Posts Tagged ‘free markets’

Can we reform capitalism

June 14, 2018

This is another website’s summary of the arguments of Yorrick Blumenfeld, slightly modified. URL below.

Summary: Capitalism cannot be reformed, because its nature is destructive.

Capitalism erodes and corrupts democracy: Capitalism is fundamentally antidemocratic. Money controls Parliaments and politicians, not the other way around. Corporate money tends to buy the ability to write and engineer favourable legislation, as parties need money to campaign, and corporate sponsored think tanks decide the environment of thought. The highest bidder – which is usually a group of corporations – buys the government.

Drive to the Bottom: Capitalism pits small countries, states, and counties against each other, seeking special tax breaks and subsidies in highly wasteful “corporate welfare” programs. Capitalism seeks the lowest level of conditions for the people: cheap labour, cheap resources, cheap dumping of waste and cheap regulations.

Capitalism drives off accountability: The political strucutre of corporations shields upper level managers from accountability, while shareholders are protected from personal liability for damage done by the corporation in making the profit they share. Multinationals are not responsible to any electorate, or to governments that respect them. Corporations can always be elsewhere, when they are challenged – just as they take their profits away from where they are earned.

Capitalism’s values are insufficient: Capitalism doesn’t foster many things we value such as: ethics; controlling child labour; strict health and safety standards; reducing hours of labour; providing security for workers; preserving nature; or guaranteeing holidays and weekly breaks from labour. The market economy has failed to focus on durability and ecologically sustainable products and services, and it cannot because these count as costs, not profits. The only spiritual values capitalism can recognise are those that see money as a sign of God’s favour, demand obedience from workers, or generate sales.

It fails to serve the poor: This model underserves over three billion people. Two hundred plus years of capitalism have not brought about global prosperity or environmental balance. It has brought massive prosperity for the very wealthy. Most of the world’s current wealth is controlled by an extremely small number of people – which gives them even more power to govern in their interests alone.

Capitalism has a stability and debt accumulation problem: The supply of money is dependent on people and firms relying on loans and perpetually increasing their debt. Issuing interest requires endless economic growth to pay back the debt, which is neither in the national nor in the global interest. This inflated speculative debt drives the never-ending economic crises and bubble bursts. Without debt current capitalism would collapse. Most of the world’s monetary transactions are purely speculative: wealth is being burnt.

Corporations are subsidized and unaccountable: Capitalist companies are often heavily subsidized (including subsidized by the global ecology by making pollution and destruction an ‘externality’). They also avoid giving back to the community. For instance, corporations avoid taxes that support infrastructure fundamental to their expansion. They use shell companies, tax havens, and modern electronic transfers to shuffle capital around and evade responsibility and to avoid contributing to the life conditions they need. They are parasitic on healthy societies, which they help run down

Globalized capitalism creates local vulnerability: Globalized export-oriented high-tech capitalism undercuts national and regional self-reliance in key commodities. Heavy dependence on global supply lines for items such as food and energy creates a fragile and dangerous situation. Countries may not be able to feed themselves in the near future. Just like workers cannot be self-sufficient without jobs in capitalist organisations. Capitalism creates low resilience to crisis.

Capitalism undercuts diversity and threatens groups: It favours cultural homogenization as well as the homogenization of goods and services to advance market control and to increase profit through uniformity of production. By pushing consumerism and materialism and crushing all other value and survival systems, some would argue that capitalism inspires terrorism. At the least, undermining local conditions creates nationalisms, and fundamentalisms in response.

Capitalism ignores and destroys nature’s life support systems: Capitalism denies that the biosphere has any limits. By failing to internalize the costs of environmental pollution, and purposefully misleading people about the effects of pollution to further their profit, corporations drive a process that radically reduces planetary carrying capacity. Endless expansion of growth and destruction of resources and ecologies is destined to cause overshoot and collapse. Fisheries are over fished, land is over grazed, chemicals are pumped into the environment with little restraint or knowledge of effects, other minerals are extracted from the environment destructively with little attempt at rehabilitation. More waste clogs the land air and sea. The ‘invisible hand’ of corporate power has been destructive. Capitalism will almost certainly drive global suicide.

