In "Zombies and cannibals: The horrors of China’s financial system, charted, Gwynn Guilford argues that China's financial system is becoming unbalanced because of (among other things) Chinese banks are preserving unprofitable companies rather than letting them fail. They do so because as long as the company doesn't default, even though they're borrowing money to pay back earlier loans (Minsky's definition of a bubble), bankers don't have to take the write-off of a bad loan against the bank's equity; the loan is still technically an asset. A company that is surviving only because of financial life support is labeled a "zombie."
Zombies are a real problem. One of the theoretical advantages of capitalism is that it lets failing companies fail: Schumpeter's "creative destruction." Note that capitalism too has a problem with banking and creative destruction; as capitalism's many financial crises have shown, capitalism too accumulates zombies until there's a general financial crisis. Worse yet, propping up zombies also tends to inflate the asset prices of viable companies, which causes later problems when asset prices fall to realistic levels: if we let too many zombies accumulate, real people get dragged down when the zombies finally die.
(Not all financial crises are strictly caused by accumulation of zombies, but the run-up to a financial crisis by any cause does cause zombies to accumulate.)
The system of democratic communism avoids financial crises by fundamentally changing the capitalist financial system. After considerable study, I've come to the conclusion that the capitalist financial system is one of the most important contradictions in capitalism: it tries to create a market in something that does not have immediate material feedback, and markets work only when there is immediate material feedback to regulate prices.
Democratic communism just smashes financial markets. Finance becomes instead just public policy. We track both nominal and real financial information because we want to know what's going on, but no one's life, wealth, or status depends on nominal asset prices. If nominal asset prices fall to match a new understanding of real value, well, nominal prices fall, no big deal. The only entity "hurt" is the government, but the government does not need money; the government can always print more.
We first care about whether we have enough to eat, stay warm, etc.. If we don't, the people will surely notice, and vote for more investment and employment in the production of food, housing, etc. If we do have enough to eat, then if we make bad investments in fun stuff, we write it off and try to do better tomorrow. The only people harmed by a write off are the workers producing stuff that no one wants, but they will at worst be inconvenienced; they will not be impoverished. The government will either employ them directly in something more socially useful, or pay them to learn to produce stuff that people do want. At worst, that we've lost X dollars in fake asset value (the nominal value of companies that were producing stuff we didn't want) will just cause a little inflation. And since no one lives on financial assets, that inflation has eroded their financial assets won't kill them.
But even if zombie companies won't cause financial crises, zombies are still a problem, at least aesthetically. It seems wasteful and ugly to artificially prop up companies producing stuff people don't actually want.
First, democratic communism makes a sharp distinction between profitability and social utility. There is sufficient institutional incentive under democratic communism to produce public goods, goods with high social utility but low (or negative) profitability. This distinction occurs because profit can come only from production of goods that are both exclusive and rival. Trying to force non-exclusive and/or non-rival goods into an exclusive/rival model is more trouble than it's worth (e.g. intellectual property laws). The problem is that unlike profitability, social utility cannot be objectively measured. Because democratic communism values social utility more than profitability, and does not consider profitability a proxy for social utility, investment decisions are moved from the private to the public, political realm.
Thus, a company that is not profitable has to convince the majority of a constituency, either that of a locale, region, or nation, that their unprofitable business offers social utility. And not just in a vague way, but convinces that constituency to allocate existing autonomous spending away from other projects, increase taxes to offset increased autonomous spending, or tolerate extra inflation. Note that under democratic communism, only the national government can raise income taxes; local and regional governments can spend only their per capita portion of autonomous national government spending and any capital taxes of profitable companies; people employed through the government as Employer of Last Resort are funded directly from the national government.
I'm going to have to create a model of this economy, and see what happens from various kinds of shocks and dynamics. Coming soon, with all good luck.
Friday, July 24, 2015
Monday, July 20, 2015
Bureaucracy
Timothy Kennett has an interesting article in 3AM Magazine: the utopia of rules. He reviews The Utopia of Rules by David Graeber (of Debt: The First 5000 Years fame).
I haven't read Graeber's book, but share Kennett's skepticism of Graeber's thesis.
I do not believe that individuals can sustain a complex society without social institutions that are, in some sense, coercive. Coercion goes far beyond pointing a gun at someone's head and making them obey: controlling access to the means of production, in terms of both production and consumption, is inherently coercive. Even with completely automated production, someone will have to build and maintain the machines, and until energy is unlimited, someone will have to decide what the machines build and who gets them.
We have to propagate and reproduce some sort of culture. Who gets to decide what does and does not get reproduced? In other words, who controls the schools? (This is the weakness, I think, of the utopian society in And Then There Were None: who maintains the anarchism of the population? How do they do so?)
I also do not entirely share Marx's absolute contempt for the division of labor. Maybe I can be a farmer in the morning and a critic in the afternoon, but I don't think I can be a physician in the morning and a computer systems engineer in the afternoon. As our technology grows more advanced, the sheer scale of just the technical knowledge necessary to maintain our civilization argues for more specialization.
One problem that I see on the left is a confusion between means and ends. We have all of these social and ideological tools, and the capitalist ruling class operates these tools for its own ends. But is the fault in the tool or the wielder? Sometimes the former is true: one tool, the democratic republic with its trustee representatives, seems fit directly to reproduce capitalist power. But others I am not so sure about. An independent judiciary, for example, seems to have potential to help a socialist society legitimize socialism just as it legitimized the Roman slave state, feudalism, and monarchism.
