Friday, April 21, 2017

Our State-Corporate Plantation Economy

We've been persuaded that the state-cartel Plantation Economy is "capitalist," but it isn't. It's a rentier skimming machine.
I have often discussed the manner in which the U.S. economy is a Plantation Economy, meaning it has a built-in financial hierarchy with corporations at the top dominating a vast populace of debt-serfs/ wage slaves with little functional freedom to escape the system's neofeudal bonds.
Since I spent some of my youth in a classic Plantation town (and worked on the plantation as a laborer in summer), the concept of a Plantation Economy is not an abstraction to me, but a living analogy of the way our economy works.
The Plantation Economy is extremely hierarchical. Corporations and the state are both extremely hierarchical.
In the Plantation Economy, the Company has access to nearly unlimited credit.Small businesses serving the employees and the employees have enough credit to live on but not enough to buy productive assets. As a result, the Corporation can always buy up any productive assets, expanding its monopoly.
The state also has an essentially unlimited line of credit which it can use to fund its favored cartels and state fiefdoms.
In the Plantation Economy, the Company suppresses any innovation that threatens its monopoly and the state enforces whatever means the Corporation deploys: buying up patents and small companies, predatory pricing to bankrupt competitors, etc.
The Plantation Economy is a mono-culture of large corporations and their partner in rentier skimming, the state. Our economy is a state-cartel finance-debt system; it's only capitalist on the margins, that is, in the fringes that aren't profitable enough for corporations to control.
The core feature of this Plantation Economy is the privileges of accumulating capital are all in the hands of the state-cartel elites. The foundation of classical capitalism is the accumulation of capital, which in our era is not just cash, factories, mines, etc.--financial and industrial capital--but knowledge capital: intellectual property, knowledge of processes, creation and control of content, research and development, control of information streams (that is, maintaining information asymmetry) and so on.
Those with unlimited access to low-cost credit can buy up or control all productive capital, including the labor of knowledge-based workers.
When an economy is optimized for global corporations, the only possible result of this arrangement is a Plantation Economy. Our economy is optimized for corporations: they have access to unlimited low-cost credit, their capital can be shifted around the globe at a moment's notice (i.e. it is mobile), they have the tax advantages of incorporation and complex tax codes, they can declare bankruptcy without any limitations and wipe out their debts, they can engage in fraud, corruption and embezzlement and face no consequence other than a modest fine, they can suppress competition and their size enables dominance of the labor market.
Imagine if all these immense advantages were granted solely to worker-owned collectives and co-ops, and corporations were de-optimized, that is, they no longer had access to credit, their employees and managers could be jailed for systemic fraud and embezzlement, they paid high fees for merely existing and they were denied the ability to buy political influence as easily as an employee buys a loaf of bread.
The problem with a Plantation Economy is that it inevitably stagnates and collapses. Suppressing competition and innovation corrodes productivity, and as productivity and social mobility both fade, so does wealth creation.
The state-cartel Plantation eventually eats all its own seed corn via the vast expansion of credit. What appears to be "wealth" in the state-cartel Plantation is illusory asset bubbles fueled by state-engineered credit expansion.
Beneath this brittle veneer of great "wealth," the real economy is stagnating.These charts reflect this reality:
Productivity: stagnant:
New business growth: stagnant:
New credit-money issued to finance, monopolies and cartels: through the roof:
And the only possible output of the state-cartel Plantation Economy: runaway wealth and income inequality. There is no other possible output of our system.
We've been persuaded that the state-cartel Plantation Economy is "capitalist," but it isn't. It's a rentier skimming machine. Capitalism enables the accumulation of capital by anyone in a transparent market, and the capitalist state enforces a level playing field.
There's the get-to-work horn, people. Time to labor for the rentier skimming machine and its enforcer, the state, to pay your taxes, student loans, mortgages, and all your other neofeudal "obligations" to the state-cartel elites.
For more on the inevitable collapse of Plantation economies, please see my book Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print, $5.95 audiobook.


