Article 43


Sunday, May 13, 2012

What Capitalists Don’t Know


Without Democracy, Capitalism Dies

By Craig Barnes
The Moderate Voice
May 11, 2012

In the 1990s renowned political scientist and author Ben Barber wrote in Jihad vs McWorld that global capitalism was at war with democracy. He was right, of course, and the intensity of that war has only increased since then. Global corporations are battling democracy’s environmental regulations, taxation, labor laws, legislation aimed at fairness or income equality. They are battling democracy’s concern for the long-term survival of community or any values more human than economic.

Emblematic of the global assault is the massive campaign by Canadian oil and gas corporations to construct a transcontinental pipeline across the American heartland regardless of local environmental consequences. Emblematic, again, are the mining corporations suing Ecuador in the WTO to open up that countrys rivers, forests and indigenous landscape to destruction. Emblematic is the 2005 exemption of “fracking” from the U.S. Clean Water Act resulting in millions of gallons of poisoned waste water, allowing global corporations like Halliburton, (headquartered in Dubai), to override the interests of local American governments, farmers, ranchers and cities. Emblematic is Wal-MartԒs aggressive activity in Mexico, consciously subverting the rule of law. Democracy is not strong in Mexico; Wal-Mart has not made it stronger.

A symbol of the global war is in that one five-story building in the Cayman Islands which is the address of more than 18,000 corporations. The Caymens do not levy income taxes. So all the corporations that call that home are opting out of their responsibilities in the U.S.. Apple, Google, and Bank of America are exemplars. They say that they are simply following the tax code and being headquartered in the Caymens is not illegal. Thats right. But they are also turning their backs on an American society that gave them educated workers, roads and bridges, science, health care, and above all, courts and the rule of law. What these corporations do not say is that they spent millions lobbying the U.S. Congress to make tax havens legal. They have made it legal but they have not made it right.

It is clear that these offshore havens create a crisis for democracy by squeezing the money out of government. What may be less clear is that these legislated special privileges also create a crisis for capitalism. In the very short term capitalism may not look like it is in trouble: Major corporations are reporting record profits. Bonuses on Wall Street in 2010 exceeded $90 billion. The Dow Jones in 2012 has been mostly above 13,000. Wall Street appears to be healthy. A Republican-led U.S. House of Representatives thinks it will get even healthier if we just eliminate all government regulations.

Never was an elite in greater delusion. Predatory capitalism is killing the middle class goose that lays the golden egg. That’s the first danger. Secondly, it is unselfconsciously driving toward unlimited exponential growth that is producing climate change which eventually will lead to social and economic chaos. In the longer term therefore capitalism is killing the eco-system that makes golden geese possible. Finally, in both short and long terms capitalisms oligarchs and supporters in Congress are fixated on a flimsy free market doctrine. In sum, the crisis of capitalism is created by the fact that today’s oligarchs still understand the world in terms appropriate for the agrarian 18th century, are opposed to regulation as if they were combatting a revolution of the proletariat, and their theoretical doctrine is to return to the simplicity of corporate life in times when monopolies were granted by kings.

The result is that todays 1% are squeezing the blood out of the middle class, creating conditions of predictable eco collapse, and have no doctrine more sophisticated than Ayn Rand. But these, even combined, are not even the greatest danger that capitalism faces. The even greater danger to capitalism is plutocracy’s blindness toward the advantages that come from democracy. These are advantages in innovation, mobility, creativity, and productivity that all arise with popular government. Oligarchs have missed this point entirely. This month The New York Times carries a quote from a former Bain Capital associate of Mitt Romneys who says, quite literally, ғAt base, having a small elite with vast wealth is good for the poor and middle class. He could be an English aristocrat on the eve of the American Revolution.

What the Bain Capital investor and the rest of the elite do not seem to understand is how much he and they depend upon democracy. A prosperous economy requires reliability in contract, truth in science and medicine, widespread, popular education, and nonviolent processes of change. Without these, markets shrink, innovation is endangered, mistrust and corruption replace nonviolent process, and plutocrats themselves become insecure. For examples, look anywhere in the non-democratic world. Look at what is happening in China this month. Bo Xi Lai’s fall, and the power struggle in China that it represents, is no different than the fall of the Caesars, the Borgias, the Stewarts or the Bourbons. Insider power struggles, wrapped in secrecy and murder, rumors of pay offs and spying by one aristocrat upon another, are the hallmark of medieval Europe and still today of Russia, Central Asia, and Latin America, to say nothing of China.

Undermining democracy as the plutocrats seem won’t to do undermines all values of equality and mutuality and, without these as a restraint, power concentrates, feudalism creeps back, plutocracy takes over and capitalism is itself endangered. Without democracy, the narrative to expect is like that of the Caesar’s killing the Republic in Rome, or the Medicis suffocating the Republic in Florence, or communists stamping out the people’s revolution in 20th century Russia. They all tried democracy a little bit. But they then slid into plutocracy and cut themselves off at the knees.

