Tag Archives: Capitalism

Is it finally safe to discuss Socialism?

smaug

May I ask, oh great and powerful Smaug, when thy gold will begin to trickle down upon us?

I was once at a high school party where the prolonged silence became painfully awkward and uncomfortable. Suddenly one precocious girl blurted out, “So, what do you all think about premarital sex?” Just like that, the party got lively with everyone talking about a wide range of topics.

Sometimes all it takes is one person to break the ice and make it acceptable to discuss what were previously taboo topics. Bill Maher made it allowable to talk openly about atheism, and Bernie Sanders made it acceptable to speak honestly about Socialism.

But this new open talk of Socialism frightens a lot of people, especially older people and rich people – and older rich people most of all. To them, and most Americans, Capitalism is tantamount to a religion that requires unwavering faith despite any evidence to the contrary. Therefore, it is not surprising that they spew out a lot of hyperbolic fear-mongering and misinformation in hopes of nipping all this Socialist talk in the bud.

These Capitalist fanatics spread so much misinformation about Socialism that responding to it all in one overview article is nearly impossible. Therefore I’m not going to take the time here to discuss every point in detail. I’ll simply put forth what I feel are the ethical and empirically supported viewpoints. Feel free to investigate each one more thoroughly on your own.

First, let’s talk about what Socialism is today. Let’s not allow opponents to sucker us into explaining whatever Karl Marx had in his mind a century and a half ago nor into defending the aberrant government that emerged out of the Socialist transformation in China under Mao Zedong in 1949.

Modern Socialists do not want to destroy Capitalism. The difference between a modern Capitalist and a modern Socialist it is simply a matter of where the balance point should be between the governmental and private domains.

Capitalists believe that the government is useless and ineffectual and that virtually all problems should be left to the private sector to solve; all needs should be left to the private sector to meet; and that the private sector should not be restrained in any way. They lie routinely about how much social programs like universal healthcare would cost, by failing to subtract the savings from the frightening numbers they cite. 

Socialists believe that government can and must do good things and that some things like healthcare, public infrastructure, utilities, social services, food and drug safety, and education can be best handled by government, and further can only be handled effectively by the government or through a high degree of regulation and oversight.

Between the two sides, it is the Capitalist viewpoint that is far more extreme, dogmatic, and radical. Socialists still want mostly a vibrant Capitalist system, with only some exceptions and regulations as warranted to protect society at large. Capitalists want to extract profit from everywhere without exception and with minimal or no regulation that would ensure that the public good is considered.

The devotees of Capitalism point out that Capitalism made us great. That is not completely true. Yes it was important, but most of our important achievements like worker safety, environmental protections, and many others came about only through violent opposition to the forces of insatiable unbridled Capitalism. Major projects like our highway system were government funded. And even if we give Capitalism all the credit it deserves for bringing us to where we are, that does not make it the right approach – or even a viable approach – to carry us forward into a more sustainable economic model.

And let’s be clear. Unbridled Capitalism is not sustainable. As Marx predicted long ago, the inevitable outcome of unrestrained Capitalism is growing wealth inequality and instability as all wealth is scooped into the coffers of fewer and fewer individuals. You end up eventually with one Pharaoh and a multitude of economic slaves. That level of inequity cannot be maintained for long. But worse, our planet can no longer sustain a humanity driven by a religion of unbridled Capitalism.

Contrary to everything the devout Capitalists try to claim, trickle down economics is really nothing more than voodoo economics. Socialism is not evil, and Capitalism is not “the best system possible.” Grow or die is a lie. Competition does not really yield the best products for the lowest prices, and what is good for the stock market is usually bad for regular workers (see here). Economic Darwinism is not tough love. Intellectual property rights mostly just retard real innovation. In the real world, free-market competition often breaks down completely. Tax breaks to the wealthy do not create jobs or increase wages. Highly progressive taxation on wealth is necessary and essential. A minimum wage – and a maximum wage – are good economics. And you only need sufficient, not unlimited, wages to motivate and reward talent and work. Private corporations are not inherently more cost-effective than their government-run counterparts, especially since they must extract as much profit as possible.

