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Is There Capitalism After Cronyism?

Judging by the mainstream media, the most pressing problems facing capitalism are 1) income inequality, the subject of Thomas Piketty’s bestseller Capital in the Twenty-First Century [1], and 2) the failure of free markets to regulate their excesses, a common critique encapsulated by Paul Craig Roberts’ recent book The Failure of Laissez Faire Capitalism [2]. These and many similar diagnoses reach a widely shared conclusion: capitalism must be reformed to save it from itself.

Exactly how this economic reformation should be implemented is a question that sparks debates across the ideological spectrum, but the idea that capitalism can be reformed is accepted by the left, right, and libertarians alike. But socio-economist Immanuel Wallerstein asks a larger question: is the current iteration of global capitalism poised to be replaced by some other arrangement? Wallerstein and four colleagues explore the answer in Does Capitalism Have a Future? [3]

Wallerstein is known as a proponent of world systems, the notion that each dominant economic-political arrangement eventually reaches its limits and is replaced by a new globally hegemonic system. Wallerstein draws his basic definition of the current dominant system—let’s call it Global Capitalism 1.0—from his mentor, historian Fernand Braudel, who meticulously traced modern capitalism back to its developmental roots in the 15th century in an influential three-volume history, Civilization & Capitalism, 15th to 18th Centuries [4]. From this perspective, there is a teleological path to global capitalism’s expansion, beneath the market’s ceaseless cycle of boom-and-bust.

It is today’s latest and most expansive iteration of capitalism—one dominated by the mobility of global capital, state enforcement of private rentier/cartel arrangements, and the primacy of financial capital over industrial capital—that Wallerstein and his collaborators view as endangered. Amidst the conventional chatter of social spending countering markets gone wild—as if the only thing restraining rampant capitalism is the state—Wallerstein clearly identifies the state’s role as enforcer of private cartels. This is not just a function of regulatory capture by monied elites: if the state fails to maintain monopolistic cartels, profit margins plummet and capital is unable to maintain its spending on investment and labor. Simply put, the economy tanks as profits, investment, and growth all stagnate.

Wallerstein characterizes this iteration of capitalism as “a particular historical configuration of markets and state structures where private economic gain by almost any means is the paramount goal and measure of success.”

Even those who reject this left-leaning description of free markets and the self-interested pursuit of profit can agree that the prime directive of capitalism is the accumulation of capital: enterprises that fail to accumulate capital lose it and eventually go bust. As economist Joseph Schumpeter recognized, capitalism is not a steady-state system but one constantly reworked by “creative destruction,” the process of the less efficient being replaced by the more efficient.

In Wallerstein’s view, Global Capitalism 1.0 could end in the inability of capitalists to continue reaping large and fairly secure profits. If capital can no longer accumulate more capital, this iteration of capitalism runs out of oxygen and creative destruction will usher in a radically new arrangement. Wallerstein’s chapter in this book is titled, “Structural Crisis, or Why Capitalists May No Longer Find Capitalism Rewarding.”

Though exponents of the status quo believe that amending the political-financial rules is all that’s needed to maintain the current centralized arrangement, Wallerstein believes that following the old rules will actually intensify the coming structural crisis.

Piketty’s analysis offers a ripe example of the belief that the old rules are sufficient: to Piketty, capital’s ability to expand at faster rates than the underlying economy (as measured by GDP) has lashed the tiller on a course to rising inequality, and the only way to ameliorate the resulting social instability is to redistribute the wealth via state-mandated taxes. Wallerstein and his collaborators, on the other hand, see capitalism’s ability to accumulate capital as anything but fixed—in their view, capitalism is threatened by profound changes in wage and labor structures and the global environment.

University of Pennylsvania sociologist Randall Collins fingers the displacement of human labor by information technology as the trigger for capitalism’s terminal crisis. Collins sees this inevitable trend as independent of economic and political theory and boom-bust cycles. “The structural crisis of technological displacement transcends cycles and financial bubbles,” he writes.

Collins acknowledges that the processes of financialization—roughly speaking, the commodification of all assets into tradable securities that are pyramided via leverage and exotic derivatives—have helped hollow out the economic middle, but technology’s displacement of labor is the coup de grace that could eliminate two-thirds of the educated middle class. (His back-of-the-envelope calculation is based on the dominance of the service sector in developed economies.) He rejects the commonly held optimistic view that new technologies always create more jobs than they destroy: “There is no intrinsic end to this process of replacing human labor with computers and other machines.”

Michael Mann, distinguished professor of sociology at UCLA, sees ecological crisis as the overriding threat to global capitalism. This entirely predictable crisis has an unpredictable resolution because it derives from our era’s dominant institutions of capital, the sovereign state and consumerism, having “gone global.” The other systemic threat is what Mann characterizes as “the treadmill of the nation-state’s obsession with growth.”  The environmental degradation resulting from increasing consumption is jeopardizing the global system’s ability to stay on this GDP-focused treadmill. One need only glance at photos of choking smog in Beijing and New Delhi to grasp Mann’s point.

If the arrangement between the institutions of state and market changes radically enough, Mann envisions the possibility that the structural crisis “will stabilize into an enduringly low-growth capitalism,” a possibility with historical precedents such as 18th-century Britain.

