Capitalism

How The Middle Class Lifestyle Became Unaffordable

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OfTwoMinds  May 7 2014

CharlesHughSmithThere are four structural drivers behind the soaring costs of the middle class lifestyle.

Why have the costs of a middle class lifestyle soared while income has stagnated?Though it is tempting to finger one ideologically convenient cause or another, there are four structural causes to this long-term trend:

1. Baumol’s Cost Disease
2. Systemic headwinds to the current version of capitalism
3. Dominance of global corporate capital
4. Financialization

The key take-away here is that the first two causes are structural and cannot be changed by passing a law or funding another state bureaucracy. Though many believe they can tax global corporate capital to eliminate wealth inequality, capital is mobile and will move to where it can expand. The dominance of money in politics also means that the political machinery is for sale to the highest bidder, which just so happens to be global capital.

Since financialization rewards both capital and the central state that depends on tax revenue, reversing financialization politically is a non-starter.

No wonder the middle class is evaporating. These trends are far more powerful than the proposed solutions.

Let’s start with Baumol’s cost disease, named after economist William J. Baumol, whose work with William G. Bowen I described in Productivity, Baumol’s Disease and the Cliff Just Ahead (December 8, 2010).

Baumol examined the relationship between productivity and cost, and found that productivity in labor-intensive services (for example, nursing and teaching) had intrinsically lower rates of productivity increases than goods-producing industries. Continue reading →

Statism And The Illusion Of Choice

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C4SS | February 1 2013

“Power is not to be conquered, it is to be destroyed. It is tyrannical by nature, whether exercised by a king, a dictator or an elected president. The only difference with the parliamentarian ‘democracy’ is that the modern slave has the illusion of choosing the master he will obey. The vote has made him an accomplice to the tyranny that oppresses him. He is not a slave because masters exist; masters exist because he elects to remain a slave.” – Jean-François Brient

The state is that entity which claims a legitimate monopoly on the use of violence in a given territory, according to Max Weber. The Hobbesian, Rousseauvian, Lockean perspectives are that the state arose from a world of chaos by social contract that vested a ruling class with a monopoly on violence (for the good of the people, of course).

The funny thing is, nobody can point to a point when the modern state arose. Perhaps it was a place like Çatalhöyük (ca. 7500 BC) or Sumer (ca. 2900 BC)—where a stratified society was structured on the basis of might. The earliest monarchies, empires, and republics—they are all essentially based in violence.  Inalienable rights were unheard of – if you blasphemed God (or one of his temporal bureaucrats in the Vatican) within the Holy Roman Empire, you could be excommunicated and anyone could kill you without reprisal. Government is rule by some men [sic] over others, nothing more. So is ours—which, let the record show, was built out of slave labor. In some sense, it still is.

Voters place their hope in God-Kings called Presidents, expecting sociopaths to lift them out of servitude.

One feature unique to states is taxation, or the forcible extraction of property to be used in a way that the victim would not use themselves. It is the only entity that does this. Taxation is theft, everywhere and always. Goods and services like roads, schools and medical care can be and are best provided by the market. The state has no incentive to provide a quality product because it has no competitors. Capital intensive projects are not better handled by the state due to diffusion of responsibility and bureaucratic opacity. Taxation is extortion at gunpoint, a vestige of tribute paid by a subservient group to conquering armies, according to David Graeber, in his 2011 treatise Debt: The First 5,000 Years.

The only way we justify taxation is to use it to claw back the monopoly profits “earned” (stolen) by the class that has taken control of the machinery of the state (capitalists). But redistribution does not address the root of the problem: state-secured privilege conferred to the politically connected capital class. Capitalism is not to be conflated with free markets, which are wonderful institutions that have existed throughout human history.

Although controversial, the present scheme, Capitalism, has only been around since the Early Modern Period. Capitalism is defined by Gary Chartier in Markets Not Capitalism as “a symbiosis between big business and government, where the workplace is ruled by an individual called a boss.” It is not inevitable that we should live in a system where there are more empty houses than homeless people, or that there can be such a thing as a permanently impoverished working class.  Voters place their hope in God-Kings called Presidents, expecting them to lift them out of servitude. The funny thing is, the rulers are drawn from the same elite class that holds essentially the same ideology as the prior masters. There are exceptions – Presidents who grew up poor, but they became wealthy prior to their inauguration and executed policies that favor the elite. One cannot become president without selling out to corporate interests because of campaign financing. Insanity is doing the same thing repeatedly and expecting different results.

What about the poor?

