the pitchfork solution to world inequality

Each year Oxfam delivers a report about how the inequality in the world is getting worse and how this needs to stop. This year, I was encouraged by a marginal note from Nick Hanauer, one of the Super Rich, who warns his fellow billionarie's that:

‘No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out.’
- the pitchforks are coming ... for us Plutocrats

Now, what did that Oxfam report say?

• Since 2015, the richest 1% has owned more wealth than the rest of the planet.
• Eight men now own the same amount of wealth as the poorest half of the world.
• Over the next 20 years, 500 people will hand over $2.1 trillion to their heirs – a sum larger than the GDP of India, a country of 1.3 billion people.
• The incomes of the poorest 10% of people increased by less than $3 a year between 1988 and 2011, while the incomes of the richest 1% increased 182 times as much.
• A FTSE-100 (Financial Times Stock Exchange 100) CEO earns as much in a year as 10,000 people in working in garment factories in Bangladesh.
• In the US, new research by economist Thomas Piketty shows that over the last 30 years the growth in the incomes of the bottom 50% has been zero, whereas incomes of the top 1% have grown 300%.
• In Vietnam, the country’s richest man earns more in a day than the poorest person earns in 10 years.

more details here

PREVIOUS BLOGS ON THIS TOPIC
Oxfam report: AN ECONOMY FOR THE 1%
the strengths and weaknesses of capitalism
Land of the Free, Home of the Poor

unpacking the value suitcase

Clarifying the meaning of and distinguishing between the words: value, wealth, quality and money

Suitcase words: Marvin Minsky (The Emotion Machine) has coined this marvellous term to describe words that are not clearly defined and mean different things to different people. For example, Consciousness is a suitcase word. It can mean unifier, self awareness, identity, animator of the mind, provider of meaning, detector of feelings. It refers to many different mental activities that don’t have a single cause or origin. In part Minsky’s book is about the need to create a new vocabulary in order to discuss the workings of the mind.

So, let us discuss the value suitcase. Over the years it has become a very large suitcase with many thousands of words devoted to different interpretations of value theory resulting in a tangled mass of incoherent vocabulary.

I start with the folk perspective because what we pick up as the everyday background noise of the meaning of words does influence our understanding when we get around to analysing those words in more detail. We cannot properly acquire new understandings without first subjecting our old understandings to critical scrutiny. No construction, without destruction.

Here are some popular uses of the word value:

1. Tom is good value, ask him to do the job
2. That car is good value for money
3. Gold increases in value during economic recessions
4. Steve Jobs adds value to Apple shares
5. The role of a teacher is to add value to their students
6. It was a valuable experience to attend that Noel Pearson lecture

So, in folk use, value might be used to describe an attribute of a person, a commodity (two examples, car and gold), a business, a process or an experience. In some cases there is a close connection between value and money (sentences 2 and 4) but in other cases it refers to the ability of certain people to successfully transfer their skill to a job of work or to other people. It can also refer to a learning experience. In all of these cases value is a good thing and the more value there is the better.

In Capital, Marx doesn’t start with value. He starts with the commodity and then splits the commodity into something which possesses both use value and exchange value. It turns out later that exchange-value is the form of appearance of value. Exchange value is “observable” in a transaction. For example, one 32GB USB stick = 16 litres of Pura full cream milk. We can equate these values in real life but more realistically in our imagination and it does not have to involve money. Value is the underlying category, an abstraction, a theoretical underpinning of exchange-value.

In Marx’s terms value has a form, a substance and a magnitude. The form of value is its capacity to be exchanged. The substance of value is embedded abstract labour. The magnitude of value is the amount of embedded labour or socially necessary labour time. This thumbnail needs to be discussed in more detail later.

Marx clearly distinguishes between value and use value. For Marx value is a social product (or in his language, a social form). It only exists in a commodity society, a society where products are produced and sold to others. For Marx value does not exist, or only exists in embryonic form, in primitive society where hunters and gatherers are mainly working for themselves. For Marx value is historically contingent whereas use value is not. Use value refers to the properties of products that make them useful. For example, a car is useful for transportation. This is true irrespective of whether it is bought and sold in the marketplace. Marx makes a radical separation between the usefulness of products (true for all social systems) and their value, which is only true for products which are made to be sold in the marketplace. Such products are defined as commodities.

What is the difference between the folk perspective of value and the Marx perspective of value?

Well, Marx mercilessly dissects or interrogates the commodity and teases out a variety of meanings and distinctions (use value, exchange-value, value). For Marx value becomes a central theoretical concept which is complex in its own right, having social form, substance and magnitude. But for Marx a line is drawn between value and use value.

So, looking again at the starting sentences and adding some annotations about what the folk use of value means in each case:

1. Tom is good value, ask him to do the job (Tom is useful at work of an unspecified character)
2. That car is good value for money (I am prepared to exchange my money to buy that car)
3. Gold increases in value during economic recessions (Gold is special for unstated reasons because it is always valuable, even in economic crises)
4. Steve Jobs adds value to Apple shares (some individuals excel at their value interventions in the capitalist system because of their creative design and marketing skills)
5. The role of a teacher is to add value to their students (in the “knowledge economy” value can refer to added knowledge too; the teacher transfers their knowledge to their students)
6. It was a valuable experience to attend that Noel Pearson lecture (an experience can be valuable or personally enriching in its own right)

The folk usage of the word value does either mean or imply the similar concepts which Marx discovers in the commodity (usefulness, exchangeability), adds on a few more (creativity, knowledge transfer, enrichment) and then fuzzily blurs them all together. In folk usage value is a suitcase word. Folks are using the word value as a suitcase whereas Marx is starting with the commodity and meticulously teasing out various meanings in his analysis.

The folk perspective on value and Marx’s perspective also deviate when it comes to labour saving or productivity increasing technology. With technological progress the value of manufactured products decreases. They become cheaper to buy in the marketplace.

I said above in relation to the six introductory sentences which illustrate a variety of usages of value, that:

In all of these cases value is a good thing and the more value there is the better

But now I am pointing out that as technological productivity increases then the value of the manufactured products decreases. That experience is part of popular consciousness. We all know that we possess more products than our parents generation. We possess them because we can afford them since comparable items are cheaper relative to our wages than they used to be. But does the concept of declining value universally enter the popular consciousness?

7) Commodities are cheaper for my generation than previous generations. We’ve never had it so good!

There may be some awareness of this truth but it is not general folk wisdom. Why not?

Well, often prices don’t go down. Rather you buy a fancier equivalent of the commodity you want for the same price. You are getting more value for money but not getting the feeling that things are cheaper in an absolute sense. Windows 10 replaces Windows 9. It really doesn’t do anything different but has a few extra bells and whistles so you end up paying a similar price. In reality, absolutely free alternative operating systems such as Ubuntu are equivalent and better in some ways (no viruses).

Some prices do go up. For example, land, petrol, electricity, internet access in Australia.

It is cheaper to build a house now than previously, due to technological and organisational development. The house is cheaper but the land is often more expensive due to supply and demand for good location.

Petrol prices are subject to the control of a cartel (OPEC)

The price of electricity goes up due to lack of forward planning by governments who don’t build surplus capacity in good time.

The National Broadband Network (NBN) is potentially a good idea but due to government incompetence it is rolled out in a more expensive fashion than is needed.

Environmental costs contribute to rising prices. Once again, governments are generally incompetent in managing these issues,

It is hard to accurately compare our generation with previous generations. This arises from the nature of capitalist development. We have more things but in the main they are different things to our parents possessions. When I grew up we did not own a flush toilet, an electric frig, a TV, a microwave or a computer. They were either invented or became affordable consumer items later. Even the items that are common to both generations differ substantially. Houses and cars are far more sophisticated today, they possess added gadgets and functionality which was not present previously. This rough comparison makes it obvious that the current generation has far more material possessions than previous generations. The value of producing equivalent and / or better commodities has declined over time mainly due to productivity improvements.

What is the difference between value and wealth?

