The End of Capitalism

Unknown-2In a previous post, I offered a simple and flexible definition of capitalism:

Capitalism is the idea that ownership, in and of itself, entitles the owner to the work of others, combined with the idea that ownership can be bought and sold.

I then noted that capitalism expects sustained exponential economic growth, which cannot be supported in nature. This unrealistic expectation is disguised by ignoring or denying the following principle:

Wealth is never created or destroyed. It is only moved and transformed.

Capitalism’s success over the last five centuries has been based, not on creating wealth, but on transforming natural wealth — usually irreversibly on any human time-scale — into human wealth.

Economists have long dismissed the entire natural economy, the source of all human wealth, as an unquantifiable “externality.” Economists don’t even think about what happens when our exponential appetites come up against the finite boundaries of the physical world.

So I’d like to talk for a moment about yeasts.

Yeasts are fascinating little beasts, with two distinct metabolisms; they can switch between these metabolisms depending on their environmental conditions.

The aerobic metabolism is used when the yeasts have plenty of oxygen in their environment. They eat sugars and oxygen, excrete CO2 and a small amount of complex organic chemicals, and produce more yeast cells.

The anaerobic metabolism is used when the yeasts become oxygen-starved, but still have food to eat and space to expand into. In this case, they continue to eat sugars, excrete CO2 and large amounts of ethanol as a waste product, and the yeasts stop reproducing.

Capitalism likewise has its aerobic and anaerobic metabolisms.

Aerobic capitalism occurs when capitalist enterprises have access to plenty of resources, and demand for the goods or services is strong. Growth potential in an aerobic business is exponential.

Anaerobic capitalism occurs when access to resources, or demand, or both, are restricted. Growth potential is now limited to sub-exponential growth, or no  growth at all.

Every successful business goes through aerobic and anaerobic stages.

My first job out of school was with the Gates Corporation R&D division.

Gates was founded in 1911, and the Gates Story is told as a typical Horatio Alger story. Charles Gates Sr. drifted into Denver, Colorado in 1911 with a mere $3500 in his pocket (actually, quite a lot of money in 1911, but let’s ignore that), bought the Colorado Tire and Leather Company, started selling a single, innovative product for the newfangled horseless carriage, and created a billion-dollar multi-national corporate behemoth within his lifetime.

By 1982, when I started working, Gates’ growth had slowed to 1% annually, and in Ronald Reagan’s Morning In America, this was deemed an unacceptably low return. Gates expanded its profits by purchasing other companies, notably the Uniroyal Power Transmission Company, and by closing the Denver manufacturing facility to reduce costs.

In 1996, Gates was purchased by the British firm, Tomkins, and in 2014 it was sold to The Blackstone Group, which (basically) buys companies and sells them off in pieces for salvage profit. There is still a “Gates” brand of product out there, manufactured somewhere by someone — a brand-name is one of the more profitable items of salvage from company — but the exponentially-growing company that Charles Gates Senior founded is gone.

This is a very normal progression for capitalist businesses.

Let’s look a this process in a little more detail.

When a new demand appears in the marketplace, lots of companies compete to satisfy that demand. These businesses are all aerobic, and they expand rapidly. If the demand is huge — say, for cars — and they run out of natural wealth — say, steel — then they create a voracious market for steel  that funds new technologies and legal excuses and even military excursions to transform more natural wealth into steel, faster, more cheaply, and (usually) more destructively. So long as the businesses all remain aerobic, there will be a lot of competition, technological innovation, and exponential economic growth.

Then the businesses saturate their market, meaning they’ve essentially satisfied all of the paying customers: I’ve already got a car, you talked me into buying two more, but dangit, I really don’t want a fourth one — I’ve got no place to park it. It’s also possible to reach a hard limit on natural resources, in which case the dynamics are a bit different, but that doesn’t happen much in the modern world. It is almost always the demand that tops out.

What happens next is called “the shake-out,” where smaller competitors are forced out of business. The larger companies — the ones that will eventually survive the shake-out — start to invest in targeted marketing, service plans, and economies of scale that allow them to lower production costs. They pass all of these benefits to their customers.

These strategies are not intended for the good of their customers — they are intended for the destruction of their competitors. More specifically, the big companies are trying to exponentially expand their slowing demand, and the only way to do that is to take out their competition, and eat their slice of the demand-pie.

The business has started to go into its anaerobic metabolism.

The shake-out eventually takes the entire industry down to a small handful of major companies that service all of the demand. Think the Big Three automakers in Detroit, Coke and Pepsi, Microsoft and Apple. Sometimes geography or government regulation will partition the markets, such as for airlines, allowing a larger absolute number of competitors to co-exist. But within any “free” segment of that market, you end up with an effective monopoly or duopoly. These can vie for “market share” with advertising, marketing gimmicks, or enhanced services, but they are essentially all fighting for a fixed pool of consumers, and any gain by one company is a loss for the others.

At this point, pretty much the only way for the dominant companies to expand further is to diversify, by buying other companies, which may or may not have anything to do with their core business. Most of the largest multi-national companies today are merely holding companies that take profit from all of their holdings, in a very pure exercise of capitalism: they have bought the ownership rights, so they are entitled to a cut of the profits. Whether they provide any real benefits to the businesses they suck profit from is at best arguable; but as I’ve pointed out before, capitalism has nothing to do with merit, and everything to do with ownership.

Here are a few stark contrasts between aerobic and anaerobic businesses.

Aerobic businesses create jobs. Anaerobic businesses eliminate jobs.

During the aerobic phase of a business, the quickest way to expand your business is to employ human labor. You can even offer travel expenses, signing bonuses, a company car, or free lodging and whiskey — the contribution of each person more than pays for such trivial expenses. You are always looking for more people.

Once the business becomes anaerobic, companies turn to cost-cutting, automation, outsourcing, offshoring, layoffs, and budget cutbacks to maintain growing profits.

It’s worth noting that people — employees — are considered financial liabilities for any business; it’s a universal accounting practice. Let this sink in: employees are liabilities. A company always improves its financial standing by reducing liabilities, such as by laying off workers.

The only way to change this — the only way to make employees into assets — would be to allow the company the right to buy and sell their employees as capital assets, just as they would buy and sell their office furniture. Last time I checked, this was called slavery.

Aerobic businesses grow by expanding to meet demand. Anaerobic businesses grow by cannibalizing other businesses.

