It's Wednesday and I discuss a number of topics today. First, the 'million simulations' that…
The neo-liberal race to the bottom is destroying communities and killing workers
I have been reading an interesting book – The Unwinding: An Inner History of the New America – by US journalist – George Packer – which traces the evolution of America over the period from 1978 to 2012. It is about how Americans have been dudded by the system they economic and political system that they hold dear to their hearts and how the core institutions that condition those beliefs have declined (changed) in the face of the rising dominance of the investment banksters. I am not so much interested in American history as I am the metamorphosis of Capitalism and the impact it has had on the working class. The book created a number of thought strands, which ultimately, led me to an interesting article in the Proceedings of the National Academy of Sciences of the USA (published December 8, 2015) – Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century – by Princeton University academics Anne Case and Angus Deaton. What we learn is that the neo-liberal race to the bottom in advanced nations is destroying communities and killing workers.
In The Unwinding, George Packer describes the way in which communities are unravelling in the US as a result of a decline in the institutional support structures that were created in the Post World War 2 period which essentially allowed the US middle class to prosper.
He considers wage stagnation and entrenched unemployment (often hidden by dropping out of the labour force) to be significant aspects of these changes, which then lead to despair and human malady.
Evidence of towns and cities being hollowed out by unemployment and their ‘main street’ shopping capacities being put out of business by Walmart and the like, who set up mega stores on the outskirts of towns.
The social aspects of life in these towns is dissolved as a result.
He talks about the rising mortality rate among the less educated, middle class Americans who since the turn of the century have been dying at an ever increasing rates.
These health trends are regionally regional concentrated so predate the GFC which has accelerated the problems.
In an interview with the US PBS service (December 26, 2013) – Tracking the breakdown of American social institutions in ‘The Unwinding’ – George Packer described the “breakdown of institutions” in this way:
And a social contract that sort of underwrote all of them, a contract that said if you work hard, if you essentially are a good citizen, there will be a place for you, not only an economic place, you will have a secure life, your kids will have a chance to have a better life, but you will sort of be recognized as part of the national fabric.
And over the generation of my adult life, going back to the late 70s, that fabric has come unraveled, and the contract has essentially been torn up.
He implicates policy makers who abandoned support from promoting a well-paid workforce:
And, instead, workers became disposable. Their wages flattened out. And the benefits of our free enterprise system went more and more to the top. And so we have more of a society of winners and losers.
All familiar aspects of this neo-liberal era that we are living through – some more easily than others.
The book, in part, is about the bifurcation in the economy between massive wealth and displays of wealth “a brand-new startup being sold to a company for a billion dollars, without any profits, with hardly even revenues” and an increasing number of workers who have to survive on part-time work at Walmart on poverty wages with now public sector support to make living under these conditions easier.
These trends are global as governments of all persuasions have bought into the neo-liberal myth that the ‘state’ is powerless in the face of global financial capital and should legislate to benefit the interests of that cohort while claiming that the endeavour of that cohort will ‘trickle down’ to the rest of us.
That idea was introduced in the 1980s if not before so we have plenty of time series evidence to support the contention that the prosperity has not trickled down. Instead, it flooded up!
These are the trends which, in part, have led to the Brexit outcome, the stunning candidacy of Donald Trump, the rise of the Alternative fuer Deutschland (AfD) party (who were ahead of Merkel’s CDU in a regional election at the weekend) and a host of other related developments.
These trends also should be the central focus of progressive movements, although as long as so-called progressive political parties continue to adopt neo-liberal macroeconomic positions and kowtow to the ‘globalisation’ myth, it will be the right-wing, popularist forces that seize the political support that these trends are generating.
The paper by Anne Case and Angus Deaton referred to in the Introduction:
… documents a marked increase in the all-cause mortality of middle-aged white non-Hispanic men and women in the United States between 1999 and 2013. This change reversed decades of progress in mortality and was unique to the United States; no other rich country saw a similar turnaround.
So it is really specific evidence to support George Packer’s contention that neo-liberalism has brought increasing despair to the US middle class.
Case and Deaton contrasts the general trend towards “a remarkable long-term decline in mortality rates in the United States” since 1970, with the recent experience of “white Americans in midlife” which they describe as a “quiet epidemic that has “killed half a million middle-aged white Americans”.
