Posts Tagged ‘free markets’

Economics and Climate

October 17, 2017

Its simple really.

If destroying the environment makes a profit and saving it has a potential cost, then saving the environment will not happen – especially under capitalism.

However, this point can be generalised.

If destroying the environment allows more tax payers’ money to be given to the established wealthy then that will happen especially under a ‘free market’ government

If destroying the environment conserves the power of the established elites, and saving it might challenge them, then saving it will not happen.

If it is easier to destroy the environment by continuing as we have done or persisting with the default position, and saving it takes effort and thought, it won’t happen.

That’s all the economics you need to know


Government as business?

October 7, 2017

One of the classic neoliberal arguments is that the country should be run like a business.

But why? The country is not a business. A country has to value things that do not make a profit, and sometimes has to do things which only have monetary cost and which business would not do – such as try and preserve the ecology for future generations and their survival. Likewise, a country should ideally not treat ‘big customers’ better than small customers because they pay more or use services more. Justice should apply equally, not by how much profit administering it makes. You should not only have free speech if you can afford to pay for it, or agree with the publisher, as is usually the case in business.

The only benefit of this neoliberal idea is that it gives the corporate sector more power and respectability, as they supposedly must know things about running a business and ideally should know how to run the country, or even be left to run the country. They are the ideal to which everyone should aspire and which should be emulated. The idea also allows a degree of pleasant abuse, of the form “those well intentioned left wingers are nice people but they don’t know how to run a business, so they are useless”. The idea also suggests that government should judge business actions by business morals: “do those actions make the business a profit?”, not whether they might harm people or the country or are a waste of government money. In this system, government should get out of the way of business, no matter what. It also justifies corruption, because it suggests all relationships are monetary, and if business wants to buy relationships with the government to give it advantages then why not? – that’s just competition? Similarly, if CEOs can get massive subsidies and special treatment, just for doing their job (even badly), then so should politicians, especially leaders, so it can be welcome to governments.

The idea promotes the lowering of government supervision of business and any efforts to prevent fraud, because clearly business knows best and the market will punish any real dishonesty or harmful behaviour – which it does not; the market may even reward such behaviour in the short term as the behaviour is profitable. The idea also suggests tax-payer subsidy of business, public private partnerships, commercial-in-confidence, because they are ‘clearly’ better than government by itself. All of these profitable relationships take responsibility away from government and distributes that responsibility where it can never be found – just as the corporate structure is intended to do (corporations are organisations designed to avoid personal responsibility). However, a government without visible responsibility for the arrangements they enter into is not even remotely democratic as that involves responsibility to the people and the whole of the people, not just the wealthy.

If we were to propose that military organization should be the model for government then we are suggesting that ‘the people’ should be fodder for the military. If we think that business is the model for government, then we are suggesting people should be fodder for business: people who consume what they have to choose whether it harms them or not; docile workers who are low paid and flexible at their boss’s request, who never think and never question business power or respectability, and who don’t have the support or information to do anything about it.

This idea can even permeate the union movement who sellout their members for business interests – after all the whole point is that business supposedly knows best, and business people are the best. So workers are perceived as merely an appendage, no longer the centre of what gets produced or gets done.

Where in life do we most heavily feel the unlistening hand of management? At work, which is usually in business, or governed like a business. Business models a form of authority which makes the state even more authoritarian and untouchable.

Capitalism vs Feudalism

October 5, 2017

Capitalism and Feudalism are not the same, but it is useful to make a comparison between them focusing on power and privilege – however much free market apologists do not want to talk about these issues.

In feudalism we basically have the following set up – a largely hereditary class system composed of:

  • 1) Aristocracy, Lords etc. with command of land, law and violence.
  • 2) Crafts people, restricting knowledge of their ‘mysteries’, organised in guilds. Some travel, some are stationary.
  • 3) Merchants and traders who convey goods between cities. Monetary wealth starts to concentrate here. Some cities manage to establish a degree of independence.
  • 4) Church: control of communications, more esoteric non-craft based knowledge, cosmology, salvation.
  • 5) The peasantry, largely bound to a Lord and an estate. Peasants are dependent on the Lords for their livelihood.
  • There is also division by gender. Aristocratic women have more power, privilege and opportunity than peasant women, but they can still lead a relatively constrained life, being bargaining chips for their fathers for alliances. There is some upwards mobility (the idea that people can move up from their parents’ position in life). Historians dispute how much, but there are examples of people being recognised for combat virtues, mercantile abilities and intellectual virtues and moving up the class system to a degree.