A business that buys another business in a merger shows paper growth: it’s a simple matter of paying less for the acquired company than it is worth (on paper), resulting in immediate profits. You also get a new set of customers, a new stream of income, and a new source of ongoing profits. If those profits aren’t as high as you’d like, you can cut the least profitable portions of the new business, and sell those off for salvage, which is additional short-term profit. In the worst case, you sell off the entire acquisition for salvage and force all its old customers to use your product instead.

This is a great strategy for eliminating competition. Very large companies can even purchase another company at a loss, simply to capture their competitor’s customers and eliminate the cost of competing with them.

Most employees in a merger are kept for a short period of time, during which they are assured and reassured that their jobs are safe, after which they are let go. Mergers are job-killers. It’s just business.

Vulture capitalism and mergers became one of the main sources of “economic growth” in the 1980’s, but it was not actual economic growth at all: one company grew, another company disappeared. Stockholders profit, but the economy as a whole remains the same, or even shrinks a little because of the inevitable layoffs, which destroys demand across a wide range of businesses.

Aerobic businesses represent a tide that lifts all boats. Anaerobic businesses represent a wave that beaches all but the largest yachts.

Aerobic capitalism views a “rising tide” of capital growth as a bunch of tiny toy boats in a bathtub, where the “magic of wealth creation” is the spigot that keeps pouring more financial syrup into the tub. This syrup forms a growing heap right under the spigot, where the ownership class moors its boats, and provides a smaller but still-growing puddle even at the far end of the tub where the non-owners (the scum) live. Aerobic capitalism doesn’t expend much thought on where the money comes from: it presumes that the spigot is simply “creating wealth” through “the magic of the marketplace,” and will continue to do so forever.

In anaerobic capitalism, the spigot is shut off, and the “rising tide” is produced by pumping the financial syrup from one end of the tub to the other: it lifts some boats while forcing others to beach themselves on the bare porcelain. The art of being an anaerobic capitalist is being far enough from low end of the tub that you stay afloat, even as the pile of syrup grows higher and narrower, and the expanse of bare porcelain broader.

This last contrast — the “rising tide” contrast — is particularly important at this moment in history.

Capitalism goes into anaerobic behavior when faced with the need for growth, without adequate opportunity for growth. Successful capitalists switch from exploiting natural wealth, to exploiting human wealth. We see corporate acquisitions instead of business expansion, corporate reduction of head-count, benefits, and pay rather than increased production, increased use of debt to finance operations, and outright fraud. The overall result is that the fiction of economic progress through wealth creation becomes straightforward wealth concentration, leading to an increasingly stratified society based on growing extremes of wealth and poverty, based in turn on the principle of the rich stealing from everyone else.

This kind of runaway wealth-gap is not isolated to capitalism: it’s common in human societies, and it is typically a precursor to some kind of dramatic social readjustment. The immensely wealthy who live at the top of the pyramid are incapable of sustaining their wealth without the support of the rest of society; the rest of society cannot support itself, because it is trapped in maintaining and increasing the wealth of the few at the top. The poor eventually break under the burden of maintaining the wealthy, and then the whole system collapses.

What’s notable about this is that the wealthy almost always remain clueless right up to the end. As far as they are concerned, everything is working just fine: their portfolios are increasing right on schedule. The rising grumble they hear from the lower classes is dismissed as the work of rabble-rousers, general laziness, and moral decay among the poor: nothing that a few lashes, jail terms, hangings, or a bit of real hunger won’t cure, and right bloody quick. Why in my day, we worked thirty-hour days, and we liked it….

It doesn’t matter whether I’m talking about Mitt Romney carping about the 47%, Marie Antoinette advising the poor to “eat cake,” or Nero enjoying music in his garden while the poor parts of Rome burned. It’s the same pattern.

Our global capitalist economy is following that pattern faithfully.

Of course, predicting exactly when and how capitalism will end is a fool’s game. Accurate data is mixed with lies and fraudulent accounting. More importantly, we have seven billion people trying to fix, break, and game the system, all at the same time. Even if we had perfect data, we could not predict the precise unfolding of events.

This is one of the reasons I try to stick to the overall process, such as the collision between exponential growth and a finite world. It’s obvious that capitalism will end. It’s not obvious when it will end, or exactly how. In fact, I could argue that capitalism has already died, and been revived, several times.

Karl Marx predicted the end of capitalism in the mid-1800’s, and any one of the banking collapses in the late 1890’s could have spelled the end of capitalism.

But capitalism didn’t die. Various financial fixes kept the system going, and led to the vast speculative financial bubble of the 1920’s, the “Roaring Twenties,” taken as evidence of the triumph of capitalism.

It was easy to see the final, bitter end of US capitalism in the bread-lines and homeless migrations of the early 1930’s — a little later than Marx thought it would happen, but the Stock Market Crash of 1929 was a suitably catastrophic ending, even by Marxist standards.

But capitalism didn’t quite die. The democratic socialism that followed the Great Depression of the 1930’s did not outlaw capitalism, as the Soviet model of Communism did — instead, the New Deal allowed a heavily-taxed, heavily-regulated form of capitalism to survive. The massive government spending on infrastructure through the CCC and WPA programs, heavy expenditures in science and technology, and (of course) continuing to expand the US military under Cold War justifications, combined with the complete disappearance of competition from war-ravaged Europe, allowed US capitalism to draw new breath on its deathbed. As a bonus, this government spending spree created an entirely unexpected new market: a vastly-expanded middle class, which created the consumer mass-market.

By the 1970’s, even regulated capitalism was in trouble again after having completely saturated the US consumer market, despite the invention of television advertising, suburban envy, and the throwaway society. It was easy to see the end of capitalism in the runaway inflation of the late 1970’s.

But capitalism didn’t quite die. Capitalists turned to creative accounting, corporate mergers, and debt to keep the system running. None of that actually helped the economy, any more than the financial tinkering had done in the late 1800’s. So it would have been easy to predict the demise of capitalism by the early 1990’s.

But capitalism didn’t die. The entirely unexpected computer boom brought a giddy decade of capitalist profits — Moore’s Law combined with a slightly elevated tax rate and Al Gore’s public funding of the national (public) Internet backbone, plus a lot of creative government accounting to hide the effects of inflation. That boom came to a sudden end in the tech bubble collapse of 2001. It would have been easy to write the epitaph for capitalism, right there.