But this rosy outcome ignores the book’s key thesis that the current system has no future because it has reached intrinsic limits: the returns on following the old rules are increasingly marginal. Financialization has run of out of assets to leverage into financial bubbles—what’s left to leverage? Bat guano?—the middle class that has paid for its ever-expanding consumption with rising wages is in structural decline due to the displacement of human labor by software; and the state’s ability to manage structural crises while protecting global cartel profits is being undermined, in Wallerstein’s analysis, by the ever rising costs of providing healthcare and income security and paying the external costs of environmental damage.

The old rules—inflating another credit bubble to bail out an insolvent financial sector, increasing taxes on the remaining employed, further centralizing authority and control—are no longer working. thisarticleappears [5]

Wallerstein and his colleagues do not address another possible future, however, one that does more with less: an economic philosophy that rejects GDP as the arbiter of nation-state success and embraces the principles of the “degrowth movement”—décroissance in French—that is gaining adherents in the developed world.  In Japan, proponents speak of the “de-generation” that is pursing degrowth, de-materialism and de-ownership: for them, advancement and success arise not from consuming more resources and capital but from using fewer resources and less capital in pursuit of a more fulfilling, lower-impact lifestyle.

Piketty and Wallerstein alike overlook Nassim Taleb’s diagnosis of what’s wrong with the current system of state-capitalism. In Taleb’s view, wealth inequality arises not from capital’s expansion but from the state’s transfer of risk from private speculation to the public sector. As the financial crisis of 2008 illustrated, the state protects financial capital from losses and inflates asset bubbles that provide outsized returns for those with access to cheap central-bank credit.

Wealth inequality is generated not by intrinsic features of capitalism—the most important of which, in Taleb’s view, is that every participant is exposed to the losses that go hand in hand with risk—but from specific state and central-bank policies that reward leveraged speculation and enable financiers to play with no skin in the game. In Taleb’s trenchant phrase, financial inequalities are “one crash away from reallocation.”

This suggests that one way to address both wealth inequality and speculative excesses is to rewrite the rules so that participants must have skin in the game. Whether this is possible in an era of regulatory capture by the very financiers the rules aim to corral is an open question. Wallerstein’s school, like Piketty, also overlooks the transformative power of the factors Giovanni Arrighi—another disciple of Braudel and author of The Long Twentieth Century [6]—identifies as the key drivers of capital accumulation: attracting entrepreneurs and mobile capital.

What could replace the current iteration of global state-capitalism? If we assemble these three potentially transformative dynamics—degrowth, the recoupling of risk and loss, and entrepreneurial mobile capital—we discern a new and potentially productive teleological arc to global capitalism, one that moves from a capitalism based on financial hyper-centralization and obsession with rising consumption to one focused on more efficient use of resources and capital via decentralization and localized innovation.

Rather than ask if such a “think globally, profit locally” alternative is possible, we might ponder the sobering conclusion that Global Capitalism 1.0 will be replaced with some new arrangement one way or another, and we might as well try for the most efficient, adaptive, and sustainable decentralized model rather than go down with the statist-steered ship.

Charles Hugh Smith is the author of An Unconventional Guide to Investing in Troubled Times [7] and writes at OfTwoMinds.com.

39 Comments (Open | Close)

39 Comments To "Is There Capitalism After Cronyism?"

#1 Comment By Fran Macadam On October 7, 2014 @ 3:13 am

Is there capitalism after cronyism? Problem is, the past isn’t dead and cronyism isn’t past, either.

#2 Comment By HeartRight On October 7, 2014 @ 6:06 am

we might ponder the sobering conclusion that Global Capitalism 1.0 will be replaced with some new arrangement one way or another, and we might as well try for the most efficient, adaptive, and sustainable decentralized model rather than go down with the statist-steered ship.

Or we could try for the German model, which features a shared power-arrangement which includes capital and workforce jointly holding the helm.
Considering the number of European nations that wish their economy is more like the German one, it must have a few things to be said in favour of it.

#3 Comment By Mr. Patrick On October 7, 2014 @ 9:05 am

A non-statist capitalism is a capitalism without private property. A lead balloon. Centralization is the natural consequence of accumulation of capital. De-growth might be better understood by the older less convoluted term “poverty”. And that would explain why it is no threat to the continued, centralized accumulation of capital.

#4 Comment By Aaron Paolozzi On October 7, 2014 @ 9:09 am

Clearly well thought out article. I love the recommendations at the end. Bringing skin back into the game is the biggest in my opinion. Your analysis that financial inequality is the product of states trying to save their piles of capital to shore up GDP numbers is spot on.

#5 Comment By Johann On October 7, 2014 @ 9:51 am

University of Pennylsvania sociologist Randall Collins fingers the displacement of human labor by information technology as the trigger for capitalism’s terminal crisis.

Complaints against creative destruction is an age old repeated complaint, but as Henry Hazlitt once sarcastically said “Why should freight be carried from New York to Chicago by railroads when we could employ enormously more men, for example, to carry it all on their backs?”

Historically, the standard of living improves for all with technological innovations.

