Greed is

Greed is ...

• Universal?
• Evil?
• Natural?
• Good?
• Unnatural?
• Inevitable?
• Genetic?

Columnist Peggy Noonan has been on a bit of a tear recently about moral issues. See her Wall Street Journal column Our Selfish Public Servants from today. She is concerned about an apparently rising tide of selfishness on the part of our public servants that has ill effects on society. She closes by saying

"Someday history will write of our era, and to history the biggest scandal will be the thing we all accepted in our leaders, chronic and endemic selfishness. History will be hard on us for that."

OK, greed. Greed is bad. We know that. However, what is new here is that this is about government greed, not private greed. We think it is important for the people to realize that their government can be as greedy as any corporation, can cover up like any corporation, and can abuse the people like any corporation. See our previous post Relief for Manufacturers: Cambodia. Instead of working with the people and the manufacturers to raise garment workers' wages, the Cambodian government broke up the strike and restored the situation by ordering the workers to go back to work without any wage concessions.

There is a problem with the term "greed," however. It is just a pejorative label, not a measurable quantity. It is a "scarlet letter" that we pin on our enemies in the attempt to punish them socially. In truth, the difference between greed and need is not clear sometimes. Also, those with the ability to manage more resources should be allocated more resources. Are they greedy if they demand resources commensurate with their abilities?

This plays out differently in different systems. In socialist terms, just using the phrase "making a living" can evoke thoughts of "making money," "the profit motive," and "production for profit." Those are unacceptable ways of thinking and speaking in many socialist systems. Saying such things might even be against the law. Good socialists would not even think in terms of having to "make their livings." They are confident that heir needs will be taken care of by society. What good socialists should think about is how to contribute according to their abilities.

Even in egalitarian socialist societies, however, some have more ability to manage resources than others. Therefore persons with more ability will be given control of more resources. Also therefore they will live privileged lives compared to others, conditions commensurate with their contributions. This is necessary to keep morale high and support the continuation and quality of those contributions. Social stratification and hierarchy are natural and expected results even in supposedly egalitarian socialist societies.

The end result of stratification and hierarchy in socialist systems is of course the person who is supposedly the best resource manager of all. This person becomes the chief executive and chief administrative officer, and is of course the one who lives the most privileged life of all. This person directly and indirectly controls all of the society's resources. "The people" end up on the bottom again, and may live in conditions that are even worse than those that the worst capitalist system would impose on them.

Despite the fact that these individuals at the top of the socialist heaps control more of their societies' resources, with tighter control and less risk than any capitalist, it is difficult to apply the term "greedy" to them and make it stick. They do not own much as individuals, if anything, in a technical legal sense. They may not "make" any money at all in a technical legal sense. Thus they can argue that society has only temporarily assigned them so much power and privilege because they have shown that they are the best caretakers for their societies' resources and for their societies' visions of the future.

The sad fact is, however, that these persons live lives that are comparable not to any wealthy capitalists, but only to the kings and emperors that were supposedly relegated to the dustbin of history by social progress. They even find ways to pass their powers on to their sons and make their families hereditary rulers, as has been done already. For example, it has happened in what is called the Democratic People's Republic of Korea. Socialism in practice has come full circle and become what it claims that it hates.

The way tosoc.org sees it, these societies use "political currency" rather than money to carry out transactions at the higher levels. This has many advantages, the greatest of which perhaps is that the leaders are not accountable except to their own leaders, who will be reluctant to discipline lest they themselves be disciplined. Without ownership or money at the higher levels, the leaders cannot be punished for fraud, extortion, embezzlement, or other acts against individual ownership. They can just take what they want, something that leaders in capitalist societies must be wary of. How many politicians have been brought down in capitalist societies for example for misusing campaign funds? Many, but it will almost never happen in socialist societies. That is one reason why leaders tend to prefer socialism over capitalism. In a socialist sysem, one can rule. Under capitalism, one must lead, and leading is harder than ruling.

In any society, however, there are those who must be ruled and those who must be led. That is why there is inevitably a bit of socialism in capitalist systems and a bit of capitalism in socialist systems. Tosoc.org recognizes that reality and incorporates it in our suggestions. Instead of awkwardly bolting bits of socialism onto capitalism and creating a Frankenstein result that still has major problems, we want to avoid those problems by seamlessly integrating socialist elements into a capitalist superstructure.