But capitalism didn’t quite die. Aggressive deregulation, financial speculation, and massive fraud through the first decade of the 2000’s supplied a way to keep the corpse inhaling and exhaling a little longer.

We’re currently in a cycle of enriching the ultra-wealthy by sucking money out of the poor through a combination of underreported inflation, outsourcing labor, personal debt (particularly educational debt), and outright financial fraud — a cycle which bounced hard in 2008, but is still in progress after a direct government bailout that further impoverished the poor by spending tax money to pay off bankers’ gambling debts, which are again accumulating. It would be very easy to predict the demise of capitalism in a flaming Wall Street catastrophe before 2020.

But then, we have renewable energy development right around the corner, and the potential magic silver bullet of LENR, either of which could afford capitalism the burst of pure oxygen needed to extend its life yet again. Or, should Bernie Sanders successfully kick off his political revolution and his movement transform government over the next decade, we just might see a revitalization of the consumer mass market through a kind of New Deal redistribution of wealth.

So predicting the precise end of capitalism is, as I said, a fool’s game.

However, it’s worth noting that when capitalism died in the 1930’s, the natural world was in, at most, mild danger from human activity — something easily handled by creating a few national parks and wildlife refuges. When capitalism went back into the hospital in the late 1970’s, we had nuclear armageddon hanging over our heads, acid rain, DDT, and superfund cleanup sites. As we approach 2020, we have global CO2 buildup from human activity, sea level rise, widespread genetic tampering, and biodiversity depletion at a rate that’s being called the Sixth Great Extinction.

The natural economy we depend on — the fundamental economic externality that economists won’t even talk about, much less quantify — is growing increasingly fragile as capitalism continues to destructively convert natural wealth into human wealth. Capitalist enterprises on the whole are slipping into anaerobic behavior: almost all of the top companies on the Forbes lists are either in the financial sector, or are multinational holding companies. Given the degree and ubiquity of fraud already involved in keeping up the appearance of solvency, I suspect the true end of capitalism — with no subsequent zombie revivals — is pretty near.

In a future post, I will offer a few constructive thoughts on where we can go from here.

Feeling the Bern

I came out for Bernie Sanders nearly a year ago. I’ve actually been donating money to his campaign, which is something I’ve never done in my life. I plan to vote in the California primary; I’ve never participated in a primary, anywhere. I’ve even registered as a Democrat, which is not merely something I’ve never done, but something I thought I’d never do.

I have relatives who are in love with the idea of Hillary as President, and we’ve exchanged some interesting viewpoints. I’m writing this mainly for them, not to sway their vote — it would be a dull world where everyone agreed on everything — but simply to clarify a few things that Facebook posts can easily obscure.

The United States has been in the midst of a strange economic experiment for the last forty years. It’s actually not so much an experiment, as a recurring fever, like malaria: I call it a fever, because it potentially has as dire consequences as a malarial fever. Our current episode started about the time I came of age as a voter, so my entire political life has been lived under its influence.

It has a lot of names. During the episode we suffered in the late 1800’s and early 1900’s, they called it laissez-faire.  The current episode has been called “trickle-down,” or “supply-side,” or simply “deregulation,” all of which refer to various fits and tics the fever produces. But the basic thrust of the process could be called “privatization.” It’s a process by which public property becomes private property, and private property becomes political power to turn still more public property into private property.

More simply still, it’s the process by which “ours” becomes “mine.” It’s the gradual theft of something called “the common wealth.”

My concern isn’t really with the theft, as such — though it’s obnoxious — as with the consequences of that theft. Let me see if I can explain the concern simply, by talking about medicine.

We have some fabulous medical technology. A cancer diagnosis was a death sentence when I was a child — now, cancer is largely curable. Clogged arteries are now a routine matter of balloons and stents. We cut open the skull to relieve pressure from a hematoma or do various kinds of brain surgery, and we’re even fitting people with mechanical limbs that respond to their nerve impulses. Modern medicine is like something out of a science-fiction story of the 1960’s.

Modern medical practice is built on the knowledge and skills of physicians who practice medicine. The reason we have these physicians is that there is a huge body of people who are so well-paid, or have such princely insurance benefits, that they can afford to be treated by these physicians.

Let’s skip the question of whether the masses deserve such princely medical care. Maybe they do. Maybe they don’t. But without these masses puffing up the ranks of people who need heart surgery, for instance, and who can pay for heart surgery, we simply would not have the heart surgeons that we do. We would have fewer heart surgeons. We would have fewer schools teaching heart surgery. We would have fewer hospitals and clinics that support heart surgery. We would have less research, less practice, less experience. The entire field of heart surgery would suffer if there were fewer paying customers.

In the ultimate end-case of privatization, we might have, say, four hundred wealthy families that could afford these advanced medical procedures. Perhaps one individual, maybe two, in those four hundred families would actually need heart surgery in a decade. That’s not enough to support an entire specialty of heart surgery. Even if you decided to create a captive market, and kept dozens of heart surgeons on permanent retainer, just in case you needed one, none of them would have actually performed heart surgery on a human being — they’d have read about it in a book, and perhaps practiced on a dog, or a cow. Unless you kept the surgical facilities right in your mansion, and never left it, you’d need EMTs to follow you around who knew how to handle a sudden heart attack. You’d need to pay for all the equipment and medicines. Just in case.

We can extend this across the entire economic spectrum.

If you want something as humble as take-out pizza, there has to be a market for take-out pizza, which means lots of customers with plenty of easy money to waste on pizza.

Even indoor plumbing is about the masses. The busy royalty of old would just hire someone to follow them around with a bucket — they didn’t need indoor plumbing. The commoners couldn’t afford indoor plumbing even if it had been available.

We need a thriving middle class. It isn’t just about the money — it’s about the shape of our civilization itself.

Though it’s also about the money. Some of the top end investors get it: they call it “the velocity of money.” They call it a lot of different things.

But it has an older and far simpler name: prosperity. Prosperity is the common wealth. Not the private wealth.

To be a strong nation, we must be a prosperous nation. We must have a great deal of common wealth. If there is only private wealth, the wealthy will find nothing to buy with their wealth. If they rule a flea-bitten empire, they will, themselves, have fleas.