They found:
Increasing mortality in middle-aged whites was matched by increasing morbidity. When seen side by side with the mortality increase, declines in self-reported health and mental health, increased reports of pain, and greater difficulties with daily living show increasing distress among whites in midlife after the late 1990s
The rising death rates are linked to “drugs, alcohol and suicides” and, while have impacted on all “white middle-aged males”, have been concentrated “among those with the least education”.
We read that:
For those with a high school degree or less, deaths caused by drug and alcohol poisoning rose fourfold; suicides rose by 81 percent; and deaths caused by liver disease and cirrhosis rose by 50 percent.
All-cause mortality rose by 22 percent for this least-educated group. Those with some college education saw little change in overall death rates, and those with a bachelor’s degree or higher actually saw death rates decline.
It is exactly the at risk cohort that has been left behind by the shifts in the production and the refusal of the state to intervene and use their fiscal capacities to attenuate the decline in private sector activity.
We read that:
Median household incomes of white non-Hispanics began falling in the late 1990s, and the wage stagnation that began with the economic slowdown of the 1970s continues to hit especially hard those with a high school or less education. Coupled with the changing nature of the financial risk Americans face when saving for retirement as well as the recent financial crisis, economic insecurity may weigh heavily on U.S. workers, and take a toll on their health and health-related behaviors.
A range of related problems accompanied the rising mortality rates – “increasing reports of pain”, “psychological stress” – and have “shot up in middle-aged white non-Hispanics … with the least education”.
Last year (March 25, 2015), a study of suicide rates in Greece – What has happened to suicides during the Greek economic crisis? Findings from an ecological study of suicides and their determinants (2003-2012) – found that:
The suicide rate overall rose by 35% between 2010 and 2012 … There was a clear change in suicide trends after 2010 for both men and women of working age and older women …
The mean suicide rate in Greece after 2010, when austerity began, was significantly higher than in the period 2003-2010 … In particular, the suicide mortality rate for men increased from 5.75 (period 2003-2010) to 7.43/100 000 population (period 2011-2012; p<0.01) ... The most affected age group was working men aged 20-59, in whom the suicide rate increased from 6.58 to 8.81/100 000 population ... [They] ... observed a significant association of male unemployment rates and suicide mortality among working age men 15-64 years
They acknowledge that in “an observational study” it is “never possible … to establish causality”. But they use a range of techniques, which suggest that since the crisis and the imposition of austerity, there has been a “reversal of a long-term decline in suicides … in almost all European countries”.
In the US, there has been an “acceleration” of the “long-term upward trend ” in suicide rates, a finding supported by the research of Case and Deaton.
In other words, the damaging effects of neo-liberalism on the health of workers left behind by the hollowing out of communities has been exacerbated by the GFC.
The Greek study concluded that “Our analysis provides preliminary evidence that increased suicide mortality in Greece is a health hazard associated with radical austerity”.
A related article, which I found interesting, appeared in the American Prospect (Longform) Magazine (May 16, 2016) – Confronting the Parasite Economy – by US entrepreneur Nick Hanauer.
He argues that “There are two types of businesses in America today: those that pay their workers a living wage – the real economy – and those that don’t – the parasite economy. And all of us who live and work in the real economy should be royally pissed at the way the parasite economy is sucking us dry.”
The argument is a sort of underconsumptionist one that was prominent in the C18th which Marx elaborated upon (in part) and, arguably, formed the basis of the work of Keynes, Kalecki, and others in the 1930s.
The idea was that “because workers are paid a wage less than they produce, they cannot buy back as much as they produce”.
Hanauer’s contentions are linked to George Packer’s observations that the rise of Walmart has undermined community stability in the US.
Hanauer writes that:
… in the parasite economy – where companies large and small cling to low-wage business models out of ignorance or habit or simple greed … tens of millions of Americans work for poverty wages with few if any benefits, often in the face of abusive scheduling practices that make it impossible to plan their life from day to day, let alone month to month …
low-wage workers at parasite companies-mostly giant and profitable corporations like Walmart and McDonald’s-cannot afford to robustly consume our products, or most anybody else’s, in return. The parasite economy is simply bad for business.