Indeed, I find the call to smash every institution that capitalism has ever employed to be egregious utopianism. Any socialist society will inherit capitalist institutions, and to smash them all and start at year zero seems a hubristic belief that we can transcend the dialectical development of society. By all means, examine the each institution carefully and critically. Subject every institution to a revolutionary dialectic. We must avoid simply replacing the name of the capitalist class while preserving its fundamental nature. But throw everything out, and start with the fantasies of an "ideal" society held by a handful of authorities? I think not. Such a fantasy is not only undesirable, but impossible.
Bureaucracy is unfortunately named, because it includes the "-cracy" suffix, meaning "rule of". Certainly, I think a bureaucracy should not rule. But can a democratic working class use a bureaucracy to rule more effectively? I see no reason why not. Bureaucracy is the tool that the capitalist class has used to subordinate the professional-managerial class to its will, and employ them effectively. There seems no particular reason why the working class cannot similarly employ the professional class, even as the professional class is proletarianized (in a good way).
I haven't read Graeber's book, but share Kennett's skepticism of Graeber's thesis.
I do not believe that individuals can sustain a complex society without social institutions that are, in some sense, coercive. Coercion goes far beyond pointing a gun at someone's head and making them obey: controlling access to the means of production, in terms of both production and consumption, is inherently coercive. Even with completely automated production, someone will have to build and maintain the machines, and until energy is unlimited, someone will have to decide what the machines build and who gets them.
We have to propagate and reproduce some sort of culture. Who gets to decide what does and does not get reproduced? In other words, who controls the schools? (This is the weakness, I think, of the utopian society in And Then There Were None: who maintains the anarchism of the population? How do they do so?)
I also do not entirely share Marx's absolute contempt for the division of labor. Maybe I can be a farmer in the morning and a critic in the afternoon, but I don't think I can be a physician in the morning and a computer systems engineer in the afternoon. As our technology grows more advanced, the sheer scale of just the technical knowledge necessary to maintain our civilization argues for more specialization.
One problem that I see on the left is a confusion between means and ends. We have all of these social and ideological tools, and the capitalist ruling class operates these tools for its own ends. But is the fault in the tool or the wielder? Sometimes the former is true: one tool, the democratic republic with its trustee representatives, seems fit directly to reproduce capitalist power. But others I am not so sure about. An independent judiciary, for example, seems to have potential to help a socialist society legitimize socialism just as it legitimized the Roman slave state, feudalism, and monarchism.
Indeed, I find the call to smash every institution that capitalism has ever employed to be egregious utopianism. Any socialist society will inherit capitalist institutions, and to smash them all and start at year zero seems a hubristic belief that we can transcend the dialectical development of society. By all means, examine the each institution carefully and critically. Subject every institution to a revolutionary dialectic. We must avoid simply replacing the name of the capitalist class while preserving its fundamental nature. But throw everything out, and start with the fantasies of an "ideal" society held by a handful of authorities? I think not. Such a fantasy is not only undesirable, but impossible.
Bureaucracy is unfortunately named, because it includes the "-cracy" suffix, meaning "rule of". Certainly, I think a bureaucracy should not rule. But can a democratic working class use a bureaucracy to rule more effectively? I see no reason why not. Bureaucracy is the tool that the capitalist class has used to subordinate the professional-managerial class to its will, and employ them effectively. There seems no particular reason why the working class cannot similarly employ the professional class, even as the professional class is proletarianized (in a good way).
Thursday, July 16, 2015
The lesson of Greece
I won't go into the details: go read the alternative press's account of Greece's abject defeat at the hands of Germany the "troika" (European Commission, European Central Bank, International Monetary Fund). The upshot is that Germany has stripped Greece of its national sovereignty, and, after six years of poverty, unemployment, and general immiseration, has imposed even harsher poverty, unemployment, and immiseration.
Germany, France, and the rest of the Eurozone core countries, by destroying Greece's economy, have no chance of getting their money back. They know they'll never get their money back. They don't want their money back. What they want is what they have achieved: destroying social democracy, the social safety net, welfare capitalism, and what little democracy the democratic republican form of government provides. The European Union and Eurozone is and has always been anti-democratic, explicitly and intentionally. Indeed, neoliberalism itself is anti-democratic. Any suffering the Greek people go through is necessary to destroy its democracy, and make it explicitly a slave colony to the Eurozone core.
The lesson is that social democracy is doomed. I think social democracy is a Good Idea. I've never been against social democracy and welfare capitalism on its own terms. I just don't think it can work. Not, however, because because I think it's a bad system on its own terms. If we talk about overall standards of living, social democracy improves the lives of not just the working and middle classes, but also the capitalist class. The problem is that the capitalist class does not want to improve its own material standard of living. The very structure of capitalism entails that the majority of people who become very rich capitalists are power-hungry sociopaths. Even the relatively nice people who become very rich capitalists have to act sociopathically in self-defense. Power is a zero-sum game, and social democracy means stripping political power from the rich. Social democracy is possible only if workers and professionals have actual political and economic power either directly, through unions, or indirectly through elections and state power. The capitalist class, however, sees this loss as an intolerable loss of their core identity. The capitalist class would rather rule in hell than serve in heaven.