Other points

Capitalism destroys commons: Capitalism produces the tragedy of the commons, in which common property is consumed and destroyed by profit seeking, because the only property that can be recognised is alienable private property. Capitalism enforces the idea that people should not cooperate to restrain the business of others when it impacts on them. Common-land is simply land to be exploited, and to be destroyed or polluted in order to cheapen the cost of production, as is the air and water. All cheap or free things tend to be undervalued, unless they can be monopolised. Capitalist theorists say they can solve all our problems by turning everything, including you, into private property. Then somebody will care. But capitalist property rights also include the right to destroy ‘your’ own property. If someone owns the air, then they can pollute it without challenge. However, if no one owns the air then everyone, especially the powerful, can pollute without challenge as well. Common property is of no value, yet it is the basis of all value.

Capitalism owns the law: for the same reason it owns politics. It buys the lawmakers, and exemptions from the law, so that law favours it’s actions. Similarly because law itself is a process involving lawyers, it can buy the best lawyers and exploit the incoherencies of law, and stretch out cases for such a long time that ordinary people are rendered bankrupt, and cannot afford to challenge the wealthy – even if the wealthy do break the law. The more the law can be bought the more wealth dominates.


Bitcoin and its costs

June 7, 2018

Bit coin is usually put forward as a piece of criminal activity or as a triumph of libertarian economics.

It has two main problems, which reflect neither of these positions..

1) It is amazingly slow. The transaction rate is so slow that it constantly grinds to a halt with high demand. As far as I know, this problem cannot be solved without increasing the intensity of the second problem.

2) It has extraordinary energy consumption. I quote from an article appended below: “A fluctuating bitcoin price, along with increases in computer efficiency, has slowed the cryptocurrency’s energy footprint growth rate to ‘just’ 20 percent per month so far in this year. If that keeps up, bitcoin would consume all the world’s electricity by January 2021.”

Bitcoin is clearly destructive….

The energy usage is a cost of bit coin transactions which has to be paid for so it means that bitcoins should have a constant drain in value. This cost works like the signorage on medieval coins (the charge for turning gold or silver into coins), because bitcoin exchange is the only ‘value’ being produced. This drain on value is probably not a good deal, and probably can only be funded in an apparently non detrimental way as long as new bitcoin users appear, and bid for coins. This makes bitcoin a Ponzi scheme which will eventually collapse, given the limits on transactions, and the eventual limit on new participants compared to old participants.

The problem for non-users is the pollution from energy consumption, which is (if the article is correct) apparently huge. That pollution is a cost that appears to be being socialised or shuffled onto everyone, even if those being enriched hope that they can get rich enough to avoid the problems it generates. It is also possible that taxpayers will end up funding the energy costs, which is also probably not a good idea.

In the long term unless the energy consumption can be reduced (and the slow speed increased) bitcoin does cost too much to maintain.

One more time: Economics of Waste

May 31, 2018

(Based on a reply to a comment)
In the last post I argued pollution erupts everywhere there:

a) is no support for ecological thinking;
b) where the costs of pollution are not factored into the economic process; and
c) where there has been conquest.

I should have added a point

d) that pollution appears to be a strong part of developmentalism wherever it operates, whether in capitalist, socialist, communist, or nationalist systems.

Making products or energy by cheaply destroying the ecology is an easy way to make money, and generate the products associated with development. Again the ecology (and often the people who depend on it) are sacrificed to the gods of development, which are usually material prosperity (for some more than others), modern technology, industrialism and military power.

The more speedy the development the more pollution seems to occur, and if it takes force or law to overwhelm those who resist, then force or law will nearly always be used. This was first illustrated in 19th century England where people were poisoned and restrained by law, and the environment was polluted on a visible scale perhaps never seen before and rarely replicated since – although parts of the communist world which did similar development in an even shorter time were probably up there with it. Its hard to compare descriptions, and to measure the past.

Developing countries can see attempts to reduce their pollution as attempts to keep them undeveloped – particularly when countries like Australia refuse to diminish their own pollution.

