Posts Tagged ‘capitalism’

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It should perhaps come as no surprise that, as capitalism has been called into question and socialism generated increasing interest during the past decade, capitalism’s defenders have resorted to a long historical view. Look, they say, how capitalist growth has decreased poverty and led to improvements in people’s lives around the globe. Just stick with it and all will eventually be well.

That’s why, as Jason Hickel points out, the above infographic, based on sketchiest of data going back to 1820, is one of Bill Gates’s favorites. Or why Deirdre McCloskey never tires in scolding the critics of capitalism that “the Great Fact of modern life, the most surprising secular news since the domestication of plants and animals, is the rise of real income per head.”

The past two centuries of economic growth have done more to help the world’s poor than any activity by governments or charities or trade unions.

There are problem, of course, in the data—especially in basing the key series on an absurdly low poverty line of $1.90 a day.* Perhaps even more important, as Hickel explains, the numbers obscure the actual historical process:

that the world went from a situation where most of humanity had no need of money at all to one where today most of humanity struggles to survive on extremely small amounts of money. The graph casts this as a decline in poverty, but in reality what was going on was a process of dispossession that bulldozed people into the capitalist labour system, during the enclosure movements in Europe and the colonisation of the global south.

The masses people who were bulldozed into the capitalist labor system now produce and consume the immense accumulation of commodities that represents the growing wealth of nations around the world.**

But even as the percentage of workers living in extreme poverty has declined, especially in recent decades, they’re falling further and further behind the tiny group at the top. That’s because the incomes generated by economic growth on a global scale have been unevenly distributed.

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As the authors of the World Inequality Report 2018 have shown, while the real incomes of the bottom 50 percent of the world’s population increased (by 94 percent) from 1980 to 2016, they only captured a relatively small share (about 12 percent) of total growth during that period—while the world’s elite (whose incomes increased by 101 percent) captured more than twice that share (27 percent).***

What about those countries, such as China and India, where most of the decline in the population living in extreme poverty took place? There, the differences in total cumulative income growth was even more obscene. In China, for example, the incomes of the bottom 50 percent grew by less than 420 percent, while those of the top increased by 1920 percent. And in India, the growing gap between the bottom 50 percent and the top 1 percent is even more stark: just over 100 percent versus 857 percent.

That spectacular growth in inequality on a global scale is the part of the story the current defenders of capitalism such as Gates and McCloskey don’t want to tell. Yes, the percentage of the world’s population living in extreme poverty (at least according to conventional measures) has fallen. But that growing mass of wage-workers has been enlisted, forcibly or otherwise, in the project of producing a surplus that has been captured not by them, but by a tiny group at the top.

In other words, extreme poverty may have fallen but relative immiseration has proceeded apace—the result of a growing gap between those who have a lot and those who now have a little.

As I see it, declining poverty and growing inequality are two sides of the same historical coin of the growth of capitalism on a global scale.

 

*As Lant Pritchett has explained,

The exclusive reporting of international poverty based on the penurious “dollar a day” poverty line (morphed by inflation into the less lyrical “$1.90 a day” line) was a tool for “defining development down”. . .

A low bar poverty line necessarily treats both people just above the poverty line and people in considerable comfort and prosperity as “not poor” and hence necessarily creates false equivalences in which those just above and just below a poverty line were considered to be different (one “poor” and one “not poor”) but two people above the poverty line with very different incomes were treated the same (both “not poor”).

**I made much the same argument back in 2016:

global capitalism has changed over its history. At one time (especially in the nineteenth century), it meant industrialization in the global north and deindustrialization in the mostly noncapitalist global south (which were, in turn, transformed into providers of raw materials, which became cheap commodity inputs into northern capitalist production). Later, especially after decolonization (following World War II), we saw the beginnings of capitalist development in the south (under the aegis of the state, with a set of policies we often refer to as import-substitution industrialization), which involved a reindustrialization of the south (producing consumer goods that were previously imported) and a change in the kinds of industry prevalent in the north (which both exported consumer goods to the rest of the world, which after the first Great Depression and world war were once again growing, and often provided inputs into the production of consumer goods elsewhere). Later (especially from the 1980s onward), with the accumulation of capital in India, China, Brazil, and elsewhere, noncapitalist economies were disrupted and millions of peasants and rural workers (and their children) were forced to have the freedom to sell their ability to work in urban factories and offices. As a result, their monetary incomes rose (which is not to say their conditions of life necessarily improved), which is reflected in the growing elephant-body of the global distribution of income.

***And, for the middle 40 percent (mostly in North America and Western Europe), the growth in real incomes was much lower (only 43 percent).

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How else to put it? The levels of economic inequality in the United States are obscene.

According to the latest data from the World Inequality Database, the share of pre-tax income captured by the top 1 percent of Americans is an astounding 20.1 percent, while the bottom 50 percent are forced to make due with only 12.6 percent. And the distribution of wealth is even more unequal: the top 1 percent own 37.2 percent but the bottom 50 percent of Americans hold no net wealth at all.

Even Donald Trump’s Federal Reserve Chair Jerome H. Powell has warned that income inequality is the nation’s biggest economic challenge in the coming decade.

Powell and many others recognize that, if present trends continue—with corporate profits growing and the Trump administration in power—economic inequality is only going to get worse.

It’s no wonder, then, that Dani Rodrick argues that the Democratic Party will face a critical test in the next U.S. presidential election:

Will it remain the party of merely adding sweeteners to an unjust economic system? Or does it have the courage to address unfair inequality by attacking it at its roots?

Clearly, Rodrick reflecting on the poor showing of Hillary Clinton in the last presidential election, who promised to continue the policies of economic recovery under Barack Obama, and the fact that most of the proposals currently on the table are aimed at raising taxes on the rich. They don’t really get at the roots of the grotesque levels of inequality the U.S. economy has been generating.

