Aggravating the Disease

It should already be obvious to most observers that tosoc.org's analysis of what is wrong with capitalism is not particularly original. It is time to give some credit to one of the thinkers who have influenced our thinking:  John Maynard Keynes. The following is from his monograph The End of Laissez-Faire, 1926.

"Many of the greatest economic evils of our time are the fruits of risk, uncertainty, and ignorance. It is because particular individuals, fortunate in situation or in abilities, are able to take advantage of uncertainty and ignorance, and also because for the same reason big business is often a lottery, that great inequalities of wealth come about; and these same factors are also the cause of the unemployment of labour, or the disappointment of reasonable business expectations, and of the impairment of efficiency and production. Yet the cure lies outside the operations of individuals; it may even be to the interest of individuals to aggravate the disease."

This is largely what we have been saying in our blog. For whatever reasons, some people become very rich under laissez-faire capitalism. These people are capitalists, but not generally supporters of capitalism at the expense of their own capital. Therefore they generally do not care about free markets or general prosperity. As Keynes said, "these same factors are also the cause of unemployment of labour, the disappointment of reasonable business expectations, and the impairment of efficiency and production."

Since it may be "to the interests of individuals to aggravate the disease," therefore, the individual decision-making which is such a central part of laissez-faire capitalism is not necessarily the socially-benevolent principle that Adam Smith envisioned. In fact, "the cure lies outside the operations of individuals." In other words, the cure lies outside of capitalism.  There we have in a nutshell the reason why capitalism is unstable and why capitalism does not correct itself when it goes wrong.

However, Keyne's solutions were limited by the technology available at the time. We propose solutions that are different mainly because they are heavily dependent on current technologies. Read our other blog posts for more details.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2013 TheOtherSideOfCapitalism

Divide and Conquer

We will be very brief this week.  One article of note is a Reuter's report by Ernest Sheyder about the US Amish in Ohio:  To Flee Ohio Oil Boom. It perfectly describes the divide-and-conquer technique that we have referred to on occasion.

Several oil companies are spending billions to develop Ohio's Utica shale formation, buying up drilling rights in areas that have been quiet, bucolic farming regions for many years. Some Amish, who tend to live simple lives and tend not to use anything but human- and animal-powered tools because of their religious beliefs, are living right on top of these oil and gas reserves. The encroachment of oil and gas technology with its noise, crowding, oil rigs, and storage tanks, is changing their way of life. Roads that used to carry many Amish horse-and-buggy vehicles are now dominated by trucks and equipment. Oil trucks have already been involved in several fatal accidents with these buggies. The Amish are faced with an unpleasant choice:  move away from the homes they have developed for many years or adapt to the destruction of their way of life. Fortunately for some of the Amish, the oil companies are offering enough for drilling rights so that they can afford to move.

When the rich set their sights on a region, it is difficult for the poor to resist. Sure, if they could stand together and none of them sell out, they could maintain their way of life. But they will not because some of them need the money more than others. Perhaps they have special health issues that require more money than they have.

Once a few of them sell out, it is easier and cheaper for the rich to pressure the rest. The Amish are easy targets because they do not like environments filled with dangerous motor traffic, noise, and overt technology. All the rich have to do to run the Amish out of Ohio is let oil field development take its course. As the region becomes more and more unpleasant to them, the Amish will have less and less bargaining power for royalties. Eventually it will cost hardly anything at all to force out the last of them.

At the same time that the rich are making what may become an industrial wasteland out of parts of rural Ohio, they appear also to have plans for San Francisco. We talked about the protests against Google and other high-tech companies in our post Revolt in District 4. The effort in San Francisco is to run off the people who have lived there "forever" and change the nature of the neighborhoods into higher-priced, higher-profit tenant-in-common and condominium arrangements. San Francisco is to become the very pleasant and safe suburb of Silicon Valley.

Are these kinds of changes to rural Ohio and to San Francisco really what our society wants? We do not know because the question never gets asked. In our economic system, the rich make these decisions and make their plans without reference to the poor. The poor get bullied and pushed around without much recourse, or even public comment. Most people do not even realize what is going on.

Another advantage of tosoc.org's multiple exclusive currencies and markets, therefore, is that these plans could not be carried out in even a semi-secret fashion. Such large deals would have to be negotiated in public view because the rich could not make private deals with poor individuals. They could not use their divide-and-conquer technique in secret. Whatever the final results of these deals would be, the decisions would not be made by the few for the many as they are today. Support tosoc.org.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2013 TheOtherSideOfCapitalism

Revolt in District 4

The title of this post, Revolt in District 4, is an intentional reference to Suzanne Collins' Hunger Games series. The protests this week against the buses in San Francisco that carry high-tech workers to their jobs evoked in us a mash-up of The Hunger Games and Tyler Cowan's 2013 book Average is Over. We are taking liberties by assigning San Francisco to District 4 (the presumably poorer fishing district) and assigning Mountain View and Silicon Valley to District 3 (the richer technology district). Please note that we do that just for the purpose of illustration since San Francisco is more about fishing than Silicon Valley.

The reason this mash-up works for us is that Dr. Cowan suggests that workers will segregate more and more into those who can deal with high technology and those who cannot. (See our post That Sounds Pretty Bad.) The fifteen percent or so who can work with high tech will become relatively rich. Many or most of the remaining 85% will become relatively poor and will be relegated to "shantytowns." That sounds like the Hunger Games' poorer districts to us.