He rejects the claim (which he himself previously believed) that “parasitic business practices … were an inherent and unavoidable feature of capitalism” and, now, believes that “Some companies just choose to pay their workers as little as possible, and others don’t … there is no line of work worth doing that cannot command a living wage.”
In other words, there is nothing intrinsic going on here – it all comes down to temporal perspectives (short-termism) and greed.
He argues that the public sector picks up the tab for the parasitic business practices:
… a majority of the money we collectively spend on anti-poverty programs doesn’t go to the jobless, it goes to the working poor.
He also highlights the mainstream economics myth (built into so-called ‘marginal productivity theory’) that workers “get paid what they are ‘worth'”.
This is a central aspect of wage theory in mainstream economics and was introduced into the literature in the late C19th to offset the growing support for Marxian exploitation theories.
Accordingly, if everyone gets back what they contribute to production then the system is ‘fair’.
Hanauer, as a business person himself rejects that construction of the wages system.
He writes:
Take it from someone who has created dozens of businesses – people don’t get paid what they are “worth.” They get paid what they negotiate. We can all point to examples of CEOs who negotiated far more than they are worth, but there are many, many more people in our country who are worth far more than they negotiated.
That’s because more than any other market, the labor market is distorted by a profound imbalance of power between buyers and sellers; in fact, other than the small share of workers who have a collective-bargaining agreement, the vast majority of workers enjoy little bargaining power at all. Most workers have limited resources and immediate needs – to eat, to pay rent, to provide for their children – while most employers could leave any particular position unfilled indefinitely without suffering any personal hardship at all.
A modern rendition of what Marx had observed way back then.
The ‘parasitic companies’ “relentlessly” exploit the “power imbalance” in the labour market to capture an ever greater share of real income for themselves.
But, steadily, given the problems that researchers are now observing (for example, the medical meltdown discussed above) and the collapsing communities, the ‘low wage’ model will collapse.
Conclusion
A race to the bottom might succeed for a while but cannot be the basis of social development in any advanced nation (or developing nation, for that matter).
There is a reason trade unions and the welfare state emerged out of the train wreck of late C19th capitalism. Those reasons are being reasserted as the neo-liberal era matures into the nightmare we observe now.
Legislative action is required. Hanauer says (after admitting to running parasitic companies himself that “People, like me, when faced with brutal competitive dynamics, will not pay workers a living wage unless all of our competitors do the same. And the only way that will happen is if citizens like you require employers like us to do it.”
That is enough for today!
(c) Copyright 2016 William Mitchell. All Rights Reserved.
Cassandra, Cassandra when will you be heeded?
What will it take to get us out of the Thatcherian quagmire before it becomes the Malthusian nightmare?
I’m glad to be old. Us pre-boomers are actually the luckiest generation that has ever lived. I weep for my grandchildren.
You’re missing one important extra aspect of the failed neoliberal program and the rise of right wing populism: open borders / mass immigration.
Many people and perhaps most people are becoming hostile to it, not because they are all evil racists, but because it is failing on economic, social and cultural grounds, and people value their national cultures, which (and Europe being the most extreme case here) they do not wish to see erased by multiculturalism and incompatible cultures.
You’re never going to be capable of explaining the modern world without starting to talk about this.
I agree with most of what Mr. Hanaur says but I think that he confuses the issue by dividing the economy by wages. The real economy and the parasitic economy aren’t divided by wages but by function, the real economy being the productive economy and the parasites being the financial sector. The parasitic economy pays well; it is the real productive economy where the wages are falling. Mr. Hanaur thinks that his business is parasitic because of low wages but he should ask himself if his business or that of Goldman Sachs is part of the real economy. I say GS is parasitic and should be heavily TAXED and regulated to put an end to their usury and financial gambling.
“In 1907, an arbitration court judge decided that wages at a Melbourne factory should be based on the cost of living for a worker and his family. From then on, Australia’s minimum wage was based on what was fair and reasonable rather than what the employer was offering.”
Tell that to the kiddies today and they won’t believe you.
http://www.abc.net.au/radionational/programs/latenightlive/is-america-coming-apart/7800692
Here are a couple of blogs from today which show just how extreme US functional failure has become.
Nozomi Hayase:
http://www.informationclearinghouse.info/article45407.htm
And Chris Hedges;
http://www.informationclearinghouse.info/article45408.htm
There are many more in such vein, including many conspiracy theories.
