rumor that we were going to invade Iraq before any of the tricky financial market stuff began to happen or be seen. I assume that was due to the fact that international investors knew we had no money to finance the war crimes. And as you said one potential solution for the tricky financial market problems (basically legal, or in some cases illegal profit taking theft that has now come home to roost) is a massive government bailout. But how can that be done if we are financing the occupation of Iraq on debt....perhaps manufacture $Trillions in inflationary currency or borrow more from China and Japan ? Hard to say how this will end. And as the economy delinces there will be less tax revenue coming in to a broken bankrupt system.
And the "stimulus" package is a pathetic answer to the reality that with so much money at the top and inflation to boot, the average American is having trouble participating in the consumer economy which is 70% of the American economy.
I think a key to understanding a lot of this is a profound ethical and cultural decline. The idea of short term profits for personal wealth with no ethical code behind the commerce has created huge problems.
Bascially we are talking about criminal behavior at all levels of government and business. I am not using the world criminal lightly.
Which brings me back to the question of how did we develop this national psychosis where war crimes are accepted as legitimate foreign policy ? And by the way the movie Redacted is on DVD about the Samarra rape and murder (burned her body as well) of a 15 year old Iraqi girl and murder of the girl's family by some bored American soldiers.
Hoo Rah...Support The Troops !
And on financial stuff, I recall an article in Time back in the eighties about MBA students at Stanford reacting to a lecture on business ethics and their overwhelming response was that if you acted ethically that you were at a disadvantage and would "lose" the money race. This IS a criminal mindset. Criminals are of the viewpoint that a scam is more effective than honest behavior with the key to wealth being expoiting others. The only rule is not getting caught. But in the long run, mass stealing begins to backfire, although a lot of white collar criminals have their loot stashed and will never see a jail cell.
I think the Iraqi "insurgency" as well as the Afghan resistance, and others around the world abused by the empire, are well aware of the economic realities and are in it for the long run watching the empire die a slow death of self-inflicted wounds. Did not the Algerians bleed the French for decades ? A lot of the people who oppose us now have degrees in economics having come a long way from being "sheep herders".
1.) I was referring to actual crime (as a transaction)...but in a more nebulous/market sense I would say the current fiascos of government using eminent domain to take property of people who don't want to part with their property then turning over that property to developer to use to make their own for profit is akin to stealing, if you ask me...legalized, but stealing.
4.) Standard Oil, Cable service, deregulation of electric services....
"1.) Communal Stealing. Basically the "I take what I want when I want it" thinking."
Was this a reference to actual crime, or your characterization of how you think markets actually work?
"4.) Monopoly Pricing. Regardless of the supply and demand relative worth, a powerful bully underprices supply to bankrupt others, then regardless of demand overprices supply once he has a corner on the product"
Can you provide your very best example in the real world?
jakenewton, What?? I was just trying to show that there can be above board transactions and less desirable parallels...where did you get mindless zombie???
"Whether or not this is a true source of market manipulation, there are a number of other sources of large enough impact to render the so-called "free market" little more than a rigged Ponzi scheme. "
The question is whether this statement is true or not. Why is it that when I hear people make claims such as this, that it's as if they are one of the few who knows and understands this "sectret" information? If this were true, and has been going on for decades, I would expect large institutional investors who have very smart people on their staffs to have already taken much bigger stakes in gold and other collectibles than they already have.
People may say one thing, but if they act in a way that they don't really beleive it you have something much better to go on.
Karlof1, We are an atomized dysfunctional society, and as such, we don't currently live on communal, family/tribe farms where the 'village" can raise the child and division of labor among different talented members of an extended family can enable everyone to prosper...wish that it were so. But to accuse me of being a narcissist because I make personal sacrifices to raise my children in this atomized disfunctional society is beyond the pale. Those who know me would laugh at your suggestion. In fact, in my previous post, I decided I was remiss...because I would argue that those who don't sacrifice for their children are probably the more disfunctional families. And my children are doing very well (as a result of our commitment and the sacrifices we have made) , thank you...
"yup on that broken window theory - a good illustration of theft posing as growth."
But the true point is that anyone commiting the fallacy can rightly and easily be shown as mistaken or worse. Who out there successfully makes a good case that perpetual war is good for the economy, or that we should desire a big increase in Katrina like storms because the people who rebuild will profit? The lesson is Opportunity Cost.
thinkingmom, if you are implying that those traits are tyoical, I would simply reject it out of hand. It smacks of the kneejerk victim mantality and I see little basis in reality. Markets work two ways as I tried to show before. If you liken yourself as a mindless zombie with no choices, have good luck with it.
