Tag Archives: Capitalism

Another Debate on Profit

The debating chamber in the Senedd
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I was quite disappointed on KatPoop’s performance in my previous debate as well as the format of the site, so I’ve decided to open a new one on a different site and leave it as an open challenge. Fortunately someone took it and we’re now on the third round of it.

I believe it’s much more interesting and well argued, giving ample opportunity for both sides to make their case. I am a bit restrained by the 8000 chars limit as my opponent has put forth 4 arguments that require extensive refutation:

I’ve countered 3 out of 4 in this site already but unfortunately I am now called to do the same thing for all of them together within 8k characters. It would have been far more useful to debate each of these arguments on it own rather than all three together but alas, this is what we have now. Still, the debate format really pushes me to articulate my defence in the most concise way and I think I’m doing pretty well for my first attempt.

So head over and take a look. You won’t be able to vote without “confirming you identity” via SMS which is a silly way to prevent multiple votes, since it basically excludes most people in the world. You can still leave a comment though and argue with the pro-capitalists residents over there.

I generally like the Debate.org site. It’s giving you a very nice layout to hold a debate, the voting system is not a simple “I agree/I don’t agree) type but asks you to actually rate people both on their argument as well as their conduct, sources and argumentation. So even though you may agree with someone when the debate starts and not change your opinion, you may still vote the other side on argumentation strength and conduct. It’s an interesting twist, pushing both sides to be civil and stick to the point.

Unfortunately, the site as US middle-class oriented has way too many pro-capitalists around. I even checked the “Anarchist” tag and noticed that 90% percent of those claiming to be Anarchists are in truth pro-capitalist “Libertarians”.

Nevertheless, I think the debate style is an important part in argumentation so if I get again into an impasse with someone, I’ll probably challenge them to a debate to allow a third party consensus to decide.

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Debating the theory of profit

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My recent spat with a proponent of Austrian Economics had started from his attempts to explain profit by ignoring the productive process. Eventually this progressed to the point where he was arguing from the superiority of capitalist intellect and further from there to plain insults. The dicussion was not going nowhere fast.

So I decided to do something new (for me at least). I challenged him to a formal debate. At least this way, by trying to convince an audience instead of each other, we can avoid personal insults and stick to arguing the arguments. The audience instead can be the one that judges.

This is actually one of the main problems of arguing on deep reddit comments or on any other semi-obscure location. The only ones who judge the arguments is the opposing side and as both sides are obviously quite strong in their opinion (or they would not be debating). As such, they end up seeing the opponent as being stupid for not seeing “the truth”. A debate might be the solution.

Unfortunately, reddit does not provide the best functionality for debates, as it may have voting buttons for each comment, but they are built mostly for hiding trolls and spammers, not for agreeing/disagreeing, not only that, but it’s difficult to see debates and separate the debaters from the commentators. It’s also difficult for people to follow the debate.

So I discovered an another site that has been built explicitly for debates and invited my opponent to argue his point there. The Debate on the Theory of Profit begins. Go over, check the arguments and leave some critical comments.

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You know why Capitalists are rich? Because they're smarter than you!

Image by Vaughan via Flickr

I didn’t think I would have to mention this, but really, Capitalists are not wealthier than the rest of us due to their superior intellect. And yet, of course there would be an apologist of Capitalism which would make this exact argument. Ah silly apologists…

It’s an quite a novel reasoning really, albeit egregiously stupid on so many levels. It’s the kind of argument that is simply irrefutable as it is based on very solid circular reasoning. Basically it goes like this: “The capitalist are in their position because they are smarter than everyone else and thus the most capable of doing the necessary intellectual labour. And they’re obviously the smarter and most capable ones for this for otherwise they wouldn’t be capitalists.”

But of course, for someone to claim anything like this, they would have to prove the intellect of the Capitalists compared to the working class with some other means than a self-proving economic result. You would actually have to do some research on the intellect of the Capitalist class and see the degree to which they exceed us unwashed masses in intelligence. Such an research would be funny to follow, just for the laughs of course.

For there are two important sticking points on this subject

  • Most capitalist do not in fact rise up the ranks through their own “intellectual superiority”. Rather, they are born or married into wealth and find it very easy to maintain.
  • While intelligence may be one factor for some capitalist’s success, there may be others as well, such as greed, crass disregard for other humans or the environment, cunning etc. All of these combined might make the best capitalist but it’s not at all clear that they should be rewarded.