No one in politics would openly disagree with any of this, but our experiment — our fever — of the last forty years has been based on a recurrent delusion, a fever-dream, that if you give money to the rich, they will give it all back in the form of jobs and technology and an improved standard of living. It’s a delusion, because the rich will only create as many jobs as they absolutely must to meet demand for their products, “demand” meaning paying customers. If paying customers can no longer afford pizza, the pizza parlors will lay off workers — they don’t hire more people when demand drops off. With that layoff, there are now even fewer people to buy pizza.

It’s a vicious cycle.

The way out is fairly simple. You collect taxes from the people who have money — the rich — and you create what we now call “infrastructure.” Infrastructure is part of the common wealth: it’s available to everyone at no cost beyond the taxes. Things like highways, which facilitate trade. Things like military forces and police, so that we can trade and be prosperous without worrying about invasion and theft by force. Things like power networks and internet backbones and regulated airwaves. Things like clean water and sewage treatment and education.

What the infrastructure investment does is to create business opportunities. They are real opportunities, because they are freely available to anyone with nothing but a dream in his heart, and the ambition to follow it, and the willingness to work for it. They don’t have to already possess the patent, and the brand name, and the customer base, and the vast sums of old money.

Because of my intended audience with this post, I’d like to talk about one very particular piece of the common wealth: publicly-funded scientific research.

I’ve worked, in one sense or another, with privately-funded research for most of my life, and the first thing you learn is that you never call it research: it’s called “development.” There’s a reason for that — it’s always targeted toward profit margins. If it doesn’t “pay out” in a “reasonable” amount of time — usually a year or at most, two — it’s abandoned. It takes a very large and tolerant company to put up with even a year of unprofitable development.

Almost the only time a company will do real research is if it receives direct government funding to do so. Even then, it will often try to farm out the hard thinking to a publicly-funded university researcher. Management wants a green light — US dollar green — on all the speculative parts of a project before investing any of its own money in development.

I recently posted on Facebook a comment by none other than Bill Gates, founder of Microsoft, who observes pretty much the same thing.

Our forty-year fever has caused most of the serious and worsening pathologies in the university research community. Funding has become tighter, and tighter, and tighter. Funding committees have closed ranks against “frivolous” research — meaning research that won’t yield immediate, spectacular, and guaranteed scientific “profit.” This gives researchers a strong financial incentive to commit scientific fraud and hope that they don’t get caught. Research papers have vanished behind abusively-priced paywalls. Universities now patent discoveries, rather than making them part of the public domain.

Publicly-funded research is being privatized right out of existence.

Bernie Sanders is the first US politician I’ve heard in forty years who seems to actually get this — the fact that we are, and have been, headed in exactly the wrong direction regarding common and private wealth for at least forty years.

Q: Do we tax the wealthy, or give them tax cuts? A: We tax the hell out of them, and plow the taxes back into real public research, and infrastructure development, and the common wealth.

Q: Do we let the banks grow large, or cut them down to size? A: We cut them into itty bitty pieces, because banks exist only to facilitate the flow of money in a free economy, and you don’t need large banks for that. Large banks take large risks, including fraudulent risks, and then when they fail, they impede the flow of money fatally, like a blood clot in the heart.

Q: Do we allow universities to put students into lifelong debt for an education? A: No. Education itself is part of the common wealth, the infrastructure, and should be tax-paid, all the way through the highest levels.

Q: Is health-care a right or a privilege? A: It’s a right. Not for weepy reasons about how sick people somehow deserve it, poor things — though there is that — but to ensure that the medical profession itself remains robust.

Q: Should trade deals reduce — directly or indirectly — the wages of US citizens? A: No. That only forces the pizza parlors to close, and the doctors to drop out of medicine. It reduces the common wealth.

I see no evidence that Hillary understands any of this.

Maybe she does, someplace deep in the secret places of her heart.

But she has taken the political route of paving her path with the money of the wealthy, most of whom are deep in the convulsions of the fever-dream — it’s the foundation of her entire campaign strategy, both in 2008 and in 2016 — so even if she really gets it, she absolutely cannot say that she gets it. Not out loud. She can’t spook her fevered donors; she has to reassure them.

In fact, the only way that Hillary could take us in the right direction as a nation is to flat-out betray her donors. She has to reassure, and reassure, and reassure, and then when she gets into the White House, turn around 180º and slap them with high taxes and bank breakups and debt forgiveness for student loans and a national public healthcare program.

She’s too honest to do that. She’s courting the wealthy because she believes in the wealthy. She is not dishonest: she is fevered. She will do nothing to turn the country around, because she doesn’t think it’s going in the wrong direction.

If I felt Hillary and Bernie were headed within even forty-five degrees of the same direction on these hard-core policy issues, and others, I could consider putting my vote behind Hillary.

But I don’t see it. I think they are headed in opposite directions, and I think Bernie’s direction is the right one. It’s why I’m “feeling the Bern.”

There are two objections to Bernie’s platform that I hear a lot of, that are worth addressing:

“This is just Utopian wishful thinking.”

I’d agree with that, and run the other way screaming, except for the fact that the US went through this fever in the early 1900’s, almost died in the 1930’s, and recovered with exactly the same medicine that Bernie is prescribing. It’s called democratic socialism, and it’s what I grew up under as a child. It’s what most of the European nations are taking these days. It’s safe, and effective.

“There is no way Bernie is going to get his policies enacted.”

That remains to be seen. The truth is that neither Bernie, nor I, are wild-eyed visionaries crying out in the desert. Look to the rallies. Look to the enthusiasm and political engagement of the Millennials. Look to the widespread support among political Independents and even moderate Republicans. This is not an election, it’s the formation of a movement. It is bringing together a lot of support.

Yes, it’s possible that democracy in the US is dead, and that this whole attempt will fail completely. In which case, our economy will continue to rot out from under us, until the multinational corporate owners decide they can’t stand the stink of poverty among the US masses any longer and move somewhere else, leaving the US as a burned-out third-world nation. In that case, at least we’ll be able to say that we tried. By God, we tried.

But my expectation is that what Bernie will accomplish is to give the tiller a hard pull to what the fevered call “the left.” It will likely take a decade or two to complete the turn, and Bernie will of course have to leave the task to others. The point is not to finish the job. The point is to start it.

Because ultimately, this isn’t about me, nor even about us.

It’s about our grandchildren.


