Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Economics Page 19 of 91

The New Age Of Vertical Integration

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On August 9, 2021

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When I was very young, conglomerates which controlled the entire chain of production were still somewhat popular. Companies didn’t like outsourcing or offshoring; if a widget went into their product, they wanted to own the factory, or eat least effectively control the supplier. Toyota had lots of suppliers, sure, but they were close the factories and they were under Toyota’s thumb: subsidiaries in all but name.

But business fashion changes, and the mantra of the day became “concentrate only on core business, get an expert to do everything else.” It often did reduce costs, but at the price of losing control. It didn’t work for everyone, General Electric under the over-praised but actually incompetent Jack Welch gutted itself. Following GE’s lead, other companies like the Big 3 auto producers started thinking they were financial companies and in the business of making money, not products.

Didn’t work out well for those who followed the fad whose business model didn’t actually support it.

But it did work well for many, at least in terms of increasing CEO and executive stock compensation. Growth actually slowed in the economy overall, but the economy in neoliberalism exists for companies, not companies for the economy, let alone society.

This era is now ending. Climate change is here, and infrastructure in foolish countries like America is failing repeatedly. China and the US are gearing up for a Cold War, Covid revealed that world shipping is fragile and not always cheap, and that no one can actually understand modern supply chains.

Supply officers panicked and started stockpiling goods, putting further pressure on supply chains and driving up prices for both shipping and materials, BUT if we didn’t have an era where trade and shipping and even production will become more and more subject to shocks, it would just be a passing fad.

But smart CEOS will now be reeling in their supply chains: rationalizing them so they know exactly where all the parts are made; the parts are made close to where they are assembled (if not in the same plant complex) and insulating them from problems with  3rd party shippers. The smart ones will pursue both vertical integration AND will have some geographic distribution (but not too much) so that geographical problems (wildfires, marine inundations, hurricanes, food riots) don’t shut them down entirely.

Those who don’t stand to lose their business entirely if a shock takes out a key part of their supply chain they don’t control or understand, or which supplies generally and is not bound to them.

We’ve been thru a very stupid era, and it’s not over yet, but it’s ending. Central banks can print money, but they can’t print machines parts, oil or food, and the limits of their power to deal with actual, real, non-financial shocks to the system are about to become evident.

Indeed, central banks, by funneling money to rich people and corporations which would have otherwise gone bankrupt have done almost everything within their power to make the system more fragile and worse run.l

When the food riots hit your country, remember to pay a visit to the central bank officers, past and present, to see how they are doing and to express your appreciation for their service. Perhaps you could also see the welfare of neoliberal politicians.

(Accurate job feedback has been removed from our elites, and they need it badly. When you have the chance, remember to help them out by providing it.)

Midas was a fool, but electronic bits are even more worthless than gold when the real world comes knocking.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

And The Mass Evictions are ON

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On August 2, 2021

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So, the evictions moratorium expired Saturday at midnight.

Over a quarter of renters are behind in some states, according to the Center on Budget and Policy Priorities think-tank.

Southern states are some of the worst affected, though some 16 percent of US households owed rent — about double the amount before the pandemic.

This wasn’t necessary, but the choice was made to not pay people to stay in place, and the money given for relief has mostly not been administered, presumably because the bureaucratic hoops are ridiculous.

only $3 billion in aid has reached households out of the $25 billion allotted to states and localities in early February.

Rental properties and single homes are being snapped up en-masse by private equity and other big investors. Eviction is in their interest, as it makes it easier to raise rent.

This is a watershed moment for real-estate in America: this is where it moves to being owned more by smaller landlords and individual owners (for homes) to just another corporate owned means of, well, rent extraction.

Remember that after 2008 banks deliberately held houses off the market to drive up prices, and you’ll understand what is going to happen to rent, which has already seen ridiculous rises. With large amounts of rental property now in a very few hands, it will be easy for a few people to decide to hold just enough properties off the market to drive up rents. It’s better for big institutional owners to have higher rent prices and some empty if that works out to more rent, and given shortages already exist, I’m betting that will be the case.