But even if we were to accept that it is somehow intelligence that allows the Capitalist class to remain at the top, would this make this situation right? This is the sticking point really since a random genetic event which happened to endow some people with more intelligence than other, shouldn’t be the basis of reward in life. For me, the intelligent person needs the emotional person who needs the strong person who needs the fast person. All of human talents are interrelated as as such, one shouldn’t be given power over the others.

The argument that our apologist drone makes would be more funny if it wasn’t so insidiously insulting of course. It implies that if you’re not a Capitalist, you’re obviously too stupid for it. And if you’re not smart enough, then you deserve to be poor. This is further clarified by the following gem:

The truth is that we become more human when we become more intelligent

You read that? Not only are you not smart enough to be a capitalist, but you’re less of a human than they are!  You really can’t get a truer picture of the capitalist psyche than what our apologists says. In fact, I’d be willing to bet that among the vulgar liberals and other assorted proponents of the system, this kind of elitist mentality is quite widespread. For what better way to sleep at night to consider all those suffering below you are worthy of their predicament while your immense wealth is a result of your skills and amazing smart.

It’s disgusting really. Of course, I doubt that apologists who make such an argument realize that they’re basically claiming that they’re less human as well. Unless of course they’re part of the capitalist class already in which case it simply becomes an insult to injury.

But this kind of argument really shows the gap in perspective between these two camps. The liberal elitists will claim that it’s our fault for being too stupid and lazy, ignoring in the meantime the very considerable violence and threat of violence that sustains the system rather than any kind of natural law.They see the current system with all its suppression of human creativity, individuality and effort and use this as proof that only the rich can be creative and individual. It’s like the apologists of slavery pointing out that slaves can’t survive being free.

On the other hand The Anarchists will point out the immense capability of humans, when set free to perform the same if not better than any capitalist. We will point out examples of cooperatives, takeovers, communes and revolutions and the feats of productivity and freedom achieved within. We call on each human to demand the ability to express themselves instead of accepting their fate as mere cogs in the machine.

But of course, there’s always the positive side. Whereas liberal elitists like KatPoop10 who will tell the poor and downtrodden that they deserve their place and they shouldn’t question the validity of their position, the Anarchists will ask them to challenge everything, that all power lies within their hands to get a better life and they’re no worse or better than anyone else, only more repressed.

And as working and living conditions worsen, it’s not hard to imagine who the exploited will believe.

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The Tragedy of Boxes

The Whitlams performing at the 2007 Australia ...
Image via Wikipedia

Lets take a Rock concert where there’s a considerable amount of people who wish to have a better look at the stage. Lets also assume that people are absolutely respectful of the negative freedom of others and thus will not take physical action to restrict it in any way, unless it is physical action against someone in itself.

Now a perfectly reasonable action on the part of any of these people will be to bring a box with him in order to stand on it and thus get a better view of the stage. Of course others will be inconvenienced by the sudden worsening of their line of sight, while others will become envious of this better position instead.

Again, for both of these cases, a perfectly rational response would be to get their own box to stand on. Eventually most people will have acquired their own and thus the end result would be the same as in the original case.

Now consider that it is possible to stack these boxes on each other and increase one’s height once more. You immediately have a height race where people are trying to outstack each other in order to get a better view.

However, there are two catches:

  • The person using these boxes needs to carry them himself and they can get quite heavy eventually.
  • The higher one’s stack, the more precarious it becomes, increasing the risk that one might fall and more than likely take others with them.

So now we have a situation where through perfectly rational individual actions, we’ve reached the following situation:

First of all, the strongest will be able to carry more boxes and thus oligopolize the view. Eventually the people below and behind will be fed up and leave the concert. Once enough people do this, the general fun of the concert decreases (a concert with 20 people is not much fun I’ll tell you – unless it’s planned that way)  and new people find it impossible to join since they have to bring a large stack of boxes from the start.

Second, as people start carrying more boxes, you end up in a very delicate situation where one person slipping might trigger a chain reaction of catastrophic proportions, both because of the height of the fall but also because it’s easier to fall. Once of course you have most people on the ground screaming in pain, the concert will stop and the new one will have to wait until most have recovered from their injuries.