Thanks for making my case that we are an atomized dysfunctional society. That thinkingmom sees raising children as parental "sacrifice" shows we are doomed as a society by our narcissism. I suppose you'd think tending your own fields to feed yourself would be sacrifice too.
jakenewton, yup on that broken window theory - a good illustration of theft posing as growth. You wondered: "You can't be the only one who "knows" this. (fraudulent under-reporting of real inflation) How is it therefore that the markets behave as if the above is *not* true?"
A common belief is that the answer springs from here - http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets
Whether or not this is a true source of market manipulation, there are a number of other sources of large enough impact to render the so-called "free market" little more than a rigged Ponzi scheme. Some good old-fashioned government regulation could have prevented this, but that has been out of vogue for decades. Many feel that we have passed the point at which we could reasonably work our way out of the mountain of debt that has been created, and that the only way out is through inflation of the money supply, shrinking the real value of the debts, but trapped in a vicious cycle nonetheless.
A transition has been made from sound financial policy to maintaining confidence among investors and consumers. That "con" in confidence is the root of the terms "con game" and "con artist".
jakenewton, interesting reference and a good bunch of transaction definitions without "labels" but these are all potentially desirable...there can also be a list of less desirable transactions:
1.) Communal Stealing. Basically the "I take what I want when I want it" thinking.
2.)Inequality matching. Most contribute with equal effort or other measure, then someone tags along for the ride. In a household, perhaps the daily chores are rotated among the Mom and Kids and the father kicks back....or the workers produce the porduct and the board installed CEO gathers tons of money and a golden parachute.
3. Authority Cheating, There is a head and a heirarchy below, the head decides or delegates...but hides behind a curtain and puts a puppet to represent himself. Up is down, good is bad and wrong is right. Could be in a family(Windsors), military (Pakistan), civilian government (US) or corporation (Hershey, HP, Sears, and many others).
4.) Monopoly Pricing. Regardless of the supply and demand relative worth, a powerful bully underprices supply to bankrupt others, then regardless of demand overprices supply once he has a corner on the product...
"I thought "progressives" thought the economy was a repulsive thing not to be discussed."
Switch to Death Metal, that oodly oodly ambient stuff may be harming you. :-)
I came across a newspaper column recently. The columnist was speaking about difficulties in understanding or agreeing on issues with economic situations, whether at the household level or that between nations or anything in between. The writer referred to one Alan Fiske, a UCLA anthropologist who I know nothing about other than from this column.
Fiske proposes four different commonly used and often competing models for transactions and arrangements:
1.) Communal sharing. Basically the "from each according to his ability, to each according to his need" thinking.
2.) Equality Matching. All contribute with equal effort or other measure. In a household, perhaps the daily chores are rotated to different members.
3.) Authority Ranking. There is a head, and a hierarchy perhaps below. The head decides or delegates to officers below, you obey who is above. Could be in a family, military, civilian government, or corporation.
4.) Market Pricing. Supply and demand in some kind of marketplace rules what things are worth relative to each other.
The idea is that there are often disagreements or misunderstandings in philosophy, specific situations, cultural expectations, etc. as to what model may be appropriate or is currently operating in a given situation.
"We could easily end up in the never ending war of 1984, its only purpose to keep the economy alive."
I don't buy it. Certain individuals, comanys, and industries can benefit but war is inherently distructive. See "The Broken Window Fallacy":
http://en.wikipedia.org/wiki/Parable_of_the_broken_window
" fraudulent under-reporting of real inflation"
You can't be the only one who "knows" this. How is it therefore that the markets behave as if the above is *not* true?
"Our real economy outside of Wall Street has actually experienced negative "real" GDP growth."
Citation please.
"The real economy has been in a depression for at least the last 7 years."
Citation please, especially for the seven year figure.
Well, Smithers, looks like we have a little problem. Some of these "progressives" have started to look at the economy as if it were something that we have perverted for our own benefit! Sweet, important us, upon whom they all depend for their flambouyant little lifestyles! I thought "progressives" thought the economy was a repulsive thing not to be discussed. Now they're going to stop buying the things we tell them to buy! Soon they'll be buying from eachother, caterwauling about "freedom" and such, and using currencies that we can't print at our leisure! Outrageous! What happens if these "progressives" build a lawful, equitable, fair, and sustainable system of true capitalism with sound money in which to run their little socialist schemes? We'll be doomed, Smithers, and we'll actually have to, dare I say it, produce something!
