Neoliberal Capitalism, Its Crisis, and What Comes Next

Yves here. While I applaud the general sentiments of the article, I have two big caveats. The first is that David Kotz seems to place too much faith in “labor,” by which I am pretty sure he means the American labor movement, as in unions. Aside from a few very high functioning exceptions, like nurses’ unions, the American labor movement is unwilling to flex what little muscle it has left against just about anyone. I’m no expert, but this appears to have a lot to do with corrupt leadership (not that that is unusual in America) and a lack of imagination.

Kotz also draws a harder line between capitalism and socialism that is necessary. The older Swedish model, which was capitalism with considerable socialist elements, was durable and very successful, although the neoliberals have now watered it down a great deal. Similarly, Japanese capitalism before its financial crisis was quasi-socialistic, since top executives were not paid much better than lower level staffers (they did get nice perks like a car and driver and a hefty expense account), preserving jobs was seen as all important (entrepreneurs were revered for creating employment, not for making money), and the old model was lifetime employment, with workers who were pushed out of the most prestigious companies being placed in smaller companies where their skills and contact would be put to good use. Japanese factory workers also famously had more input into operations than their Western peers (although the relationship between floor workers and management was more complicated than you think; the workers had an obligation to come up with improvements).

The best example of a socialist system is in the book The Dispossesed, by Ursula LeGuin. Trust me, if you have not read it yet, you need to. It’s beautifully written, with a very spare style, as well as thought-provoking.

By David M. Kotz, a professor of economics at the University of Massachusetts Amherst and the author of The Rise and Fall of Neoliberal Capitalism (Harvard University Press, 2015). Originally published in the January/February 2016 issue of Dollars & Sense magazine

Neoliberal capitalism had, at its core, a basic contradiction: Rising profits spurred economic expansion, but at the same time the source of the rising profits—the suppression of wage growth—created an obstacle to expansion. With wages stagnating, and with government spending rising more slowly, who would buy the output of an expanding economy? For a while, this simmering “demand problem” was forestalled, as risk-seeking financial institutions extended credit to the hard-pressed families whose wages were stagnating or falling. Debt-fueled consumer spending made long expansions possible despite the stagnation of wages and of government spending. Big asset bubbles provided the collateral enabling families to borrow to pay their bills.

The economic crisis of 2008 marked the end of the ability of the neoliberal form of capitalism to promote stable economic expansion. In the wake of the massive housing-bubble collapse and financial crash, the previous debt-and-bubble-based growth machine cannot be revived. The banks continue to find new speculative ventures and corporate profits remain high, but this process no longer brings normal economic expansion.

Change: Reactionary, Reformist, or Radical?

So far, the powers that be, in the United States and elsewhere, have been pursuing “austerity policy” as a way of doubling down on neoliberalism, which has greatly rewarded the “one percent.” However, continuing along that path promises only unending stagnation. Long-lasting stagnation is destabilizing to capitalism, tending to promote the growth of political movements—on the left and the right—demanding major political and economic change. This prods big business to consider some restructuring of capitalism to overcome stagnation and its dangerous consequences.

There is some evidence of the beginnings of big business consideration of economic alternatives. In January 2015, Lawrence Summers, a close ally of Wall Street who promoted bank deregulation in the 1990s as treasury secretary in the Clinton administration, coauthored a major report calling for significant institutional changes—including measures to reduce inequality and to redirect large corporations toward the pursuit of long-run gains instead of short-run profits.

Big business is not the only actor on the stage. If history is any guide, we can expect that various groups and classes will become increasingly active in the years ahead, pushing for changes that would further their own interests. While significant change seems highly likely, the precise outcome cannot be foretold in advance. Three possible directions of change can be identified—reactionary, reformist, and radical. Which one emerges will depend on the relative strength and determination of the potential beneficiaries of each kind of change. If labor and other popular movements remain relatively weak, as they have after several decades of demoralization and demobilization under neoliberalism, big business will likely drive change in the reactionary direction. This could take the form of a statist and nationalist form of capitalism without any capital-labor compromise.

The neoliberal labor market and the current weak position of labor would remain, while the underlying problem of inadequate growth of demand would be solved via growing state spending for military purposes and perhaps infrastructure and technological innovation. Nationalism is the likely dominant ideology of such a transformation, focusing the attention of the 99% on building national economic and military strength and away from the limited economic benefits for them of this reactionary direction of change. Two prominent right-wing intellectuals, Francis Fukuyama and William Kristol, have recently suggested a move in that direction. Such a reactionary program would not only spell continuing bad conditions for American workers but, with further military buildup and nationalist posturing, a growing danger of even greater inter-state conflict than we have seen in recent times.

If the labor movement, and other popular movements, gain in strength, then a second, reformist, direction of change would become possible. This might entail another capital-labor compromise. A form of capitalism like the previous regulated capitalism, of the post-World War II period, could potentially resolve the current economic crisis by bringing a more balanced growth of profits and wages. It would also likely include a growing state role focused on infrastructure, innovation, education, social provision, and environmental protection. However, change of that type has never come from a “forward-looking” big business class. It would become a serious possibility only if the labor and progressive movements revive and are able to force compromise on the capitalists. Unless big business sees a mortal threat to capitalism, it is not likely to be willing to compromise with labor.

A reformist direction of change, while better for the majority than the reactionary direction, would still pose serious problems. The previous capital-labor compromise of the 1940s to the 1960s left out some groups, notably many women and many African Americans, and it is not clear today if all of the 99% could be accommodated under a renewed compromise. Also, such a reformed capitalism is not a promising system for avoiding disastrous climate change. Reformed capitalism would require—and give rise to—relatively robust economic growth, which would make it difficult and perhaps impossible to avoid the looming climate-change tipping point. While reformed capitalism would likely include measures aimed at environmental protection, large private companies tend to be effective in resisting government measures that limit their freedom of action in pursuit of profit.

If labor and other popular movements gain strength, however, that would also open the possibility of a move beyond capitalism. Continuing stagnation, along with the other problems that derive from capitalism, are likely to lead many to question whether capitalism can any longer meet the needs of the majority and to consider whether an alternative system might able to do so. That would mean a renewal of interest in socialism, which is the only comprehensive alternative to capitalism. There is evidence of a possible shift in that direction in public opinion surveys since 2009, which have consistently found that, in the United States, between one-third and 45% of people under age 30 have a positive view of (an undefined) “socialism.” The high level of popular support for Sen. Bernie Sanders (I-Vt.), a self-declared democratic socialist, in his campaign for the Democratic presidential nomination is also suggestive. In Latin America, a number of countries, such as Venezuela, Bolivia, and Ecuador have elected leaders pledged to build some form of socialism. New leftist political movements in Europe, such as Syriza in Greece and Podemos in Spain, have been challenging the austerity policies that have generated mass unemployment (although the Syriza government elected in January 2015 has so far been unable to jettison the austerity program forced on Greece by the big powers in the European Union). Given the many negative features of twentieth-century Soviet-style socialism, advocates of a new socialism stress the need for democracy and widespread popular participation in both economic and political decision-making.

Change in this direction would be driven by the conviction that production for the profits of the minority can never adequately meet the needs of the majority, which instead requires an economy system that places the human needs of all at its center. Unlike capitalism of any variety, such a system in a highly developed country would not require a relentless increase in the production of goods, and therefore could build a sustainable relationship to nature. A socialism based on democracy, participation, cooperation, and sustainability could bring a promising future for all. Perhaps, in this period of pressure for institutional change, such an alternative path might emerge—but only if the 99% become active, organized, and determined to chart their own future.

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  1. Michael Hudson

    David is a Marxist, long associated with U/Mass at Amherst. Last spring we were both appointed professors at the School of Marxist Studies in Beijing. He’s long been one of their favorite economists. So yes, his idea of labor does rely largely on unions, but he also is treating it “in the abstract” as having class interests.
    I’ve been trying to get a half-price review copy of his book at Strand since I got back from China, but no copy has come in yet, so I can’t comment on his book. (We both emptied out our suitcases and gave all our respective copies to the university in Beijing.) I assume that his theme is the inability of labor to buy the products it makes, as a result of the exploitation discussed in Vol. I of Capital.

    1. a different chris

      Is there a deliberately hidden joke in your post? Because the “inability of labor to buy the products it makes” juxtaposed with the preceding, seemingly tossed-off statement from you, a writer, that you’ve “been trying to get a half-price review copy” made me smile.

    2. athena1

      I assume that his theme is the inability of labor to buy the products it makes, as a result of the exploitation discussed in Vol. I of Capital.

      Couldn’t we just keep rolling on indefinitely with the plutonomy model, as discussed in the leaked citigroup memos?

      For example, highly trained, low-paid biotech workers developing effective cures for cancer via nanobots, but with only the super-rich having access to them, under the justification of the very real phenomenon of “trickle down technology”?

    3. Charles Fasola

      As a union member since ’78 it became very apparent their problems are equally the fault of union leaders lack of foresight, lack of educating membership to the very obvious fact that you can negotiate a wage of $1000 per hour but unless your productivity justifies that wage companies cannot be profitable. Simply stated the companies must be viable and profittable in order to provide employment to membership. Instead leadership seems to want to have membership believe they work for the union rather than for companies. Which leads to an attitude among many members that the company gets what they get, 8 for 8 and no more. Leadership has become a self-serving corporation instead of worker representatives. Capitalism has surely hit the fan; as Richard Wolf clearly states. It is anti-democratic, and at this point in time has reached a point where no amount of attempts at regulation or reform is possible. Our hope lies in creating an alternative system or violence will be our reality. The breaking point has been reached. When a six figure wage becomes inadaquate for a comfortable worry-free existance the system is broken. When the average worker earns $30,000 or less in a society where twice that amount cannot provide any sort of security the system must be teplaced by any means. Finally, the next time I hear Saunders is a socialist I’m going to vomit.