So we have a classic game theory situation, where individual rational actions for the short term gain have an irrational collective result. This all starts of course from the ideological position that no physical action must be taken against people who start this height race.

This example of course is not random. Specifically it is made to provide an analogy for the capitalist crises. Consider that the concert as a whole represents the economy. The people are the individual companies and the boxes represent investments in capital.

The more and faster a company invests, the bigger the short-term advantage it has until the rest invariably catch up. The rising investment in turn creates the possibility for a crisis of overproduction as eventually there is so much supply that it cannot be matches by demand (especially if wages stay low, but even if not). Once this happens the whole system grinds to a halt, totters and collapses under its own weight once the profits cannot be realized anymore.

In our analogy this is the phase where a few people finally lose their balance. Depending on the precariousness of the concert area, this might mean that a whole section collapses, or that the entire thing does. And once that happens a few people can get some extra boxes on the cheap from those who will no be using them anymore.

The first situation on the other hand is simply the tendency of the system to end up in oligopoly, from which it’s almost impossible to get out of, as new players need to start with a lot of boxes instead of slowly building up. This again exaberates the situation as it takes fewer people to fall and initiate a collapse (They’ve become now “too big to fail”).

What is this analogy meant to show? Nothing more than the structural problem of any system based entirely on rational individualistic self-interest (ie greed).

It is also meant to give an example of why crises of capitalism are systematic and not caused by external factors such as the state modifying the money or credit supply. As you can see, in the analogy these is no need for an external party (a state) in order to have a disaster, but even if we were to add one, the result would be the same.

Lets assume for the sake of this exercise that the state (or in our case, the concert organizers) controls how fast or slow people can get new boxes (eg, they help you carry them).
Would this make any difference overall? Of course not.The drive to the top would still be the same but it would proceed at a faster or slower pace. However neoclassical economists would have you believe that because it is not “natural”, some people overextend, causing them to lose their balance.

But this is not the case of the fall, although it might allow it to come sooner. You simply cannot keep building an edifice indefinitely, no matter how slowly, especially since the same tendency is the one that shrinks its base (as people would  leave disappointed in our example). In the same sense, Capitalism is impossible to be in a perpetual boom situation. Not only does it eventually have to collapse, but it will do so with a ferocity that will be analogous to the intensity and length of the previous boom period.

Of course anyone can see that there is another solution to this problem, one that avoids and endless series of builds and crashes, boom and busts. it is the simple solution of not allowing any individual person to start bringing boxes to the concert due to the long-term repercursions. Doing so would avoid an irrational collective decision.

Needless to say that this would require (the threat of) physical force against the ones who ignore the collective will in favour of their own self-interest. While this is obviously for the best, some ideologues will cry bloody murder and claim that such actions either restrict negative freedom (which they should do. Because.)  or that they will necessarily lead to authoritarianism. But of course this is an absurd proposition for there is nothing authoritarian about not wanting one or two greedy bastards to ruin it for everyone. Concerts everywhere seem to back this up.

Neither would this mean that everyone would have to suffer an inferior concert experience. Rather the solution would lie in rational collective interest, where instead of each person acting alone, all cooperate (ie pool their resources) and democratically decide on what the best thing would be, to benefit all equally.

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Why not try to change the system from within?

What is it with the people who have taken the road of compromisation to direct arrows or morality and condescention to those of us who have recognised it for the sham it is and choose to act appropriately? It is not the first time I’m reading this kind of appeal to emotion, but the difference is that this time the argument comes from a self-identified socialist who even flies and red and black flag.

So this latest argument (in Greek) basically says the following:

  1. Capitalism is bad and many of us struggle to topple it in favour of socialism.
  2. But realistically this will not happen within out lifetimes. If that is the case, why do we still struggle instead of just  living a normal life?
  3. Is it because we want to help the downtrodden nevertheless? But in that case, centrist politics are a better path since those have the possibility of making an actual change within our lifetimes.
  4. If you don’t want to follow centrist politics, it follows then that it must be because of your “egoistic idealism” which prevents compromise even though it would do more good within your lifetime.
  5. If then one does not expect his struggle to topple capitalism in his lifetime, and as a result of this knowledge does not turn to centrism, then they are a hypocritical idealist.

Unfortunately the author makes some pretty bold assumptions in here which I need to tackle.