Taxes, by the way, are not “giving away your money.” Taxes are how we agree to fund philanthropic and charitable causes and joint ventures for the essential public good. Taxes are what we pay for our roads, and police, and all the other services that our government provides for us. Make no mistake, under a Capitalist model, all those services would be far more expensive, if they were provided at all. If left to a purely Capitalist system, all our lives would be horribly diminished.

Capitalism simply has no mechanism to fund essential public services when there is too little profit in it. Even worse, in areas like healthcare, the profit motive is fundamentally and intractably in opposition to providing the best outcome. Capitalist fiduciary responsibility requires that healthcare providers provide the lowest level of care for the highest possible price to maximize profit for their shareholders (see here). Anything less would be antithetical to the Capitalist religion.

The kind of extreme Capitalism that many Americans have been convinced they would prefer is nothing more than “I got mine” economics in which every man (and woman) are out for themselves, and screw everyone else. The idea that good can come from selfishness and greed is a morally bankrupt tenet of our Capitalist religion.

Socialism, on the other hand, is simply how we do things together. It is how we pool our efforts for the good of all. Socialism is the “let’s work together” system of economics. Socialism does not inhibit or replace Capitalism. It merely acknowledges that there are some vitally important things that Capitalism cannot do well enough and it provides the model to work together to achieve those services that Capitalism simply cannot address.

So let’s continue to carry on this discussion that Bernie started and continue to work to find the healthy balance. But do start to question the Capitalist catechism that we have all been taught, and don’t let the fanatical Capitalists convince you that you are the extremist if you defend elements of Democratic Socialism.

Privatizing Theocracy

privatizationThe strategy is clear. Privatize as much of the government as possible and exempt those privately run services from Constitutional protections.

If we do not wise up, we could gradually privatize our way to theocracy.

Conservatives love privatization. Regardless of where they lie on the not-so-wide spectrum from capitalist to libertarian, they all share a foundational belief that the private sector does everything better than publicly run counterparts. To them, it is self-serving economic dogma that a hard-nosed, self-interested, profit motive is somehow inherently superior to a sincere mission to serve the public good. Therefore everything that can be privatized should be privatized.

Of course, there is no actual proof of any such inherent superiority. Sure, some privately run companies can be more efficient than governmental programs. But many are not. For every inefficient, bureaucratic, slow-moving government agency, one can point to dozens of disastrous, failed, bankrupt, unresponsive, and socially irresponsible private companies with obscenely overpaid corporate leaders.

Moreover, the primary function of private businesses is not to serve their customers with the best possible goods and services, but to extract maximum profit for shareholders and executives. The idea that competition always optimizes to result in the best possible services at the lowest possible price is a convenient fiction. Private businesses actually optimize to extract the highest possible profit by providing the cheapest possible services. Their fiduciary obligation is not to serve the public good, but on the contrary it is to pass off as many of their harms and risks as possible onto the public sphere.

It is simple math. All else equal, a well-run private company simply cannot provide better services than a well-run governmental agency because the private company must extract maximum profits. And it is a lie that government agencies cannot be just as well-run. In fact, our Conservative leaders know this, which is why they work so hard to make the Post Office and other services fail so that they can justify privatizing them.

Further, there are some public functions that are simply incompatible with the profit motive, these include things like health care. I am not against all private business, but I am against private businesses running essential social services that fundamentally conflict with their profit motive. I wrote a blog on the conflict between profit and healthcare (see here). And we have all seen how well has privatization worked for prisons.

This fanatical push for privatizing everything from military service to social security in order to extract private profits has been bad enough. But now, with Citizen’s United and Hobby Lobby and the dominance of Church-friendly executives in public office, we should clearly see another terribly dark side of privatization – the synergy of privatization and religion.

As more and more government services, from social services to education and beyond are privatized, those new “public service” companies can then exert their growing independence to reject governmental policies and even Constitutional protections to inject religious beliefs into those services. Rather than serve the general public good, rather than adhere to restrictions put in place to ensure the public good, these newly privatized services can now exert their “religious freedom” to limit those services in accordance with their religious beliefs.

The Religious Right has been frustrated because they have been thwarted in their efforts introduce prayer and intelligent design in schools. Their new strategy is focused on privatizing education so that they can “teach” whatever they wish to larger numbers of children. By simultaneously asserting religious rights of conscience for these private companies, they can do an end-run around the Constitution.