A lot of Americans understand but they are a drop in the bucket. Hanauer wrote in 2015 “The Pitchforks are coming”;
http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014_Page4.html#.U76FMI2Sz3Q
Regarding the hollowing out of towns by Walmart, I saw an example last year in Mackay, a city of 75,000 in Queensland.
I had been there in 2006 and the town was a typical lively place in the centre business area.
Since then however Caneland has expanded significantly and now has rendered the town centre moribund. All the activity is in Caneland today. Very disturbing.
That’s some grim aspects of the results of the neo-liberal model. Another side is the developing countries that have been forced to adapt the neo-liberal model by Washington Consensus. Any attempt to any alternative to this have been crushed. TINA rules. The only ones that have had enough national cohesion to resist had been some Southeast Asian countries. Now there are more refuges in the world than any time before. In most of it one can trace the neo-liberal influence of a so called New World Order where neo-liberalism dominate.
And the lefties of the world think that the American lower educated working-class is ignorant and call them fact-resistant if they doesn’t want to vote for Hillary, the candidate that truly represent those who have created the neo-liberal mess.
Just in this blog from The Conversation, highly relevant here;
https://theconversation.com/its-time-we-reinvented-labor-for-the-21st-century-64775?utm_medium=email&utm_campaign=Latest%20from%20The%20Conversation%20for%20September%204%202016%20-%205548&utm_content=Latest%20from%20The%20Conversation%20for%20September%204%202016%20-%205548+CID_647a8cb361006c87ffd13526ed3d9314&utm_source=campaign_monitor_us&utm_term=Its%20time%20we%20reinvented%20labor%20for%20the%2021st%20century
Bill, you’re right to highlight the plight that modern “western” economies have evolved into, but be careful of interpreting this in terms limited by the marxist/capitalist conflict.
Certainly in the UK, and arguably throughout much of the world, post-war industrial developments have seen much skilled manufacturing employment shipped abroad – most people would call that globalization. The beginning of these changes was evident as long ago as the 1960’s when large historic locomotive works were phased out; large steel, mining and other apprentice-taught skilled industries followed.
To have successfully resisted these changes would have been the humane solution – but would it have resulted in a more successful economy (relative to the rest of the world) if, as a result, productivity failed to keep up with that of the rapidly developing countries, to whom the skilled employment had migrated.
Of course it can be argued that the demise of the middle-classes has occurred more harshly under the free-for-all of the last half century. But this still leaves open a very difficult square to circle – how do you allow free enterprise to flourish in a society that is guided so strongly by the humane cause of greater equality and human consideration.
The answer is of course, to give it a try. But be careful what political title you give this experiment. Because if things get problematic as they are bound to, the electorate, instead of turning on detestable employers, will focus attention on a political party.
The trick will be to take MMT insights and form a set of policies and operational procedures that allow a currency area to operate as it wants to operate pretty much regardless of what everybody else does.
That gives you a currency area of high cohesion, but lightly coupled to all the other currency areas.
We need to take into account network effects and get the right balance of efficiency and resilience within a currency area to provide optimum sustainability (a robust system).
Bill Mitchell,have you come across Bruce Greenwald,he often says and in his book globalisation says that
the US job market is dominated by high quality service jobs and that employment losses in manufacturing have been due to productivity increases and that this a has been absorbed by new quality jobs in the service sector.
The job mrket has become dominated by managerial and professional jobs and interactive service jobs in healthcare ,education,housing and financial services.And that this hasn’t been a bad thing, as high/middle wage paying jobs like librarians and teachers has increased.
In this new service orientated economy ,only a tiny number of workers have ended up as minimum wage fast food workers.he points out that there are only 2 mill fast food workers,but 7 mil teachers.so apparently everyone one is mostly doing okay.
The power of memes is well exemplified by the grip the 150 year old Horatio Alger Jr myths (whose ghost was invoked in the messages delivered by Ayn Rand) still have on the minds of so many young people. It’s hard to watch as they emerge from their efforts to achieve excellence in the secondary and post secondary educational systems only to gaze upon the real world realities those authors helped shape.