    1. susan the other

      Thank you nobody. I just crashed my old computer downloading access to this – and I’m back up! Gonna read this everyday after I shovel my stupid driveway. El Nino Grande.

      1. Oregoncharles

        Are there smart driveways?

        Actually, I can imagine one with heating coils built in, to save you all that shovelling. I grew up in a house with that arrangement; I remember standing on the bed to get dressed because the floor was too hot to stand on barefoot!

        1. Crazy Horse

          If you can imagine it, it’s already been done. Log home for a billionaire who’s parents had made the mistake of buying him a pony at an early age—- burns 2000 gallons of diesel per month keeping the patio and the entry gate area 200 yards away free from snow in the winter.

          And another Jackson Hole architect’s wet dream, a house designed for a Texas Fracker with an inverted roof (lowest point in the middle) that has to have continuous heat in the roof in order to keep it from ice damming and ripping the roof apart. But the house is on the cover of Architectural Digest, so it must be wonderful.

          1. GoraKoska

            In West Vancouver, heated driveways are de rigueur… quite common. Of course, it is the most expensive real estate in Canada…

    2. YankeeFrank

      The Dispossessed, as Yves says, is indeed the most beautiful description and expression of a true socialism I’ve read anywhere. I too highly recommend it. Yves continues to surprise me with the breadth and depth of her insight 8 years after I found this site.

  2. washunate

    The economic crisis of 2008 marked the end of the ability of the neoliberal form of capitalism to promote stable economic expansion.

    This continues to be an inaccurate depiction of events. What happened in 2008 is that more affluent liberals were forced to at least somewhat acknowledge that our system was already an unstable morass of inequality and injustice. Nothing substantive happened in 2008 to the general economy; it was a panic of connected insiders pining for ever greater fascism. This is important because far from being at the end, fascism can continue for quite some time more if we don’t change things.

    Also, it’s inaccurate to refer to neoliberalism as a form of capitalism. Neoliberals hate markets. Their preference is the authoritarianism and hierarchy of bureaucratic power at home combined with aggressive foreign policy abroad. They can’t stand people making their own decisions; neoliberals have a pathological need to control others. This is the opposite of rule of law at the heart of market-based economics.

    1. pfiore8

      hadn’t thought of it this way, but yes, i believe you’re analysis is correct:

      “Also, it’s inaccurate to refer to neoliberalism as a form of capitalism. Neoliberals hate markets. Their preference is the authoritarianism and hierarchy of bureaucratic power at home combined with aggressive foreign policy abroad. They can’t stand people making their own decisions; neoliberals have a pathological need to control others. This is the opposite of rule of law at the heart of market-based economics.”

      1. Yves Smith Post author

        No, neoliberalism is all about forcing people into markets, with the market as the best device for intermediating all human activity! I disagree vehemently with this definition.

        1. Oregoncharles

          One might ask whether they’re really markets. Health care, for example, is a perfect example of market failure. It meets none of the requirements.

          Of course, those who claim to worship markets deny that there is such a thing, or that there are requirements for them to function.

        2. priory

          I think it would be more accurate to say creating markets where none existed previously e.g. privatisation of public goods and services and forcing people to believe that the market is the best device for intermediating all human activity ; because neoliberalism is first and foremost an ideology which pays lip service to the idea of a market based economy to give itself a veneer of credibility, but a ‘ free ‘ market is the last thing its adherents want . Washunate is correct in saying ‘ neoliberal have a pathological need to control others ‘ .

        3. Ruben

          I think you are fundamentally wrong regarding neoliberalism.

          Neoliberalism’s central tenet is that the State should help the rich. The pious explanation is that the rich know how to create wealth so in the end everyone is better off (trickle down, floating boats). All major features of this doctrine can easily be derived from the central tenet.

          On the other hand the concept that the market is the best device for intermediating all human activity belongs in another doctrine, anarcho-capitalism.

          Neoliberals love the State, they love central planning from central banks, they love creating State laws to speed transfer of wealth to the wealthy.

          1. Skippy

            The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective is instructive here imo…

            Tho anywho an abbreviated three part series…

            In the previous part of our series on the origins of neoliberalism, we saw that the vigour mustered to start the movement on its way was generated by an enormous repression undertaken by the Austrian political philosopher Friedrich Hayek. When Hayek saw his intellectual position, a position in which he had invested most of his emotional energy, falling to pieces due to contemporary economic events, political happenings and theoretical debates, he opted to seal himself into his own mind and reject reality. Instead he began pushing a political philosophy and a metaphysics that he set to work constructing and disseminating. In this part of the series we explore in more detail the fruits of his labour in America.

            In the following two parts of the series we draw extensively on the excellent work which a number of historians of science have undertaken and published collectively in the volume The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective. We cannot recommend enough that the interested reader searches out this volume for more details of this extremely important institution which, in a very real way, has come to shape our political discourse today.

            The Road to Serfdom: American Edition

            A major concern of the American members of the Mont Pelerin Society, most of whom were based out of the now infamous Chicago School of Economics and Law, was to make Hayek’s delusion more palatable to the American public. During the Second World War many New Deal institutions had solidified and become popular with the public and after the war the majority of Americans did indeed think that their country, while definitively capitalist, was nevertheless one in which the government played a rather large and constructive role.

            The political right found themselves completely flummoxed by such a situation. More practical men, like President Ike Eisenhower, jumped on board, while fringe elements, like Joe McCarthy, fled into paranoia, attacking many prominent liberals as Communist agents. Already in the wartime planning era of the 1940s, when Keynesianism loomed large in America, those economists at the Chicago School and elsewhere in the US who had read and absorbed Hayek’s delusion knew that they needed to change the terms of the debate. But how they were to do this proved a daunting question.

            In 1945 Hayek conceived that there should be a sister book of The Road to Serfdom written for an American mass audience. Hayek and the Chicago School economists knew that the original was too refined for American tastes. After all Europeans like their propaganda filled with lofty philosophical notions, while Americans are more content with sound bites that chime with certain trigger words that have been circulating since the revolution of 1776. It is the evolution of what effectively became the American edition of The Road to Serfdom that Philip Mirowski and Rob Van Horn explore in their paper “The Rise of the Chicago School of Economics and the Birth of Neoliberalism,” included in the volume mentioned at the beginning of this piece. The evolution of this book was particularly important because it gave rise to a specifically American strain of neoliberalism.

            The problem for the Mont Pelerin members was basically as follows: classical members of the Chicago School, like the economist Henry Simons, were, like Hayek, fairly tied to certain ideas that existed in the older liberal school of political economy. Among these ideas was the notion that monopoly and oligopoly were twin evils that conspired against the public and caused inefficiencies in the market. Simons was arguably more tied to this idea than Hayek mostly because Hayek had developed, as we have seen in the previous part of this series, a pathological obsession with planning as it related to forms of government. For this reason Hayek thought that most forms of monopoly were the result of government planning. But whatever his views were, the implications were clear: this sort of ideology was not going to fly in an America that was now dominated by large corporations with substantial ties to the state.

            Mirowski and Van Horn make this case apropos of the Volker Fund, a charitable foundation set up in 1932 by home furnishings mogul William Volker, which was then converted into a bankroller of libertarian propaganda by Volker’s nephew Harold Lunhow upon the former’s death in 1947. They write:

            The politics of postwar America presumed not only a powerful state, but also a configuration of powerful corporations whose international competitors had mostly been reduced to shadows of their former selves. In promoting “freedom,” they were primarily intent on guaranteeing the freedom of corporations to conduct their affairs as they wished. Thus, the Volker Fund was not interested in bankrolling a classical liberal economic position resembling that of Henry Simons, for it did not adequately correspond to their objectives. American corporations did not fear concentrations of power and generally favored the existence of a powerful Cold War state. It is our contention that the Volker Fund pushed for a reformulation of classic liberalism in the American context to conform to its Cold War antisocialist agenda. The participants in the Free Market Study [an offshoot of the Mont Pelerin Society], and even eventually Hayek, would just have to learn to adjust to the emergent characteristic doctrines of neoliberalism.

            The money men loved Hayek’s message that government interference and economic planning would lead to tyranny, but they were not so keen on his purist free market ideas. Fortunately for them, however, Hayek himself was less concerned with constructing a pure free market system than he was with fighting the ghost of what he called “socialism”. Thus a union was accommodated and the child of this marriage was to be Milton Friedman, who would pen the American edition of The Road to Serfdom, which came to be called Capitalism and Freedom.

            Before turning to this, however, we should briefly highlight this emergent anti-socialist trend – or, more accurately, this ideological trend constructed against what a fringe group of people thought to be “socialism”. It is this we hear when we stick our ears into the right-wing echo chamber in America today. Many are perplexed with how right-wingers and vulgar libertarians completely change the meaning of the English language and denounce centrist and centre-left politicians and commentators as “socialist” when these people have no interest in having the state seize control over the means of production – which is the definition of the term “socialism”. Now perhaps we can more clearly see that the roots lay buried in the dominant aspect of Hayek’s delusion; which was the aspect taken up and bankrolled by certain right-wing corporate interests in the 1940s and 1950s. – snip read on…


            Which then brings us too – When Congress Busted Milton Friedman (and Libertarianism Was Created By Big Business Lobbyists) –

            Skippy…. too over simplify, most mainstream economics post WWII is akin to off the shelf software purchased by power nodes to serve – their self interests – things get very glitchy when everything is bastardized to suit never ending demands to tweak it, to ever changing dynamics and needs of its owners. That – is – a feature and not a bug of neoliberalism as applied by flexians.

