Quote of the day: Capitalism and Liberalism

 "Capitalism is not a form of government."
- Ghost Dansing, comment to Roger Cohen's “Death of Liberalism” column, New York Times, 2014-07-14

http://www.nytimes.com/2016/04/14/opinion/the-death-of-liberalism.html?comments#permid=18202173:18206074

This link includes Ghost Dansing’s and my comments.

For what’s wrong with the world, look in the mirror

“They [shareholders] dream of dividends, and their dividends are the ruin of mankind.

“No, it is we who are to blame. You, Domin, myself, all of us.

“For our own selfish ends, for profit, for progress, we have destroyed mankind. Now we'll burst with all our greatness.”

- Karel Capek, R. U. R. (Rossum’s Universal Robots), 1920

Free market in telecommunications?

A free market does not exist in telecommnications.

Consider that a free market
– Has many buyers and sellers
– Both buyers and sellers are free to enter and leave the market
– Both buyers and sellers have all the information they need to make a decision
– All costs are covered in the transaction, that is, there are no externalities

Let’s start with the last because it has some relevance to current politics.  What are the externalities of telecommunications?  There are the overhead lines, the underground cables, and the radio waves zipping through our bodies.  Most of us don’t seem to be concerned with the last; we’ve had radio, TV, and radar signals going through us for decades.  The overhead lines are not very aesthetic but we put up with them.  Similarly, the underground cables don’t seem to be a problem until one has to be dug up.

The externality that is raising the most discussion is the use of copper wires.  However, this need is being reduced by the use of fiber optics and wireless communications.

The telecommunications market certainly has more sellers than it used to, some in competition with one another for the buyers’ business.  Still, given that the buyers’ choices in any given area are limited to less than a dozen, the market is more of an oligopoly than a free market.

A few of us could go off all the nets and save a bundle of money.  But most of us depend on telecommunications for communicating with friends, family, and emergency assistance.  Few businesses would succeed without telephones and Internet access.  They need it for marketing, sales, and customer support.

All the information you need to make a buy decision?  Hah!  You really have to dig around to get a detailed quote on what a particular package of services will really cost you.  Ads are all over about Internet service for $19.95 for five years guaranteed.  But do you know how much you’ll pay for installation, service fees, and taxes?  Do you know how fast the service will be?  Do you know how much faster service will cost?  Even if you sign up for service, the customer service department can’t tell you how much service fees and taxes will be.  Gosh, if the billing computers have this information, why don’t the customer service computers have this information?

About the only company that is upfront about the costs of services is Consumer Cellular.  Its web page has the cost of the basic service, the cost of each upgrade, and you can do it all online.  Like all others, they don’t have a calculator for service fee and taxes.

As with much of my writing, this examination was started by my own recent experience.  I’ve wanted to have faster Internet speeds for some time, I wanted caller ID on our home phone because probably three-quarters of our incoming calls are junk calls, and I wanted better Internet access at our cabin.  I thought our best arrangement would be to drop CenturyLink for phone and Internet at home, get a Home Base phone from Consumer Cellular, and get a portable modem from AT&T.

Well, the AT&T modem didn’t deliver much speed at our house and so I returned it.  I use my Consumer Cellular iPhone to periodically check the AT&T speed.  That speed has improved but is not consistent; sometimes it is way better than the CenturyLink DSL speed, sometimes it is worse.

What if I upgrade my DSL speed?  How much does it cost?  Well, the “free market” CenturyLink won’t tell me on their website.  I am supposed to call for that info.   Once upon a time in the days when we had Qwest, the website offered three different speeds with prices.  When we got tired of 256kbps, we made a few clicks and we had faster speed in a day or two.

Finding the prices elsewhere is a bit of a chore.  Over half the hits are for CenturyLink web pages or for CenturyLink reseller pages.  I think on the second search page I found a site that gave detailed pricing (without taxes and fees, of course).  It would cost us “$5.00” more to go from a nominal 7Mbps to 12, “$15.00” to 20, and “$25.00” to 40.  My wife balked at even the upgrade to 12Mpbs because she thought things were fine.

As for the cost of getting caller ID, it is the same story.  One cannot get just caller ID, but has to get a package of many unneeded features.  Could I find the cost?  Of course not!  It’s a “free market” and companies are free to do as they please.

As I was reviewing the many pages that I had opened in my quest, I found one with a long list of entries complaining about CenturyLink service.  Of course, those who are satisfied don’t post on such sites, but the number of instances of overbilling, not sending any statement, having a collection agency demand payment, of undelivered service, of repeated calls for non-functioning or poorly function service, and on and on.  Do I even want to make even a small change in my service?

