Tag Archives: crony capitalism

The Marxist Nightmare Of The 1 Percent


“… between technology, globalization, trade, the winner-take-all superstar effect, inequality is rising. This is not just a ‘moral’ issue but also an issue of too little consumption too little savings that is bad for global growth. So it becomes vicious cycle. It’s a bit like the old Marxist idea that if profits grow too much compared to wages, there’s not going to be enough consumption, and capitalism is going to self destruct. So I think that insight of Karl Marx is as useful today as it was 100 years ago.”

If profits grow too much compared to wages, there’s not going to be enough consumption, and capitalism is going to self destruct.

That quote is from Nouriel Roubini, and it perfectly summarizes what a lot of the world’s elites were thinking about at the World Economic Forum.

Roubini’s words echoed the warning from MIT professor Erik Brynjolfsson, who told us:

…there are a lot of forces affecting inequality. There’s globalization, there are institutional changes, cultural changes, but I think most economists would agree that the biggest chunk of it is due to technology. And that’s because of what economists call skill-biased technical change — favoring skilled workers versus less-skilled workers.

Also we talk in the book about capital-biased technical change — you bring capital over labor like when you replace humans with robots. And the third category that maybe is the most important one, we call it superstar-biased technical change, maybe we should come up with a better name. But it’s the fact that technologies can leverage and amplify the special talents, skill, or luck of the 1% or maybe even the 100th of 1% and replicate them across millions or billions of people. In those kinds of markets, you tend to have winner-take-all outcomes and a few people reap enormous benefits and all of us as consumers reap benefits as well, but there’s a lot less need for people of just average or above-average skills.

Brynjolffson came to The World Economic Forum in Davos to warn policymakers that without changes, technology would exacerbate inequality, rather than benefit society as a whole.

The folks at the World Economic Forum in Davos are almost all doing extremely well. They’re the world’s 1% (actually probably more like the world’s 0.001%), and it’s well known that the recovery has been good to them. But there was also a sense — that Roubini gets at in his comment — that the good times won’t last if things keep becoming more unequal.

Figuring out a way to promote mass welfare and to ensure that more people have jobs and strong incomes becomes crucial to preserving what the elites have. Better to have some sort of rebalancing than a dramatic capitalist-destroying rebalancing.

Read more: http://www.businessinsider.com/rich-tech-fears-2014-1#ixzz3KDVYHufQ

Marx Was Right: Five Surprising Ways Karl Marx Predicted 2014

From the iPhone 5S to corporate globalization, modern life is full of evidence of Marx’s foresight

There’s a lot of talk of Karl Marx in the air these days – from Rush Limbaugh accusing Pope Francis of promoting “pure Marxism” to a Washington Times writer claiming that New York City Mayor Bill de Blasio is an “unrepentant Marxist.” But few people actually understand Marx’s trenchant critique of capitalism. Most people are vaguely aware of the radical economist’s prediction that capitalism would inevitably be replaced by communism, but they often misunderstand why he believed this to be true. And while Marx was wrong about some things, his writings (many of which pre-date the American Civil War) accurately predicted several aspects of contemporary capitalism, from the Great Recession to the iPhone 5S in your pocket.Here are five facts of life in 2014 that Marx’s analysis of capitalism correctly predicted more than a century ago:

1. The Great Recession (Capitalism’s Chaotic Nature)

The inherently chaotic, crisis-prone nature of capitalism was a key part of Marx’s writings. He argued that the relentless drive for profits would lead companies to mechanize their workplaces, producing more and more goods while squeezing workers’ wages until they could no longer purchase the products they created. Sure enough, modern historical events from the Great Depression to the dot-com bubble can be traced back to what Marx termed “fictitious capital” – financial instruments like stocks and credit-default swaps. We produce and produce until there is simply no one left to purchase our goods, no new markets, no new debts. The cycle is still playing out before our eyes: Broadly speaking, it’s what made the housing market crash in 2008. Decades of deepening inequality reduced incomes, which led more and more Americans to take on debt. When there were no subprime borrows left to scheme, the whole façade fell apart, just as Marx knew it would.

2. The iPhone 5S (Imaginary Appetites)

Marx warned that capitalism’s tendency to concentrate high value on essentially arbitrary products would, over time, lead to what he called “a contriving and ever-calculating subservience to inhuman, sophisticated, unnatural and imaginary appetites.” It’s a harsh but accurate way of describing contemporary America, where we enjoy incredible luxury and yet are driven by a constant need for more and more stuff to buy. Consider the iPhone 5S you may own. Is it really that much better than the iPhone 5 you had last year, or the iPhone 4S a year before that? Is it a real need, or an invented one? While Chinese families fall sick with cancer from our e-waste, megacorporations are creating entire advertising campaigns around the idea that we should destroy perfectly good products for no reason. If Marx could see this kind of thing, he’d nod in recognition.

3. The IMF (The Globalization of Capitalism)

Marx’s ideas about overproduction led him to predict what is now called globalization – the spread of capitalism across the planet in search of new markets. “The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe,” he wrote. “It must nestle everywhere, settle everywhere, establish connections everywhere.” While this may seem like an obvious point now, Marx wrote those words in 1848, when globalization was over a century away. And he wasn’t just right about what ended up happening in the late 20th century – he was right about why it happened: The relentless search for new markets and cheap labor, as well as the incessant demand for more natural resources, are beasts that demand constant feeding.