It may be possible to make the argument that capitalism is now often justified by its ideologues in terms of it being a major force for development, which is why it is so bad for the environment. Both the demand for profit and the desire for development give each other support in their destructiveness.

If pollution was only marginal to capitalism we probably would not have had so much political action trying to justify pollution and make it sacred. How often do we hear something like: “If we stop polluting then the economy will crash. We can’t afford these restrictions?” Likewise, I have not seen that many companies protest against President Trump’s attempts to ‘free the market’ by making it easier to pollute and poison people, but I dare say there may be some – after all being capitalist does not mean a person is inherently evil.

The days in which ‘the people’ could use ‘their State’ to attempt to unambiguously reduce pollution, or enforce costs onto business use of pollution seem pretty dead, as the idea of the ‘free market’ fossilises corporate power, and any such anti-pollution movement is accused of wanting to bring about poverty and primitivism- that is they are said to be “anti-development.”

The ability of people as consumers to affect capitalism is probably limited – after all they still have to buy something to live… but if the consumer wants less pollution, they have to find correct information about pollution and who is making it (which companies may try to hide) and find a difference between companies with similar products. They must also be able to afford buying products with less pollution. There is no sense they should participate in the processes of the State to gain enough power to enforce less pollution, as that might diminish the liberty of the powerful to pollute on those less powerful.

We should also probably note that in capitalism the word ‘cost’ usually means ‘monetary cost’ alone. If the creatures and the land do not belong to anyone who both cares and is wealthy enough to go to law, or to make law, to protect them, then there is no recognisable cost; even if the destruction may be fatal to humans in the long term. If the person destroys their “own land” then everyone should be happy, as it is their ‘private property’ to destroy as they will, as if that property was separate from everything else in the world. Non-monetary cost, or cumulative dysfunction, seem difficult concepts to deal with once monetary profit becomes the only mark of virtue and success. If something is priceless, then it has no value.

In response to these kind of arguments, some people will appear to argue that there can be an ideal capitalist market in which problems dissolve, ie we just get rid of State regulations and protections for the environment and workers. This is bold, but the problem is that this ideal process never arises, and all the talk of free markets appears to do, is justify a more stringent plutocracy. So I assume that producing plutocracy is the function of that talk.

I may be wrong, but it does seem to be the case that the more pro-free markets the political party claims to be, the more they defend pollution and ecological destruction with vigour. They see themselves as vigorously defending capitalism and development, and demonstrate why we have to be careful with both of those institutions.

Economics of waste again

May 29, 2018

Why do humans pollute?

Firstly, because these particular people don’t think ecologically or systemically. They think that dumping their individual or organisation waste products into the environment will not harm anything that much. They may ask, ‘how much difference can one person/organisation make?’ The answer is, over years, and with other people thinking and acting similarly, a lot.

Secondly, pollution can be encouraged by society when the costs of polluting are not factored into the economic process. If it is cheaper to pollute, there is no penalty for polluting, and it does not seem to harm them directly then people will pollute. The more that profit becomes a god the more people are likely to cut costs by polluting. The freer the market, the more intense the pollution, as those who can buy the laws and ethics make the laws and ethics.

Thirdly, if one group has conquered another and they can direct their pollution at the weaker group then they will often do so. I suspect this comes from both the brutal joy in displaying power, the aim of further weakening the conquered, and a lack of consideration for others -especially ‘the weak’. It was traditional for the wealthy to live on the top of a hill and sewerage to flow down and accumulate, and the most polluting factories and mines tend not to be in wealthy areas.

A relatively equitable society, with friendly relations with its neighbours, that did not value money above all else would probably not have as many pollution problems. If people also thought ecologically, realised that individual actions were rarely individual or unique, did not emit more than the ecology could process and turn back into ‘goods’, realised that all such processes are uncertain, ‘complex’, unpredictable, often irreversible, and cumulative and that you need to factor in lots of ‘slack’ for systems to stay relatively stable, then it would almost certainly not be poisoning itself, and would make polluters take responsibility for their waste.