    The Church and the Lords have an uneasy truce, but in general the Church promotes the ideas that the Lords have the necessary inherent virtues to rule, and are put there by God, and revolt is bad.

    There is little resembling the present day state. Lords are tied together by ties of oath and kinship. The king is the supreme lord, but he only has a small administration and his own loyal troops. As Shakespeare said “uneasy lies the head that wears the crown”. A quick study of British feudal history will show kings being killed or displaced or disciplined with regularity. It was only with the end of the Wars of the Roses that we get the start of something approximating a modern State. Henry VIII takes over the church and builds a new aristocracy loyal to him through redistribution of its wealth. Elizabeth continues the trend with a secret police and more admin, but even she is so poor that she has to regularly travel the country with her court living on the beneficence of fellow aristocrats. Merchants get more and more control over the wealth. In the middle of the next century a mercantile and largely popular revolution kills Charles I, and sets up an independent government. The Merchants and Presbyterians crush the more democratic elements. Eventually the kings come back, but they are subordinate to Parliament and mercantile wealth for funding – James I and the Stuarts are thrown out. Capitalism develops.

    Out of this history the traditional power and class structure of capitalism appears and is something like this:

  • 1) State: control of law and violence.
  • 2) Capitalists and remaining aristocrats: owners and controllers of business, wealth and land.
  • 3) Professionals: control of knowledge (science) education and entrance to the professions.
  • 4) Media, distribution of knowledge.
  • 5) Unions, representative bodies of workers. Workers are generally dependent on capitalists for their livelihood.
  • 6) Churches.
  • However over the last 40 years, since the Thatcher/Reagan neoliberal (talking about the freemarket) revolution, wealth has become the dominant source of power, purchasing, curtailing, taking over or destroying all the other bases of power. Wealth has the potential to be the ultimate source of power because it can take over anything.

    We now have a situation in which wealth controls State, law and violence though politicians and party funding; it controls knowledge through think tanks and corporatisation of universities; it largely controls media and the distribution of knowledge; and has largely destroyed or crippled unions.

    We live in a hierarchical capitalist plutocracy. This is perhaps the inevitable consequence of putting business and profit first. Business people become the only people worth talking to, or listening to, and their think tanks promote ‘free markets’ (ie the total dominance of business interests) as the only important part of society. They funded Hayek, Mises, Cato inst etc. to make a coherent justification for their unimpeded rule. We now know that the wealthy are wealthy because they “worked hard”, have “special talents”, are “innovative”, are “blessed by God or the market” etc. Revolt, or even objection, is bad.

    This is not to say that the corporate class is completely united. There are divisions which struggle against each other. For example a rough division occurs between those capitalists (and their hangers on) who have a relatively humanistic attitude to the rest of the world, think environments and people require some support or equalising of opportunity, and those who don’t, or who think all good and only good all arises through ‘the market’ or the actions of corporate capitalists.

    There are also gender divisions, relatively few women control wealth production, and the same is true of race/ethic divisions within the country. Everything I have read suggests that upwards mobility has declined over the same period. This implies that class has ossified the more free markets are valued.

    Basically in such a system, the “billionaire next door” can do whatever they like, unless they are opposed by another billionaire, and we see this happening all the time. All other controls on the power of wealth have largely evaporated. It is possible to see most right wing policies at aiming for the removal of any restrictions on wealthy individuals, or any possibility of poorer individuals curtailing the impact of these individuals on their own lives.

    It seems pretty obvious that has well as ‘totalising’ power into plutocracy and rendering it largely (if not completely) hereditary, capitalism likes to displace the costs of its activities on to others, through distribution of pollution, injury environmental destruction, subsidy and so on. So the rest of us end up subsidising their wealth. This increases profits and anyone who does not do it, is at risk in loosing investment, and of being destroyed by a less principled company….

