Tag Archives: capital

Wealth creation

Adrian Rogers, a previously major figure in the Southern Baptist Convention, once said that ‘you cannot multiply wealth by dividing it’ as a way of critiquing socialism. However, such a statement is misguided for two reasons, one which concerns to process of wealth creation within capitalism, and another which concerns the utility of a monetary system within socialism. I’ll start with the second one first (since it is a more direct response to the statement).

The nature of socialism can be defined as the very absence of wealth rather than simply the redistribution of wealth. Since everyone is equal across the board, there is no wealth to be distributed or divided. In fact, the more idealised version of socialism rejects the usage of a monetary system. Everyone is entitled to a basic level of living: health care, education, a job, food, housing, etc. Within a developed practise of socialism, the necessity and commonality of these things would see the usage of money as a central mediating factor (i.e. income from a job and payment of services and goods) disappears. There is no need for money in these basic transactions. Instead, money is reduced to a less meaningful mediator (perhaps used for transactions with parties external to the socialist system and/or for purchasing unnecessary products). To speak of ‘wealth’ within socialism requires an inequality or the capitalist belief that wealth can be possessed. This is exactly how many reactions to the Occupy Wall Street movement fail to recognise their arguments: the respondent often speaks of giving money away to people instead of providing an avenue for the people to become gainfully employed. At its heart, then, Western capitalism misconstrues an integral part of socialism by viewing it as a variation of capitalism rather than as an alternative system. It cannot fathom the possibility of a way of life without a monetary intermediary despite the existence of such communities before the rise of capitalism (e.g. prior to the enclosure of the commons in the sixteenth century).

Since the ascendancy of capitalism and its monetary intermediary, its greatest proponents have a romanticised notion of the creation of wealth. In fact, one could argue that wealth did not exist prior to capitalism because wealth requires an inequality in the cost of production and the product’s selling price*. Prior to industrialisation (and modern capitalism), the person selling the product was often its producer. The sale ‘price’ was equivalent to the cost of production, which means that a person was ‘breaking even’ rather than gaining extra wealth. However, after the advent of industrialisation — which began a process of alienating the workers who produced products and the product itself — the capitalist owner could sell a product for more than what he paid to have the workers produce the product. This can be done either by charging the buyer more than the cost of the product, by paying less to have the product produced, or both. The first is often considered an integral part of the process of supply and demand. However, it does not last often because the second option viciously undercuts that process. As a result, the second is often the primary way of gaining wealth.

The way in which production costs are minimised can be by technological advancements, but competition always catches up. Instead, costs are reduced more permanently by simply paying less. In particular, the workers are paid less than ‘actual market value’ for their labour. In other words, the creation of wealth comes first and foremost by the exploitation of labour. The process of industrialisation increases this effect because a worker is no longer producing a shoe but rather a small part of a shoe. The worker is alienated (again) from her product. (Don’t believe me? Notice the brief mention in this article about Mike Daisey showing a Foxconn worker who helped build the iPad the finished product for the first time.) The result is that the worker no longer knows how to build a complete product and is unable to compete (ignoring intellectual property and copyright laws) with the owner. The only options a worker has is (1) to continue working and be underpaid, (2) quit and find another job which will do the same thing ultimately, or (3) protest.

When individual workers protest, the owner has the ability to terminate the employment and hire a replacement (which is easy to find when there is an army of unemployed workers desperate for any income and willing to sell themselves for even less). This is where unions enter in: by forming unions, workers have greater strength. When a unionised workforce strikes, the owner is unable to get more products to sell because the entire industrialised process is halted. The owner, like the workers, does not know how to produce the product; the owner may have the knowledge and schematics but is often unable to operate the machinery and tools needed to assemble the product. As a result, the owner is faced with two major options: (1) remove the entire union workforce and re-hire and re-train a new workforce (something that would cost a lot of money for training as well as a loss of income while the factory re-build) or (2) deal with the union and appease the workers. In a country or state which protects workers, the first option is often illegal (at least for a period of time which allows negotiation). By forcing owners to attempt to resolve labour disputes, these states and countries provide a basic employment security which allows workers to bargain effectively for their labour. In other words, the power of collective bargaining is a way for workers to demand a more equal distribution of profits to those who actually produce the products. However, many countries and states are moving away from these protections and are implementing at-will employment laws and (as Indiana is preparing to do) ‘right-to-work’ laws. The result is the resurgence of the exploitation of workers for the accumulation of profits which is often coded in terms of creatio ex nihilo whereby the capitalist owner (magically) adds value to a product which allows it to be sold for more than its worth. The reality, however, is less than magical because the wealth does not come from nothing despite the imagination that the whole of the product is worth more than the sum of its parts.