Can this happen without some kind of revolution in the capitalist west? I don’t know. Let’s hope so. Otherwise our lives will be driven not by constructive production, but the production of waste.

short libertarianism

April 13, 2018

Libertarianism seems to function as the friendly propaganda for the neoliberal project of tipping all power relations over to the side of the corporate sector and weakening any power that ordinary people may use to contain that sector.

It occupies a similar space to that libertarian communism occupied with respect to Stalinism – except (and its a vital except) that some libertarian communists were some of the fiercest critics of Stalinism. If libertarians say they are against corporate power, they never want to eliminate that power before they eliminate the check of government restriction on it.

This is why there is rarely any real facture between libertarians and ordinary politician conservatives, because they are both about preserving and increasing the power of money.

Any real conservative would recognise that libertarianism reduces all virtue and value to profit and stay as far away from it as possible. And any real anarchist would have nothing to do with supporting religious or corporate authority.

Libertarianism is fake news.

The Political Right and the ‘Bottom Line’

March 8, 2018

Do the right look after the budget bottom line in government?

Probably not anymore. Not if it interferes with giving taxpayer’s money and possessions to the corporate sector.

In the US, we have corporate tax cuts, massively increased military spending and license for corporations to pollute and poison people – none of this will apparently cost the public anything – while even the smallest increase to the dole or the basic wage is cause for catastrophe.

In Australia, the Right wing Coalition has blown out the debt since taking over, and plans to blow it out even more, with more military spending, more spending on supporting the Adani corporation dig up and burn enough coal to wipe out climate stability, tax cuts for corporations who don’t pay any tax and so on.

Then there is the Coalition in NSW. They apparently have plenty of money to throw at developers, while selling off public goods, making life easy for coal miners to pollute, and destroy our water table, and harder for ordinary people to protest. They constantly make massive commercial in confidence deals with public money. They sign contracts with private enterprise before business cases and Environmental Impact Statements are finished. They support the idea of public money being spent on private enterprise sports stadiums, when the sports organisations are tax exempt because they are supposed to provide their own facilities. They make totally stupid decisions with public transport – new trains without toilets on long routes, new trains that can’t fit in the tunnels, new tunnels that can’t fit normal stock. They dig up rail access into the centre of Newcastle so that developers can build on the ex-tracklines. They think that a major new tax on transport in Sydney (through the Westconnex set of motorways) is a great idea as long as the tax is a toll going to private enterprise, and it won’t end up funding public hospitals, schools or renewable energy research – and the public funds the building of the new roads. Cost, of course, blows out massively as it is remuneration for private business, and people get thrown out of their homes and undercompensated. This is either a pure waste of money and incompetence, or a deliberate policy about giving money to those who already have it, at the cost of everything else. The other way of seeing this is as normal crony-capitalism in action. The corporations control the parties who control the State, and the State exists to benefit the ruling corporations.

The last two Federal Coalition leaders, have both failed to deal with any of the problems we face at all – in fact they have run away from them, tried to put the cost on the less wealthy, or have simply made the problems worse.

It is always easy to pretend to live prosperously if you sell off your assets and overspend – eventually it hits, and that could be the grand idea, bankrupt the government and throw ordinary people to the wolves. Sometimes, as Walter Steensby says, it looks as though the neoliberal philosophy thinks that people and nature are just costs and an obstruction to its own development, and they need to be disposed of.

The Right often only seems to worry about the bottom line when there is a chance that money might be going to people who actually need it to survive.

What is ‘Crony Capitalism’?

March 5, 2018

Crony capitalism describes two situations: the situation in which different capitalists co-operate to distort the market and maximise their profits, and the situation in which people in government either support, or are bought by, corporations to make laws that favour those corporations, or offer some other kind of subsidy, protection or help. More generally, the second half of the definition describes the case in which the State largely governs on behalf of big business, because business is defined as possessing all the virtues and abilities that matter to the society, and many businesses collaborate to maintain the general dominance of business and crush resistance.

