The Flaws of Capitalism

The major flaw of capitalism, that it has no limit of even a brake on greed, I have pointed out before, but there are others. Here are a few.

It is claimed that capitalism provides the most efficient distribution of resources. That may or may not be true, but capitalism sure doesn’t do diddly-squat for the distribution of production wastes. There are a spare few examples in which capitalism did have an effect upon waste. A steel company was drawing some heat from the amount of waste they were producing. This waste stemmed from the “pickling acid” (actually hydrochloric acid) used to reduce corrosion of newly poured iron ingots. The acid “passivated” the iron but it also dissolved a bit of the iron and so “wore out” its ability to perform that task. They were dumping that liquid waste, some legally, other not so much and were drawing heat from the federal government (too much regulation, my ass). A consultant told them that their “spent” pickling acid contained a great deal of iron(III) chloride which could be sold on the market and much of the unused acid could be recycled. The sale of the iron(III) chloride and reuse of the acid reclaimed paid for the processing and, in fact, made a profit. Ta da! A capitalism success story. Unfortunately such stories are rare. Dumping of waste is the lazy and cost effective way to deal with it and has been for a very long time.

A capitalism horror story involved a battery recycling plant near Oakland, CA. This plant took car batteries, broke them down, and recycled the lead in them to make new car batteries. Sounds cool, no? Well, part of the process involved emptying the old batters of the fluid in them which was heavily acidic (sulphuric acid, stronger even than hydrochloric acid) and had a great deal of dissolved lead in it as well. So, how did they dispose of this nasty liquid? They poured out on a bare patch of ground out back behind their buildings . . . for decades. Evidence of this waste process was discovered many tens of miles (hundreds even) away as the ground water system spread it out to cover a large part of central California. We do not possess the resources or the techniques to clean this up. The company? Oh, they declared bankruptcy to avoid any liability on the part of those who did the deed.

Basically, capitalism abuses “the commons,” that is those things we hold in common: the air, our waterways, the ground and all of the systems operating therein. Capitalists pollute it, we clean it up. (We are still spending tax money to clean up Superfund sites from decades ago.)

Capitalism does a lousy job of distributing wages. As a prime example, CEOs in the 1950’s made 20-30 times what their average worker made. Today, more than a few CEO’s make 300-400X what their average worker makes. Wow, did CEOs increase productivity, knowledge, customer satisfaction, anything that much? Nope. If one could track CEO productivity (and that would be hard to do), I am sure that CEO salaries have rocketed ahead of any productivity measurement you could some up with. How is this so? It is so because the CEOs packed their own boards of trustees with friendly faces and when the issue of “CEO salary” came up they vote for “raise” every damned time. Some of these CEOs return the favor by serving on their friend’s boards so they could get unwarranted raises, too. Unwarranted salaries paid out to CEOs doesn’t end up in shareholder’s pockets, so how could this happen? Capitalism basically doesn’t care.

In this country we have come to view capitalism as a thing in itself, rather than a tool we wield. We think “it” does this and “it” does that when it is we who do everything. It is very, very (very) clear that unregulated capitalism is disastrous. So, why does one of our two major political parties campaign all of the time on a “less regulation” is better and “no regulation” is best platform? Shouldn’t we be searching for the best regulation and if not that, better regulation? Why would capitalists campaign against the thing that makes capitalism viable? Oh, it’s the greed thing again. Even rabid anti-socialist politicians will vote for corporate socialism almost every time and the reason they do? They are being paid generously, by capitalists, to do so. Apparently politics doesn’t limit greed either.

Let Them Do It How We Had To

In Diane Ravitch’s blog she reports that “Over the opposition of Joy Hofmeister, the state superintendent, the Oklahoma State Board of Education voted 4-3 to allow charter schools to have a share in property taxes and motor vehicle taxes that previously were reserved for public schools.

“State schools Superintendent Joy Hofmeister said the settlement could violate state law and have ‘seismic’ implications by redistributing school funding.

“Today’s board action circumvents the will of the people of Oklahoma and the state legislature by unilaterally determining how public education is to be funded,” Hofmeister said in a statement Thursday evening. ‘I fear this action knowingly violated Oklahoma statute and the Oklahoma Constitution.’

“The original promise of charter schools when they started thirty years ago was that they would cost less than public schools because of their lack of bureaucracy. That pledge has long been forgotten as charters fight to have equal funding–or in some states, like Texas–more funding than public schools.

“This decision will mean less money for Oklahoma’s underfunded public schools.”