    So one difference between capitalism and feudalism, is that there were more bases for power in feudalism and likely more freedom to exit the system, or to curtail excessive destruction of the system by one particular group. Another is that there was less material wealth. Most of the practical benefits of that wealth have arisen through better technology and medicine, whether the professional organisations could have done that in western feudal society is unknown, but it certainly started there.

    Markets and politics, to flog a dead horse

    October 4, 2017

    You may have heard or read that in the US and in Australia the right wing parties are campaigning to maintain coal and to over-regulate renewables. There are plenty of news items to this effect, especially after Rick Perry’s recent announcements – which may or may not become law, but reflect the general campaign.

    Some libertarians, or idealist capitalists, actually object to this, and express surprise that it is happening…

    For what its worth I think it is worth repeating that, historically, this is how capitalism always works.

    Politics and power can shape markets, therefore players in markets will compete to shape markets through politics to gain advantage in those markets. That seems to be an inevitable road that established businesses will take to defend both their establishment and profitability.

    In a situation in which capitalism is made the only good (as in neoliberalism or libertarianism), this is unpreventable. Politicians depend on business for campaign funds and support, so business ends up buying politics, and there is no surviving power base with which to reliably curtail business influence – because of business opposition to unions etc.

    As established businesses tend to be the wealthy well connected businesses, they tend to have an advantage, and this is called conservatism 🙂

    Libertarian Fantasy….

    October 3, 2017

    I’ve just been reading an article by Australian Parliamentary libertarian David Leyonhjelm (ie a government man) which starts “Living in Australia sometimes feels like living in a bureaucrats’ version of a spaghetti western. The heroes are the brave and all-knowing public servants, while the villains are the naughty people who are too foolish to realise that government knows best.”

    I sometimes wonder what world the silly right live in. Where are these pages of news articles, or TV programmes, saying how wonderful public servants are?

    I’d be surprised if he could find more than a couple in the last ten or so years. The organised hue and cry against them is huge… and business people have their own section of the news in which we can constantly hear how heroic they are and how they fight against people being protected from them (unless, perhaps, some journalist has decided that the public should be informed of what seems like normal corruption.)

    Instead of bureaucrats hindering business, we have daily reports of businesses being allowed to ride over people, being given permission to injure or poison people for profit with full governmental support. Want to industrially fish in a national park? Go ahead. Want to destroy the climate, build pointless roads, or denude the Great Barrier Reef? Here’s some taxpayer money. Want to scrap regulations? Lower worker’s wages? Destroy the water table? Mine in people’s backyards? Here’s the legislation.

    “We are open for business” – not people.

    We live in a plutocracy in which “Business is not the solution, business is the problem” (see I can do slogans too…)

    The reason why things like AirBnB might needs *some* regulation is easy to find if you live in a block with a number of such units. All night parties, damage to surrounds and so on. Costs spread on the rest of the strata owners… just like most business loves to spread the cost of pollution and take the profits for itself.

    I guess the libertarian capitalist solution is just to let business get on with destroying people’s lives and for those who object to move somewhere else – where they will probably get done by another business…

    We can all cheer for that…

    Climate change and prosperity

    September 23, 2017

    People can argue that climate change will bring economic prosperity. This is supposed to arise because currently frozen areas will become less frozen, the northwest passage will open, and we can more easily obtain minerals and oil from currently inhospitable locations.

    So, let’s be clear – there may well be parts of the world which do appear to get a strategic or financial advantage from climate change. That is indeed possible. That does not mean the rest of the world will not suffer severely, nor that the melting ice will not mean that sea levels will almost certainly rise impacting many communities, that mountain glaciers will almost certainly shrink lessening water supplies, that deserts will probably expand, and that existing farming areas may become less productive. It is also possible that this could cause global warfare as people fight over access to water and arable land.

    Indeed, I might argue that one of our problems is that we live in an economic system in which fantasies of wealth are encouraged to take precedence over survival, or even over having a healthy eco-system. Wealth has become symbolically equivalent to life and happiness. However, there is no prosperity if a civilisation undermines the ecologies it needs to survive or flourish. With current trends of climate change, it would seem that there is only increased hardship for most people, whatever the new economic openings (at best – it is hard to predict what the worst could be).