Finally, about greed, our readers will find that we rarely use the term. We think we have shown that greed operates just as much in socialist systems as in capitalist systems, but also that the accusation only has real political impact in capitalist systems. To us that means that the term is politicized and biased by nature. That is, "greedy" is just an epithet without foundation in reality. Its use makes rational decisions more difficult, not easier. Generally we will not use the term because we find it a stumbling block to keeping things "real."

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2014 TheOtherSideOfCapitalism

Relief for Manufacturers: Cambodia

Headlines tell the tale. Here are three links to the latest updates of online Wall Street Journal articles by headline, from January 3^rd, 5^th, and 6^th:

Four Dead in Cambodia Garment Strike

Cambodia Reverts to Harsh Approach in Protest Crackdown

Cambodia's Garment Industry Resumes Production After Strike Ends

Strike, crackdown, and then everything returns to the way it was. Production resumes. Is this a happy or a sad tale? Here is a quote from the "Resumes Production" article:

"The fizzling of one of Cambodia's largest strikes in recent years brought relief for many garment manufacturers, who have complained of mounting financial losses because of missed shipments and lost orders."

Whew! All of us were concerned about the garment manufacturers and the stress they suffered from the strike. Now we can move on. The bodies have been buried.

Tosoc.org of course does not want to move on. This is another example how the poor are treated by the managers when the opportunity arises. Let us look at some of the economic details, also from the "Resumes Production" article:

"Garment manufacturing is Cambodia's biggest export business, supplying apparel to retailers mainly in the U.S. and European Union. The industry earned nearly $5.1 billion in the first 11 months of 2013, up 22% from the period in 2012, according to the Commerce Ministry. Cambodia has about 800 garment and footwear factories that employ about 600,000 workers, mostly women, labor officials say. 

"Manufacturers favor the country for its low-wage costs, but strikes are frequent because of what union leaders say is widespread discontent with meager salaries, poor working conditions and lax enforcement of labor laws."

This means that 600,000 workers generated about $5.6 billion in 2013 (estimated), or about $9,330 for each worker. Here is what they are paid (from the same article):

"The strike started as a protest against the government's offer last month to raise the industry minimum wage 19% to $95 a month, starting in April—well short of union demands for $160 a month. Workers then scorned a sweetened offer made by officials last week—a 25% increase to $100 a month, starting in February—and defied government orders to return to work by Jan 2."

Adjusting for the proposed increase, the workers are currently paid about $79.80 per month, or about $958 per year. On average, worker pay is about 10.3% of industry income in Cambodia.

Instead of complaining, the Cambodian government probably thinks that the workers should be grateful. Compare conditions in Cambodia to conditions in Bangladesh. In our tosoc update for 22 September, 2013, we noted a report about a Bangladesh garment workers strike (Tosoc Update 20130922). They were earning on average about $38 a month. That was less than 10% of industry earnings in Bangladesh.

Since then we see a report on libcom.org that the Bangladeshi workers have won a 77% increase in monthly pay, to about $68 a month (Striking Bangladeshi garment workers win a 77% pay rise). Good for them! That corresponds to about $816 per year. According to the report, the Bangladesh garment industry makes about $20 billion per year with 4 million workers, or about $5000 per worker. With the pay increase, Bangladesh workers will now take in about 16% of their industry income. Very good!

In comparison, Cambodian garment workers had been earning about twice the pay for about twice the production of the Bangladesh workers. The articles do not say so, but presumably the Cambodian workers or their representatives are fully aware of what has happened in Bangladesh. A comparable 77% pay increase for the Cambodian workers would raise their incomes from about $80 a month to about $142 a month. No wonder the Cambodians are striking.

Beyond Cambodia and Bangladesh, US workers also need to be paying attention. The international rich, meaning international corporations and their owners, are always looking for cheaper labor. In the apparel industry, US employment dropped more than 80% from 1990 to 2011 (BLS Spotlight on Statistics: Fashion). This kind of trend is not limited to the apparel industry. It could happen in any industry.

The issue is not so much that US workers will lose their jobs because corporations move their operations to other countries, though that happens. The issue is that our money managers (the rich) will invest our savings in other countries. Those investments will create jobs that will not be available to our children. This is a variation on the theme we explored in our post Take from the Poor. The difference is this: We will be investing in the growth of other countries and not in the growth of our own. We will be absentee worklords relative to the workers in other countries, getting income from the fruits of their labor. If that trend continues, the risk is that we will work less and less, becoming a rentier nation. One for which large parts of the rest of the world labors at relatively low wages to maintain our lifestyles. (This will be true also for all the "Western" countries," not just the US.)