The era of cheap housing has been over for a while, but it’s going to be thrown in a coffin and staked thru the heart if big investors have their way.

We’ll talk more later this week, probably, about how wonderful and useful the homeless are and why they are treated so badly.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

A Great Idea About Capitalism That Was Wrong

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On July 27, 2021

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So, back in the 80s, when I was young, green and wet behind the years, one of the great thinkers about how to help poor people was a guy named Hernando DeSoto. (Great name, aces on parents!)

DeSoto, who was mostly concerned with Latin and South America had one big idea: the reason that poor people were fucked is they didn’t have clear ownership of what they actually owned: slum dwellers didn’t own their houses or the land they sat on, peasants often didn’t own their land either, and informal bus companies and the like operated without licenses or any rights to their routes.

Because they had no clear title, they couldn’t borrow against their actual property, couldn’t sell it and move, or in general use it as an asset.

This DeSoto said (and at the time, I believed, and so did many governments and NGOs and so on) was one of the reasons they stayed poor, not only couldn’t they access capital: they couldn’t even use the capital they already really owned.

The solution was to give them that clear title, which would allow a million new businesses to bloom, and so on.

Because we live in a far more cynical age (and because I gave it away in the title!) you know this didn’t work out. What happened instead, though it took a couple decades to become obvious, is that once they had title, they could lose it: sell it, have the government take it away, go into debt (which most poor people do) and have it seized in payment of debt, etc…

If you’ve ever been real poor (in the informal economy, unbanked, no assets) you know that perhaps the only good thing about it is the ability tell collection agents (generally the scum of the Earth) to go fuck themselves. “Take me to court, I have nothing you can seize!)

DeSoto managed to remove that one sliver a silver lining, so that slum dwellers could even lose their tin shacks.

Ah, capitalism! Truly the most glorious system ever developed to concentrate wealth and power in a few hands while pretending that it’s all voluntary. At least when feudal nobles or MOngols conquered you and took everything you didn’t have to pretend it was your free choice, or something.

Realism aside (I was going to say snark, but this is just how the system is meant to work) this is what happens when we are indoctrinated into thinking that capitalism is a system designed uplift everyone, and it just happens to require concentration of wealth. It’s also what happens when we assume that the uplift actually powered by industrialization happened because of capitalism instead.

It’s hard to disentangle these two because capitalism was in power when industrialization happened and the great challenge against it (state centralized “communism”) lost (largely because it had the inferior geostrategic position, I’d suggest.) So we mix the two.

But they aren’t the same, and capitalism, to the extent it has virtues, works best when it is kept under strict control and a lot of things are kept out of the market.

I assume DeSoto was sincere (though who knows), but because he bought the myth, and sold his myth so well, he wound up hurting exactly the people he wanted to help.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

 

How The Metaphysics Of Capitalism Destroyed The World

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On July 22, 2021

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Back in 1968 the book “Limits to Growth” stormed the world. Computer models predicted that humans would run out of almost every resource, overshoot carying capacity, then crash.

It was well known and widely discussed and combined with the oil crashes, made the 70s a ferment of practical and theoretical work on alternative energy, different ways of farming and so on.

Almost all of that came to an end in the 80s, with Reagan. Carter had put solar panels on the White House, Reagan had them torn down. A decision was made to crush wages and thus the oil consumption of ordinary people, while bringing new sources online as fast as possible. Obama, with fracking, made the same decision, by the way, but even more successfully, turning the US back into a HUGE producer of oil.

But what’s important today isn’t all of that, which I’ve discussed at tedious length in the past.

Instead I want to discuss the basic argument against the “Limits To Growth”.

“We will substitute away.”

In other words, alternate energy will step up and we’ll move away from oil and coil. We’ll find substitutes for steel and nickel and rare earths and anything else in short supply.

BUT what matters is the metaphysics of the argument. When the people making this argument said it would happen, they assumed “the market” would do it.

Which, it sort of has, but too late. Much too late.

There was a strong assumption that prices were information which stored in them all known information about the past and the future, and that therefore prices would drive self-interested people to make the necessary substitutions or find new sources.

