STRANGE TIMES

You Tube version

Stunning video by Hans Rosling, the Director of the Gapminder Foundation which shows how much the wealth of the world has increased in the past 200 years.

brown – Europe
red – Asia
green – Middle East
blue – Africa
yellow – Americas

Most of the commentaries on the web praise this video to the skies. It deserves praise for its overall assessment of the progress of capitalism but there is also a tendency to fast forward through the bad times.

In 1810 the wealthiest countries were the UK and the Netherlands. The average life expectancy of every country was below 40.

Enter the industrial revolution and the wealth and life expectancy begins to dramatically improve for the countries which do industrialise. This is true although there is no mention of the appalling working conditions, the very long working hours, the child labour in the emerging factories of Britain and elsewhere. The birth pangs of capitalism  led to major upheavals in 1848, the shortening of the working day, the Factory Acts, etc.

As the wealth of countries increases then so does the gap between rich and poor countries. Rosling does mention this (at 2:35). It also needs to be emphasised that the scale he is using on the horizontal wealth axis is logarithmic, showing the per annum categories of $400 (roughly one dollar per day), $4000 ($10 per day) and $40,000 ($100 per day). If he had used a linear scale then the gap between rich and poor countries would be far more pronounced. The gap between the richest and poorest countries taken from  the closing and opening screens of this video is at least 100 times today compared with less than 10 times in 1810 (1)

He does mention the catastrophe of WW1 but then fast forwards through The Great Depression and WW2. It is far easier to fast forward through the bad times than live through them or explain them.

His focus is on post 1948, the boom years of capitalism.

By 1985 even in the poorest country, Mozambique on just $366 per year, the average lifespan was three years higher than Britain in 1810.

Wealth has increased but so has inequality. Rosling visually extracts Shanghai out of China towards the end, showing that it is similar in wealth to Italy. Then he extracts the poor inland province, Guizhou, and compares it to Pakistan. Finally, he shows how the even poorer rural part of Guizhou has a wealth index similar to Ghana, Africa. Certainly in this section there is no brushing over the real world problem of inequality in China.

He finishes on an optimistic note. The gap between the rest and the west is now closing. In the future it is possible that everyone can make it to the healthy and wealthy corner with more aid, trade, green technology and peace. Rosling slips into an optimistic version of political correctness in this parting message. This is far more welcome than the prevailing doom and gloom about the future but is still political correctness.

If we assess Rosling’s state of the world against the three criteria outlined in my earlier article, The Achilles Heel of Capitalism, then how does he go?

standard of living has increased dramatically – correct

inequality has increased too – covered well in places, but the logarithmic wealth scale distorts the huge and growing gap here

capitalism is an unstable system which can’t avoid economic crisis – Rosling fast forwards through the bad times

(1) The dynamics of the gap between rich and poor countries is further discussed in Bill Warren’s book, Imperialism Pioneer of Capitalism (1980)

Tyler Cowen The Inequality That Matters

Capitalism has delivered an increased standard of living to those it exploits, which explains its longevity. Although Bill Gates is far, far wealthier than the average joe this in itself will not create a huge problem for the system, provided average joe feels that his or her lot is improving as well. Tyler Cowen’s article compares living standards today with 1911 and concludes correctly that most people feel that capitalism has delivered more prosperity over time.

At the same time, social inequality has increased. But people may put up with increasing inequality as long as their standard of living is not threatened. Once again the statistical facts are clear on increasing inequality and the social fact is clear that overall people put up with it, they don’t take it as sufficient reason to rebel. In practice the moral outrage argument put forward by free market anarchist Kevin Carson (1) (Damning Corporate Capitalism With Faint Praise) is not sufficient for most people to change their outlook. As long as the system delivers for most it is safe.