          2. salvo

            yes, you are right, but that doesn’t mean that neoliberals are some kind of inverted socialists who love the state and hate the market as right wing libertarians claim. Neoliberalism is just the ideological representation a form of power relation which wants to control existing institutional frameworks on various levels (the national as the state, international, supranational, intranational and so on) to maintain and possibly shift the power relation (mainly against labour) further to their advantage. Neoliberalism is the ideological framework by which the forces already dominating the market aim to also take total control of the institutions (state and so on) which previuosly have functionned as a counterforce. Right-wing libertarains obfuscate the real power relation between capital and labour by focusing on a supposed antagonism between market and state, individualism and collectivism (which are then associated with another constructed antagonism between freedom and force), and by doing so they conceal the fact that that very power relation resides in the so-called market, where the real antagosnism between capital and labour takes place. There is no such thing as a free market in the sense of a gathering place of free individuals: The capitalist market needs on the contrary the repressive functions of the institutional frameworks to impose its rule over an oppressed labour force. Free shall only be the power to dispose of the exploited productive means (labour and nature) as they wish

            1. Ruben

              They are a kind of inverted socialists considering their need for the State but they certainly don’t hate the markets. They want to create market-like systems in economic areas that were previously domain of the State though they do this less because of free market ideology and more because with market-like systems they can create more mechanisms to transfer wealth to the rich to increase overall productivity. This is their ideology.

              Of course if you are a Marxist you see everything in politics and economy through the prism of capital versus labor, any other view is obfuscation.

          3. Moneta

            They love it when they get the state to sell off assets at under 1x book and they get to buy them at basement bargain prices.

            1. Moneta

              Of course their focus is on the necessities of life… making sure the general population NEEDS to buy their product… Notice how neolibs tend to put down studies in social sciences by calling them basket weaving.

              The government apparatus is needed to increase the barriers to entry and stifle competition.

              The market is used to get the value.

          4. Alejandro

            Meandering without referents, i.e., lost and confused. NL and AC would both be pegged on the right side of the economic scale…their contrast could be found with the “fifty shades of exceptionalism” on the social scale, where contentions emanate from important questions like-“whose liberty is more worthy of state protection?”, “what defines ‘freedom’ in ‘free’ markets? Etc…of course, thinking about abstractions as things has always been confusing.

            1. Ruben

              “of course, thinking about abstractions as things has always been confusing”

              A vast under-statement of the true problem. Thinking about abstractions as things is the source of all large-scale evil.

        4. pfiore8

          I think the operative idea of washunate’s thesis is this: “their preference is the authoritarianism”… so your use of “forcing” is spot on: but it’s the relationship that’s key… whether it started out as that or not, it has evolved to force human activity to be enthralled to whatever the markets dictate . . . neoliberalism has taken away the power of the humans in the system. i think that’s quite clear. the system has become an entity outside of those who think they control it and it is killing us.

          1. washunate

            Yeah, I appreciate the focus on the operative idea. The semantic challenge in discussing this is that Kotz has made a fundamental error: he decries the results of what is really neoconservative fascism yet calls it neoliberal capitalism. I chose making a more concise original comment rather than examining that error in detail, which in hindsight was a poor choice. Who knew this would become such a great discussion!

            My hunch is that Kotz called it neoliberal capitalism rather than neoconservative fascism because his underlying desire is impeaching capitalism, not describing our present system, but of course that is just speculation. It would be interesting to get a post from him sometime on that matter.

        5. DanB

          But what kind of “market” is Obamacare, Yves? It’s not adequately defined simply as a market. This reminds me of the sixties book titled, “Military Justice is to Justice as Military Music is to Music.”

          1. Yves Smith Post author

            Obamacare is a market because “customers” are forced to shop for policies on a marketplace. The existence of choice, even crapy choice, and making a purchase from among those choices is a market. I don’t see why this is hard to understand. A market with only tired old vegetables in it is still a market, and you may wind up buying some of those tired old vegetables even though you don’t like the choice if the alternative is not having enough food for dinner.

            1. pfiore8

              so I’m not sure how you disagree with washunate’s definition, if neoliberals are the ones defining the markets for consumers or, as you write, “‘customers’ are forced to shop for policies” . . . which is one of the things i detest about ACA btw.

              it may be about markets, but not anything near “free markets”

              1. swendr

                There is no such thing as “free markets”. That phrase should be expunged from the English language. Replace the word “free” with “good and cool”, and I think you’ll have a closer approximation of the intended meaning.

                Talking about markets reminds me of mosh pits when I was a kid. There was something magical about a mosh pit when everyone had the right attitude and didn’t push too hard against the flow of the crowd. There was a sense of freedom and momentum that allowed the crowd to become an expressive part of the musical performance. But then the jocks, and in my town, fresh military recruits came on the scene and started smashing and abusing the scrawny punk kids because of the perceived free-for-all. The crowd could handle one or two people who didn’t get it, but beyond that, it soon reached a tipping point that degenerated into larger scale violence. A couple of shows turned into outright riots which ended the performance and saw people fleeing the venue. The earlier sort of “free market” or self-regulated condition of the pit only set the stage for the neanderthals to come in and screw things up later. While I’ll admit it was pretty neat to be there when it was “cool”, the way things ended up certainly demonstrated the risks.

                1. Skippy

                  Wholeheartedly concur.

                  The “Free” in free markets is just an illusion, just as its inference to Free Will, then add on some Locke and you have willing slaves…

                  Skippy…. the mental anchoring point where all kinds of sophist reasoning can be tethered… its self evident – !!!!!!

                2. Skippy

                  BTW Free Markets are completely dependent on equilibrium and that little ex nihilo rumination was thoroughly thrashed in the early 20 century…. but yet here we are again… sigh… memes…

            2. DanB

              I did not say Obamacare was not a market -I asked what kind of market it is. And you offered a modifier by noting people are forced into it to buy a crappy product. I hope I’m not being pedantic, but it seems to me there are types of markets with salient differences.

        6. washunate

          I know Lambert is rightly hesitant about ‘assigning homework’, but I’d suggest this is really one of the core issues in political economy: is the problem capitalism, or is the problem that we have moved away from capitalism to embrace fascism (or some other more general word for a kind of totalitarianism characterized by the merger of private and public action backed by the generous application of force in sustaining concentration of wealth and power)?

          I think it would be very interesting to hear your thoughts in longer form on this front. To me, the very idea of employing force in that manner is fundamentally contradictory to market-based economics. Property rights and functioning markets require equality under the law and decision-making processes free of duress and public policy operating through transparency rather than secrecy. It is the cartel nature of public-private partnerships that deploys the stick against the average citizen while giving the carrot to the connected insider. Specific to the US, the sustained and broad assault against Constitutional rights is not an accident; the control freaks need to wash away the concept that individuals have rights.

          This has far-reaching implications, because if the problem is capitism itself, if individual property rights inherently create the kinds of systemic injustice we face today, then we have a moral obligation to do away with them, to replace them with something fundamentally different. MMT and other proposals like it are essentially mainstream tweaks to the existing system, not a fundamental reboot. If markets – true markets, not the faux ones we have in so many areas today – don’t work, then the government needs to take direct ownership of everything, from houses to hospitals, from universities to underwear, from stocks to shoes, and divvy them up amongst the population based upon the wisdom of central planning.

          1. jrs

            The thing is I don’t know if capitalism without force and some degree of crony-ism (though this may indeed be getting worse, but I wouldn’t be so sure, has anyone really researched it?) has ever existed in the U.S. or maybe anywhere.

            Force has been used to sustain concentrations of wealth and power for a really long time in American capitalism as witnessed by the violence the early union movement often met with. It’s not new. Might it be getting worse with a black person killed by police regularly now? Maybe. I don’t know. But it’s not a new feature. Public private partnerships may also have gotten worse. But weren’t even the railroads public private partnerships of a sort?

            “This has far-reaching implications, because if the problem is capitism itself, if individual property rights inherently create the kinds of systemic injustice we face today, then we have a moral obligation to do away with them, to replace them with something fundamentally different.”

            Equivocation though. Even the Soviets (who I am not suggesting we imitate generally but …) allowed individual property rights of personal possessions.

            “If markets – true markets, not the faux ones we have in so many areas today – don’t work, then the government needs to take direct ownership of everything, from houses to hospitals, from universities to underwear, from stocks to shoes, and divvy them up amongst the population based upon the wisdom of central planning.”

            Work for what? The idea is they are supposed to allocate resources efficiently (not justly). But true if they fail even that it’s pathetic. But even if they succeed at that, it doesn’t guarantee a lot, not even an environmentally sustainable future.

            Capitalism is most people working under conditions they have no say under (under the capitalists direction), so yea I’d have to say it’s bad as such, but some systems put a lot of restraints on this that maybe make it bearable.

            1. washunate

              It’s the manner of force that I would note. Capitalism would suggest the use of force to prevent (or ameliorate) market failures, prosecuting fraudsters and breaking up monopolies and levying taxes to capture externalities and so forth but otherwise leaving people alone to make their own decisions. Neoliberalism turns that on its head, using force to create and exploit market failures, then adding layers of useless social control, then topping it off with outright use of military scale force in foreign affairs.

              The broad embrace of violence in the police state and the national security state seems to be a huge blind spot that many academic economists refuse to acknowledge.

        7. john

          This was a fantastic article, YS. Please post more of these. What makes NC one of the best sites on the internet is that it provides an alternative to the discourse of mainstream economics dominated by the corporate controlled media as well as the corrupt discipline itself. My only criticism though is that heterodox economics is a big tent, and this website pretty much exclusively represents the Keynesians. The Marxists predicted the ’08 crisis as well as anyone and deserve a voice, too. Please post articles from authors like Robert Brenner, David Harvey, Dumenil and Levy, Michael Roberts, etc.

        1. Alejandro

          For your consideration:

          “U.S. neo-conservatives, with their commitment to high military spending and the global assertion of national values, tend to be more authoritarian than hard right. By contrast, neo-liberals, opposed to such moral leadership and, more especially, the ensuing demands on the tax payer, belong to a further right but less authoritarian region. Paradoxically, the “free market”, in neo-con parlance, also allows for the large-scale subsidy of the military-industrial complex, a considerable degree of corporate welfare, and protectionism when deemed in the national interest. These are viewed by neo-libs as impediments to the unfettered market forces that they champion.”