#6 Comment By Giuseppe Scalas On October 7, 2014 @ 11:35 am

To be thoroughly honest, I have no clue about the outcomes of current “crony capitalism”, if it will be more wealth for everyone or destitution for all but the selected few.
However, at least in Europe, is almost sure that the creation of a vast class of impoverished and educated people,will bring violent overthrow of the system of revolutionary character, preceded or not by governments and cartels turning to totalitarianism in order to prevent the same.
However, I doubt a similar outcome would take place in the US, because of the different social culture there.

#7 Comment By KXB On October 7, 2014 @ 12:23 pm

Right now, global holders of capital have a very profitable, albeit unstable system. You go to the Western nations of liberal fiscal & monetary policies – cheap credit, easy bankruptcy laws, the ability to move capital around without taxes. Companies as varied as Apple and Starbucks profit nicely from this system.

Then, for actually assembling products, you go to the developing world. No unions, a compliant government, no protection of local property rights. You can shove thousands of Chinese off their land to build one Samsung or Foxconn factory.

Then, as far choosing where to live, these Masters of the Universe will continue to live in select cities in the West – New York, San Francisco, London, etc. They want a First World existence at Third World prices. They don’t have to even vote, because the government pays attention to their interests in exchange for campaign contributions. They set the limited agenda that the general public gets to vote on. So, you can be sure there will be no Wall Street transaction tax levied on micro-second trades. But, Joe Sixpack will still have to pay sales tax on the brew with which he unwinds at the end of the week.

Even in the First World, the middle class can be kept in line. Any demands for wage increases are nipped by lack of unions, immigration to keep wages low, and even simply moving to the next state if workers get too demanding.

“America is not a country. It’s a business.” – Brad Pitt in “Killing Them Softly”

#8 Comment By Johann On October 7, 2014 @ 1:00 pm

Or we could try for the German model, which features a shared power-arrangement which includes capital and workforce jointly holding the helm.

I agree with that. The partnership approach resulted in essentially no layoffs during the sharp reduction in factory orders right after the 2008 financial crash. Employees remained employed with some reduction in hours until after the fairly quick v shaped recovery in factory orders. So it saved a lot of disruption not only for the employees but for the companies as well, and surely must have been a big factor in keeping their economy stable through the crisis.

My personal opinion is that there are some other differences that have at least up to now sustained the German economy. They are the only developed nation that has a significantly different economic policy school of thought. Their dominant economic school of thought is based on the Freiberg school of economics. The school of economic thought is sometimes referred to as Ordoliberalism. They believe the state’s job in the economy is to make sure that the free economy does not become un-free, so to speak by monopolies and other organizations that may destroy the free market. They also believe that the state should not direct or try to control economic processes, and specifically reject Keynesianism at least as it has developed today. One result of that is that they believe in a hard money policy. But of course that has largely been taken out of their hands after joining the Euro zone.

The German Ordoliberalism is the reason that the Anglo-Saxon world is so frustrated with the German fiscal policies.

I personally don’t agree with all of the tenets of Ordoliberlism, and the government could do a lot of bad things under the guise of protecting the free market, but overall, I think their philosophy has helped the German economy.

#9 Comment By Kurt Gayle On October 7, 2014 @ 1:56 pm

The comments of Giuseppe Scalas and KXB are especially encouraging, because Giuseppe and KXB see the problem.

Giuseppe understands the choices – and the differences in political sophistication between Americans and Europeans.

By European standards of political discussion ordinary middle class Americans have only a primitive understanding of what’s happening to them. A far higher percentage of even ordinary Europeans can point directly to the crony-capitalist system and explain why it must be stopped before it impoverishes us all.

Maybe someday soon a populist third party will appear on the scene and explain to Americans why the alternative to crony capitalism is, as Giuseppe says, “more wealth for everyone or destitution for all but the selected few.”

But just as likely, we politically child-like Americans will continue to be toyed with – and made fools of — by the twin Republican and the Democratic parties (Crony Capitalist Party # 1, and Crony Capitalist Party #2, respectively).

The two-party system in the US is not working for ordinary Americans.

A fundamentally new and different party is the only answer to the profound economic and political crisis that faces us all.

#10 Comment By Francis On October 7, 2014 @ 2:15 pm

Just as in regional conflicts with international consequences, only the USA is positioned to meaningfully address this issue.

Sadly, save for perhaps the UK, the USA is the most crony-dominated country in the developed world. Thus, change will not occur until developed economies become so unstable that near revolutionary actions occur.

Greater regulation of the financial services industry along with a global financial transaction tax would be a start — the chances of either happening are slim to none.

All developed countries need to recognize that not only does “free trade” not exist, but for the most part is long-term detrimental to developed nations’ economies. As mentioned, China, India and other developing countries do not play by the same rules, if any.

Developed countries cannot compete with those countries lacking in labor laws, environmental laws and building construction codes. China has the added advantage to these of an essentially unaudited internal economy, notwithstanding various window dressings for the consumption foreign analysts.

Since the “management class” is unaffected by their own decisions (their jobs are never outsourced, they are rarely laid-off and if then, with very generous severance packages) without government intervention, nothing will change.

Domestically, Republicans offer no hope. Democrats offer some hope, but only incremental.