I don't fault the capitalists themselves. I have considerable sympathy for Milton's Satan. But, fundamentally, this kind of sociopathic struggle for absolute power is an inherent, ineluctable part of capitalism. No social institutions can for very long moderate this struggle. It might be the case that this sociopathic struggle for absolute power is inherent to humanity itself; if so, all of our political philosophy is not just an illusion but a lie; there is no other option but for each person to struggle for as much military power as possible, with the successful becoming the slave-owners and the rest becoming slaves. Perhaps Orwell is correct: the future of humanity is a boot smashing a face, forever, and the only struggle is who wears the boot.
I am not so pessimistic. I do not believe that sociopathy is the norm and empathy and cooperation is the delusional aberration. I'm not an objectivist: the universe forbids neither the tyranny of the individual nor the collective, nor peaceful cooperation and happiness. I simply believe that human beings can create any kind of society we choose, good or bad. Although we can create any kind of society, the actual implementation is constrained by reality, both objective reality and the historical, contingent social reality of a given time and place.
And it is crystal clear that if we want the things that social democracy provides, and I think we do, we cannot have them and have a capitalist class of any kind. The capitalist class will do anything, and struggle for as long as it takes, to destroy social democracy, to strip all power from any individual, class, or social group that the capitalists do not absolutely control. Not because capitalists are bad people, but capitalism is the struggle for absolute power, and this struggle constructs the social reality of people who become successful capitalists.
Germany The troika has revealed the true heart of capitalism: slavery or death. The only choice now is whether we will accept slavery or struggle for freedom, no matter what it takes.
([ETA] It occurs to me that the arguments against social democracy are almost identical to arguments against "moderate" religion.)
Germany, France, and the rest of the Eurozone core countries, by destroying Greece's economy, have no chance of getting their money back. They know they'll never get their money back. They don't want their money back. What they want is what they have achieved: destroying social democracy, the social safety net, welfare capitalism, and what little democracy the democratic republican form of government provides. The European Union and Eurozone is and has always been anti-democratic, explicitly and intentionally. Indeed, neoliberalism itself is anti-democratic. Any suffering the Greek people go through is necessary to destroy its democracy, and make it explicitly a slave colony to the Eurozone core.
The lesson is that social democracy is doomed. I think social democracy is a Good Idea. I've never been against social democracy and welfare capitalism on its own terms. I just don't think it can work. Not, however, because because I think it's a bad system on its own terms. If we talk about overall standards of living, social democracy improves the lives of not just the working and middle classes, but also the capitalist class. The problem is that the capitalist class does not want to improve its own material standard of living. The very structure of capitalism entails that the majority of people who become very rich capitalists are power-hungry sociopaths. Even the relatively nice people who become very rich capitalists have to act sociopathically in self-defense. Power is a zero-sum game, and social democracy means stripping political power from the rich. Social democracy is possible only if workers and professionals have actual political and economic power either directly, through unions, or indirectly through elections and state power. The capitalist class, however, sees this loss as an intolerable loss of their core identity. The capitalist class would rather rule in hell than serve in heaven.
I don't fault the capitalists themselves. I have considerable sympathy for Milton's Satan. But, fundamentally, this kind of sociopathic struggle for absolute power is an inherent, ineluctable part of capitalism. No social institutions can for very long moderate this struggle. It might be the case that this sociopathic struggle for absolute power is inherent to humanity itself; if so, all of our political philosophy is not just an illusion but a lie; there is no other option but for each person to struggle for as much military power as possible, with the successful becoming the slave-owners and the rest becoming slaves. Perhaps Orwell is correct: the future of humanity is a boot smashing a face, forever, and the only struggle is who wears the boot.
I am not so pessimistic. I do not believe that sociopathy is the norm and empathy and cooperation is the delusional aberration. I'm not an objectivist: the universe forbids neither the tyranny of the individual nor the collective, nor peaceful cooperation and happiness. I simply believe that human beings can create any kind of society we choose, good or bad. Although we can create any kind of society, the actual implementation is constrained by reality, both objective reality and the historical, contingent social reality of a given time and place.
And it is crystal clear that if we want the things that social democracy provides, and I think we do, we cannot have them and have a capitalist class of any kind. The capitalist class will do anything, and struggle for as long as it takes, to destroy social democracy, to strip all power from any individual, class, or social group that the capitalists do not absolutely control. Not because capitalists are bad people, but capitalism is the struggle for absolute power, and this struggle constructs the social reality of people who become successful capitalists.
([ETA] It occurs to me that the arguments against social democracy are almost identical to arguments against "moderate" religion.)
Wednesday, July 15, 2015
The economics of democratic communism: housing
Both of the following statements are true:
Wait, what?
The key is that "ownership" is complex, a "bundle of rights" in modern (capitalist) legal theory. A more accurate description is that under democratic communism, the government has some rights from ownership's bundle, and occupants have other rights from that bundle.
What absolutely goes away is private absentee ownership of real property (land and land-fixed property such as buildings). To the extent that we have absentee ownership rights (which is necessary for property that outlives any specific individual's use), the government has those rights; to the extent that individuals do in fact occupy and use property, they have the ownership rights that accrue from occupation and use.
Thus, the government pays for the creation of new residential and commercial buildings (although they're actually built by private firms). The government at least pays for and probably directly maintains existing buildings.