The most revealing things about neo liberalism with it’s purported goal of neutering sovereign nation states in the name of global peace, is the amount of violence it’s followers have been willing to perpetrate against the working class everywhere, and their willingness to place the power stolen from nations into the hands of those who won’t be controlled or held accountable for their actions. It doesn’t just look like a lie, it is a lie. Neo liberalism is just the thin contemporary cover for the same underlying vulgarities which lay behind the curtain of what was once known as fascism.
The philosopher Slavoj Zizek recently commented on the beauty of Rand’s most ardent trumpets, being from the perspective of the left, the extent to which they embarrass their own ideology; suggesting that rather than resist and criticise, it might be more expedient to just let them realise their dream exposing it’s fallacies as quickly as possible for all to see.
Dear Jake (Sept 6@0:00), You might also take a look at the what US economist and former US assistant treasury secretary Paul Craig Roberts has to say about the jobs market in the US. He tends to write monthly on the monthly jobs report released by the BLS on his website. His analysis paints a far less rosy picture of what is going on there.
Bill: I am glad to see you referring to Nick Hanauer. I recently discovered his writings and was amazed by his insights and desire to speak out. It seems to me if he learns how money really works (MMT) he would be complete.
to GLH, I won’t discuss your critique of Nick’s opinions; but I am happy and amazed to have someone of his experience and position spreading his message.
From my limited experience with Mr. Hanauer’s talks and interviews it appears he still believes that taxes fund spending. But he clearly understands the need to reverse the concentration of wealth among a few people and the long-term dangers of that process.
GLH, your position on the parasite economy won’t work either. Terminology that would incorporate both Walmart and the financial sector is to view a parasite economy as one where the businesses prey on either their customers or their workforce or both. Predators almost never give their prey or others anything; they only take. Walmart primarily provides junk and the financial sector provides no value whatsoever to the society in which it operates. Moving money around doesn’t help anyone other than those who succeed in the casino banking economy. I am not including that part of Wall Street where real companies that produce real value for the society obtain investment via market operations. Casino “investment” is not really investment. As for Walmart, some US townships have barred Walmart from coming into their communities.
Engels had a similar problem facing Hanauer regarding raising his workers’ wages. He wanted to do so but knew that none of his competitors would follow suit. No one could do this acting alone. It would only work if a number of his competitors and he acted in concert. Were he to act alone, none of his competitors would do the same and he would go out of business with the result that his workers would be unemployed with only a few of them being taken on by his competitors or other businesses. This would help no one. He felt that only government could force capitalists to act together in raising their workers’ wages, as that would be the only way in which no one would lose by so doing. It was obvious that the environment of the time, as we would describe it now, was forcing a race to the bottom. It could be argued that he could have taken less out of the business, but that would not actually have helped. Besides, he had Marx to support. In the end, he sold his business.
Larry- if Costco’s experience is anything to go by Hanauer and Engels were both wrong. Costco has loyal and productive employees, partly because they pay well (about twice as much as Walmart) and have relatively good and inexpensive health care and retirement plans. As a consequence their turnover rate is very low and this, combined with the productivity advantage, actually results in their labour costs being lower than Walmart’s. It shows up in their per employee profits: $21805 for Costco, $11615 for Walmart.
They treat their employees well, and it makes more money for them. What a surprise.
source:https://hbr.org/2006/12/the-high-cost-of-low-wages
Marx is continually being proved correct in his diagnosis and prognosis for capitalism. Each new stage of capitalism validates the overall thrust of Marx’s theories.
“(Capitalism)…. has … left remaining no other nexus between man and man than naked self-interest, than callous “cash payment.”
“Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois (capitalist) epoch from all earlier ones.”
“A class of labourers, who live only so long as they find work, and who find work only so long as their labour increases capital. These labourers, who must sell themselves piecemeal, are a commodity, like every other article of commerce, and are consequently exposed to all the vicissitudes of competition, to all the fluctuations of the market.” -Marx.
After the Great Depression and World War 2, and with the policies of Keynesian economics and welfarism well established, is was thought by many persons of a social democratic persuasion (including me!) that capitalism was tamed and humanised permanently. How wrong we were! The “Golden Age” lasted just a few decades and then capitalism’s remorseless system logic reasserted itself. This is the thing that has to be remembered about capitalism (and which Marx understood), namely that capitalism is a complex system. Like all complex systems is exhibits a set of complex system properties.
