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The Collapse of the Left
The Collapse of the Left
Capitalism and (De)Growth
A kind of state?
An institution?
Some values?
A power structure?
Ideology?
A Culture?
What governs capitalism?
Supply and demand
Invisible hand
Enclosure of land
The drive to expand
Market mechanism
Class schism
Racism
The moral virtue of productivism.
Innovation!
Invest!
Impress!
Progress!
Entrepreneurial quest for
Technological success in
Pursuit of profit.
Laissez faire!
Free market
Free trade
Free enterprise
Freedom to buy
Wage slavery
And debt.
Individual self-interest!
Ambition
Addiction
Friction
Cut throat competition
Eat or be eaten
Grow or die.
I think about capitalism as a moment. A blink in time. Organic life has thrived on earth for4 billion years. Modern humans have been walking around for some 200,000 years, looking a lot like you and me. That magical moment of capitalism dawned just 500 hundred years ago with European colonial expansion that enabled the rise of fossil-fueled industrial economies.
Vital to that rise are hierarchical systems of class, gender and race that interact with markets to engineer—and to justify—unequal exchange .Those who engage in markets from superior positions get more for their money. Ecological value flows toward them and wealth accumulates. Those who sell labor and other resources from inferior positions tend to get drained. Degraded. Deforested. Eroded. Impoverished. Exhausted.
Net cultural exchange has flowed in the other direction: capitalist practices, values and myths have been impelled far and wide, with scant return of other traditions. Cultural features of capitalism now seem so omnipresent that it is difficult to imagine and to forge alternatives. The most ingenious maneuver of modernity is to propagate the perception that this moment fills all horizons. As a result, political left and right, pro-growth and degrowth, slug it out in a confined capitalocentric arena.
The biggest challenge faced by degrowth is the shallow historical depth and narrow cultural scope that circumscribe contemporary debates. How to break out?
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A Scam Too Far
A Scam Too Far
The relentless propaganda of economic recovery isolated ‘the economy’ from the broader system of political and economic control and posed the heavily engineered up-cycle as a permanent new state of affairs. It also pitted the facts as lived by hundreds of millions of people against the insistence by the governments and central banks of the U.S., the E.U. and Britain that recreation of the circumstances that produced the prior three crises would somehow produce widely-shared and benevolent outcomes this time around. What the Wells Fargo ‘scandal’ renders evident is that what was recovered is the system of predatory finance that exists as institutionalized capitalist taking in the service of a tiny but powerful plutocracy.
Graph: the capitalist coup that began in the 1970s was a response to a real crisis alternatively framed as a falling rate of profit and / or declining plutocratic control over Western political economy. Financialization shifted the balance of power back toward capital through the money system. Banks create money against separable liabilities.
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Beyond the Zombie Economy
Beyond the Zombie Economy
Economic metaphors are important to illustrate the distinct features of specific economic systems that exist at particular times. The Great Depression, for instance, uses a psychological framing of ‘depression’ to depict the dynamics of an economic system incapable of recovering from financial collapse. The present day metaphor is the ‘Zombie’ economy depicting the economic system as an unthinking monster in relentless pursuit of a single objective – here, short-term profits are synonymous with human brains. This builds on from the well-used ‘Zombie Banks’ metaphor made popular in the 2000s to describe the Japanese financial system, in which endless public subsidies to banks resulted in systemic erosion of economic vitality – the lesson was feeding the Zombie only breeds more.
There are, of course, other metaphors used to describe contemporary capitalism; like the ‘Vampire Squid’ used to illustrate the role of financial institutions in sucking the life out of the global economy. Sanguineous metaphors are very popular historically for depicting the role of finance within the economy as ‘bleeding it dry’; the Vampire, like the Zombie, is a monster with a singular rational objective ‘to feed’ and the humans are always its prey. Of course, Keynes preferred the ‘animal spirits’ metaphor to explain the same inhumane aspects of markets that must be controlled to sustain a market civilization.
Two books in particular articulate different aspects of the Zombie economy metaphor. The fist is John Quiggin’s Zombie Economics: how dead ideas still walk among us, which systematically unpicks how defunct economic theories are clung to by policy makers and politicians.