Individuals have the alienable and revocable-for-cause right to occupy and use property. This right is alienable: the occupants can sell their right to occupy and use property to others. This right is also revocable for cause, on due process of law: an occupant has certain obligations and restrictions on the occupancy and use of property. The occupants cannot, for example, allow the property to deteriorate or be a hazard to others.
Although the right to occupy is alienable, it is owned only by physical possession. The monetary value of this right can be realized only by a transfer of possession. It cannot be owned or attached by anyone other than the occupant. (The right of occupancy can be attached by the government; in some circumstances, the government will probably provide credit to individuals to purchase the right of occupancy, and can, with due process, evict occupants for non-payment.)
Occupants pay "rent", more properly considered property taxes. Non-payment of rent (difficult, but not impossible) is grounds for coercive collection or eviction. (Eviction will occur only for relatively expensive housing when the occupants have had a decline in income.) The purpose of rent is to drain approximately as much money as the government injects to build and maintain property. The exact amounts collected in rent and spent in building and maintenance is a matter of government fiscal policy, dependent on immediate circumstances.
As best I can tell, the United States spends about \$1 trillion per year on all construction (residential, commercial/industrial, and government). Even trebling that number, it looks like total rent should average about 15 percent of disposable income, which is considerably less than the more-or-less modern standard of 33 percent of total income.
Every family is entitled to housing with rent of 15 percent of the minimum standard week's disposable income, within a reasonable distance of the working adults' jobs. There is residential rent control: a family occupying a dwelling cannot have its rent raised more than twice the inflation rate. There's no commercial/industrial rent control; raising rent is one way for local governments to force less-profitable firms to make way for more profitable firms. (The other way is to starve less profitable firms of circulating capital.)
For example, given a 24 hour minimum work week at 1 SVU per hour and a 12 SVU per week income tax, a two-parent family with two children would have an minimum disposable income of 36 SVU per week: 12 SVU per week per parent and 6 SVU per week per child. They would be entitled to housing at a rent of 15 percent of 36 SVU, or 5.4 SVU per week, or \$648 per month. Note that because rents are generally lower under democratic communism (since there are no landlords to extract economic rent), this corresponds roughly to a capitalist rent of about \$1500 per month, which is about the monthly rent of a small two- or three-bedroom home in the suburbs in my community.
Of course, people may spend more than the minimum on rent. If the parents of our example family above were to work 35 hours per week at 1 SVU per hour, then they would have a total disposable income of 58 SVU per week; if they spent 25% of their disposable income on rent (possibly including a loan for right of occupancy), they could spend \$1,740 per month for rent, almost three times the minimum.
All rent goes to the local government; all maintenance and construction is administered by the local government. The national government can add additional funding (from income taxes) for construction; they must do so if the demand for minimum housing exceeds the ability of the local government (which must run a balanced budget) to provide. If the people so choose, local governments can collect more in rent than they pay in construction and housing, with the extra money spent on other public goods (infrastructure, transportation, amenities, etc.).
There are still market forces operating on dwellings, but unlike capitalism, they are no economic rent-seeking incentives. If, for example, a lot of people want to move to a city (e.g. New York City or San Francisco), then they will be willing to offer existing residents a lot of money to purchase the right to occupy, providing an incentive for people to move out. They will also be willing to pay extra rent, giving the local government an incentive to build more housing. (Similarly for commercial/industrial rent.) Also, local governments can petition the national government for extra construction money; since (presumably) new residents of a city are being lured there by higher wages, they will pay more taxes, and it is in the interest of the national government to afford more housing to collect those taxes.
Unlike under capitalism, the asset value of all real property is exclusively in its ability to generate rent; since the government owns all real property, and cannot sell it, real property has no sale value. The government, therefore, has no incentive to leave real property unoccupied. (Indeed, it should probably be legal for anyone to occupy property unoccupied for more than a period of time (90 days?) and pay the minimum rent.) And, since rent in excess of maintenance and construction costs must be spent (local governments cannot save money), there is less of an incentive to raise rents to collect as much surplus value as possible.
- Under democratic communism, the government owns all housing
- Under democratic communism, each family owns their own housing
Wait, what?
The key is that "ownership" is complex, a "bundle of rights" in modern (capitalist) legal theory. A more accurate description is that under democratic communism, the government has some rights from ownership's bundle, and occupants have other rights from that bundle.
What absolutely goes away is private absentee ownership of real property (land and land-fixed property such as buildings). To the extent that we have absentee ownership rights (which is necessary for property that outlives any specific individual's use), the government has those rights; to the extent that individuals do in fact occupy and use property, they have the ownership rights that accrue from occupation and use.
Thus, the government pays for the creation of new residential and commercial buildings (although they're actually built by private firms). The government at least pays for and probably directly maintains existing buildings.
Individuals have the alienable and revocable-for-cause right to occupy and use property. This right is alienable: the occupants can sell their right to occupy and use property to others. This right is also revocable for cause, on due process of law: an occupant has certain obligations and restrictions on the occupancy and use of property. The occupants cannot, for example, allow the property to deteriorate or be a hazard to others.
Although the right to occupy is alienable, it is owned only by physical possession. The monetary value of this right can be realized only by a transfer of possession. It cannot be owned or attached by anyone other than the occupant. (The right of occupancy can be attached by the government; in some circumstances, the government will probably provide credit to individuals to purchase the right of occupancy, and can, with due process, evict occupants for non-payment.)