An Open Letter to Hillary Clinton

images-1Dear Hillary,

Since I know you are busy, I’ll come straight to the point. As I see it, you have exactly one course of action to take if you want to avoid walking through the rest of this election wrinkling your nose and checking the soles of your shoes. You’ve stepped in something quite unsavory, almost certainly by accident, and the only way to clean it off is to openly join the people calling for a new Democratic primary in Arizona.

You see, that primary reeks of being rigged. The butcher did not press his thumb on the scales — he sat on the scales. The election officials were clumsy, and arrogant, and stupid. It was so overt, it should probably result in criminal charges. But that is water under the bridge. You have a campaign to manage, and a primary to win, and here’s your problem.

If you complacently smile and claim your “victory” in Arizona, it looks as though you were in on the fraud. That wouldn’t make much difference if Bernie Sanders were trailing miles behind you in the polls. But he isn’t, and — as I’m sure you know all too well — he’s going to close the gap in the next few weeks. So you’re going into a tight contest with a blatantly fraudulent win on your side, and the fact that you would keep such a thing in a tight race makes it look like you believe you need such a thing. You can talk with your handlers about this, but I suspect that looking like an overtly corrupt politician willing to collude in election fraud to capture eighteen lousy delegates, is going to hurt you a whole lot more than those eighteen delegates will help you.

If, on the other hand, you turn down this “win” and call foul, you’re going to gain a lot of credibility with your supporters, your detractors, and all the folks on the fence. Who knows — if we have a subsequent honest primary in Arizona, you might even get all eighteen of those delegates back, anyway. Even if you don’t, you’ll gain some traction in subsequent races that you will lose if you stand by this fraud.

There’s a deeper and more important current to this, however, and despite your obvious intelligence and experience, I cannot shake the feeling that you simply don’t get it. So I’ll spell it out for you, in the hopes that you will get it.

It’s important.

In mid-2015, when this race was shaping up to be a polite bicker between you and Jeb Bush, I blogged that I was going to walk away from voting in 2016 altogether. That was, indeed, my intention — because frankly, I didn’t see any difference between you and Jeb. You’ll disagree, of course, and will think me a fool for failing to see the differences, and you may even be right. But if I am a fool, then I am a common fool, surrounded by many other common fools who also have stopped voting. And if the common fools stop voting, who shows up at the polls? Obviously, the uncommon fools.

This is why, if you win this nomination, you will face Donald Trump: he is the candidate of the uncommon fool. All of us common fools have long-since given up on politics, because we’ve come to believe — if it is not, indeed, a realization — that our vote simply doesn’t matter. The game is rigged.

A few years ago, I read a biography of Lorenzo di’ Medici, the man they called Il Magnifico in fifteenth-century Florence, and it was fascinating to learn that, despite the enthusiastic voting and the lotteries and the elaborate political machinery of the Florentine Republic that gave all citizens a full standing in government, somehow — somehowIl Magnifico always ended up as First Citizen, surrounded by a tight circle of his cronies. Just as his grandfather, Cosimo, had always been at the center of Florentine government, surrounded by his own loyalists. Just as Lorenzo’s son, Piero, ended up with the title of First Citizen, though he was utterly incompetent, and ended up turning the republic over to a religious fanatic and demagogue, Girolamo Savonarola, who was hanged and burned in the public square only four years after he took power.

You see, in the last forty years, all of you in Washington have lost the loyalty, the support, and the votes of us common fools. You are now courting the votes of the uncommon fools, and the truth you need to understand is that a narcissistic, sociopathic, gaslighting liar like Donald Trump is better than you at courting the vote of the uncommon fools.

If you succeed in taking this Democratic nomination with the stink of a cheap trick like Arizona trailing after you, and if — somehow — you squeak past Trump into the White House, you’re creating an even more serious problem for the future of this country. Arizona, followed by a Clinton presidency, teaches all us common fools that our dark suspicions were right all along, and that our votes simply don’t matter: that this whole thing is a big, empty sham where Il Magnifico, or his appointed heir, always ends up First Citizen. We will walk away, and abandon voting to the uncommon fools.

So if you defeat Donald Trump in 2016 with this Arizona farce still standing, you will need to defeat a worse monster in 2020, and with less support than you have now. Your successor will face something worse yet in 2024.

Call foul, Hillary. Give up your Arizona win in the short term, in the hopes you can win it back honestly in the long term.

On Hating Hillary

There’s an interesting post by someone who doesn’t understand all the vitriol that Hillary is catching from the liberals who should be part of her base. I think the author has missed the boat, however.

There are two candidates in this race who are saying that the US American political system is broken.

One is Bernie Sanders. His claim is that money has corrupted politics to the point that we are becoming — or have already become — a plutocracy with decorative democratic trappings, where the real economic and political systems are rigged in favor of the extremely wealthy. If we want to have any kind of real democracy in the future, now is the time to speak up, because the options are slipping away permanently even as we watch on television.

The other is Donald Trump. His claim is that the problem is Mexicans, Muslims, Blacks, Chinese, cripples, liberals, the politically-correct, and not nearly enough war, torture, and autocracy emanating from the White House. He’ll personally fix everything and make America great again. Trust him.

But these two both agree, and say out loud, that the system is broken.

None of the other candidates, including Hillary, seems to believe that the system is broken, or even that there is anything particularly wrong with it. They all call for incremental change to what they seem to see as a centrist, traditional, entirely functional government; a government that is perhaps going through a bit of a rough patch right now, but will inevitably right itself as it always does.

For those of us who believe, rightly or wrongly, that the system is in fact seriously broken and in danger of slipping away entirely, and who are horrified by what we have seen the US become in the last forty years, particularly the last ten, there are really only four ways to view Hillary.