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Wednesday, April 19, 2017

Marx, Orwell and State-Cartel Socialism

When "socialist" states have to impose finance-capital extremes that even exceed the financialization of nominally capitalist economies, it gives the lie to their claims of "socialism."
OK, so our collective eyes start glazing over when we see Marx and Orwell in the subject line, but refill your beverage and stay with me on this. We're going to explore the premise that what's called "socialism"--yes, Scandinavian-style socialism and its variants--is really nothing more than finance-capital state-cartel elitism that has done a better job of co-opting its debt-serfs than its state-cartel "capitalist" cronies.
We have to start with the question "what is socialism"? The standard definition is: a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.
In practice, the community as a whole is the state. Either the state owns a controlling interest in the enterprise, or it controls the surplus (profits), labor rules, etc. via taxation and regulation.
The problem with equating the community with the state is the community is a completely different order from the centralized state, which is operated and controlled by a self-serving clerisy class that institutionalizes benefiting the few at the expense of the many.
The more accurate definition of socialism is: the means of production are owned and controlled by those who produce the goods and services.
Marx wrote a great many things in his career, and those who view his writings as scripture will argue endlessly over various interpretations and passages, much like people argue over the Bible.
In my view, Marx was a political-economy philosopher, not a demi-god, and so he retained the right to be completely wrong about some things, to contradict himself, to have missed important second-order effects, to have gotten some things half-right, etc., and most importantly, not to have been clairvoyant about the trajectory of history and capitalism, which he correctly identified as disruptively dynamic, i.e. everything solid melts into air.
One of the things Marx got right was the alienation of the producer/ worker from the output of his/her labor. The alienation is not just a loss of ownership; it's also a loss of agency and a psychological alienation from the entire mode of production.
The workers' alienation from the output of their labor doesn't vanish just because the state owns the means of production; rather, the "capitalist" elite is replaced by a political elite and a state-clerisy managerial class.
"Socialism" is simply another flavor of state-cartel capitalism; Orwell would be proud of all the simulacrum self-serving "socialists" who have managed to enrich themselves at the expense of those actually producing goods and services.
Calling state-cartel finance-capitalism "socialism" doesn't make it socialist.Orwellian double-speak doesn't change the neofeudal nature of debt-based state-cartel finance-capitalism.
Let's boil it down to its essence: if the producers don't directly own/control the output of their labor, it's capitalism, not socialism. State ownership/ control is nothing but the state-cartel coin turned over.
The only truly socialist system would be comprised of worker-owned collectives and co-ops, and privately owned and operated small enterprises.
In a truly socialist system, global corporations would pay such high entry fees and taxes that they could not compete on price against local worker-owned collectives/ co-ops.
In a truly socialist system, state functionaries would be banned from accepting bribes, campaign contributions, seats on philantro-capitalist foundations, corporations, etc., and barred from taking jobs in corporations after leaving state employment.
In state-cartel economies, "socialist" or otherwise, the system optimizes corporate profits, influence and agency. In a truly socialist system, worker-owned collectives/ co-ops and small business are optimized and corporations are de-optimized.
The only way state-cartel "socialist" economies can prop up their vast spending is by inflating even vaster debt and housing bubbles via financialization-- the exact same mechanism used in so-called "capitalist" economies to benefit the few at the expense of the many.
So-called "socialist" nations from China to Scandinavia are inflating monumental bubbles of debt to keep their delusions of sustainability aloft. I have covered China's unprecedented expansion of debt many times; Acting Man does an admirable job of covering Scandinavian Bubbles in Overdrive.
Worker-owned and controlled enterprises don't need to inflate-monopoly-capital financialization bubbles to stay afloat. Only state-cartel elite-run systems need to exploit financialization to keep from imploding.
Danish household debt to GDP is among the highest in the world: what's "socialist" about debt bubbles?
"Socialist" countries like Denmark are practicing extreme financial repression: what is "socialist" about negative interest rates?
Why does "socialist" Sweden need to inflate one of the world's most precarious housing bubbles? If "socialism" requires extremes of financialization to stay afloat-- sorry folks, it isn't socialism.
Here's Norway's M2 money supply. What's remotely "socialist" about this staggering increase in elite-controlled money supply?
Last but not least, here's SOE (state-owned enterprises) "socialist" China's debt to GDP ratio.
As Marx anticipated, finance-capital would come to dominate industrial capital and the state. What we see in these charts is finance-capital running to extremes to keep the state-cartel version of capitalism from imploding.
When "socialist" states have to impose finance-capital extremes that even exceed the financialization of nominally capitalist economies, it gives the lie to their claims of "socialism." The simulacrum "socialist" economies will implode with even greater force than the nominally capitalist economies, as a result of the same dynamic: state-cartel financialization is intrinsically unstable and unsustainable.