Occupants pay "rent", more properly considered property taxes. Non-payment of rent (difficult, but not impossible) is grounds for coercive collection or eviction. (Eviction will occur only for relatively expensive housing when the occupants have had a decline in income.) The purpose of rent is to drain approximately as much money as the government injects to build and maintain property. The exact amounts collected in rent and spent in building and maintenance is a matter of government fiscal policy, dependent on immediate circumstances.
As best I can tell, the United States spends about \$1 trillion per year on all construction (residential, commercial/industrial, and government). Even trebling that number, it looks like total rent should average about 15 percent of disposable income, which is considerably less than the more-or-less modern standard of 33 percent of total income.
Every family is entitled to housing with rent of 15 percent of the minimum standard week's disposable income, within a reasonable distance of the working adults' jobs. There is residential rent control: a family occupying a dwelling cannot have its rent raised more than twice the inflation rate. There's no commercial/industrial rent control; raising rent is one way for local governments to force less-profitable firms to make way for more profitable firms. (The other way is to starve less profitable firms of circulating capital.)
For example, given a 24 hour minimum work week at 1 SVU per hour and a 12 SVU per week income tax, a two-parent family with two children would have an minimum disposable income of 36 SVU per week: 12 SVU per week per parent and 6 SVU per week per child. They would be entitled to housing at a rent of 15 percent of 36 SVU, or 5.4 SVU per week, or \$648 per month. Note that because rents are generally lower under democratic communism (since there are no landlords to extract economic rent), this corresponds roughly to a capitalist rent of about \$1500 per month, which is about the monthly rent of a small two- or three-bedroom home in the suburbs in my community.
Of course, people may spend more than the minimum on rent. If the parents of our example family above were to work 35 hours per week at 1 SVU per hour, then they would have a total disposable income of 58 SVU per week; if they spent 25% of their disposable income on rent (possibly including a loan for right of occupancy), they could spend \$1,740 per month for rent, almost three times the minimum.
All rent goes to the local government; all maintenance and construction is administered by the local government. The national government can add additional funding (from income taxes) for construction; they must do so if the demand for minimum housing exceeds the ability of the local government (which must run a balanced budget) to provide. If the people so choose, local governments can collect more in rent than they pay in construction and housing, with the extra money spent on other public goods (infrastructure, transportation, amenities, etc.).
There are still market forces operating on dwellings, but unlike capitalism, they are no economic rent-seeking incentives. If, for example, a lot of people want to move to a city (e.g. New York City or San Francisco), then they will be willing to offer existing residents a lot of money to purchase the right to occupy, providing an incentive for people to move out. They will also be willing to pay extra rent, giving the local government an incentive to build more housing. (Similarly for commercial/industrial rent.) Also, local governments can petition the national government for extra construction money; since (presumably) new residents of a city are being lured there by higher wages, they will pay more taxes, and it is in the interest of the national government to afford more housing to collect those taxes.
Unlike under capitalism, the asset value of all real property is exclusively in its ability to generate rent; since the government owns all real property, and cannot sell it, real property has no sale value. The government, therefore, has no incentive to leave real property unoccupied. (Indeed, it should probably be legal for anyone to occupy property unoccupied for more than a period of time (90 days?) and pay the minimum rent.) And, since rent in excess of maintenance and construction costs must be spent (local governments cannot save money), there is less of an incentive to raise rents to collect as much surplus value as possible.
Monday, July 13, 2015
Economics of democratic communism: circular flow
Sorry that the diagram is hard to read; Blogger won't let me post images in EMF format.
Numbers are in billions of SVU (hours of socially necessary abstract labor time) and currency, roughly equivalent to trillions of 2015 US dollars.
To the extent that the government employs and pays individuals directly (e.g. the civil service, elected delegates, members of the armed forces), it is considered a "firm" for the purpose of the circular flow. Because the details of how the government spends money is a matter of contingent public policy, I don't want to split it up yet. Back of the envelope calculations show that the numbers are consistent with present spending in the United States (using data available in mid-2015).
Because this model is predicated on the Labor Theory of Value, GDP is equal to the amount of socially necessary labor time that individuals actually work. In other words, wages from firms to households constitutes 100% of GDP by definition. Note that gross household income exceeds 100% of GDP (wages plus transfers); net household income (wages - taxes + transfers), however, is less than GDP. All percentages are proportion of real amounts in SVU to total GDP.
Everything balances in SVU (because we can't create labor out of thin air). However, I've shown government spending in dollars (roughly equivalent to 2015 dollars) as intentionally inflationary: the government adds enough dollars to create 4 percent overall inflation. (I've added 4 percent of total GDP; it may be better to just add 4 percent of consumer spending.)
Saturday, July 11, 2015
Zizek on Greece
Slavoj Žižek writes clearly and concisely about the Greek Crisis. He emphasizes that is is a political crisis:
Žižek quotes Varoufakis:
But Žižek does not believe that Varoufakis, modest and "moderate" as he might be, can be successful:
Žižek argues that the European project is fundamentally anti-democratic:
The true goal of lending money to the debtor is not to get the debt reimbursed with a profit, but the indefinite continuation of the debt, keeping the debtor in permanent dependency and subordination. . . .
Greece would never have got so heavily indebted without the connivance of the western establishment. . . . What the EU bureaucracy should be blamed for is that, while it criticised Greece for its corruption and inefficiency, it supported the very political force (the New Democracy party) that embodied this corruption and inefficiency. . . .
