Is Marxism Coming Back?

It is true that as the financial and economic crises roll on, as more and more disasters accumulate, as more people are thrown into unemployment and suffering that more and more of us will question the fundamentals of our economic system. It is inevitable that many will be drawn to some of the criticisms of capitalism, including Marxism.

The Guardian today published a salutary overview of this revival:

In his introduction to a new edition of The Communist Manifesto, Professor Eric Hobsbawm suggests that Marx was right to argue that the “contradictions of a market system based on no other nexus between man and man than naked self-interest, than callous ‘cash payment’, a system of exploitation and of ‘endless accumulation’ can never be overcome: that at some point in a series of transformations and restructurings the development of this essentially destabilising system will lead to a state of affairs that can no longer be described as capitalism”.

That is post-capitalist society as dreamed of by Marxists. But what would it be like?It is extremely unlikely that such a ‘post-capitalist society’ would respond to the traditional models of socialism and still less to the ‘really existing’ socialisms of the Soviet era,” argues Hobsbawm, adding that it will, however, necessarily involve a shift from private appropriation to social management on a global scale. “What forms it might take and how far it would embody the humanist values of Marx’s and Engels’s communism, would depend on the political action through which this change came about.”

Marxism is a strange thing; it provides a clean and straightforward narrative of history, one that irons out detail and complication. It provides a simplistic “us versus them” narrative of the present. And it provides a relatively utopian narrative of the future; that the working classes united will overthrow capitalism and establish a state run by and for the working classes.

Trouble is, history is vastly more complicated than the teleological narrative provided by dialectical materialism. The economic and social reality of the present is vastly more complicated than Marx’s linear and binary classifications. And the future that Marx predicted never came to fruit; his 19th Century ideas turned into a 20th Century reality of mass starvation, failed central planning experiments, and millions of deaths.

Certainly, the system we have today is unsustainable. The state-supported financial institutions, and the corporations that have grown up around them do not live because of their own genius, their own productivity or innovation. They exist on state largesse — money printing, subsidies, limited liability, favourable regulation, barriers to entry. Every blowup and scandal — from the LIBOR-rigging, to the London Whale, to the bungled trades that destroyed MF Global — illustrates the incompetence and failure that that dependency has allowed to flourish.

The chief problem that Marxists face is their misidentification of the present economic system as free market capitalism. How can we meaningfully call a system where the price of money is controlled by the state a free market? How can we meaningfully call a system where financial institutions are routinely bailed out a free market? How can we meaningfully call a system where upwards of 40% of GDP is spent by the state a free market? How can we call a system where the market trades the possibility of state intervention rather than underlying fundamentals a free market?

Today we do not have a market economy; we have a corporate economy.

As Saifedean Ammous and Edmund Phelps note:

The term “capitalism” used to mean an economic system in which capital was privately owned and traded; owners of capital got to judge how best to use it, and could draw on the foresight and creative ideas of entrepreneurs and innovative thinkers. This system of individual freedom and individual responsibility gave little scope for government to influence economic decision-making: success meant profits; failure meant losses. Corporations could exist only as long as free individuals willingly purchased their goods – and would go out of business quickly otherwise.

Capitalism became a world-beater in the 1800’s, when it developed capabilities for endemic innovation. Societies that adopted the capitalist system gained unrivaled prosperity, enjoyed widespread job satisfaction, obtained productivity growth that was the marvel of the world and ended mass privation.

Now the capitalist system has been corrupted. The managerial state has assumed responsibility for looking after everything from the incomes of the middle class to the profitability of large corporations to industrial advancement. This system, however, is not capitalism, but rather an economic order that harks back to Bismarck in the late nineteenth century and Mussolini in the twentieth: corporatism.

The system of corporatism we have today has far more akin with Marxism and “social management” than Marxists might like to admit. Both corporatism and Marxism are forms of central economic control; the only difference is that under Marxism, the allocation of capital is controlled by the state bureaucracy-technocracy, while under corporatism the allocation of capital is undertaken by the state apparatus in concert with large financial and corporate interests. The corporations accumulate power from the legal protections afforded to them by the state (limited liability, corporate subsidies, bailouts), and politicians can win re-election showered by corporate money.