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Brexit and the Crisis of Capitalism
Brexit and the Crisis of Capitalism
If you collapse these extractive, debt-dependent crony-capitalist cartels, you collapse the entire status quo.
Thousands of commentaries have been issued about Brexit in the past week.I’ve written four myself. Most discuss Brexit as the result of immigration issues, class war, political theater, a reaction against the European Union’s bureaucratic power, sovereignty, etc. Other essays focus on the potential upsides or downsides of Brexit.
What few if any commentators present is the idea that Brexit is a symptom of the Crisis of Capitalism.
The current global version of Capitalism is characterized by these overlapping dynamics:
1. Replacing stagnant real growth and income (and thus taxes) with debt.
2. Replacing investment in real-world productivity with speculation (i.e. financialization)
3. Replacing “everyone must have skin in the game” free-market capitalism withprotected, privileged Elites crony capitalism in which the few benefit at the expense of the many.
4. Replacing local, decentralized democracy and ownership with central planning.
5. Using “extend and pretend” financial trickery to mask insolvency, impaired assets/ collateral and non-performing loans rather than address the debt overhang directly via write-downs and liquidations of impaired assets.
If real (adjusted for inflation) growth and wages were increasing organically(i.e. as the result of free-market dynamics rather than central-planning manipulation)there would be no need for financialization, “extend and pretend” or central planning.
These ills are the status quo’s “fixes” to the Crisis of Capitalism, which arises from these causes:
1. It is no longer profitable to hire people to do an expanding range of work, from minding the jumble store on high street to writing software code that has been automated.
There is no fix for this. As I explain in my book A Radically Beneficial World, the idea that we can “tax the robots” to generate the $2.4 trillion we’d need to make a Universal Guaranteed Income a reality in the U.S. is pure fantasy, as profits collapse as the cost of those commoditized tools decline.
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Monopoly’s New Era
Monopoly’s New Era
NEW YORK – For 200 years, there have been two schools of thought about what determines the distribution of income – and how the economy functions. One, emanating from Adam Smith and nineteenth-century liberal economists, focuses on competitive markets. The other, cognizant of how Smith’s brand of liberalism leads to rapid concentration of wealth and income, takes as its starting point unfettered markets’ tendency toward monopoly. It is important to understand both, because our views about government policies and existing inequalities are shaped by which of the two schools of thought one believes provides a better description of reality.
For the nineteenth-century liberals and their latter-day acolytes, because markets are competitive, individuals’ returns are related to their social contributions – their “marginal product,” in the language of economists. Capitalists are rewarded for saving rather than consuming – for their abstinence, in the words of Nassau Senior, one of my predecessors in the Drummond Professorship of Political Economy at Oxford. Differences in income were then related to their ownership of “assets” – human and financial capital. Scholars of inequality thus focused on the determinants of the distribution of assets, including how they are passed on across generations.
In the West in the post-World War II era, the liberal school of thought has dominated. Yet, as inequality has widened and concerns about it have grown, the competitive school, viewing individual returns in terms of marginal product, has become increasingly unable to explain how the economy works. So, today, the second school of thought is ascendant.
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Next Economy: The Coming ‘Age of Stagnation’
Next Economy: The Coming ‘Age of Stagnation’
Author Satyajit Das kicks off Tyee series on global capitalism’s crisis.
Satyajit Das believes the global go-go growth economy is quickly ending and a tough transition lies ahead. What to expect? The title of his new book succinctly predicts: The Age of Stagnation: Why Perpetual Growth is Unattainable and the Global Economy is in Peril.
An Australian born in Calcutta, Das draws on a range of experience — banker, corporate treasurer, industry consultant, academic, author — in making his prognostication. His views on what actually causes an economy to grow stand in contrast to how governments model and forecast economic trends.
Das argues factors that enabled decades of gradually increasing prosperity throughout the post-Second World War era will be overwhelmed by a range of financial, economic, demographic, resource, and environmental challenges in the next few decades.
The Tyee asked Das to break down those critical forces.
The Tyee: What is your future vision of the global economy over the next 20 years? What are the next few decades going to look like?
