Nothing wrong with capitalism, the capitalists are the problem

In March 1964, a group including Linus Pauling, Gunnar Myrdal, Tom Hayden, Ben B. Seligmanm and computer pioneer Louis Fein sent a letter to President Lyndon Johnson covering their report on “The Triple Revolution.” The letter began: “We enclose a memorandum... prepared out of a feeling of foreboding about the nation's future. The men and women whose names are signed to it think that neither Americans nor their leaders are aware of the magnitude and acceleration of the changes going on around them. These changes, economic, military, and social, comprise The Triple Revolution. We believe that these changes will compel, in the very near future and whether we like it or not, public measures that move radically beyond any steps now proposed or contemplated.” They were right about the changes but underestimated our ability to drift towards the iceberg most would not see until much later.

The three revolutions were in cybernation, weaponry and human rights. The nuclear and other new weapon systems threatened peace. The African American struggle for equal rights in the US was part of the rising demand around the globe for full human rights. But the report focused on the affects of the cybernation revolution (their term). The combination of the computer and automation was issuing in a new mode of production as different from the industrial as that was from the agricultural. It would result in “almost unlimited productive capacity which requires progressively less human labor.” Yet the current economic model awarded access to this production, to the wealth it created, unequally to those with capital and those who earned their keep through labor. The cybernation of production would mean increasingly less of good paying industrial jobs. The US was experiencing this process first but it would spread throughout the world we dominated.

The report argued that having access to the collectively produced wealth of society could not any longer be tied to labor. Maintaining and improving individual wellbeing across society – through making maximum use of the potential of automated production – would have to transition from depending on good paying jobs. Income would have to be separated from work. This would require some form of guaranteed individual income and vast investment in public goods. Left to itself, the market would not move in this direction, it would require government action.

As it turned out, capital figured out a way to exploit the new cybernetic economy by shifting production to automation (and now AI) and to areas of cheap labor. Some developing countries – like China – followed suit using their cheap labor to industrialize. This form of globalization produced cheaper goods and did lift many from poverty, worldwide. But it mostly benefited capital rather than labor.

The Western democracies did little to ensure the political sustainability of free trade globalism. This would have required providing those reduced to un- and under-employment or low-paying service sector jobs with the decent income and public goods (including improved education, free healthcare and jobs created through spending on updating infrastructure) that we could have begun 60 years ago. The Western European democracies did a bit better than the US with their social welfare programs but still found themselves in this 21st Century facing the political drift to the right fueled by those left out of the wealth creation.

In the US, we got Trump and his MAGA movement. This virulent form of the anti-globalism reaction has plunged the world into Trump’s tariff war on the very foundations of the world capitalist order.

Nothing wrong with capitalism, indeed there seems to be no good alternative to markets coordinating supply and demand. Free trade to maximize market functioning is part of this (with some measures perhaps needed to ensure fair trade). The World Trade Organization could expand its trade liberalization agenda to include mandates to improve local living standards alongside fair labor standards. Rather than make war on the system of rule-based trade that we have benefited from, the US government would encourage foreign investment in our productive sector as part of a rational approach to whatever re-industrialization makes sense. (This could include China.)

The monopoly capitalists at the top of our cybernetic economy are the problem. They need to be taxed at levels considerably greater than their workers. Their ability to wield political power through money needs to be ended. Government must be empowered to ensure that everyone benefits from market functioning even if this means a form of guaranteed minimum individual income. The Democrats need to do more than wait for Trump to fail. Railing against the billionaires must be accompanied by explaining the need for change and advocating the policies laid out in that report to Johnson.

Three Things

Thing One: As noted before, we now have front row seats to Trump’s attack on governing, the Constitution, his enemies, migrants, and the government protections built up over decades to protect us from the ravages of unrestrained capitalism, climate change, and globalized disease. The pundits have recognized that Trump’s aggressive efforts to see what he can get away with – the courts being the only potential obstacle – is an intentional effort to enlarge his power not by flaunting law and order but by bending it to his will.

The mostly unqualified sycophants with which he is seeking to stuff his cabinet will pass or not through the Senate – Hegseth squeaking by J.D. – and thus fully legally. As Jon Stewart recently noted, this is not fascism but entirely consistent with the 18th Century founding document – allowing a presidential monarchy – we seem to be stuck with. We will have to do something about that someday if we are to ever grow up. This bring me to ….

