Category: Class Warfare Page 22 of 36

Uber has become like Walmart. Drivers now make less than the minimum wage when we do the math,” said Abdoul Diallo of the newly formed Uber Drivers Network, which opposes new lower fare rates set by the company.

The high-tech livery-service firm recently slashed passenger fares to compete with car services such as Lyft, Gett and regular yellow cabs, a move that drivers say takes money out of their pockets.

Some Uber drivers claimed fares — and their paychecks — had been chopped 25 percent in recent months.

Other drivers said they make less than a living wage, just $7 to $12 an hour after expenses and fees — far less than the $25.79 an hour Uber promises drivers can make by joining its fleet, protesters said.

Drivers began complaining that Uber was taking them for a ride back in July, when the company temporarily launched its less-than-taxi-rate Uber X service.

In late September, Uber extended those cuts permanently — outraging drivers.

Uber treats drivers like private contractors, saddling them with insurance, gas and vehicle expenses but the company has total control over fares.

In its essence the sharing economy is similar to offshoring and outsourcing in how it works.

Let us establish the basics: high income for individuals, absent government fiat, is based on a tight supply of whatever it is they are selling, and nothing else.

This can be a generally tight labor market, as in the late 90s or most of the years from 45 to 68, or it can be in a specific area. If you have an occupation where most people can’t compete, you make more money. This could be because you have skills they don’t have, it could be because of artificial scarcity imposed by regulation (most professions which require licensing), it could because of geography, and so on.

Hotels make decent money because any Joe or Jill can’t sell their rooms. Taxi drivers (or, more accurately, those who own the licenses) used to make decent money because any schmo with a car couldn’t compete. And so on.

In manufacturing terms, when those jobs pretty much had to be in a first world country, and the government enforced the ability of unions to strike by forbidding replacement workers, assembly line workers made good money.

So the sharing economy increases capacity. It increases supply to areas which had constricted supply.

Supply increases, and the profits and/or wages of those in the old sector go down. Spotify claims artists receive 6 cents to .84 cents per thousand plays. That means 1 million plays will get you 6K to 8.4. But there’s reason to doubt those numbers, Swift has refuted them, and earlier reports were lower as well, plus Indie labels get less.

All of these platforms: Spotify, AirBnB, etc… take huge margins. Spotify takes 30%. This is in line with what App Stores take, again, 30% being standard.

That number is one we’ve become numb to, but it’s essentially oligopoly or monopoly profits, a huge distribution rate. If you add that much to the cost of a product, it will sell far fewer copies and make far less money. That percentage comes directly out of profits.

In most cases, one or two sites control most of the business. Maybe three. That makes them oligopolies or monopolies. You go through them, or you don’t make a living, and once they are established, they are essentially impossible to dislodge.

In the fifties or sixties this would have been recognized as clear abuse of monopoly or oligopoly power and they would have been busted up or regulated.

But they aren’t. Instead what they do is lower prices, vastly concentrate earnings (30% is a lot, and makes you billions if you control any reasonable platform, even if that billions is from equity), and they lower wages and earnings to everyone who doesn’t control the platform.

Now the sharing plaftorms would be ok (minus the oligopolistic abuse) in a genuinely booming economy where there genuinely weren’t enough workers, and where companies were competing for workers by increasing wages and treating them well (think how programmers were treated during the late 90s internet boom.)

Bring the extra resources online, let people earn some extra cash by driving occasionally, and move people over to the parts of the economy that are booming and need workers.

We don’t live in that world. We haven’t, absent a few years, since somewhere between 1968 and 1980.

Instead what the sharing economy does is lower the value of specific types of labor and assets, allowing more people to compete, but reducing the actual earnings for those who are in that market.

Reduced prices might increase standards of living, and in any single case they do. The number of musicians who can’t earn a living under the new regime (not just Spotify) is much less than the number of people who can consume much more music. People who want to be driven prefer to pay less to Uber. AirBnB makes it cheaper to travel. Etc… There are genuine gains.

But added to offshorng, outsourcing, oligopolistic storefronts like AppStores and Amazon, and with increase parts of the economy moving into the sharing economy, while in the meantime older jobs have been deskilled (all fast food is deskilling of cooks jobs, for example), and you reach a point where “there are hardly any good jobs”. Prices are not dropping faster than good jobs.

The other effect of this is that because many of these trends are naturally oligopolistic or monopolistic (even fast food is, if you take a bit of time to think about all the small business restaurants they put out of business), they tend to concentrate wealth and income radically. That leads to capture of the political process by the rich (yes, even more than already), and that leads to policies like, well, turning anti-trust law into a dead letter, or endless copyright extension, or vast numbers of anti-union policies.

As Stirling Newberry once pointed out to me the more humans are fungible; that is one human can replace another and do whatever that person is doing, the less they have value. That doesn’t mean that fungibility is necessarily bad, it increases efficiency, can increase economic capacity, and so on, IF we choose to distribute the gains properly. But absent trends moving in opposite directions it decreases the amount everyone except those who control the points of coordination of the economy make while vastly centralizing wealth, income and power.