#11 Comment By EliteCommInc. On October 7, 2014 @ 3:02 pm

“Even those who reject this left-leaning description of free markets and the self-interested pursuit of profit can agree that the prime directive of capitalism is the accumulation of capital: enterprises that fail to accumulate capital lose it and eventually go bust. As economist Joseph Schumpeter recognized, capitalism is not a steady-state system but one constantly reworked by “creative destruction,” the process of the less efficient being replaced by the more efficient.”

In the constant bid to prove their intellectual capital about market comprehension no simpler premise is missed more than this: for capitalism to work, the actors must behave in an honest manner in which the numbers reflect real world circumstances with low level speculation and adequate liquid funds to meet demands.

It would be nice to start with capitalism as all enterprises in which human beings engage in any exchange — rests on honest and fair dealings among the players. Minus that it matters not what system: socialist, communist or any quasi combination of above to include capitalist structures – are thwarted to their purpose of meeting the needs of financial veracity to anyone.

Example, bailouts wholly circumvent the process of economic accountability thereby rendering any reference to capitalism within such a system useless.

The basics matter.

#12 Comment By EliteCommInc. On October 7, 2014 @ 3:06 pm

For capitalism to have any veracity its premises must be permitted to operate. If a company engages in risky practices, the consequences of the same must rest on that entity . . .

Interjecting a socialist solution into the free market system, upsets the bounds by which one can measure capitalist practice.

Basel I and II are the new forces at play here in which lending measures so far out reach with available liquid is another perfect example of risk taking in which the solution thwarts the ability for discipline and accountability. In dishonest brokering.

#13 Comment By Reinhold On October 7, 2014 @ 3:42 pm

“The two-party system in the US is not working for ordinary Americans.”
Since Americans are terrified of doing anything to alter or suspend or replace our Constitution, there’s little likelihood that the two-party system will change. The third party fantasy has been dashed again and again, and we’re too scared to make real changes to our political society––so it’s all about ‘constitutional amendments’ and ‘third parties’ and ‘restoring the Constitution’ and ‘free markets’ and a lot of other slogans that won’t solve our problems and probably mean nothing, but serve to comfort us, so that we don’t have to make political revolution ourselves. There’s even naivete in the liberal ‘we need a strong labor movement to counter ruling class excess,’ since it doesn’t deal with the evident failure of the unions to keep themselves together and powerful in a capitalist economy––they made a bargain with the capitalists and then they paid for it.

#14 Comment By Reinhold On October 7, 2014 @ 3:44 pm

“for capitalism to work, the actors must behave in an honest manner”
The idea that an economy based on private profiteering and labor exploitation has anything within it to tend it toward honesty and fairness is one of the most brilliant of all ideological delusions.

#15 Comment By Mr. Patrick On October 7, 2014 @ 5:08 pm

Buying government influence is a form of insurance policy. Bailouts are part of capitalism; they’re not given to just any Joe Jack but only to those who have purchased the contract. The premiums (political contributions) don’t match the risk, and they are paid to the sales agents rather than the insurer (government) directly, but these terms are not outside the law at present.

#16 Comment By Giuseppe Scalas On October 7, 2014 @ 5:50 pm

HeartRight suggests to consider the German model as an alternative. I’d also recommend to your attention the Hungarian experiment, where a truly cultural conservative party (Fidesz) is in power. At the beginning, it was hit by the usual slander of “fascist” which is a standard way of the leftists to try to expel someone from the political discourse, not surprisingly, now a tool of hypercapitalists (of the doctrinal and political convergence of hypercapitalists and socialists there is a lot to be said). In reality Fidesz is a Christian-democrat party with a populist and anti-globaist streak. The Fidesz entry in Wikipedia is a good primer on the topic.

#17 Comment By HeartRight On October 7, 2014 @ 5:55 pm

I personally don’t agree with all of the tenets of Ordoliberlism, and the government could do a lot of bad things under the guise of protecting the free market, but overall, I think their philosophy has helped the German economy.

60 years of faithful, efficient and effective service – and counting.

They also believe that the state should not direct or try to control economic processes, and specifically reject Keynesianism at least as it has developed today.

Pure Keynesianism is marvelous – in theory.
The drawback is political: the model prescribes boosting consumption in bad times, countered by cutting consumption in good times. For some reason we don’t need to discuss in detail, the latter part of the programme always gets ignored.

The result is that the marvelous theory can never be succesfully implemented, and I don’t expect it will be done.

#18 Comment By Jonathan On October 7, 2014 @ 7:36 pm

Markets do not flourish except within a legal context and the latter is shaped by politics. The problem with Capitalism is not with the mere agglomeration of capital. This is an inevitable process in all economic systems.

The problem is when the state hierarchy shifts its focus away from its oversight responsibilities to help maintain stable markets and help minimize the deleterious impact of market failure. Unfortunately, politics is inherently and irrevocably myopic and this problem requires long term, nonpartisan policy to stay the course. It requires the establishment of an institution that is insulated from all political contests and whose primary goal is maintaining a stable economy. But, alas, we have seen how such an institution becomes subject to regulatory capture (i.e. subject to cronyism)by specific interests that facilitate or rather lubricate this very process of capital accumulation. The ongoing result is wide destabilization of markets through the fueling of financial bubbles. How can this be remedied?