In particular, capitalism is a complex adaptive system. Of course, all political economies are complex adaptive systems. But each variant of political economy, as a complex adaptive system, has its own set of internal laws. The political economy system is affected by the environment (external factors) and indeed it is ultimately dependent on that environment for energy and materials. Within those constraints however, the complex adaptive system will persist and evolve, then reach a final set of crises and decay, in a manner which is in accord with its own intrinsic or endogenous laws. This is the essential meaning of Marx’s philosophy and proto-science of “dialectical materialism”. The term “dialectical materialism” seems quaint and discredited now. Yet dialectical materialism is nothing else but an early development of complex systems theory. Marx, if properly recognised, can be seen as an important early figure in the development of systems science.
The discrediting of dialectical materialism stemmed in part from the Soviet theorists who misunderstood it and made of it a dogmatic, deterministic pseudo-science. The subtlety of dialectical materialism is that, like complex systems theory of which it is a philosophic precursor, it recognises that complex adaptive systems embody embryonically various possibilites for emergent properties, emergent behaviours and unexpected, unpredictable novelties. Some emergent behaviours and novelties are indeed unpredictable. This is uncontroversial now in most quarters. Chaos theory and considerations of micro-indeterminacy (especially, but not only, in the role of generating human behaviour) suggest that;
(a) highly complex and extremely difficult (to practically impossible) to predict deterministic behaviours can emerge from tiny changes in initial conditions (chaos theory).
(b) micro-indeterminacy can feed up into macro-indeterminate developments.
Having said this, macro-determinancy still exists too. Colloquially we could express this simply by saying, “There are predictable events and there are unpredictable events.” Extending this we can say there are predictable developments and there are unpredictable developments. Complex adaptive systems possess both these characteristics. That is to say complex adaptive systems can exhibit both predictable and unpredictable developments. Marx’s advance was to uncover some of the internal laws of capitalism which in turn permitted certain predictions to be made about capitalism. Capitalism’s exact path and all its exact productions, historical crises and historical achievements could not be predicted. But its general path, its general tendencies could be predicted. This is much as the Gas Laws (Boyle’s Law, Charles Law etc.) can be derived from the kinetic considerations of (random) Brownian motion. The behaviour of individual atoms cannot be predicted but the behaviour of the gas body or gas system can be predicted overall, albeit by making certain idealised assumptions, setting allowances for tolerable error, and deriving a “macro” or “probabilistically determined” law.
In the same manner (very broadly), some inner laws of the capitalist system could be deduced. Of course difficulties arise. A capitalist system is far more complex than a laboratory gas system experiment! This hardly need be said. In addition, the “laws” involved are different. Physical system laws are those immutable (in this universe) laws which we discover to be universally regular and dependable (relating to matter-energy and time-space). Political economy “laws” are a complex of formal laws and natural laws. The political economy is a hybrid system. The real economy is a real physical system. It most obey the laws of thermodynamics for example. It is a dissipative system. A dissipative system is a thermodynamically open system which is operating out of, and often far from, thermodynamic equilibrium in an environment with which it exchanges energy and matter. Marx recognised fundamental dependncy of the economy on nature in his theories of the emerging “metabolic rift” between capitalism and the natural, sustaining environment. Marx anticipated ecology as a science just as he anticipated complex systems theory.
However, as well as being a real system, the political economy has another aspect, and this aspect is as a formal system. Being intelligent animals combined in society we develop moral laws (as rights-obligations systems), customs, institutions, formal laws (legal laws), transaction systems with contractual rules and finally financial system(s) with axiomatic rules. Firm formal rules (of these types) begin to exert a hard “law-like” (meaning a somewhat hard-physical-law-like influence) on the system. The system develops hard law-like behaviour which is relatively consistent while the firm formal rules continue to pertain. A clear example from a modern economist is the law which Piketty obtained from his detailed researches into capital. This law describes an invariable tendency if a certain condition is met. If r (return on capital) is greater than g (growth) then inequality (say as concentration of wealth in the highest percentile) increases. This tendency is axiomatic under capitalism. The capitalist financial system (an axiomatic system) buttressed by the ideology and reality of minority ownership of productive apparatus can ONLY operate in this manner (when r greater than g).