Žižek quotes Varoufakis:
A Greek or a Portuguese or an Italian exit from the eurozone would soon lead to a fragmentation of European capitalism, yielding a seriously recessionary surplus region east of the Rhine and north of the Alps, while the rest of Europe would be in the grip of vicious stagflation. Who do you think would benefit from this development? A progressive left, that will rise Phoenix-like from the ashes of Europe’s public institutions? Or the Golden Dawn Nazis, the assorted neofascists, the xenophobes and the spivs? I have absolutely no doubt as to which of the two will do best from a disintegration of the eurozone. I, for one, am not prepared to blow fresh wind into the sails of this postmodern version of the 1930s. If this means that it is we, the suitably erratic Marxists, who must try to save European capitalism from itself, so be it. Not out of love for European capitalism, for the eurozone, for Brussels, or for the European Central Bank, but just because we want to minimise the unnecessary human toll from this crisis.
But Žižek does not believe that Varoufakis, modest and "moderate" as he might be, can be successful:
Syriza effectively is dangerous; it does pose a threat to the present orientation of the EU – today’s global capitalism cannot afford a return to the old welfare state.
Žižek argues that the European project is fundamentally anti-democratic:
An ideal is gradually emerging from the European establishment’s reaction to the Greek referendum, the ideal best rendered by the headline of a recent Gideon Rachman column in the Financial Times: “Eurozone’s weakest link is the voters”.
In this ideal world, Europe gets rid of this “weakest link” and experts gain the power to directly impose necessary economic measures – if elections take place at all, their function is just to confirm the consensus of experts.
The politics of democratic communism: overview
How do we make democracy work in a nation of 350 million people? In a world of 7 billion people?
We have very little experience in democracy, none at all on a large scale. England in 17th and 18th century and America in the 18th century employed a particular political structure to structure the dialectic between the elites and the people: the democratic republic. The democratic republic starts with a privileged elite. Sometimes, representatives are chosen from that elite (e.g. Washington, Jefferson, the Bushes); always, representatives fundamentally represent the elite. The role of the people is to choose, as best they can, between factions within the elite. The theory behind the democratic republic is that society will benefit from the wisdom, discipline, and the superior intellect of the elite, while the people's role in choosing factions of the elite will ameliorate the natural tyranny and arrogance that every elite develops.
Democratic republicanism introduced an important concept: popular sovereignty. Prior to republicanism, political power was something to be owned by people: Louis the XIV famously declared, "L'état, c'est moi. Political power was owned by the king and feudal lord, inherited by his (usually) children. The people were the property of the lord. The people had no more say about how the lord used them than my car has to say about where it's driven. The theory behind feudalism is that the lord, having a property interest in his people, would protect them just as one protects any valuable item of property. Democratic republicanism smashed this social structure; the people, the state, was no longer the property of any person, even the representatives; instead, the state became, at least philosophically, the property of the people as a whole, and representatives the agents of the owners, rather than the owners themselves.
Democratic communism takes the ideas of democratic republicanism to their logical conclusion. Economically, like political power, the means of production are no longer something to be owned, but owned by the people as a whole. (In this aspect, communism differs from capitalism, where the means of production are owned by individuals who rent them to workers, and from anarcho-syndicalism, where the means of production are owned by the workers who actually employ them.) Politically, democratic communism takes the idea of popular sovereignty to its logical conclusion: if the people own the state, they should operate it themselves.
But how? The most obvious solution is to simply let everyone vote on everything. Even in a very large state such as the United States, this solution is not impossible because of the internet. Although not technically impossible, I think that this solution is not presently optimal. One important element of politics is personal contact and personal relationships, and it is psychologically impossible to have a personal relationship with 350 million other people.
A better solution, I think, is localization and delegation. We group people into small enough units that they can have personal relationships with each other, and a personal relationship with a delegate to the next larger unit. The delegates of the next larger unit then have a personal relationship with each other, and a personal relationship to a delegate at the next higher unit, and so forth.
It's also important that power is delegated, rather than trustee. In democratic republicanism, the representatives are trustees. Representatives are elected for a term, and what the representative herself decides is the decision of the constituency. No matter how strongly the constituency disagrees with the representative's decision, the constituency has no recourse (save the expensive and rare recall) but to unseat the representative at the end of her term. And even if the representative were recalled or replaced, all of her prior decision still stands as matters of law.
Delegation fundamentally differs from trustee representation. Trustees exercise their own independent judgment; delegates, however, implement the judgment of their constituencies. (They can, of course, always attempt to persuade their constituencies.) A constituency can (and should) easily recall any delegate who does not act according to the judgment of her constituency. Furthermore, the constituency can, as a matter of law, reverse any action of a delegate: a delegate's decision is never by itself absolutely decisive. And finally, delegates cannot use their positions for economic gain, either while acting as a delegate or afterwards.
There are other structural elements that true democracy would require; I'll discuss them in later posts.
We have very little experience in democracy, none at all on a large scale. England in 17th and 18th century and America in the 18th century employed a particular political structure to structure the dialectic between the elites and the people: the democratic republic. The democratic republic starts with a privileged elite. Sometimes, representatives are chosen from that elite (e.g. Washington, Jefferson, the Bushes); always, representatives fundamentally represent the elite. The role of the people is to choose, as best they can, between factions within the elite. The theory behind the democratic republic is that society will benefit from the wisdom, discipline, and the superior intellect of the elite, while the people's role in choosing factions of the elite will ameliorate the natural tyranny and arrogance that every elite develops.