To market disciples, the market’s “free hand” was like God, all-knowing and all-powerful and weirdly benevolent. All we had to do was let the market run and it would solve all our problems.

So why didn’t that happen?

Well, to start, the market doesn’t price the future well at all. Never has, and never will. People making decisions in 1970 will mostly be dead before all this stuff matters, and the same is true of people making decisions in the 2010s. Even if they aren’t dead, is there anything in human history which makes us believe humans are good at making very long term plans, over decades to generations?

Why would you believe the market would do it based on a discipline which suggests humans are rational and know what is good for them and act rationally to get what is good for them? (If you believe all of that, you are more of a fantasist than some fanatic whipping himself while screaming for God to save him.)

Now I’m not concerned here with the hypocrites: the people who knew this was all bunk but expected to get rich off it (they were, in a real sense, very rational. A bad future they don’t see or don’t care about, “I get 50 good years and die rich when the bad times come, whatever” isn’t a reason not be rich now, if you don’t care about future people.)

But many many people really believed this bunk and the issue is that by believing that the “market” and “price signals” and *vague hand waving* would solve the problem: by saying “we have a system that solves these problems automatically by giving correct feedback” they made it impossible to solve to the extent that they were believed. (And remember, huge amounts of money were run on the markets for decades based on these ideas. People believed and put their cash on the line.)

In fact, of course, we could have taken the warning of “Limits To Growth”, “Peak Oil” and “Global Warming” and used them to make changes.

Ironically a lot of those changes would be exactly what the disciples of hand-wavy “market” crap suggested would happen automatically.

Use markets and public policy: massively subsidize alternative energy and research so that where we are with solar today is where we would have been in the 90s. Massively research alternatives to bottleneck resources. Stop over-fishing, by force if necessary. And, of course, put sharp limits on “planned obsolence” backed with death sentences for executives.

If you’d rather get more resources or if you want more than one strategy, massively fund space exploration with an eye to mining rather than defund NASA in waves (Obama, classically, did the worst cuts to NASA ever so that private industry/billionaires could make money, but NASA funding should have been increased in the 70s.)

Warnings only serve those who heed them and when you believe in metaphysical entities which don’t have the attributes they think they do (God, Markets), then you don’t act to save yourself. Markets were never, by themselves, going to miraculously do what needed being done in time. Oh sure, price feedback has eventually gotten us some decent solar, and so on, but decades later than we needed it.

Markets are human creations, like God, and to work correctly they have to be tuned for the problem at hand or, even (heresy) one has to consider that there are things that Markets or Gods can’t do, or are bad at, and find other solutions.

So here we are, and markets have not made everything good and the world’s forests are burning and we’re about to have another oil boom, as best I can tell.

Like God, mis-using markets or assigning them powers they don’t have, leads to terrible consequences, so get ready for the invisible hand to slap us silly.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

Quarantine Matters

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On July 21, 2021

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So, compared to a lot of other countries, Australia has done a pretty good job on Covid.

But they just had a Covid breakout in two major cities: Sydney and Melbourne. Those breakouts required them to then go back to shutdowns: closing and restricting businesses and movement.

Both outbreaks come from failures in the quarantine system: from hotel quarantine not working because hotels are not set up properly for quarantine due to not separately ventilating.

On July 7th I wrote that quarantine should be mandatory, with criminal penalties for violation, and…

We also do quarantine badly. Hotel quarantine is ridiculous in most hotels, because Covid is airborne and most hotels spread air between rooms.

This isn’t a difficult problem, however. Build a bunch of small huts in a field (you can even stack them), each with its own ventilation, and put people in there.

How has this been proved across the board in Australia?

I am tired of living in societies where we know how to do the right thing and simply refuse to do so because our elites are psychopathic, selfish and greedy and our population refuses to discipline or control the elites.

We KNOW what to do to stop Covid. We KNOW how to do it. We just fucking refuse.

This is goddamn pathetic. It’s just like climate change, but on a faster timeline so you can see it in weeks to months rather than decades. We may go extinct, we are certainly going to kill and impoverish billions and probably wipe out half the world’s species (which will hurt us terribly, not just them) all because while we KNOW how to do the good, non psychopathic, non criminally insane things, we REFUSE.