The Sharing Economy really isn’t. Sharing is the wrong word. And for now, while some of us many win and get income we need for it, overall we’re losing.

The way we distribute resources; the way we distribute necessities and the good stuff of life is going to have to change. Ultimately a market which clusters into oligopolies; deskills jobs; makes humans interchangeable; is not one which can produce widespread prosperity, let alone well being. If we continue to distribute goods and power primarily by market success, even if we manage a fix, it will only last a few decades at most—and there is no guarantee, this time, that we will manage a fix.

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The Technology of Violence and its effect on prosperity and freedom

By Ian Welsh

On October 21, 2014

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A Greek Phalanx

Prosperity is two things:

1) How much you can produce with your technology and social organization;

2) Who gets how much.

The second is determined by a number of factors, but the simplest is the structure of violence. Those who aren’t good at fighting, don’t get as much of the surplus created by society as those who are. Who is good at violence is determined to a remarkable extent by the interaction between the technology of violence, geography and the everyday life of different classes of society.

It has long been noted that in polities where warfare requires a large, organized chunk of the population, more widespread affluence and democracy are more common.

So we have Athenian Greece, where free males fought either as infantry or in the fleets, and where the franchise extended to those who fought. We have Republican Rome, whose legions were originally raised from the citizenry, and which became an Empire when the armies were no longer raised primarily from those close to the city of Rome and when soldiers became more loyal to their generals than to the state. We have the Swiss Cantons, where men fought as close order pikemen and were free, while most of the rest of Europe was ruled by mounted nobles and most ordinary people were serfs. And we have the age of conscript armies in the 19th and 20th centuries, also coincident with a vast increase in democracy and prosperity.

Note that in many of these cases democratic rights extended almost exactly to the fighting class. Women in Switzerland received the vote later than in most of the European subcontinent. Athenian women were infamous for the lack of rights, and the same is true of Republican Rome at its height: the society which defined patriarchy. In Rome there was a separate, higher class, the Eques (Equestrians) based on having enough money to afford to fight on horseback.

All of these places were well known for their prosperity in the heyday of their use of citizen armies. Men too poor to take care of themselves properly (by which we mean eat a nutritious diet) make poor soldiers, and just as poor rowers in a galley navy. There were always rich, and Republican Rome can be understood as partially oligarchical and partially an aristocratic oligarchy depending on what time period you’re looking at, but still, Romans were free, had access to relatively reliable law, and were prosperous.

When they stopped being prosperous as a group, when inequality soared, the Republic went through a series of convulsions (recognized as class wars even at the time), and eventually ended in rule by an Emperor.

The relationship between fighting as infantry, even close order infantry, and prosperity and democracy is not a sure thing. Many of the Greek Polis were not democracies and had frightful inequality, Sparta most famously. Rome fought using close order infantry well into the period of the Emperors, and so on.

Nonetheless, if the method of warfare involves men who must cooperate together and trust each other implicitly, they are much more likely to be free, prosperous, or both. Saxon and Norse England, before the arrival of the Normans is a place where ordinary people have far more rights than the Normans (a Norse offshoot) allow (in part because of Norman forts, meaning that local revolts can rarely succeed, and in which a small number of men can hold off a vastly largely number. It is largely because of forts that Wales, for example, is permanently subdued.) The wealth is also much more evenly spread in pre-Norman England. English history books often start with the Norman conquest, it should be understood that, overall, that conquest was a disaster for the inhabitants of England.

The price of armaments is one of the key factors in prosperity and democracy. If a group of individuals is effective and can win using cheap armaments over those using expensive armaments, again, expect more widespread prosperity and greater rights for the poor. The cutoff point for effective armaments if the cutoff point for widespread prosperity in most cases. If a rifle with a bayonet is all someone needs to be effective, expect the franchise to spread. If it does not spread, expect the first nation to spread it, to be wildly successful on the battlefield: the French revolution is the paradigmatic case.

Of course reactionary regimes can conscript too, but Germans in the late 19th century are more prosperous, even the poor, than those before widespread conscription.

If, on the other hand, effective warfare requires significant wealth, as with Medieval knights, who require a multitude of serfs to support even one fighter, well, expect that those who aren’t good at fighting won’t be prosperous. People today don’t realize how many peasant revolts there were. What is instructive about them is the slaughter involved: the slaughter of serfs and peasants. Often huge rebellions would be put down with only a handful of casualties. Knights were very good at killing peasants armed with makeshift weapons.

If you can kill them and they can’t do anything about it, how much of what they produce is really theirs?

How armaments are made also matters. Even cheap weapons, if they must be made in centralized factories and cannot be made by individuals and small groups, will not be as useful to widespread prosperity as otherwise. The Jeffersonian style yeoman farmer society takes a serious blow in the war of 1812, when it becomes clear that the British centralized manufacture of weapons is more effective than making weapons locally.