4. Walmart (Monopoly)

The classical theory of economics assumed that competition was natural and therefore self-sustaining. Marx, however, argued that market power would actually be centralized in large monopoly firms as businesses increasingly preyed upon each other. This might have struck his 19th-century readers as odd: As Richard Hofstadter writes, “Americans came to take it for granted that property would be widely diffused, that economic and political power would decentralized.” It was only later, in the 20th century, that the trend Marx foresaw began to accelerate. Today, mom-and-pop shops have been replaced by monolithic big-box stores like Walmart, small community banks have been replaced by global banks like J.P. Morgan Chase and small famers have been replaced by the likes of Archer Daniels Midland. The tech world, too, is already becoming centralized, with big corporations sucking up start-ups as fast as they can. Politicians give lip service to what minimal small-business lobby remains and prosecute the most violent of antitrust abuses – but for the most part, we know big business is here to stay.

5. Low Wages, Big Profits (The Reserve Army of Industrial Labor)

Marx believed that wages would be held down by a “reserve army of labor,” which he explained simply using classical economic techniques: Capitalists wish to pay as little as possible for labor, and this is easiest to do when there are too many workers floating around. Thus, after a recession, using a Marxist analysis, we would predict that high unemployment would keep wages stagnant as profits soared, because workers are too scared of unemployment to quit their terrible, exploitative jobs. And what do you know? No less an authority than the Wall Street Journal warns, “Lately, the U.S. recovery has been displaying some Marxian traits. Corporate profits are on a tear, and rising productivity has allowed companies to grow without doing much to reduce the vast ranks of the unemployed.” That’s because workers are terrified to leave their jobs and therefore lack bargaining power. It’s no surprise that the best time for equitable growth is during times of “full employment,” when unemployment is low and workers can threaten to take another job.

In Conclusion:

Marx was wrong about many things. Most of his writing focuses on a critique of capitalism rather than a proposal of what to replace it with – which left it open to misinterpretation by madmen like Stalin in the 20th century. But his work still shapes our world in a positive way as well. When he argued for a progressive income tax in the Communist Manifesto, no country had one. Now, there is scarcely a country without a progressive income tax, and it’s one small way that the U.S. tries to fight income inequality. Marx’s moral critique of capitalism and his keen insights into its inner workings and historical context are still worth paying attention to. As Robert L. Heilbroner writes, “We turn to Marx, therefore, not because he is infallible, but because he is inescapable.” Today, in a world of both unheard-of wealth and abject poverty, where the richest 85 people have more wealth than the poorest 3 billion, the famous cry, “Workers of the world uniteyou have nothing to lose but your chains,” has yet to lose its potency.

Courtesy: Rolling Stone

Russell Brand’s Revolution Is Right, We Have To Change.

Bob Geldof Backs Russell Brand’s Revolution In Call For New Politics

The Huffington Post UK | By Asa Bennett

Sir Bob Geldof has thrown his weight behind Russell Brand‘s call for a political revolution, warning that the current system of democracy “may not be viable for much longer”.

Speaking to the Huffington Post UK, Geldof praised Brand for his “articulacy and expressing the anger of the moment”, after he sparked a controversy with an essay in the New Statesman magazine calling for the “overthrow of the current political system”.

The Irish rockstar and political activist said: “We have to change and it needs to be in the context of how we live now rather than with some old-hat political ideal.”

Geldof blamed the failure of capitalism on the banks going “out of control” and due to human greed, inventing “completely spurious” financial products.

“They ceased to [give money to others] and gave it to themselves through fraud, outright international global gangsterism.

In an impassioned attack on recent banking scandals, he went on: “That’s what it was. Mispricing of products, fraud. Mis-selling of products, fraud. Fixing the interbank lending rate. Fraud. It was fraud on an unprecedented scale! They sucked billions out of the world economy, destroying individuals, companies and countries.”

“Russell [Brand] is completely right. That model cannot sustain us as we saw, it bankrupted Greece, almost Italy, almost France and almost Ireland. It just can’t work.”

Geldof, renowned for his role behind the Live Aid and Band Aid charity initiatives, spoke to HuffPostUK after talking to young entrepreneurs at an event hosted by the RockStar Youth group.

Geldof warned Brand that replacing the current political system with anarchy was “not viable or plausible”, adding: “You can’t just have a free for all. It just wont work because we will form structural organisations within that as it’s the kind of thing we do.”

However, he said the bankers’ immense levels of pay posed a serious threat to society. “When you have these supposed masters of the universe averaging more than 248 times the average worker’s pay, you have a serious problem of inequality. Inequality stops a society functioning and so it has to stop.

“I do think the version of democracy that we have been living with just may not be viable for very much longer. We will have something where we have proper freedom and elected representation.”

“We all co-operate in the knowing lie, which is that everybody promises more and that the economy will inevitably grow. what does that mean? It means more, more of what? That’s not viable in an unsustainable and finite world.

“Nor can you in a four year electoral cycle put into place programmes that would help to ameliorate the effects of that. If the economy is affected in that way by definition politics are so that the politics that we’ve grown up with in a different economy cannot work in a new one, there has to be a newer type of politics.

“You will see a change in the type of politics. It’ll still be our government, it needs to be otherwise you’ll have problems and it still needs to be a more coherent economy.”

Courtesy: Huffington Post