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Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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Tuesday, April 18, 2017

Our Intellectual Bankruptcy: The "Religion" of Economics, UBI and Medicare For All

Clinging to magical-thinking fixes that change nothing on the fundamental level hastens collapse.
Here we stand on the precipice, and all we have in our kit is a collection of delusional magical thinking that we label "solutions." We are not just morally and financially bankrupt, we're intellectually bankrupt as well.
Here are three examples of magical thinking that pass for intellectually sound ideas:
1. Mainstream neo-classical/ Keynesian economics. As economist Manfred Max-Neef notes in this interview, neo-classical/ Keynesian economics is no longer a discipline or a science--it is a religion.
It demands a peculiar faith in nonsense: for example, the environment--Nature-- is merely a subset of the economy. When we've stripped the seas of wild fish (and totally destroyed the ecology of the oceans), no problem--we'll substitute farmed fish, which are in economic terms, entirely equal to wild fish.
In other words, the natural world cannot be valued in our current mock-science religion of economics.
Other absurdities abound. Stripping the seas of wild fish adds to GDP, so it's all good, right? Dismantling newly constructed buildings and building a replacement structure also adds to GDP, so it's an excellent source of "growth."
As Max-Neef points out, conventional economists have absolutely no understanding of poverty. If you need a sobering account of just how this abject willful ignorance works in the real world, I recommend reading The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good.
Gail Tverberg (among others) has shown how the existing economic model no longer makes sense of the actual economy we inhabit: The Economy Is Like a Circus.
As for rising wealth/income inequality--there is a cure for that, but it's not in mainstream econ textbooks: The Only Thing, Historically, That's Curbed Inequality: Catastrophe Plagues, revolutions, massive wars, collapsed states—these are what reliably reduce economic disparities.(via Arshad A.)
2. Universal Basic Income. As noted in yesterday's essay, wages are no longer an adequate means of distributing the dwindling surplus of advanced economies. Wages as a share of GDP have been declining for decades, and only click up temporarily during massive speculative bubbles. Once these bubbles pop, which they inevitably do due to their instability and unsustainability, wage earners' share of GDP plummets to a new low.
The mainstream is enthusing about the "solution": Universal Basic Income (UBI). The solution to low pay and scarcity of middle-class paid work is to give everyone a basic income for doing nothing.
Delusional academics anticipate a flowering of creative talent akin to a new Renaissance as people are freed from work by robots and automation. But if we look at people already receiving the equivalent of "free money" UBI--disability-- studies find recipients are simply watching more TV and YouTube videos and pursuing opioids, not writing poetry and composing concertos.
They are not volunteering in their community or engaging their communities in any positive fashion. What actually happens with UBI is recipients become isolated and miserable because UBI strips their lives of meaning, purpose and the need to contribute to a community.
The real purpose of UBI is to chain every household to the state, and drain all social relations between the isolated "consumer" and the state.
As tragic as the delusion of UBI is to individuals, it is unworkable financially because profits will fall as automation becomes commoditized, and the surplus available to distribute to every household will diminish.