Satyajit Das: I think the last 50 to 60 years were quite odd in terms of the longer run economic history of the world. Now, we face a series of challenges. Some are financial and some are non-financial. But, they are all linked.
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Western Mistakes, Remade in China
Western Mistakes, Remade in China
SHANGHAI – The Chinese economy faces an enormously challenging transition. To achieve its goal of joining the world’s high-income countries, the government has rightly urged a “decisive role for the market.” But, while market competition works well in many sectors, banking is different. Indeed, over the last seven years, China’s reliance on bank-based capital allocation has led to the same mistakes that caused the 2008 financial crisis in the advanced economies.
Rapid GDP growth requires high savings and investment, and high savings almost never result from free consumer choice. States can directly finance investment, but bank credit creation can achieve the same effect. As Friedrich Hayek put it in 1925, rapid capitalist growth depended on “the ‘forced savings’ effected by the extension of additional bank credit.”
Japan and South Korea both used bank credit to finance high levels of investment in their periods of rapid growth. South Korea’s nationalized banks directly funded export-oriented companies. In Japan, private banks were “guided” toward the tradable sector.
But while governments dictated broad sectoral priorities, banks decided the firm-by-firm allocation and extended credit via loan contracts, which imposed financial discipline. If Japan and South Korea had instead used direct government finance, capital allocation would almost certainly have been worse.
But while Japan’s banking system helped drive stunning post-war growth, its credit-fueled real-estate boom in the 1980s and subsequent bust led to 25 years of slow growth and creeping deflation. The global financial crisis of 2008 and subsequent post-crisis malaise replicated the Japanese experience in many other countries.
As economies get richer, they become more real-estate intensive. That is partly because people devote a rising share of their income to competing for property in more attractive locations, and partly because in service-intensive economies, high-value-added activities and talent cluster in dominant cities.
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150 Strong: A Pathway to a Different Future – Serialisation
150 Strong: A Pathway to a Different Future – Serialisation
Capitalism comes with a potpourri of sweet-scented prefixes, all of which presume that there is something wrong with capitalism per se. There are some other prefixes we commonly hear—crony capitalism and unbridled capitalism—that suggest that we aren’t doing it right.
Perhaps it is Goldilocks capitalism we need? Not too mean, with just the right amount of good will and charity, a measured dose of state regulation, a safety net – not too big and not too small, and the rest left to the free market?
Or is capitalism just capitalism in the context of people being people? The system swings between the poles of libertarianism and social democracy according to the changing tides of voter opinion. Some capitalists have more feeling for their fellow humans than others, while there are always greedy, selfish sorts lurking to do one over the rest of us, and certain trends are inevitable according to the incentive structure inherent in the system.
It is this last point, that outcomes tend to be inevitable according to the incentive structure operating, that serves as the starting point for a book I have recently written, titled 150 Strong: A Pathway to a Different Future, published by ClubOrlov Press. Over the coming weeks it will be serialised on Renegade Inc, with extracts presented.
On the topic of incentives, the book begins with an Author’s Note:
This book began as a response to the use of the word “sustainability,” a concept I became connected to through my training in sustainability engineering: the design and incorporation of environmentally-friendly practices into commerce and industry. It is based on principles such as these:
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All is Not Well
All is Not Well
Japan was the early major recipient of U.S. Bubble excess (throughout the eighties). The world today would be a much different place if the policy onus had fallen upon the Fed and congress to rein in U.S. borrowing excesses. Instead, enormous pressure was placed on Japan (and, later, others) to ameliorate trade surpluses with the U.S. by stimulating domestic demand. Such stimulus measures were instrumental in (repeatedly) stoking already powerful Bubbles to precarious extremes.
Fiscal and Current Account Deficits exploded in the early-nineties post-Bubble period. And as the nineties reflation gathered momentum, the boom in Wall Street and GSE finance pushed the Current Account to previously unimaginable extremes. Then, as the decade progressed, the associated global boom in dollar-based finance proved ever more destabilizing. Always ignoring root causes, each new crisis provided an excuse to further stimulate/inflate.