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Global Elites Are Confused, Reactive, And Sinking Into A Quagmire Of Their Own Making

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William I. Robinson | Al Jazeera
November 30 2011

OPINION | Santa Barbara, CA – As the crisis of global capitalism spirals out of control, the powers that be in the global system appear to be adrift and unable to proposal viable solutions. From the slaughter of dozens of young protesters by the army in Egypt to the brutal repression of the Occupy movement in the United States, and the water cannons brandished by the militarised police in Chile against students and workers, states and ruling classes are unable are to hold back the tide of worldwide popular rebellion and must resort to ever more generalised repression.

Simply put, the immense structural inequalities of the global political economy can no longer be contained through consensual mechanisms of social control. The ruling classes have lost legitimacy; we are witnessing a breakdown of ruling-class hegemony on a world scale.

To understand what is happening in this second decade of the new century we need to see the big picture in historic and structural context. Global elites had hoped and expected that the “Great Depression” that began with the mortgage crisis and the collapse of the global financial system in 2008 would be a cyclical downturn that could be resolved through state-sponsored bailouts and stimulus packages. But it has become clear that this is a structural crisis. Cyclical crises are on-going episodes in the capitalist system, occurring and about once a decade and usually last 18 months to two years. There were world recessions in the early 1980s, the early 1990s, and the early 21st century.

Structural crises are deeper; their resolution requires a fundamental restructuring of the system. Earlier world structural crises of the 1890s, the 1930s and the 1970s were resolved through a reorganisation of the system that produced new models of capitalism. “Resolved” does not mean that the problems faced by a majority of humanity under capitalism were resolved but that the reorganisation of the capitalist system in each case overcame the constraints to a resumption of capital accumulation on a world scale. The crisis of the 1890s was resolved in the cores of world capitalism through the export of capital and a new round of imperialist expansion. The Great Depression of the 1930s was resolved through the turn to variants of social democracy in both the North and the South – welfare, populist, or developmentalist capitalism that involved redistribution, the creation of public sectors, and state regulation of the market.

Globalisation and the current structural crisis

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America’s Descent to Depravity

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By Prof. John Kozy | Global Research
October 20, 2011

The Protestant ethic once defined the American character. It was held to be responsible for the success of Capitalism in Northern Europe and America by sociologists, but the Protestant ethic and Capitalism are incompatible, and Capitalism ultimately caused the Protestant ethic to be abandoned.

CapitalismA new ethos emerged that the governing elite completely misunderstands. It is the ethos of the “big break,” the “jackpot,” the “next big idea.” The slow and deliberate road to success is now anathema. Coming up with the next big commercial idea is the new model of the American dream. All that matters is the money. Given that attitude, few in America express moral concerns. Wealth is its own reward; it’s even worth destroying ourselves for. And if we haven’t done it yet, we surely soon will.

I suspect that most people would like to believe that societies, no matter how base their origins, become better over time. Unfortunately history belies this notion; societies have often grown worse over time. The United States of America is no exception. It was not benign at its origin and has now descended to a region of depravity seldom matched by even the worst nations of history.

Although it is impossible to find hard numbers to prove that morality in America has declined, anecdotal evidence is everywhere to be seen. Almost everyone can cite situations in which the welfare of people was sacrificed for the sake of public or private institutions, but it seems impossible to cite a single instance of a public or private institution’s having been sacrificed for the sake of people. If morality has to do with how people are dealt with, one can legitimately ask where morality plays a role in what happens in America? The answer seems to be, “Nowhere!” So what has happened in America to account for the current epidemic of claims that morality in America has collapsed? Well the culture has changed drastically in the last half century, that’s what.

Once upon a time in America, the American character was defined in terms of what was called the Protestant Ethic. The sociologist, Max Weber, attributed Capitalism’s success to it. Unfortunately Max was lax; he got it wrong, completely wrong. Capitalism and the Protestant ethic are inconsistent with each other. Neither can have been responsible for the other.

The Protestant (or Puritan) ethic is based upon the notion that hard work and frugality are two important consequences of being one of Christianity’s elect. If a person is hard working and frugal, s/he is considered to be one of the elect. Those beneficent attributes, it was believed, made Americans a more industrious people than people elsewhere (although Europe’s Protestant societies were considered a close second while Southern Europe’s Catholic peoples were considered slothful.) Some now claim that we are witnessing the decline and fall of the Protestant ethic in Western societies. Since the Protestant ethic has a religious root, the decline is often attributed to a rise in secularism. But that case is considerably easier to make in Europe than in America where Protestant fundamentalism still has a huge following. So there must be some other explanation for the decline. Nevertheless, the increase in secularism has led many to claim that secularism has destroyed religious values along with the moral values religion teaches. There’s another explanation.

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