You discipline your elites, or most of  you and your children will die or be impoverished by their actions and lack of actions.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

The Canadian Economy Under US Hegemony and Neoliberalism

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On July 19, 2021

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Canada’s economy is substantially resource based: minerals, wood, agriculture, and, before the collapse, fish. (The Maritimes were originally colonized largely to harvest trees for masts, which Britain had run out of at home.)

Resource economies are boom and bust economies; resource prices are cyclical, and sometimes resources get replaced. Brazil had a huge rubber plantation industry at one point, before chemists figured out how to make synthetic rubber.

Resource economies tend towards corruption because the profits are so high during good times, and they tend to not develop industry for the same reason, but also because the currency rate tends to be too high to  allow exports of manufactured goods during boom periods — so any industry gets destroyed during the boom.

For about a hundred years, Canada had a simple solution to these problems. We had a manufacturing sector, and during boom resource times, when the Canadian dollar’s strength made manufactured goods too expensive, we just subsidized the manufacturing and slapped on tariffs.

This was a fair deal, because when resource prices went bust and the dollar went low, manufacturing would boom and the taxes from that would be used to support people who worked in resource extraction.

Combined with some simple industrial policy along the lines of “don’t export raw logs or raw fish,” this created a nicely self-balancing economy, and it did so from about 1880 until the 1980s.

Neoliberalism and idiotic trade deals like NAFTA and the WTO put paid to that. It became very difficult to subsidize industries or to insist that processing be done in Canada; we started shipping raw logs and fish to the US, and we stopped subsidizing manufacturing during resource booms, so Canadian manufacturing got gutted.

This was, well, stupid, and a lot of blame is on Canada, Canadians, and the Canadian system, though, to be fair, most Canadians voted for parties opposed to the Free Trade Agreement (which later became NAFTA), but because of vote splitting in a third-party first past the post system, it went through anyway.

But it’s also because the US is, well, powerful. Canada’s economy is a little smaller than California’s, and Canada is a satrapy. Back in the 50s, Canada had a world-leading aviation industry and created the best fighter jet in the world: the Avro Arrow. The US government put on the pressure, and Avro (the company) was put out of business. The prototypes were sunk in a lake.

The threat was that if Canada didn’t give up its aviation industry, the US would take away auto manufacturing, and that was a much larger industry.

If the US wants Canada to do something, Canada generally does it. There have been exceptions, especially under Pierre Trudeau in the 70s, and in the early 2000s Prime Minister Chretien did refuse to invade Iraq, but they are exceptions.

Anyway, Canada’s economy is now much more fragile than it used to be, because it’s much more integrated into the world economy and much less able to adjust cyclically or insist on keeping a significant manufacturing sector.

This isn’t unique, or anything. It’s the shape of the world economy overall, where countries, especially under neoliberalism, mostly aren’t allowed to have an independent economic policy. Canada was never autarchic; we were always a trading state, but we were able to more or less run our own affairs and insist that resources mined, chopped, or fished here be at least primarily processed here.

Nations which do not make what they need are at the mercy of those who do. The US got around this by maintaining control of making, growing, and digging things without keeping them in the US, until they made the mistake of letting China industrialize.

That has lead to the rise of China/US tensions, and a realization that neoliberalism is a two-edged sword.

More on that later. In the meantime, the reason most of the world’s nations are poor and have to do what the US wants when push comes to shove, is exactly because they were not, and are not, allowed separate industrial and economic policies.

Canada, the near neighbour and satrapy, actually still has a pretty good deal, better, in fact, than is given to American peasants.

But all of that will be changing over the next couple decades.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

Siphon the System Thinking Doesn’t Work Against Nature

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On July 5, 2021

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We live in a very, very rich society.

Oh, many people are poor, and real poverty, whether in the “Global South” or first-world backwaters, but our society throws off vast wealth. We could, essentially trivially, feed, house, and clothe everyone and give them a decent life. We have that sort of surplus, and far, far more.