* NB: I am using ‘price’ loosely here for a product may have been exchanged for something other than currency (e.g. other products).

The ‘Third Way’ of the Middle Class

For some time, I had been contemplating Adam Kotsko’s attitude towards ‘third way’ solutions (e.g. here). For the longest time, I have been a proponent of a ‘third way’ that would synthesise successfully the disparities between ‘left’ and ‘right’ into a more agreeable middle path between the two. However, I think that when this dialogue is turned towards the idea of a ‘middle class’, the failure of most ‘third way’ options (hey, I’m still woefully idealistic that one may succeed!) becomes apparent.

The emergence of the ‘middle class’ is a kind of ‘third way’ between the working and owning classes best described in Marxist accounts of capitalism. As a ‘third way’, the middle class was seen as the grey area between the two in which families could exist relatively peacefully while allowing differing political opinions. It didn’t matter if one was a Democrat or a Republican because the middle class was connected by something other than labour or capital.

Further ideological development of the middle class began to overlook and later erode class distinctions so that everyone could be ‘middle class’. As a socio-economic class, the ‘middle’ became uninterested in politics, economics, class struggles, etc. Political platforms turned away from politics and moved into the realm of social mores and appearances. Candidates were elected not on the basis of their political acumen or their ability to fight for the people they represented but on the basis of a few ‘key issues’ which dealt less and less with the politics of the world and more with the representation of certain ideological disposition. Political opinions could be reduced to simple binaries around social issues which threatened the nuclear ‘family’ of the ‘middle class’: abortion, death penalty, etc. Arguments were personalised in such a way that the old political discussions of, for example, taxes were transformed into how the ‘left’ Democrats wanted to increase taxes on the ‘middle class’ and the Republicans wanted to cut Medicare, Social Security, etc.

This can be seen in the current news dialogues concerning the temporary payroll tax cuts which are due to expire this year. The discussion has shifted towards tax cuts and tax increases on ‘middle class’ families. Its origin as a temporary measure has been lost and re-created into a war being waged against the family. The same can be said about the debate surrounding the Democrats’ proposed surtax on families with income over one million dollars — even they are now ‘middle class’!

What happened between the relatively strong left/labour movements in the US after the Great Depression and now? I suggest that it was an ideological battle in which members of the working class who were benefiting from the labour movement began to see themselves as the ‘third way’ of the ‘middle class’. While they acknowledged their ‘roots’ in the working class, their children saw that less and less. Instead, the ‘middle class’ children saw the ‘middle class’ as something hard-won from the working class and, consequently, needed protection from the working class as well. They moved to newer neighbourhoods and developed a culture which saw the working class as a lower class which was unable (due to laziness, poor decisions, etc) to rise up into the ‘middle’. In other words, the ‘middle class’ began to treat the remainder of the working class in the same manner that the owning class has always done. Now, the working class was fighting against itself. The ‘middle class’ was marketed by savvy politicians into thinking that their taxes were being spent unwisely and that the ‘lower class’ was abusing the social welfare for which the ‘middle class’ paid through taxes. The result was the ‘middle class’ seeing itself as self-secure, independent, and hard working in contrast to the lazy ‘lower class’ which stole their money. The ‘middle class’ began to agree with the owning class that they should keep their tax money and the ‘lower class’ just needs to work harder. They forgot that they themselves were working class and were able to ‘become “middle class”‘ solely because of the measures put into place just a generation before.

And this is where the failure has occurred. Everyone wanted to be considered ‘middle class’  and the solidarity has been so strong that tax increases on less than 1% of the population is encoded as a tax increase on everyone. The ‘middle class’ has become (if it ever wasn’t) an illusion. There is no middle class. Yet, its creation and existence has destroyed the self-image of the working class as a sort of Stockholm syndrome in which they now empathise and support the owning class even while the safety nets and security measures which keep the working class alive and sane are being dismantled. The only class solidarity which has persisted is that of the owning class who had seen the creation of the ‘middle class’ for what it is: a fake ‘third way’ which can abuse the working class into hating themselves.