My final set of changes for telecommunications was to have my Consumer Cellular iPhone become a hotspot (no charge, done in about 15 minutes) and upgrade to the max of 2GB of traffic.  That should allow us to use our iPads at the cabin to read the newspapers.  Or even write this column at our cabin and send it before the deadline.  When it gets warm enough for my wife to want to go there again.

Quote of the day: democracy or great wealth

"[W]e can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both."
– Justice Louis Brandeis, quoted by Chrystia Freeland, "Thanks to Pope Francis, Revolt Against the Global Super-Rich Is Underway", Huffington Post, 2014-01-21

For this and more Brandeis quotes, see http://en.wikiquote.org/wiki/Louis_Brandeis.

Ironically, just before I was reading Freeland's article I heard on an old "Godmorgon, världen" podcast that Rush Limbaugh called Pope Francis a Marxist.  See "The message of Pope Francis can survive Rush and the rest", Mary C. Curtis, Washington Post, 2013-12-06.

So, according to Rush Limbaugh, Justice Louis Brandeis was a Marxist.

Dictatorship of the directorate

I've long promoted the idea of withholding votes for directors of companies who are paid too much.  Well, even if all the shareholders withhold their votes, the directors of many companies get to keep their jobs.  All that is required is a plurality of votes.  Since one vote with no opposition is a plurality, they get to keep their jobs.  And their perks.  And accumulate more shares.  And run the company without any consideration for the owners.  Instead of Milton Friedman's corporate purpose of "shareholder value", they run the company for "director value".

For more, see "When Shareholder Democracy is Sham Democracy", James B. Stewart, New York Times, 2013-04-12.

Quote of the Day: "Everyone knows"

"If you hear that 'everyone' supports a policy, whether it’s a war of choice or fiscal austerity, you should ask whether 'everyone' has been defined to exclude anyone expressing a different opinion."

- Paul Krugman, "Marches of folly", New York Times, 2013-03-17

Capitalism and socialism - let's get our definitions straight

A survey polled people on how they felt about capitalism and socialism - positive or negative.  But did the pollsters give a definition of these two terms or ask respondents to give their own definitions?  I think not.

See "Is Rush Limbaugh's Country Gone?", Thomas B. Edsall, New York Times, 2012-11-19.

Capitalism is gathering  resources to do something, whether it's to start a neighborhood grocery or to start an airline.  Capitalism is not the buying and selling of stocks and schemes based on the stock; that is finance.  Finance can raise capital, but the secondary markets of that capital are not capitalism.

Socialism is the government providing all the resources to do something and controlling how those resources are used.  I don't think there is a country in the world where that happens for all projects.  Even China has private capital ventures.  Social welfare is the government providing various safety nets or investments that help people with needs that "capitalism" doesn't provide to everyone.  Most developed countries have capitalist economies supported by social welfare programs.

Think of LM Ericsson in Sweden, Nokia in Finland, Siemens in Germany, and FIAT in Italy.  These large capitalist companies aren't going away.  Well, maybe Nokia will go away but that's because of technology, not government interference.

And many of these social welfare programs depend on a large number of private organizations, large and small.  Germany has hundreds of insurance companies underpinning its health care.  England has thousands of physicians in private practice who provide government listed services.

What I find ironic is that proponents of "capitalism" don't understand how "socialism" makes "capitalism" work better.  If there weren't government-provided roads, sewers, schools, and yes, regulation there would be chaos.  Chaos is something capitalists do not need or want.  If there wasn't government-sponsored research, many new ideas would never even reached the capitalists who would implement them into products.  If there is a good public health care system, then corporations don't have to fund them directly at great inefficiency.  Wasn't it G. Richard Wagoner of General Motors who said that he wasn't an auto executive but a health care executive?  See "U.S. Firms Losing Health Care Battle, GM Chairman Says", Ceci Connolly, Washington Post, 2005-02-11.

Be careful how you define things.  If you define things incorrectly or too narrowly, you may miss out on many opportunities for a better society.

Plutocracy and democracy

Someone on a facebook page asked what is plutocracy.  I don't remember whether it was about all the money in politics or not.  I answered that plutocracy meant rule of the wealthy.  We certainly see it with the Koch brothers and Michael Bloomberg.  The greatest danger of plutocracy is that it drives out participation by ordinary people, the essence of democracy.