The problem is, most of what Rodrick offers as an alternative agenda for “the Left” also fails that test. His plan for “inclusive prosperity” is confined to “productive re-integration of the domestic economy” (basically, encouraging large corporations to invest in their local communities), directing technological change (to help less-skilled workers), rebalancing labor markets (for example, by promoting unionization and raising minimum wages), regulating the financial sector (with higher capital requirements and tighter scrutiny), and electoral reform (such as more stringent campaign financial rules).

Now, there aren’t many on the Left—at least progressive thinkers and activists I talk to or whose work I read—who would be opposed to such changes. They would, indeed, improve the condition of the working-class and make it somewhat easier for the vast majority of Americans to make their voices heard.

But, by the same token, the kinds of policies Rodrick is putting forward do not meet his own test of attacking the problem of inequality “at its roots.”

The fact is, inequality begins where the surplus is produced and appropriated—in the factories, offices, and warehouses where most Americans work. Workers produce much more value than they receive in the form of wages and salaries, and it’s that surplus that is appropriated by their corporate employers to do with it what they will. Some of it is invested and the rest is distributed for other purposes—stock buybacks, mergers and acquisitions, salaries for corporate executives, and so on—which only serve to make the existing distribution of income and wealth even more unequal.

In other words, it’s that control over the surplus by a small minority of Americans that is the root, the condition or source, of the unfair inequality that characterizes the United States today. And there’s nothing in Rodrick’s set of policies that seeks to fundamentally alter or solve that particular problem.

Perhaps a month ago, when Rodrick first published his piece, he could claim to have been out front in the discussion—and perhaps he still is for mainstream liberals. But already the terms of debate, for the Left, have bypassed him and moved on. Now, politicians, activists, and journalists are asking new questions and posing new solutions—under the rubric of socialism.*

People in the United States often ask whether or not we should keep the socialist label. My answer is an unequivocal “yes,” for two reasons: one is that it ties contemporary discussions and debates to a long historical tradition of criticizing existing conditions and proposing alternatives; second, socialism is based on a recognition that the problems workers face are based on and stem from an “unjust economic system,” and “merely adding sweeteners” doesn’t represent a solution.

The current discussion of socialism is only in its infancy, and it’s impossible to tell at this point where it will end up. But already, in putting issues like a Green New Deal and economic democracy on the table, it is much close to attacking the roots of unfair inequality in the United States than anything mainstream Democrats or Dani Rodrick have to offer.

 

*Even “On Point,” a radio program produced by WBUR in Boston and broadcast every weekday on NPR stations around the United States, recently hosted an episode on socialism.

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If you listened to or read the text of President Trump’s State of the Union speech Tuesday night, you might have been surprised by the explicit mention of socialism.

Here, in the United States, we are alarmed by new calls to adopt socialism in our country. America was founded on liberty and independence — not government coercion, domination, and control. We are born free, and we will stay free.

Or maybe not—since just last year the Council of Economic Advisers apparently found it necessary to issue a report, on the cusp of the midterm elections, to push back against the fact that “socialism is making a comeback in American political discourse.” And Fox News is engaged in its own campaign against socialism, since “support for Karl Marx’s collectivist ideas is steadily increasing.”

The irony, of course, is that Trump and his principal media outlet are in part responsible for the growth of support for socialism and for policies that are often associated with socialism (such as raising taxes on the income and wealth of the rich).* Claiming that “our country is vibrant and our economy is thriving like never before” and then scapegoating immigrants in “organized caravans [that] are on the march to the United States,” while ignoring the effects of the largest tax break for large corporations in U.S. history—which, while boosting economic growth, executive salaries, and the stock market, leaves American workers further and further behind—makes the case for socialism even more compelling.

But interest in socialism was growing even before Trump took office, especially among millennials. The question is, why?

As I’ve noted before, the members of Generation Y are generation screwed, with lower earnings, fewer jobs, more part-time employment, and a higher unemployment rate than any other generation in the postwar period. As a result, they’re more likely than their elders to think of themselves as working-class and less likely to identify as middle-class.

For Malcolm Harris, the problem is exploitation:

This is a fundamentally capitalist story. Workers have always been exploited, but that rate of exploitation. . .is increasing exponentially for millennials.

What Harris is referring to is the growing gap between productivity and workers’ wages. And it really doesn’t matter how that gap is measured.

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Harris refers to the numbers produced by the Economic Policy Institute, according to which”net productivity” has grown 6.2 times “hourly compensation” since 1973.

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Alternatively, we can look at the gap between real output per person in the nonfarm business sector and real weekly earnings, which has increased by a factor of almost 10 since 1980.

Both measures point to increasing exploitation—to a growing gap between what workers produce and what they receive back as their pay. And it’s that exploitation—which neither Trump nor, for that matter, “conventional American economists” want to talk about—that is generating interest in socialism today.

Workers, especially young workers, are suffering the consequences of increased exploitation and beginning to look beyond capitalism, to different ways of organizing the U.S. economy and society. Socialism, since at least the end of the eighteenth century, has been the name for those alternatives.

Why is there growing interest in socialism in the United States today? The answer is clear. It’s capitalist exploitation, stupid!

 

*Such policies now include abolishing billionaires. However, Farhad Manjoo, who tried to sort out good from bad billionaires, never asks where those billions come from.  If he did, he’d discover the ways an increasingly unequal and unjust distribution of income is tied to—as both condition and consequence—a fundamentally unequal and unjust structure of production.

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Special mention

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California Wildfire Victims As Martyrs to Capitalism

Special mention

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Cartoon of the day

Posted: 19 November 2018 in Uncategorized
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