The technology of violence interacts with the terrain. Note that in three of these cases we are talking about societies which were born in hilly terrain. Greece, Rome and Switzerland are not flat land. Cavalry is far less effective. Cities have mobs that are effective, even communes, in the Middle Ages, because of how they are laid out. Not only is cavalry useless inside a city, but the narrow streets mean that men can only fight one or two abroad, so even organized infantry has very little advantage in a city. The great broad boulevards of Paris, the wide streets of other cities were created first not for the convenience of the citizens, but so that they could easily be killed in large numbers if they revolted. Medieval cities were free in part because they were very hard to conquer: fortifications, enough money to equip soldiers and streets in which a knight could easily be hauled from his horse and have a knife shoved into the eye-holes of his helmet. And, of course, cities paid a great deal of money for the privilege of being free, often directly either to the king or the equivalent of a Duke; thus putting them under the protection of the most powerful noble in the realm.

Terrain where cavalry can operate freely; where infantry can be bypassed, tends to either be ruled by states or, historically, by nomads, depending on whether it is good for growing crops or for pasture.

Nomads and barbarians, but especially horse nomads, should also be discussed. Much of history can be viewed as a cycle of Agrarian civilizations expanding, being conquered by barbarians or nomads, expanding till they have no surplus due to administrative overload, then being conquered by barbarians or nomads again.

From a population point of view, this is absurd. The Manchu, when the conquered China, probably had 1 to 2% of the population of China. The Mongols were a miniscule fraction of the population of the territories they conquered. But Barbarians have something going for them; every fighting age male who isn’t a thrall or slave is a warrior, and often a very good one. It has long been noted that healthy rural or wilderness people make the best soldiers: Roman recruiters wanted the sons of free farmers. Canadian and Australian soldiers in WWI were far better than English soldiers because they grew up on the farm, well fed as a rule, and shooting a gun.

Unfree or other impoverished rural types are generally not much use in a fight. If they didn’t have proper nutrition as children, they’re worthless. But free rural males are tough, and in a culture where they use weapons, already skilled, generally to a level no “basic training” for conscripts can possibly reach. All basic training teaches such people is how to fight as a disciplined group: the weapon skills are already there.

The Mongols hunted in large, indeed army sized groups, driving the prey before them. They were expert horsemen, master archers using one of the best bows in the world, and they were used to working in organized groups. The Mongols, it is said, hunted like it was war, and made war like it was a hunt.

The specific technology they used was also perfect in an important sense: horse archers choose their battles against slower armies, and can withdraw effectively taking few losses. If the Mongols didn’t want to fight, they didn’t. They only fought, during their heyday, when they had the advantage and as a result they racked up victory after victory.

The everyday structure of Mongol life thus provided most of what they needed to be extraordinarily effective soldiers: it took only uniting them and making some strategic and tactical doctrine changes to turn them into a force that conquered the largest land empire in history, and allowed them to conquer nations which were far, far more populous than they. Note, again, however, the interaction of terrain and technology: the Mongols’ initial conquests were generally in relatively flat lands. (Though not exclusively. Genghis Khan was the last person to really crush the Afghans, after all.)

So we have our trifecta: the Mongols had excellent technology (bows, horses and stirrup); the terrain was suited to their style of warfare; and their way of life made them tough and taught them almost all the skills necessary to be effective soldiers.

BOOM. World Conquest.

Another major factor might be called “not worth conquering”, or (related, but not identical) “area denial”.

This is an important consideration in today’s world. The Coalition attack on Afghanistan was all very fine and good, and they easily conquered the cities, but they couldn’t control the countryside. Guerrilla warfare, to be sure, has been used for millennia (the Romans fought a nasty guerrilla war in Spain.) But modern technology, specifically explosives in the form of mines and their easily made irregular counterpart the IED, make it easy to do area denial. NATO troops in Afghanistan and Iraq had their mobility and their ability to control the country severely curtailed: they couldn’t drive their vehicles down most roads without risk.

The Taliban and the Iraqi freedom fighters thus could not defeat the US army in open field battle, as a rule, but they could bleed them and deny them the fruits of conquest. Much of Afghanistan could not be effectively taxed by the puppet government in Kabul; the same was true in Iraq. In the end, in Iraq, the US military had to pay militias in order to be allowed to withdraw.

This, then, is the question of how effective irregular warfare is. How much loss can under-equipped troops inflict? An American infantryman is expensive; an American tank is more expensive. An American helicopter pilot is precious. An insurgent with an grenade launcher is not. Your expensive troops may inflict higher casualties on the enemy, but they are more expensive and harder to replace.

If the Chinese had been able to reliably inflict one loss on the Mongols per five Chinese losses, they would have won, at least in the early part of the war.

For much of history many areas were simply not worth conquering: the natives were dangerous and had no wealth that anyone else wanted. The fall of the British Empire can be viewed in part as “why are you conquering huge chunks of the world that offer nothing worth the cost of subduing and then administering them?”