#19 Comment By Kurt Gayle On October 7, 2014 @ 9:00 pm

Class warfare with an American face:

Nassim Taleb’s analysis of the US state-capitalist system: “Wealth inequality arises not from capital’s expansion but from the state’s transfer of risk from private speculation to the public sector.

“As the financial crisis of 2008 illustrated, the state protects financial capital from losses and inflates asset bubbles that provide outsized returns for those with access to cheap central-bank credit.

[In October 2008 the US House voted to enact into law a bill that created the $700 billion Troubled Asset Relief Program (TARP) to purchase failing bank assets. By March 2009 (Bloomberg analysis) the Federal Reserve had committed an additional $7.77 trillion (more than ten times the value of the original TARP bill) to rescuing the financial system. The $7.77 trillion was more than half the value of everything produced in the U.S. in 2009.]

“Wealth inequality is generated not by intrinsic features of capitalism—the most important of which, in Taleb’s view, is that every participant is exposed to the losses that go hand in hand with risk—but from specific state and central-bank policies that reward leveraged speculation and enable financiers to play with no skin in the game.”

This is class warfare in the truest, rawest sense of class warfare. Yet so committed are the ruling US elites to perpetuating their rigged system of crony-capitalism/state-capitalism that even the mention of “class warfare” is condemned by those same elites and by the media they own as subversive.

#20 Comment By Winston On October 8, 2014 @ 1:03 am

Things pay come to inflection point sooner than later:
[8]
The Imminent Demise Of The American Economy
[9]
S&P 500 Companies Spend 95% of Profits on Buybacks, Payouts
Sounds like subprime all over again:
[10]
Chair Janet L. Yellen
At the 2014 Assets Learning Conference of the Corporation for Enterprise Development, Washington, D.C. (via prerecorded video)
September 18, 2014
The Importance of Asset Building for Low and Middle Income Households
[11]
The Origin Of ‘The World’s Dumbest Idea’: Milton Friedman
[12]

America’s dark economic secret: How a giant gimmick has wages and jobs hanging by a thread
Welcome to the “gimmick economy” — where it’s not about good products or labor, but something far more scary
[13]
PUBLIC OFFICIAL: You’re Right About How Wall Street Treats Americans Like ‘Costs’ — And It’s Worse Than You Think

#21 Comment By EliteCommInc. On October 8, 2014 @ 2:37 am

“The idea that an economy based on private profiteering and labor exploitation has anything within it to tend it toward honesty and fairness is one of the most brilliant of all ideological delusions.”

There are couple of realities that you are attempting to make unique to capital systems.

1. All systems demand profit making. That profit making is what provides the basis by which societies exist.

2. All systems have workers who are exploited. That is nonunique. Attempting to turn that into some manner of capitalist evil is mischaracterizes the nature of the need to work. Your complaint is more concerned with the determination of the value assigned to work or employee efforts.

3. I want to be careful in my interpretation of your use of the term profiteering. But I think you are referring to some manner of disparity in which profits taking is viewed negatively.

a. reference number one
b. In case you have not noticed neither communism or socialist systems have been free of abuse as you are inferring, I think. That said, the original premise remains in effect, regardless of the system — honest dealings are mandatory.

Capitalism recognizes this simple basic model — that of private property. It is the use of private property that is the basis for all societies to thrive most effectively. What is interesting in the socialist models is that they also recognize private property as the means by which to support socialist systems.

The problem with our cpital practices is not capitalism is the failure to enforce and practice methods of penalizing dishonesty and failure to allow the consequence for risky practice to be held to account when those risks fail.

Our modern time has made it clear that socialist models are the least robust from error, manmade or otherwise. Greece, Spain, Italy, France, and other European, Asian and Latin American models remain in state of serious stagnation. Not to mention their own scandals of dishonest brokering.

In fact, unbeknownst to most of us the adoption of the Basel accords has left with us with the very same practices of bank lending that is fueling the chaos in Europe.

Your complaint does not note anything wrong with the capitalist system save what is pertinent issues to others.

I would note the examples above as a fairly good descriptor of the consequences of shifting the consequences of private error onto the public without demanding some benefit being forwarded to the public that is bailing out the same.

This long standing practice is taking its toil. Given that the public debt is above 19 Trillion and climbing — also nonunique to other modern systems — seems a model destined for an ultimate collision.

#22 Comment By EliteCommInc. On October 8, 2014 @ 2:39 am

I am not leaning on the class warfare advance in my scenario. The gaps we are seeing are global in nature and I think have many rungs for cause.