I looked up plutocracy on Wiktionary and found this wonderful quote by G.K. Chesterton:

"Modernity is not democracy; machinery is not democracy; the surrender of everything to trade and commerce is not democracy. Capitalism is not democracy; and is admittedly, by trend and savour, rather against democracy. Plutocracy by definition is not democracy. But all these modern things forced themselves into the world at about the time, or shortly after the time, when great idealists like Rousseau and Jefferson happened to have been thinking about the democratic ideal of democracy."

Socialism or needed regulation, they ain't the same thing

It seems every where one turns, there are cries that Obama is a socialist, that the country is becoming socialist, and on and on ad nauseum.

One, do many of these people even know what socialism is?  In short, it often means state ownership of the means of production.  Is any major party candidate calling for government takeover of all companies?  I haven't heard of any.  Is it co-operatives?  Could be, but they are operated by their members, not the government.  For a more complex discussion of socialism, see the Wikipedia entry on socialism.

Two, are those orchestrating the cries of socialism those who want no government regulation unless it is to their benefit.  Is it polluters who cry socialism when they are called to task?  Is it those who cut corners on safety of workers or consumers?  Is it those who would cheat customers or not provide customers with sufficient information?

Considering the sources of the orchestration, I would say its those who want to operate without any government regulation at all.  They don't want to pay taxes for all the public goods they depend on, including an educated work force and an infra-structure of highways, water, and sewer.

In short, they want to privatize profit but socialize losses or costs.

Ironically, Adam Smith, the guru of so-called free-marketers, and many of the writers of the U.S. Constitution called for regulation in varying degrees.

Humpty Dumpty and Free Markets

The Coffee Party on Facebook had a link to a CNN interview of Christine O'Donnell by Soledad O'Brien.  O'Donnell claims the Obama has made Marxist remarks.  O'Brien did call her on using the term Marxist but didn't really follow through.  Many respondents to the Coffee Party page were disappointed that O'Brien didn't press for specifics.

One commenter mentioned that the Wealth of Nations wasn't published when the Declaration of Indendence was written, and so the signers couldn't include Adam Smith's thoughts.

I added the following to the comments:

Words! Words!  As Humpty Dumpty said in Lewis Carroll's "Through the Looking Glass": 'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.'

Worse than the misuse of the words "Marxism" and "Socialism" is the misuse of the word "Free Market".

The classical definition of a free market is:

1. Many buyers and sellers
2. Buyers and sellers are free to enter and leave the market at any time.
3. Buyers and sellers have all the information they need to make a satisfactory transaction.
4. All the costs are covered in the transaction, that is, no externalities.

Interestingly, it is "free marketers" who don't want true free markets.

We have more and more consolidations into larger and larger corporations.

Are you free to leave the health care market when your child is sick?

GMO producers and others don't want buyers to know what's in their products.

Who is covering the costs of pollution and nuclear waste?

Adam Smith's "Wealth of Nations" was first published in 1776.  Maybe the signers of the Declaration of Independence hadn't received copies yet, but I'm sure that many of the signers of the Constitution had read it by 1787.

Those who love to quote the "invisible hand" should read the other 500+ pages, including "When the regulation, therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes
otherwise when in favour of the masters."

Absentee capitalism and participant capitalism

I thought I had posted the following in January after reading the article on co-op statistics.  It was a fluke that my January notes file was open and open to this article.  But I couldn't find it among my actual posts.  Better late than never!

Capitalism thrives all over the world, but few of us see much of it, being blinded by the ads of the multinational corporations.  The co-operative movement is a huge source of personal investment by workers or customers.  Actually it is so huge that co-operatives provide over 100 million jobs around the world, 20% more than multinational enterprises. (Source: Statistical information on the Co-operative Movement).  Then there are all the individual or small group owner-operator enterprises that still exist, though less and less in retail.

I can't complain too much about absentee capitalism because I get a portion of my income from dividends of corporations whose leaders I don't remember past skimming the annual reports.  However, we do buy most of our groceries at Whole Foods Co-op in Duluth where we are owner-members.

My chances of serving on a board of one of these large corporations are as much as the proverbial snow ball*, but if I so chose, I would be welcome to run as a candidate for the board of Whole Foods Co-op (actually getting elected and serving well are different issues).

* For readers who are not familiar with American idioms - As much chance as a snowball in Hell

"Socialism" and "free markets", an observation

The ideologues of "socialism" think that taking away the benefits of the few will benefit the many.