In fact The more I think about it...it is Corporate Socialism and they have become the "looters"..it really has become a government of, for and by the corporation... The treasury is empty (and has been looted) and 1% have run off with the spoils...
Karlof1, I beg to differ with you on the way a family functions..."benefit of all at the expense of none" I think is hogwash. Parents sacrifice their time, interests and resources for their children...at the EXPENSE of their own "fulfillment" if you will...From an evolutionary perspective one would argue it's for the continuance of their genetic pool...or from a mother's perspective you could say it's done out of love...but do not delude yourself or your students into thinking it's at no one's expense..And more families are disfunctional than functional....To argue that this could work on a scale larger than a family (when it hardly works within families) and on a false premise..is leading everyone astray...
Wilmoor, I too have read Atlas Shrugged, everyone puts themselves on the "good" side...we are all John Galts or Dagney Taggarts...in our own eyes. I think the fundamental problem with extrapolating Ayn Rands ideas to our present society is that like the many above comments..we all think we live in a capitalistic society...This is NOT true...we live in a Corporatist society. The men and women who are incredibly talentled and build wonderful businesses are usally bought out for huge sums of money...their creations (corporations) become run by masters of money rather than creators. The current capitalists have NO resposiblity (the current reason for incorporation and definition of a corporation..llc) and the corporation becomes a person and lives forever. This is NOT capitalism...
This has been a most interesting discussion thread.
Unlike Karlof1, the town in Oregon where I live is struggling for survival. With the federal government having cut off most of the so-called socialistic funds to the state, we've lost our libraries,our schools are struggling, local law enforcement is at rock bottom, and the gangs are moving in.
With Oregon's no sales tax to entice, growth has been pushing the boundaries hard in the last decade, and mansions popping up all over the scraped clean hillsides. We have our world famous river to help our economy, but how soon will it be too despoiled and unable to be of any use?
A reformed capitalism balanced with a reformed socialism, and a healthy dose of communialism, I believe would be a perfect fix.
A quote from Geoff Davies, in his book "Economia".
... There are many other absurdities to be discovered as probe the workings of our economic system, like money that is created out of nothing but then loaned with interest due, as though it were hard-earned cash. In fact our monetary system never supplies enough currency to cover the ever-growing debt attached to it, so is it then surprising if there is a fierce scramble for scarce currency and the world's indebtedness to money lenders seems always to increase? Then there is the economic theory that is supposed to justify the whole regime. It is so irrelevant to what is actually happening that its application can only be called psuedo-science...
Question one is does the earths current production sustain its current population, and without decreasing its natural capital ? No.
Question two is, can the current natural production required : basics like food, shelter, water , a bit of cultural freedom, enjoyment, honesty and learning, be spread more equitably? Yes, and even better, in a manner that ameliorates the problems with Question no. 1.
Question three is, how to moderate human reproduction and competition, so that the human race does not destroy the conditions for environmental and social co-existence.
The Money crisis is a phony crisis of a phony economic system. It won't help questions 1 to 3 by paying too much attention to the symptoms.
Japan did fine because Japan maintained it's industrial base, and the production they did move to China is a 2 hr flight away so the high value parts can still be made in Japan and sent to China for assembly cheaply, so this saved some jobs. It's GDP stagnation is preferable to our GDP growth, which has been artificially manipulated by fraudulent under-reporting of real inflation, hedonic manipulation, and growth limited to fictitous capital, otherwise known as funny money, that is controlled by the 0.1% elite. Any bubble losses are backed up by tax payer bail outs in the form of corporate welfare. Our real economy outside of Wall Street has actually experienced negative "real" GDP growth.
Free market capitalism is a fine thing. We don't have that kind of capitalism, we have had monopoly capitalism for almost a century, with new deal socialism that reduced the corporations labour costs. And that worked out fine, so long as we kept the industrial base that provided decent jobs and benefits.
However, the power elite decided that the US was too small a market for them, only 6 % of the total population, so a globalization movement was called for, and by the 1970's, following the civil unrest of the 60's and wildcat strikes of the 70's, and with the Trilateral Commissions plan, they declared war on the Working Class and 3rd world nations. They proceeded to lower your standard of living, told you they were going to do it, accelerated the export of your jobs, and took away your liberties, gave more power to government, taxed you more and more in one form or another, a little at a time so you did not know, lied about the state of the economy, inflation, GDP, to keep you thinking your poverty was your fault and to limit COLA adjustments and wage increases. They used the IMF/World Bank/WTO and our military/dollar/food to dominate the 3rd world.