          1. washunate

            I figured that’s what was meant as well. In the interest of giving Kotz some benefit of the doubt, I was going with the broad definition of neoliberal that we use colloquially to refer to the whole power structure in DC.

            Because if we’re being more precise, then that makes Kotz look rather silly and amateurish. My interest is in the substantive issues, not personal embarrassment. It’s obviously the neocons that are in charge, not the neolibs. No one in DC is that kind of neoliberal. They all love high military spending and the global assertion of national values and tend to be more authoritarian than hard right. That’s what the American empire is, from global military bases to the two-tiered justice system at home.

            Maybe Yves can send that link to Kotz before he puts up too many more of these neoliberal posts? But he’s kinda stuck now defending that framework since he used the phrase neoliberal capitalism for his book.

            I mean, reading some of Milton Friedman’s writings on the drug war and contrasting them to someone actually in power over the past couple decades, like Joe Biden, is pretty revealing.

        2. john

          They have the same goal but different objectives.

          Both want to spread liberalism throughout the world.

          Neocons want to use force to achieve this end. Neoliberals, on the other hand, believe that free markets are sufficient, and aim to dominate through consensual (well, sort of) free trade agreements, etc. The other key difference is that the latter supports the demise of the nation state.

          1. washunate

            Who are these decision-makers in positions of power that don’t believe in the use of force? From the domestic police state to our global bases, the leaders of both political parties have rather enthusiastically embraced centralized bureaucracy over individual choice.

            1. john

              The Clinton administration though simply tried to spread the Washington Consensus throughout the world and encouraged (pressured) democratically-elected governments to take up its program. Sure, it had no fear of the use of force, but it didn’t want to get us involved in any long, protracted wars, either.

              The Neocons hated Clinton because they thought there was a need for heroism in order to defeat our enemies. The 90’s was a rough time for them because they didn’t know who just that enemy was. But then 9/11 happened and it became “the Muslim world,” and since then we’ve gotten ourselves entangled in two massive occupations. The Neocons want to continue and invade half of the countries in the ME in a struggle to wipe out “radical Islam,” a project neoliberals aren’t on board with because they realize that the best way to dominate is through (at least perceived) consent, not compulsion. They realize how obvious US neoimperialism was during the Cold War era and now understand that getting elected governments to carry out their wishes looks a lot better.

              1. washunate

                The Clinton Administration? The people who killed hundreds of thousands of Iraqis, pushed NATO expansion, pushed media consolidation, pushed financial consolidation, pushed financial bailouts rather than prosecutions, pushed NAFTA, pushed DMCA, fought a ruthless drug war, dismantled welfare, began a debt-fueled housing bubble, began a debt-fueled stock bubble, refused to take the peacetime dividend of demilitarizing after the collapse of the USSR…

                I agree they were ‘better’ than the two administrations to follow, but that’s a difference of degree, not kind. It is a reflection that things have been getting worse, not a reflection that the 1990s were a great time of peace and prosperity for all.

                1. john

                  I think you’re getting off-point here.

                  I’m not trying to argue that the neoliberals are much better, or that I’m some sort of Clinton support. But I think that it is obvious that neocons are more warlike. They want to use force because they believe that in a world with so much evil, there is a need for heroism. They want to involve us in a series of long, protracted wars and occupations against “radical Islam” over the course of the next century, no matter the costs. Neoliberals would prefer to open the Middle East through trade agreements, if possible. I’m not saying they’re averse to violence, but they aren’t nearly as aggressive as the neocons (who is?).

  3. Uahsenaa

    I’ve always considered it a shame that Le Guin has for so long been pigeonholed as a genre fiction writer, when her takes on politics, ethnography, feminism, and so forth are top notch by any standard. People can’t seem to get past the wizards and spaceships to see just how perceptive she is concerning human relationships.

    There’s also not a little bit of sexism involved. Vonnegut, Pynchon, et al. get praised to the high heavens for writing genre bending fiction, while writers like Le Guin get a soft pat on the head and the occasional SF/Fantasy award.

    1. pretzelattack

      i’ve read that there is a group of right wing male sf writers that have a disproportionate influence on awards.

    2. James Levy

      In academia, LeGuin is actually more highly regarded than Vonnegut, and because she deals with issues of feminism (and, to be frank, is a woman in a male-dominated field) is something of a pet in Lit departments that would scoff at equally excellent writers (Ellison, Zelazny, Ballard). She may or may not be as good as Pynchon, but she is certainly as good as Philip K. Dick (another writer who has a small but real following in academia). However, in the SF culture war LeGuin is currently on the waning team, as the libertarian and survivalist hard SF crowd is powerful and vocal. They almost lost their minds when the excellent novel Among Others (written by a Welsh lady) won the Hugo a few years back and have been on the warpath since. Their attempt to stuff the ballot box this past Hugo season was only partly successful, and the pushback is on.

      1. HotFlash

        Interesting! I will check out Among Others, thank you for the rec.

        WRT the pushback, how can I help?

        1. James Levy

          If you buy a ticket to World Con, even if you do not attend, you can vote for the Hugo Awards. If the Right tries to stuff the ballot boxes, you can chime in.

    3. Oregoncharles

      Ursula LeGuin is the reigning queen of SF, I think by acclaim. Of course, not all her work is SF – her most recent is historical fiction, about the beginnings of Rome.

      Don’t know about outside the field, but within it I think she gets all possible respect. She’s the best they’ve got, and most of them know it. And now, of course, very senior – I was relieved and pleased to attend a reading of her recent book, at which she seemed very healthy indeed.

      1. James Levy

        I wouldn’t count on that within the SF community of readers. I’d wager heavily that if you polled Convention attendees and serial readers of SF Lois McMaster Bujold or Vonda McIntyre or Anne McCaffery would be more popular and better regarded than LeGuin. That’s not saying the punters are right, but as a veteran of many an I-CON and the MENSA SF community, I think that’s the community consensus.

  4. Ulysses

    Thanks for sharing this important post!

    The key point that so many mild-mannered reformists miss is that:

    “Unless big business sees a mortal threat to capitalism, it is not likely to be willing to compromise with labor.”

    The rest of humanity can no longer afford to meekly ask the billionaires to be a bit nicer to us, from the goodness of their hearts. We need to directly challenge their power and demand a better, more humane system right now. No justice, no peace! We may not be lucky enough to ever realize Ursula LeGuin’s vision. Yet, if we continue to wait for change from above, we will be lucky if our future is only as grim as that depicted by Margaret Atwood.

  5. Larry Coffield

    My primary influence, Michael Hudson, gave his pal a pass. Neoliberalism doesn’t care about consumer power. Capitalists become antagonistic to capitalism with financialized monopoly power to extort and extract. I can easily envision potable water and two inelastic food staples symbolizing the new normal. The bankster parasites are stealing tangible assets by keystroking vapor liquidity for pulling off the same LBO strategy of corporate raiders in the Eighties. Austerity reflects neoliberal inversion to expand debt arbitrage under the guise of reducing debt by extracting consumption. This invites structural reforms that yield corporate privatizations until we take it back and it becomes commie nationalization.

  6. Left in Wisconsin

    Apologies for length in what follows:

    The ambiguous use of the terms “labor” and “labor movement” are a tell that this is a class (i.e. Marxian) “analysis.” Actually, more of a comment than an analysis.

    As I pointed out yesterday, US organized labor (i.e. real unions) is on one, long continuous losing streak since Taft-Hartley passed in 1947. This is how it goes for unions – rapid growth when unionism becomes the solution to wage cutting (by organizing most or all of a particular labor/product market and thus taking wages out of competition), an indefinite period of relative political influence, and then a long period of slow decay. JR Commons pointed this out in 1916, I think it was, and the 20th century was simply the next iteration. The problem now is the decision by our elites to globalize labor/product markets makes (re)organizing the market very difficult (to say the least). There are those who believe US labor can be reorganized based on non-tradeable services, low-wage workers, and/or the public sector, but there has never been a case in history where a politically powerful labor movement has arisen without strong unions in the export sector.

    IMO, there are only two ways for US “labor” to gain strength. One is to truly internationalize. This would be a very long term process and it isn’t obvious that it would lead to higher wages and benefits for American workers in any event, so it is hard to see how that process gets started. (It is very hard to get workers to organize if they do not see direct benefits from doing so.) It is worth noting that economic globalization has thus far led to fracturing of international labor solidarity, not closer coordination. Look at how the national unions in the EU (don’t) interact with each other. And people forget the UAW was an international union of American and Canadian autoworkers until the disparate national impacts of early globalization in the mid-80s led to the union splitting along national lines.

    The other way is to pull back from globalization and try to re-establish national product/labor markets. One big reason the Germans have declined less than everyone else is that Germans still culturally prefer German-made products, so the fit between product and labor markets is much closer than in the US. It is certainly the case that the Japanese boom from 1960-1990 was driven in part by Japanese nationalism, including both a preference by Japanese consumers for Japanese products and a willingness on the part of the Japanese workforce to work extremely hard (at least compared to similarly situated workers in the US and Europe).

    The best thing that could happen to US labor is a requirement that Apple manufacture a substantial percentage of the products it sells in the US in this country. That would be a game changer.

    Yves wrote: Aside from a few very high functioning exceptions, like nurses’ unions, the American labor movement is unwilling to flex what little muscle it has left against just about anyone. I’m no expert, but this appears to have a lot to do with corrupt leadership (not that that is unusual in America) and a lack of imagination.