There is already enough worldwide anger about American "Imperialism." At this point, that anger is still misplaced. If the trend continues, however, that anger will ultimately become justified. We and our children will cease to work to produce what we need. We will be in a strange and probably unsustainable position. Our incomes will be based on our investments in those who produce what we need. We will pay for their goods and services, but if their wages are only about 10% of industry earnings, then we might get back as much as 90% of what we pay through our investments. What a refund!

That all depends on their allowing it to happen, however, which seems unlikely. We need to be prepared for change.

Finally, for tosoc.org, there is the question how multiple exclusive currencies and markets would help this situation. The main problem appears to be government support for international manufacturing rather than their own people. The Cambodian government ordered the garment workers to go back to work by January 2^nd, according to the report. All we hear about is corporate greed. We do not hear enough about government greed. As we said before in Tosoc Update 20130922, government officials typically are not trying to keep up with their own people, they are trying to keep up with Western government officials. That means they have to squeeze their own people unmercifully.

That would change if Cambodian government officials were only allowed to earn and keep an internal currency, one that they cannot convert to a relatively hard external currency like the US dollar. Then Cambodian government officials would be in the same economic soup as their citizens. Their economic loyalties would no longer be to international corporations, but to their own people. Their wealth would be linked to their nations' wealth. Their focus would change from shooting their protestors to negotiating higher wages for their people. We cannot convert Cambodia from a poor nation to a wealthy nation overnight, but we may be able to turn it around and keep it from languishing in poverty. Who knows? We might even be able to help the US State of Mississippi. Support tosoc.org.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2014 TheOtherSideOfCapitalism

Left for Dead

See this quote from the Global View opinion piece Obama's Envy Problem by Bret Stephens in the 31 December 2013 edition of the Wall Street Journal:

"Besides which, so what [if the top fifth takes in over half the aggregate income]? In 1979 the mean household income of the bottom 20% was $4,006. By 2012, it was $11,490. That's an increase of 186%. For the middle class, the increase was 211%. For the top fifth it's 320%. The richer have outpaced the poorer in growing their incomes, just as runners will outpace joggers who will, in turn, outpace walkers. ... 

"As it is, to whom except the envious should it matter that the boss now makes a lot more, provided you, too, also make more? ..."

Sorry, Mr. Stephens. This is not Obama's envy problem, this is your math problem. You looked at a snapshot of relative incomes today and said they were fine, but you did not consider the trend. It is not so much where income inequality is now, it is where it is going. Even if relative incomes are acceptable now, they will become worse unless something stops the trend. Your "who cares?" attitude means that no one need come to you for a solution.

The top fifth already makes about seven times what the bottom fifth makes. If the trend continues, that will become ten times, then 100 times, then 1,000 times, and so on. Is that still OK? How about when the multiplier is a million or a billion? And what is there in capitalist theory to stop the trend? Nothing. That is why it is important. It may not matter very much if our bosses makes seven times what we do, Mr. Stephens, but it will if they make a million times what we do. The whole economic system will break down. We will stop being a capitalist democracy and become a plutocracy.

Tosoc.org has a solution for this problem. The underlying issue is that, using Mr. Stephens' metaphor, we compel the walkers and joggers to compete for their lives against the runners. Then capitalism encourages the runners to leave everyone else for dead. So much for the idea that letting everyone work for their own selfish ends is good for society. That principle works well in situations where it possibly can work, but at some level of income inequality, it does not work at all.

In fact it is exploitative, oppressive, and cruel to force people to compete for their lives when they cannot win. That has been tosoc.org's major point all along. Walkers should only have to compete against other walkers and joggers only against other joggers. Sure, let the runners take the biggest prizes, but do not let them take all the prizes.

As it stands now, the system does not even recognize that some people are life's walkers and others are life's joggers. The government tries to fix this perverse nature of the system by taxing away some of the runners' prizes and giving them to the others. However, we think it would be even better to have a system that is not perverse by nature, but is designed to work properly in the first place.

On the other side of capitalism, therefore, the government would set up different competitions and apportion the prizes between them. There would be a competition for walkers, a different one for joggers, and yet another one for runners. It would not be possible for runners to win all the races. All the competitions would be, for lack of a better word, competitive. That way all types of competitors could survive and no one would be left for dead. Support tosoc.org.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2014 TheOtherSideOfCapitalism

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