Has Capitalism REALLY Hit the Fan?

Capitalism Hits the Fan: A Marxian View from UVC-TV 19 on Vimeo.

Analysis follows:


In short, the first 15-22min are instructive, the last bits are interesting; but fundamentally flawed.

In the comments- at vimeo- on this video, you can see a number of ideas discussed. Some (most? I didn't read more than the first handful) are marxist/socialist, some are capitalist (including the linked PDF from the Chicago Federal Reserve Bank's Letter from March 1997), some are anti-corporate, yadda yadda yadda. The thing that unites them is they each represent a fascinating singular viewpoint, and none of them do more than superficially present a straw man of any other views. But that's the comments (which we'll come back to), now for the video...

Are his facts accurate? Yes. He never claims they are more than generalizations- which they appear to be on closer inspection. For 150 years productivity, profit and wages rose each year. Was it always at the same rate? Probably not. Was it 1975 when wages started their stagnate/downward trend? Looking at the PDF linked above, it was 1972 when real hourly wages peaked. They explain the numbers they use:

"It is obtained by deflating the average hour earnings figure that the Bureau of Labor Statistics (BLS) obtains every month from its Current Employment Survey (CES) of establishments by the BLS’s Consumer Price Index for Urban Consumers (CPIU)."

That seems a reasonable way of deriving the numbers; and the Newsletter continues with an analysis of why it's not if you care for that. (I'll dig deeper into that PDF in a moment).

Generally, Professor Rick Wolff's facts and analysis of the 150 years from 1820-1970 is correct- as you'd probably expect from someone at the Department of Economics at the University of Massachusetts - Amherst. His assertion that this isn't a financial crisis is emotionally/politically motivated. This crisis may have resulted from many things- in fact, I think it's safe to say that it did- but to compare it to the body isn't very valid. Everything in life, today, is far more entwined than it was 100 years ago. 100 years ago a mechanics wasn't expected to understand basic nutrition, basic finance, basic law (and basic copyright law), basic electronics, and various other basics essential to navigating life in the modern era. That's not to say such understanding wouldn't help a mechanic 100 years ago, it's to say that they weren't expected by their society to know those things.

Today, the RIAA will crucify your grandmother if her granddaughter doesn't understand that torrenting music is illegal (basic copyright law). The MPAA will attempt to crucify anyone who doesn't adhere to the warnings they put on all VHS tapes and DVDs- on the DVDs you can't even skip their warning (even the one written in a language you don't understand). No more pensions, IRAs, 401(k)s, etc etc (basic- maybe even moderate- finance). A mechanic can get sued if he allows a customer to drive a car out of his shop- even if he fixed the one piece he was asked to fix (basic law). Undernourish your kids and see what DHS says (basic nutrition). Setup the router so you can safely navigate the internet for entertainment, education, and porn (technically entertainment; but SO much more, really); set up the flat screen 1080i television, the MP3 streaming wifi enabled home stereo and entertainment system, the cable box DVR, the DVD/Blu-ray player, etc (basic electronics).

Just because we're that entwined, doesn't mean this didn't start in the Financial sector. If we had done things differently, we MIGHT not have seen this crash happen, or spread as far as it did. That's a maybe; not a definite. If we had done things differently- say a dictatorial political system with a communist market- we may have been Russia in the early 1990s.

His fact that the American working class was the only one that could have been leveraged was new to me; and fit many things I had heard and read. For many years I wanted to move to the UK and live there awhile. I knew most people there rented- though I still don't know why exactly, tax law seems to have some effect on it. I knew that is the commonly accepted de facto living arrangement in Europe and Developed Asia: renting over buying.

His facts are solid, if general, and his ideas are fairly valid. Despite the fact that this started in the Financial sector, it's spread to many- if not all- sectors and is resulting in massive job losses. It's a world disaster/crisis/whatever.

His plan is interesting. Read the comments to see where it falls short from the marxist/socialist mindset. He's detailed cooperatives, not communists; but ignoring jargon and revolutions, it's an interesting idea. I doubt, as one commentor said, that workers already have the power. How can you "refuse low wages" when you're too broke to provide yourself food, water, and shelter? How can you refuse "higher prices" when it's milk, eggs, flour, rice, water, and shelter whose prices are increasing?

A digression on worker's power...

When I lived in Birmingham, I stayed at an Apartment for two years. When I got in, the price for that place was $675 a month (2 bed room, 1 bath, with water, sewer, and garbage included). When I left it was $725. When I left, the rented that apartment- to whoever moved in after me- for $750 + $30 for the included. The apartment wasn't in a bad neighborhood- though a prostitute did try to pick me up in the parking lot once, and many of the immigrants had their apartments invaded. (I was walking the dog one morning, barely awake, when I brushed through a piece of fishing line. It tripped a very loud, and annoying, alarm; designed to wake the families before thieves could make off with their kids' bikes or break down their doors). It was in Homewood, on Valley Ave, right off Green Springs. And the only place cheaper- on that road- was about $50-$60 cheaper a month, but about three-four times less safe. Imagine trying to walk to work from further away. I originally moved there from a place near Cahaba Heights that was 2 Bedrooms, 2 Baths, for $715 (garbage and sewer included). They arbitrarily raised rent rates every year- the longer the buildings stand the less is actually needed for the owners to turn a profit, until they're so old they should be torn down. Moving further away might have resulted in less rent; but more travel time to work, more gas in general travel, and basically less net gain.