Political Qualifications

With the recent memory lapse by Rick Perry fresh in people’s minds, one of the criticisms was that these debates and celebrity-style appearances proved which candidates were best qualified for the position of President of the United States. The contemporary infatuation with the media has shifted political qualifications away from a person’s intellectual, political, and/or diplomatic acumen to how one can project an image in the public spotlight.

It should be strange for any voter to be thinking about whether a candidate remembers a third point to a tangential comment rather than the whether a candidate’s proposed changes are desirable. Our nation has shifted to weighing candidates on appearances, and we have had problems because of this. Why? Because someone has to call the shots. When the office-holder is a pretty face who doesn’t understand the various contexts which have caused the need for ‘change’, she must look to someone else for guidance. In the case of our media-centric minor celebrity politicians, they look towards the ‘people’ with the loudest ‘free speech’ (i.e. the corporations with the largest campaign contributions) because keeping office is more important than anything else for a celebrity politician. And it doesn’t matter which party it is, both Democrats and Republicans fall into this rut (there are some exceptions).

The fact of the matter is that it costs a lot to win an election. A candidate running in a local council election for a suburb of New Orleans spent over $250,000 for his campaign this year. He even put a second mortgage on his house to afford it. And the position’s salary is a meager $60,000. I bet a substantial amount that his second mortgage will be paid off faster than his first (especially with his political salary’s improvement from $21,000). Of course, this excludes what he earns from the small business his family owns.

This is, of course, nothing new. In the 2008 Presidential elections, Obama spent $730m which is more than double McCain’s $333m (the next most expensive campaign in the ’08 elections was Nader’s: a mere $4m). There’s a number of excellent websites (e.g. OpenSecrets) which show how well corporate campaign contributions are tied to votes, policies, earmarks, etc. In general, corporations regain what they spent in contributions through earmarks and contracts, the politicians gain money for future elections, and the law is written to be advantageous to the corporations which spend the most.

However, there are solutions. The one which I am fond of is three-fold: (1) limit the total amount of money which can spent for a campaign (I’ve worded it this way so that spending by groups not within the purview of a campaign, like a political action committee, cannot ‘take up the slack’), (2) candidates cannot spend their own personal money (this is to prevent candidates from putting their houses/family in financial risk and harm), and (3) every candidate who is able to be on the ballot is required to have the same amount of funding (either through government subsidies to candidates with smaller finances or restricting further what the larger budget ones can have). I’m open to allowing #2 to be proportional to percentage of votes in the previous election, though it would have be organised in such a way that it does not simply reinforce existing proportions. At least one study (warning: PDF) has suggested that ‘clean elections’ have resulted in more equality in campaign presence (i.e. people are aware of more campaigns than the two or three ‘big’ parties), and greater ‘voter participation’. I would argue that this is because voters are treated as intelligent people who can decide for themselves what they want to vote for beyond the appearances.

Work Hard

One of the common themes in what I will characterize as the “right-wing” response to the Occupy X Movements has been that the occupiers are somehow lazy and/or whining while “real Americans” (I guess the nationality can be changed to suit other countries as well) “work hard”. One blog (I’m guessing not the only one) is in some ways dedicated to this position. Post after post talks of people who “made it on their own” and “without handouts” by working multiple jobs, living paycheck-to-paycheck, without health insurance, etc.

Adaptations of the phrase “work hard” have become a religious mantra to the American civil-capital religion. It is used as a mark of honor that someone works 60 or more hours a week in a low-paying job to make ends meet. The idea of living a life apart from work is non-existent. What these reactions insist is that working hard somehow proves a person’s worth. This is no different than a penitent religious adherent who must perform some menial tasks to prove her penitence.

While this belief is fine to have — I don’t care what one personally believes — the theological question we should be asking is this: for what transgression are we being penitent? If working hard is the penitential act, for what are we seeking forgiveness? This is where the civil-capital religion which has re-appropriated American Evangelicalism (much in the same way that Caribbean religious movements like Santeria have appropriated Roman Catholic imagery) comes into focus. One is working hard either because they have become indebted to creditors or because they believe their working class origins are somehow wrong.