However, finally, it is the inability of capitalism to avoid economic crisis that is its real achilles heel. Tyler Cowen concludes on a pessimistic note:

“We probably don’t have any solution to the hazards created by our financial sector, not because plutocrats are preventing our political system from adopting appropriate remedies, but because we don’t know what those remedies are … Is the overall picture a shame? Yes. … Will it again bring our economy to its knees? Probably”

So, after arguing that increasing inequality doesn’t really create a threat to the system, Tyler Cowen concludes that the system is still under threat simply because we don’t understand how it works. Indeed, we don’t yet understand how it works …

(1) See Carson’s Mutualist blog for his own perspectives. In his homebrew manifesto Carson argues that big is bad and advocates resilient neighbourhood, backyard, desktop technologies as a progressive substitute. He has also published a significant study of political economy (Studies in Mutualist Political Economy) Many of Carson’s articles are published at Center for a Stateless Society. I noticed an article there attacking political environmentalism (Green Rising: The Dangers of Political Environmentalism) because extreme Greens value the earth more than humans. Carson and the free market anarchists deserve an extended footnote because these sorts of positions are well worth further discussion.

Sheldon Filger who maintains a regular commentary on the current economic crisis (Global Economic Crisis) provides this prognosis for 2011:

Among the many clouds on the horizon regarding the global economic outlook for 2011, here are three:

1. Greek sovereign debt crisis not cured by the massive Eurozone and IMF bailout. Knowledgeable observers have pointed out that mathematically, it is not possible for the Greek state to deflate its economy in line with deficit reduction commitments required under terms of the bailout package, while simultaneously engineering a miraculous return to robust economic growth at a level sufficient to service the exploding public debt. There is already word being leaked to the Greek press by government officials that after the current bailout package expires in 2013, Athens will seek to restructure its sovereign debt.

2. Irish banking crisis far from over. After receiving a staggering level of bailout assistance from the EU and IMF to cover the country’s insolvency due to guaranteeing the obligations of Anglo Irish Bank ( along with all other banking institutions in Ireland), the Dublin authorities were forced to inject nearly $5 billion into Allied Irish Banks, another bankrupt institution. As with Greece, it seems almost a certainty that Ireland will eventually seek to restructure its public debt.

3. China, the one ray of hope in the global economy due to massive government injections of liquidity that have led to high levels of supposed growth during the global economic crisis, is now beginning to raise interest rates in a frantic effort aimed at reining in burgeoning levels of price inflation. This could lead to a tightening in the Chinese economy, combined with a catastrophic deflation in the Chinese real estate market. Any downturn in China will reverberate with dire impact on the overall global economy.

Wandering Earl, a recent traveller to Kurdistan reports his impression of the people of a whole region who love George W Bush:

The Kurdish people are incredibly fond of foreigners, especially Americans, and not an hour goes by without a Kurd telling you how much they love George Bush and the USA. The Kurds benefited immensely during Bush’s eight year presidency, as the take down of Saddam led to a safer, freer and more autonomous Kurdistan.
– How safe is travelling to Iraq

History and Helplessness: Mass Mobilization and Contemporary Forms of Anticapitalism by Moishe Postone (pdf 18pp)

This article is an analysis of the reasons behind the malaise of the Left which has in common some of the themes discussed at this site as well as raising some new angles

For example, the following quote outlines the superficiality of the reflexive anti-Americanism of many on the “left” in response to the 9/11 attacks:

“Let me elaborate by first turning briefly to the ways in which many liberals and progressives responded to the attack of September 11. The most general argument made was that the action, as horrible as it may have been, had to be understood as a reaction to American policies, especially in the Middle East. While it is the case that terrorist violence should be understood as political (and not simply as an irrational act), the understanding of the politics of violence expressed by such arguments is, nevertheless, utterly inadequate. Such violence is understood as a reaction of the insulted, injured, and downtrodden, not as an action. While the violence itself is not necessarily affirmed, the politics of the specific form of violence committed are rarely interrogated. Instead, the violence is explained (and at times implicitly justified) as a response. Within this schema, there is only one actor in the world: the United States.