Much of what is passed off as "corporate profits" is accounting fraud and the monetization of what was once free. For example, all that customer labor: now that we pump our own gasoline, check and pack our own purchases, do our own banking--who's skimming the output of our labor? Yup, the corporations.
Commoditization of software and tools + the Internet = loss of monopoly. This is a problem, for the core function of the state-cartel version of capitalism we inhabit is the state enforces a cartel-monopoly structure to guarantee steady surpluses it can tax for its own expansion.
As automation is commoditized, profits plummet as competition can no longer be controlled by cartels or even the state--just as Marx laid out.
Combine declining productivity and declining surplus (profits) (both for deeply structural reasons) and there cannot be enough money to fund UBI. Weirdly, proponents of UBI never even perform a back of the envelope calculation of cost and the source of all this free money (tax revenues and/or borrowing from future generations). Perhaps they intuit that such an exercise would reveal the bankruptcy of their magical thinking.
As we shall see below, the system can't even support the entitlements it has already promised to hundreds of millions of people, never mind an additional universal entitlement.
(Note to UBI enthusiasts: there are limits on what robots and automation can and will do: they will only perform work that is highly profitable. Since most human work is not profitable (or even paid), the idea that robots and automation will free everyone from work is delusional fantasy. I explain all this in greater detail in A Radically Beneficial World.)
3. Medicare for all. I understand the desire for a single-payer healthcare system, and have published various proposals over the years for such a system.
The latest magical-thinking "solution" attracting widespread support (again, without any basis in actual numbers) is Medicare for all. The idea is: take a system (Medicare-Medicaid) that's already bankrupting the government and the nation and expand it from 70 million people to 320 million people.
Uh, right.
Shall we consult reality before embracing delusional "solutions"? Here's a chart of the rise of administrative costs in healthcare, public and private. Proponents of Medicare for All claim admin costs are lower in Medicare, but this conveniently overlooks the estimates that 40% of Medicare costs are paper-shuffling, needless or harmful tests, procedures, etc. and outright fraud.
We know a few things as fact. One is that the populations qualifying for Medicare and Medicaid (the elderly and low-income households) are expanding at a high and very predictable rate.
The other thing we know is that the Medicare-Medicaid costs are rising at a rate far above the growth rate of the economy that supports these programs (GDP), far above the growth rate of tax revenues and far above the growth rate of wages, which matters because payroll taxes fund Medicare.
It doesn't take much to extend these lines and conclude Medicare-Medicaid alone will bankrupt the federal government and the nation. The problem is these programs are bloated by fraud, defensive medicine, predatory pricing for medications, and every other costly ill of our healthcare system.
Like every other centrally funded/regulated sector, Medicare-Medicaid is optimized for maximizing private-sector profits and increasing regulatory costs.This is one manifestation of the diminishing returns on the entire centralized-control model:
We'd all like "solutions" that don't change anything, but when the system itself is the source of our problems, changing nothing guarantees collapse. As noted in the article linked above, various inequalities and asymmetries get resolved by collapse.
Clinging to magical-thinking fixes that change nothing on the fundamental level hastens collapse. In that sense, magical-thinking fixes are "solutions," but not the sort their proponents imagined.