  1. We are simply wrong. There really is nothing wrong with the US government, or the US economy. We’ve been listening to horror stories from the sensationalist media outlets, whether it’s the Daily Kos or Fox News, and we are — frankly — only a half-step removed from wearing tin-foil hats to keep the CIA from altering our brain waves. Hillary is the only credible candidate, and Sanders and Trump are both demagogues playing to our baseless fears. We need to get some therapy, and get over it.
  2. We are right to be horrified by the US political system, but it really hasn’t changed in the last forty years, or the past two hundred — we’ve simply grown up beyond our golden childhood view of America, and have come to realize that politics is a barnyard full of manure, as it has always been, as it will always be. Hillary is the best candidate, the quintessential, experienced adult, someone willing to go out and muck the barn, today, tomorrow, and the next day. Sanders is an idealistic fool, and Trump is a fascist demagogue. We need to finish growing up, get used to the smell of manure, and get on with life as adults.
  3. We are right to be horrified by the US political system, and Hillary — for whatever reason — simply doesn’t see the problem. She has become like George H. W. Bush during the 1992 debates, when Bill Clinton offered his election-winning zinger, “It’s the economy, stupid.” GHW Bush — a white, cultured, educated, wealthy, well-connected, hereditary player in the Washington system — had become so disconnected from America that he was, or at least seemed to be, genuinely clueless about what most people were experiencing in the country he served during twelve years of stagflation and economic and political scandal. Hillary is likewise clueless, and by the time she figures it out — if she ever does — she’ll be a lame duck at the end of her last year as president. Sanders is the only credible choice, and Trump is a fascist demagogue.
  4. We are right to be horrified by the US political system, and Hillary is a corrupt tool of the system, and part of the problem. She’s bought and paid-for; whatever rationalizations she uses to sleep at night are her problem, and should not become ours. Hillary is no better than Jeb Bush, no different from Jeb Bush, and is not a viable candidate at all. Sanders is the obvious choice, and Trump is a fascist demagogue.

The liberals who hate Hillary fall, I suspect, into category #4.

Very few people will accept that they belong to category #1, of course, even if they do belong to category #1. It’s worth mentioning for completeness, but no one is going to admit to belonging here.

I could probably be talked into category #2. I grew up with a much rosier view of US history, and of human herd instinct, than I’ve developed in more recent years. I have to say, though, category #2 makes it very hard to vote, or even care what becomes of the barnyard.

But I actually fall somewhere between #3 and #4. I know a little bit about how confirmation bias works, and how people fall in with other people who agree with them and then conform to the group. There isn’t a lot of moral struggle that actually occurs on the slide into corruption: you simply adopt the attitudes of your peer group, avoid censure, bask in the praise. You accept and repeat the most common rationalizations, and your peers nod thoughtfully and smile and make you feel like you said something smart and relevant. You come to feel you are doing right, and if it’s less than perfect, well, for God’s sake, you’re only human.

So I don’t think there’s really a lot of difference between #3 and #4 in practice. It’s why I don’t hate Hillary.

But I don’t trust her.

It isn’t that I think she’s “untrustworthy” in some abstract sense, and I certainly don’t think she answers to corporate overlords whose minions drop into her office and remind her that she owes them favors, then tell her what she’s going to do next. That’s how things work in the X-Files, which is television fiction. It isn’t how things work in real life.

I don’t trust her judgement.

There’s the interview with Bill Moyers where Elizabeth Warren talks about her experience talking with First Lady Clinton about the bankruptcy bill the Republicans pushed through Congress, where she praises Hillary for her quick grasp of the horrors of the law being proposed, and then comments on Hillary’s flip-flop on essentially the same bill as a Senator only a few years later.

What struck me was not Hillary’s flip-flop, but that Warren had to explain this to Hillary in the first place.

We have here a bankruptcy bill drafted by the banks, and people representing the banks. Bankruptcy law is more correctly called “bankruptcy protection law,” and its whole purpose is to protect individuals who are over their heads in debt from having banks do horrible things to them — things that banks used to do quite commonly before there were such bankruptcy protection laws in the US.

So if a bank were to come to me with a new bill that proposes changes to bankruptcy law, I would immediately suspect that this bill removes protections that prevent banks from doing horrible things to people to increase their profits — harvesting organs, selling children into slavery, imposing indentured servitude, or perhaps more subtle things. I would expect a person of good judgement to seek out people like Elizabeth Warren, and ask bluntly, “What’s wrong with this bill? Tell me what I’m not seeing.” I would even expect a person of good judgement to seek out people who have an axe to grind with the banks, to see if they can make a solid argument against the proposed law.

This is what Franklin Roosevelt used to do. He’d pull in experts with widely varying opinions, and he’d put them in a room together and make them argue. He would sit and listen to their arguments. There were reportedly a great many tempers lost during these arguments. But some of the best ideas in the history of the US came out of this.

That apparently did not happen with the Clintons and the bankruptcy bill.

In the 1990’s, Hillary pushed hard for an early version of universal health care, based on the HMO model. I’d been involved as a patient in HMO care in the 1980’s, and it was utter shit. There is nothing good to say for what I experienced. This was obvious to anyone who had ever dealt with an actual 1980’s HMO. This should have been obvious to anyone at all simply from the stated objective of the HMO model, which was to act as a barrier to patient care. Hillary wanted to make this HMO model the law of the land, based on the recommendations of a few corporate tools who worked at for-profit health insurers. It was such bad judgement that the stink of it has followed Hillary to this day.

In 2003, Senator Clinton stampeded with the herds on the Iraq war. Hillary is clearly well-received by the biggest banks, which caused the 2008 meltdown. She’s recently cited Henry Kissinger as a trusted resource.

I think there’s a pattern here. I think Hillary is particularly vulnerable to confirmation bias, based on her absolute trust in “her people.” I think this leads her into making very bad judgements.

So I have to ask, what will Hillary do if the for-profit prison industry comes to her with recommendations for expanding their business model? What will she do if the banks come to her and pitch privatization of Social Security? What will she do if policy analysts from some neocon think-tank propose war with Iran? What will she do when arms dealers push for dropping nuclear weapons on terrorists in Afghanistan, and then tell her that, as a woman, she doesn’t have the cojones for the job?

I don’t hate Hillary. But I don’t trust her judgement at all.

The Problem with Capitalism

stock-photo-68899959-cracking-dollar-symbolIn a previous post, I offered a simple and flexible definition of capitalism:

Capitalism is the idea that ownership, in and of itself, entitles the owner to the work of others, combined with the idea that ownership can be bought and sold.

This definition of capitalism ties together all of the various forms of capitalism we’ve seen in the last five centuries — such as mercantile capitalism, industrial capitalism, and financial capitalism — and connects it to the European feudalism from which it developed. But this definition does something else, as well: it clarifies the central flaw in capitalism.

Ownership entitles me to profit from the work of others; I can then use that profit to purchase more ownership, which entitles me to even more profit.

This is what engineers call a positive-feedback loop, or an amplifier. Its natural function is to amplify wealth.