The fundamental choice that we face today is between economic freedom and central economic planning. The first offers individuals, nations and the world a complex, multi-dimensional allocation of resources, labour and capital undertaken as the sum of human preferences expressed voluntarily through the market mechanism. The second offers allocation of resources, labour and capital by the elite — bureaucrats, technocrats and special interests. The first is not without corruption and fallout, but its various imperfect incarnations have created boundless prosperity, productivity and growth. Incarnations of the second have led to the deaths by starvation of millions first in Soviet Russia, then in Maoist China.

Marxists like to pretend that the bureaucratic-technocratic allocation of capital, labour and resources is somehow more democratic, and somehow more attuned to the interests of society than the market. But what can be more democratic and expressive than a market system that allows each and every individual to allocate his or her capital, labour, resources and productivity based on his or her own internal preferences? And what can be less democratic than the organisation of society and the allocation of capital undertaken through the mechanisms of distant bureaucracy and forced planning? What is less democratic than telling the broad population that rather than living their lives according to their own will, their own traditions and their own economic interests that they should instead follow the inclinations and orders of a distant bureaucratic-technocratic elite?

I’m not sure that Marxists have ever understood capitalism; Das Kapital is a mammoth work concentrating on many facets of 19th Century industrial and economic development, but it tends to focus in on obscure minutiae without ever really considering the coherent whole. If Marxists had ever come close to grasping the broader mechanisms of capitalism — and if they truly cared about democracy — they would have been far less likely to promulgate a system based on dictatorial central planning.

Nonetheless, as the financial system and the financial oligarchy continue to blunder from crisis to crisis, more and more people will surely become entangled in the seductive narratives of Marxism. More and more people may come to blame markets and freedom for the problems of corporatism and statism. This is deeply ironic — the Marxist tendency toward central planning and control exerts a far greater influence on the policymakers of today than the Hayekian or Smithian tendency toward decentralisation and economic freedom.

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Springtime for the Military-Industrial Complex

The FT erroneously concludes that the boom-times are over for the military contractors:

The wars in Afghanistan and Iraq have been a boon to US contractors. The US has used so many of them in the conflicts that at times they outnumbered the military they supported. But the boom times are coming to an end and military service companies in particular are being squeezed.

Moody’s, the rating agency, expects revenue and margin pressure on defence service companies to become visible soon as the US Department of Defence, the world’s biggest military spender, negotiates tougher terms for contractors, reduces spending on them and brings its troops home from Afghanistan in time to meet the end 2014 deadline set by President Barack Obama.

In Iraq and Afghanistan the top contractor was Kellog, Brown & Root, the engineering and construction services company. It earned $40.8bn during the past decade, while Agility, the logistics company, and DynCorp, which specialises in security, earned $9bn and $7.4bn respectively, according to a US government report.

After a decade of unrivalled prosperity thanks to war and a booming global economy the defence service sector will have to work harder through innovation, as well as lean and well-focused management, to prosper.

In a word, nope. What cuts? The Obama budget aims to increase military expenditures far-above their already-puffed-up status quo:

Offering a military budget designed to head off charges that he’s weak on defense, President Obama unveiled a Pentagon spending plan that fails to cut any major procurement programs and calls for spending $36 billion more on the military in 2017 than it will spend this year.

Here’s what Obama intends to increase (and what Romney, of course, intends to increase more):

Yeah, America is spending more today drone-striking American citizens in Yemen, drone-surveilling Mexican drug lords and “turning our attention to the vast potential of the Asia-Pacific region” than she was during the cold war when a hostile superpower had thousands of nukes pointing at her.

Military contractors have nothing to fear. Whether it is the Pacific buildup to contain Chinese ambition, or drone strikes in the horn of Africa or Pakistan, or the completely-failed drug war, or using the ghost of Kony to establish a toehold in Africa to compete with China for African minerals, or an attempted deposition of Bashar Assad or Egypt’s new Islamist regime, or bombing Iran’s uranium-enrichment facilities, or a conflict over mineral rights in the Arctic, or (as Paul Krugman desires — and what the heck, it’s 2012, why not?) an alien invasion, or a new global conflict arising out of a global economic reset, it’s springtime for the military contractors. It’s everyone else who should be worried.

