Links 7/18/09 « naked capitalism

Saturday, July 18, 2009

Links 7/18/09

Oldest WWI veteran dies aged 113 BBC

Artistic tendencies linked to ’schizophrenia gene‘ New Scientist. Um, this is news?

Low-wage capitalism : colossus with feet of clay– what the new globalized, high-tech imperialism means for the class struggle in the U.S. Fred Goldstein (hat tip reader John D). This actually looked quite interesting (I only looked at chapter headings and a few bits here and there, I will confess) and I think most readers can read past the Marxist orientation and focus on the underlying dynamics. It has a lot of case studies. Hhhm, is this an indicator that Marxism is having a mini resurgence?

Persistent Ignorance Michael Panzner

JPMorgan, U.S. Lenders Lean on Investment Banking for Profits Bloomberg

Return of the Jedi Accrued Interest

Goldman Sachs to the Forefront Fyan Chittum,Columbia Journalism Review and “Goldman Sachs are scum” Lambert Strether

Outplaying your partner: Poorly Made in China by Paul Midler Asia Times (hat tip reader Paul S). Today’s must read.

Antidote du jour:

15 Comments:

attempter says:

July 18, 2009 at 4:26 am

The Goldstein book does look interesting. I think I might print it out. Thanks for suggesting it.

I think most readers can read past the Marxist orientation and focus on the underlying dynamics.

I'm not sure why anyone would need to "read past" a Marxist orientation.

As we've seen, the basic premises of Marx and Engels' analysis, if not all the details, have held up better than any other economic analysis and prognosis.

fresno dan says:

July 18, 2009 at 8:14 am

"Midler finds it odd to manufacture products that are mostly water in China and ship them halfway around the world, but that's not his business."

I find it odd that products that are ALL WATER get shipped about, when any credible objective analysis shows that there is no difference between tap and bottled (other than the psychic gratification of drinking "designer" water).

After years of reading leftist critiques of how the West exploits the 3rd world, its ironic to see how we are really the victims.

But I'm not worried. In a couple of years when the dollar is devalued by 90%, and the Chinese are starving because they amassed worthless dollars, we can return to the way it should be – us guilty and rich. And I will be reading how this all was a Western plot to take advantage of the 3rd world

Sheridan Family says:

July 18, 2009 at 9:30 am

Poor old Marxism. Elegantly beautiful in it's compassion, but ruthlessly terrible in the hands of the dictators who inevitably exploit it.

Revolt will come like this. (just a prediction, take it for what it's worth) Sometime after the offshoring boom starts, we'll have shifted so many jobs away from the US that we will be forced to live with constant bubbles in non-offshorable labor markets. Those include the internet in the 90's (totally offshorable today) and housing in the 2000s. We'll also probably have a bubble in the financial industry as well, because we'll put all our smart people to work being creative, like Thomas Friedman says they will be. Only, sadly, they'll probably be creative making toxic assets and stuff that's not really worth anything.

In the meantime, since there are no jobs in decent paying work except the law, financial services, selling houses, or the medical field, everyone will enter one of those professions. Course, we don't really need 40,000 new lawyers a year in the US, since that's also mostly offshorable work anymore. Most of us lawyers will graduate to find no jobs, and that we are competing against Indians for "Document Review" work.

So get this, people are going to turn to credit cards and other borrowing to maintain their standard of living! In the end though the bubbles will burst, and we'll elect a bunch of people to office who promise during the campaign to fight free trade agreements. That will be our revolution.

Later, we'll all get kind of sulky when they turn out to be too spineless to actually control wall-street. In a few years we'll blindly stick the Republicans back in power, to continue on the spanking machine. This is just a prediction, of course, and has no real bearing on reality.

emca says:

July 18, 2009 at 11:29 am

Thanks for the must read article on China. It offers fresh insight into the "how can they sell this so cheat".

Once a junkie, the supplier is all important.

Aki_Izayoi says:

July 18, 2009 at 11:33 am

The "prosperity" brought by "capitalism" (which I will define as the maximization of "economic freedom" [in this case we'll use the Heritage Foundation's index]) is an illusion. Capitalism did not bring prosperity to the US after World War II; the War itself and Socialism/Communism brought the US prosperity. The war destroyed economic competitors, and communism kept the global labor force small. The US did not prosper from "free trade" or low taxes (during the 1950s taxes there were high marginal taxes.)

Anyone who suggests that capitalism leads to prosperity is lying. To rectify this, let's just plagiarize from Henry C. K. Liu and call for a global labor cartel (OLEC: Organization of Labor Intensive Exporting Countries) as a way to give developing countries market power for wages.

DownSouth says:

July 18, 2009 at 11:56 am

@From the Poorly Made in China review: "Among the economic miracles unfolding in China over the past two decades, the most mysterious may be how a country that skipped the Industrial Revolution, substituting the Cultural Revolution, became the low-cost factory floor to the world."

For students of history, culture or art I don't believe that it is "mysterious" at all.