#23 Comment By LT On October 8, 2014 @ 10:10 am

Reading all your posts I find myself in awe of your linguistic gifts and articulate speaking. Unfortunately, I am not that smart but I am smart enough to know that the biggest reason America is in trouble is the reason NONE of you smart guys have figured out. The Federal Reserve. The dragons head that has caused this country to run itself into ruin. Introducing the IRS to collect the money owed by the American people to the Federal Reserve for borrowing money from them instead of printing it’s own. Not one penny of your income tax dollars ever see a school, road, park, or anything else you may or may not believe it goes for. It all goes to the Fed Res. to pay for the interest on money printed out of thin air and loaned to the American people. They create the bubbles, pick the presidents, and completely run the show from indoctrinating our children very early and teaching them that the founding fathers were terrorists and the Constitution is outdated, etc. They own the media, the printing presses, Reuters/Api, and suppress any knowledge of what they are about and how they are destroying this country. Capitalism/Free market works and worked well until the bankers penned the “Federal Reserve Act” in 1913 at Jekyll Island under secrecy and pushed through congress during Christmas break with Pres. Woodrow Wilson signing it in return for campaign contributions. Since then this country has been anything but free. Capitalism/Free market is what made this country the pinnacle of any civilizations economy since the beginning of time, barr none. The idea that socialism/communism is even worthy of a second thought is beyond absurd if you are a believer in personal liberty. Fractal Banking is what is killing us all and the bankers know they have reached the limit to their corruption and blantant stealing from the American people. This is why they need so badly to “reset” and start over. Hence the NWO. Like I said, I’m not very smart and will be the first to say so but you guys are not talking about the real reason things are the way they are. All that other stuff you guys speak of sounds great but it’s all bs until you get to the core of the problem, of most of the problems this country faces today.

#24 Comment By EliteCommInc. On October 8, 2014 @ 10:23 am

My comments in no manner excuse the anti-capitalist behavior that has been used to swindle or manipulate certain populations.

i.e. high interest rates despite adequate credit reports or payment schedules, the practice of bait and switching loans processes or hiding balloon payments in complex formulas

#25 Comment By Kurt Gayle On October 8, 2014 @ 11:32 am

A few comments on EliteCommInc.’s: “All systems have workers who are exploited.”

Not necessarily. The type of exploitation we are discussing takes place when the means of production are owned by a small minority, the capitalists, and those who are not owners of the means of production have to sell their labour-power for wages in order to live. The main feature of capitalist exploitation is that the capitalists pay the workers less than fair compensation for their labor – this differential being capitalist profit. The capitalist state functions to safeguard this unequal distribution of power and property.

On the other hand, if the means of production are owned by the individuals who performs the work themselves – for example, classic small artisans like blacksmith, joiner, shoemaker, tailor, potter, tanner, locksmith, etc. – there is no exploitation.

Likewise, if the ownership of the means of production (a factory, for example) is shared equally – either collectively, cooperatively by a group of workers or communally – there is no exploitation.

It is certainly true that nation-state experiments that sought to eliminate capitalist exploitation via collective ownership have tended to fail on a number of levels. Part of the failure of these experiments has been their tendency to substitute new forms of exploitation for classic capitalist exploitation. But that having been said, the failure to eliminate exploitation is not a built-in necessity, but merely demonstrates the historic difficulty of the task.

#26 Comment By EliteCommInc. On October 8, 2014 @ 1:36 pm

If you want to seriously level the financial playing field you will advocate the complete conflict of interest of elected and appointed officials having any ownership or board membership in financial products – period.

If the salary paid by the people is insufficient, then a role as a legislator is not for them.

They can own stock
They cannot sit on similarly situated boards
No of their immediate family members can do the same.

#27 Comment By Reinhold On October 8, 2014 @ 2:24 pm

“In case you have not noticed neither communism or socialist systems have been free of abuse as you are inferring, I think.”
No, not free of abuse, free of exploitation in the technical sense. Actually, I’m not convinced at all that the state is a superior employer––look at how the city of Detroit gutted public workers’ pensions. As for your idea that profit and exploitation are universal, they are not; exploitation is not evident in worker-owned firms, and profit was absent for most of history, actually, which is why ‘growth’ and the accumulation of capital are modern ideas and practices. Your claim that all systems are exploitative and profiteering does not seem historically accurate; but you are right that there are different problems with the alternatives, and very wrong that the social market economies you describe are the same as socialist economies.

#28 Comment By Reinhold On October 8, 2014 @ 2:48 pm

“Attempting to turn that into some manner of capitalist evil is mischaracterizes the nature of the need to work. Your complaint is more concerned with the determination of the value assigned to work or employee efforts.”
This I really disagree with. The need to work is obvious; for that work to be exploited is totally unnecessary, so yes, the issue is the way that work is organized and not the necessity of work itself.

#29 Comment By Jonathan On October 8, 2014 @ 7:46 pm

LT,

Please look at my comment. Read it very carefully and ponder to what institution am I referring.

We part ways in that the Federal Reserve System is crucial for maintaining a stable economy. The question is whether its internal culture can be reformed and by whom.

#30 Comment By Jonathan On October 8, 2014 @ 7:58 pm

Reinhold,
That work is organized implies the imposition of an external structure upon labor. And that alone is exploitation though not necessarily monetized as surplus value.

If one can equate alienation with exploitation then in the Hegelian sense the mere objectification of labor is alienation. It is exploitation in that the market sets the price for the artisan’s product. It is not of the artisan’s choice insofar as he or she must conform to the market’s constraints. In this idyllic model, the market’s participants are exploiters.