What Marx recognised, at least implicitly, is that when a powerful formal system is in conflict with a real system, the formal system will perpetuate and intensify itself while it can but it then must run up, sooner or later, against, real limits in real systems. One real limit, already mentioned above, is the ecological or biospheric limit alluded to by Marx as the metabolic rift. This is a little known aspect of Marx’s work.
The better known aspect of Marx’s work hinges on the real physical limits of humans and by extension on their psychological limits which are reached before their real physical limits. In mentioning the real physical limits of humans I am referring to the reproductive cost of labour. This is the minimum humans need to eat, live, domicile, work and produce and educate children to at least replace themselves as workers. If capitalists take so much that the worker does not have enough to live on and biologically and socially reproduce, then the system is unsustainable. Of course, humans reach psychological limits before such final straits and will, if they can combine effectively, revolt against the system.
The full system (including the government system) in turn develops stratagems to “save capitalism from itself”. This was what happened in the Keynesian-welfarism era and still happens today with both welfare for the poor and welfare for the rich (bank bailouts, QE etc). In turn however capitalists are so greedy, so rapacious it finally emerges they do not want or do not understand that they need to be saved from themselves. Hence we have the neoliberal era. The neoliberal era is the predictable result of once-again unfettered capitalism. Capitalism is not sustainable and will collapse. This is predictable. What is not predictable is how many times it can reinvent and transmute itself and resolve its crises. Given past history, WW1, WW2, and now the endless war on anyone or any people the American oligarchy regard as a threat to their wealth and power, it would seem likely that a breakdown into fascism, war and destruction will once again be the capitalists’ chosen method of resolving a crisis. This crisis is too deep to resolve by any other method except (heaven forbid!) a permanent recasting of the ownership and management of production such that workers and non-working citizens substantially own and manage the greater proportion of production and distribution. This does not entail crude state capitalism of the Soviet Communist type. That is a straw man objection.
Soviet Communism arose in response to the uncompleted nature of the global capitalist project. Capitalism must first transform the entire world (as it is now doing with Russia and China more or less “in the fold”). This apparently (given its actual coming to fruition) is necessary for capitalism to fully exhaust its internal dynamic and run up against its inescapable internal contradictions. Piketty has certainly uncovered full empirical evidence of one inescapable internal contradiction. If capitalism cannot grow faster than the plutocratically imposed rate of profit then the system gravitates to unworkable levels of extreme inequality. Given our approach to the limits to quantitative growth, if not qualitative growth, and the wide emergence of secular stagnation in the developed world, we can rightly deduce (I think) that neoliberal capitalist policies are only partly the cause of secular stagnation. A deeper cause arises from both the internal contradictions of capitalism qua capitalism (not just as neoliberalism) and its contradiction (as a need for endless growth and an imperative to ignore negative externalities) with the environment itself.
we’re back to this concept of how collectively ignorant a collection of individual geniuses can be
there’s a particular genius to seeing the forest for the trees; the “best” trees may not share that particular kind of adaptive genius
as always, data is meaningless without context
J Harrop, Costco does look as if it provides a counterexample to Hanauer and Engels, but I would argue that it doesn’t. Costco is so large that it has assimilated a good deal of its environment unto itself and is, therefore, in command of it , in as much as a single large corporation could be. We need to look at its smaller, direct competitors if it has any.
Or take the case of the tiny Japanese firms that are highly skilled operators that supply small but essential components to the large computer manufacturers, including phones. While the larger computer companies are in bed with government, these tiny one man bands or small family enterprises have to charge the lowest, most competitive rates, as a number of such tiny enterprises are in direct competition with each other. Should any single operator raise prices on their own, they could be rendered bankrupt relatively shortly. They work from hand to mouth. For the most part, It is not unlike a subsistence existence. But worse.
Thank you Billy, Ikonoclast, and others for some brilliant expositions.
Larry: I am with you. I am not defending Wall Mart in any way. Nothing bothers me more than to go to a register at the WM and have them ask for a donation. I get pissed every time by the idea of billionaires wanting money for poor people. But, regardless of WM’s pay scale it is part of the real production, consumption economy, the real economy. It sells products that consumers use in their lives. But in what way are the big banks a part of the real economy? They suck money out of the real economy with very little in return. And because of their manipulation of the tax system the banksters are allowed to keep their bounty. Even when they cause a complete financial collapse the Fed Illegally bails them out. When is the last time the Fed bailed out Wall Mart?