In healthy societies, or societies where elites are scared of outside forces (whether human or natural), the emphasis is on growing the pie, on making the society stronger and richer so that it can survive the forces of which the elites and the population (perhaps) are wary. Unproductive use of resources is frowned on, something you can find even in English common law, where if land or property wasn’t being used, after a time it could be taken by someone who would use it productively.

In fantastically wealthy ages, where elites are sure they are secure from all enemies, they concentrate on fighting over the wealth, or, the pie.

The Gilded Age is a good example. The Americans and Brits of the early to mid 1800s were concerned with growing the pie; they didn’t feel invincible or untouchable. But after Britain had secured its second Empire, and painted more of the map than any other nation in history, and after the US had its civil war, broke the natives, and crushed the Spanish and Mexicans, the US and Britain felt they had it made. There were no real threats left.

So, the countries turned inside. They concentrated on taking from others, on amassing wealth. Rockefeller’s Standard Oil empire was created by by buying out (often at terrible prices) the existing oil industry. It wasn’t creation of something new; it was consolidation in one man’s hands, of what was already there, so that he could reap the benefits.

England’s middle class in 1850 was the envy of the world. By World War I, the average Englishman had been so impoverished that huge swathes of potential soldiers had to be turned away from service in the armed forces. The rich imtiserated the middle class, crushed the farmers as best they could, and fought amongst each other to see who would rule the roost. (In this, they were less collegial than our rich are — far more willing to throw former members of the elite out entirely.)

To put it simply, there was far more money and power to be gained by grabbing a bigger slice of the pie than by growing it.

In the US, this wasn’t fatal; there was a lot of stolen land, and there was still plenty of room for elites to grow new things, even if it wasn’t the emphasis.

In Britain, it led to a fatal decline which is still ongoing; we can see now that Britain probably won’t even stay the “United Kingdom” —- odds are good Scotland will leave, and to add insult to injury, they’ll lose Northern Ireland as well. It is even possible, in the next 40 years or so, that Wales might leave.

From the behemoth astride the world, to a pathetic country that can’t even keep its heartland together.

For our purposes, however, the point is simpler: If you want to rule over other people, you must, in the words of Lois McMaster Bujold, rule their imagination. The greatest of men and women could lose everything tomorrow if their subjects simply stopped believing in their subjugation — and who has how much is entirely a matter of convincing other people to give it to you and let you keep it. Even when it’s a matter of force, you must convince the enforcing class to do what you say and to point the guns and use the prisons on the “right’ people.

It is true that growing the pie requires a fair bit of ruling over other people’s imaginations, but real increases in societal wealth require actually dealing with the world as it is; conquering people who resist, inventing and building steam engines, figuring out how to grow more food on the same land, and so on.

Just getting people to give you more of what already exists, what was created by other people and is produced by a system created by humans of the past, however, is pure imagination work. If people believe it is true, it is. You’re only dealing with human psychology and mass psychology.

Of course, a real world still exists; sometimes its people who don’t buy into your story. This is why China and the US are going to cold war and maybe real war, because neither is willing to live in the world created by the others fictions and ideals.

Then there is nature. It doesn’t matter if you believe that carbon and methane heat up the planet. They do and they will. It doesn’t matter what you think about Covid, if you un-mask and don’t quarantine people who have it, or came in contact with those who do, and if you don’t contact trace, and so on and so forth, then it will act like any other pandemic disease and keep mutating and spreading.

You can’t just manipulate other people’s beliefs about Covid and expect it to go away.

And so, people who have spent their entire lives doing nothing but manipulating other people’s beliefs are incapable of dealing with Covid or climate change. Covid doesn’t “listen to them.” Covid doesn’t care what they say.

Same with climate change. The forest will burn, regardless of what you say to the trees or to the weather.

Our elites, trained only to manipulate other people, are incapable of dealing with real-world events that can’t be controlled simply by controlling other people’s beliefs.

And so we will burn, and cough, and Covid will become endemic as the world slides towards collapse.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

The Lords of Hell (and Their Slaves)

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On June 14, 2021

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Most people spend their entire childhoods and adult lives until they are really too old to work, doing shit they don’t want to do and would never do absent coercion.