In folk usage wealth may refer to:

8 ) There are a wealth of ideas in the mind of that intellectual
9) James Packer is wealthy (aka filthy rich)
10) Capitalism increases the wealth of society but that wealth is distributed unevenly

If you substitute wealth for value in my original sentences it doesn’t work out. You wouldn’t say:

1′) Tom is good wealth, ask him to do the job
2′) That car is good wealth for money
5′) The role of a teacher is to add wealth to their students
but you could say:
4′) Steve Jobs adds wealth to Apple shares

This is because value means more than the finished product or money. It also means or implies productive labour. Wealth doesn’t fit in those sentences because it usually refers more to the end product or the market value of the end product than the productive labour required to obtain that product.

Marx and his predecessors also distinguished between value and wealth. Wealth is the sum of all use values irrespective of whether they require labour. Hence unadorned natural products, eg. virgin land, are part of wealth but not part of value. In Marx’s terms nature is not a source of value. Marx approved of his predecessor William Petty in distinguishing between labour and nature as sources of wealth:

“Labour is … not the only source of material wealth, ie of the use-values it produces. As William Petty says, labour is the father of material wealth, the earth is its mother.” (Marx, vol 1)

Wealth is the sum of all use values, which are concrete and particular. Wealth originates in both nature and labour. This applies to any society. Value is a creature of capitalism or a society where commodities are exchanged in the market place and display their exchange-value there.

What is the difference between value and quality?

In Marx’s terms value is not metaphysical. By metaphysical I mean broad trans historical concepts which attempt to define meaning in a permanent or grandiose sense. Marx’s analysis is relevant to capitalism, not all of history. Marx is not writing a theory of everything to last for all time but is doing a specific critique of capitalism and classical political economy, the partly correct then existing theories of his predecessors Adam Smith, David Ricardo and others.

It is a different approach to my memory of the sense in which Quality is discussed at length in Pirsig’s Zen and the Art of Motor Cycle Maintenance. I had the sense there that if only the slippery concept of Quality could be grasped then that would be similar to solving the riddle of life itself.

However, folk usage does not always embrace metaphysical texts. In folk usage there is not a clear distinction made between value and quality. If you take the sentences I began with:

1) Tom is good quality, ask him to do the job
2) That car is good quality for money
3) Gold increases in quality during economic recessions
4) Steve Jobs adds quality to Apple shares
5) The role of a teacher is to add quality to their students
6) It was a quality experience to attend that Noel Pearson lecture

For most of them you could substitute the word quality for the word value. It is only in sentence (3) that this substitution does not work. This is because the phenomenon of gold increasing in value during economic recession requires a detailed economic theory to explain it. Even though the sentence is part of folk usage the explanation of that sentence is not.

What is the difference between value and money?

From the original sentences value is measured in money terms in sentences 2 and 4 or at least the connection is clear:

2) That car is good value for money
4) Steve Jobs adds value to Apple shares

In folk terms the value suitcase is much broader than money and encompasses usefulness, creativity and experiences as well.

For Marx value originates from labour and evolves into a universal equivalent, gold money, which further evolves into paper money. But for Marx value is in motion. The capitalist uses money or credit to buy labour and means of production, proceeds to a production process, sells the resultant commodities and finally invests more into the production process in a continual cycle. Value moves through this whole process dynamically.

So value is far more than money in both folk and Marx’s usage but in different ways.

The folk connotation of value is that it is a good thing, that valuable things (people, commodities, experiences) are worth having. This is different from the Marxist understanding, that value is a creature of capitalism an underlying theoretical concept which is the starting point to explain the motion of the whole capitalist system. For Marx, value is the starting point for further analysis and understanding of capitalism.

(part 2, to be continued)

marx and the domains of ignorance

The domains of ignorance:

• Known unknowns: All the things you know you don't know
• Unknown unknowns: All the things you don't know you don't know
• Errors: All the things you think you know but don't
• Unknown knowns: All the things you don't know you know
• Taboos: Dangerous, polluting or forbidden knowledge
• Denials: All the things too painful to know, so you don't

The domains of ignorance are relevant to Marx. Some people don't read him because it is taboo. Some people read him and think they understand but they don't. Some people have a superficial knowledge of Marx and think that is good enough. But none of that really explains the extent of the marginalisation of Marx. I think the main issue is that he is difficult to understand. The thing missing from the domains of ignorance is contradictory knowledge.

Isaac Deutscher provides an anecdote about the knowledge of Marx in that era (the 1930s):

"Capital is a tough nut to crack, opined Ignacy Daszyński, one of the best known socialist "people's tribunes" around the turn of the 20th century, but anyhow he had not read it. But, he said, Karl Kautsky had read it, and written a popular summary of the first volume. He hadn't read this either, but Kazimierz Kelles-Krauz, the party theoretician, had read Kautsky's pamphlet and summarised it. He also had not read Kelles-Krauz's text, but the financial expert of the party, Hermann Diamand, had read it and had told him, i.e. Daszynski, everything about it"
- http://en.wikipedia.org/wiki/Historical_materialism

Marx's critique of political economy is old knowledge, forbidden or marginalised knowledge and difficult to understand knowledge. Because it was written 150 years ago many think it is no longer relevant. Because communism is believed to have been tried and found wanting many who want change think it could not provide the answers we want. Because Marxism is an insignificant part of mainstream education and in particular often not taught in the economics faculty then it is only going to be accessed by those who think outside of the mainstream. Finally, the many volumes of Capital are difficult to understand for a variety of reasons.

Conceptually the work is very rich and it is difficult to keep the whole of fit in your head. Marx uses a method of investigation (his adaptation of Hegelian dialectics) that is unfamiliar to moderns. Much of the language he uses is unfamiliar and this issue is exacerbated through a variety of translations. The prose is dense. Marx established a precise, strict terminology, eg. use value, exchange value, value, relative and absolute surplus value and then uses it rigorously for hundreds of pages. Therefore you must pay close attention, otherwise you are lost. He frequently uses French and Latin quotations. He also employs fascinating, tangential footnotes, which must be read.

The economic crisis which began in 2007 created an intellectual crisis, which did already exist, but was not so obvious as before the crisis. For much of time following WW2 economic crisis was absent, the capitalists had appeared to work out how to stabilise an unstable system. That assumption has now been shown to be false.

My contention is that to understand the inner workings of capitalism you have to understand Marx. Although this will not provide any magic solution to the current issues of ongoing economic crisis it will provide a deep appreciation of the inner contradictions of capitalism that make it forever an unstable and unpredictable system.

To understand value theory you have to read the original Marx. My goal here is to describe some of the hurdles I encountered along the way and answers I found to those problems. I called these AHA moments. I'm writing it as a series of confusions or sticking points followed by breakthroughs which were then followed by more confusions, etc.

The Value concept is central to Marx's whole argument. To understand capitalism, how it works from the inside, requires an understanding of Value. It is this broad view that has motivated me to persevere in reading Marx, whose writings are difficult, and various interpretations.

(part one, to be continued)

marx on alienation

What did Marx mean by alienation and is it still relevant?

When using the word alienation, Marx was talking about the fundamental social structures of the capitalist system. He was not talking about psychological alienation. In saying that I would not discount the concept of psychological alienation in connection with Marx's analysis. Rather, it is not the starting point of comprehension of what Marx was on about.

Marx regarded the contradiction between private property (the social class who owns the means of production) and alienated labour (the social class who has no option but to work to earn money to maintain themselves) as the fundamental issue of the capitalist era. Fundamental here means the main underlying contradiction, the one that can't be resolved by capitalism. It is not the same as the principal contradiction. The principal contradiction is the one which manifests itself most sharply in any particular era. I won't attempt to say what the principal contradiction is in the world today but I will say that if the post 2008 economic situation continues to deteriorate then the principal contradiction may become aligned with the fundamental contradiction.

In this essay I'm focusing on Marx's 1844 writings (Economic and Philosophical Manuscripts of 1844, particularly the section on Estranged Labour)

Christopher Arthur summarises Marx's 1844 writings as follows:

“Because the worker has no property in the means of production his labour-power is excluded from the instrument and object of production owned by another; his labour realizes itself therefore only through the wage-contract whereby it is alienated to the master and works in his behalf.”
- dialectics-of-labour/chapter-01

Marx discusses the nature of alienated work under capitalism, from a four fold perspective:(1) alienation from the products of labour; (2) alienation from his own labour; (3) alienation from fellow men and (4) alienation from his own species.