Thing Two: In the face of Trump flooding the field to keep everyone else off balance, the Democrats are either hiding, lost in a forest of self-analysis, or just plain waiting for the Trump chickens to come home to roost on all of those deluded people who voted for him. That is not much of a political party, more a herd of well-fed sheep. The Democrats need to find a way to address the issues that drove so many to place hope for a better life in Trump and the oligarch-loving Republicans amassed under the MAGA banner. This brings me to ….

Thing Three: The Democrats need, the country needs, to find a way to deal with the forces driving so many to feeling relatively deprived. All too many Americans feel that they and their children cannot reach, or maintain, the lifestyle of their own parents or grandparents. They are right to so believe.

The post-WWII economy of the Boomers peaked by the early ‘80s. Since then, inequality has been increasing while the Reagan Republicans and Clinton Democrats have favored capital over labor. Good paying union jobs gave way to low paying service sector work. Big capital fought off unions. The 21st Century has added further automation, now powered by AI, to further diminish the good paying working class jobs of the past. Health costs have risen, public schools struggle, drug use moved well beyond inner cities. Folks wonder what happened? So they look for those to blame – migrants, Jews, anyone different – and those to save them.

We need to face up to a few basics. We will never be a country full of high-paying work again. Tariffs won’t do it and build-it-here won’t do it. Most remaining (or recaptured) industry and many so called white-collar jobs will be done by machines and computers. For a while we may still need some skilled craftspeople like plumbers and electricians. But picking our crops, slaughtering our animals and rebuilding our outdated infrastructure will be done by machines and those migrants we say we don’t need. (No high paying jobs there.)

What is to be done? The Democrats will need to bite the bullet and revisit that approach long made anathema by the rich and their Republican servants: socialism. By which I mean, collecting substantial taxes from the obscenely rich and from big business, perhaps nationalizing fundamental platforms of the 21st Century economy such as Amazon and providing a guaranteed minimum income to everyone. This last would not be means tested or require looking for work and should be at least a few multiples of the basic poverty line. (Free healthcare, life-long education and varied public goods would supplement this.) We should, in other words, separate making and providing the goods we sell to ourselves and the world from the necessity to make them through human labor.

From each according to his ability, to each according to his needs.

Watching President Trump

In my previous piece, I laid out what another Trump presidency might look like. In short, if he does what he said he would do during the campaign: chaos. But it could also be, if not actual fun, certainly interesting – an experiment, if you will – to watch him do, try to do or, in the end, not do all the things he said. The list is a long one:

• seeking revenge on his opponents, including by weaponizing the Justice Department;

• imposing high tariffs on China and goods not made in America;

• putting Musk in charge of making more government more efficient (apparently by stopping all $2 trillion of USG discretionary funding);

• letting RFK Jr. “go wild” on health issues such as vaccines and fluoride;

• rounding up and deporting 20 million “illegals” using police and the National Guard;

• preventing by various measures “illegal migration” and finally building that wall;

• supporting a wide open field for crypto including Bitcoin;

Now, it may be that the Trump will not take any of these actions. The Republican leadership – and JD – may focus instead on using control of all three branches of government to do the things the party has always sought to do, provide tax cuts for corporations and the rich, dismantling “troublesome” regulations on business as well as consumer protections and ending efforts to combat climate change. There are also positive elements among the many other promises Trump made during the campaign, such as ending taxation on Social Security or providing payments for IVF. This approach would make the new Trump Administration a “normal” one in which the ruling party carries out its own ideological platform (with or with out elements of Project 2025).

But what if Trump does try to take action against political opponents and “illegal migrants” using the justice system, law enforcement and the military? This could result in considerable activity in the courts. If the military is asked to undertake actions forbidden under the Constitution – such as domestic law enforcement – relations between the Commander-in-Chief and the military leadership could become very tense.

Discretionary spending ($1.7 trillion in the 2023 budget) includes the military ($806 billion, where surely there must be considerable waste) and everything else the government does including education, social services, health, transportation, science and technology, justice and local development. Leaving aside the military (?), allowing Musk to dismantle the social safety net and backbone of our economy built up over the last several decades would have a serious social and economic impact. Raising tariffs – and therefore prices – of everything we now import – also causing shortages of needed goods that we cannot yet produce in quantity – could plunge the economy further into a downward spiral. Rounding up “illegals” and stopping the flow of migration into the US – if even possible – would reduce the supply of labor in the many places in which no one else wishes to work. Allowing an unfettered field for crypto-currency speculation could add financial turmoil to economic disruptions.