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Monday, April 17, 2017

The Left's Descent to Fascism

The Left is morally and fiscally bankrupt, devoid of coherent solutions, and corrupted by its embrace of the Corporatocracy.
History often surprises us with unexpected ironies. For the past century, the slide to fascism could be found on the Right (conservative, populist, nationalist political parties).
But now it's the Left that's descending into fascism, and few seem to even notice this remarkable development. By Left I mean socialist-leaning, progressive, internationalist/globalist political parties.
What is fascism? There is no one tidy definition, but it has three essential elements:
1) State and corporate elites govern society and the economy as one unified class.
2) This status quo (i.e. The Establishment) seeks to impose a conformity of values and opinion that support the dominant narratives of the status quo via the mass (corporate) media and the state-controlled educational system.
3) Dissent from any quarter is suppressed via mass-media ridicule, the judicial crushing and silencing of whistleblowers, and all the other powers of the central state: rendition, extra-legal imprisonment, political gulags (in our era, disguised as drug-war gulags), character assassination, murder by drone, impoverishing dissenters via firings and blacklists, and on and on.
The Left is now the political wing of the corporatocracy. As Phillipe Poutou, a Ford factory mechanic from Bordeaux who is the sole working-class candidate in France's presidential election, so deliciously pointed out, the Left and Right status quo candidates are indistinguishable in terms of their self-serving corruption and elitism:Mechanic-Candidate Bursts French Political Elite's Bubble (NY Times)
Here in the U.S., the self-serving Democratic Party elites operate within the Corporatocracy structure, in which the state protects and funds private-sector cartels; the two intertwined and self-reinforcing elites manifest and enforce state policies.
This state-corporate elite domination is fascism. Some may claim the Left was co-opted by the Corporatocracy structure, others will blame capitalism (never mind the dominant form of capitalism is state-cartel, and it cannot exist without the central state enforcing the privileges of monopoly).
But these are simply excuses for the abject surrender of the Left to self-enrichment and power. Since the Left has always claimed the high moral ground--and continues to do so--see my essay Virtue-Signaling the Decline of the Empire(February 28, 2017)--  the Left must mask its own corruption and role in the Corporatocracy structure.
The Left accomplishes this by imposing a virtue-signaling conformity on corporate media, social media, and the state institutions under its control-- higher education, government agencies, etc.
Dissent is by definition fake news or hate speech--Orwell would be so proud of the Left's deft doublespeak.
The suppression of skeptical inquiry and alternative narratives is fascism. There is no way to sugar-coat this, so let's not even try, shall we?
The principle of substitution reveals the underlying truth. If a Rightist state imposed a virtue-signaling conformity on corporate media, social media, and the state institutions under its control, the Left would be very quick indeed to identify this as fascist.
It's still fascist if the Left does the same thing.
While the Left attempts to deflect a wider understanding of its descent into fascism with obsessive accusations of fake news and incessant demands for virtue-signaling conformity, the developed-world economies are circling the drain. The Left's obsession with meaningless speech acts is a direct result of its lack of will and intellectual firepower to tackle the erosion of working-class/middle-class income, wealth and political power.
This is the harsh reality: wages are no longer an adequate means of distributing the dwindling surpluses of advanced economies:
The Left's single "solution" to this profound structural trend is for central states to "fight austerity" by borrowing and blowing trillions of dollars, yen, yuan, euros, etc.--with no end in sight. But as even the most economic illiterate Leftist understands somewhere in their muddled soul, borrowing trillions from future generations is morally and fiscally bankrupt, and the very opposite of a "progressive" policy.
Here's the U.S. central state debt: if the Left claims this trajectory is sustainable, what is this claim based on? It's based on magical thinking.
The magical thinking of the Left is that decades of slowing growth will be reversed and the clock of history magically reset to 1946 if the central state borrows even more trillions from future generations. But there is abundant evidence (see the wages chart above) that borrowing and squandering immense sums has not boosted growth rates in a sustainable fashion--rather, the staggering debt loads are squeezing current spending and shackling future policy-makers with an ever-grimmer slate of self-reinforcing bad choices.
The Left is morally and fiscally bankrupt, devoid of coherent solutions, and corrupted by its embrace of the Corporatocracy. Its descent to fascism has too much momentum to be stopped. Isn't it obvious that the only way forward is to jettison both the Left and Right flavors of state-cartel Corporatocracy and pave a third way?


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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