Capitalism has been around for 150 years since Marx wrote and has adapted in that time. Workers have struggled successfully to improve their working conditions through trade union and other struggles. The productive forces have developed tremendously and many of the most difficult jobs are now less difficult because of machines assisting the work. The education system has developed and expanded world wide to keep up with the requirements of the more developed productive forces. Many of the worst jobs have been exported to the developing countries. Knowledge industry and service industry type jobs have replaced many jobs in the industrial and agricultural sectors. A useful book, which I read years ago discussing the shift from industrial to service industry work was Sleepers, Wake! Technology and the Future of Work by Barry Jones, but obviously that analysis needs to be updated and developed.

It seems that Marx didn't anticipate the resilience and longevity of capitalism. I feel that in some places he exaggerates how bad things are for the worker. Capitalism has been adaptable in order to survive. Capitalism is a flexible and adaptable system but within limits. The bottom line is that it must continue to find a way to extract surplus value. Capitalism can't compromise on that issue.

Given these changes I will make some qualifying comments on Christopher Arthur's summary of Marx's 1844 document about the nature of work:

“The labourer treats his labour as a commodity; as a consequence he has no interest in the work itself but only in the wage; labour does not belong to itself but to private property.”

It is true that most people are driven to work to earn money. However, given Marx's general attitude to the central importance of work (aka labour, activity) in human development it is strange that he asserts that the worker has no interest in the work itself

This is too extreme. In another place (Critique of the Gotha Program, 1875) Marx, anticipating communism, describes labour as life's prime want. IMO it is simply not possible for the boss-worker alienated relationship to comprehensively destroy all interest in the work itself. Marx's ironic statement that capitalism creates it own grave diggers (Communist Manifesto, 1848), a proletariat that has learnt to run the system by building it, is far closer to the mark.

“... the worker ... executes plans he does not form; he objectifies himself in his product only to have it taken from him”

This is correct for most factory work and low skill jobs but when it comes to the knowledge industry (eg. engineers, computer programmers, some aspects of teaching) the workers are significantly involved in the planning

“he produces palaces but lives in hovels; his labour creates beauty but deforms himself ...”

Today, many workers live in nice homes. Home ownership is a problematic aspiration of the capitalist system. Nice if you can get it but it is going to take a significant proportion of your working life to attain it.

Does the worker deform himself? In the physical or bodily sense this is another exaggeration, although true in the cases where difficult manual work and industrial accidents still occur. In the mental sense it is true in the sense that workers have to adapt their lives to the needs of their jobs – eg. long hours, division of labour – but there are other aspects of work that are enjoyable and enriching. I think the key issue here in interpreting Marx about division of labour is that even for relatively good jobs the emphasis in training is on technical skills and the education system is not designed to develop critical, broad ranging thinkers.

“ … the more intelligence is embodied in the design of the factory system the more machine-like and stupefying the routine of work, so much so that the labourer faces machinery as a competitor for his place”

It is true that the dead labour in machines (aka fixed capital) progressively replaces living labour. This is part of the evolutionary dynamic of capitalism. Marx anticipated this, see this passage from the Grundrisse (1857-61) [“The development of fixed capital indicates to what degree general social knowledge has become a direct force of production, and to what degree, hence, the conditions of the process of social life itself have come under the control of the general intellect and been transformed in accordance with it” source]. The intelligence also becomes part of the skilled workforce (managers, scientists, engineers, computer programmers). It remains a living thing, not just embodied in the design of the factory system.

“at work he does not feel at home; he feels himself only when he is not working; his work is not voluntary therefore, but is forced labour; in it the worker belongs not to himself but to another”

Many workers will testify that they would rather be at home than at work but nevertheless many workers also feel that being at work broadens and enriches them in significant ways.

If we focus on factory work (not knowledge work) for a minute it is relatively easy to see that in such work the worker is alienated from the product he makes but does not own. Marx goes onto argue that since the product is alien then the labour process which made the product must also be alien. He calls this self-estrangement. Marx sees labour or work or activity, when it is not alienated, as life itself, since productive activity between man and nature is human essence.

So, the factory worker feels external or outside or not at home with this labour process. What would it take for this feeling to be reversed? Well, say the worker is at home doing home improvements or building a cubby for their child or researching a favourite topic on the internet. This is more like life activity being internal to the worker. I would argue that this is an experience that knowledge workers obtain sometimes at work, which leads to the “I like my job” feeling.

The main thing I liked about my teaching job was that ability to research different innovative approaches that helped me teach concepts I felt were useful more effectively to my students. When doing that I felt inside the work. This approach to internalisation of development was expressed through the constructionist learning theory developed by Seymour Papert. He even described the turtle in turtle geometry as an object to think with, conveying the internalisation of the learning process. But this bottom up learning is only happening in a few classrooms controlled by innovative teachers. It hasn't been taken up by the education system as a whole, which favours more structured top down approaches, which have a legitimate place in learning theory and practice, as well.

Capitalism leads to the dominance of things over people. Things develop personalities and workers lose their personalities, become mere wage plugs. Capital and capitalists (Bill Gates, Mark Zuckerberg, Steve Jobs, James Packer, Twiggy Forest) have individuality, their wealth or things enables them to express it (the personification of capital), whilst the worker is always struggling to keep afloat, pay off the mortage. Veblen pointed out the phenomenon of conspicuous consumption. Dead labour dominates living labour. The worker becomes an abstract individual (impoverished, pared down). The world of objects (property) becomes massive and powerful relative to the worker's world. In the face of the massive development of productive forces it is easy for workers to feel powerless. But it is the labour of the working class which has created this massive world of things.

Marx wants to transform the whole work experience so that all workers can become fully alive at work. If the worker feels at one with society, rather then having to compete to earn money to stay alive, then even mundane or banal jobs, jobs which have to be done, would feel useful rather than alienating.

It follows on from product ownership (previous section) that workers will have anxious, insecure, alien and hostile relations with the capitalist and landlord. The capitalist is powerful and alien compared to the worker.

Our self conscious species life is potentially rich. We produce a great range of things including beautiful things and things which can be used later. But the potential to live to the full extent of our species being is destroyed because capitalists appropriate the product of our labour.

Capitalism dissolves the world into competitive atomistic individuals rather than the cooperative, harmonious and joyful species that we could be.

Capitalists are alienated too! They cannot have normal human relations with the worker. They are dominated by the social conditions of the system, including competition. They are driven by the desire to amass profits. They are not directly involved in productive activity themselves. They become greedy (for money because they don't produce themselves), cruel and hypocritical.

MAN, NATURE AND MEDIATION

Taking a step back we can view work as a mediation between man and nature. Christopher Arthur puts it like this:

“(Marx) ... speaks of nature as 'man's inorganic body' and says that 'he must maintain a continuing dialogue with it if he is not to die ... for man is a part of nature'. On the other hand, he says that 'it is in his fashioning of the objective world that man really proves himself; through such productive activity 'nature appears as his work and his reality . . . and he can therefore contemplate himself in a world he himself created'; this process is characterized as 'objectification' (Vergegenständlichung) ...

(objectification means the making of a product or object)

In truth, man is neither passively dependent upon nature, nor is he able to create his world from nothing. It is rather the case that through industry, productive activity, a dynamic relationship between man and nature is established in which both poles are transformed ...”

The word mediation is used in the sense of an extended process between man and nature which determines the nature of change of man and society. Contrast mediation with immediate. The view that man is in some sort of passive, contemplative relationship with nature or, the opposite view that man can somehow overthrow nature both suggest an immediate, short term connection rather than a mutually transforming mediation. Rather, man transforms nature, a process which requires both struggle and unity, and in the process transforms himself.

This establishes Marx's fundamental ontology, that human essence arises, is created, through the process of productive activity which mediates between man and nature. This provides a thematic starting point for the outlook of historical materialism, that historical development can be understood through the working through of this process of productive activity which mediates between man and nature.