The Charter School Business in this country is so far off base that it is undermining public education as a whole. There is a solution, however.

Whenever school districts wanted more funding in the past, they floated a “bond issue” to pay for it and then the people decided whether or not they wanted to pay for it. Most often, they did not.

In Oklahoma, as elsewhere, public schools are massively underfunded (by their own standards, not mine) and clawing back a large segment of those funds is defensible only if what they are being used for replaces what those funds used to pay for. And, basically, they should do that task better, otherwise why make the change?

Charter schools have proven to be no better than our current public schools and in more than a few cases are much, much worse, even to the point of being total frauds.

So, here is how we fix this mess. In the past public schools made a pitch to the people or the legislators representing them to fund what they do. If a charter operator (more and more these are large organizations, far from Mom and Pop efforts) wants to open a charter school. let them float a special bond issue and see if the public is willing to pay for it. Currently legislators are making this decision and charter operators are allowed to make “campaign donations,” aka bribes, to those legislators (often using funding supplied by the state) whereas the public schools are not. And is it not obvious that those who come bearing checks to our legislators get better treatment than those who do not?

If we have a democracy, let the people decide. A special tax issue for every charter school or group of charter schools can be voted up or down and then you will know whether “the people” actually do or don’t want those schools to be created.

Made You Look—A Documentary

Last night I watched an interesting documentary about a massive art fraud in New York City. In the late 1990s and much of 2000s $80 million of fake paintings were sold as if legitimate. The pieces had sketchy provenance, so they were often “authenticated” by experts.

This is a fascinating documentary, well done, but a number of points were never mentioned or were glossed over.

The Authenticating “Experts” Were Full of Shit
Various experts were asked to “authenticate” these paintings and often did so wholeheartedly, even though they turned out to be fakes. This process has been shown to be flawed over and over but keeps being used. If a new painting is discovered, one not seen in catalogues of the artist’s works, an expert should go no further than to comment something along the lines of “It appears to be in this artist’s style and the painting appears to be of an appropriate age.” That’s it. But these “experts” were stumbling all over themselves to state that the paintings were authentic, something that couldn’t be told without extensive testing. When the extensive testing was done, some of the pigments hadn’t been invented until after the artist died, which is kind of a clue, don’t you think?

The experts basically should limit there comments on a previously unknown painting to “is worth further testing.”

Collectors were Glowing About the Fakes
When the fakes were purchased, the new owners loved those paintings, gushed about how beautiful they were, etc. so they were good art, no? But when they were proved to be fakes the collectors were outraged. Clearly they were not buying art for the sake of the art. They, instead, wanted to brag about how much money it cost, or that it was painted by a famous painter, or looked at it as an investment, but these people never say things like: ”It was such a good bargain, I could see myself selling it for a nice profit is just a few years.” or “I wanted to snatch this up before a bidding war started. It will be much more valuable in time.” So, these hypocrites gush over the quality of the painting but are outraged when they find out that it was faked. Apparently they can distinguish between fake beauty and real beauty . . . not.

This Has Been Going On for Years
This was mentioned a couple of times. It was not a surprise to find out that the forger/painter was a Chinese gentleman. Whether he was a willing participant in the fraud was not determined because there is a tradition in China of copying other works (and not just China). These copies are often sold quite cheaply to people who could not come close to affording the real thing. Much like we have posters of famous art works to hang on our plebian walls. It was suspicious, of course, the lengths gone to to use period and artist correct materials, which would not be necessary for “decorative art pieces.”

Art students are often seen in museums copying masterworks as exercises. And when the originals are being sold for millions, the temptation is there. In this case the works copied were those of American Expressionists (not my cup of tea) which are random enough to be more easily copied, also materials of the age these were created (1950s and 1960s) are still available.

Fueling all of this were prices of hundreds of thousands paid by the art dealer for paintings that sold for much more, even millions. This was a point critics say should have cause alarms to go off, but since greed is the driving force of this age, no one noticed anything sketchy for over a decade.

Making a Living as a Writer

Recently I extolled the writing wisdom provided by both C.S. Friedman and Mercedes Lackey on the Q&A website Quora. As an example of this, here is Ms. Lackey’s take on “making a living as a writer” (the question was actually different but it equates to this):

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First: Never, never, never, never, never pay anyone anything to publish your book. People who ask you for money to publish your book are frauds and scammers.

Second: You are more likely to be struck by lightning than to be able to make a living at writing, especially from the very beginning.