We therefore live in a time of two crises, one of democracy, another of capitalism. They are intertwined. The solution to the democracy crisis is probably the only long lasting solution for the capitalists. Apparently, most corporate leadership does not understand this. Unfortunately, without that understanding todays oligarchs are apt to bring both down.

Craig Barnes is the author of Democracy At The Crossroads, Princes, Peasants, Poets and Presidents Struggle for (and against) the Rule of Law. His website is HERE.



For U.S. Workers, Global Capitalism Fails to Deliver

By Chrystia Freeland
April 14, 2011

Global capitalism isn’t working for the American middle class. That isnt a headline from the left-leaning Huffington Post, or a comment on Glenn Beck’s right-wing populist blackboard. It is, instead, the conclusion of a rigorous analysis bearing the imprimatur of the U.S. establishment: the papers lead author is Michael Spence, recipient of the Nobel Prize in economic sciences, and it was published by the Council on Foreign Relations.

Mr. Spence and his co-author, Sandile Hlatshwayo, examined the changes in the structure of the U.S. economy, particularly employment trends, over the past 20 years. They found that value added per U.S. worker increased during that period - 21 percent for the economy as a whole, and 44 percent in the tradeable sector, which is geek-speak for those businesses integrated into the global economy. But as productivity soared, wages and job opportunities stagnated.

The take-away is this: Globalization is making U.S. companies more productive, but the benefits are mostly being enjoyed by the C-suite. The middle class is struggling to find work, and many of the jobs available are poorly paid.

Heres how Mr. Spence and Ms. Hlatshwayo put it: “The most educated, who work in the highly compensated jobs of the tradeable and nontradeable sectors, have high and rising incomes and interesting and challenging employment opportunities, domestically and abroad. Many of the middle-income group, however, are seeing employment options narrow and incomes stagnate.”

Mr. Spence notes the benefit to consumers of globalization: “Many goods and services are less expensive than they would be if the economy were walled off from the global economy, and the benefits of lower prices are widespread.” He also points to the positive impact of globalization, particularly in China and India: “Poverty reduction has been tremendous, and more is yet to come.”

Mr. Spence’s paper should be read alongside the work that David Autor, an economist at the Massachusetts Institute of Technology, has been doing on the impact of the technology revolution on U.S. jobs. Mr. Autor finds that technology has had a polarizing impact on the U.S. work force it has made people at the top more productive and better paid and hasn’t had much effect on the hands-on jobs at the bottom. But opportunities and salaries in the middle have been hollowed out.

Taken together, heres the big story Mr. Spence and Mr. Autor tell: Globalization and the technology revolution are increasing productivity and prosperity. But those rewards are unevenly shared - they are going to the people at the top in the United States, and enriching emerging economies over all. But the American middle class is losing out.

It may seem surprising that it takes a Nobel laureate and sheaves of economic data to reach this conclusion. But the analysis and its provenance matter, because this basic truth about how the world economy is working today is being ignored by most of the politicians in the United States and denied by many of its leading businesspeople.

Consider a recent breakfast at the Council on Foreign Relations that I moderated. The speaker was Randall Stephenson, chief executive of AT&T.

One of the Council of Foreign Relations members in the audience was Farooq Kathwari, the chief executive of Ethan Allen, the furniture manufacturer and retailer. Mr. Kathwari is a storybook American entrepreneur. He arrived in New York from Kashmir with $37 in his pocket and got his start in the retail trade selling goods sent to him from home by his grandfather.

He asked Mr. Stephenson: Over the last 10 years, with the help of technology and other things, we today are doing about the same business with 50 percent less people. WeӒre talking of jobs. I would just like to get your perspectives on this great technology. How is it going to overall affect the job markets in the next five years?

Mr. Stephenson said not to worry. “While technology allows companies like yours to do more with less, I dont think that necessarily means that there is less employment opportunities available. It’s just a redeployment of those employment opportunities. And those employees you have, my expectation was, with your productivity, their standard of living has actually gotten better.”

Mr. Spence’s work tells us that simply isnt happening. “One possible response to these trends would be to assert that market outcomes, especially efficient ones, always make everyone better off in the long run,: he wrote. “That seems clearly incorrect and is supported by neither theory nor experience.”

Mr. Spence says that as he was doing his research, he was often asked what market failure was responsible for these outcomes: Where were the skewed incentives, flawed regulations or missing information that led to this poor result? That question, Mr. Spence says, misses the point. Multinational companies, he said, are doing exactly what one would expect them to do. The resulting efficiency of the global system is high and rising. So there is no market failure.

Mr. Spence is telling us that global capitalism is working, but that the American middle class is losing out anyway.

Mr. Spence admits he has no easy answers. American politicians are focused on a budget debate that is superficial, premature and ultimately about something pretty easy to figure out. Instead, we should all be working on the much bigger problem of how to make capitalism work for the American middle class.


Posted by Elvis on 05/13/12 •
Section Revelations
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