In 1565 the Spanish, after decades of failed attempts, finally discovered how the return voyage from Asia to Mexico could be made. The Spanish, however, were late to the game, as Vasco de Gama, under the Portuguese flag, had rounded the southern tip of Africa in 1497. That feat, in combination with a series of papal bulls that culminated in the Treaty of Tordesillas in 1494, gave Portugal a monopoly of maritime trade with Asia that lasted until 1565.

As Rodrigo Rivera Lake points out in El Arte Namban en el Mexico Virreinal, "for the residents of New Spain to inititate commerce with the East was no easy task. When Legazpi finally founded Manila (1571), one of the first Western capitals in Asia, he came to understand that here it would be impossible to achieve an important part of the spice trade, which was the principal goal of the entire enterprise, the spice production being much farther south in continental Asia." What little trade that existed from the Pacific islands was dominated by the Muslims, who had of course arrived centuries earlier.

Enter the Chinese, who, according to Rivera Lake, together with the Spanish were to "change history." As Rivera Lake goes on to explain, "the Phillipines produced almost exclusively primary materials that the Chinese adquired at very low cost and returned transformed in artistic treasures." "From this new commercial interchange," Rivera Lake continues, "Mexico recieved an impressive quantity of merchandise and exotic treasures," including cloth made of Chinese silk, of cotton, porcelains and ceramics, works of copper, lacquered wood and sculptures carved from ivory. So thorough was the Chinese-Spanish connection that the Chinese merchants established their own neighborhood in Manila called El Parian, which was eventually to also evolve into a local manufacturing center.

The "all we need is your sample" reminded me of this tale:

One of the many stories that is told is that of a Chinese merchant who sold a Spanish settler a wooden nose as a prostesis to substitute for one that had been lost due to an illness. The Chinese merchant thought that none of the Spanish had noses, so he began making similar protesis and brought an entire shipment of false noses to sell, sufficient to "ennarizar" (nose) almost all the foreigners in the Phillipines.
~
–Rodrigo Rivera Lake, El Arte Nambam en el Mexico Virreinal

Anonymous says:

July 18, 2009 at 12:23 pm

Re: Poorly made in China

Poorly Made in China: An Insider's Account of the Tactics Behind China's Production Game provides fascinating and disturbing answers. Chinese manufacturers cut corners wherever they can, from product quality to factory equipment and maintenance. They unilaterally change product and packaging specifications to trim costs. They raise prices after the deal is signed, leaving the importer to absorb the added cost. They reproduce their customers' products for sale at higher margins in other markets. With support from government, bankers, and networks of fellow manufacturers, they conduct manufacturing and customer relations as a game, treating the other party as a patsy not a partner, playing for the short term of making an extra penny at the risk of product quality but also taking a long-term, multidimensional outlook that outflanks the hapless customer.

****
I'm sorry, but I don't understand how this differs in any way from Wall Street practices (in fact, this could have been lifted from just about any recent description of Wall Street that I've heard over the last ten years).

Or is this type of behaviour only considered acceptable in finance, but not in anything else?

DownSouth says:

July 18, 2009 at 12:46 pm

@Aki_Izayoi

Every great empire has its dominant ideology. For imperial Spain, it was a combination of Christianity and militarism. For the United States, it is capitalism and militarism. But at some point, the ideology inevitably loses its magic:

It reflects, rather, the failure of a generation, and of an entire governing class. Seventeenth-century Castile had become the victim of its own history, desperately attempting to re-enact the imperial glories of an earlier age… That it should have reacted in this way was not inevitable, but it was made the more probable by the very magnitude of the country's triumphs in the preceding era. It was hard to turn one's back on a past studded with so many successes, and it became all the harder when those successes were identified with everything that was most quintessentially Castilian. For had not the successes derived from the military valour of the Castilians and their unswerving devotion to the Chruch?

–J.H. Elliott, Imperial Spain: 1469-1716

Carlosjii says:

July 18, 2009 at 12:48 pm

I just returned from the Himalayas where I purchased a ‘genuine’ Mammut Pro-Lite Gore-Tex jacket for about $25. These are sold mostly in Europe for around $125. The Sherpa seller told me it was a “Chinese copy”. The jacket was identical to the original right down to the labels and product tags and my guess is it was over runs for the world market from the same factory.

The real problem for ANY Westerner is getting over the huge difference in basic thinking patterns. Some of my Asian friends, especially the more Chinese among them such as Nepali Sherpa, routinely lie to me and are very obtuse in trying to get their points across. What it seems to be is a desire to GET their transaction done or get what they want no matter what. It’s visceral – it’s tied up in their basic survival mechanisms – somewhat akin to the alcoholic’s persistent drinking or the morbidly obese compulsively eating.

I get along GREAT in Asia and have many friends and happy business relationships of a small sort but relatively high value transactions where I cannot afford to get stiffed such as purchasing gems.

Some of the best sources for beginning to understand the Asian mentality are Guanxi (The Art of Relationships): Microsoft, China, and Bill Gates's Plan to Win the Road Ahead, Robert Buderi & Gregory T. Huang, and another book I can’t currently locate as I’m moving describing the multi-thousand year history of
China as a feudal and stratified society and the basic thinking that arises from that.