In crony capitalism risks of business and costs of business are usually diffused onto the general taxpayers (with the wealthy often paying little tax). For example, in crony capitalism, pollution and environmental destruction is encouraged as it lowers costs to business, and usually just poisons the poorer sections of the population, who don’t count. Any regulations which try to enforce business responsibility for their actions are usually seen as ‘red-tape’ and repealed. Laws are generally designed to help maintain business benefits, and the courts arranged so that non-wealthy people have relatively little chance of success in using the law against business power.

Crony capitalism encourages situations in which ‘workers’ organising to protect their rights, conditions and wages, are frowned upon or prosecuted because they disrupt business, while federations of business organisations are considered normal and acceptable.

Crony capitalism is driven by, and results in, plutocracy.

Crony Capitalism is the normal form of capitalism, and power plays are a normal part of competition in markets.

Some remarks on the Communist Manifesto

March 3, 2018

If you read the Communist Manifesto, you will find that Marx and Engels briefly describe the dynamics and results of capitalism, and they claim it is pretty much to produce a situation similar to that we find we are in now….

  • Globalisation of a particular culture;
  • Destruction of national industries;
  • Inflation of the size of particular cities;
  • Increasing inequality (particularly in wealth distribution);
  • Increasing monopolization (ie more and more companies and owned by a small number of other companies);
  • Making labour an appendage to the machine;
  • Freeing capital from local regulation;
  • Turning the State into a managing agent for the benefit of upper corporate class;
  • Increasing the spread of directives and the control of land and people;
  • Turning all values into property or monetary exchange.
  • I don’t know of any other 19th Century figures who score so many accurate predictions. Yes they seem to have been wrong on the inevitability of revolution, but that is one missed prophecy and that was optimism in play.

    Nowadays we would probably add to these predictions, the idea that capitalism will destroy its civilization by destroying the ecology in an orgy of mass death and destruction; but we would have to say we have no idea what kind of organisations will follow on from its self destruction.

    Superfunds and ‘We are the shareholders’

    February 19, 2018

    Australian Banks are trying to defend their excessive profits and lack of competition by using the furphy that because Superannuation funds are large owners of shares, that their profits benefit ordinary Australians who own the shares through those funds. However, reality is more complicated than that

    1) Large amounts of fees are siphoned off in fees to the super funds, and go to superfund managers – so the main beneficiaries are the managers and people with large superfund holdings, not ordinary Australians, unless perhaps the funds are industry based. The first fund I was in cost more in entrance and exit fees than I could possibly earn on input. This is clearly not the banks fault, but it indicates something odd about the way ‘we’ own these shares. Putting it in another way, the rational action of fund managers acting for their own benefit with these shares, does not have to deliver maximum benefit to the people who pay into the fund.

    2) We “ordinary Australians” do not own the shares. We cannot vote, we cannot influence bank policy because of those shares. We do not hold the rights associated with those shares. Those shares are owned by the superfund, and any input into the bank will tend to benefit the fund not its members. It is irrelevant as to whether it might be ‘better’ for large institutions to take those rights away from us and exercise them as if they owned the shares – which they do (again the point is that the institutions have the ownership, not ordinary Australians).

    3) This fictitious ownership only exists as long as we keep paying the super company. Again we do not own the shares, we pay the Superfunds to own them, hopefully (but certainly not guaranteedly) on our behalf.

    4) However, the public pays the costs and losses associated with those shares, while the funds continue to pay out to themselves, irrespective of loss. This is the usual privatization of profits, publicization of loss common in capitalism.

    5) The banks may also have holdings in the Superfund, and these holdings are large enough to be used to outweigh any objections that individual members have to the way they operate. and use the shareholdings to benefit themselves and shut down inquiries by the fund into the way profits are made, declared and distributed.

    6) It is more than likely that most of the bank shares are owned by a very few, and only a few shares owned by the many.

    As usual, the market is structured by political action, usually the action taken by those who are wealthy, and is intended to benefit them. The market is rarely ever neutral – it is intertwined with power relations.

    (Some of these arguments borrowed from a critical thread in response to an article on the Conversation)

    Origins of Capitalism?

    February 7, 2018

    Capitalism is a mode of power (primarily economic), based on appropriation of people’s goods and labour, and the distribution of wealth.