The more the locals can resist; the more they can have a good life without creating portable wealth; and the more they are lucky not to be sitting on gold, silver, or oil, the more likely they are to be left to their own affairs. If the wealth of a nation is its people, profiting from its conquest is tricky: if its wealth is a resource that a few people can extract, profiting from conquest is easy.

Being conquered, some exceptions aside, is rarely good for those conquered. India before the Mughals and the British was one of the most prosperous areas in the world. Afterwards it was known for its poverty. India had more manufacturing ability than the British before the British started conquering it, for example. And British India had frequent famines, while independent India does not.

For those involved, this can be a lose/lose proposition: Iraq has been devastated. Afghanistan has been devastated. Some Americans definitely got rich (mostly by stealing from the American government through vast corruption); but both societies lost. Nonetheless, those who will not resist, gain only and exactly what those who win will allow them to have. Republican Romans were not taxed. Their conquests were.

The effectiveness of personal violence also matters. The concealed dagger, the concealed revolver, make assassination possible, even easy. They restrict the mobility of those who oppress. It is not accidental that Nixon, who is President when American inequality is still low and world inequality is declining, goes to see protestors at night with only one aide, and no bodyguards, while Clinton, Bush or Obama would never consider such a thing and Washington DC is disfigured by huge concrete barriers; constant weapon checks and so on.

The more ruling requires the rulers to actually be amongst the ruled, the more the effectiveness of personal weapons matter. Obama can rule behind a cordon of guards; rulers who need to be in contact with the people cannot.

Finally we come to the balance of terror. Weapons that devastate are weapons of terror. Aerial bombardment is about terror, drones with hellfire missiles are about terror. “We can kill you, and we can destroy your infrastructure, and there is nothing you can do to stop us.”

Terror begets terror. Those who are terrorized (and bombing is a terror weapon, let no one tell you otherwise) begets attempts to retaliate.

Terror is remarkably ineffective against non-elite societies until it scales. If you can destroy entire populations, your terror will work. If everyone fears your kidnap and torture squads; it may work. But it doesn’t win actual wars: even World War II strategic bombing was found to be largely ineffective at stopping German production, what it was good at was killing large numbers of civilians.

What terror is good at is dealing with out of touch enemy elites. If you can swoop in, kill the elites, and they cannot stop you, they are more likely to give you what you want without ever having to fight. This is also what conventional military supremacy is good for. Imagine the following scenario: George Bush invades Iraq, publishes a proscription list, and elevates a competent Colonel to be the new leader of Iraq and leaves within 6 months.

That would send a message to elites with ineffective conventional armies all through the world: “we can kill you, personally.”

It does not work against highly motivated ideological organizations. Killing the #2 man in the Taliban more times than I can remember has not stopped the Taliban. Vast waves of assassination throughout large parts of the Muslim world have not stopped the rise of al-Qaeda affiliates or similar organizations. Terror works against people who have something left to lose, or who value their life more than anything else. Against those who are willing to die for their beliefs and who lead an organization or society which agrees with them, it matters little: they will be replaced and their replacement is just as likely to be more competent than less.

But if your elites fear for their lives and do not have strong beliefs they are willing to die for your society will be run, in effect, by the foreign nation which they fear, and while your elites will probably do well enough from bribes, ordinary people will not.

From the point of view of those with an advantage in terror, then, it is best used either as wholesale slaughter, or as very occasional examples. Once people have nothing to lose; or once you have radicalized them, it is almost completely ineffective, and can even be counterproductive, with each new atrocity simply making the masses more determined to resist.

If terror is your weapon, use it sparingly, or make sure your enemies’ ability to resist in destroyed utterly.

Wars of terror are devastating to prosperity. Waves of torture; mass bombing campaigns; serial assassination, destroy either the infrastructure of society or the cohesion and trust required for prosperity. If one side feels it can destroy the other with impunity, you wind up with Gaza.

Those who want prosperity must be able to retaliate effectively. If you can be fined millions for “stealing” a few dozen songs; if you can be jailed for, in effect, going bankrupt (the case in America today); if the police can easily defeat the masses; then those who control government and thus control the police can and will take as much of the surplus of society as they want. Those who doubt this proposition are invited to note that the top 10% of society (really the top 3% or so) in America are now taking more than the entire gains of the recovery while America has created a paramilitary police; and an unprecedented in American history surveillance network and has put in prison the largest % of its population in history. These three facts are not unrelated.

Concluding Remarks

There are many in the world today who want to change technology to make the world a better place. If they are concerned with prosperity for the masses let me suggest to them this: cheap weapons that make groups of men and women effective fighters; which require them to trust together and work in groups; are in the long run likely to lead to prosperity. Nor can this empowerment be in area denial alone. IEDs are great at ensuring the writ of the government cannot extend to an area: but they destroy prosperity. Technologies like drones (and effective ground combat robots are about 10 years out), will do the opposite.

By itself technologies that empower organized groups are insufficient. But they are virtually a requirement for widespread prosperity. Without them those who have the advantage in violence will use it to take what they can, and those who cannot resist will live in the conditions their superiors allow.

(Update: reference to droit du seigneur removed.)