    I think this is wrong in a couple of ways. First, the term “labor movement” is a bad descriptor of US unions. A labor movement is a social movement that works in the interest of “labor” as a class. US unions are not a labor movement and haven’t been since at least 1960, probably earlier. There is copious evidence of this, the most obvious being the lack of interest by virtually all US unions in single-payer health care. And the focus on corruption and lack of imagination, though there is plenty of evidence of both, is a red herring. US unions operate under a labor law designed in the 1930s for a world that no longer exists. A few examples:

    1. US labor law effectively prevents unions (outside of construction, which is a special case) from representing workers with higher level technical skills (accountants, engineers, etc.) or any level of management. Compared to say Germany, Sweden, or Japan, this cripples the ability of US unions to exercise leverage within the firm.
    2. Private sector US employers are only obligated to negotiate wages, benefits and working conditions. Even if unions are interested in negotiating productivity improvements or workplace reorganization, management isn’t required to do so (except over the effect of such reorganization on working conditions) and virtually never does. So people who complain that all unions want is higher wages don’t understand US labor law, which says that is all they can influence.
    3. Any sale, merger or reorganization of a business structured as an asset sale allows the company to terminate the collective bargaining relationship. As a result, every sale, merger or reorganization is structured as an asset sale (where the buyer buys the assets of the business but not the workforce).
    4. The US two-party system is not conducive to a politically-strong labor movement (though organized labor is struggling everywhere these days).

    Lastly, unions are democratic institutions where leadership is subject to periodic member elections. Lots of unions and leaders game the system to make these elections less democratic than they could be. But outside rare occasions, it is wrong to say that US unions do not represent the interests of their members. The reason why the nurses have strong, radical leadership is that the labor market for nurses is and has been for a long time so strong that nurses don’t have to worry (hardly) about being black-balled for union activity – if their employer fires them, they can go get hired down the street. Same for many of the newly radicalized fast food workers. This is just not true for most other private sector union workers. In contrast, the Reuther brothers returned from two years in Russia in 1936 and were immediately hired when they returned to Detroit because they had in demand skills. Except in industries with severe labor shortages, this would never happen today.

    The reason why US private-sector unions are so timid (except when they aren’t) is that the workers represented by them are desperate to hold onto their jobs and are very leery of doing anything that could piss off management. For the most part, US labor leaders are much more willing to push the envelope than their members. It is much more likely the case that a local union leader gets voted out for taking on management than for rolling over. Yes, the national leadership is all in bed with the D Party, which I wish wasn’t the case. But I would argue that says more about the awful state of our politics (and our politics, awful as they are, don’t seem that much worse than politics elsewhere) that union corruption.

    1. Sandwichman

      Thank you for this. It is crucial for people to understand that the Wagner Act administrative model has failed and cannot be revived by “better leadership” or “creativity.”

      1. Jim

        Couldn’t agree more Sandwhichman,

        The once potentially powerful American labor movement had its militancy short-circuited once it was integrated into the State through federally mandated collective bargaining such as the National Labor Relations Act.

        1. Sandwichman

          Yes, in effect the “good” Wagner Act deputized certified bargaining agents as enforcers of a “labor peace” whose definition ultimately was up to the appointed Labor Board. Strikes were transformed from potential threats to political and social stability into ritual performances. The “bad” Taft-Hartley Act followed in the footsteps of Wagner, appending the adjective “meaningless” to the ritual. In retrospect, it was bait and switch, with Wagner the bait and Taft-Hartley the switch.

        2. Left in Wisconsin

          Yes, most of the real organizing was done before or outside the Wagner Act. That said, the Wagner Act did to a certain extent take this into account. Moreover, labor policy up through WW2 took it as a no brainer that any sensible worker would rather have a union than not, and simply presumed that a unionized labor force was a given going forward. This is one reason why the sectors elites did NOT want unionized were clearly spelled out as not covered – notably agriculture and domestic work.

          Taft Hartley upended all that. At first, it seemed like (and was sold as) simply a rebalancing of power relations that elites (and Southerners) felt, in the wake of the post-WW2 strike wave and UAW demands to have a say over production at the Big 3, had shifted to far in the direction of unions. But it didn’t take big business too long to realize that TH signaled the end of (this phase of) US union growth.

          1. Sandwichman

            Two elements that I point out in my collective bargaining course: first the Wagner act language, first legislated in section 7a the NIRA, was not the priority objective of the AF of L at the time. The priority was the Black-Connery 30-hour workweek bill. Section 7a was put in to give something to labor while killing the Black bill.

            Second, certification as exclusive bargaining agents through majority election was not mandatory under the Wagner Act. It became customary because in the early years it was easy to win certification elections. Taft-Hartley made it much harder to win elections but unions continued to follow the old certification strategy as if they couldn’t believe a change in the rules could change the outcomes — even though that is what it was intended to do.

          2. Steven D.

            Very thought-provoking comments, Wisconsin. What, then, is your vision for the legal and political framework for labor organizing in America and the world? In France, unions represent only their dues-paying members and different unions compete for members in the same companies. Is that a viable model? Not far-reaching enough?

    2. jrs

      Left in WI: what laws are 1-4 covered under, which laws forbid this? Is it all Taft-Hartley? Or some of it the Wagner act? Or much more recent laws?

      It would make a lot of things make sense, like why don’t “professionals” unionize, because they don’t have the mindset is the usual explanation, while I think this is partly true, if it’s illegal anyway … no wonder no such mindset ever arises.

  7. susan the other

    Thank you for this post. Socialism is the only alternative to neoliberal capitalism. It could be a law of physics because it is so true at this point. This is not really news. We have known this for a century. And allowed ourselves to be deluded that neoliberal capitalism could resolve the need for both democracy/sovereignty and socialism. Ha. So just go out and float those boats on the rising ocean of reality! But don’t phase out the Coast Guard. My big concern is that we do not throw the baby out with the bathwater. I do not think the military is just another barbaric relic; another disposable commodity. I think, even tho’ it was always unintended, that the military will serve us well going into the future. It is organized, not averse to actual science, not driven by religion or ideology, etc. etc. and it has the capacity both materially and intellectually to turn this mess around. Big business does not. Let the military go Green. Let EVERY military go Green.

    1. gordon

      “Socialism” has many different meanings. For a start, it means different things to a Marxist and to most unionists. That doesn’t make you wrong; in fact it just about automatically makes you right, because any system that isn’t neoliberal capitalism might be described as some kind of socialism.

      I can’t think of any examples of “green” armies except the kind of improvised citizen armies of the English civil war, the French revolutionary period and the Red Army of the early Bolshevik years. No highly professionalised standing armies.

  8. Sandwichman

    “If labor and other popular movements gain strength…”

    To “gain strength” would require a different conception of “the labor movement.” By that I don’t mean simply “more militant” or “ideologically socialist.”

    The difference would have to entail two features: 1. repudiation of the narrow definition of work as employed wage labor and 2. adoption of a social accounting framework in which compensation is reckoned collectively rather than individually. In short, the abolition of wage labor.

    The abolition of wage labor doesn’t imply that workers would not get paid for work they perform. What it requires is that workers not be paid directly and individually by employers. The underlying principle for the compensation of individuals would then become the administration of labor power as a common pool resource. Unemployed workers would be eligible to be paid for being available to work. “Wages for housework” would become a reality.

    Traditional trade unionism has historically manifested aspects of this alternative principle but has never fully articulated and developed it. The demise of the Wagner Act model of administrative unionism in North America presents an opportunity for fundamental re-thinking of what a “labor movement” could be.

    1. Left in Wisconsin

      I agree with your last paragraph – we need a new labor framework (law + institutions) more appropriate for the contemporary world of work. But if that new framework requires the abolition of wage labor, I don’t see how we get there. Social change requires agents of change. Who would the agents be?

      1. Sandwichman

        Admittedly “abolition” sounds like a momentous universal stroke-of-the-pen act. It doesn’t have to be that way. What I am suggesting is a social accounting framework that could be adopted in an industry, a region — even a single workplace or neighborhood. Furthermore, it can be adopted as a parallel accounting framework to — and critique of — conventional enterprise and national income accounting.

        Think of the publication of National Income and Product Accounts by the Commerce Department starting in the 1940s. In the subsequent 70 years “economic growth” — defined as an increase in GDP — has become a political imperative, stifling serious reconsideration of what that reported number actually symbolizes. Wages project the same illusion as GDP of being self-evidently meaningful quantities, although they are no such thing.

        Critiques of the growth imperative and of the composition of national income accounts, based in part on alternative accounting frameworks, have begun to challenge their hegemony. Abolition of wage labor can proceed through a similar challenge to the hegemony of conventional labor accounting framework.

        1. Anarcissie

          Small groups can do as you suggest, forming cooperatives, communes, different money systems, and so on. If enough people participated, they could form larger networks. In fact, I suppose that’s going on now. But large numbers of people do not know about them or care about them if they do know about them. The workers can’t own and control the means of production unless they want to. Ironically, the most egalitarian and broad-based possible configurations of the social order are rejected by most of the population. This makes proposals for changing the general social order in any significant way highly problematical, to say the least, especially by means of contemporary political processes.

          1. Sandwichman

            “The workers can’t own and control the means of production unless they want to.”

            I couldn’t agree more.

            On second thought, there is one more thing: the workers should not be compelled to own the means of production if they don’t want to.

            Social democracy (or democratic socialism) assumes a latent motivation that may or may not materialize. If the democratic will does not manifest itself then the substitutes ready at hand are the technicians and political cadre. How would you like your Thermador? Well done or medium rare?

            What I am suggesting is that the popularization of competencies in industrial self-management does not have to await popular appropriation of the means of production. Would anyone like to see some examples?

          2. Ruben

            In my vision, the liberal State will gradually abandon the lower classes, will gradually leave them to their own devices, and simultaneously the lower classes will gradually ignore more and more the laws of the liberal State. This is inherent in the main role of the the liberal State of nurturing and protecting private property. The lower classes are a burden to the liberal State and the liberal State is a yoke to the lower classes.

