Wednesday, February 03, 2010

Positive feedback

Consumer demand* is subject to a positive feedback loop: When consumer demand is high, there's incentive to produce to fulfill that demand. Increased production causes increased employment; as employers compete for labor, wages rise, further increasing consumer demand. Likewise, when demand falls, decreased demand causes decreased production, which decreases employment, further decreasing demand.

*Demand is the socially constructed justification for fulfilling one's economic desires.

The risk is not just that a too-small stimulus will fail to restore consumer demand quickly enough, as most liberal capitalist economists are predicting. The big risk is that a too-small stimulus will fail to break the positive feedback loop decreasing consumer demand and unemployment.

This positive feedback loop has actually been going on for a decade: demand has been shifted from wages to stocks and then home prices: there's no longer any asset class to bubble to socially justify demand. The Randian faction of the capitalist ruling class realized it was easier to gain power and advantage over other factions not by creating new value, but by appropriating the value that had been "unjustly" allocated to consumers. This strategy is obviously poor in terms of mutual benefit, but it's obviously excellent in terms of individual benefit, and it seems that the Randian faction will indeed prevail over the productive faction.

Given the eliminationist tendencies of the Randian faction, we can expect widespread misery, poverty and probably outright oppression as they "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate... [Panic and depression] will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.*" Presumably the "less competent" people will be liquidated as well, perhaps literally.

*Andrew Mellon, Secretary of the Treasury, ca. 1931

The "death spiral" won't cease until popular misery forces radical change. As a communist, much as I might in theory like radical change, keep in mind that I'm a revolutionary communist not because I "want" to be, but because I believe I have no other moral choice. With all its weaknesses and outright evils, capitalism is at least the devil we know, and any revolution entails such uncertainty that no moral person should face its possibility without fear and trembling worthy of Kierkegaard or Lovecraft.

People, who are not very rational to begin with, are at their least rational during panic and crisis. The same conditions that provide the opportunity for real positive change also provide the opportunity for horrors undreamed of by more civilized societies.

I don't think it's all that morally wrong to preserve and reform capitalism as best you can; it's just that I can't figure out a way you can succeed. But when the inevitability of its collapse becomes apparent to you, I hope you will renounce the fascists and the Randians, even though they will promise material rewards undreamed for the trivial price of a bullet in some useless child's brain.

I hope instead you will join us, the communists, fighting imperfectly but as best we can for real positive change for the benefit all humanity.

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