The fact that Wall Mart pays so little and bums off of the government doesn’t stop it from being a part of the real economy. Those problems come form free trade legislation and neo-liberal government policies put in place since the 80’s.
And as for towns banning Wall Mart, all those towns are doing is making their citizens poorer by requiring them to buy higher priced goods at other outlets. Wall Mart practices can’t be solved locally or voluntarily. We need national laws enacted to enforce worker security. We also need a tax system to take some of the wealth from people like the Waltons and the Goldman Sachs of the world to stop them from buying off politicians to make laws in their favor. I don’t believe that there should be a billionaire anywhere in the world for any reason.
As for wages we need a minimum wage of at least $21 per hour to meet 1968 standards. http://inequality.org/minimum-wage/
“Or take the case of the tiny Japanese firms that are highly skilled operators that supply small but essential components to the large computer manufacturers”
That’s just a form of franchising where people have to buy their own job. If you had a Job Guarantee, then such exploitation would disappear almost instantly and you would see vertical integration.
Neil, I agree with you, but that wasn’t my point. I take a JG as an essential aspect of economic reform.
GLH, I agree with you about Walmart and all other firms like them. My point was that firms like Walmart and the casino banks, like GS, do the same thing albeit in different ways, thus collecting them together under a single term would be useful. Both groups act like blood suckers, or as Matt Taibbi once said of GS but which I think applies to the parasite economy as a whole, that it is like “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money” (Rolling Stone, 9-23 July 2009; 5 April 2010). And of course I agree with you about some kind of minimum wage. The US minimum wage estimate, although this would vary from region to region, is I think now in the region of $29 per hour.
As Kindleberger once said and as others, like Taibbi in this article, Bill in various places, and Bill Black in numerous articles have said, at the heart of every bubble is some sort of fraud. Taibbi quotes a manager from GS saying that selling customers something that you would bet against (i.e., short sell) is the essence of securities fraud.
Do we necessarily want vertical integration?
guys still i dont understand why are you so hostile toward small buisnesses yes some of them are basically from hand to mouth but they still have respectful salaries compare to wall mart workers,lets assume another suggestion (which of course is not instead but together with JG) and its making a government supported co-op supply chains for small stores/workshops and etc.
in this case the corporate welfare will go to ordinary people and it will help the small guy and not to the mega corps.
why not doing something like that?
why not supporting small worskhops and mom and dad stores?
Nick Hanauer is a great reference Bill. A billionaire who is warning of the coming pitchforks coming for his ilk in a great ted talk. He knows inequality will end and it’s usually easily ended by some sharp metal. How long till that happens is anyone’s guess but with climate changes affects in coming years something will give. I’ve been predicting war and if Hillary wins that may be the end game. I highly recommend looking up Nick Hanauer’s ted talk on pitchforks as he explains inequality extremely well.
Also “Deer Hunting with Jesus: Dispatches from America’s Class War” by Joe Bageant, 2008
“Do we necessarily want vertical integration?”
Yes. Vertical diversity is only any use if there are multiple customers for the product/service.
One of the failings of all outsourcing models is that they don’t really have vertical diversity, and therefore no sharing of the capital base amongst multiple customers. So you get no economies of scale. In fact you get diseconomies because each you have to pay for sales people, marketing and failed tenders as well as building a unique capital base for every contract.
There is a lot of false diversity in the economy that is really large companies pushing capital risk onto employees and then blowing them out when things go south. Zero-hour contracts are just one of the tricks.
“why not supporting small worskhops and mom and dad stores?’
The question is why should we support them? If they are a business they should support themselves, or alternatively we need to provide living wage jobs for everybody *including* those currently supposedly running business, but aren’t really.
Why should the state support so many museums?
Poor entities with poor capital bases and poor productivity levels are not the businesses you want in a productive economy. Capitalism will eliminate them as ineffective. The Job Guarantee picks up the spare labour and re-deploys it.
Now of course you can support these entities politically. You just get people to vote for politicians that will extract a contribution from everybody to pay to prop up vanity business, or you set up a charity to collect donations. Good luck with that.