Tuesday, January 22, 2013

Capitalism Imbalance and Resolutions

What is destroying capitalism is its penchant for gaming monopolies and stifling competition and innovation. The expedient of setting the tax universe to powerfully over tax the cost of capital for the capital rich is likely able to end this abuse.

Recall that large capital accesses cheaper money than a small dynamic growing business. It is no trick to establish the cost of capital and to then tax away the advantage. It is not particularly onerous, but assembling for the sake of assembling becomes unattractive and will only be driven then by specific business rationalization.

Such a formula would quickly see the too big to fail enterprises unwind in a hurry when their smaller competitors have a few hundred extra basis points to work with.

The real problem of capital has been the simple access to capital which has been rationed by the King to his buddies. Micro banking has shown us that there are alternatives that work and empower.

If the entire population is a natural member of an economic cooperative whose size is not in excess of 200 individuals and has access to sufficient capital to prosper with lending managed by a group of internal peers, then it is reasonable that all these issues will in time resolve simply because we have a working balance.

Is There an Alternative for Capitalist Economics and Politics? Richard Wolff Says Yes

Tuesday, 08 January 2013 09:18

"Imagine a country where the majority of the population reaps the majority of the benefits for their hard work, creative ingenuity and collaborative efforts. Imagine a country where corporate losses aren't socialized, while gains are captured by an exclusive minority. Imagine a country run as a democracy, from the bottom up, not a plutocracy from the top down. Richard Wolff not only imagines it, but in his compelling, captivating and stunningly reasoned new book, Democracy at Work, he details how we get there from here - and why we absolutely must."

-- Nomi Prins, Author of It Takes a Pillage and Black Tuesday

Few are better equipped than economist Richard Wolff, professor emeritus at the University of Massachusetts, to address the massive failings and inequalities of capitalism as he does in his latest book, Democracy at Work: A Cure for Capitalism.

He also describes Workers' Self-Directed Enterprises (WSDEs) as an alternative to the capitalism that broke the US economy and has resulted in massive economic redistribution to the ruling elites.

Mark Karlin: In your book, what is the distinction between capitalism and welfare state capitalism?

Richard Wolff: Capitalism, like all other economic systems, displays a variety of forms. There are, for example, largely private, laissez-faire kinds of capitalism that differ in many ways from forms of capitalism in which the state plays more significant roles, such as market regulator or social welfare guarantor (as in "state welfare capitalism"), or as a close partner of capitalists as in fascism. What remains the same across all such forms - why they all deserve the label "capitalist" - is the exclusion of the mass of workers that produces the output and generates the profits from receiving and distributing that profit, and from generally participating democratically in enterprise decisions. Capitalism excludes workers from deciding what is produced, how it is produced, where it is produced and how profits are to be used and distributed. Democracy at Work is a critique and alternative aimed at changing that exclusion shared by all these forms of capitalism.

Mark Karlin: In that regard, what do you think about the contention that FDR was not at all an opponent of capitalism, but simply saw that some government intervention was necessary in the US economy in order to save capitalism during the depression of the '30s?

Richard Wolff: What FDR saw was the political might of the coalition of unionists (galvanized by the CIO in the middle 1930's), socialist and communist parties demanding that government not only bail out the banks and corporations, but also directly help the mass of people suffering the Great Depression. Elements within that coalition threatened that Washington's failure to respond to do so would turn many millions of US citizens against capitalism. FDR got the message and crafted a deal in response. The government would both tax and borrow from corporations and the rich to fund the new Social Security system, national unemployment insurance, and a vast program of federal hiring. In return, the coalition would downplay its anti-capitalism and celebrate instead the achievement of a welfare state type of capitalism. The coalition mostly accepted this New Deal. FDR went on to win four consecutive presidential elections making him the most popular president in US history. The New Deal saved the capitalist system by changing its form from a relatively more laissez-faire [form]to a welfare-type state.

Mark Karlin: Before the recent crash, what was the capitalist crisis from above and below that you describe in the book?

Richard Wolff: The crisis from above refers to the speculative mania indulged by the small minority of people (major holders of corporate securities, boards of directors, their professional staffs, etc.) who gathered increasing profits into their hands as wages stagnated after the mid-1970s. Financial enterprises competed for the funds accumulating in this minority's hands by taking ever-greater risks with old and new (e.g. asset-backed securities, credit default swaps, etc.) financial instruments. Another in the long history of capitalist speculative manias built a bubble on the back of the rising debt of the US working class. When the latter's debt burden could no longer be serviced, the bubble burst, adding the crisis from above to that built from below by the lethal mixture of stagnant wages and rising debts.

Mark Karlin: How does the distribution of surpluses in revenue (profits) in business enterprises affect the economic structure of a society?

Richard Wolff: The surplus generated by enterprises - the excess of revenue from commodity sales over the direct costs of producing those commodities - is what capitalists receive and control in capitalist economies. They then distribute those surpluses as they see fit to reproduce the system in which they occupy such exalted positions. Thus, for example, they distribute some of the surplus to top corporate officials (shaping the distribution of income and wealth in capitalist societies), some to moving production abroad if, when and where that might generate larger surpluses (producing unemployment at home and growth abroad), some to donations to politicians and parties to shape and control political decisions to serve their needs, and so on. The distribution of the surplus is thus a major shaper of how our society works, how we all live.

Mark Karlin: During the last few years, particularly during and after the Occupy movement, many of the masters of the universe on Wall Street trumpeted their alleged intellectual capital, as if capitalism was equal to being the smartest guys on the block. In this bragging rights boasting, it can be inferred that workers are interchangeable parts of a machine and should be grateful to those with "intellectual capital." How do you respond to that claim?