Christopher Arthur refers to Istávan Mészáros's analysis of first order and second order mediations. The mediation of productive activity between man and nature is a fundamental first order mediation which applies historically to all societies. Compare this with capitalist society where:

“... in the present economic conditions we find that productive activity itself is mediated through the division of labour, private property, exchange, wages, in sum a system of estrangement in which productive activity loses itself and falls under the sway of an alien power. Istávan Mészáros has termed this 'a set of second-order mediations . . . i.e. a historically specific mediation of the ontologically fundamental self-mediation of man with nature” (emphasis added)

GOALS MET AND TASKS ARISING FROM THE ABOVE ANALYSIS

I have explained what Marx meant by alienation, a fourfold analysis [(1) alienation from the products of labour; (2) alienation from his own labour; (3) alienation from fellow men and (4) alienation from his own species] and contrasted his meaning with the more fashionable interpretation today of psychological alienation. Marx's meaning of alienation needs to be contrasted with his vision of communism where the mediation of productive activity between man and nature (human essence) is not contaminated by the social forms of capitalism (division of labour, private property, exchange, wages).

I have touched on technological change and the changing nature of work and how that requires Marx's class analysis to be updated but by no means negates its fundamental importance.

I'll return to these topics in subsequent blogs.

update (Jan 16):
Marx's solution to the problems of capitalism is for the proletariat to seize political power, through revolution, and to proceed to create communism, through a transitional period of socialism, or dictatorship of the proletariat over the capitalist class.

Now, obviously the proletariat, the 99%, could achieve this against the capitalist class, the 1%, if there was clarity, unity and good leadership to attain such a goal. The reason we don't have socialism is for various reasons the proletariat doesn't strongly desire socialism.

What I will do here is attempt a rough preliminary analysis, in terms of the ideas discussed by Marx, of the push factors from capitalism to communism and contrast them with the pull factors which prevent the proletariat from embracing that change.

In favour of the transition from capitalism to communism: The iniquitous social forms of wage labour, private property, division of labour and exchange would be eliminated and replaced with a not alienated mediation of productive activity between man and nature.

Factors impeding the transition from capitalism to communism: In order to support the Marxist revolution you need to understand what it is. That requires some slow, deep thinking, reading and analysis. Most workers are too busy working long hours to pay off the mortgage, keeping afloat in a competitive system. Our education system trains specialists (a division of labour) and not whole people who reflect on wide ranging social issues. Overall, the education system is designed to reproduce existing class relations rather than overthrow them. Capitalist culture tends to distract or entertain people in a whole range of ways (from David Bowie to Buddhism to Foxtel to drugs). The disenfranchised are given welfare, enough to survive, which keeps them distracted and so that threat to the system has been manageable up until now.

Alternatively, it could be argued that Marx was wrong. I'm interested in those arguments and have at times adopted them myself. But I now suspect it is more the case that Marx has not been understood or only partially understood or that some "Marxist" leaders have been too dogmatic, one sided and have ended up offering bad leadership.

REFERENCE

Arthur, Christopher. Dialectics of Labour: Marx and his Relation to Hegel, Ch 1

Jones, Barry. Sleepers, Wake! Technology and the Future of Work

Marx, Karl
Economic and Philosophical Manuscripts of 1844, particularly the section on Estranged Labour,

Communist Manifesto

Critique of the Gotha Programme

Grundrisse (section)

marx's moral theory

HUMAN ESSENCE

If there is such as thing as human essence and we can discover what it is then that will go a long way towards developing a moral theory.

Human nature is part biological, part social and not religious. Religion is something to be explained rather than believed. This includes modern religions such as Nature worship (currently popular) and Marx worship (currently marginalised).

Humans have both needs and powers. Obviously, it follows that we are both needy and powerful and both of these aspects of being human need to be explored further.

The biological and social parts are connected or interact dialectically. It would be an error to see them in isolation from each other.

Fundamental biological needs include eating, drinking, habitation, clothing, sexuality ...

Biological and Social. Humans produce their own existence / material life through social labour. Our biology allows this, eg. Opposable thumb, upright posture frees the hand, large brain. This separates us from other animals. Compared to other animals we are self conscious and wilful to a qualitatively different degree. Although we originate as part of nature, with our social labour we oppose nature. Our productivity is also imaginative. We imaginatively and self consciously transform nature and in that process also transform ourselves. This is a teleological process. Humans imagine new forms of the material and self and then through social labour bring that imagination into reality. This is human essence.

THE GUIDING MORAL PRINCIPLE

The guiding moral principle is to do whatever is required for the human flourishing of rich individuals, to dynamically expand human powers for all humans. Human flourishing is not original to Marx but Marx built on the best available ideas that came before him, those of Aristotle.

Marx and Engels were more aware than Aristotle about the role of social labour in this enrichment process. After all, Aristotle lived in a slave society. Refer Engels, The Part Played by Labour in the Transition from Ape to Man. In communist society there would not be a division of labour based around the supply and demand of the labour market. In a world where production for the needs of all is established then each individual would be free to pursue their own perceived interests.

PHILOSOPHICAL STANCE

The philosophical stance here is to investigate what is distinctive about humans (biologically and socially) and from that basis to articulate what a good or rich life is.

ONTOLOGY

Be clear about where our moral principles come from. Being determines consciousness. Matter is philosophically prior to ideas.

The theory is philosophically materialist. It starts from real people and real conditions. It ascends from earth to heaven, not descends from heaven to earth.

But, once we are in heaven how do we get back down to earth again? The only way is to make a detailed study of society in all its aspects. Mode of production, division of labour, social classes, Is there a surplus and who controls it?, the history of knowledge, current issues, individual self knowledge. There is a lot to know! The desirable actions that promote the best human nature at any point in history depends on the depth and perspicacity of such an analysis.

CAPITALISM and ALIENATION

Capitalist limitations. For the capitalist, because they own the means of production, the workers life activity becomes a mere use value. In general, workers have no direct stake in the products they produce. Temporary niche solutions may be possible for individual workers but overall work loses it human character. In class society, the economy operates as a thing more or less outside of human control. If there is no profit to be made then production grinds to a halt. There maybe poorly understood economic laws. But the best that could be said of capitalism is that it is a highly unstable system in which the future well being of the workers who make it is uncertain and problematic.

Capitalism gives labour a bad feel (alienation) and production a bad name. Under capitalism humans are alienated from their essence, their living social labour, since the capitalists own the means of production and determines which products are made and who owns those products.

The capitalist economy is an unstable monster, poorly understood, difficult to manage and continually spinning out of control. Workers are alienated from the products they produce. Creative people who produce things of beauty (some artists, some writers, some teachers etc) are often not seen or appreciated as typical workers, rather they are marginalised workers looking for a niche to survive in a system that systematically undermines them. Or a handful may become megastar celebrities who play a significant role in entertaining the masses. Moreover, many believe today that capitalist production is despoiling the environment at an alarming rate. I think there is some truth to this latter charge, although I also see talk of environmental Armageddon as exaggerated and a distraction from the main wrongs of our society.

These issues in combination (production for profit not human need) give production itself a bad name. Human essence, social labour, life's prime want, is reduced to being a wage plug, without a real say in the overall progression of society.

Rather than saving the planet (the current “left” mainstream zeitgeist) we need to focus more on how to liberate the social productive forces, human essence, in all their real power and beauty. A power and beauty which is obscured by the ugliness of capitalism.

NATURAL NATURE

The natural world is the world created by humans, who are part of nature, as well as the world that existed before humans. The natural world is not “green” insofar as that suggests a world not touched by humans. Such a world no longer really exists on Earth. In a post natural world (aka the anthropocene) our needs will be created more by what we make than the natural world that exists independently of what we make.

As society evolves our tastes, including our basic biological tastes, become more sophisticated: “the forming of the 5 senses is a labour of the entire history of the world” (source)

THE SCOPE OF MORAL THEORY

A moral theory has to somehow account for all human moral thinking, good and bad, angelic and evil, noble and perverse, optimistic and pessimistic. But Marx's moral theory is (intentionally?) thin. It does not claim or suggest that humans are any of essentially selfish, altruistic, competitive, fallen, vicious etc. Is this a feature or a bug? In my view Marx is right about the essentials but there is a lot of stuff that is not covered. Marx analyses the deep structure of capitalist society but there are important issues that lie more on the surface (eg. the dark and deep emotions such as love, grief, anger) that strongly motivate individual actions but are left hanging. Hence, many people find that other moral philosophers and novelists address their needs more directly.