Time to Get Out of the Middle East

It takes a lot of time and effort to try to understand American counter-terrorism policy today.

Personally, I think the status quo is like trying to treat a cocaine overdose with methamphetamine. It’s like trying to cure chlamydia by having sex with multiple random strangers in a park. It’s like trying to cure a broken nose by punching oneself in the face.

Or, as Glenn Greenwald puts it:

I absolutely believe that another 9/11 is possible. And the reason I believe it’s so possible is that people like Andrew Sullivan — and George Packer — have spent the last decade publicly cheering for American violence brought to the Muslim world, and they continue to do so (now more than ever under Obama). Far from believing that another 9/11 can’t happen, I’m amazed that it hasn’t already, and am quite confident that at some point it will. How could any rational person expect their government to spend a full decade (and counting) invading, droning, cluster-bombing, occupying, detaining without charges, and indiscriminately shooting huge numbers of innocent children, women and men in multiple countries and not have its victims and their compatriots be increasingly eager to return the violence?

Isn’t it painfully obvious? The interventionist policies — occupation, drone strikes, cluster-bombing, indefinitely detention, false vaccination programs and so forth — in the middle east advocated by both “liberal” and “conservative” hawks that are supposed to prevent terrorism are creating anger, creating enemies, and creating terrorists. I too am amazed another 9/11 hasn’t happened. I despise jihadism and Islamism. It is contrary to everything I stand for. That’s exactly why I oppose a foreign policy that serves as a hugely effective recruiting tool for the totalitarian jihadists. 

Yemeni lawyer Haykal Bafana explained the rationale last month:

Dear Obama, when a U.S. drone missile kills a child in Yemen, the father will go to war with you, guaranteed. Nothing to do with Al Qaeda.

Or as convicted terrorist Faisal Shahzad put it:

Well, the drone hits in Afghanistan and Iraq, they don’t see children, they don’t see anybody. They kill women, children, they kill everybody. I am part of the answer to the U.S. terrorizing the Muslim nations and the Muslim people.  And, on behalf of that, I’m avenging the attack.  Living in the United States, Americans only care about their own people, but they don’t care about the people elsewhere in the world when they die.

Or as former CIA counter-terrorism expert Michael Scheuer noted:

The idea that has been pushed by President Clinton and President Bush and Mr. Cheney and Barack Obama and Senator McCain, that America is being attacked [for its freedom] is a disservice to the population of the United States. This war is not against Americans because we’re Americans, it’s motivated by the activities of our government and its allies in the Muslim world.

So why do we keep doing this? Two reasons: hubris and greed.

First, the hubris. We know Ron Paul was booed in South Carolina for advocating that we should do to others as we would like done to us:

My point is if another country does to us what we do others, we’re not going to like it very much. So I would say that maybe we ought to consider a golden rule in — in foreign policy. Don’t do to other nation what we don’t want to have them do to us.

But that’s just the propagandistic nature of being a superpower. Years of prosperity, military supremacy and pro-war propaganda have made it normal to believe strongly in the idea that America is intrinsically better, and wherever America goes America brings freedom, and anyone who doesn’t agree with that needs to be waterboarded until they do.

Yet however many times as the phrase “they hate us because we are free” is repeated, mantra-like by a Rick Santorum or a Newt Gingrich, it does not become truer. It is just an illusion, just a fantasy. While the jihadis were always anti-American, anti-democratic and anti-capitalistic, Osama bin Laden, Ayman al-Zawahiri and Sayyid al-Qutb — the fathers and grandfathers of modern Wahhabism, jihadism and al-Qaeda — became anti-American militants because of America’s role in the middle east.

As bin Laden himself said:

Those who kill our women and innocent, we kill their women and innocent, until they refrain.

And even more clearly:

Free men do not forfeit their security, contrary to Bush’s claim that we hate freedom. If so, then let him explain to us why we don’t strike Sweden, for example.