            Eventually a spatial arrangement will emerge whereby the minority in the lower classes will actually separate physically from the rest of the people. This will be a boon to both, economic growth and environmental protection. The lower classes will create cooperatives, communes, money and accounting systems. A lot of creativity will be unleashed. Humanity will continue its march towards progress for centuries.

            Then a big rock from space will re-set the game.

  9. Steven

    I have two big caveats. The first is that David Kotz seems to place too much faith in “labor,” by which I am pretty sure he means the American labor movement.

    You aren’t the only one – and you are by no means the first. See Thorstein Veblen’s “The Engineers and the Price System”, Chapter 1, “On the Nature and Uses of Sabotage”. Veblen is also, of course, the author of the phrase “conspicuous consumption” (CC). It has been a while since I’ve read the book but as far as I can recall Veblen did not list the waste inherent in CC – or planned obsolescence or … in his discussion of economic sabotage.

    Veblen’s hope (delusion) was ‘an instinct of workmanship’ he presumed at least engineers possessed that would lead them to rebel against ‘the pecuniary interests’. Veblen’s contemporary Frederick Soddy saw the world a little more clearly – a world in which “Science (and its technicians, the engineers – Steven) had (has) become the handmaiden of business.”

    I suspect Soddy also saw the world more clearly than Kotz. Soddy repeatedly refers to “…the stale political and sociological controversies between capitalism and socialism.” He believed control of the right to create money was far more important than who owned the means of production. We’ve seen a little demonstration recently (‘quantitative easing’) of why Soddy might have been right. Why pay people for the right to use their money to balance their reserve accounts for the money they’ve created when banks can simply ’borrow’ it from the Fed?

    Ultimately to counteract ‘the miracle of compound interest’ capital (i.e. money) has to be ‘redeemed’ through taxation if ‘the big fish’ refuse to spend it. (See Soddy’s Wealth, Virtual Wealth and Debt, Chapter 8, CAPITAL REDEMPTION) Failure to do so will result in the build-up of capital with what laboring cattle remain spending their entire waking existence keeping that capital running – or explode in war as the big fish contend with each other for the right to control the world’s remaining wealth and exploit its ‘debt peasants’.

    1. Jim

      “[Soddy]…believed control of the right to create money was far more important than who owned the means of production.”

      How is the political state organized under this Soddy insight?

      1. Steven

        I don’t think Soddy delved very deeply into this question. You can infer certain conclusions from his proposals; e.g. the state must be strong enough to insure that someone other than “little people” pay taxes. Soddy was certainly aware of the nightmare ‘communism’ had become in the Stalinist former Soviet Union. A lot of his concern with preserving the value of money over time had to do with preserving the individual’s to save and thus secure some degree of freedom from the otherwise necessary dependence on the powerful centralized authority otherwise necessary for insuring the distribution of the necessities of life under a collectivist form of social organization (some kind of ‘ownership society’ for people on the verge of retirement?)

        Admittedly, the prospect of TPTB of this or any other country’s military-industrial complex in sole possession of the power to create money is terrifying. I guess Soddy was hoping that a population that understood money and science a little better wouldn’t let that happen.

  10. human

    When our current socio-economic systems are analyzed, whether in the future or on some distant planet, mention will be made of Castro, Chavez, Gaddafi, Assad, Hussein and any number of others as having enlightened administrations and populations that simply did not conform with Western power agendas and therefore had to be abolished.

    1. jsn

      Take a closer look at how Hussein came to power, there are videos from a soccer stadium that can in no way be considered enlightened. That we suck does not make Hussein enlightened.

  11. Jim

    So David you state–“a socialism based on democracy, participation, cooperation and sustainability could bring about a promising future for all.”

    Exactly how is power organized in this new political entity?

    What exactly is the role of an intellectual, such as yourself, in this new political entity?

  12. KYrocky

    David Kotz, and most opining on why our economy is performing or should perform in certain ways, overlook the giant thumb on the scale. The system is rigged, and relying on comparisons and combinations of theories that ignore this fact is as meaningful as discussing last week’s football game.

    Business have been spending BILLIONS to lobby Washington every year. Where does that type of investment track in these discussions? It has been well documented that these businesses receive gargantuan returns on these investments, often they are the most profitable thing many of them do. How does this fit within the above discussion of the capitalist system and the power of labor, profits, etc.? How do these economic discussions address the markets of lobbying investments and financial instruments, whose paper worth may exceed the value of all manufacturing, and in which labor has no role?

    Economic discussions should focus less on conditions from the past and more on how capitalism and labor function in an oligarchical society.

  13. Jabawocky

    The problem with low wages is that is discourages investment for compounding reasons, lower numbers of customers -and less incentive to replace workers with automation. The latter leads to stagnating standards of living.

    The second issue is where the money goes. One lesson of the financial crisis is that it gets ever harder to find people to take on new debt. Thus monetary expansion via debt reaches an obvious limit. This is compounded by removal of money to tax havens and other unproductive places. First the system can be sustained by ever lower interest rates, then after that only when coupled with high inflation. Who knows what comes next.

  14. pfiore8

    Interesting discussion. I have a much plainer view: the tension needed for balance among systems has been upended. Consolidated markets, consolidated power, championing the idea of “cheap” goods… in short, the globalization of markets has basically killed more than labor, but sovereignty itself.

    I think we need two things: first, we have to regain some operational integrity and evolve in our value system and, second, we need to contract the economy. Retool local and regional economies and charge the correct and fair price for goods, including what it takes to clean up afterwards. We need to reckon with cheap goods as the most expensive goods we can buy… from the meaningless of the plastic junk produced (at considerable cost of resources, impact on the planet, and our fellow earthlings) to the toxic quality of much of it, including our food.

    I mean we can go on trying to analyze but at some point, we must recognize this: We don’t need to fix the existing system; we need to move away from it as fast as we can.

  15. sierra7

    Not meaning to be super-critical….but, after reading so many good to very good comments on this super-complex issue….what remains is a lot of “thinking” and no real action……..predicted.
    (In my opinion) firstly we lack any real political leadership in today’s world to even begin to think of and or tackle the immense problems facing the “commons”.
    We do not have any in the larger financial world, or the “organized labor” class that are willing to become, as Franklin Roosevelt was considered, “…..a traitor to his class”.
    He had the disposition and courage to warn his wealthy friends that if certain political grants were not made to the “laboring class” (in those years) that “…..all hell would break loose.”
    Who is that leader today?
    Where is he/she?
    “Organized labor” and the “capitalist class” have both been literally crushed by the spread of globalization.
    The only game in town for the political class has been to extend their own power regardless of which major party they belonged.
    The only game in town for the capitalist class has been to “financialize” their businesses facing changing markets, declining consumption and the “natural” spread of their original businesses and relationships to the global market.
    The only game in town for the laboring classes is to hang on for dear life as they watch their earnings reduced by declining bargaining power, their own jobs being globalized and hence the “financialization” of the consumer world they yearn to belong. Can’t afford it? Financialize it….get into more debt.
    On the other hand, it is to their own hand that most businesses and labor suffer from.
    Who is familiar with any labor history today?????
    The rank and file?
    The common citizen?
    We will not solve our economic, education, healthcare, foreign policy, environmental, etc, etc, problems with “ordinary” thinking….No more….those days are gone.
    We need radical thinking.
    And, when radical thinking prevails all bets are off…….
    We had a chance to somewhat straighten out the mess of 2008….it was simple really…..
    Break up the major financial houses; Send some of the criminals to jail (remember, hundreds and hundreds of heads and participants in the S&L crisis in the late 1980’s went to jail; they did not pass go and get a free pass).
    There was no political courage whatsoever.
    IE. there is no political leadership today and there is only greed, corruption and outright criminality in the financial world for the most part.
    Without radical political courage focused on the common people and for the common people we are continuing down the path of economic and political ruination.
    So many countries in the so called “third world” have striven mightily to develop, “mixed” economies which this and other western countries literally physically crushed.
    I believe in capital markets.
    I also believe in the development and maintenance of, “the commons”.
    But, we have let so-called “free market” capital annihilate those commons.
    If we are to have a somewhat resurgence of market capitalism we must have a “firewall” between the ravages of free globalized capital and the real needs (not materialistic) of a progressive society.
    We had somewhat some of those pieces of a “firewall” put into place after the Great Depression.
    Those pieces of the firewall were chipped away by the mental pygmies since then and over the years until we had the final denouements during the 1990’s and 2000’s until today it is just a freaking free for all……..
    The (in my opinion) final dismantling of the Glass Steagall Act did us in.
    In a “socially oriented” capitalist system (which we certainly no longer have any semblance) there has to be rules to the game. After all capitalism is only a game. And ALL games need rules.
    Redo globalization treaties and rules to be all inclusive with the common people at the table; reinstate rules to the game SEPARATING social finances (what belongs to the commons) from the slurpy greed of financial speculation would be a beginning to radical change.
    (I have no problem with capital speculation…..only when it rapes society….then to the gallows!)
    In our world the above last few sentences is truly radical….
    Are we ready for a bit of radicalism?
    Enough…Thanks for the great post and the opportunity to post my thoughts.

  16. Dino Reno

    Forget trying to revive the labor movement with unions. Their time has passed. Representation is down to what, less than 5% at best? The fact that the biggest ones became corrupt didn’t help. Corporate armor is so arrayed against them, it would be a no win contest for the next twenty years. Breaking unions using violence has a long history. Not exactly consensus building.

    Just raise the goddamn minimum wage to $15 and keep raising it a buck a year for the next ten years. Add in Medicare for all to take care of the benefits side and you’re done helping out the bottom 65% without all the conflict.

    1. Michael Fiorillo

      And what social institution is going to bring that about, if not unions?

      Who or what is going to compel Capital to do so, since it won’t do it freely?