As another case in point consider hospitals. We used to have a lot of public hospitals. But we have allowed private, for profit hospitals to take over without requiring them to provide the same level of service to underprivileged populations. Increasingly, churches are assimilating all of these private hospitals and refusing to offer essential services that they feel violate their religious beliefs. The New York Times recently highlighted this (see here).

Now duplicate this same strategy to privatize every government service with an ideological or profit interest. If the greedy and the religious can remove all such operations from governmental oversight, then the protections of our Constitution become moot. How can the Constitution protect us with nothing remaining under its jurisdiction? The Conservatives want less, not more of the regulations that would be required.

Make no mistake. This trend toward theocracy by privatization will continue to accelerate unless we understand the following:

  1. Private corporations do not really do everything better, and some essential public services are fundamentally undermined by a profit imperative.
  2. Private companies must not be allowed to claim personhood and religious liberty in order to abdicate ethical responsibilities and circumvent Constitutional protections.
  3. Political leaders must not be allowed to be complicit in this theocritization by intentionally destroying working public services and by putting in place governmental structures to assist in privatization and the expansion of religious exemptions.

For further reading I recommend a previous blog entitled Why Wall Street Loves Trump (see here).

Competition Improves Healthcare?

MedicalMoneyI really, really wanted to get to my backlog of scientific blog topics today, but was distracted once again by Shawn Spicer at his daily press briefing. In defending “Trump/Ryan Care,” he repeated perhaps a hundred times that “It is an economic certainty that increased competition unquestionably brings down costs.”

(Note that he uses the word “costs” but he presumably intends this to mean “prices.” Cost is really the cost of manufacturing a product. Price is the cost to the consumer. Price minus cost equals profit. I will use these words consistently in this way to eliminate ambiguity and confusion.)

Shawn’s assertion is a meme that is almost universally accepted in America as a fundamental principle, a given, but it is simply untrue. It is part of the falsely simplistic “Economics 101” nonsense that has been repeated so often that it feels like perfectly sound common sense (see here).

Our acceptance of false arguments like this manipulates us into adopting “free market” solutions that harm our own self-interest and shovels money from poor Americans to rich Corporations.

The reality is that the “free market” does not give a hoot about low costs or even about high quality and there is nothing inherently forcing it to provide the highest possible quality at the lowest possible price. Quite the opposite. Businesses in unregulated free markets will minimize cost (quality) and maximize price to realize the highest possible profit.

If their manufacturing costs are reduced through deregulation, they will not lower their prices to the consumer, they will enjoy higher profits. If they are forced to lower prices through regulation, they will lower their costs (quality) before lowering their profits.

But wait you say. Of course that is true and that is why competition works! If there is competition then if a business wants to survive they must deliver higher quality at lower prices than their competitors. Eventually we reach an optimum for the consumer.

Except that rarely works in the real world, and works least well in providing essential services that really matter, things we must have to live and work and even survive.

The example that is invariably given in idiotic Economics 101 courses is the lemonade stand. If Sally sets up a stand in her yard and charges $1 per cup, but then Billy across the street sees her making money and sets up his own competing stand charging $.95 for the same lemonade, then Sally must either increase her quality or lower her prices or accept less profit if she wishes to stay in business.

But in the real world, Sally and Billy would both quickly understand that getting into a price war is a lose-lose scenario in game theory. If they both just keep their prices the same, they both enjoy higher profits than if they compete. If Jimmy were to open up a stand in his yard and sell lemonade for $.50 at no profit, Sally and Billy would quickly buy him out and return prices to $1. Further, they would both lower the quality of their lemonade, thereby increasing their profits, right up to the point at which they lose sufficient customers to cause a net loss.

In reality, the free market optimizes for the lowest quality at the highest price the market will bear to maximize profits.

When I lived in India, I often had to use a rickshaw to get around. The rickshaw wallahs would see that I was a Westerner and smarmily quote me exorbitant prices for a ride. Now, there were at least 100 wallahs waiting around with nothing to do, all perfectly able to take me. But if I went from one to another they would all give me the same inflated prices. Even if I simply left and walked the 5 miles, none would budge. In that free market, like most, businessmen would rather lose customers than lower their prices. The wallahs all knew as big corporations well know, that I would eventually have to pay their high fees to someone and that benefitted them all much more than undercutting each other.