Second, the greed. America is in the middle east because America likes cheap energy. That myth of America as liberators flourished first as a justification for America’s petrodollar foreign policy.

And people get rich from America being at war — so far in the region of $4 trillion has gone to fighting since 9/11. A lot of weapons contractors are happy with the status quo.

So the military-industrial complex — the lobbyists, the weapons makers, the media — may accept it if Obama kills 14 women and 21 children to get one suspected terrorist. More terrorism means more weapons spending. For the lucky few it’s a self-perpetuating stairway to riches. Yet for wider society it means spending time, money and effort on war, instead of on domestic prosperity. It means the constant threat of terrorism. And it means the loss of our liberty, as the security state adopts increasingly paranoid anti-terrorism measures.

We should do to others as we would have done to ourselves. That means — unless we are comfortable with the idea of ourselves living under military occupation and drone strikes — getting out of the middle east, and letting that region solve its own problems — forget another costly and destructive occupation in Syria. Slash the war and occupation spending, and redirect the money to making America independent of middle eastern energy and resources.

One Simple Rule To Stop Unnecessary Wars

I’m sick of war.

Officially the cost of the war on terror has been $1.3 trillion. And military spending — especially the interest on debt to pay for past wars — keeps growing year on year:

As General Eisenhower noted:

Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed.

This world in arms is not spending money alone. It is spending the sweat of its labourers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. We pay for a single fighter with a half-million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people. This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.

The cost in life was been ever steeper; over a million Iraqis died.

But it’s more than cost; this a problem of responsibility. George W. Bush and Dick Cheney live a comfortable life of wealth and leisure, four years after leaving office having started two destructive, costly and ineffective wars of choice. They didn’t fight. None of their children fought. But lots of American and British soldiers and innocent Arabs got their limbs and heads blown off.

Of course, military deterrence — and sometimes military action — is necessary.

As Eisenhower noted:

A vital element in keeping the peace is our military establishment. Our arms must be mighty, ready for instant action, so that no potential aggressor may be tempted to risk his own destruction.

The trouble is that war is a great excuse for weapons contractors to make lots of money, and weapons contractors happily fund war-mongering politicians into power. That’s the self-perpetuating military industrial complex.

So the problem then lies in differentiating the necessary actions from the unnecessary.

I propose a simple heuristic for this purpose, one that if introduced would also render the war-mongering politician — the Congressman who votes to authorise, or the President who signs the authorisation into law — personally responsible:

If you start a war, you have to fight. If you cannot fight, then your nearest fit relative has to fight.

This puts the skin back into the game. You want to risk blood and treasure to start a war? If it’s that important, you’ll put your body and blood on the line before you ask any soldier to fight, or any taxpayer to pay. If not, then it must not be necessary.

Would George W. Bush have started the Iraq war had he known his two daughters would be conscripted, and shipped off to Iraq to find Saddam’s weapons of mass destruction?

I doubt it.

Is it Racist to Attack Obama?

Ta-Nehisi Coates insinuates that there is racism in the claim that Obama is a Food Stamp President:

When a professor of history calls Barack Obama a “Food Stamp President,” it isn’t a mistake to be remedied through clarification; it is a statement of aggression. And when a crowd of his admirers cheer him on, they are neither deluded, nor in need of forgiveness, nor absolution, nor acting against their interest. Racism is their interest.

First, I don’t doubt that cynical Machiavellians like Gingrich will pander to racism to advance their agenda. But the problem is, the claim is true. There is no great distortion here.

The compelling factor is raw empirical data:

For good measure, here’s black unemployment (in red) — contrasted with total unemployment (in blue) — under Obama:

Not only have lots of people ended up on the bread line under Obama, but a disproportionately high number of these have been black.

Now, we can blame Bush, and Bernanke, and Greenspan, and Geithner, and bad luck too. Who or what is most to blame is a matter open for debate. But the raw claim that he is a Food Stamp President is empirically accurate.