The ideologues of "free markets" think the benefits of the few will benefit the many.

In either case, only the ideologues benefit and the many get the crumbs.

Beginning of the end of finance as we've come to hate it?

Today, Greg Smith is resigning as Executive Director of Goldman Sachs.  He wrote "Why I Am Leaving Goldman Sachs" for the New York Times.

The Coffee Party Facebook page provided a link to this.  I'm sorry that I can't give you a URL for it.   What struck me about many of the comments was that many seemed to equate finance and capitalism; they are not the same.  Finance is a tool of capitalism, but to mix metaphors, it has become the tail wagging the dog.  See my blog entry "Finance is not capitalism", 2012-12-07.

The repeal of Glass-Steagall put a lot of muscle into the tail, and at the time only a few saw this coming.  Sen. Byron Dorgan (D-ND) warned about this in a Senate speech in 1999.  See "Byron Dorgan's Prophetic Words", Moyers & Company, Lauren Feeney, 2012-01-27.  I recommend watching the full show: "How Big Banks are Rewriting the Rules of our Economy".

For more of the gory details of the collapse of finance, see "All the Devils are Here", by Bethany McLean and Joe Nocera.  See also my quote from the book about the plea from Wall St. for more regulation!

Capitalists Who Make vs. Capitalists Who Take

I found a wonderful analysis of good and bad capitalism, "Capitalists Who Make vs. Capitalists Who Take".

I haven't finished reading it yet, but I posted the comment below to it.  I think the title is very descriptive of the definition trap we've fallen into.

Aren't we way past the time of evaluating Gross Domestic Product where speculation in tulip bulbs is considered part of the GDP?  Maybe we should keep track of Net Domestic Product, or maybe even Minimum Domestic Product.  The latter would be to evaluate the wealth of the bottom 10 percent.

If we were truly a Christian nation, we would take to heart "whatever you did not do for one of the least among you, you did not do for me." - Matthew 25:45.

Finance is not capitalism

I've long thought that Wall St. and capitalism were two different entities. Wall St. is almost exclusively about moving money around, not about raising money to put into businesses that provide goods or services. The latter is secondary to Wall St.

Today I read/saw a good distinction in "An Unexpected Fate for Occupy Wall Street". Lee Munson, author of "Rigged Money: Beating Wall Street at Its Own Game", was interviewed on Yahoo Finance's Breakout.


Munson said that "finance is supposed to be grease for the wheels of capitalism." Now capitalism is a tool of finance.

One of the comments was on buying IBM shares long term is not investment. My response was

"It's a personal investment in that you hope someday somebody will pay you more for your IBM shares than you did. IBM gets no new money. Your buying IBM shares gives liquidity to a previous buyer. Liquidity of shares does make it easier for IBM to borrow money or to issue new shares."

Another interesting comment was "New name for Wall Street: FRAUDWAY".

Oh, about Occupy Wall Street, Munson thinks it will evolve to be a watchdog group by 2013.

See also "Beginning of the end of finance as we've come to hate it?"

High profits are the road to ruin - Adam Smith

The Rev. Bruce Johnson of the Unitarian-Universalist Congregation of Duluth gave a sermon this morning on consumerism - "Consuming Religion". In it, he used "free markets" in the corrupt sense, that is, business is free to do whatever it wants, free of regulation. I knew that Adam Smith used "free market" only once in "Wealth of Nations"; I wondered how often he used "regulation".

Well, I gave up counting, but I noted that he treats regulations as both good and bad. One of the good senses is that regulations prevent abuses. One of the sections that mentioned regulation discussed the three classes involved in the economy - one does nothing and keeps getting richer, the second is necessary to get things started, and the third actually does the work. Here is what he wrote about the second, those who supply the capital (stock in the sense of materials, equipment, and workplaces).

"It is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects.  But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin."

Is the economy changing away from current models?

The Coffee Party had a Facebook link to "The New-Economy Movement", Gar Alperovitz.  It was originally published in "The Nation", 2011-05-27

Alperovitz writes that there are many alternatives to the large corporations doing business successfully.  There include co-operatives and employee-owned companies.  Many companies have become "triple bottom line"; the environment and social outcomes are considered as well as profits.

The American Sustainable Business Council recently told the Labor Secretary Hilda Solis "that the US Chamber of Commerce does not speak for all American business".

Alperovitz thinks that many of these efforts will bring about systemic change.  I wonder if this might also mean a couple of new parties to replace the two corporate parties.