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Japanification and the end of the American Dream

By Ian Welsh

On August 14, 2014

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Stirling Newberry and I have been writing about Japanafication for years—on blogs, at least since 2004.

Those of us who are old enough remember when Japan was THE miracle economy. Technologically advanced, vibrant and rich. It was eating America’s lunch, and most other countries. For peak alarmism at this fact in a fictional form, read Michael Chrichton’s Rising Sun.

Tokyo real estate was worth more than the entire world’s real estate combined.

Then the bubble crashed. Japanese policy was to protect the banks, and to bury the bad loans on the books. They undertook literally decades of stimulative policy, mostly pouring useless concrete (exactly the wrong thing to do unless your country really lacks that sort of infrastructure, which Japan did not.)

To put in terms familiar to my readers, they extended and pretended.

Japan went into semi-permanent stagnation.

We have, now, the news of a quarter drop in GDP of 6.8% annualized for the last quarter. (This is blamed on increased sales taxes, but it was coming anyway.)

The long stagnation is over (it’s been over for a bit). Japan is actually in decline.

This is important because Japanification was always the plan for the US after the bubbles: extend and pretend, stagnate wages and employment. Pretend.

But there were significant differences between the two countries. Japan started with massive savings and a huge trade surplus. It is now in trade deficit and savings compared to debt are way down. Economic equality was relatively high, as well, spreading demand.

America came out of the financial crisis with a trade deficit, a pathetic savings rate and massive inequality. This is why I predicted that Japanification would not work in the US. It could not, because there was no saved fat to be used to create the long bright depression the Japanese had.

This brings us to stimulus and development (not just for developing countries). The money must be used not for pork projects with no follow on, but to create new industries or to bring money off the sides into the economy. Pouring concrete (and not even bothering to shore up nuclear reactors in areas which were not electorally viable) was pointless in Japan. Buying bonds is pointless and even harmful.

Likewise you cannot have real open trade flows and expect to keep whatever you are building. You build it, you make it work and once an industry is systemized, it can be moved to a low cost domiciale. It takes deliberate government policy to prevent that.

Monetary policy in Japan could never work, because the money went to the wrong things, and much of it immediately decamped overseas in the so-called carry trade—borrow low in Japan, buy securities somewhere else where they had a higher return.

All of this should be obvious and uncontroversial. It is not, it flies directly in the face of modern neo-liberal theory and it is that theory, in the face of decades of failure, that the Japanese followed.

The human capacity for ideologically driven stupidity and atrocity is endless. (Those who do not believed me are invited to study Church history and its effect on society from 1000 AD to 1900 AD or so.) People will ignore the evidence in front of their eyes, years of failure and continue doing the “safe”, “orthodox” thing no matter what the results. This is true even for well-meaning people.

Of course, in the US, Japanification has a US twist: it massively increases the wealth of the already wealthy, through unconventional monetary policy. American leaders are far too greedy to make Japanification work: any surplus, or room to lend, or room to print money, must be given away to rich people as quickly as possible.

I point out, finally, that the first sin in Japanification was buying the bad loans. This was a huge mistake in the US too, bailing out the banks and not forcing them and their share and bondholders to take their losses was the main mistake of the financial crisis. Yes, things might have been worse if the US had done so (though steps mitigating the hit on the regular economy would have been easy enough to take with the 4 TRILLION dollars used bailing out rich people), but even so, the US would have recovered better afterwards.

Instead the US has an economy in which 90% of the population has seen an actual decrease in income and wealth, while 10% has seen an increase: with the 1% and the .1% and the .01% benefiting most of all.

Japanification was the plan for America. It isn’t working, it could never work, but the policies in place are nonetheless doing what is most important to their architects: they are making the rich richer, and everyone else poorer and doing it quickly.

The Bush years were the long suck. This is the deep dive, and remember, the US isn’t in recession yet (though it is in depression). The pain when it happens (and absent nuclear war, there is always another recession), will be unbelievable.

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Yellen tells American Industry not to produce jobs or good wages

By Ian Welsh

On July 16, 2014

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There is no other way to read this:

Federal Reserve Chair Janet Yellen said U.S. labor markets are far from healthy and signaled the Fed will keep monetary policy loose until hiring and wage data show the effects of the financial crisis are “completely gone.”

Look, why would those who hire people want easy money to go away? They don’t. So if giving people good wages and employment will mean the Fed tightening, they have every incentive not to do so.

The actual way to do it is to say “this policy is not working. If it does not show progress, we will cancel it.”

If what you wanted was high wages and low actual unemployment.

Which isn’t what Yellen wants.

The Result of Austerity and Neo-Liberalism is the Rise of the Neo-Fascist Right

By Ian Welsh

On May 27, 2014

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includes, as expected, the rise of the neo-fascist right. The UK Independence Party and France’s National Front won national elections to the European Parliament.

This doesn’t mean they would win national elections proper, the EU vote is often a protest vote, but the results are still impressive.