Richard Wolff: Intellectual capital is just the latest name for an old idea that has long been recognized as a crucial part of production. In the past, other names included "know how" and "technology" and "expertise." The basic idea was that in addition to the tools, equipment, machines and raw materials that go into production, and in addition to the muscles and energy people contribute to production, there is the mental capacity to think, to adjust behavior, to invent new things and new ways of working - that is also crucial to production. To build that "intellectual capital" is one purpose of schooling. Of course, everyone in the production process can bring his or her intellectual capital into the production process if that process is organized to welcome, recognize, reward and stimulate that. When people suggest that only executives or financiers have or apply "intellectual capital," that is one sure way to discourage and reduce the application of workers' intellectual capital to production.

Mark Karlin: Refreshingly, you offer a key alternative to capitalism in decline. You promote Workers' Self-Directed Enterprises (WSDE) in Part III of your book. What would be a succinct description of a WSDE?

Richard Wolff: Quite simply, a WSDE entails the workers who make whatever a corporation sells also functioning - collectively and democratically - as their own board of directors. WSDEs thereby abolish the capitalist differentiation and opposition of surplus producers versus surplus appropriators. Instead, the workers themselves cooperatively run their own enterprise, thereby bringing democracy inside the enterprise where capitalism had long excluded it.

Mark Karlin: In your sixth chapter, you contrast WSDEs with worker-owned enterprises, worker-managed enterprises and cooperatives. What are the primary differences?

Richard Wolff: Workers have a long history of multiple kinds of cooperatives. That is, workers can cooperatively own (e.g. their pension fund holds shares in the company that employs them), buy (e.g. the many food coops around the country), sell (e.g. grape growers who combine to market their outputs), and manage (e.g. workers take turns supervising themselves). All such cooperatives can and often do co-exist with a capitalist organization of production in the precise sense of workers being excluded from the decisions of what, how and where to produce and what to do with the profits. What makes WSDEs unique is precisely that they are about cooperative production, about ending the capitalist division of producers from appropriators of the surplus, and replacing it with democratic cooperative decisions governing production and the social use of its fruits.

Mark Karlin: Where does the much-celebrated (and world's largest) Mondragon cooperative model fit in with your vision of WSDEs?

Richard Wolff: Mondragon is the world's largest and perhaps most successful example of WSDEs' successful growth in competition with conventional capitalist enterprises. Begun in 1956 with six workers organized into a cooperative enterprise by a Spanish priest, the Mondragon Cooperative Corporation (MCC) now employs over 100,000 workers, is the largest corporation in the Basque part of Spain and the tenth largest corporation in all of Spain. It has extensive research and development labs generating new ways to produce new products and maintains its own university to train its workers and interested others in all the ways of running and building democratically cooperative enterprises. MCC is thus a remarkable testimony to the contemporary viability and strength of non-capitalist production systems.

Mark Karlin: I recently asked this question in another interview on labor and economics and received an answer that amounted to a sigh. Although there is definitely a growing cooperative movement in the United States, it is still struggling. What will be the tipping point that will persuade US workers that WSDEs are preferable to the current managerial capitalist system? So many workers in the US have been brainwashed that any alternative to capitalism is satanic and communist. How does an idea like WSDEs change from an intellectual concept to a grassroots labor movement?

Richard Wolff: As has happened often in human history, what provokes change is less any clear vision of where we go next and more the intolerability of where we are. Capitalism is no longer "delivering the goods" for most people. The circle of its beneficiaries grows smaller and richer and more out of touch with the mass of people than ever. In the US, this is particularly problematic because the rationale of US capitalism has long been its creating and sustenance of a vast "middle class." As capitalism's evolution destroys that middle class, it opens the space in minds and hearts to inquire after alternatives to an increasingly unacceptable system. WSDEs offer precisely that. Nothing better illustrates that growing interest than the fact that Democracy at Work is going into a second printing three months after it was first published.

Mark Karlin: Republicans and Democrats both tout the alleged benefits of free trade agreements, despite their lack of adequate support for labor rights and worker remuneration. One thing that free trade advocates claim is that by moving to lower-cost labor, products will be cheaper in the US. While this may be true in some cases, this hardly appears to be the case in name brand products (particularly clothes) and trendy hi-tech products such as Apple. For instance, I went to a retail store and looked at items made by Calvin Klein, Nautica, and IZOD. Not one of the items, not one, was made in the United States. Most were made in China and Southeast Asia. Supposing we assume a worker who gets a few dollars a day produces a Nautica polo shirt for $1. Add the costs of material and equipment and maybe we get to $3. Add management and shipping and maybe we get to $5 per shirt, maybe. But the retail price on upper end brand name polo shirts could be as much as $70. So the shirt is not less expensive; the company is just making a greater profit off of exploited labor overseas. Is that correct?

Richard Wolff: When US corporations producing for the US market move existing (or open new) production facilities overseas, their usual goal is more profits. They relocate to exploit cheaper labor, lax environmental rules, lower taxes, etc. If they lowered their prices, then the cheaper labor, lax rules, and lower taxes would raise their profits less or not at all. So they rarely drop prices much when they move and then only temporarily to gain market share (thereby pressuring competitors to similarly relocate). Of course, relocating corporations could choose to lower their prices, but profit considerations usually render that a last resort. Finally, corporations in lower-cost overseas locations can usually more easily manage competition among themselves than they do in the US (because local rules against monopoly are less effective and relatively low-cost bribes are more effective).

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