The fundamentally unsound dollar proved pivotal for European monetary integration, as the strong euro currency coupled with global liquidity abundance ensured runaway Bubble excesses throughout Europe’s periphery. If the U.S. could run perpetual Current Account Deficits, why not Greece, Italy, Spain and Portugal? Having ignored problematic financial and economic imbalances for years, when European troubles erupted everyone turned immediately to pressure the big surplus economy (Germany) to further stimulate their Bubble economy.
Economists traditionally viewed persistent Current Account Deficits as problematic. But as New Paradigm and New Era thinking took hold throughout the nineties, all types of justification and rationalization turned conventional analysis on its head.
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Why we need to beat Russia
250,000 capitalists read the Financial Times, and it has been our undertaking to chronicle our understanding of capitalism via our book The Philosophy of Capitalism. A USA led team has answered the question ‘What is The Nature of the Monetary System?’ The Monetary system has three layers – the core is Religion and the unconscious mind – as they formed first. The outer layer is operational and intersects with geopolitics, it explains:
Why we need to beat Russia
We may see Syria as a testing ground for Imperial Power. Russia has tested our influence and shown the World it’s wanting, so it’s crucial to appreciate why and of what consequence.
Our Imperial weapons give definite form to our Empire. And nothing has shaped our Empire more than the FIAT. The deformation began in 1971, when the US imposed her Power to re-define the rules of the monetary system for her sole benefit. The ability to print IOU’s in exchange for real value is more clever than theft as we borrow and do not pay back in kind due to inflation. Our enemies, adversaries and vassals must found their financial systems upon the printed dollar which they must purchase with hard earned money. That seizure has financed a vast network of military bases, bribery, assassinations, coup d´états and perpetual war.
What’s not to like? All that Power without taxing the produce of the American people. So why have we lost in Syria?
Let’s begin by appreciating that the global “FIAT system” is responsible for our moral crisis and departure from virtue. As we embrace further the gods of greed – listen to the masses cheer for Clinton and Trump – we must recall that virtue is knowledge of what is good. We are getting weak because we have forgotten what is good for us.
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Retro-modernism
Retro-modernism
So it’s probably time to move on from ecomodernism. But there’s a little bit of unfinished business to unfurl in this post before starting on something else. I may even need to spend some time actually farming soon (there’s ewes to lamb and seeds to sow), as well as putting in some research time for my next cycle of posts, so the pace may have to slacken.
Anyway – Unfinished business #1: I got some great feedback to my last post here on SFF, and at Resilience.org and via New York academic Anthony Galluzzo’s site. Constructive, engaged criticism – the blogosphere at its best. I’d argued with the help of the late Marshall Berman’s book All That Is Solid Melts Into Air1 that agrarian populism – that is, the localist politics of a neo-peasant small farm movement – is not anti-modern, nostalgic or backward-looking but on the contrary is thoroughly modernist in its willingness to abandon the weight of tradition accumulated through the history of capitalist development, and to chart alternative paths to sustainability and social justice. The criticisms that came back to me mostly hinged on a sense that I was over-extending the concept of modernism and effacing its negatives. Reasonable points, calling me back to my more sceptical pre-Berman take on modernism. But I still think Berman opens interesting ways of seeing how contemporary politics – including the green, leftist and agrarian populist politics with which I’m most engaged – have to develop more subtle narratives about history and human agency than they typically do. I hope to come back to this at a later date.
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Why We Consume: Neural Design and Sustainability
Why We Consume: Neural Design and Sustainability
Exponential economic growth is rapidly destabilizing the biosphere. Among the many factors that stimulate such growth is the human tendency to consume goods and services far beyond what is required to meet basic needs. We have to grasp what drives this tendency in order to manage it. The brain’s core circuits were long believed to stimulate us to seek pleasure—greedily and selfishly—while higher cortical circuits try to rein us in. Neuroscience now shows that the core circuits serve not pleasure per se, but efficient learning. When we obtain a reward that our frontal cortex values highly, the core circuit delivers a chemical pulse that we experience as satisfaction—so we repeat the behavior. Satisfaction is brief and diminishes as a particular reward becomes predictable. This circuit design works well for pre-industrial societies in which rewards are varied and unpredictable. But capitalism shrinks the diversity of possible rewards, leaving the remainder less satisfying, and making stronger doses, i.e., more consumption, necessary. The path toward sustainability must, therefore, include re-expanding the diversity of satisfactions.