When you start, you will suck. No one has ever been a good writer without writing about a million words of crap first. You have to learn how to write well by writing a lot and studying writing. This will take years.

Of all of the members of the Science Fiction and Fantasy Writers of America, only about 10% make a living from writing. Only about half of the ones making a living from writing are making a living from writing fiction exclusively.

“You are more likely to be struck by lightning than to be able to make a living at writing.”

Get a day job that doesn’t suck; there is nothing harder to do than to sit down to write after a day so exhausting that your brain has turned off. This is the job you are going to be having for a while, so make sure it’s something that doesn’t make you want to open a vein rather than go to work.

If you are really serious about wanting to make a living from writing, decide, right now, what the minimum amount you can live on is, because that is probably what you’ll be doing for years and years. Learn how to make and stick to a strict budget.

If you are really serious about wanting to make a living from writing, you will be sacrificing your social life. You will not be able to play games, hang with friends, go out for drinks, go to the movies, watch the Big Game, or watch television, much less binge. You will be writing every hour before or after work (some people write better when they first get up, some write better after work) and every weekend, or whatever free days you have. There is an entire 10 year swath of popular culture I know nothing about, because that is what I was doing.

You will be ready to quit that day-job and try full-time writing when you have five published books or screenplays that someone else paid you for, each one has paid better than the last, you have contracts in hand for three more books or screenplays, and you have a year and a half of expenses in the bank. Why the bank account? Because shit goes wrong, and without that cushion you could wind up unable to keep the lights on.

You might decide that you can’t do all of that. That’s fine. Remember what I just said, only ten percent of most writers write full time for a living. There’s no shame in being part of the ninety percent.

But don’t take my word for it. Here’s Charlie Stross, saying basically the same thing.

Common Misconceptions About Publishing

And someone else, talking about how she can write only because she has other people supporting her:

A dirty secret: you can only be a writer if you can afford it

The Wealthy Want What They Want and They Want It Now!

Recently the wealthy in California spent huge amounts of money getting a proposition passed; namely Proposition 22, which exempts “gig workers” from the normal protections of labor laws. See “Prop 22: why Uber’s victory in California could harm gig workers nationwide” <subtitle> Ballot measure exempting ride-sharing companies from treating drivers as employees could serve as model for future laws” in The Guardian.”

While that article addresses the fear that such efforts will spread across the nation (and they will because it is what the wealthy want), the main point is what is never, ever is mentioned in discussing Uber. And that is that: Uber is losing mountains of cash and has no conceivable route to profitability.

Uber is losing mountains of cash and has no conceivable route to profitability.

Uber built its business by subsidizing driver’s wages (and then lying freely on its required financial reports). The amounts collected by drivers are not enough to pay the driver and Uber’s overhead, therefore billions of dollars have been spent subsidizing Uber’s drivers “salaries.”

If all taxi companies were to go out of business tomorrow, Uber could only be profitable by cutting driver’s salaries to the point that most drivers will quit. Yes, it is that simple. Drivers aren’t stupid. They have figured out that after they pay for gas, maintenance (tires, insurance, wear and tear, etc.) they are barely making minimum wage. And when municipalities lose the income from taxi-cab licenses, don’t you think they will come up with an annual sticker for gig worker drivers to display on their cars. (I live in Chicago and we have to buy a sticker annually to be allowed to park in the city. If you never stop and park, you can do without the sticker . . . or in other words, you have to have a sticker. At $75 a year or so.)

Can you see now why rich people don’t want ordinary labor laws to apply to Uber drivers? So much that they were to spend big bucks and lie through their teeth to get a proposition passed to that extent in California?

Well, if this company has no way to make a profit, why do they care? Well, if they jack up the fares so much to be able to pay for everything, the taxi companies become attractive once again, so they can’t do that. Uber states that it is betting on driverless cars being made available in just a few years, which will eliminate the expense of a driver. But it would also necessitate the purchase of fleets of driverless cars, monitoring the cars, and maintaining the cars. (Who cleans the cars when a drunken rider barfs in the backseat foot well?)

As I said, there is no path to profitability for Uber . . . none.

So, why do the rich care? Because they can make huge sums dicking around on the stock market, that’s why. Studies show that the so-called “secondary market” which includes the vast majority of all stock market transactions right now, the buying and selling of stocks already sold, is a vast drain on the economy. That is it sucks money out of the economy, and it doesn’t produce anything in return.