Now that’s not to say that I like, or generally agree with the originator of the claim, Newt Gingrich. I have written before that I believe Newt Gingrich is an appalling Presidential choice, for a variety of reasons.

But disdain for Gingrich, or Romney, or Paul, or Santorum, is not a good reason to blindly support Obama, or to deodorise his record. A while back I wrote adamantly that Obama was engaged in class warfare, but not the class warfare Romney accuses him of. I accuse him of class warfare against the poor through military overspending that takes resources away from the poor, and destroys them in the theatres of war.

Here’s a full breakdown of Federal spending in Obama’s first year in office:

Current Military
$965 billion:
• Military Personnel $129 billion
• Operation & Maint. $241 billion
• Procurement $143 billion
• Research & Dev. $79 billion
• Construction $15 billion
• Family Housing $3 billion
• DoD misc. $4 billion
• Retired Pay $70 billion
• DoE nuclear weapons $17 billion
• NASA (50%) $9 billion
• International Security $9 billion
• Homeland Security (military) $35 billion
• State Dept. (partial) $6 billion
• other military (non-DoD) $5 billion
• “Global War on Terror” $200 billion

Past Military
$484 billion:
• Veterans’ Benefits $94 billion
• Interest on national debt (80%) created by military spending, $390 billion

Human Resources
$789 billion:
• Health/Human Services
• Soc. Sec. Administration
• Education Dept.
• Food/Nutrition programs
• Housing & Urban Dev.
• Labor Dept.
• other human resources.

General Government
$304 billion:
• Interest on debt (20%)
• Treasury
• Government personnel
• Justice Dept.
• State Dept.
• Homeland Security (15%)
• International Affairs
• NASA (50%)
• Judicial
• Legislative
• other general govt.

Physical Resources
$117 billion:
• Agriculture
• Interior
• Transportation
• Homeland Security (15%)
• HUD
• Commerce
• Energy (non-military)
• Environmental Protection
• Nat. Science Fdtn.
• Army Corps Engineers
• Fed. Comm. Commission
• Other physical resources

The reality here is that a majority of nondiscretionary federal spending is going toward permanent warfare, “global security“, the military industrial complex, guns, bombs and death. Beyond that, money spent is often frittered away on crony capitalism, bridges to nowhere, and Washington’s largesse. That is an epic transfer of wealth from ordinary Americans. But not only that, it is significantly weakening America — every gun built, every bomb dropped, every phoney war created is money, time, effort and skills wasted that could instead have been spent on creating infrastructure, starting enterprises, investing in new equipment, building schools, developing technology, opening factories, or hiring workers.

Then there is the drug war  that Obama has continued, which has today led to more black men being incarcerated than there were slaves in 1850.

Obama supporters would do well to look at the facts, instead of churning out allegations of “racism” as the fire burning beneath opposition to his Presidency.

The Edge of Bankruptcy

We are like a man who used to be rich and is in the habit of paying for everybody’s meals and announces at a lavish dinner that he will pay the bill, only to then turn to the fellow sitting nearby and say, “Can I use your credit card? I will pay you back!”

— Ron Paul

I have in the past very briefly made the case for why it is not time to attack Iran:

The truth is that Iran (and more explicitly a strong and united Eurasia) is only a threat to America if America chooses to continue the absurd and destructive path of a world-dominating petrodollar superpower, dependent on foreign oil and resources, and with a foreign policy designed to (essentially) extort these things from the rest of the world.

Today, I want to go a little further: While — unlike some readers — I believe that Islamic terrorism is a real (though minor) threat, I believe that America’s neoconservative foreign policy is the greatest threat to American interests.

Neoconservatism holds that American and Western civilisation has a unique moral role in policing the world. That means military commitment, and very often war. That, in turn, means spending:


Spending has meant huge deb acquisition:

There are many historical antecedents of empires convinced of their own special role in history, and determined to impose it on the rest of the world by force. Look at Rome — driven into the ground by the cost of imperialism, and its “bread and circuses” welfare state.

A greater example still is Britain:

This graph is a tale of imperial overstretch, a tale of debt acquired by a colonial power playing world policeman, and trying to maintain the status quo.