Empowering Kennedy to turn the U.S. health system into a haven for anti-vaxers and anti-fluoride, flat-earthers could lead to more pandemics and a legion of new dental patients.

Trump has also said he would settle the Ukraine war even before taking office and has vowed to bring peace to the Middle East. These too will be interesting to watch, especially the process of picking the losing and wining sides. It may also be “fun” to watch our NATO allies try to back fill their ability to go on their own. And the whole world may experience economic and political tremors.

Some of the 71 million majority who voted for Trump could experience a bit of buyers remorse. But he may not have any interest in matching his election campaign performance with real life action. It may also be that his supporters really don’t expect him to do so. In any case, we will all have front row seats.

PS: A friend reminded me of this from H.L Mencken:

Democracy is the theory that the common people know what they want, and deserve to get it good and hard.

The Profit Motive

There can be no doubt that the profit motive provides a positive dynamic in human society. It is essentially the drive for Darwinian survival expressed in the economic realm. One can argue that the tremendous global changes brought about in the past few centuries have not been unambiguously good for us and the planet. But it’s also true that the profit motive has lifted human life to an entirely different plane. It provides for the sustenance and comfort of billions and has allowed mankind to reach for the stars. It also seems that there is not a clearly better way to run an economy. Inventors, makers and sellers trying to get buyers to pass them money for whatever it is that they are offering does, in theory and largely in practice, effectively and rationally organize economic exchanges. It seems much more likely that free markets of willing sellers and buyers works better than any one actor or group of actors trying to mandate or direct such exchanges.

But.

Darwinian adaptation is blind. It does not automatically lead to the greatest good for the greatest number. It aims instead at the continued viability and growth of the individual organism. The other members of the species or the ecological community may find themselves not much advantaged by the successful organism and may in fact be harmed or out-competed. The profit motive in human society operates in the same way and does not, by itself, work towards the greatest good for the greatest number. Over time, markets become encrusted with the Darwinian “winners” whatever else has happened to the others sharing the economy. Inequalities will increase and society will move ever further from distributive justice. (According to John Rawls, a just society is one in which we would be satisfied being born into if we did not know where in that society we would appear.)

Pure markets – where the profit-seeking winners take all – are rarely truly free. More to the point, no innovator or entrepreneur has created all the inputs and structures that make his or her business possible. Every individual “creation” of something profitable rests on the social, cultural, political, economic and built capital that was already there. So it seems fair to place some requirements and limits on successful enterprises and even certain incentives to nudge enterprises towards adding to social value as well as their own.

Some examples:

1. Progressive income taxes on individual and corporate wealth and income (from whatever source).

2. Inheritance taxes on every generation and similar turnover.

3. Various forms of government action to tilt income distribution back towards even such as livable minimum wage and unemployment assistance levels, some form of universal health care, cash payments to children born to parents below a certain income level, high quality and affordable primary and secondary education and vocational training and/or university.

4. Occasional and limited government actions and policies to avoid or ameliorate the broad social and economic impacts of economic disturbances.

5. Occasional, limited and restricted government support to promising and socially or economically beneficial technologies or enterprises.

None of this would entail abandoning the profit motive (or capitalism) but would instead go in the direction of perfecting its results.

What Needs To Be Done

Let us put aside for the moment the fear that Joe Biden’s lead against Trump in the polls is bad because it seems all too reminiscent of Hillary’s last time. Let us also assume that that Republican defeat in November is so complete that the Democrats win both houses. Let us then consider what the agenda should be for a new Biden Administration in 2021.

The first challenge facing President Biden and the Democratic Party will be to begin the arduous process of undoing the damage Trump and the Republicans have done. This means first of all, of course, leading the country in the effort to put the corona virus behind us and refunding state and local governments and health institutions. But also, reviving rule of law and the administration of equal justice, undoing the dismantling of environmental protections, ending the war on immigrants, reimposing federal oversight of local police performance, aiding states to simplify and protect their voting systems, reestablishing our relations with friends and allies abroad and countering Russian, Chinese and other actors waging cyberwar upon us. These reflect simply the requirement to reverse the erosion of governance and national interest inflicted by Trump and his administration but will nevertheless take great effort and concentration.