Workers at the lowest end of the spectrum don't have much power. Look at who pays the most in taxes. Don't you think it's highly likely they're the same people spending the money on most non-essential (i.e. non-grocery, non-gas) supplies? They have the power, and they're not the middle class, they're the upper middle class and higher. This is where the ideals of a consumerist, materialistic, greed based value system fucks us. Plus advertising. In America, Taco Bell during the early to mid 1990s had a 59c, 79c, 99c menu. Wonder why they don't now? Because if you price something too low it's perceived value is always lower than it's price. Take the same item, price it at $1.09- instead of 79c- and its value seems greater, though the only thing that has changed is the price point. This works ont he psyche of people invested int he rat race, and who have won. People struggling to get by don't give a shit if it tastes a little funny and is half broken, if it's cheap and plentiful (and won't give them cancer today) it's gonna have to be good enough.

Back to his models...

Look at those silicon valley start-ups. As one commentator noted, venture capitalists supplied many of them with enough money to actually get the product out there. Then the VC's would, usually, own the largest portion of the company (compared to any other single investor, at least). Even if the VC's were bought out- control reverting to the workers- how did those companies end up? Oracle. Compaq. Google. Go look up which ones are publicly traded, and which ones make their Board of Directors public. Go see who is on those boards. Who is the CEO- and where did that person come from? It's not a pretty picture for the idea of cooperatives. Which might be a fault of the capitalist market, and the fallible human's need to indulge their greed; but if it is, we'd have to change the entire system before the cooperatives we were changing the system for could actually work in the long-term.

Lastly, the commentors. As I have said, I didn't read many of them. Comments can be useful; but they can also be rather useless. Most don't fully consider the ideas purported by others- even when they directly address those others. I did, however, go look at the Fed of Chicago's newsletter.

Let's be clear, I thought it would be the pro-capitalism view, and it is. It is also 12 years dated- which is significant in light of the last six months to a year. I didn't manage to make it through more than the first page.

There are, however, major methodological problems with using the average hourly earnings series to gauge long-term trends in wage rates. First, they cover only wage and salary compensation. Fringe benefits and contributions for social insurance programs, important parts of workers’ total compensation, are left out.

Because these components of compensation have been increasing more rapidly than wages and salaries over most of the period covered by figure 1, average hourly earnings understate compensation growth. The earnings data are also limited to production and nonsupervisory workers. The nearly 20% of workers excluded from the average are more likely to be highly skilled and highly paid. Because such workers have experienced more rapid wage growth since the early 1970s, their exclusion imparts another downward bias to the measured rate of average wage growth. Finally, though it covers a large fraction of employment, the CES is subject to substantial biases in sample selection; for example, it excludes workers at newly opened establishments.

In other words, because CEOs don't get covered- and their wages and benefits have grown vastly- the figure is inaccurate. My general refutation is: FUCK YOU!

Also, it doesn't cover NEW companies. Yet, it will soon; but more importantly: where do you think the new companies get their data for salaries from? Cause I'm betting established companies.

Fringe benefits are good; but they're also a crock of shit. In the 1950s you got a pension. Today, you get far less money, devoted to matching your 401(k) or IRA contributions. They have their benefits over the old style pensions- but mostly for upper middle class and above. Many people feel the "choices" and "freedom" of IRAs and 401(k)s are worth it; but I contest those "freedoms" and "choices" blow when compared to a pension for 90% of people. Health insurance could be worse if employers didn't help; but it's still ridiculous- even for Hospital employees. Why? Because of businesses we like to call the Insurance Companies (who are highly unregulated, and about the worst of the worst when it comes to greedy corporate fucks). Go look at what some sites that show median salary, and see how much higher they rate things like retirement packages and health care.

Don't get me wrong, Health coverage is even more expensive- a lot of the time- if the employer doesn't help with it; but it's not exactly like a benefit when a large chunk of salary gets pulled out of each check. What's the term for something that's not a benefit, but not a disadvantage, either? That's how I see health care compensation at most companies.

Do I have a solution?
Nope. But I'm not a professional economist, either. I think Professor Wolff makes some interesting points; but I also think he can (literally) afford to view things the way he does. I also think he knows quite a bit about what he's glossing over. All in all, it's definitely a must see lecture, because it illustrates an alternative viewpoint and sparks discussions. His solutions are maybe a little better- because of who they benefit- than most of the ones I hear currently; but they're also less likely. We're a hierarchical society, trying to disrupt the hierarchy isn't a small thing- and despite the benefit 99% of people will resist that change.

Of course, it'd be easier to substantially change if we could get those 99% to actually think about what/how/why the system is/does/causes the things/ways/beliefs it is/does/causes.