In the first case, the most common agent of debt is university education and I would wager the second is family medical problems and the third is spending debt (both housing and credit card). All of these are built upon an ideal which was created and harnessed in the mid-twentieth century as the “American Dream®”: good Americans own houses and cars, have university degrees, be in good health, and are able to purchase luxury items such as televisions, electronics, brand-name clothing, etc. This dream had begun to be achieved during this time because labor unions and “left-wing” politics pushed for workers’ benefits, subsidized education, etc. However, at the same time, the costs of these things begin to rise well above inflation rates (e.g. university, mortgage, consumer goods) while personal income has not kept up with the trend. The responses we have seen in recent weeks has followed one of two types: the “left-wing” type which advocates doing what was done before (labor unions, broadly “left-wing” politics, etc) while the “right-wing” type advocates becoming more committed to the dream and working harder to achieve it.

I suggest that both responses want the same result (the dream) with similar personal security, but they want it in different ways: the first wants government to remain committed to its social projects which have worked in the past (the irony of the “The 53%” website is that many were able to make it “without entitlements” precisely because of government programs such as foster care, subsidized public universities, progressive tax rates, government/military employment, subsidized government/military healthcare, GI Bill, federal student loans, etc) while the second wants to privatize those government programs and work harder to invest personal income into those private choices. While I am more sympathetic to the “left-wing” view (e.g. why should anyone need to “voluntarily” work overtime in order to make meager ends meet?), it also has its own problems.

It is relatively easy to make an argument that the “right-wing” view is deeply connected to the American civil-capital religion (I believe I’ve already done so above), yet the “left-wing” view popularized by the Occupy X Movements is also connected to the same religion. While the “right-wing” view can be seen as advocating an monastic/ascetic position within the civil-capital religion, the “left-wing” view amounts to an ecumenical Civil-Capital Council. Rather than questioning the wage system and consumerist trends which fuel the civil-capital religion, the “left-wing” response seeks to reform its image into one which makes it easier for one to participate as a believer without the “heavy” asceticism that the “right-wing” view enjoys. In short, the Occupation X Movement is an attempt at bringing the “seeker-sensitive” style of 1980s/1990s American Evangelicalism into the civil-capital religion where everyone can become good, obedient practitioners of civil-capital.

Capital is dead!

While concerns grow about a second recession (e.g. the Hindenburg Omen), the more worrying event is the American public’s ignorance of the significant revelations the ‘financial crisis’ two years ago brought out. The most significant of these revelations is the death of the illusion that America is a classless society. Prior to the events, corporations obscured their intentions by marketing their parasitic control of Capital as a way for Americans to pursue the American dream. This was in the guise of home ownership, suburban (and even rural) communities, and extravagant lifestyles. However, the reality of these have set in as the possibility of funding this dream has disappeared as jobs and credit options are being trimmed in accordance with ‘recovery’ from the ‘financial crisis’.

What has actually happened, however, is the rise of class warfare. While unemployment soars, so do corporate profits. The parasitic relationship has been abandoned as the corporate wealthy see that ‘middle class’ can no longer support the system. The Capital has been drained from the economy, consolidated into the hands of the corporate wealthy. The new plan of action isn’t parasitism anymore; it has turned to subjugation and enslavement. America has become a ‘third world country’ now, yet those who are in the direst positions (i.e. that ‘middle class’) cannot believe it. In fact, they even defend those who have stolen from them (e.g. the Tea Party’s defense of ‘free market’ capitalism, the ‘reformation’ of financial regulations, etc).

In short, the illusion of democracy has been cast aside. In its place, the ulterior motive of class warfare has come out in public. The problem is that the ‘middle class’ in America is too busy defending the people who have declared war against the ‘middle class’. We have seen this in the rise and (lack of) fall of prices. Theoretically, supply and demand state that prices should drop when there is high supply and low demand. However, when has this actually happened? Look at the ‘financial crisis’ in which demand for anything beside basic needs dropped, what prices dropped? Cars? TVs? Computers? Software? Housing. That’s the only thing that dropped in prices (temporarily), and typically because the houses were being foreclosed and people made homeless. While there are many responses to class warfare, the first step is to dispel the Stockholm Syndrome that the ‘middle class’ has long since believed.