Capitalists also believe in proportional amplification: that their returns on investment should be proportional to their investment. If they buy two houses and rent them out, they should see twice the profit they would see if they buy one house and rent it out. This seems only fair.

Proportional gain and exponential growth are, mathematically, the same thing. So capitalists believe in the exponential amplification of wealth.

This is more than just an arbitrary expectation: it is actually the moral center of capitalism. The argument goes something like this.

“Yes,” the capitalists say, “we are getting wealthy, extremely wealthy. And well we should: for every $166 that we gain in wealth, the poorest people in the world, the non-producers, the parasites, the bums and the wasters, get one dollar in an improved standard of living. We’re doing all the work, taking all the risks, and the poor are getting this dollar for free. For absolutely nothing. So just shut up and show a little gratitude for the better, wealthier life we are bringing to the whole world.”

This is how capitalists view themselves and what they are doing. They are improving the world, and they should not be asked to “give back” anything, because everyone is already getting the benefits that their efforts bring. Railroads. Automobiles. Computers. Every dollar they invest into exponential economic growth benefits everyone, and that benefit — like their fortunes — also grows exponentially.

If they “give back” through taxes, that money does not go into the exponential growth machine. It’s wasted on handouts. That slows down the exponential growth of the $166 to which they are entitled, of course, but it also slows the exponential growth of the $1 that goes to the rest of the world.

Getting themselves rich, according to the capitalists, is the fast track to eliminating all poverty through economic progress. For them to pay taxes is, in their view, an  immoral use of money that would be better spent getting them rich and promoting economic progress for the poor.

This is the theory of “trickle-down.” The rich get richer. The poor get dragged up with them, whether they participate, whether they even want to be dragged up. A rising tide lifts all boats.

Now, for capitalists to experience sustained exponential growth of their wealth in this vision of progress, the economy as a whole must also grow exponentially.  When economists pronounce that the United States showed a “healthy growth” of 2% last year, with the expectation that it will grow at least 2% next year, and again the next, they are affirming the exponential growth of the US economy.

Even if we limit the number of capitalists in the world — let’s say that only the richest 500 people in the world are allowed to practice capitalism — the global economy must grow exponentially in order for economic progress to proceed. Even if we cap the exponential growth of these 500 fortunes at some arbitrary amount — say, one percent — the global economy must grow exponentially.

This is the mathematically unavoidable consequence of exponential growth.

Suppose, however, that the economy stops growing exponentially — it might still be growing, simply not exponentially. In that case, the exponentially growing gains that capitalists continue to draw from their investments would be taken out of an economy that did not keep up with what they are taking out. That wealth has to come from somewhere — which means, ultimately, that the capitalists’ growing wealth comes at the expense of other people’s wealth.

This is generally called theft.

With global exponential economic growth, capitalism arguably provides the greatest economic good for everyone. Without global exponential economic growth, capitalism becomes a form of theft.

The core problem with capitalism is that sustained exponential growth is not, and cannot be, sustained in nature.

This is self-evident. An exponentially growing economy is a doubling economy. With a “healthy” annual growth of 3%, the economy doubles every 24 years. That means we must eat twice as much beef, use twice as much gasoline, buy twice as many cars, build twice as many houses, stay in twice as many hotel rooms, watch twice as many movies. All economic activity must double: from Ambulances to Zambonis. Any economic activity that falls behind this brutal doubling pace requires that other activities more than double, or that new economic activities be spawned, to take up the slack.

Then, in another 24 years, the economy must double again.

A more modest 2% annual growth takes 36 years to double. It’s exactly the same problem, on a slightly extended timetable.

We live on a finite planet. It doesn’t take long for the exponential growth of resource exploitation to hit the bounds of the earth.

When people argue that this just isn’t true, their arguments generally fall into three categories: technology, the information economy, and the idea of “getting off this rock,” or migration to other planets.

Before I touch on these, I’d like to deal with the first and most specifically human of all approaches to this problem: denial and intellectual dishonesty.

I’m going to tag the professional economists, here: they have covered up the impossibility of sustained exponential economic growth with bad accounting, and a vague concept called “wealth creation.”

Let me illustrate with an example. Building a paper mill creates paper, but it doesn’t create wealth: it transforms natural wealth (trees, water, chemicals) into human wealth (paper). Humans value paper over trees, just as magpies value shiny objects over dull objects, so people consider a paper mill to be something that creates wealth. However, natural wealth exists in its own natural economy — we call it an ecosystem — of which humans are also a part, and upon which humans depend for air, water, food, and other more subtle necessities of life. In this natural economy, paper is considerably less valuable than trees, and paper mill effluent is downright destructive. So if we want to say that a paper mill creates (human) wealth, we need to acknowledge that it does so by destroying (natural) wealth.

The destruction of natural wealth is completely ignored by economists as an “intangible.”

This is irresponsibly bad accounting — robbing from Peter to pay Paul, but never keeping track of what was stolen from Peter, or even acknowledging Peter’s existence — covered up by the specious idea that wealth is being created out of nothing, which is not only untrue, but obscures the obvious question of what happens when Peter goes broke.

Now, trees grow back, and in the long run, every ream of paper ends up in a landfill which, in a few thousand years, will become a new forest. So in the global picture, we could state the following general principle:

Wealth is never created or destroyed. It is only moved and transformed.

The issue is in the transformation, because some transformations are — on any practical human time scale — irreversible. Burning petrofuel is one of these irreversible transformations. Fishing a species to extinction is another. It’s quite possible to exhaust the carrying capacity of an ecosystem and disrupt it fatally — to destroy its natural wealth completely, at least on any time-scale of interest to the human species. It’s possible to kill a forest. It’s possible to kill an entire planet. One way to guarantee that will happen is to use bad accounting to write the natural economy completely out of the economic equation, and then consider exponential growth of the one-sided human economy a “moral imperative.”

This is exactly what capitalism does.

There’s nothing new or even uniquely human about this, of course. Most organisms exploit their ecological niche to whatever extent they can, and they often render the ecosystem they rely upon uninhabitable. The phytoplankton species that gobbled up most of the atmospheric carbon dioxide millions of years ago and polluted the air with its waste product, oxygen, killed off its entire microscopic civilization, leaving only a fractional, gasping remnant of its former glory. That opened the door, of course, to oxygen-breathing life, such as our own human lives.