The single incident that shifted my mind was some years ago seeing a Tibetan woman in Kathmandu simultaneously bargaining to both buy and sell used trekking equipment with 5 different people in 5 different languages – Japanese, English, German, Nepali and Tibetan. You have to shift your thinking to the pattern of the people you are dealing with.

Sacks says:

July 18, 2009 at 3:04 pm

Capitalism is a strange word. It is used as synonym for indutrialisation, i.e. applying technological innovation to increase productivity and develop new products through investment in capital goods and R&D, thus accumulating Capital, and a radical transformation of society, from feudal lords living of the rent of enslaved cultivators to where we are today.

But I contend that communism, and more precisely Stalinism, is a form of capitalism. Russia in 1917 was mostly a Feudal Empire, who ha lost a war against Japan in 1907. The october revolution was totally at odds with Marx's prediction that communism would appear first in the most advanced capitalist countries.

But Stalin transormed, with an iron fist and in a brief time, that agrarian empire into a Highly industrialised country with advanced military capacities, in other words a capitalist economy that eventually defeated the german army, against which the imperial cavalry would have been absolutely powerless (as hapenned in Poland, horsemen against tanks).

But the stalinist variety of capitalism was a genine supply side economy, totally ignoring consumers and focussing on quantitative production targets. And put the first man in orbit, and great fright into the American psyche.

Anonymous says:

July 18, 2009 at 7:01 pm

ForaTV video:

"Dmitry Orlov: Social Collapse Best Practices"

http://fora.tv/2009/02/13/Dmitry_Orlov_Social_Collapse_Best_Practices#fullprogram

Orlov is the Russian/American who argued a couple of years back that Russians were in far better shape pre-collapse than Americans are now.

While not Mad Max, this video will give you the fix that you need.

Minh says:

July 18, 2009 at 8:16 pm

"Hhhm, is this an indicator that Marxism is having a mini resurgence?"

Hhhm, as a born-again Marxist, I am very pleased with this comment of yours coming from the heartland of capitalism. The problem with Marxism is the people and their education as well as the tradition of the societies that adopt Marxism weren't at the right level of human development to implement a lasting success. Marx himself didn't forsee his ideology to be implemented in rural China or Vietnam for that matter. As to the XX-century debate over socialism and capitalism, it's over and capitalism with socialists' characteristics has won. (I mean Goldman Sachs).

Jokes asides, the Chinese philosopher Lao Tzu started his works with this two sentences (my translation from Vietnamese)

"The philosophy that can be called true philosophy can not be enduring and unchanging philosophy. The name that can be named is not the enduring and unchanging name."

If you understand Tao as the way, the everlasting philosophy of the world, and name as the ideology that man can use to name what he has in mind, then it is much easier to discuss things.

It also explain the way Chinese people see the world, and why the discussion of socialism vs capitalism is reduced to the black cat-white cat quote by Mr Deng Xiao Ping.

Dave Raithel says:

July 18, 2009 at 11:15 pm

The fundamental question is and has always been: Who's to decide what is to be done with the surplus? Neither Nozick's nor Keen's counter (that machines can be measured as exploited) seems to answer that question.

Thanks for the link.

Dave Raithel says:

July 18, 2009 at 11:52 pm

I have to add: Nobody having so much contempt for Thomas Friedman can be all wrong.

Sacks says:

July 20, 2009 at 2:57 pm

Thanks for the link. Very interesting. I'm an outsider, living in Switzerland, but I've spent a year (1960) in Charlottesville (VA) where I went to the local public school (I was 9 years old), and that's been the biggest cultural shock of my life, even though I had spent the two previous years in Ethiopia, with public hangings, urban warfare in my backyard, etc.

The shock was, a) Prayer at school 3 times a day, and everybody asking me to which church I belonged, whereas my family were hungarian atheist jews since 1900 at least when they converted to catholicism, my great granma having decided that not going to church would make life much easier than not going to synagogue.

b) the paranoid brainwash about communism (apprently starting at a very early age).

Later on, early 1970's, I studied architecture in Switzerland, and about one third of the students were trotskyst activists (the most virulent opponents of the USSR regime, which to them was a parody of pure Marxism). So I read a lot of stuff that I guess were high treason in the US and could only be found in the CIA's library. I was'nt convinced, and my father had had first hand experience of Russia's version of democracy in Budapest after the war.

But of late I've been thinking a lot about the current crisis, Marx's analysis (Marx considered himself as a philosopher of history and his purpose was'nt to lead a revolution, but to ridicule Hegel's theory of the end of History (quite a few years before Fukuyama), perfection having been reached in the Prussian Nation-State. Which led him to study political economy.

And my conclusion is: the collapse of the Russian empire, predicted by Andrei Amalryk for 1984, demonstrated the limits of one model of capitalism, or social engineering experiment, i.e. central planification and State monopoly of everything. And the imminent collapse of the American Empire will prove the fallacy of the main competing model, laissez-faire capitalism (freedom of everything except thinking and drugs). Both have similar features: War economy, paranoid secret services, waste of natural resources, make believe democracy and concentration of wealth and power in the hands of a ruthless oligarchy.

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