Therefore we think it is reasonable to expect protests if we actually proceed toward Tyler Cowan's dystopic vision of the future. Perhaps the protests in San Francisco are some of the first of these. The dislocations, displacements, and evictions related to the wealth differentials between high-tech workers and the average San Franciscan is beginning to cause friction. High-tech workers may become the bad guys because they are driving out the "Old San Francisco," buying up housing and raising prices.

Adding to the friction is the attitude of the "techies." Some of them have made unfortunate public comments that they later have to apologize for. We think that is only natural. High-tech workers experience rapid change and high stress. If you cannot keep up, you are out. Like soldiers charging a hill, they have to focus on the objective. The wounded get left behind. Tough, but that's the way it is.

High-tech workers will also say, with perfect truth, "If you are jealous of us and our higher salaries, there is nothing stopping you from competing with us. Try doing what we do all day and see if you are good enough. Of all the jobs there are, high tech jobs are the most open to everyone. You just have to prove that you can do the work and keep up."

Perfectly correct, but we say that sometimes you can be right and still be wrong. Wrong in how you say the truth. Wrong because of the context. Wrong because of the emotional content. Wrong because of your purpose. If you use the truth only to bully others, then the truth content gets lost in the attempt to create a dominant/submissive relationship. If you say that "We are the best of the best of the best, and we prove it every day. If you cannot keep up with us, then too bad," then you can only expect resistance to you to increase over time. An "Eat dirt and die!" attitude is always wrong even if your facts are perfectly correct.

Returning now to the economic aspects of this, we think it is true that relatively wealthy high tech workers also act as proxies for the rich. Encouraging them to occupy certain areas is a way, perhaps, to "spruce up" those areas and drive out the riff-raff. All without a rich person having to say or do anything publicly, or even privately. When you occupy a middle level in an organization and are paid a bit more than others, one of the unspoken things you are paid extra to do is take the heat off your employer by taking the blame. Taking a "bullet" for your employer is a major component of what is today called "loyalty."

What this means is that we (tosoc.org) are on both sides of this dispute. As the system is set up now, on "this side of capitalism," there is no resolution to these kinds of disputes. The reason why this protest captured our attention is that it is a microcosm of the larger disputes across the US. The rich are driving the poor, arbitrarily changing their lives and causing conflicts; invading "their" territory. More conflict is inevitable. Again, there is no solution. That is because the system is fundamentally flawed.

The flaw is that the rich and the poor participate in the same markets and with the same currency even though the markets are no longer competitive. If the rich decide to use their economic power to drive the poor out of San Francisco, our "free" markets allow that. Whatever social and physical capital the poor have built up will be taken from them or destroyed.

In the tosoc.org system, however, the rich would not be able to arbitrarily destroy entire poor neighborhoods that have long-standing social structures. That is because the rich and the poor would be in different markets and use different currencies. Divide-and-conquer techniques could not be used against a neighborhood because the rich could not make offers directly to individuals.

It is important to recognize that there is a huge difference between trying to preserve jobs in buggy-whip factories and trying to allow the poor to save and preserve capital. The buggy-whip factory is outdated technology and workers with outdated skills. On the other hand, a nice San-Francisco neighborhood might be destroyed not because it is outdated and useless, but because the rich cast envious eyes upon it and maneuver to take it away from its less-competitive owners. Where is the social or even economic value in that? Tosoc.org is proposing a way to fight the arbitrary destruction of the poor by the rich. Support tosoc.org.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2013 TheOtherSideOfCapitalism

Unfortunate if Unavoidable

"It is with great sadness that we must impoverish you more. So sorry. So very, very sorry." We seem to hear this kind of thing more and more as an explanation why the poor must be made poorer. See for example the following editorial piece about Detroit's bankruptcy and it effect on pensions in a recent Wall Street Journal: Detroit's Painful Pension Lesson. Here is what it says.

"This week's legal decision on Detroit's bankruptcy means Motown pensioners will take a hit, which is unfortunate if unavoidable. But there's a lesson in this for government workers who have been told that defined-benefit pensions are safer than 401(k)-style defined-contribution plans.
"...
"We sympathize with the Detroit retirees who will now suffer after years of service. But they ought to aim their ire at the politicians and union chiefs who told them the lie that government pensions are forever."

At tosoc.org, we find this kind of attitude deplorable in the current economic situation. For several reasons, we think it would be better for the editors of the Journal to just say nothing at all about the shabby treatment of Detroit pensioners. First, your vaunted private companies lie about the safety of their pensions, too. Holier-than-thou attitudes are not called for. Second, your sympathies would be more believable if you advocated bail-outs for pensioners like the bail-outs that saved US banks. But you do not have anything useful to suggest. You just accept that additional suffering by the poor is "unavoidable."

Finally, the editors of the Journal suggest that what is going on is that workers unwisely trusted politicians and union leaders. We think that what is really going on is that the Great Recession has blown the US "social contract" apart. Trillions extra are spent to save the rich but the poor get only crocodile tears. The idea used to be that years of service in the US would be rewarded by financial security. Not everyone could be rich, but most could at least build up a secure retirement.

That is no longer true. The idea now is that the rich will inherit the earth, including the pensions of the poor. The idea is that the rich will continue to create conditions, crisis after crisis, under which it will be unfortunate but unavoidable that the savings of the poor will be transferred to the rich.

There is no reason for us to stand idly by and let that happen. We must take control of our own financial security and stop entrusting it to the rich. As tosoc has said before, the best way to do that is to separate ourselves financially from the rich. They should not control our currency. They should not be able to buy our politicians. We should deal with them collectively, not individually, and with the same shrewdness that they deal with us. Multiple exclusive currencies and markets is the way. Support tosoc.org.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2013 TheOtherSideOfCapitalism