    There are a number of forms of what is called capitalism. In my lifetime, where I live, we have had socialist-capitalism and we now have neoliberal capitalism, with more or less complete domination by the corporate sector. Scandinavian capitalism differs from French capitalism, differs from Anglo-capitalism and so on.

    Capitalism is not trade. Trade exists in all societies, including ones that most people would not call capitalist. (China is weird, if people want to praise it they point out it is now capitalist, and if they want to condemn it they point out it is now communist. In either case there is trade.)

    The origins of any of these forms of capitalism depend upon a heap of contingent factors, particularly including politics, and clearly cannot be summarized in a readable post – so this is only a summary for Anglo-capitalism.

    Historically, one argument is that this capitalism grew out of the inequalities, violence and wealth accumulations of feudalism. It was boosted in the UK by dispossession of people from their land, which provided a class dependent on wage labor for survival, and who could be hired and dismissed with little cost or sense of social obligation. Wealth accumulation was also boosted by the slave plantations in the Americas, which pretty obviously depended on dispossession and non consensual labour. It was also boosted by private citizens engaging in piracy on the Spanish treasure ships on behalf of the crown. The British Tudor (and later) Monarchy promoted non-aristocratic citizens to positions of power and wealth, which weakened the aristocracy. This movement was accompanied by the rise of a powerful mercantile class, and between them they began to change the form of British politics and economic structures into one far less dependent upon royal patronage or the ties of feudal obligation.

    Then the development of the steam engine, together with an abundance of coal, plus further political action and repression, allowed the relatively secure work and trade of crafts people to be destroyed, so more people became dependent upon capitalist industrialists for survival and more profit was channeled towards those who owned and controlled the technologies of production. The search for markets and resources to support this production led to Empires, as for example when the East India company took over India and destroyed local crafts and to help with their exports of cheap machine made materials (made with Indian cotton). There is a little dispute, but basically the now-standard argument is that the company and its accompanying British Rule completely destroyed the Indian non-capitalist economy and was largely responsible for the mass poverty and inequality that the 20th Century Indian State has had to deal with.

    Capitalism has also taken advantage of fossilised energy. It is the development of energy, from slavery, wage labour to coal that produced whatever abundance was shared by the more fortunate members of capitalist society. The steam engine depended upon coal, but around about the start of the 20th Century, oil and petroleum upped the portability and effectiveness of energy once again and with it the apparent abundance. However, this abundance depends on power relations and law which allows pollution and poisoning costs to be ignored by the producer, or diffused onto those of ‘lesser importance’. It is always the way that the poor have pollution poured on top of them. This could be realistically known as ‘trickle down economics’. The current problem for capitalism is that the pollution it, and its variants, are engendering is likely to destroy the ecological systems it has depended upon but has refused to acknowledge. Today we see that battle being conducted in the form of a struggle over climate change and appropriate action.

    While the economy is not natural, but political and embedded in power relations, it does need to be acknowledged that conquest and appropriation, in itself, does not lead to capitalism. The way plunder was organized in the Spanish Empire, for example, seems to have destroyed their economy. It was not invested in manufactures and trade – the ‘bloated’ aristocracy won out over the mercantile class and the peasants.

    Everywhere that capitalism has gone, it has tried to destroy non-capitalist economies, through dispossession of property, the imposition of wage or indentured labour, and taxes which required people to pay cash which they had to earn through wage labour. There are endless colonial and business reports complaining about the laziness and irrationality of ‘natives’, who had better things to do with their lives than hold down jobs, and who did not need jobs to survive(until that independence was destroyed).

    Capitalists always argue that capitalists are wealth creators and deserve special privilege and powers. Because large capitalists end up owning most of that wealth they are usually able to buy politicians and propaganda, and control society to act to give them those special privileges and powers. Hence capitalist power tends to reinforce itself, and make all life even more dependent on capitalist action, and capitalism seems like “common sense”.

    We had a relatively generally prosperous period when capitalists feared revolution, but since that period has passed, wealth and power now accumulate primarily at the high ends.