This the natural reaction to austerity. When times get tough, and when the “mainstream” parties have no answers which work, people will vote for alternatives. In Greece, to the Greek’s credit, this was SYRIZA, an actual left wing party (though the fascist Golden Dawn party did do reasonably well).

When I was a child, living in the city of Vancouver, I told my father I didn’t see a lot of racism. I’ve always remembered his response “wait till times get bad. People will hate those who are different.”

My father was a child of the Great Depression.

The neo-liberal left of Europe and North America offer no solutions. They cannot offer solutions, it is not possible under neo-liberalism to fix the problems neo-liberalism has created: they are a result of neo-liberalism’s genuine beliefs about how the world economy should be run.

You can not, under the neo-liberal model of globalization, tax the rich effectively: they can go somewhere else. You cannot hold wages up, because jurisdictions can always be played against each other. You cannot fix the environment and stop the mass wiping out of species and the probable death of a billion humans, because jurisdictions can be played against each other. That countries no longer produce the majority goods they need themselves, nor in many cases even the food, means jurisdictions cannot unilterally do the right thing, even if they wanted to (which they don’t.)

Because the oligarchs also control the means of ideological dissemination, you also can’t effectively communicate either the problems or good solutions. Because the oligarchs control the means of political production (ie. the process of producing and nominating political candidates), you can’t get into power the people who would actually want to change the neo-liberal political order (and if by some miracle you could, expect them to be treated as Argentina or Venezuela have been treated or destroyed as Howard Dean was.)

Neo-liberalism is an effective ideology and set of policy prescriptions: not because it produces good outcomes for the majority of people (that’s not its purpose), but because it creates a constituency (oligarchs and their supporters/retainers) who are able to maintain it in power.

All ideologies eventually come to an end, however. The oligarchs hate real left-wingism far more than they do fascism. They have crushed the left. Because no new coherent ideology can arise due to oligarchical control over the mechanisms of dissemination, all that remain are old ideologies.

Given no real and viable left-wing parties to vote for; given the failure of what they are told are left-wing policies (as with Obama being called a left-winger when his economic policy has been to give trillions to oligarchs); people will vote for the only other option: the hard right—the neo-fascists.

They are, at least, against the status quo. The UK-IP wants to leave the EU. They want less “free” trade. And so on. Given no other option for actual change, people opt for the parties actually offering it, even if those parties are noxious.

And so, the hard right rises because of the failure of the so-called center-left, which is not left wing at all, but is for more slightly less cruel neo-liberalism.

But neo-liberalism cannot be made kind. It is antithetical to one of the fundamental purpose sof neo-liberalism, which is to drive down wage rises and inflation by playing jurisdictions against each other.

And so the hard right rises.

Remember, the economies in Germany and Italy under Hitler and Mussolini, for ordinary people, improved immensely. (Unless you were a Jew, gay, a socialist, a gypsy, etc… But that’s a price those who won’t pay it, are willing to pay.)

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Why Nations Can’t Resist Austerity

By Ian Welsh

On April 25, 2014

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Free trade, as practiced, is designed to destroy local autonomy by making nations dependent on foreign goods, and by removing decision making from democratically elected bodies and pushing them to transnational tribunals, secret courts and laws which cannot be changed without opting out from treaties, something most countries are reluctant to do, because they need the trade once they are enmeshed.

Keynes believed that most production of basics should be local: you should manufacture most of what your country needs, in your country. You should also, ideally, be able to feed your own population.

If you can’t make what you need or what your people (and more importantly, elites) really want, then you’re screwed. In the modern world you need hydrocarbons, you need food, and you need the machinery which turns hydrocarbons into the industrialized lifestyle.

Your prosperous citizens probably want food your country doesn’t produce: summer vegetables in winter, possibly meat you can’t provide in large enough quantities, and so on. They want electronic goods like smartphones that due to patents are quite expensive, and which you probably can’t make domestically.

Your elites want a vacation in Paris, a home in London, a German car, a French mistress, a New York Apartment, and a variety of luxuries that their own country doesn’t make.

If you want or need these things; if you do not have a taste for what your country can produce, in terms of basics and luxuries; if you do not ensure your country can feed itself, generate electricity and make cars or other forms of transit, you MUST do what those who control the trade regime want you to, or you will find yourself cut off from all these things.

Distributed production of necessities (which includes basic lifestyle goods and luxuries and machine goods) is anti-democratic and anti-national control in a world where the primary decision making units which are amenable to pressure from the commons, whether democratic or not, is exerted almost entirely on national and local units.

If you want to not do austerity when the Troika demands it, you must be in a position to tell the Troika to go stuff itself. If you have made yourself vulnerable, by losing your ability to feed yourself; by not developing local industry or exporting it; by your citizens acquiring a a perceived or real need for foreign goods; or by your local elites wanting to be “transnational elites” who want foreign luxuries and who feel as at home in Paris, New York and London as in their own country, then you cannot refuse to do what those who control the trade and international monetary regime tell you to do.