    The fantasy of boom, also tends to be unreal because our economic system is problematic. Since the 1980s it certainly does not look like the proceeds from economic booms have been shared around. They have mostly gone to particular, and very small, groups of people, while the problems of economic busts have been shared around. So an economic boom arising because of the artic opening up, or tundras melting, is not likely to help that many people, or compensate the rest of us for the climate becoming tumultuous and hard.

    It is probably better to put the money and effort into stabilizing climate, before pursuing fantasies of gain.

    Action on Climate Change

    September 17, 2017

    Some random comments.

    Let us be clear, the issue is that people should not emit more greenhouse gases than the environment can handle, if we wish our ‘civilization’ to survive – not that we should not emit any. Not emitting any greenhouse gases is impossible, and the system emits and reprocesses these emissions naturally, just not as much as we are currently emitting.

    Coal is particularly bad in terms of the poisons it emits at all stages in its production and use. There is very little positive to say about coal (that is not in the ground) at this stage in our history. Coal mining and power probably needs to be eliminated, as there is no evidence that coal can be made ‘clean’ or environmentally friendly to the degree that we need it to be.

    We probably also need to work at changing what seems to constitute modern life. Modern life is not a product of free choice but of what we were offered and chose within a particular set of social arrangements that did not value ecological survival.

    That needs to change – and frankly I’m not sure people really ‘need’ or ‘want’ disposable bottles, polluting and failing concrete, coal power, massive amounts of beef, destroyed fishing grounds, and so on. This can be modified, and hopefully will modify.

    It will be hard of course. Some of the problem may well be that the system we live in seems to create a psycho-spiritual emptiness which we fill by purchasing products – and this keeps us acting as wage slaves and generally making ourselves feel empty. This is part of the pattern of domination which we often call neoliberalism, but is probably better ‘capitalist plutocracy’.

    Recognising plutocracy is important. I’ve rarely met anyone who is interested in renewables, who is not aware that these new technologies are being resisted by people who have lots of wealth, power, status and symbolic resonance tied up in fossil fuels. It’s pretty much an every day experience, and the established powers have heaps of money to throw around to influence the debate. Without them, and without the triumph of neoliberalism, we probably would not be having a debate; we would be engaged in finding the best solutions. Resisting plutocracy is important but difficult.

    My main problem with the “energy problem” is that it distracts attention from the other ecological crises which are happening simultaneously. These are produced by building (concrete), mining, farming methods and so on, which are destroying our fresh water supplies, downing our oxygen supplies, wrecking the phosphorus cycle, killing the oceans and so on.

    To be real, we need a lot more action on a lot more fronts.

    Most capitalism is ‘crony capitalism’.

    September 10, 2017

    Often people speak of ‘crony capitalism’ as if it was an aberration of economics. However it is an inherent part of the capitalist system.

    It was recognised by Adam Smith when he said that:

    People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

    It seems to be an essential part of human nature for people to cooperate to further their group interests, and when the powerful and wealthy do this it has large consequences. They also try and break up cooperation amongst ordinary people by demonizing Unions and preaching individualism to workers. That helps magnify the power of their own cooperation.

    If business people can team up to manipulate the markets then they will. If capitalists can team up to make a State to enforce laws that benefit them, then they will. If capitalists can team up to take over the State to enforce laws that benefit them then they will. All of these acts help make money for them, and that is the point; such behaviours are a normal part of profit seeking. The bosses will call these laws, and these power structures, ‘free markets’, or say they are essential to the functioning of those markets.

    In a society in which profit is the prime good, then the wealthy become the epitome of virtue and talent. They are by definition the good and worthy people, who have their status because of that virtue. They are supposedly the admirable and intelligent people who are worthy to rule, and critising them is base envy. They make sure that their kin inherent the wealth, and form a ruling class with a State to support them to make sure that even more of the social wealth goes to them. That is basically the history of the last couple of hundred years with a short interlude after the second world war.