Democratic republicanism introduced an important concept: popular sovereignty. Prior to republicanism, political power was something to be owned by people: Louis the XIV famously declared, "L'état, c'est moi. Political power was owned by the king and feudal lord, inherited by his (usually) children. The people were the property of the lord. The people had no more say about how the lord used them than my car has to say about where it's driven. The theory behind feudalism is that the lord, having a property interest in his people, would protect them just as one protects any valuable item of property. Democratic republicanism smashed this social structure; the people, the state, was no longer the property of any person, even the representatives; instead, the state became, at least philosophically, the property of the people as a whole, and representatives the agents of the owners, rather than the owners themselves.
Democratic communism takes the ideas of democratic republicanism to their logical conclusion. Economically, like political power, the means of production are no longer something to be owned, but owned by the people as a whole. (In this aspect, communism differs from capitalism, where the means of production are owned by individuals who rent them to workers, and from anarcho-syndicalism, where the means of production are owned by the workers who actually employ them.) Politically, democratic communism takes the idea of popular sovereignty to its logical conclusion: if the people own the state, they should operate it themselves.
But how? The most obvious solution is to simply let everyone vote on everything. Even in a very large state such as the United States, this solution is not impossible because of the internet. Although not technically impossible, I think that this solution is not presently optimal. One important element of politics is personal contact and personal relationships, and it is psychologically impossible to have a personal relationship with 350 million other people.
A better solution, I think, is localization and delegation. We group people into small enough units that they can have personal relationships with each other, and a personal relationship with a delegate to the next larger unit. The delegates of the next larger unit then have a personal relationship with each other, and a personal relationship to a delegate at the next higher unit, and so forth.
It's also important that power is delegated, rather than trustee. In democratic republicanism, the representatives are trustees. Representatives are elected for a term, and what the representative herself decides is the decision of the constituency. No matter how strongly the constituency disagrees with the representative's decision, the constituency has no recourse (save the expensive and rare recall) but to unseat the representative at the end of her term. And even if the representative were recalled or replaced, all of her prior decision still stands as matters of law.
Delegation fundamentally differs from trustee representation. Trustees exercise their own independent judgment; delegates, however, implement the judgment of their constituencies. (They can, of course, always attempt to persuade their constituencies.) A constituency can (and should) easily recall any delegate who does not act according to the judgment of her constituency. Furthermore, the constituency can, as a matter of law, reverse any action of a delegate: a delegate's decision is never by itself absolutely decisive. And finally, delegates cannot use their positions for economic gain, either while acting as a delegate or afterwards.
There are other structural elements that true democracy would require; I'll discuss them in later posts.
Wednesday, July 08, 2015
Peter Singer's sham altruism
Philosopher Peter Singer has a long article about altruism: The Logic of Effective Altruism (h/t to 3 Quarks Daily). In the article, Singer argues that individuals should use a substantial portion of their resources to help other individuals. Singer also implies that although there's no obligation, it's at least better to accumulate enough resources as possible so as to have more to give.
Singer's paradigmatic case is of Matt Wage. As Singer recounts, Wage, a promising philosophy student, decided to forego a career as a professor; instead, Wage worked on Wall Street in finance, so he could give a substantial amount to charity: according to Singer, Wage donated "a six-figure sum—roughly half his annual earnings" after his first year working.
Now, I'm an altruistic guy. I have enough to live simply and comfortably, and I spend a lot of my time as an educator (tutor/TA) helping others. But there's something about Singer's article that goes thud instead of ding. I can't help but think that Singer is missing something important.
What bothers me most about Singer's article is its focus on the individual. Singer rarely mentions and never judges the larger institutions and structures of our society. Singer seems to take the international neoliberal capitalist structure as a force of nature. But capitalism is not a force of nature; it is a human invention. And capitalism is the cause of most of the suffering that Singer calls on people to altruistically ameliorate. Children are starving and dying from malaria in Africa because of colonialism, and the African people cannot lift themselves out of poverty because capitalism denies them not just capital but agency and autonomy.
Singer's altruism is also insufferably elitist. The vast majority of people in the world do not have the resources to engage in altruism at Wage's level. And what has Wage himself actually contributed to the world? Financiers, especially those on Wall Street, do not contribute anything at all to society: they are simply parasites. Wage has merely expropriated others' labor, kept half (at least thirty times the 2012 global per capita median income, probably more, and four or five times more than I live on), and "altruistically" given the other half away, given it away to those who are suffering because of the system that Wage supports and maintains. What Wage has done is acquire power over others, exercising
Furthermore, Singer's altruism is not reciprocal: it is the powerful and superior giving to the powerless and inferior, reinforcing the superiority of the powerful. Singer's altruism is, I suppose, a better way to establish and reinforce superiority than punishment and torture, but being less bad than Orwell's Inner Party is not a particularly high bar. Singer's altruism always has strings attached: it is given to those whom the powerful consider "deserving", the meek supplicants, not the revolutionary fighting to change the unjust system from which Wage handsomely profits.