This is always the devil’s bargain offered in international regimes: “you can get all the stuff we have if only you open up”. It’s true, and for many countries it works for a while. The less you had, the shorter period it works for (countries who only have to be convinced to give up their ability to feed themselves by switching to cash crops and forcing subsistence farmers get a few years), but once you’ve given away your autonomy, the deal will, at some point, always turn bad. Those with the whip hand, will always eventually drive you down unless you have as much power over them as they have over you.

And knowing that your elites are no longer yours, but theirs, they will always find someone to do it for them, because your elites will be eager to sell you out for the flat in New York, the vacations in the south of France, the German automobile, the French mistress, the Swiss boarding school for their children, and for the fine luxury goods their own country cannot make.

If you get yourself into this position, you must overthrow your elites, and you must figure out how to become independent again. You must make deals with other blocs: the Russians and the Chinese, for the transition period, and figure out how to move your production of what matters back to local, and if you no longer can, how to feed yourself. You must inculcate in your elites and peoples a desire for what you make locally – local lovers, the food of your nation, the luxuries you can produce.

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The Rapid Destructon of Countries

By Ian Welsh

On April 14, 2014

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My regular readers have no doubt noticed my near-obsession with the Ukrainian crisis. Part of it is the risk of real war, but most of it is that the Ukraine is yet another country being destroyed. Even if it had been kept together, even if the Russians had taken the Maidan coup sitting down, the coup signaled the Ukraine’s destruction, because it meant that IMF austerity, meaning slashing pensions 50%, increasing gas prices by 50%, selling off the industries worth selling and the agricultural land which is the most valuable thing the Ukraine has, would occur. Massive debt would be piled onto Ukraine, at higher rates than Russia was offering, and the economy would be looted.

Since 9/11 we have been destroying countries at a ferocious rate: Iraq, Iran (sanctions there are brutal), Libya (far better off under Qaddafi), Syria, Southern Lebanon (their industry destroyed by Israel in 2006). After the financial crisis Portugal, Spain, Greece, Ireland, Italy, Cyprus to a lesser or greater degree. Even core economies like Britain and the US, while not technically in recession, are gripped by what is a long Depression, with real standards of living for median individuals dropping, health metrics dropping and employment and wages never recovering to pre-crisis levels. Egypt has been turned into an even worse despotism than under Mubarak, Turkey is sliding down the road to an elected kleptocratic dictatorship, Thailand is in permanent turmoil.

To be sure, some have been destroyed militarily, some by internal political strife and others by austerity but the collapse or decline is clear in all cases. The so-called Arab Spring was to a large extent caused by the financial crisis and the soaring food prices which came in its wake. Syria was deliberately destabilized by the West, and as bad as Assad is (he appears to just love torture), the situation is worse under him than before. Qaddafi, likewise no Saint, ran Libya better than the current near anarchy.

Though not as bad, the austerity driven destruction of countries has been even more common. Austerity is crazy, it says “take on vastly more debt and cut spending”, but what happens is that the economy contracts due to the reduced spending, so that the debt becomes even more injurious, and the country then has to borrow even more money. Greece is more in debt, with a smaller economy, than when the Troika started “helping” them.

This destruction is done for the benefit of various elites: the south of Europe has been shoved into poverty so that financial elites didn’t lose their money, and so that they can make even more money off loans effectively guaranteed by the IMF, ECB and northern European governments.

The correct thing to do, of course, was to force financial elites to take their losses, toss those who had engaged in fraud in jail (which is to say almost all of the executive class), and bail out ordinary workers. The ONLY country to do this was Iceland.

Our current world system destroys countries. And it is destroying more and more. It drives their populations into penury, it takes whatever they have and distributes it to oligarchs, and if a country irritates our Lords and Masters too much, it will be destroyed by economic sanctions or direct or indirect military force.

This is all of a piece: the reason food prices are so high is because of financialization: because all the money has flooded to the top, and there is no money to properly oversee expansion of agriculture and to subsidize food (which is far cheaper to do than the bailouts were, so it’s not a case of being “unaffordable.”

Understand this: if you are not a member of the oligarchy, the financial elite, or a senior member of the security state, your well-being is of little interest to our Lords and Masters. Oh, they might prefer that you don’t die, or go hungry (they might not), but if your well-being conflicts with the desires of the oligarchy, as it did during the bailouts, they will not hesitate to cut you dead.

If you’re unfortunate enough to live in a non-core country, well, even your ability to eat, or not have a nasty militia beat you, rape your daughter, and put drill holes in your son, let alone have a good job or be able to live with dignity, is of little interest to them. This is not hyperbole, it is an exact description of how those who live in non-core countries have been treated, repeatedly.

And remember, the core is shrinking. Greeks and Italians and Cypriots and Spaniards and Irish—they thought they were members of core countries; that they were Europeans, that Germany and France and the ECB and the IMF wouldn’t destroy their countries.

The core is shrinking: the moment elites neither need nor fear you, you are disposable. Are you willing to do anything, absolutely anything, to stay on the inside? If you are, and you can claw your way over the bodies of the others competing for the shrinking spots, well, you may live a good life as a retainer. Otherwise one day you too will be surplus to needs.