Countless human societies have done the same thing, on a smaller scale, and those societies were forced to either migrate elsewhere, or starve to death. We see plenty of archaeological evidence of both. We don’t get a free pass just because we have delusions of being God’s Little Helpers.

Indeed, a warning against ecocide is one reading of the story of being driven out of the Garden of Eden in the Christian Bible.

There is an important shift of awareness that happens as soon as we recognize the existence of a natural economy, and the fact that our human wealth creation depends upon natural wealth destruction. This shift of awareness raises the question of how capitalism even took root, much less lasted as long as it has.

Surely the fact that capitalism has been so successful is clear evidence that everything I’ve said so far is wrong?

The question is answered by looking at when capitalism took off: the year 1500 is the turning point, in round century numbers. What happened in 1500? Simply this: the European discovery, conquest, colonization, and exploitation of what they called “the New World,” the North and South American continents: an almost unimaginable repository of easily-accessed natural wealth. Timber. Silver. Gold. Rubber. Maize. Fertilizer (guano). Space, vast empty space for an expanding population, space left in the wake of European diseases that wiped out as much as 95% of the indigenous populations of the Americas, leaving two essentially empty continents to exploit.

The problem now, of course, is that the New World has become the Old Americas. The silver mines at Potosí are played out. The Colorado, California, and Yukon gold rushes are over. The US steel belt has become the rust belt. The vast stands of old-growth timber are only a shadow of what they were. The rich fishing-grounds have become oceanic deserts. US oil fields are dry. The various colonies the Europeans spawned around the world during their colonial phase to “develop” (exploit) resources have all flattened in growth, and can no longer keep up with the demand for exponential growth.

The capitalist fuel tank is pushing Empty, and there is nowhere on Earth left to conquer.

Some people say that this is defeatist nonsense. They say that technology will save us. Some think that technology can actually keep up with exponential demands: those people simply don’t understand what the word “exponential” means. Those who do understand the word, however, will still argue that the eventual end of capitalist growth is years, generations, or even centuries down the road due to potential advances in technology.

So let’s talk a bit about technology.

People have been developing technology to fight resource shortages since long before we were homo sapiens. Technology is hardly a new concept. Even crows and ants develop technologies to gather resources necessary to their survival.

However, there’s a general thing about technology that people seldom appreciate: our new technologies typically extract more wealth from the natural economy than the technologies they replace, just to sustain the same level of resource exploitation.

Now, it is possible to develop win-win technologies, where both human and natural wealth are increased. But none of these win-win technologies can give us the exponential growth we demand under capitalism: their growth curve is generally an asymptotically-slowing growth toward a maximum steady-state limit, which could be called the “carrying capacity” of the technology. Permaculture, for instance, improves the soil as we farm it. But it can only improve the soil to a certain maximum carrying capacity, after which you can’t enrich the soil any further, and you can’t increase your crop yield without destroying the balance and extracting natural wealth from the soil.

So capitalism can’t really use win-win technologies to support its exponential models, and doesn’t normally develop them. It turns, instead, to extractive technologies that can be (temporarily) scaled up on an exponential curve at an ever-increasing cost to the natural economy, to fool us into believing that our human economy is once again growing at a “healthy” exponential rate. Then extraction hits its peak, and we need a new and more damaging extractive technology to extend or replace the old.

Up until recently, we’ve been able to do this and quietly collude with the economists in ignoring the natural economy, simply because the natural economy was so vast compared to the size of the human economy. It was, after all, only a few decades ago that we said, “The solution to pollution is dilution.” That was on the tip of every civil engineer’s tongue. It’s what they were taught in college.

No one teaches that any more, because every new technology is beginning to show almost immediate, and global, feedback. We invent DDT, and entire food chains are poisoned and begin to die out within decades. We invent CFCs, and the Earth’s protective ozone layer starts to break up. We improve corn yields, and then honeybees drop dead in large enough quantity to cause concern about the future of agriculture itself. We build cars, and polar ice melts. We make the desert bloom, at the cost of draining ten-thousand-year-old aquifers.

When our technological fixes start to immediately reflect back off the limits of the planet, we’re very close to the end of all technological fixes — and therefore, the end of growth capitalism that depends on technology to keep feeding it with an exponentially increasing supply of resources.

Now, it isn’t impossible that a technological “silver bullet” is just waiting to be developed, that will kick the can down the road another few centuries or even further, such as the so-called “cold fusion” process I’ve written about here and here. But this really underlines my point: for capitalism to continue operating, it pretty much needs a technological miracle. Sustained exponential growth being what it is, even a miracle is only a temporary (and surprisingly short-term) fix.

Technology isn’t going to solve this problem. It will only delay it.

Then we have this concept of the Information Economy, an economic model based on information rather than goods, dealing in products which don’t require raw materials to produce. It’s not quite true that they need no raw materials, but that’s a quibble; the real problem with the Information Economy is Bishop Berkeley’s question from philosophy: if a novel is written in a sea of novels, but no one has time to read it, does it really exist? Certainly it doesn’t turn a profit if no one buys it.

Again, this is a matter of bad accounting. The critical resource in the information age is people, more specifically, people’s attention, which is a finite resource. As each of us becomes more desperately involved in using our attention to produce an exponentially growing corpus of “content,” we certainly don’t have time left to read anyone else’s content, much less pay for it.

Unless, of course, human population continues to expand exponentially. But people are not information: they require space, food, water, and air. Population will not continue to expand exponentially.

The Information Economy isn’t going to solve this problem.

Finally, there’s the idea that if we can just “get off this rock,” our problems will be solved. We can find another New World somewhere out there in the darkness of the Final Frontier.

I’ve explored the mathematical problem here, and the physical problem here. Even if we solved the physical problem — and that isn’t impossible, though it requires physics no one has yet proposed, much less demonstrated — the mathematical problem is still intractable. No matter how fast we expand through space, the need for exponential economic growth backs us into exactly the same corner a handful of centuries down the road.

Space travel isn’t going to solve this problem.

Capitalism is built on a completely false premise: that wealth can be created out of nothing, and can sustain exponential growth. In reality, capitalism creates human wealth by destroying natural wealth, which we need as humans to survive. Exponential growth of the human economy means exponentially increasing destruction of the natural economy, and we’ve already reached a scale where our depredations have global consequences.

Capitalism is driving the human race toward extinction.

In a subsequent post, I’ll write about some of the changes we’re already seeing in capitalism as it tries to adapt to this reality.