The unions had served it's purpose of providing cost certainty, whose costs were passed onto consumers in other industries, and were no longer needed. We have allowed legal and illegal immigration, and exported so many jobs, that we now have a huge labour surplus to keep wages low. Those working, are to afraid of losing health insurance, or risk losing a job due to not having any savings, to ask for more money.
The real economy has been in a depression for at least the last 7 years. People were given access to cheap credit so they did not notice it. The fictitous capital bubble has put the fictitous capital economy into a recession, which might get worse, and then we can officially recognize the depression that already existed in the real economy.
We could get out of it, perhaps with World War or a New Deal after Nationalizing the Finance Industry, or at least the Federal Reserve System. LOL
But it may be that the power elite does not care, they are global citizens, and America has served it's purpose. The consumer has been picked clean, nothing much of value is left. They might buy our military industrial complex from us, it is a first class asset. It would be paid for with carbon dollars, the replacement for the USD as the global reserve currency, to help us get on our feet and out of debt. They would use it for the One World Government after the military take to oath to the UN, and would pay us rent on the land they use, and even offer to help police the herd if they get restless. Of course, we will have to pay a carbon tax, so better buy a horse to get to work, and if you have a big yard, you can grow some food. Might be fun. Might not.
Hello TheMan--As to Japan, their culture highly values saving and thriftiness--not consumption for consumption's sake. Also, a very large percentage of familial wealth is "frozen" in the home, which is VERY expensive--Japan was the first country to introduce the 100 year mortgage to allow young folks the possibility of home ownership. Because of their neutral to negative population growth, it was/is possible for them to have a steady-state economy, as growth isn't needed to satisfy a decreasing population. Those are the main points, but there're many other variables that make the whole story.
The military bubble, such as it is, will burst very easily as it is 100% dependent upon the savings of people outside of the USA, as the USA savings rate is zero to negative in aggregate. This is happening as we write with dollar hegemony being overthrown, albeit slowly, and is a major reason why Iran wasn't attacked.
Kivals--Thanks for the response. While studying the modern Chinese politicaleconomy, I discovered the mistake Marx made that caused him to assume the universality of the Proletarian Revolution--England, where he studied and did most of his writing, was the only industrial country to ever have a proletariat that made up over 80% of the population; no other even went beyond 50%. So, the class solidarity--family cohesiveness--he knew was needed for sucessful revolution was never able to approach a critical mass for the bottom-up revolution he postulated.
Where I live in Oregon, we have a lot of socialism, and the people wouldn't have it any other way. Another word for it is Communitariansim or Communalism, which are always confused with Communism. The USSR and PRC are/were neither communist or socialist--State Syndicalism is closest, IMO. The movement toward localism is very much Communitarian, but you probaly know these things already. At the musical event I attended tonight, the band leader put forth the message that we humans are far more alike than different, that there cannot be a human alien. In functional families, the members love each other and function as a cooperative unit. That society doesn't is an indicator that it's dysfunctional. And when people try to point this out, they are called radicals or worse by those who benefit from societal dysfunction. It would seem jakenewton is one of these.
Solutions? Society for centuries has been in a state of dysfunction, and the various cultures have evolved to accomodate for its inequities. Humans are imperfect, so there will always be inequities, and we cannot forget we are animals that must kill to live. Cultures take generations to evolve, so an altruistic socialist culture would take centuries to mature. This may happen in the wasteland of the peak energy/peak food climatically altered world of tomorrow as I believe it's the best way to survive. Change will occur, willingly or not. Building community that is family from the bottom-up and functions as family sounds easy, but in our very atomized, stratified, segregated society it won't; yet, it's the only real longterm solution.
I'm not sure a military bubble would burst so easily. Even it our nation becomes an intolerable police state, even if hundreds of thousands died in pointless foreign wars it would still be the military industrial complex that would be holding the economy together, and people would know it, and not want to give up that last string supporting the economy. Further as the country would become a police state to satisfy much of the military bubble people would become more scared of the government, and the government would become more totalitarian. We could easily end up in the never ending war of 1984, its only purpose to keep the economy alive.