The last people who should be fooled into believing that competition lowers prices are Walmart customers.  Walmart literally destroys all competition and then, as essentially monopolies in their markets, they provide the lowest prices to their customers. Where is the “free market competition” argument here? Monopolies clearly can do way better. They have huge purchasing power and don’t have to pay advertising overhead.

So it is with essential services like healthcare in America. Free market competition will not force healthcare companies to lower their prices, improve their quality, and sacrifice any of their profits. Competition inherently segregates risk pools which particularly damages this industry. Deregulation will only allow insurers to work together to maximize profits by lowering their costs and raising prices to the highest level the market will bear, which in the case of essential healthcare is cripplingly high.

What we need in healthcare is not deceitful free-market snake oil, but a healthcare monopoly like Walmart. We need public healthcare that can create the largest possible nation-wide risk pool, negotiate the best costs, and take all profit out of the equation. Our free-market system has a vested interest in maximizing profits over patient health. These interests are simply not compatible and never can be (further reading).

 

 

 

Why Wall Street Loves Trump

I hear that Wall Street is all excited about a Trump Presidency. They should be. I’d like to comment on this, but first let me admit that I have absolutely no qualifications to offer any sort of informed analysis. In fact I’m probably the least qualified financial analyst possible. As amazing as it may seem, I am literally an Economics 101 drop out.

How is it possible to fail one of the easiest undergrad filler classes you ask? Well back in Econ 101, the professor instructed us that we had to “play the game.” We were explicitly told not to consider any common sense, logic, or real-world experience while participating in his discussion sessions. We were admonished to simply play along and accept his premises as presented, however absurd they they may seem.

I had trouble participating in these discussions. In fact, at one point the professor called on me to select either option A or option B for some hypothetical scenario. I told him that I could not choose either one because they were both ridiculous. As this was not my first uncooperative infraction, he told me that I should either “play the game” or drop his course. I stood up, gathered up my books slowly, and announced that I chose option C, dropping the course. Then I took a long walk up the lecture hall steps and across to the back door to give my fellow students as much time as possible to consider what they hell they were learning in this idiotic class.

Although I never did “play the game” to the end to see how it all came together, I suspect that the professor never actually got around to showing how all of his ridiculous economic scenarios applied to the real world. I suspect that all of my former classmates came away only with the expected understanding of our crazy capitalist system, and with absolutely no recollection of the sanity that they were required to abandon in order to accept it.

Now most of us do accept as we are constantly led to believe by the media, that when the Dow and the Nasdaq are excited, we should all be excited. And here I am, without the insight gained by completing even Econ 101, epically unprepared to understand why we should all be excited by Wall Street’s enthusiasm for Donald Trump.

Yet it seems to me that Wall Street gets excited over one thing and one thing only, higher profits for shareholders. Profits are not increased by the things most of us want like more jobs, higher wages, better benefits, a cleaner and safer environment, or greater consumer protections. In fact profits go up most dramatically when these things can be reduced, circumvented, or eliminated completely.

Wall Street gets excited when businesses can replace jobs with machines or cheap overseas labor. They get excited when they can lower wages or benefits to increase profits for shareholders. They get excited when they can be shielded from corporate malfeasance or pollute our environment or bankrupt retirement funds to hand out executive bonuses. The markets go up and down all the time. Usually when they go up it means nothing good for the workers or for the consumer.

These are all things that Wall Street expects Donald Trump to help them do as President. Is it any wonder they are all excited?

wallstreetOne thing that Wall Street loves most of all are disasters. Disasters make bankers salivate. Life is full of its little ironies, and as it turns out I just moved away from New York City after 10 years of living literally on Wall Street. In another strange twist of fate, I worked on Church Street (I’m a devout atheist). Anyway, back on point. I used to meet lots of financial types. I remember after a tornado leveled some towns in the South, these guys were like kids in a candy store. They could hardly contain their enthusiasm over this disaster and all the new loans and sales it would create.

Make no mistake. The election of Donald Trump was a huge, mega-disaster. No wonder my former Wall Street neighbors are getting erections. Disasters create opportunities for massive profits for the already wealthy. But for all the rest of us? Well they are still just disasters. Maybe we all just need to forget reality and simply “play the game” when CNN Money and The Economist reassure us that Wall Street is bullish over a Trump Administration.