One can argue that in specific utopian projects, such as the workers’ cooperatives of Mondragon, exploitation as you define it does not exist. But the Mondragon corporation participates within a greater capitalistic environment being obliged to abide by the constraints imposed by markets. Ah, but that does not fit into your definition of exploitation does it.

#31 Comment By Jonathan On October 8, 2014 @ 8:04 pm

Kurt Gayle,

What is fair compensation for labor?

Who determines this so-called fair share?

And if you say the workers then on what basis (i.e., what criterion or criteria)?

What do you mean by sharing the factory equally?

In your idyllic example, who are the managers?

How do you deal with strikes and lockouts and other forms of internal strife that still may happen as in the case of Mondragon in the 1970s?

#32 Comment By EliteCommInc. On October 9, 2014 @ 5:31 am

“This I really disagree with. The need to work is obvious; for that work to be exploited is totally unnecessary, so yes, the issue is the way that work is organized and not the necessity of work itself.”

Just to keep it straight, my use of exploit is not colloquial. It is not negative. Work serves a purpose for those who request it and those who do it.

Whether or not it is or the employees are abused is not a symptom of capitalism in any manner.

I think Russians having a look back at the manner by which their work was valued and abused would share my view.

#33 Comment By Reinhold On October 9, 2014 @ 2:00 pm

What’s so hard to understand about ‘exploitation’? It is not simply adaptation to the market’s demands––that is the definition of commodity production, which doesn’t require wage labor (wage labor is the exploitative part, not the market––the market is just destructive). The external factor exploiting the labor is the capitalist, who uses the labor for the market.
And it’s not just ‘abused’ labor, either––so the abuse of the communist gov’ts does not fit the definition of exploitation, as is easily understood, if you were to read what I said.
These are simple ideas, they don’t originate with Marx or communism. The Civil War Republicans agreed with them and proposed an exploitation-free ‘free labor’ ideology which General Sherman even attempted to realize at one plantation.

#34 Comment By Jonathan On October 9, 2014 @ 6:52 pm

EliteCommInc.

With regard to the former Soviet Union there were the intelligentsia (a.k.a capitalists) and then there were the workers and thus exploitation. The Left has been divided in defining this extreme experiment in one-state Socialism. Some went along with Stalin and called it Socialism. (shrug) Others termed it a degenerate worker’s state. (more shrugs) While others called it state capitalism. And they also fought over whether there existed a social class system (even more shrugs).

(See James Burnham The Managerial Revolution and Bruno Rizzi The Bureaucratization of the World).

And now you have the nomenklatura. Party bosses become corporate bosses. Animal Farm revisited.

#35 Comment By Jonathan On October 10, 2014 @ 8:25 pm

Reinhold,

When a crafter sells his product at the marketplace he is selling his time which is the same as his labor. That product is objectified labor. And the proceeds from the sale are equivalent to wages. Does he control his work? The artisan, for him to succeed, obeys the whims of the consumer. How is that dissimilar to the wage-earner who sells his time to his employer?

Some Civil War era Republicans may have been exposed to Marx’s Capital. President Lincoln was sent a copy from Karl Marx.

#36 Comment By EliteCommInc. On October 12, 2014 @ 11:20 am

“(wage labor is the exploitative part, not the market––the market is just destructive). The external factor exploiting the labor is the capitalist, who uses the labor for the market.

And it’s not just ‘abused’ labor, either––so the abuse of the communist gov’ts does not fit the definition of exploitation, as is easily understood, if you were to read what I said.”

This makes no sense to one. And I don’t think its for a lack of understanding. The purpose of labor is to extract some benefit for one’s needs and wants. It matters not whether said system is capitalist or anything else. Your complaint s abut the power structure of labor verse owners or whoever it is that controls the exchange.

As stated capitalism does not block employees from negotiating their wages against the interests of owners or controllers.

Your position still demands that some method of equity be arranged by some party or parties for the system to function. Whatever it is that you claim Gen. Sherman attempted to advance minus the details and I have not found it, it is unclear whether it reflects what you contend. In either case wage labor is only exploitive/abusive – since that is how mean the term – if it can be determined that it in some manner is unfair. I have already noted the areas that one would need to examine to determine that. In short, does a wage earner meet their desired needs for their living standards. Minus some agreed upon or even understood parameter to determine exploitive/abusive dynamic your advance is just a vague complaint. I have already addressed my use of the term exploitation — neutral. Your use of the term is too generic. And you have yet to describe how capitalism is by definition abusive/exploitive of labor.

Your introduction of co-ops has no damaging impact on the veracity of capitalism. The coop in which a group of people opt to share the value of production is not antithetical to capital markets. They decide amongst themselves that all players are of equal weight and value and whatever is gained is distributed equally — maintenance worker will derive the same benefit as the sales worker or the managers of various departments. Capitalism is not in any manner a hindrance to such organizations. The CEO gets ten dollars and ten cents as does the janitor, as they are equal partners.

But what remains is the vagueness of the concept as detailed in my previous response and listed in a series of questions by another comment is the process by which a community decides, a state, a nation decides we are all equal partners. Not only would such an attempt require a reformulation of the US mind, but of people as well in assessing worth of labor and the product they produce. Which brings us back to the Soviet example.