I know, you were taught in school, how the stock market helps companies get started or expand through the initial sale of stocks. This is till true, but is a rare occurrence when compared with the numbers of shares bought and sold that are not new. The “support” for those newbie companies is long gone, the secondary market is just between buyers and sellers, and is considered a bit of a game. (Experts in game theory mathematics are employed.) The winners take money out of the market, and the losers leave theirs behind. Nothing tangible or useful is created and money is siphoned into the pockets of the already rich, who own the vast majority of the shares.

Our problem in the US is greed. The greedy have accumulated a great deal of wealth and they are using it to remake the economy to serve their desires (not needs, desires). If there is any way to disadvantage labor unions, they will do it. If there is any way to disempower working people, they will do it. They love a high unemployment economy because workers are just glad to have a job, any job, no matter how shitty and they won’t cause a fuss.

You see we abandoned slavery and the wealthy really, really miss it.

A Pandemic Rude Awakening?

The GOP and to some extent the Democrats have been suppressing wages of working people for decades now. Worshiping at the altar of profits, the route to greater and greater profits has been to lower taxes on businesses (in essence transferring them onto individuals) and reducing the cost of production, which is dominated by wages paid to workers. So, wage suppression has become a fine art in corporate circles.

A consequence of this approach is that people, aka “consumers,” have less and less disposable income to buy the output of American businesses. American companies have taken the strategy to the max. Many jobs that could be kept here have been exported to “low wage” countries, which now turn out to be not so low wage because the wages in those countries have been rising (It’s the demand, idiot!) and transportation costs, obviously, went up a great deal, management, too.

The Pandemic Recession, looking to morphing into the Pandemic Depression, is showing the short-sidedness of the short-term pursuit of profits, profits, profits. Here is an excerpt from a Naked Capitalism post on small businesses:

“It’s depressing, but not exactly surprising, to see a major New York Times story about one-third of the small businesses in the city have died or expected to shutter. Needless to say, it’s not just restaurants.” How’s Your Economy, Small Businesses Death Watch Edition

Small businesses in NY City, it is reported, constitute 98% of the employers and account for 3 million jobs in the city. The businesses close, the employees are without jobs, and while jobless, they will be having trouble paying their bills. This will crater other small businesses and away we go . . . spiraling down the economic toilet.

So, I am told (by Dwight Eisenhower, no less) that one shouldn’t criticize unless one has a better alternative. (It is far too easy to tear something down and much harder to build something up. Take that you “creative destruction” purveyors.) So, what is the alternative? Easy peasy. Be patriotic. Keep jobs here, pay higher wages, make less profits.

What was that? I just saw a Republican running past me with his hair on fire, sputtering “Higher wages . . . less profits . . . Arggghhh!” Please do realize that many believe that in our “pay as you go culture,” a business must make a profit to continue to exist. But even this dictum is soft. I had a fellow professor leave teaching to set up his own business. His first major mistake was he didn’t pay himself enough. At the end of his first year, he had profits, which he paid business taxes on, which he then paid to himself, which he then paid income taxes on and thus got double taxed on what he had made. He learned to pay himself everything that might be considered to be a business profit, and paid income taxes on those sums but no business taxes. His business happily perked along make no profits to speak of . . . but I digress.

The titans of commerce have taken the “We have to make a profit,” an acceptable dictum, to “we have to maximize our profits over every other consideration we can conceive of.” This is dubious at best. There is no limit to how much profit can be extracted from a business (as a percentage, not in absolute terms) consequently using “we have to maximize profits” as a motivation is an incentive without any boundaries whatsoever. This is a fatal flaw of capitalism: there is no limitation on greed.

What if corporations considered one of their “products” to be “reliably good jobs for people in our community,” or “creating healthy lives for our employees,” or even “creating happiness for our employees.” Don’t laugh, all of these have been stated by corporations as goals in the past (or their equivalents).

No one begrudges companies or corporations reasonable profits. Everyone should begrudge corporations who make obscene profits by grinding their employees under their heels to make them.

The Class War is Over

The Class War is over. What we have left are crumbs tossed our way in a system ruled by savage class-rule capitalism.

Let me ask you this—here is a passage from the gospel we call “Luke” (in Chapter 4):”

And he came to Nazareth, where he had been brought up: and he entered, as his custom was, into the synagogue on the sabbath day, and stood up to read. And there was delivered unto him the book of the prophet Isaiah. And he opened the book, and found the place where it was written, The Spirit of the Lord is upon me, Because he anointed me to preach good tidings to the poor: He hath sent me to proclaim release to the captives, And recovering of sight to the blind, To set at liberty them that are bruised, to proclaim the acceptable Year of the Lord. And he closed the book, and gave it back to the attendant, and sat down: and the eyes of all in the synagogue were fastened on him. And he began to say unto them, Today hath this scripture been fulfilled in your ears.