Imperial Britain’s debt load hit its peak at the very point when its empire crumbled into the sand. This is not a co-incidence, and the good news for America is that once Britain ended its global role, growth soon returned, and Britain’s debt-to-GDP ratio fell back to a sustainable level.

Of course, America’s debt position might be more sustainable if she was still the world’s greatest industrial powerhouse. But she has instead exported much of her productivity to her hostile creditor, China:

The deindustrialisation of the West has allowed newly industrialised nations, especially China, to build up huge monetary wealth. This is a map showing the net of each nation’s reserves, minus external debt:


And neoconservatives continue to believe that America — dependent on foreign goods and resources, hugely indebted to hostile nations, and war fatigued — is somehow in a position to expand her empire, and to attack more countries?

The Emperor is Wearing No Clothes

As I’ve covered in pretty excruciating depth these past few weeks, the Euro in its current form is sliding unrelentingly into the grave.

Some traders seem pretty excited about that eventuality.

Why? There’s plenty of money to be made killing the Euro, (just like there was plenty of money to be made in naked-shorting Lehman brothers to death):

Markets are ruled right now by fear. Investors: the big money, the smart money, the big funds, the hedge funds, the institutions, they don’t buy this rescue plan. They know the market is toast. They know the stock market is finished, the euro, as far as the Euro is concerned they don’t really care. They’re moving their money away to safer assets like Treasury bonds, 30-year bonds and the US dollar.

I would say this to everybody who’s watching this. This economic crisis is like a cancer. If you just wait and wait thinking this is going to go away, just like a cancer it’s going to grow and it’s going to be too late.

This is not a time to wishfully think the governments are going to sort this out. The governments don’t rule the world. Goldman Sachs rules the world. Goldman Sachs does not care about this rescue package, neither do the big funds.

A few points:

“They’re moving their money to safer assets like Treasury bonds, 30-year bonds and the US dollar.”

Safer assets like the US dollar? Sure, that’s what the textbooks tell you has been the safest asset in the post-war era. But are they really safe assets? On dollars, interest rates are next to zero. This means that any inflation results in negative real rates, killing purchasing power. Let’s have a look at the yields on those “super-safe” 30-year bonds:

At 2.87%, and with inflation sitting above 3.5% these are experiencing a net loss in purchasing power, too. Yes, it’s better than losing (at least) half your purchasing power on Greek sovereign debt, or watching as equities tank. But with the virtual guarantee that stagnant stock markets will usher in a new tsunami of QE cash (or better still, excess reserves) expect inflation, further crushing purchasing power.” 

“The governments don’t rule the world. Goldman Sachs rules the world. Goldman Sachs does not care about this rescue package, neither do the big funds.” 

Well Goldman Sachs are the ones who convinced half the market to price in QE3. And they’re also making big noise demanding action in the Eurozone. I’m not denying Goldman don’t have massive power — or that they are ready and willing to book massive profits on Eurozone collapse. But — like everything in this crooked and corrupt system — they are vulnerable to liquidity crises triggered by the cascade of defaults that both myself and Tim Geithner (of all people) have talked about over the past week.

Of course, we all know that as soon as that tidal wave of defaults start, global “financial stabilisation” packages will flood the market to save Goldman and J.P. Morgan, and anything else deemed to be “infrastructurally important”, and survivors will take their pick of M&A from the collateral damage.

And kicking the can down the road using the same policy tools that Bernanke has been using for the past three years (i.e., forcing rates lower and-or forcing inflation higher) will result in harsher negative real rates — making treasuries into an even worse investment. Eventually (i.e., soon) the institutional investors — and more importantly (because their holdings are larger) the sovereign investors — will realise that their capital is rotting and panic. In fact, there is a great deal of evidence that China in particular is quietly panicking now. The only weapon Bernanke has is devaluation (in its many forms) — which is why he has been so vocal in asking for stimulus from the fiscal side.  

And — in spite of the last week’s gold liquidation, as China realised long ago — the last haven standing will be gold. Why? Because unlike treasuries and cash it maintains its purchasing power in the long run.

The Emperor is wearing no clothes.