        1. Stephen Gardner

          Unfortunately that institution is as bad off as the labor unions. You vote for someone and as soon as that person is in office they start catering to the powerful interests that really run the country.

  17. kevinearick

    AI Tuning: Final Rights

    The brain is a tuner. It comes with both channels preset by DNA and the ability to expand the band with imagination, the implicit conscience – what you cannot see, which is far, far greater than what you can see. Parenting, what the self-obsessed majority wants nothing to do with except to employ the output as economic slaves, is about encouraging your children to expand their conscience productively.

    Empire GDP measures consumption, not production; its productivity measures efficiency of natural resource liquidation; and its employment measures compliance, in an economy of stupid rewarding itself for self-obsession. Only a moron accepts credit from the top down and tax from the bottom up expecting anything other than a short rent/income squeeze. GDP is a sub-tuner, a welfare state for stupid activity.

    The majority always chooses the path of least resistance offered by the empire broadcast, adopting and replicating the habits of those whom they can expect to confirm their choices, shorting the short and replacing their own consciousness with whatever false prophet controls the channel. Empire is an artificially closed system, liquidating nature to provide channels of employment, guaranteeing inflating prices on declining resources, insured by an actuarial ponzi, paying the participants in their own debt for compliance. The only possible outcome is war, and empire is in the business of war.

    Regardless of governing ism in the divide and conquer regime, they are all feudal organizations controlling the bandwidth narrative to issue themselves credit, on the expectation of liquidating natural resources in their own favor. In this iteration, the healthcare system simply selects based upon compliance and the education system confirms routing into established channels, in a process it calls expert system certification. Why would anyone trust a contract from a slaveholder cartel made to be broken by Family Law, unless they were chosen and programmed to do so?

    Critters stranding themselves on an island of scarcity in a sea of abundance aren’t going to behave well, surprise. The majority willingly chose to believe that an individual cannot outlast an irrational market, which is simply the majority behaving irrationally to tune out all other channels and calling the product economic activity, GDP as an excuse to issue more debt. There is no shortage of oil; the majority is waking up to global demographic collapse, with no talent and no skills.

    The disposable economy of disposable make-workers, passing debt instruments around in a MAD circle, is collapsing of its own dead weight, just when the communists thought they had it all figured out, again. Whether global economic collapse is a problem or a solution depends upon your perspective. Empires come and empires go, because empire is a depository institution for those incapable of adapting in a real economy.

    Communism is a bipolar marriage between capitalism and socialism, to replace a complimentary marriage between a man and a woman with government. But if you look, you will see that the two worst weeks for the market in this cycle came the week after they took my kid and the week after the decision was confirmed by a judge. Hunting down an AI guy with an AI derivative doesn’t end well, and you have two points on a line.

    When you have two points on a line, you may expect the third by eliminating time as a variable at the position you set on the fulcrum. Of course the critters will vote for an equal right to consume, no responsibility to produce, and a cushy make-work job to pretend they are busy. At awakening, who do you suppose has the advantage of leverage?

    When my pop brought me to California from white Ohio as a little kid, he placed me in school with blacks and browns on the bad side of town, and sent me to class with a military haircut, but I had free roam of the military bases, if I rode my bike 10 miles across ‘enemy’ lines. Capital, the middle class and my welfare mom placed their kids in the most posh, affirmative action schools they could afford. Funny, the race is irrelevant.

    I am not the least bit concerned about Grace; she is smarter than I am, with far more resources at her disposal. And funny thing about smart kids; they begin their life ignoring ignorance, to develop their own identity. You can’t choose your parents and you can’t choose your children, but that never stops the majority from trying, which is why it is always traveling in common, back to the DNA churn pool.

    JPM and Edison were self-obsessed morons doing the wrong thing at the wrong time in the wrong place 99% of the time, but you wouldn’t know that studying History in the public education system at a dc terminal.

  18. barrisj

    I’m surprised that nobody has mentioned Friedrichs v. California Teachers Association, 14-915,
    currently under discussion by the Roberts SCOTUS. A decision for the plaintiffs will go a long way toward destroying public-sector unions by removing mandatory union fees (“dues check-off”), which of course would allow members to walk away without paying dues but still enjoy the union’s collective-bargaining powers. If enough members walk, there goes the union, QED. As in the Citizen United case, the Court’s Big Five will invoke First Amendment rights by agreeing with plaintiff’s argument that fees that could go toward political funding and campaign contributions would directly conflict with those members whose views are opposed to the union leadership or even the majority of its members. Public-sector unions remain today the only area of growth of union membership and affiliation; once SCOTUS tosses out dues check-off, it’s bye-bye-baby for the American union movement, as unions will be as emasculated as those in so-called “right-to-worK” states. This Court is taking “settled law” as it affects the right to organise into unions and turning it on its head…the enduring legacy of The Shrub.

  19. craazyman

    asking the question is easy but answering it is hard.

    where’s the answer? anybody can type out the questions (athough this post is pretty good, except it starts stronger than it ends)

    It’s important to realize that 2016 is the 50th anniversary year of the Beach Boy’s PET SOUNDS, the album of genius that shook the world of music to it’s very core.

    wouldn’t it be nice if I were richer
    and I wouldn’t have to wait so long
    and wouldn’t it be nice if a 10-bagger
    put me in the world where I belong

    you know it’s gonna make it that much better
    when I wear a Paul Stuart sweater
    Oh wouldn’t it be nice

    All you geezers should remember this. Maybe even you were there when it arrived on your turntable. Those were the days, when a young man with a turntable and a little reefer could chill for a whole afternoon and experience the eternity of time in the ever-present NOW. If he wasn’t in Da Nang anyway, fighting the Marxists.

    Who is there now to see this and experience this phenomenon of being? I don’t know but it’s not something anybody should miss when they’re alive. Why can’t the economy be built around that? It’s quite strange why. But that’s for another time. Right now I’m too spacey to put the words down with the rigor they require.

  20. gordon

    Just for fun, I’m going to recycle my personal brief history of the modern world from a comment I made on a different blog in January 2013. It’s a bit stream-of-consciousness, but I think I actually like it like that:

    There were things going on back in the late 60s and forwards from there that had big effects on inflation, money and credit creation and asset prices. The US financed the Vietnam war without tax increases, leading to the creation of a whole lot of money. At the same time, petrodollars were moving out of the US as US oil production fell and imports rose. Remember Eurodollars? That combination looked like setting off the mother of inflation bombs in the US and Europe and almost did – there really was a lot of inflation in the mid-late 70s – so the US crunched markets with interest rate rises. Remember Volcker? That didn’t affect the price of oil, though, which continued to rise (though irregularly and sometimes with backslidings, but the volume of oil exported by the ME and N. Africa rose so much that it swamped price variations and the flow of petrodollars remained large), and so did the stock market, which came to be seen as an inflation hedge. Everybody was obsessing about stagflation in the late 70s, which in hindsight can be seen as that interval between the post-War reconstruction of Europe (finished) and the takeoff of NICs like Korea and China (not yet begun). It was only when the artificial financial and trade barriers around China and Russia fell down and places like Korea, Taiwan, Thailand, Vietnam and later the E. European countries became players that the essentially monetary (in my view) causes of inflation could be ringfenced from consumer prices. That was achieved by globalisation, which forced down wages in US and Europe without requiring either interest rate rises (monetary action) or budgetary surpluses (fiscal action). It was the best of all possible worlds for investors; money creation drove up the prices of assets but globalisation stopped the consumer price indices from rising. So the Great Moderation, which looked so wonderful and provoked the same sorts of responses from economists as the pre-collapse peak of the US stock market in 1929 famously provoked from Fisher. Trouble was, everybody had forgotten about households (which had sort of become surplus to requirements) which now had no money, only credit. So the housing bubble burst, and that triggered the GFC, and so here we all are.

    1. Paul Greenwood

      Postwar Reconstruction of Europe was delayed significantly by JCS1067 imposed on Germany and the Dollar Shortage in Europe. Morgenthau and Harry Dexter White did enormous damage by dismantling the German banking system and trying to return Germany to 1932 living standards with 1000 calories/day

  21. Paul Greenwood

    The Stagnation is caused by Cartellisation. The Cartels or Trusts are the cause of economic stagnation. The concentration of retailers caused concentration of food processors. The global concentration around brands that are in essence hollowed out has exacerbated the problem by shrinking employment and diversity and choice.

    Predatory Free Trade needs to be blocked. The oversupply of junk is rampant now China floods the world with items destined for junk within months rather than years.

    The global economy will retreat into managed trade and regional breakup. There is no reason for global banks. There is no reason for global food processors like Mondelez or Kraft or businesses like McDonalds or Frito-Lay. They have become wallpaper

  22. Keith

    Neo-Liberal economics believes in the polar opposite of reality in most cases and is just wrong in many others.

    1) It is based on supply side, trickledown economics

    There was an approximation to this when bank credit was almost un-limited prior to 2008. Now we are seeing the problems with lack of demand everywhere and businesses won’t invest until they see a rise in demand, they don’t believe the supply side nonsense either.

    Every system is designed to benefit those that put it in place.

    To think anyone is going to design a fair system would totally ignore human nature.

    Capitalism is the dominant system today because it is works on greed and self-interest (human nature).

    Every social system since the dawn of civilization has been set up to support a Leisure Class at the top who are maintained in luxury and leisure through the economically productive, hard work of the middle and lower classes.

    (The Theory of the Leisure Class: An Economic Study of Institutions, by Thorstein Veblen. The Wikipedia entry gives a good insight. It was written a long time ago but much of it is as true today as it was then. This is the source of the term conspicuous consumption.)

    In the UK we call our Leisure Class the Aristocracy and they have been doing very little for centuries.

    The UK’s aristocracy has seen social systems come and go, but they all provide a life of luxury and leisure and with someone else doing all the work.