One day sooner than you think.

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The Age of the Obvious: Thomas Piketty’s Capital

By Ian Welsh

On March 27, 2014

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The economist Thomas Piketty, who along with Emmanuel Saez has done great work on the concentration of income, has written his magnum opus, Capital(pdf). The title is an obvious reference to Marx’s Kapital, and the book is a huge survey of 200 years of economic history, specifically relating to what Piketty calls Capital. It is here, as Galbraith points out in his excellent review, where Piketty starts moving away from Marx: for Piketty, capital is just anything that is valued in money: capital is wealth, whereas for Marx it is whatever allows Capitalists to control the means of production, and thus workers.

Piketty’s argument is that:

1) If national income grows slower than capital (wealth, really), then capital tends to concentrate. If income grow faster than wealth, then capital tends to disperse.

2) Capital grows faster the more of it you have: so if you have a hundred thousand, you get more returns than someone with ten thousand. A million gets less than a billion, and so on. This contradicts orthodox economics, with its claim of diminishing returns, but it is a common sense observation of how the world actually works today, and Marx noted the concentration of money and capital in his time.

3) The long term growth rate for wages over the last 200 years has been about 2 to 2.5% (tech increase of a bit over 1%+ population increase). The long term growth rate for capital (money/wealth), has been 4 to 5%. There have been periods and places where this is not true, but it is generally true.

4) Wealth is wiped out by war, financial collapse and depression, or it is controlled by confiscatory taxation and inflation. The good period after the war is thus created by the wars and depression, and the policies that followed from them.

5) The Industrial Revolution created a period where income grew faster than wealth. That period was extended by the cataclysms of the early 20th century. But the gains from the Industrial Revolution are mostly gone: once every part of the World has gone through it (China, India, Africa), that’s it—you return to an era where wealth grows faster than income and inequality is thus permanently high.

This is an important book: it marshals a lot of data, and puts it together in a coherent model.

But the model is not as new as it might seem. Piketty spends a lot of time distancing himself from Marx, and well he should, because this argument, even with a different model of what Capital is than Marx used, isn’t that much different from Marx’s view on the concentration of Capital, nor is his view of post – WWII history particularly different from a fairly orthodox reading of it: the financial collapse, depression, and two World Wars destroyed the wealth and thus power of the rich, and made it possible to put in place policies which were hostile to their interests and which made it so that more of national income was distributed to ordinary people.

Low inflation is bad for ordinary people (who tend to borrow) and good for the wealthy (who tend to lend). Policies since 1979 have favored crushing inflation. This has increased the power of the rich.

High marginal taxation is good for ordinary people (they don’t pay the taxes, they get the benefit of the money, and the rich are kept weak).

There is no fundamental analysis of the mode of production or the mode of violence, either, and without those you cannot determine how much power various groups have to take a share of the national income. How many people are needed for production? How many people are needed for violence?

Piketty’s book is important primarily because it proves the obvious, and this is the age of the obvious. You must prove, beyond a reasonable doubt, what any educated individual already should know because there is a lot of money in obfuscating the obvious. It pays very well to be a conservative ideologue spouting off about economic freedom, because very rich people want the government to make them rich, bail them out, and not tax them.

Political decisions are important: in 1929 Hoover, the Fed, and later FDR did not bail out the rich. They were allowed to lose their money, and thus much of their power. That was a decision: another decision could have been made, and in 2008 it was made: the rich were bailed out. It was made differently in 2008 because the rich have spent the last 80 odd years obsessing over what went wrong in 1929 that allowed FDR, the New Deal and everything which flowed from it. Ben Bernanke’s entire career was “how do we make sure the rich don’t lose their money so that FDR doesn’t happen.” He was chosen to be the Fed Chairman precisely to ensure that the next Great Crash, which everyone who wasn’t an idiot knew was coming, wouldn’t wipe out the rich.

The cost of his actions is the actual drop in ordinary Americans wealth and income, the impoverishment of the south of Europe, the austerity in England, the failed Arab Spring, the Ukrainian Maidan revolution, and so on. Yes, a Great Depression was forstalled, but a long Depression was created instead, and there were other options: other ways to forestall a depression.

History is not inevitable: decisions are made by people that change its outcome.

As for Piketty’s prescription: a wealth tax is fine as far as it goes, but the question isn’t whether the rich should be taxed, the question is how to create a world where they can be taxed.

That question, and questions like how we could increase the technological rate of improvement, increase the power of the commons, allow national policy by dismantling so-called “free trade”, and so on, are not dealt with.

But Piketty’s book is still important, because it proves the obvious beyond a reasonable doubt. In this it is similiar to the mountain of evidence of climate change. We can now say that climate change is happening and anyone who denies it is a fool. Likewise we can now say that allowing returns on unearned wealth to be higher than labor income, in a capitalist economy, leads to high inequality and doesn’t improve the economy. We should have known that already; we did know it already; now it has been proved to the point where we can say anyone who denies it is a fool.

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