It seems that a very main point of the author is point 2, (something which is later confirmed in the comments). But wether Capitalism will be toppled within our lifetime is irrelevant to wether one should struggle towards this purpose. The reason why I speak and take the appropriate actions against it is because it must be toppled eventually. It may not be within my lifetime but I can only hope that what I do and say will be the base on which others will step on to perhaps complete this task.

Further to this, it is practically impossible for any of us to know when Capitalism might die. None of us is a seer and if anything has been shown by history is that Capitalism is a very precarious system. Going from a stable Boom to a dangerous Bust within a few short years. And if the correct mindframe has not been cultivated when the Bust comes, then the opportunity is lost.

So if anything, not working towards the end of Capitalism through radical means, even when the system is stable, only ensures that the system will perpetuate.

Point 3 however is the largest objection I have to the whole thing. The assumption that working through parliamentary centrist channels will do more overall good than radical actions. The whole political history of the 20th century in the western nations is one of Socialist or Centrist parties trying to make the system better. What have they achieved? That the worst excesses of Capitalism will simply be migrated to areas outside of their “benevolent” influence (ie other nations), that the revolutionary movements at times of crises were safely defused by a few scraps thrown to them (via the same centrist parties) by a terrified capitalist class, that the situation in the world has nevertheless steadily grown worse.

No, the reformist parties are never a better solution. History has proven that much time and again.

What is the reason why me and others refuse to play this game? No it’s not utopian idealism, it is the knowledge that our energy would be better served elsewhere. Direct action for example is a 100 times more effective than parliamentarism. It is through direct action that every socialist change has happened, for which then the aforementioned parties have attempted to get credit. Leading by example, with cooperatives and takeovers is another.

There’s too many different ways that Capitalism can be undermined, and reformism is not one of them. If anything, the accusation of naive idealism should be directed back to those who call themselves socialists and yet support a course of action that has been proven, both in theory and in practice, to be actually helping the Capitalist system stay in place, rather than the opposite.

Of course, that is not to say that parliamentarism cannot have its uses. In some political systems for example, where non-voting counts for the winning party, it’s far better for radicals to simply vote for the most radical party that exists, or alternatively to simply create a new party for the purpose of removing the votes from the (usually two) ruling ones and to serve as an awareness vessel. Winning parliamentary seats is irrelevant as even if by stroke of luck it happens, it will not amount to anything.

In short no, even if Capitalism is not to be toppled within my lifetime, direct action from below is infinitely better than parliamentarism. Any emotional arguments to the contrary simply try to play people in supporting the lesser evil and perpetuate the status quo.

Further Reading

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Managers are the new nobility

Harvard University
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I just read this interesting piece on how the MBA degree is not only useless but practically fostered the mindframe that drove the Wall Street meltdown. There are some interesting points within and some of the quotes are just hilarious but I feel that the author does not go far enough.

While the problems of the mindframe that your can “train a leader” are obvious not only after a short explanation but also through viewing the dismal failure most managers are, a failure which in turn has not relation to their subsequent payment and bonuses, the reasons of why this paradigm came to be is not explored.

And what would you know, I have a theory on that.

You see, we have a society which rewards those who can accumulate wealth better with more wealth. We also have the concept that this wealth can and should be passed to one’s progeny so as not to be squandered.  We also know that wealth = power and power can be used to prevent others from challenging one’s own wealth/power.

As wealth accumulated to fewer and fewer hands, those at the top, through inheritage ended up creating dynasties, and the mentality of those who are born within a dynasty is that they deserve to be there. That they deserve these privileges that their ancestors have granted them (AKA Spoiled rich brats). When you add to that the common feeling of people who have “made it”, who do not want to see their progeny having to walk the same path but rather continue where they left them, you get the mentality of nobility: By right of heritage, one deserves their social position.

Sure one could train his children as experts on something but that would mean that they may start low and actually have to take orders from someone else. There also the alternative that the progeny simply lives of the considerable wealth the parents have created but this would lead to a progressive reduction of wealth, especially since a jbless hedonistic child is bound to spend increasingly more and more. No, the wealth a position had to be transferred somehow.

In the past, the founder of a very succesful company could easily tranfer his wealth to his children (or at least some of them) which wasn’t much different from a lord tranferring his feud to his sons. However as privately owned companies were outcompeted from public ones, this path became progressively harder to take as the shareholders don’t necessarily have to be the same as the managers.