UTOPIANS and OTHER ALTERNATIVES

Utopians make the error of promoting general moral principles in the abstract, without regard to the current real state of society, without assessing the social forces at play. They are not realistic. Mere moral persuasion in favour of a better society is inadequate / doesn't work.

There are many alternative moral theories. For example Plato (Iris Murdoch provides a modern interpretation), Stoic, Christian (various branches), Kantian, Utilitarian (Bentham and JS Mill provide different interpretations), feminism / women's liberation, Buddhism (meditation and mindfulness are currently popular), existentialism, libertarianism, animal liberation, Sufism (adopted by Doris Lessing after her disillusion with communism), pragmatism (Dewey, Putnam), the liberal Capabilities approach of Amartya Sen and Martha Nussbaum.

All of these need to be critically examined since what is correct only emerges clearly from a critique of such alternatives. At this stage I would say that none of these alternatives share with Marx the view that human essence is the conscious production of our existence / material life through social labour. Moreover, they tend to be indifferent to the analysis that the main current problems are generated by capitalism.

INDIVIDUALS and SOCIAL CLASS

Humans are self conscious, intelligent, purposive, active, self directed. But this doesn't mean we can negate the so called "external world" (only external to humans, who are a part of nature, so not really external to nature in that broader sense of the word) or history.

Human individuality (as distinct from herd or tribal mentality) emerges historically from the bourgeois revolution against feudal relations (when it was “natural” to obey a preordained superior such as a lord or king). Herds are not good at shopping, whereas individuals are. But just as individuality emerges strongly in the capitalist era, you would expect it to also change dramatically in a post capitalist society.

In class society, social class is a more important determiner of who we are than individuality as such. Individuals pick their personalities, interests, work etc. from what is available socially (including the cutting edge, futuristic and off beat, quirky trends) at the time. The idea that we are free, autonomous individuals is more part of capitalist mythology or ideology than reality.

HISTORY

Morality is historically contingent. What is moral in one historical period becomes immoral in another. The central issue is doing whatever is required to maximise the human flourishing of rich individuals in the given time and place.

For example, in the French revolution the rising bourgeois class overthrew feudal relations, got rid of divine rule by the King etc. In that historical period bourgeois right coincided with the needs of the proletariat as well. But at a later date the bourgeois class held things back, became reactionary, used social labour for their own ends, promoted an economic system which went through periodic crises and still does. At that point the revolution to continue human liberation and the liberation of the productive forces must be picked up by the proletariat, sooner or later.

Given the views expressed here about ontology (materialists need to deeply investigate reality) and history (morality is historically contingent) it follows that to work out the best moral - political actions requires some hard work. No one said it would be easy.

TRANSITION FROM CAPITALISM TO COMMUNISM (SOCIALISM)

The productive forces developing within bourgeois society create the material conditions (preconditions?) for the solution to the problem of the antagonism of the individuals social conditions of existence. Big is beautiful, not small is beautiful (the latter from EF Schumacher). Not because capitalism is beautiful but because big, centralised production prepares the way for socialism.

COMMUNISM

Marx is grounded, not utopian. In The German Ideology, Marx rejects the idea of communism as "an ideal to which reality will have to adjust itself", rather he sees it as "the real movement which abolishes the present state of things”

This is pretty much the opposite of what most people today believe about communism, that it is idealistic and unrealistic.

From a moral perspective the aim is to bring together social being (human existence as it is) with social essence (human existence as it ought to be). As the contradiction between the individual and the social diminishes then the need for morality to maintain social cohesion would also diminish. All the conditions for rich individuality would be met by society. Eventually, morality might disappear altogether. If everyone's needs were being met through the basic social structure then wouldn't concepts such as selfishness or altruism lose their meaning?

SOME THINGS MISSING FROM THIS ACCOUNT OF MARX'S MORAL THEORY

There are many important issues missing from both the theory and practice of Marxism in this account. I have a preliminary list but will leave that to another time. No doubt if you have read this far you are both interested in this topic and will have your own unanswered questions. This will require far more discussion.

REFERENCE:

I have done a lot of reading on this topic but won't attempt a detailed bibliography at this stage. But I will mention one reference which to me is a stand out, a PhD thesis by Vanessa Wills titled Marx and Morality (pdf 269pp) who has read and understood all of Marx IMHO.

the environment, capitalism, modernity and marx

Capitalism does harm the environment in some ways because it is a system that pursues profit before anything else. For instance, coal and other carbon based fuels will continue to be used by capitalism in general and developing countries (China, India, etc.) in particular as long as they remain cheaper than non carbon based alternatives.

It is difficult to work out the real state of the environment. This requires more scientific investigation by unbiased experts. They do exist but their voices tend to be drowned out by alarmists and deniers on global warming and other issues. It has become very difficult to sort out the reality since environmental issues have become heavily politicised. There is a litany of issues which require scientific investigation: climate system, ocean-acidification, ozone depletion, phosphorous levels, land use change, biodiversity loss, nitrogen levels, freshwater use, aerosol loading and chemical pollution. Nevertheless, there is no real option but to continue to make the effort.

As well as sometimes harming the environment, capitalism also improves the environment. eg. It is a huge environmental advance for humans to live in big cities with all that they offer compared with previous regimes such as hunter gatherer society. The built environment, planned and developed by humans, is a beautiful part of our modern environment. It seems reasonable to assume that even the latte drinking, dog walking Adam Bandt supporters in Fitzroy agree with this, in their actions at least, since they haven't moved to remote areas off the grid, yet.

Some authors make the distinction between modernity (good) and capitalism (bad or not so good): An Ecomodernist Manifesto. Modernity is all the great things developed by scientific – technological humans that enhance our lives. Civilisation, electricity, transport, cities, the internet etc.

The distinction between modernity and capitalism is a good one. But can they be decoupled so easily? We do live in a capitalist system and so more often than not the capitalist dog wags the modernity tail. This severely limits the ability of us moderns to do all sort of things, including improving and appreciating the environment. We would make a lot more progress if we replaced capitalism with a system not based on profit (Socialism → Communism)

But given that there is currently no mass movement in support of a socialist revolution it is far, far better to embrace capitalist creative destruction, warts and all, than the Deep Green alternative of throttling back on development in general to a zero growth state. This futile idealism would condemn the developing world to ongoing poverty and the developed world to intellectual poverty. The whole idea that we should cautiously huddle on the earth (light footprint) is a denial of what humans are, a social, tool making species who has progressively made scientific and technological breakthroughs which enable us to understand and control the natural world more and more. Certainly, we should not overestimate our knowledge. There are many things about nature that we don't understand. But the Deep Green philosophical stance that we should worship nature is looking backwards. Nature is powerful and magnificent. We should embrace that and strive to emulate it, not humbly worship it. See Tale of a Doomed Galaxy:

The civilization I’m imagining was smart enough not to stick around. They decided to simply leave the galaxy.

After all, they could tell the disaster was coming, at least a million years in advance. Some may have decided to stay and rough it out, or die a noble death. But most left.

And then what?

It takes a long time to reach another galaxy. Right now, travelling at 1% the speed of light, it would take 250 million years to reach Andromeda from here.

But they wouldn’t have to go to another galaxy. They could just back off, wait for the fireworks to die down, and move back in.

So don’t feel bad for them. I imagine they’re doing fine.

Forms of Green ideology and policies exist that totally distort the better ways to look at these questions. As a corrective it needs to be pointed out that the earth and humans are incredibly robust, not fragile. Humans are part of nature. We are social, tool making, future planning (teleological) animals. That is how we differ from other animals and in fact it makes us superior to other animals. There is no static balance in nature. Irreversible change has always been the real state of the natural world. See Alston Chase's In a Dark Wood: The Fight over Forests and the Myths of Nature where he critiques the biocentric viewpoints that "There is a balance of nature", 'that nature can be "healthy' or "unhealthy" ' in a similar sense to the human body being healthy or unhealthy, that "in the beginning all was perfect" (a Garden of Eden or Golden Age) and that "Nature is sacred".