It's notable too that Singer concentrates his exhortations to altruism on the safest and most removed of recipients. Singer ignores the minimum wage worker, living in grinding poverty in the midst of the wealthiest nation in the world, begging the bosses for a bathroom break. Singer does not mention the black people in our society, suffering daily from the most direct and brutal oppression, an oppression that breaks through our willful complacency only when young black men, women, and children are shot down like dogs. Singer closes his eyes to women, still in the 20th century living in a rape culture. Where is the altruism of the wealthy? Are they altruistic enough to attack the foundation of their own privilege and power? I think not.
Reciprocity is a more fundamental value than the amelioration of suffering. I would rather suffer as a free person than prosper as a slave, however "altruistic" my master. (Of course, I would much rather prosper as a free person; and the whole point of freedom is that in the aggregate, freedom creates more prosperity than slavery.)
There is another kind of altruism that is profoundly better than Singer's: the invisible reciprocal altruism we take for granted in human society, an invisible altruism against which capitalism has since its inception centuries ago exhibited absolute and implacable hostility.
As Singer recounts, Wage thought, "Suppose you see a burning building, and you run through the flames and kick a door open, and let one hundred people out. That would be the greatest moment in your life. And I could do as much good as that!" But Wage is just indulging in an adolescent power fantasy. To belabor the metaphor, the real heroes are the civil engineers who make buildings that don't catch fire in the first place, and the bureaucrats who ensure that the landlords build correctly despite their greed.
No, Singer's vision is not exciting. It is just a sop to the capitalist elite, that they can return a little of the labor they have expropriated and pat themselves on the back for their sham generosity.
Singer's altruism is nothing but the acquisition of power, and the exercise of power to shape the world as the powerful see fit, treating their recipients as infantile subjects.
I don't want Singer's altruism. I want justice.
Singer's paradigmatic case is of Matt Wage. As Singer recounts, Wage, a promising philosophy student, decided to forego a career as a professor; instead, Wage worked on Wall Street in finance, so he could give a substantial amount to charity: according to Singer, Wage donated "a six-figure sum—roughly half his annual earnings" after his first year working.
Now, I'm an altruistic guy. I have enough to live simply and comfortably, and I spend a lot of my time as an educator (tutor/TA) helping others. But there's something about Singer's article that goes thud instead of ding. I can't help but think that Singer is missing something important.
What bothers me most about Singer's article is its focus on the individual. Singer rarely mentions and never judges the larger institutions and structures of our society. Singer seems to take the international neoliberal capitalist structure as a force of nature. But capitalism is not a force of nature; it is a human invention. And capitalism is the cause of most of the suffering that Singer calls on people to altruistically ameliorate. Children are starving and dying from malaria in Africa because of colonialism, and the African people cannot lift themselves out of poverty because capitalism denies them not just capital but agency and autonomy.
Singer's altruism is also insufferably elitist. The vast majority of people in the world do not have the resources to engage in altruism at Wage's level. And what has Wage himself actually contributed to the world? Financiers, especially those on Wall Street, do not contribute anything at all to society: they are simply parasites. Wage has merely expropriated others' labor, kept half (at least thirty times the 2012 global per capita median income, probably more, and four or five times more than I live on), and "altruistically" given the other half away, given it away to those who are suffering because of the system that Wage supports and maintains. What Wage has done is acquire power over others, exercising
Furthermore, Singer's altruism is not reciprocal: it is the powerful and superior giving to the powerless and inferior, reinforcing the superiority of the powerful. Singer's altruism is, I suppose, a better way to establish and reinforce superiority than punishment and torture, but being less bad than Orwell's Inner Party is not a particularly high bar. Singer's altruism always has strings attached: it is given to those whom the powerful consider "deserving", the meek supplicants, not the revolutionary fighting to change the unjust system from which Wage handsomely profits.
It's notable too that Singer concentrates his exhortations to altruism on the safest and most removed of recipients. Singer ignores the minimum wage worker, living in grinding poverty in the midst of the wealthiest nation in the world, begging the bosses for a bathroom break. Singer does not mention the black people in our society, suffering daily from the most direct and brutal oppression, an oppression that breaks through our willful complacency only when young black men, women, and children are shot down like dogs. Singer closes his eyes to women, still in the 20th century living in a rape culture. Where is the altruism of the wealthy? Are they altruistic enough to attack the foundation of their own privilege and power? I think not.
Reciprocity is a more fundamental value than the amelioration of suffering. I would rather suffer as a free person than prosper as a slave, however "altruistic" my master. (Of course, I would much rather prosper as a free person; and the whole point of freedom is that in the aggregate, freedom creates more prosperity than slavery.)
There is another kind of altruism that is profoundly better than Singer's: the invisible reciprocal altruism we take for granted in human society, an invisible altruism against which capitalism has since its inception centuries ago exhibited absolute and implacable hostility.
As Singer recounts, Wage thought, "Suppose you see a burning building, and you run through the flames and kick a door open, and let one hundred people out. That would be the greatest moment in your life. And I could do as much good as that!" But Wage is just indulging in an adolescent power fantasy. To belabor the metaphor, the real heroes are the civil engineers who make buildings that don't catch fire in the first place, and the bureaucrats who ensure that the landlords build correctly despite their greed.
No, Singer's vision is not exciting. It is just a sop to the capitalist elite, that they can return a little of the labor they have expropriated and pat themselves on the back for their sham generosity.
Singer's altruism is nothing but the acquisition of power, and the exercise of power to shape the world as the powerful see fit, treating their recipients as infantile subjects.
I don't want Singer's altruism. I want justice.
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