So another way had to be found to ensure that the progeny of the movers and shakers of any society would in turn become the movers and shakers of the future.  And just in time, the managerial courses came about. I have noted that the rise to prominense of such courses correlates very nicely with the increased incorporation of American business. The less the posibility one has to transfer the accumulated wealth, the more necessary to have a way to jump start one’s career.

And slowly but surely, the managerial class was created. A class which incidentally has a very high entrance cost (as you need to have both the money and the status to be accepted in institutions such as Harvard) which practically means that only those already in the upper levels of society can enter. And as progressively the higher paying positions of companies necessitated one being part of the managerial class, the cumulative dificulty in getting in, became even larger.

So now you’ve basically got a system where if you’re rich and powerful you get to become even more rich and powerful by right of heritage, while the chances of one of the unwashed masses “making it” are as high as the chance a mercenary or a merchant had to become a “sir” or a lord in an Aristocracy.

Like the nobility, the managerial class is not taught how to be productive or ethical like the rest of us, they are tought how to be decisive and arrogant. Like the nobility, the managerial class does not need to suffer the bad results of their actions (golden parachutes and the like) unless they happen to step on the toes of another of the ruling class while they’re at it.

It is funny because this is the culmination of all the bourgeoisie has been striving to achieve ever since the liberal revolutions of the past few centuries. To take the place the aristocracy had in their zenith. They have obviously achieved it, but like the aristocracy before them, they have nowhere to progress, but down.

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"This ain't Capitalism"

Enjoy Capitalism
Image by Jacob Bøtter via Flickr

It’s a recurring theme lately that whenever one will point out sufferring and generally bad stuff happening because of Capitalism, right-wing libertarian apologists will pop-up from the woodwork to point out that “This ain’t Capitalism”. They will claim that the government played too big a role and this we can’t really consider it a fault of the system per se, but must lay all the blame on the government intervention1.

This is starting to get quite annoying so I think it’s time to explain why I consider this a no-true Scotsman fallacy.

First of all, ‘Capitalism’ as a word is quite recent, only coming into the mainstream vocabulary at the start of the 20th century by Werner Sombart, a Marxian who used it in his critique of the system. Before that, the use of the word had been sporadic and in variants of the root, with the most important being by Karl Marx himself who wrote mainly about the Capitalist mode of Production.

This concept has been expanded in the last century to mean a complete economic system who’s core characteristic is the same Capitalist mode of production that Marx was accurately criticizing. Peripheral to that is the sociopolitical situation within which this mode of production exists. This can range from authoritarian imperialism (Fascism), to libertarian minarchism (The American ‘Libertarianism’).

All of these, are still Capitalism. The means of production (factories, land, labour) are still privately owned and the only thing that changes is the degree of political freedom and interference of the state. But the degree to which these two fluxuate has nothing to do with wether the system is Capitalistic or not.

The Austrian school of Economics is of course the most rabid denouncers of this idea. For them, as long as Capitalism is not absolutely free any government, it cannot be called as such (Merchantilism is apparently the correct word) something of course which is complete nonsense. Even under the most welfare-oriented system, the mode of production still remains in the hands of private owners and as such the core characteristic is fulfilled. To argue otherwise is similar to claiming that someone is not a Scotsman because he puts sugar in his porridge.

Apologists of Capitalism from every school of thought, wether that is that there is too much restriction on Capital or that there is not enough restriction on Capital, will eagerly lay the blame for all the human suffering under the actions (or inactions) of Capitalist regimes on anything else than the economic system itself. It’s too much state intervention. Or too much credit expansion. Or not enough checks and balances. Or too much Greed. Or too much Corruption. Or too much environmental destruction. Whatever. It’s anything and the kitchen sink to blame but Capitalism.

And yet we see the same suffering and destruction occuring to any Capitalist system sooner or later. Wether that is the Free Market Wonder of Chile, the Soaring Growth of India or the State Capitalism of the USSR. No matter how much or how little government intervention there is in the market, the same crises happen, povertry and starvation remain, and people suffer. And the only thing that stays constant, the only common denominator, is the Capitalist mode of production.

This is Capitalism.

Also see: Capitalism: A good word for a bad thing.

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  1. The hypocrisy that takes the cake of course is when the same people will blame all the suffering of USSR, Korea and China squarely on Communism without being willing to recognise any other factor other than how those nations defined themselves []