It would be a huge error to follow some sections of Green ideology down an anti development or zero growth pathway. Technological risk taking, what we have always done, is an essential way for the human race to proceed: the proactionary principle:

The Proactionary Principle emerged out of a critical discussion of the widely used “precautionary principle” during Extropy Institute’s Vital Progress Summit I in 2004. The precautionary principle has been used as a means of deciding whether to allow an activity (typically involving corporate activity and technological innovation) that might have undesirable side-effects on human health or the environment. In practice, that principle is strongly biased against the technological progress so vital to the continued survival and well-being of humanity.

Understanding that we need to develop and deploy new technologies to feed billions more people over the coming decades, to counter natural threats from pathogens to environmental changes, and to alleviate human suffering from disease, damage, and the ravages of aging, those involved in the VP Summit recognized two things: The importance of critically analyzing the precautionary principle, and the formation of an alternative, more sophisticated principle that incorporates more extensive and accurate assessment of options while protecting our fundamental responsibility and liberty to experiment and innovate.

The precautionary principle, while well-intended by many of its proponents, inherently biases decision making institutions toward the status quo, and reflects a reactive, excessively pessimistic view of technological progress. By contrast, the Proactionary Principle urges all parties to actively take into account all the consequences of an activity—good as well as bad—while apportioning precautionary measures to the real threats we face, in the context of an appreciation of the crucial role played by technological innovation and humanity’s evolving ability to adapt to and remedy any undesirable side-effects.

While precaution itself implies using foresight to anticipate and prepare for possible threats, the principle that has formed around it threatens human well-being. The precautionary principle has become enshrined in many international environmental treaties and regulations, making it urgent to offer an alternative principle and set of criteria. The need for the Proactionary Principle will become clear if we understand the flaws of the precautionary principle.

In Essay on the Principle of Population (1798) Thomas Malthus claimed that exponential population growth was produced by God so that human beings would be forced to learn such virtues as abstinence and restraint. According to him, it would always be the case that population growth would outstrip the resources available to satisfy the needs of society, and thus it was not possible to improve society by increasing production, since the population would always increase to catch up with and eventually outstrip it. (Reference: Marx and Morality by Vanessa Wills, pp. 139-51 and 227)

Marx's criticisms of Malthus were (1) that Malthus blamed the poor for their poverty and recommended them to abstain from procreation, rather than blaming the real culprit, capitalism (2) Malthus believed that the productive forces would reach a ceiling beyond which they would not further increase.

The modern Green Malthusians also preach catastrophe arising from population increasing beyond what the Earth can support (see the litany above). Those who have challenged this Green orthodoxy such as Julian Simon (who won a bet against Paul Ehrlich) or Bjorn Lomborg (in The Skeptical Environmentalist) are often written off as right wingers because they support capitalist development. But we need to remember that Marx also supported capitalist development insofar as it liberated the productive forces which provided the potential for the needs of everyone to be met. His criticism of capitalism was that in the course of its development it shut down the productive forces due to periodic economic crisis arising from its internal dynamics. The argument to develop productivity to the maximum is a Marxist argument, not a right wing argument. The other part of Marx, which is not identified with right wing, is that distribution ought to occur by work under socialism or by need under communism.

Ursula Le Guin: "We live in capitalism. Its power seems inescapable ..."

Ursula Le Guin, author of my favourite novel, The Dispossessed.

“We live in capitalism. Its power seems inescapable. So did the divine right of kings. Resistance and change often begin in art, and very often in our art—the art of words.”

Role of PPPs in Transition

Guest post by Arthur Dent
PPP = Public Private Partnerships

A scenario for transition from capitalism with socialized investment following another Great Depression and its (im)plausibility is discussed elsewhere.

For present purposes those assumptions are as arbitrary as the selection of some hypothetical specific PPP infrastructure project to pitch to some hypothetical target audience.

The need that has not been acted on is investment having become generally paralysed by world economic crisis. Not just traditional infrastructure but all kinds of large scale fixed capital construction projects are needed.

The essence of transition from capitalism under such a scenario is that it is partially public and partially private.

PPPs would be used for all major fixed capital construction projects that are significant for planning resumption of economic growth and ending mass unemployment. Buildings and plant that were previously (not) being privately financed, by single enterprises or project finance, not just the closely related “utilities”. Public institutions would also initially be largely untransformed, so public procurement of a traditional public utility infrastructure facility by a public agency would be subsumed under PPP arrangements as just another private participant that happens to be a public agency.

Public financial and economic planning and management organizations would be involved either as sponsors or minor participants in many types of build, own and operate projects, often taking substantial financial positions in both debt and equity based on the expropriated funds they are now able to invest as well as making ordinary commercial PPP arrangements with private participants.

The relatively small amount of economic and management expertise fully supportive of transition available to an inexperienced government would be heavily focused on the preparation, procurement and contract management/implementation of PPPs. They would have to structure the contracts so the private participants use their know how to maximize the public benefit in their own commercial interests. This would be very difficult and error prone, but not as implausible as simultaneously taking over all existing large economic institutions without enough skills to actually manage them in the public interest.

The much wider role of PPPs requires much better resourced public institutions responsible for PPPs. The relatively small numbers of government decision makers with adequate skills must supervise and structure appropriate incentives to motivate, much larger number of employees and consultants recruited from the private sector for their know how, despite their lack of support for transition.

Currently known “best practices” for PPPs would be generally applicable. There is no point in listing them. But the assumption of quite different circumstances imply many new lessons could only be learned from experience with at least the following differences from the usual circumstances.

1. Much greater transparency and much less corruption would be imposed on both the public and private participants as part of the broader social changes involved in transition.
2. Greater flexibility for detailed renegotiations would be necessitated by the circumstances of economic crisis and the more dynamic situations arising from transition.
3. Political, foreign exchange and national macroeconomic risks (interest rates etc) would be exclusively borne by the public participants and corresponding contingent liabilities and hedging or insurance costs appear openly on the central balance sheets. The public institutions responsible for exchange rates and macroeconomic stability would be closely involved in understanding the financial flows and risks they are assuming and the prices they require for asuming those risks and any hedging arrangements they may be able to make separately. Both international and local private participants would not need to make separate judgments or their own hedging arrangements for particular projects but only apply the sovereign risk ratings assessed uniformly by their own trusted ratings agencies.
4. Land use and resource management public agencies would likewise manage and appropriately price the responsibilities for land acquisition, site and regulatory risks.
5. Design, operations, construction, completion and maintenance performance risks would be exclusively borne by the private parties directly responsible for each aspect with detailed incentives tailored to reward overperformance and penalize underperformance. They would be carefully separated according to the expected and actual costs and risks borne by the participants engaged in each aspect and related global, national and sectoral statistical indexes.
6. Allocation of upside and downside market risks for supply of inputs and sale of outputs would be significantly more complex since the expropriation of private wealth for public investment in PPPs was made necessary by lack of profitable investment outlets in the prevailing market conditions of economic crisis. The aspect for which each private participant is responsible must be commercially viable to that participant at the low competitive rates of return prevailing under crisis conditions. But the overall project need only be value for money to the public participants based on accepting an even lower (or even negative) return on their investment in order to achieve planned economic growth and rapid recovery from mass unemployment.

Transition from Capitalism

Guest post by Arthur Dent

This article is a placeholder for an introduction to a series of articles on various aspects of economic policy to be advocated before, and implemented during, the early stages of, a transition from capitalism in advanced capitalist countries under various different possible scenarios.

I am nowhere near ready to write any such articles, even as tentative drafts, so I cannot write an actual introduction.

Meanwhile one of the courses I am studying to become able to write such tentative drafts is a MOOC on “Public Private Partnerships” by the World Bank. 

This requires as a final project for the policy and procedures track, publication of a “digital artefact” plus a description of the target audience in one hundred words.

I have published as my “digital artefact” the eight hundred word article on “Role of PPPs in Transition”:

The key requirement is:

“Topic: Identify an infrastructure need that could be developed as a PPP. This could be a project that is in process of development, one on a country’s PPP project lists, or a need that has not been acted on. Think about the key facts or ideas you wish to convey by answering the following questions:

• What is the infrastructure problem that the PPP is trying to solve?
• What services are to be provided and are these services affordable?
• What are the reasons that the private sector would want to participate?
• How should these risks be allocated? Consider the country context in judging the risks and who should take them.”

