Saturday, December 27, 2008

The Nature of Capital and Bob Herbert's "Stop Being Stupid"

Today's NYT's has Herbert's latest OpEd, "Stop Being Stupid," in which he points out how extraordinarily stupid the idea - originating with the free market fundamentalists and implemented beginning under Reagan - is "that you could radically cut taxes and still maintain critical government services — and fight two wars to boot!"

Herbert scores many good points, but fails to really nail down the source of these stupidities and what it would take to turn the corner on it. He does correctly name some names, such as Alan Greenspan, Rob Rubin and Larry Summers, but not their ideological foundations.

An excerpt, followed by a reader's letter and my commentary:

December 27, 2008
Stop Being Stupid


I’ve got a new year’s resolution and a new slogan for the country.

The resolution may be difficult, but it’s essential. Americans must resolve to be smarter going forward than we have been for the past several years.

Look around you. We have behaved in ways that were incredibly, astonishingly and embarrassingly stupid for much too long. We’ve wrecked the economy and mortgaged the future of generations yet unborn. We don’t even know if we’ll have an automobile industry in the coming years. It’s time to stop the self-destruction.

The slogan? “Invest in the U.S.” By that I mean we should stop squandering the nation’s wealth on unnecessary warfare overseas and mindless consumption here at home and start making sensible investments in the well-being of the American people and the long-term health of the economy.

The mind-boggling stupidity that we’ve indulged in was hammered home by a comment almost casually delivered by, of all people, Bernie Madoff, the mild-mannered creator of what appears to have been a nuclear-powered Ponzi scheme. Madoff summed up his activities with devastating simplicity. He is said to have told the F.B.I. that he “paid investors with money that wasn’t there.”

Somehow, over the past few decades, that has become the American way: to pay for things — from wars to Wall Street bonuses to flat-screen TVs to video games — with money that wasn’t there.

For the rest of his OpEd, see here.

In times of major crisis the opportunity presents itself to either recognize what's really wrong and radically change this (and thereby really resolve things), or fail to rise to the occasion and usher in some other more virulent version of what has previously existed. What paradigm one is employing will prove decisive. The following comment on the NYT's website from a reader, one of the NYT's editors' selections, reflects this:

"Nobody can argue with 'be smart.' But how many tens of millions of Americans make their living with a job that, in one form or another, is aimed at getting other Americans to decrease their savings or increase their debt? Too many of us go to work and devise ways to legally pick the pockets of our unknowing fellow citizens in ways big and small. Americans are subjected to a daily blizzard of hidden fees and co-pays and penalties and tolls, each of which wears us down mentally, emotionally and financially. And behind every one of those fees is probably another American who thought it up, and got a big bonus for doing so. We need to revert back (or should I say move forward?) to true capitalism, where the seller and the buyer understand exactly what is being sold and the price that will be paid, and where it is engrained into our capitalist souls that cheating, swindling, hiding, and misrepresenting are immoral, shameful, illegal, and a threat to our country's future. If we know what things truly cost -- whether it be a cell phone, a mortgage, a flight to Denver or a visit to our doctor -- we can can make more intelligent decisions and maintain more control over our financial destinies. This is what actually goes on now, every day, between sophisticated businesses: prices are known, terms are understood, and the commercial code is clearly defined. When there are two sophisticated parties to a transaction, armed with tools of enforcement, things run remarkably smoothly. But consumers are not armed with the information or power necessary to calmly and rationally control our financial destinies. We open our bills wincing at the hidden pain we expect to find, because we are completely vulnerable to small print and long disclosures and agreement amendments and impossibly byzantine rules that we had no choice but to sign on to. Making this change requires more than a "be smart" slogan (which is a good start, mind you). In the short run it requires legal access to information, and penalties and stigma strong enough to dissaude [sic] deception. In the long run it requires us to redefine right and wrong.

— Kevin C, New York, NY"

Kevin C, like Herbert, puts his finger on some important aspects of the situation. I especially like his point that many people's jobs and bonuses are tied to driving other Americans into debt and "legally pick[ing] their pockets."

However, the idea that pure capitalism is the solution is precisely 180 degrees incorrect.

What would it take for the public to know exactly how much something cost, as Kevin recommends happen? How could dissuading deception with penalties and stigma actually come about? You'd have to introduce measures to curb the power of capital in a situation in which capital commands the key levers of power in the society. You'd have to convince those who really run things to do things that are not in their interests.

You might tell them, "Dear Messrs Capital: It is in your best and long-term interest to allow those who you rob and steal from everyday - which is the source of your profts - to regulate you and limit your ability to rob and steal from them. After all, look at the fine mess you are in and have put us into!"

Messrs Capital would say what exactly in response to this? "Dear Mr. and Ms. Citizen: Thank you for your letter. I have your best interests in mind. Yours truly, Capital."

In other words, Capital wouldn't listen. And for a very good reason. Because it's in its nature to do exactly what it has been doing! Asking Capital, or even demanding that Capital do something else, is like trying to get a crab to walk forward. It's like telling a butterfly to go back to being a caterpillar. Even if you could force butterflies back into being caterpillars - pushing monopoly capital back into free enterprise capital - they'd evolve back into butterflies again. Why? Because free enterprise capital becomes monopolistic because the modus operandi for capitalism is profit and it's more profitable to reap the rewards of economies of scale and to eat up your competition. Those who try to do otherwise will be extinguished by the nature of capital itself.

If Wal-Mart's CEO was visited by the Ghost of Christmas Past, Present and Future, and realized the folly of his ways and announced to the Wal-Mart Shareholders and Directors that he was going to stop paying Wal-Mart workers poverty level wages, begin giving them health and pension benefits, and stop driving down the costs of suppliers to the nth degree, what exactly would the shareholders, the directors, and the rest of the stock market do to this CEO and to the share price of Wal-Mart?

We all know the answer to that question, whether we've never taken Econ 101 or we've gotten an advanced degree in Economics. Wal-Mart's stock price would dive and the enlightened CEO would be canned forthwith.

Even if all of the Captains of Capital were to become Buddhas overnight, in other words, financial capital would discipline them or replace them.

Dealing with the crisis and the insanity that we see all around us requires recognizing what is at fault. It isn't capitalism distorted that is at fault. It is capitalism par excellence that is at work here. The problem isn't back to the future. The problem is capital - that is, a system that feeds on and requires deception, profit and exploitation.


Arthur84 said...

Yes! I totally agree with this article. I felt like I was the only one for a while saying the same things. We need to cut our losses in the Middle East and other foreign objectives, and focus on our own country and our own economy for the next five to ten years, if not more. We have spread ourselves too thin, and risk a major collapse of the economy for the first time since the Great Depression. Hopefully, Obama realizes this and tries to follow in FDR's footsteps to save the economy; create new jobs, regulate business, etc. We can see now that no longer do wars spur the economy, instead they hinder it.

Dennis Loo said...

Hey Arthur:

Good to hear from you. I don't always have time to reply to you, but please know that I appreciate your comments always.

The key to understanding why the US is so embroiled in other countries' affairs all the time - invading, controlling through economic, military and diplomatic means, interfering and overthrowing leaders (through direct and covert means) - grows out of the very nature of imperialism. Imperialism is not a policy choice but a fundamental characteristic of globalized, monopoly capitalism. It's an extension on the nature of capital itself