    In capitalism, wealth eventually comes to control the means of communication, the means of learning and the modes of thought, and the means of violence and law enforcement. By owning and controlling these essential parts of social process, the wealthy make sure they cannot be attacked, and that ‘free markets’ seem sensible and legitimate – and if you don’t like these markets, well you are an enemy.

    The wealthy elites may try and deflect attention from their power by paying people to attack other groups as elites, but generally these other ‘elites’ are not that powerful to begin with – they don’t have that much wealth. Wealth ends up controlling the other elites (where do they get the money from to live on?)

    The system of free markets always makes plutocracy, and the State grows to maintain the systems of wealth and oppression.

    Indeed people/politicians who talk a lot about free markets carry out these policies all the time – this is what is called neoliberalism – and it has been working quite well for the wealthy for over the last 40 years.

    The Purpose of Business

    August 14, 2017

    The purpose of business is profit.
    (keep costs low and charge as high as possible)

    Profit means survival.

    If something is profitable, then it will be done.

    If it is destructive to others, or hurts others, and profitable then it will be done.

    If it looks like high level executives will make a greater profit and their actions destroy the business, then it will be done.

    If business can use government to share its costs with taxpayers, or alleviate its responsibilities for harm, and that action increases profit, then it will be done.

    If its beneficial to others and costs, then it won’t be done.

    If it costs the high level executives, then it probably won’t be done.

    If a business can appear to be doing good, while doing nothing to affect profit or increase cost, then that can be done, but it might not.

    Economics and public discourse

    August 6, 2017

    Because there appears to be no provision for Comment on Jessica Irvine’s article in the Australian SMH today, about the benefits of economic ‘reforms’ and the decline of economics in schools along with public discourse, here it is….

    It is certainly true that people often have a great ignorance of economic history and Jessica Irvine has revealed she is one of them.

    Before the “great economic reforms”, even the right wing Coalition party could tend to govern on behalf of everyone, not just the wealthy corporate sector. Wages rose steadily above inflation. Social mobility was real. People born into poverty could work and make it into the middle class, something almost impossible now. Education was largely free to help the mobility and, under Whitlam, became generally available to all adults as well. People could afford houses. Homelessness was rare or voluntary. People could drop out to explore life or art or science or politics or business without fear of being disadvantaged for the rest of their lives. Strong Unions gave people security and clout. People extended their participation in government and so on.

    This did cause some fear amongst the establishment; it was something to be curbed – as the ‘proper elites’ were being challenged. People who had previously been quiet about their suppression were becoming economically secure enough to make noise.

    Despite Irvine’s claims, we were largely insulated from “international contagions” until the 70s oil shock when the multinational oil companies made a fortune out of crisis, and started funding free market think tanks to promote the power of their class. Since then we have suffered from overseas shocks routinely, the last major one originating in the corruption and stupidity of the dominant players in the US financial and housing market, and which penalised ordinary Americans, not them. Nowadays even the most conservative commentators wonder how we will survive a downturn in even one overseas market (China). Jobs have been exported. Manufacturing has declined. We largely cannot make our own products. Minerals are routinely given away to miners. We ignore, or even encourage ecological collapse if it makes money for the wealthy. Major financial institutions appear to continually suffer from corruption, fraud and scandals, which, before ‘reform’, were rare and penalised. Wages are no longer increasing, and the wealth of society is being redistributed back to the financial elite.

    Whatever the intentions of those involved, the ‘great reforms’ have led to an economy in which Plutocracy flourishes, and the rich are nannied and treasured, while ordinary people are abandoned. It is not an improvement, and its success requires that economics is not thought about, that economic history remains distorted and that public discourse becomes trivial. Economics has to mark an ‘unconscious’, as real thinking about the subject, might lead to radical politics and the overturn of ‘free market reforms’. Ignorance is inculcated by dominance.

    It is no surprise, in this situation, that real economics is not taught in high school, and it is no surprise that business studies replaces it. Business is were you get wealth and status. Business is, we are told, the important thing, the privileged thing. Naturally students are attracted to it. Naturally subjects based in dispassionate knowledge decline. That is the result of the reforms. We breakdown in an ignorance that supports power, but which leads to breakdown.