I have identified as a “need that has not been acted on” the general paralysis of investment resulting in prolonged mass unemployment in another Great Depression worse than the 1930s following a financial crisis worse than 2008.

Such a worse financial crisis than 2008 does not seem to be entirely implausible since the last one seems to have been merely postponed rather than resolved by the extraordinary measures taken. Nor does another Great Depression worse than the 1930s seem entirely implausible following such a worse financial crisis.

The need is for all the infrastructure required to resume economic growth, not just traditional infrastructure like existing public utilities. The problem that has to be solved is that there are no profitable outlets for private investment in crisis conditions so investment must be socialized rather than left up to private investors.

This would require some form of state capitalism either as a transition back to “normal” private capitalism or as a transition away from capitalism.

The absence of any significant left in advanced capitalist countries, at least in the english speaking ones I am familiar with, makes any transition away from capitalism seem completely implausible. But then the continued absence of any significant left under the conditions of prolonged mass unemployment and economic paralysis seems even more implausible.

There are already important changes in the political climate of countries like Greece, Spain and Iceland that could become precursors of something much bigger. These countries are peripheral rather than central to the advanced capitalist world, but they are part of it and they are already facing serious economic and political crisis situations.

So I am writing for the target audience described at the end of this introduction, in the conceivable scenario described below.

The services to be provided are not traditional public utilities but the ending of prolonged mass unemployment through resumption of economic growth.

These services are affordable because prolonged mass unemployment is not affordable and both labor and capital are cheap in depression conditions. What is missing is profitability, not affordability.

The private sector would not particularly want to participate, but would not have better options available. Corporations would still want whatever contracts are available at the best returns they can competitively get for the benefit of their shareholders, whether or not some of their shares that used to belong to wealthy private individuals now belong to public institutions. Board members and senior managers who no longer wanted to participate because their incentives had been expropriated would be replaced by board members and managers willing to work for the owners, old and new, under the incentives currently being offered.

But the social system would not yet have been changed and risks and incentives would still have to be allocated in the context of an advanced capitalist country in crisis that is merely beginning a transition from capitalism, not one that has completed such a transition. So many of the same principles would have to still apply and new ones could only be understood and evolved over time.

Scenario

Any transition from capitalism in advanced capitalist countries as a result of another Great Depression would involve:

1. Inexperienced left governments required to urgently get the economy moving again and end mass unemployment because previous governments, whether claiming to be left or right, had been unable to do so.
2. Some level of rapid expropriation of privately owned wealth that was immobilized by the crisis now made available for socialized investment in new fixed capital construction projects to get the economy moving again and absorb unemployment.
3. The day after a change in government would be similar to the day before. The same social relations based on money, wage labor and capital, the same social institutions such as globalized large corporations, and national and local large, medium and small enterprises and bureaucratic government departments and agencies, and the same economic paralysis.
   
   To simplify things I further assume a “simple” scenario with:
   
   
4. Expropriation narrowly targeted to take all and only the excess wealth of the top 1% of nationals.
5. This results in substantial investment funds becoming available to governments starting transition but most of the capital in each such country would still be held privately and by foreigners.
6. The most important capitalist countries such as the USA, China, Japan, and Germany would not be the first to start making the transition. But international financial and investment flows as well as trade continues.
7. Many top layers of management in most social institutions would be quite hostile to transition but there are enough supporters capable of supervising or replacing them.

Some of these assumptions may not look very plausible. But advocating measures based on such a “simple” case, would place the responsibility for different policies firmly with those who might prevent the policies discussed for this scenario by resorting to the breakup of international financial investment and trade flows, and civil and international wars.

Target Audience

I am studying economics, finance and other subjects to understand how capitalism works and become able to propose economic policies for transition from capitalism in advanced capitalist countries. Currently there is no significant left movement in such countries, but I am drafting tentative ideas for a wider future audience of prospective government policy makers expected when a financial crisis like 2008 eventually becomes another Great Depression like the 1930s. They are not concerned with some specific PPP project. I am conveying one possible policy option for managing partially socialized and partially still private investment projects using PPPs.

Inequality is increasing

Whatever happened to Occupy Wall Street?

• Almost half of the world’s wealth is now owned by just one percent of the population.
• The wealth of the one percent richest people in the world amounts to $110 trillion.
• That’s 65 times the total wealth of the bottom half of the world’s population.
• The bottom half of the world’s population owns the same as the richest 85 people in the world.
• Seven out of ten people live in countries where economic inequality has increased in the last 30 years.
• The richest one percent increased their share of income in 24 out of 26 countries for which we have data between 1980 and 2012.
• In the US, the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009, while the bottom 90 percent became poorer.

- source, Oxfam

the strengths and weaknesses of capitalism

A recent article by Bill and Melinda Gates (Three Myths on the World's Poor) gives the impression that capitalism is an unparalleled success story:

In our lifetimes, the global picture of poverty has been completely redrawn. Per-person incomes in Turkey and Chile are where the U.S. was in 1960. Malaysia is nearly there. So is Gabon. Since 1960, China's real income per person has gone up eightfold. India's has quadrupled, Brazil's has almost quintupled, and tiny Botswana, with shrewd management of its mineral resources, has seen a 30-fold increase. A new class of middle-income nations that barely existed 50 years ago now includes more than half the world's population.

And yes, this holds true even in Africa. Income per person in Africa has climbed by two-thirds since 1998—from just over $1,300 then to nearly $2,200 today. Seven of the 10 fastest-growing economies of the past half-decade are in Africa.

Here's our prediction: By 2035, there will be almost no poor countries left in the world.

This reminds me of a stunning video by Hans Rosling, the Director of the Gapminder Foundation which shows how much the wealth of the world has increased in the past 200 years:
You Tube version

brown – Europe
red – Asia
green – Middle East
blue – Africa
yellow – Americas

Most of the commentaries on the web praise this video to the skies. It deserves praise for its overall assessment of the progress of capitalism but there is also a tendency to fast forward through the bad times.

In 1810 the wealthiest countries were the UK and the Netherlands. The average life expectancy of every country was below 40.

Enter the industrial revolution and the wealth and life expectancy begins to dramatically improve for the countries which do industrialise. This is true although there is no mention of the appalling working conditions, the very long working hours, the child labour in the emerging factories of Britain and elsewhere. The birth pangs of capitalism led to major upheavals in 1848, the shortening of the working day, the Factory Acts, etc.

As the wealth of countries increases then so does the gap between rich and poor countries. Rosling does mention this (at 2:35). It also needs to be emphasised that the scale he is using on the horizontal wealth axis is logarithmic, showing the per annum categories of $400 (roughly one dollar per day), $4000 ($10 per day) and $40,000 ($100 per day). If he had used a linear scale then the gap between rich and poor countries would be far more pronounced. The gap between the richest and poorest countries taken from the closing and opening screens of this video is at least 100 times today compared with less than 10 times in 1810

He does mention the catastrophe of WW1 but then fast forwards through The Great Depression and WW2. It is far easier to fast forward through the bad times than live through them or explain them.

His focus is on post 1948, the boom years of capitalism.

By 1985 even in the poorest country, Mozambique on just $366 per year, the average lifespan was three years higher than Britain in 1810.

Wealth has increased but so has inequality. Rosling visually extracts Shanghai out of China towards the end, showing that it is similar in wealth to Italy. Then he extracts the poor inland province, Guizhou, and compares it to Pakistan. Finally, he shows how the even poorer rural part of Guizhou has a wealth index similar to Ghana, Africa. Certainly in this section there is no brushing over the real world problem of inequality in China.

He finishes on an optimistic note. The gap between the rest and the west is now closing. In the future it is possible that everyone can make it to the healthy and wealthy corner with more aid, trade, green technology and peace. Rosling slips into an optimistic version of political correctness in this parting message.

Some people are optimistic about the future of capitalism because of its productivity; others are pessimistic because of its inequality, anarchy of production, environmental destruction, and alienation . We need to see both sides of this picture. In evaluating the rosy picture of Gates and Rosling, I would use three criteria: standard of living, inequality and stability.

The overall standard of living has increased dramatically. Correct, capitalism has delivered in this respect.