I also don't fully understand how Japan's economy could not grow at all for a decade or so without it reverting to near Depression conditions unless the Japanese people are in much worse shape than I have been lead to believe.
karlof1,
Certainly the socialist model can be seen as a form of expanding the relations (sharing, communal) in the small family unit to the whole of society. This always proved difficult because in a society of thousands the likelihood of large numbers of free riders and abusers of the system becomes too great to ignore. I believe Engels, Marx's co-author of Das Kapital, was an anthropologist and was aware of the harmonious communal societies found in small primitive groups and wanted to create large modern societies with similar values.
Large societies that thrived throughout history created productive and efficient positive feedback loops in which free riders were minimized and work was rewarded. The concepts of property and property rights evolved, and the "market" developed and efficiency improved. But great accumulations of capital, particularly by powerful economic players such as corporations, players that can warp the system to suit their own interests, have reduced the efficiencies and introduced long-term dangers (climate change, nuclear war, use of great wealth and high tech to enslave others and create instability, etc...) that make radical change absolutely necessary.
It seems absurd to claim that it is theoretically impossible to achieve high motivation in a socialist system. Obviously it would be difficult to achieve, and many technical problems would have to be overcome, with probably the greatest obstacles being the inertia of the current system and the power of the current elite players to protect their own interests. However, no one should get discouraged by the failure of the few primitive socialist systems that have been tried.
One could compare the difficulties in designing an efficient socialist system with the challenges faced by those attempting to develop heavier than air aircraft (with lighter than air aircraft being equated to capitalism, with its limitations in efficiency and control of direction), which required the solution of many technical problems that discouraged and thwarted many dreamers and risk-takers along the way, but which were eventually solved. One needs to ensure that constructive behavior is rewarded and improvements in efficiency are rewarded, with all externalities considered, and that monitoring is sufficient that no individual or small group of individuals can accumulate enough power to warp the system. There are innumerable possible systems, and it appears extraordinarily unlikely that none would work well.
Cool. Better stay away from that Steven Roach. (Although I am listening to some ambientTechnoMusic by a guy called Steve Roach right now. Very nice.) Cheers!
"Or do you see those things as blips in the system?"
There will be some shake outs for sure regarding the housing. We'll just have to see.
Well, with food prices and bankrupcies shooting way up, I'm believing something a bit more tangible than a board game. Or do you see those things as blips in the system?
"You trying to lead me somewhere?"
I would only try to lead you away from that Parker Brothers board game as any kind of model for real life. Your doom and gloom stuff, you can beleive anything you want.
Shall I mention Brazil again? Far from an apocalypse. But not a situation that could be addressed without acknowledging the root causes. You trying to lead me somewhere?
"trying to drive home the point, that, just because the money you carry today has been exchangable for food for a great many years leading up to today, doesn't mean it's not at risk of becoming useless, soon. People won't bother to work for x+5 if they need x+50 to eat. They'll turn to crime before they'll starve. You can build all the jails you want, "
I see, you believe in a coming apocalypse or something. I don't subscribe to that at all, good luck to you.
It's true that I missed the point. I'm picking on anyone that wants to see capitalism or socialism marooned on a desert island somewhere. And trying to drive home the point, that, just because the money you carry today has been exchangable for food for a great many years leading up to today, doesn't mean it's not at risk of becoming useless, soon. People won't bother to work for x+5 if they need x+50 to eat. They'll turn to crime before they'll starve. You can build all the jails you want, (you sound like you might be the type to think that will solve the problem), but really, if you have to jail large numbers of people for trying to feed themselves, you can't really call it a successful society. Or could you?
"It seemed like a funny response to your claim that the problem with monopoly is that people are compelled to pay rent."
But in real life, I don't have to pay rent on *only* the house or hotel that the dice dictated. I can in fact choose among a number of options.
" I still think it's funny, more so now that you're going to shut your business becuase you don't wanna pay x+5 to the rabble. Oops! You shut your business! How you gonna eat?
It may be less than "wanna", I may be "unable" to pay that rate. If so, I will have to shut down the business, and in order to eat I may have to find another more suitable business or even join the rabble as you put it and get a regular job.
How is it though, that you seem to have missed the point that I was trying to make to ClassAct? He was seeing the Capitalist/Labor exchange as being only one way, and I showed in my example that it isn't.
It seemed like a funny response to your claim that the problem with monopoly is that people are compelled to pay rent. I still think it's funny, more so now that you're going to shut your business becuase you don't wanna pay x+5 to the rabble. Oops! You shut your business! How you gonna eat?
"Hey, jakenewton, the problem with the real world is that people are *compelled* to eat."
So what's your point?
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.
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.
"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.
"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?
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.
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.
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.
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.
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!
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.
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.
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.
"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.
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.
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.