    Feudalism – exploit the masses through land ownership
    Capitalism – exploit the masses through wealth (Capital)

    Today this is done through the parasitic, rentier trickle up of Capitalism:

    a) Those with excess capital invest it and collect interest, dividends and rent.
    b) Those with insufficient capital borrow money and pay interest and rent.

    The system itself provides for the idle rich and always has done from the first civilisations right up to the 21st Century.

    For 5,000 years the rich have been taking from the poor, now there is some flow the other way they don’t like it, they don’t like it at all.

    Trickledown, are they insane?

    2) No differentiation between “earned” and “unearned” wealth

    The parasitic, unproductive, rentier, FIRE (finance, insurance, real estate) sectors are destroying the real economy.

    Michael Hudson “Killing the Host”

    3) Ignores the true nature of money

    One of the fundamental flaws in the economists’ models is the way they treat money, they do not understand the very nature of this most basic of fundamentals.

    They see it as a medium enabling trade that exists in steady state without being created, destroyed or hoarded by the wealthy.

    They see banks as intermediaries where the money of savers is leant out to borrowers.

    When you know how money is created and destroyed on bank balance sheets, you can immediately see the problems of banks lending into asset bubbles and how massive amounts of fictitious, asset bubble wealth can disappear over-night.

    When you take into account debt and compound interest, you quickly realise how debt can over-whelm the system especially as debt accumulates with those that can least afford it.

    a) Those with excess capital invest it and collect interest, dividends and rent.
    b) Those with insufficient capital borrow money and pay interest and rent.

    Add to this the fact that new money can only be created from new debt and the picture gets worse again.

    With this ignorance at the heart of today’s economics, bankers worked out how they could create more and more debt whilst taking no responsibility for it. They invented securitisation and complex financial instruments to package up their debt and sell it on to other suckers (the heart of 2008).

    Neo-Liberal dogma is so wrong it could never work.

    It did function well for a while by allowing bankers to flood the world with almost unlimited supplies of money through debt.

    Debt just borrows from the future to spend today and the repayments are now due.

    It’s success was a debt based illusion.

  23. Jim in SC

    Many brilliant people post here at NC. However, I detect in the comments a persistent belief that some magical figure, call him Santa Claus, is going to show up and shower money on the world. Many people apparently believe the wealthy–that is, whoever makes $10,000 a year more than they–can be taxed to acquire this money. ‘Don’t tax you. Don’t tax me. Tax the fellow behind the tree.’ It’s up to the psychologists to figure out where this belief comes from.

    Reality is a bit more harsh. In reality, people are paid what the market will bear, and wealth is created more by delayed gratification and gradual investment of savings than by any other single reason. Anyone can invest very cheaply in the S&P 500 via index funds. Over a lifetime, that makes even janitors rich. But people would rather complain and complain than do what is necessary to improve their condition. I can’t believe that the high IQ people who post here don’t get that.

    1. Jerry Hamrick

      Actually, the reality you describe is a fraud perpetrated by the big boys. Our current economic system is based on the lie that we have a limited supply of money. When FDR, for all practical purposes, took us off the gold standard he removed any support for the fraud you describe. We have had an unlimited supply of money for more than eighty years but our system still operates as if we were on the gold standard. No longer will we have to operate as a system of redistribution, but instead we will operate as a system that distributes. We will no longer have to take money from one citizen and give it to another. We will need some sin taxes, and we will need a way to drain excess money from the system, but, compared to today, we will live tax-free lives.

      The first thing we should do with this unlimited supply of money is provide each citizen with the Social Security Lifetime Supplement (SSLS) of $36,000. Money will flow like water into each American household and poverty will be washed away. Demand will accelerate, and we will have an economy that is demand-driven. Our unlimited supply of money will bring on many changes–all for the better. Our new economic system will be called democrato-capitalism because we, the people, will be investing our capital in ways that will provide resources, opportunities, rights, and protections that will enable each citizen to go as far as her efforts and talents can take her, we will all be able to live long lives that are worth living.

    2. Keith

      Capitalism benefits those with Capital (the clue is in the name).

      Inequality grows as wealth concentrates due to the benefits of wealthy parents being able to provide the best education and passing their wealth on in inheritance.

      With Neo-liberal ideology taking us further to the Right this effect is magnified.

      Equality of opportunity is provided in a meritocracy.

      “What is a meritocracy?”

      1) In a meritocracy everyone succeeds on their own merit.

      This is obvious, but to succeed on your own merit, we need to do away the traditional mechanisms that socially stratify society due to wealth flowing down the generations. Anything that comes from your parents has nothing to do with your own effort.

      2) There is no un-earned wealth or power, e.g inheritance, trust funds, hereditary titles

      In a meritocracy we need equal opportunity for all. We can’t have the current two tier education system with its fast track of private schools for people with wealthy parents.

      3) There is a uniform schools system for everyone with no private schools.

      Thinking about a true meritocracy then allows you to see how wealth concentrates.

      Inheritance and trust funds are major contributors.

      When you start off with a lot of capital behind you, you are in life’s fast lane.

      a) Those with excess capital invest it and collect interest, dividends and rent.
      b) Those with insufficient capital borrow money and pay interest and rent.

      If the trust fund/inheritance is large enough then you won’t need to work at all and can live off the rentier income provided by your parents wealth and the work of an investment banker.

      If you are in life’s slow lane, with no parental wealth coming your way, you will be loaded up with student debt, rent, mortgages and loans.

      To ensure the children of the wealthy get the best start we have private schools to ensure they get the best education and make the right contacts ready for the race of life.

      The children of the poor are born in poor areas where schools are typically below average and they are handicapped before they have even started the race of life.

      Wealth concentrates because the system is designed that way.

      With Capitalism always biased to favour the wealthy, the new Neo-Liberal ideology has moved us further to the right and made this inherent bias obvious to everyone.

      Just in case anyone has missed it, the current campaign to tilt the playing field down even further for the less affluent young, should leave no one in any doubt at all.

      Generation rent are being used as a traditional source of rentier income for those with more Capital:

      “The Landlord is maintained in idleness and luxury by the labour of his tenants.” Adam Smith

      Then student loans give a life of repayments before they have even started working.

      Before the Neo-Liberal changes have filtered through we already have the second lowest social mobility in Europe:

      With our privately educated elite this should come as no surprise.

      That our other bastion of Neo-Liberalism (Crony Capitalism), the US, is just as bad, the American Dream is just a dream.

    3. Keith

      Capitalism is about Capital (the clue is in the name) and a nice inheritance/trust fund is all that is required.

      The symbols of hard work, the hammer and sickle, are the symbols of Communism.

      You are getting the two mixed up.

      1. jrs

        Communism’s only symbols are hard work, geez they need better branding. Yes more of the wealth of society should be distributed among most people including all the peons who labor. But I would hope leisure would also be better distributed and we would be able to work less as well ….

    4. Vatch

      “the wealthy–that is, whoever makes $10,000 a year more than they”

      “people are paid what the market will bear”

      I don’t think that people who earn $10,000 more than I earn are wealthy. Neither are people who earn $100,000 more than I earn per year. But at some point, perhaps $750,000 per year, high levels of income stop being “earned”, and become something else. People with very high incomes or very high amounts of wealth have a far greater ability to influence events than other people do. The very rich can and do write the rules of society by donating to legislators. They can control their own salaries — CEOs do it all the time. Nobody becomes a hecto-millionaire or a billionaire simply because he/she works hard or has a great product. What is required is luck, fraud, theft, or the ability to control the laws that we live by.

      Do you really think Bill Gates got rich because MS-DOS was a high quality innovative operating system? No, he got rich because he and Paul Allen copied Tim Paterson’s clone of Digital Research’s CP/M operating system, and his mother personally knew the CEO of IBM. Ditto for Windows — they copied work done at the Xerox Palo Alto Research Center as well as the Apple Macintosh.

    5. jrs

      That the wealthy make 10k more than joe schmoe is a mathematically illiterate comment. More like a small group of people make more than the vast majority of the population COMBINED. That’s the mathematical reality of this society.

      Whether Joe Schmoe envies those who make 10k more is not the sin only conservatives would have you believe it was, but it’s really neither here or there, since that is not the wealthy. A tiny tiny minority controls almost all the wealth in this society, not someone earning 10k more.

  24. Nell

    Totally agree that The Dispossessed should be on people’s reading list. Really interesting juxtaposition of two different political economies. Those two systems are capitalism and anarcho-syndicalism. Anarcho-syndicalism is not the same as socialism. The big difference between them is in the role of the state. From the perspective of anarcho-syndicalism, the state cannot act in the interest of workers as it’s primary purpose is to protect property rights. They’ve got a point, if we consider current legislative practices of government.

  25. oldmusic

    Good to see the mention of Ursala K Le Guin’s “The Dispossesed”. In many other works, she has portrayed with imagination and some realism the many ways humanity could live their lives in different, sustainable ways. And her speech where she compares capitalism with the divine right of kings is priceless.

  26. Minnie Mouse

    No matter what kinda phony baloney ideology is applied inside of country X it will be undermined by globalist “free trade” phony baloney.

  27. Randy

    Kotz’ “The Rise and Fall of Neo-Liberal Capitalism” ( makes it case elegantly, thoroughly and without technical jargon. I am 3/4 of the way through and can’t recommend it enough.

    So far, it seems like he is arguing that regulated capitalism is a workable and preferable alternative to the neo-liberal form currently operative in the US and Western Europe.

  28. Knute Rife

    From what I’ve seen, neoliberals pay lip service to markets, but the folks who pull the levers (and whom the neolibs serve) game the system at every opportunity to avoid competition. On the other hand, they do force the rest of us to market, rather the way slavers used to force their “harvest” to market.

  29. Knute Rife

    The Dispossessed was a major player in my youth. A badly needed counterweight to Heinlein’s Randofascism.

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