Inequality has increased too. This is totally ignored by Bill and Melinda. It is mentioned by Rosling in places but the logarithmic wealth scale distorts the huge and growing gap here

Stability: Apart from the post war boom period (relatively stable and prosperous) capitalism has been an unstable system which can’t seem to avoid periodic economic crises. Over the next few years we will see how acute this problem will become. I'm really uncertain. I don't think anyone fully understands the inner dynamics of capitalism and its tendency to crisis. That elephant is still in the room.

capitalism kills

Suicide note left by the 77 yo Greek pensioner who shot himself dead outside parliament on Wednesday morning:

 "The government has annihilated all traces for my survival, which was based on a very dignified pension that I alone paid for 35 years with no help from the state.

 "And since my advanced age does not allow me a way of dynamically reacting... I see no other solution than this dignified end to my life, so I don't find myself fishing through garbage cans for my sustenance."
- Greek unrest after pensioner suicide beside parliament

Update: 9th April Amazing. Not only does capitalism kill but the capitalist media censored out the identification of the enemy and the call to arms in the above suicide note. So someone commits suicide and leaves a protest note. The capitalist media edits the contents. It's upsetting that we don't have a free press. But not only is it not free it also slimy and manipulative and can't even honour the final wishes of its own victims. The full message reads:

The Tsolakoglou government has annihilated all traces for my survival, which was based on a very dignified pension that I alone paid for 35 years with no help from the state.

And since my advanced age does not allow me a way of dynamically reacting (although if a fellow Greek were to grab a Kalashnikov, I would be right behind him), I see no other solution than this dignified end to my life, so I don’t find myself fishing through garbage cans for my sustenance.

I believe that young people with no future, will one day take up arms and hang the traitors of this country at Syntagma square, just like the Italians did to Mussolini in 1945. source

BBC slimy version
NYT slimy version

the roots of socialism grow out of the perversions of capitalism

Joe Scientist comes face-to-face with the scientific publication business

Land of the Free, Home of the Poor

The extent of economic inequality is astonishing and underestimated by nearly everyone. PBS NewsHour’s Land of the Free, Home of the Poor with Paul Solman is brilliant and a must watch.

Over 90% of people interviewed underestimated the extent of wealth disparity picking the Swedish wealth profile as the one they thought represented America. Differences b/w Democrat and Republican voters were insignificant.

Reality:

• Top 20% possess 84% of the wealth 
• Second 20% possess 11% of the wealth 
• Third 20% possess 4% of the wealth 
• Fourth 20% possess 0.2% of the wealth 
• Fifth 20% possess 0.1% of the wealth 

In the last 10 years most of the change has been a dramatic increase in the wealth proportion of the top 0.1%

Warren Buffet:

Yes, there has been a class war in the United States and my class, the super rich, have won

Towards the end Richard Freeman points out that the extent of inequality in the USA matches that of China, still a mainly peasant society, and African countries.

Another reference which makes some similar points and also emphasises that across the political spectrum Americans desire a more equal society than the one they currently live in: Building a Better America—One Wealth Quintile at a Time

First, respondents dramatically underestimated the current level of wealth inequality. Second, respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution. Most important from a policy perspective, we observed a surprising level of consensus: All demographic groups—even those not usually associated with wealth redistribution such as Republicans and the wealthy—desired a more equal distribution of wealth than the status quo.

crises of capitalism (David Harvey)

This talk contrasts five different mainstream theories of the economic crisis with David Harvey's Marxist analysis. He build the talk around the rhetorical device of a question which the Queen asked the London School of Economics: How come you guys didn't see the crisis coming?

The very entertaining RSA ( (Royal Society for the encouragement of Arts, Manufactures and Commerce) artistic animation enhances the presentation considerably.

ethical consumption debunked (Zizek)

I love the way this Slavoj Zizek talk is animated by RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) and some of his argument about how post 1968 capitalism offers redemption for the consumer through ecological sound purchases is spot on, too.

Some snippets, just phrases:

... the anti consumerist duty to do something for the environment is included (in your purchase)

Starbucks coffee ethics ... good coffee karma

... through a consumerist act you buy your redemption of being a consumerist

He then quotes extensively from Oscar Wilde in a polemic against all charity. Some of that was challenging but overall I wasn't so supportive of that section. It is one thing to expose phony "ethical consumerism" but I don't think all efforts to reform the system from within are misguided. "One laptop per child" is a good example of reform from within initiated by philanthropists which empowers the recipients.

money, liberty, credit, crisis

John Weeks has three great quotes on his home page which sums up the spirit of our times:

"When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall…dare to assess the money-motive at its true value. The love of money as a possession…will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease ..." [J M Keynes, ‘The Future’, Essays in Persuasion 1931]

"Unhappy events…have retaught us two simple truths about the liberty of a democratic people. The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it comes stronger than their democratic state itself. That, in its essence, is fascism - ownership of government by an individual, by a group" [Franklin D Roosevelt, message to the US Congress 1938]

"In a system of production, where the entire continuity of the reproduction process rests upon credit, a crisis must obviously occur — a tremendous rush for means of payment — when credit suddenly ceases and only cash payments have validity" [Karl Marx, Capital III, p 490]

growing wealth disparity

I regard growing wealth disparity as uncontroversial and an indictment of the system which produces such disparity. I'll just quote an extract from David Harvey's Limits to Capital which provides substantial evidence for growing wealth disparity:

"According to the UN by the mid 1990s the net worth of the 358 richest people in the world was then found to be equal to the combined income of the poorest 45 per cent of the worlds population - 2.3 billion people. The world's 200 richest people more than doubled their net worth in the 4 years to 1998, to more than $1 trillion, so that the assets of the world's top three billionaires were more than the combined GNP of all least developed countries and their 600 million people.... The share of the national income taken by the top 1 percent of income earners in the US more than doubled between 1980 and 2000 while that of the top 0.1 percent more than tripled. The income of the 99th percentile rose 87 percent between 1972 and 2001 while that of the 99.9th percentile rose 497 percent. In 1985 the combined wealth of the Forbes 400 richest people in the US was $238 billion with an average net worth of $600 million, adjusted for inflation. By 2005, their average net worth was $2.8 billion and their collective assets amounted to $1.13 trillion - more than the GDP of Canada. Much of this shift has been due to rapidly rising rates of executive compensation. In 1980, the average chief executive made about $1.6 million a year in today's dollars but by 2004 this had risen to $7.6 million." (p. xi, Intro to the 2006 Verso Edition)

I quoted an extract of Harvey's figure on a reddit thread and received this reply from mrhymer:

"Wealth is not a finite pool that all humans pull from. There is no evidence that if the millionaire in Dubai releases his wealth back into the wild that it will ever find the hand of the poor man in Bangladesh. So studies highlighting the gaps and distributions are foolish post hoc, ergo proctor hoc arguments."

For a more detailed outline of Harvey's views where he does connect the increasing of wealth disparity with the evolution of the capitalist economy into neo liberalism try this interview. I don't agree with all of Harvey but his analysis of the effects of neo liberalism seems sound to me.

capitalism: for and against

I responded to LinuxLiberty on a reddit thread (source), which began with a misleading quote from John Maynard Keynes.

LinuxLiberty:
It is kind of amazing that capitalism even needs to be defended given the enormous amount of prosperity it has brought to the world. While I won't say the U.S. is an example of free market, in particular like the rest of the world it has a Marxist banking system that repeatedly fails, but it has brought enormous amount of prosperity to even poor people. Look even most poor people live in a house an apartment that has indoor plumbing, electricity, AC, a color television, a DVD player, a phone, a computer with Internet, and many poor people own cars. If you own all of those things that puts you in the top 10% of the rest of the world. The average person in China can't even afford a color television much less a car.

The biggest problem with capitalism is it turns people into spoiled brats who can't even comprehend what a rough life or poverty is.

billkerr:
It's true that capitalism has been the most productive system to date. However, there are also some problems with it, which I would summarise as follows:

• it can't avoid major economic crisis, eg. the last Great Depression and the next one, soon
• it has deformed or crippled the nature of work, especially the way factories operate
• the wealth disparity b/w rich and poor continues to increase
• it promotes the unsustainable dream that you can create more money from money