Do, you know what the Year of the Lord refers to? Isn’t every year a Year of the Lord? (As a child I saw many, many documents dated as such and such a date “in the year of our Lord XXXX.”)

Do, you know what this was?

It was what is often referred to now as a Jubilee year and Jesus just proclaimed this to be one (along with all of the other succor) promised but Jubilee years were usually only proclaimed by kings, often at the beginning of their reign. In the story, this proclamation supports the argument that Jesus thought of himself as a king, which the Romans preferred to exterminate, rather than work with.

In a Jubilee year, all public debts were canceled. This practice came about, not through any largess by the elites but for a practical reason. If private debt was allowed to continue without limit, compound interest, even ordinary interest would result in many people defaulting on their debts. If that debt were held by a private person, the person defaulting was obligated to pay of the debt with their land, and then their labor. well, and the labor of their wives in the bedroom of the debt holder, you know what I mean. But people in debt bondage didn’t pay taxes and they were available to be drafted for public works projects. The elites recognized that the primary debt holder almost everywhere in the region was the central government and the debt was because of unpaid taxes. A crop failure meant someone couldn’t simultaneously feed their family and pay their taxes, so. . . .

So, rulers would start their rule with a debt jubilee, thus making themselves popular and making their economy viable. It was not unusual to need one of these every so often. The Bible even speaks to debt forgiveness.

Now the Pharisees tended to be from the more prosperous segments of Hebrew society, so if Jesus had his way and a debt jubilee were proclaimed, how do you think they would respond? Hmm?

My main point is what Albert Einstein referred to when he was asked what the most powerful force in the universe was and he answered “compound interest.” Our system, however is no longer an autocracy, but an oligarchy. the debt holders are running the country. Do you think for one minute they would sit still for any kind of debt jubilee, even if just for college education debts? Do, you know understand why Bernie Sanders presidential campaign was deep-sixed by the powers that be in favor of a barely comprehendable Joe Biden? (If they would take it from Jesus, Bernie had no chance.)

These idiot oligarchs are acting out the parable of the Goose that Laid the Golden Egg and are smiling through the entire thing, reflecting on their own cleverness.

 

If You Needed a Reason Why a For Profit Healthcare System Doesn’t Cut the Mustard, Here’s One

From The Guardian:

The frontline in the battle against coronavirus has shifted a couple of hundred yards down the main road through the Kansas city of Wellington.

Two weeks ago, as the virus crept closer and people in other parts of the state started dying, the owners of the city’s only hospital thought it a good time to close down with just a few hours’ notice on the grounds the facility was losing money.

“We lost our hospital abruptly and without warning,” said Dr Lacie Gregory, a family practitioner in Wellington. “Even as the healthcare providers here in town, we did not hear that it was closing until it was a done deal. We received a text message from the director of nursing saying as of now there’s no hospital. So really, really unfortunate timing.”

That has left Gregory and a small group of other doctors and nurse practitioners at the city’s Family Care Center at the forefront of preparing for the coming pandemic with little guidance and not much equipment.

The physicians had assumed the 63-bed Sumner community hospital’s emergency department would deal with people contracting coronavirus while they went on treating more routine conditions of cuts, broken bones and high blood pressure, and that the two would remain safely at a distance. But now the Family Care Center is the first line of defence for the city of 8,000 people.

 

We Don’t Need Regulators, Corporations Would Never Do Anything to Harm Their Reputations

The Big Lie is a lie so obviously untrue that people would not accept it unless it became “common knowledge” which it does if the BL is repeated over and over and over.

We have been told by the “De-Regulators” that all of these regulations and regulators are unnecessary, that “The Market™” will take care of all of the bad actors. And, certainly major corporations would never, ever do anything to harm their reputations.

How many times do we need to see this is not only not true, but very, very false?

Read this!

Capitalism gone wrong: how big pharma created America’s opioid carnage

The biggest drug epidemic in the U.S. created not by human weaknesses but by the profit motive. (Read this sentence again!)

The Absurdity of Maximizing Shareholder Value as a Business Goal

I have written about this before, but this post over at Naked Capitalism drives the nails home into the coffin of this very, very bad idea. (Being a Zombie idea will make this turkey very hard to kill.)

Rebel Economist Breaks Through to Washington on How Shareholder Value Theory Rewards the Undeserving