This sort of argument focuses on the grievances of those who carry out such actions without engaging the framework of meaning within which those grievances are expressed. The actions that flow from those meanings are taken simply as expressions of anger, however unfortunate. Such arguments neither interrogate the understanding of the world that motivated this violence nor critically analyze the sort of politics implied by violence directed intentionally against civilians. Consequently, such arguments can become implicitly apologetic rather than political; they make little attempt to understand the strategic calculations involved — not so much of the bombers as of their handlers — and ignore issues of ideology. It is a serious error, for example, to interpret the felt grievances underlying a movement like al-Qaeda in narrow terms, as an immediate reaction to American policies and Israeli policies. This ignores too many other dimensions of the new jihadism. For example, when Osama bin Laden speaks of the blow inflicted on the Muslims eighty years ago, he is not referring to the founding of the state of Israel but to the abolition of the caliphate (and, hence, of the purported unity of the Muslim world) by Ataturk in 1924 — long before the United States was involved in the Middle East and before Israel was established. It is noteworthy that the vision he
expresses is more global than local, which is one of the salient features of the new jihadism, in terms of both the struggles it supports (transforming them into manifestations of a single struggle) and its driving ideology. And an important aspect of the global character of that ideology has been anti-Semitism.

Addressing anti-Semitism is crucially important when considering issues of globalization and antiglobalization, even if it can be subject to misunderstandings because of the degree to which the charge of anti-Semitism has been used as an ideology of legitimation by Israeli regimes in order to discredit all serious criticisms of Israeli policies. It is certainly possible to formulate a fundamental critique of those policies that is not anti-Semitic, and, indeed, many such critiques have been formulated. On the other hand, criticism of Israel should not blind one to the existence today of widespread and virulent anti-Semitism in the Arab/Muslim world. As I will try to elaborate, anti-Semitism poses a very determinate problem for the Left.”

Continue reading ‘Postone’s analysis of the malaise of the “left”’

The next Melbourne  Monthly Argument looks like being a ripper!

Topic: The wars in Iraq and Afghanistan: Can our participation be justified?

When: Thursday December 9 at 6.30pm for 7.00pm start. Free admission. No need to book. Meals available from 6.00pm.
Where: The Function Room, The Dan O’Connell Hotel, 225 Canning Street (corner of Princes Street) Carlton. ( Melway 2B J4)

Main speakers:

• Major General Jim Molan (Retired senior officer in the Australian Army, author of Running the War in Iraq, Chief of Operations, Headquarters Multinational
  Force in Iraq (MNF-I) 2004-2005) )
• Adam Bandt ( Green member for Melbourne in the House of Representatives.)

Panelists:

• Professor Richard Tanter (Director of the Nautilus Institute,  RMIT.)
• Jeff Sparrow (Editor of Overland magazine.)
• Arthur Dent (Previously known as Albert Lange)r.

Chaired by Darce Cassidy

There are many schools of economic thought. I have listed more than twenty (at the bottom). It’s important of course to have some real understanding of these various schools. However, Marx stands alone for his work on understanding the fundamentals of how capitalism works, its inner machinations. His work was a critique of the political economy that came before him and in its fundamentals delves far deeper than the economics that has preceded him. Although the person is long dead his ideas are still very relevant and in need of an update.

It is generally acknowledged that the most difficult part of Marx is Chapter One of Capital, titled Commodities. It has taken me quite some time to get my head around it. I believe that most people would require a guide or guides to understand it. It also requires a commitment to slow, deep thinking. I’m listing here some resources I have found useful with some short notes as to which areas they cover.

Marx, Karl. A Contribution to the Critique of Political Economy
This was published in 1859 by Marx before he wrote Capital. So it provides a briefer overview of his argument. It is useful to compare Contribution with Capital as well as the differences between first and second editions of Capital. There is considerable redrafting and evolution in Marx’s thinking. Contribution also contains a section on Method, which is famously missing in Capital.