This is the ur-fact about capitalism. You cannot leave. If you do not submit to slavery, you will wind up homeless and eventually dead, and suffer a lot along the way.

This is built into the system: The “whip of hunger” is used to make people work. The threat of homelessness.

Homelessness, despair, and so on are required; without them people would not bother working at bad jobs. Indeed, without them many people would not work any more than required to feed and house themselves.

Now, understand clearly, rip a hole in your skull, and put this in: There is more food than needed and way more homes than homeless people in all of the developed countries and more food than needed to feed everyone in the world. We could easily feed and house everyone in the world. It is almost a trivial problem. We simply have to do it.

Industrialization, plus modern agriculture, produces easily more than we need. Automation should mean that less and less hours need working. We should be living in a paradise of free-time and choice.

We do not because a small minority has captured power and enslaved the rest of us.

These people are monsters on every possible level, including in their depraved indifference to what will happen to their children and grandchildren under environmental collapse and climate change.

We have a surplus, but it is generated in the stupidest ways possible — with planned obsolesence, soil degradation, and pollution causing environmental collapse.

If we had built everything without planned obsolesence, we wouldn’t be where we are. If we had not degraded the soil and dumped so much pollution into the air we would not be where we are. We made a bunch of choices to do things the fast, “profitable” way that actually led to people being sicker (all that pollution and soil degradation means you are undernourished and full of unhealthy chemicals) and having to work longer.

We had the knowledge to have a manageable, sustainable cornucopia by just looking at the effects on people, animals, and plants, and the environment in general and correcting. We did not.

School, if you will put aside your prejudices for a couple minutes and look at it coldly, is a process whereby you are made to sit still, talk only when teacher allows, piss only when teacher allows, stand only when teacher allows, and do all sorts of things you don’t want in the way that pleases teacher or you get bad grades, and if you get enough bad grades, you will almost certainly never have a good job or any power in society.

You were trained to be a slave by school then you went to work and acted like a good slave. Some few proved themselves psychopathic enough to ascend to the elites (though the few open routes are rapidly closing down), though most elites come from the already-elite (check out who Bill Gates father was).

Since creating a utopia in which people don’t have to obey their masters is no fun for psychopaths or functional psychopaths and narcissists (our ruling class), keeping the majority of the population firmly in a form of slavery they could tell themselves was freedom, “I get to CHOOSE MY MASTER who tells me what to do! I am free!” is what our master-class has done.

We run around on treadmills, working for them to get what we need, and the various drugs (including entertainment) we use to ease ourselves and pretend it’s all worth it. The internet, which looked like it might increase freedom, has simply set up more hedonic treadmills, optimized for us to tell our masters everything about ourselves, so they can sell us our next drug, and continue their removal from us of all real assets. (Private equity is now buying up single family homes, the middle class’s last real asset.)

If you work at a normal job, you are a slave. If you have ascended to the ranks of high executive, CEO, or board member, you are Lord of Hell. There are some other seats, rather nice places: the independent best-selling author or musician, for example. The high paid consultant, the big Twitch streamer and so on. They are rare, and like becoming a pro-sports player, they exist for the majority of the population more as a way to blame themselves for not “making it” than as a real possibility.

This is our society: A society which had the technology to create a near utopia without destroying the world (yes, some people will argue this was always impossible; let us say that we never even tried) and which chooses instead to run a master/slave society which is so advanced it convinces most of the slaves they are free.

You WISH you had “Brave New World” because at least then you’d think you were happy.

It is odd, and sad, that this world will end because the masters, abetted by their slaves (who, remember, have not revolted in any meaningful way and have chosen the master-class through voting), have mismanaged the environment so badly.

When that happens, the powerful are betting they will become even more powerful, so that they can use their resources to be masters in an even greater hell.

Let me suggest, that as you or your children are scrabbling for survival in the world to come, you take the time to ensure that the masters don’t “win” by destroying the environment.

The hell they will create in a collapsing environment will make the present hell look wonderful by comparison, and they will never stop creating hells unless it is made clear to them that their perpetual hell creation will soon become unprofitable for them as well; even if it has to be with their lives.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

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