But the real challenge will be even harder because it will require going beyond fixing what Trump has broken to fixing America itself as the damage predates him. Indeed, Trump is a symptom of the two fundamental and related problems that afflict us: gross and growing economic inequality and partisan tribalism. Economic inequality reinforces both racism and ultra-nationalism and exacerbates racial inequality. Partisan tribalism has made it near impossible to extract rational political debate and responses to the problems we face from our government.

There is no way to tackle economic inequality without re-conceptualizing how we do capitalism. The United States is as near as one can imagine to a completely laissez faire system, in which not only does the market rule in the economic realm but in politics as well. Both parties are fueled by loose money and have long accepted the results of the market, its up and downs, its winners and losers. The Republicans seek the to protect the gains of the winners and ensure that the downturns don’t lead to raised taxes on the rich or efforts to place limits on the way business is done. The Democrats – to give them their credit – have sought to provide and protect minimum social welfare and have begun to do the same with health care. But they too accept market mechanisms as a given.

It is time to place limits on markets, allow them to operate in some areas, limit how they affect others and ensure that their results work for the majority and not only the few. The goal must be to greatly reduce economic inequality and provide basic necessities – including health care – for all as needed.

Partisan tribalism goes back to the very founding of our republic. But the degree to which it has in the last decades overwhelmed the very ability to actually govern is without precedent. Bill Clinton’s effort in the 1990s to take the Democrats towards a more market friendly approach was met with worried warfare by Newt Gingrich and the Republicans. If the Democrats tacked right, the Republicans would go even further in that direction. Since then, they have waged class war in favor of the 1% and against the middle class and the poor by cynically seeking to enlist the latter into an assault on the very government that could protect them. The policies pursued by the Republicans lowered taxes on the rich, cut government services for the non-elite as much as possible and covered everything in the rhetoric of patriotism and charges that the other side were socialists. The Democrats seemed obvious to the possibility of representing the 99% (with Hillary actually calling them the “deplorables”). The Democrats therefore implicitly eschewed the class approach to the political war waged against them instead sinking into a morass of contending internal constituencies each seeking to tear their own piece of flesh from the party and its candidates. Bernie Sanders – not surprisingly an independent – understood this dynamic and sought to bring the party to its natural base. The Democrats twice refused. (Whether or not Sanders was too “socialist” to be elected leaves open the question of whether Elizabeth Warren was overlooked because she was too much a woman.)

Trump may bring the Republicans to their knees. But this will not by itself end the tribalism. Indeed, it seems time for the Democrats to go on the offensive. Clean up Trump’s mess, begin undoing economic and racial inequality, and figure out what kind of country America needs to be to face the foreign, domestic and environment challenges the rest of the 21^st Century will bring. Yes, elect Biden and then get on with it!

Notes on "A History of Political Theory" -- Episode 18

For episode 17, see here

The Theory of the Nation State

XVIII. Jean Bodin
 A. His work Republic took the idea of sovereign power out of the shadow of
      theology.
 B. Sought to put the king above religious conflict, as a center of national
       unity. 
 C. Mix of old and new philosophy
 D. Took method and form, such as it was, from Aristotle.
 E. Saw basis of society in pater familias who acted with others outside the
      family as citizens.
       1. Property was natural right of the family
       2. State could not alienate property because it was not the proprietor
 F. Mark of sovereign power is distinguishing characteristic of the state.
       1. Citizens are such only by their subjection to the rule of a common
           sovereign
       2. Sovereign is the source of law
       3. Sovereign is undivided, no mixed state but only forms of government
       4. State consists in the possession of sovereign power
       5. Government is apparatus through which power is exercised
       6. All lesser bodies were subordinate to the state and any authority they
           might have is delegated by the state
       7. Sovereignty is perpetual, humanly unlimited and with unconditional
           right to make, interpret and execute the law
 G. Sovereign limited by will of God and natural right
 H. F7 and G (above) lead to possible conflict
 I. Confusion arose from:
       1. View that sovereign was bound by God
       2. Fidelity to the constitutional law of France
       3. View of inviolability of private property

Next week: The Modernized Theory of Natural Law