Your attempt to slide the issue into some unique category so as to avoid the obvious indictment that exploitation/abuse of labor falls pretty flat. Your observation that the state is not better in fair or nonexploitive/abusive is demonstrated by that system as well as systems in which employees of the state routinely go on strike, especially in socialist systems: France, Germany, Greece, Spain, etc.

The civil war republican may have agreed with something, but it certainly was not an ethic of fair dealings as to economic practices anymore than the democrats. And this the issue at its core: they returned did not operate in good faith as to former slaves. They withdrew from ensuring that blacks had no say in the design of the economy of the south. Your attempt to constantly pin misbehavior or greed on capitalism is rebuffed by the following:

“With regard to the former Soviet Union there were the intelligentsia (a.k.a capitalists) and then there were the workers and thus exploitation. The Left has been divided in defining this extreme experiment in one-state Socialism. Some went along with Stalin and called it Socialism. (shrug) Others termed it a degenerate worker’s state. (more shrugs) While others called it state capitalism. And they also fought over whether there existed a social class system (even more shrugs).”

Here’s the rhetorical game, that anyone who is in control is referred to as a capitalist, despite the system they are is to implement communism. Thereby making any discussion on the question of exploitation almost impossible because eventually someone is going to have the position of management, there is some form of hierarchy that is going to form, regardless of how they benefit from the company. Fairness is always going to be a question And despite these vague references to exploitation/abuse it is doubtful that even a co-op is going to resolve benefit stratification.

The rhetorical attempt to muddy the waters just won’t wash the issue — and the issue is one of control which is the socio discussion. The capitalist like any other employer measures wage against profits and his or her desired outcomes. If an employee doesn’t appreciate the wage set, then they should be free to negotiate it our or even set their own wages such as what an independent contractor might do.

So an owner of a product cannot do the manufacture, he hires and maybe even trains X number of people to do the task. Those either agree with the benefit offered or they do not. There’s nothing exploitive or abusive about that relationship. Nor is there anything abusive about an owner or laborers adjusting their desired benefit based on the profit or loss of the product being sold. It’s purely a numbers game — if a product brings in more then the benefit for all is determined by said contractual agreements.

Ah, I see there’s an entire post missing here where I responded in detail. Note: Your claim about history and profit are just denied by archeologists which time after time have uncovered the societies in the ancient world in which income stratification is common based at a look at the artifacts found, the design of the cities, murals and writings: wealthy, middle and lower income stratas are common regardless of culture.

#37 Comment By Dean Smith On October 12, 2014 @ 12:20 pm

Poverty is not a lack of income or the lack of a means of production. Possibly in its simplest form you could say it is because of a lack of money. It would be like a teacher saying there is a lack of A’s. When trying to solve the problem he could blame it on the lack of means of production, not enough books. Was that the problem in any class you have ever taken? NO. He could force the students with A’s to help teach the class and then constantly blame everything on the A students. As Ludwig said another man’s wealth does not diminish me. You may not like the kid with all A’s but he did not hurt you. You may not like Apple because they have huge amounts of money but the existence of Apple does not make the world a worse place. Even if Apple has a factory and you don’t. They only way to fix the A problem is to first understand what the A represents. It represents performance/production. Does the individual produce something of value to society? If you dig ditches that has a certain value to society. That value has never changed and never will until the end of time no matter what system Socialism Communism Capitalism. In a poor society they live very poor and in a rich society they live better. That is the only system that will ever effect them. No matter what you do no system will ever take more of the A’s than the A students are willing to give up. The fact is all people are not A students and that will never change. Money represents wealth which is production. If producers don’t produce there is no production. The government could take over Apple in the name of the people and run it and make production. They would produce. It just would never be as productive as it was. The fact is all people are not A students and the government officials are not the best people for the job. Finally of course it would go out of business because new ideas and innovation are a form of production which would suffer the most. And of course the ditch digger’s standard of living would fall. The system which would give the highest standard of living for everyone is the system that is most blind. No special favors. Laws apply to everyone equally. The main opposition to that system are the parasites. They need inequality to survive and grow. I am not taking about people on welfare as much as the biggest parasite of all government Socialism Communism Capitalism. We have to have a government but the blinder the better. The problem to solve is how to keep this cancer/parasite government in check as it such off its host the people and mostly the one percent.

#38 Comment By EliteCommInc. On October 13, 2014 @ 8:00 pm

“We have to have a government but the blinder the better. The problem to solve is how to keep this cancer/parasite government in check as it such off its host the people and mostly the one percent.”

I am for people getting work and people getting paid to work.

Whether that work is creating, producing, or selling — whether that product is material or services — whether that work is intellectual or physical . . .

I would only add that work and the ability to get it should not be artificially undermined in any manner anymore than getting paid.

#39 Comment By Jonathan On October 14, 2014 @ 8:06 pm

EliteCommInc.

Certainly in free and competitive markets the producer has choices. He or she can abide by the market’s competitive price for his or her goods or starve to death. Is that exploitation? Certainly, in that the market does not obey the whim of the individual producer. Is that producer free to produce and sell his product? Again affirmative. The point here is that exploitation, no matter the economic system, is its unavoidable and inseparable component.

Methinks we just might be in agreement and nimbly dancing around words.