Marx, Karl. Capital Volume One, Chapter one: Commodities (first published in German, 1867)
There are 4 sections to Chapter One
Section 1: The Two Factors of a Commodity: Use-Value and Value (the Substance of Value and the Magnitude of Value)
Section 2. The Two-fold Character of the Labour Embodied in Commodities
Section 3. The Form of Value or Exchange-Value
Section 4. The Fetishism of Commodities and the Secret thereof
This must be one of the most contested, interpreted and reinterpreted texts in the history of texts. We can’t expect to just read and understand this text. It does need to be gone over very carefully and of course a good conversation along the way helps with learning, a lot.

Fine, Ben and Alfredo Saad-Filho. Marx’s Capital (2004)
This is a relatively short (180 pages) introductory account of the central issues of Marx’s political economy and its brevity might appeal as a way to start.

Harvey, David. The Limits to Capital. (2006)
David Harvey has written lots of books including volumes devoted more closely to reading Capital. He also has a series of online videos about Volume One. This book by Harvey is the one I have been reading. He is a very good writer and interpreter overall of Marx IMO (although I am puzzled by his sometimes advocacy of a zero growth future) and provides many footnotes and references for further study.

Rubin, Isaak Essays on Marx’s Theory of Value (written circa 1928)
I have found this one extremely useful for understanding the form of value, as distinct from the magnitude of value, eg. Chapter 12. Content and Form of Value. The form of value has been missed or neglected by some interpreters.

Fine, Ben and Milonakis, Dimitris. From Political Economy to Economics: Method, the social and the historical in the evolution of economic theory (2009)
This contains some brief but very good sections explaining value theory. They are situated in a broader overview of the whole history of the economic methods of different schools, which helps to fill a gap left by Marx. It is quite an amazing feat really to compare the methodology of the major schools of economic thought in one volume.

Saad-Filho, Alfredo. The Value of Marx: Political Economy for Contemporary Capitalism.
Currently this is one of my favourite interpretations of Marx’s value theory and luckily it is online. I really like the first chapter which taught me new things about materialist dialectics and the subsequent chapters do a good job of critically explaining different interpretations of value theory including some of the more recent ones. I recommend reading the footnotes too, they are very informative.

Rosdolsky, Roman. The Making of Marx’s Capital (first published circa 1968)
Rosdolsky gained some insights into controversies about Marx’s value theory by reading work by Marx published long after his death, such as Grundrissse. Rosdolsky is not a great writer but he knows his Marx and he sets the record straight in a number of instances.

Quite a few of these resources are available on line at the Marxist Archive. Personally I find it best to buy them or print off the chapters I want to study, since the material is too dense to assimilate just by reading. My own study style is to make marginal notes and also to compile separate notes as I go along. If anyone can just read Marx and pick him up like chewing minties then good luck, i would like to meet you.

Of course all of this reading is  rather daunting. It’s a grunt. But it would be great to grow a community who understand and discuss these ideas and their application to the current economic crisis. Now then, we can’t really apply Marx’s ideas to the current economic crisis if we don’t understand them, can we?

List of Economic schools of thought:

• mercantilism
• physiocrats
• classical
• marx
• neo classical (marginal theory of value)
• keynesian
• neo classical synthesis or neo keynesian or neo classical keynesian
• welfare economics
• new keynesian
• post keynesian
• chartalist
• austrian
• monetarist
• chicago school aka neo liberalism
• neo ricardo – sraffa
• complexity theory – econophysics
• complexity economics
• dynamic stochastic general equilibrium
• institutionalist or evolutionary or innovation economics
• behavioural economics
• public choice theory
• rational choice theory
• social choice theory
• information economics
• ecological economics
• thermo economics
• energy economics
• neuro economics
• experimental economics
• first chicago school
• mutualist political economy
• game theory
• agent based computational economics
• AI economics
• Dynamic economics