A Brain Circuit for Learning | Human Nature | Implications for the Great Transition | Endnotes
The evidence deepens daily that human activity is now imperiling the stability of the biosphere. The main cause is exponential economic growth, driven on the production side by capitalist competition, pursuit of profit, and financial manipulation. Yet persistent growth ultimately requires demand—that is, individual consumption. If people consumed less, stuff would accumulate and growth would slow. Economic growth far exceeds population growth, so if economic growth could be slowed, there would still be enough for all seven billion of us, at least if wealth were distributed more equally.
So why do people consume ceaselessly, far beyond the point of meeting basic needs? There are social factors, such as competition for status, and personal factors, such as shaping a self-image.
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My letter to the WSJ re: Inflation is not indicative of an expanding economy
My letter to the WSJ re: Inflation is not indicative of an expanding economy
Re: US Consumer Prices Flat in January, but Offer Glimmer of Inflation
Dear Sirs:
This quote from Ms. Davidson’s article perfectly illustrates the fallacy that higher prices are desirable:
”Broad-based price growth is signalling that the wage and price pressures are building, an indication that the economy is expanding at a solid pace and that recessionary concerns are overdone,” PNC economist Gus Faucher said.
Higher prices are the result of a combination of two factors, both of which are undesirable–lower output or an increase in the money supply which causes an increase in spending. The following simple formula of Professor George Reisman can be found on page 505 of his magnum opus Capitalism: A Treatise on Economics.
P = Dc/Sc
P is the general level of consumers’ goods prices, in the sense of the weighted average of the prices at which consumers’ goods are actually sold. Dc is the aggregate demand for consumers’ goods. as manifested in a definite total expenditure of money to buy consumers’ goods, and Sc is the aggregate supply of consumers’ goods, as manifested in a definite quantity of consumers’ goods produced and sold.
As further explained by Professor Reisman, “An expanding quantity of money operates to raise the general price level by virtue of raising aggregate demand relative to aggregate supply.”
In other words, the Federal Reserve Bank’s policy of printing more money causes aggregate demand to rise, but the rise in prices does not mean that more goods and services are being produced. It most probably means that more money is chasing the same or even smaller quantity of goods. In fact an increase in the quantity of money causes dislocations and disequilibrium in the structure of production, which causes the supply of consumers’ goods to fall.
Therefore, an increase in prices, which is commonly called “inflation”, is nothing to be desired by the general public.
Patrick Barron
Socialism and the Battle of Ideas
Socialism and the Battle of Ideas
It is a mistake to think that the lack of success of experiments in Socialism that have been made can help to overcome Socialism. Facts per se can neither prove nor refute anything. Everything is decided by the interpretation and explanation of the facts, by the ideas and the theories.
The man who clings to Socialism will continue to ascribe all the world’s evil to private property and to expect salvation from Socialism. Socialists ascribe the failures of Russian Bolshevism to every circumstance except the inadequacy of the system. From the socialist point of view, Capitalism alone is responsible for all the misery the world has had to endure in recent years. Socialists see only what they want to see and are blind to anything that might contradict their theory.
Only ideas can overcome ideas and it is only the ideas of Capitalism and of [Classical] Liberalism that can overcome Socialism. Only by a battle of ideas can a decision be reached.
Liberalism and Capitalism address themselves to the cool, well-balanced mind. They proceed by strict logic, eliminating any appeal to the emotions. Socialism, on the contrary, works on the emotions, tries to violate logical considerations by rousing a sense of personal interest and to stifle the voice of reason by awakening primitive instincts.
Even with those of intellectually higher standing, with the few capable of independent reflection, this seems to give Socialism an advantage. With the others, the great masses who are unable to think, the Socialist position is considered unshakable. A speaker who inflames the passions of the masses is supposed to have a better chance of success than one who appeals to their reason. Thus the prospects of Liberalism in the fight with Socialism are accounted very poor.
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