Book about the myths of capitalism

The Coffee Party facebook page had a link to a Truthout article.  It is the first chapter of Ha-Joon Chang's "23 Things They Don't Tell You about Capitalism"; the chapter is "There Is No Such Thing as a Free Market".


The Duluth Public Library has a copy, but it is out until June 29.

Free markets and capitalism – their supporters don't want them!

Disclaimer: We own shares in some companies and mutual funds.  In our retirement we will depend more and more on dividends and interest.  However, we don't feel compelled to hide the warts in the system.

We read many complaints that the U.S. is becoming socialist and turning against free markets and capitalism.  Well, we are seeing many efforts to erode free markets and capitalism, but these efforts are being made most strongly by those who proclaim them.

The classical definition of a free market is one with many buyers and many sellers and with both buyer and seller having all the information they need to make a decision.  Oh, also, either the buyer or seller should be free to enter or leave the market.

We see many moves to reduce the number of sellers as companies gobble up their competitors.  We also see some moves to reduce the number of buyers - Wal-Mart has become the sole buyer for many suppliers.

Many large corporations fight efforts to give buyers important information to make a good decision.  The tobacco companies denying their products caused harm is one of the more egregious distortions of important information.  Agribusiness companies don't want foods labelled as genetically modified.  Many large dairy companies don't want competitors products labeled BGH-free (bovine growth hormone).  Telecommunication companies make it difficult to know the exact cost of their services before a customer makes a purchase.  How come the billing computers know exactly what a customer should pay but the sales computers supposedly don't have that information?

Freedom to enter and leave the market exists in varying degrees.  There are certainly many products we can choose to buy or not buy.  Suppliers with a single buyer can stop selling to that buyer, but they will have a lot of work to replace that buyer.

Capitalism - ah, a lovely concept when it started.  Some people got together and pooled their money to form a company, each getting shares proportional to their contribution.  Then markets developed to buy and sell those shares as owners wanted to reallocate their investments.  All well and good.  If Smith wanted to sell his shares in XYZ to buy a house and Jones was glad to buy XYZ shares because he missed out when they were issued, that's all above board.

I won't get into day-trading versus investing or all the derivatives that Wall Street thinks up.  This is almost all smoke and mirrors and a long, long way from capitalism.

As economies grew, so did the companies originally financed with stock.  But as they grew, the shareholders became more and more distant from the operation of the company.  They had to hire executives and board members to run the company.  All well and good.  But with all the buying and selling of shares, the shareholders had little interest in the company other than it grew and turned a profit.  Few had any interest in the day-to-day running of the company.

As time went on, the board members nominated themselves for successive terms, without any competition.  Shareholders could either accept them or withhold their votes; the boards made any mechanisms to offer a different slate extremely difficult.  To make matters worse, many of the shares were owned by mutual funds and other institutions; in general, the operators of these institutions exercised their "fiduciary responsibility" and voted with the board.

In many democratic countries, the boards lobbied their friends in governments to put up various hindrances to any shareholder control beyond the above yes or no votes.

These board members grant their appointed executives shares in the company for their "performance" and grant themselves the same.  In other words, they are giving themselves more and more of the company and more and more of the votes.  The board members often get over $100,000 per year for showing up for six meetings.  Nice work if you can get it.

Many define this whole process as capitalism and as a great good.  I call it capturism; the few have captured control of a company to run as they see fit.  At least, unlike many oligarchies, they don't throw dissidents in jail.

Shall we boycott BP?

What if several thousand people stopped buying gas at BP stations?  Would BP notice?  Would a boycott have any effect on its safety practices?

It's easy enough for me to say; there are not that many BP stations in my area.  Also, the gas sold at them probably is not refined by BP.  Retail gasoline is generally refined locally by a few refineries and blended according to formulas provided by each retailer.

However, would a boycott of BP give a message beyond BP, say to politicians who have knee jerk reactions to any interference in the so-called "free market" or to wimpy politicians who live in fear of such reactions.  For how much time has been wasted see, "Obama and the Oil Spill", Thomas Friedman, New York Times, 2010-05-18.

I thought of doing a mashup for YouTube of testimony of how safe offshore drilling was combined with news footage of the spill.  To save myself the trouble I did a search of YouTube for "BP oil spill rainy" where Rainey is an executive who testified before the Senate on how safe offshore drilling was.  I hit pay dirt with "Play him off, Keyboard Cat (Sarah Palin, BP Oil Spill, Senator McCain) FAIL!!!!"