Saturday, January 14, 2017

Book Review: Is Socialist Revolution in the US Possible?

Is Socialist Revolution in the U.S. Possible?

The short answer is no. But that's the title and thesis of this book by Mary-Alice Waters, Olympia Newton and Norton Sandler. Of course they answer Yes.

Published in 2009, the book recounts events at the Venezuela International Book Fair, held in Caracas in 2007, specifically the session on the prospects for socialism in the US. It includes Ms. Water's opening presentation, along with reporting on the entire proceedings by Ms. Newton, and a presentation Ms. Waters gave a year later at another event in Caracas. Mr. Sandler contributes the introduction.

I guess it's human nature to regard our current generation as representing some inflection point in history. People imagine that folks in the future will spend their days thanking/condemning us for what we have or haven't done: saved the climate; prevented nuclear war; stopped an asteroid from hitting the earth; prevented the dystopia of artificial intelligence that's smarter than we are; solved the problem of overpopulation; returned us to the gold standard; etc.

Any of these items could represent the end of civilization as we know it, but they probably won't. Chances are the real threat to human flourishing will be something nobody today has even thought of. What the soothsayers all forget is that life is very contingent; the future depends as much on what side of bed Kim Jong-un wakes up on tomorrow morning as on anything else.

But Mary-Alice takes soothsaying to an extreme. Part of the future is inevitable, and another part of it depends on our choices.

The money quote is actually on the back cover.
To think that a socialist revolution in the U.S. is not possible, you would have to believe not only that the ruling families of the imperialist countries and their economic wizards have found a way to 'manage' capitalism. You would also have to close your eyes to the spreading imperialist wars, civil wars, and economic, financial, and social crises we are in the midst of.
In her world, the bourgeoisie are compelled by their "declining rate of profit" (she never explains what that means) to steal from the rest of us until the entire world order collapses into a catastrophic mess. The rich, despite their wealth, are insatiably hungry and inevitably can act in no other way.

On the other hand, we, the working class, have options, albeit only two of them. We can organize to fight back and defeat the bourgeoisie. For this we will need a vanguard party, which is the unique role of the Socialist Workers Party (SWP). Or, we can allow ourselves to be guided by false prophets who sell us out for a pocketful of change, betraying the working class and leading to the very end of the human civilization.

It's like a train rolling inevitably down a hill, and ahead is a switch between two tracks. Choose the wrong track and you'll head over a cliff. Flip the switch the other way (follow the SWP) and instead you'll reach safe harbor where everybody lives happily ever after.


On matters of fact the above quote is misleading in at least two ways. First, she is quite right that the wizards are unable to 'manage' capitalism--neither the Fed, the Treasury department, nor the White House. Capitalism is, by design, completely unmanageable. But what she doesn't understand is that capitalism is stable--it doesn't need to be managed. Adam Smith's invisible hand works remarkably well.

And second, she is also correct that we have turmoil, strife, and "crises." The Militant always exaggerates every problem into a crisis--today we have an economic crisis, an educational crisis, an ecological crisis, and so on. Mostly these are just the warp and woof of every day life--problems, to be sure, but hardly a crisis. It is true that in 2008 we had a financial crisis, and in 1961 we had a missile crisis. But nothing today rises to anywhere near such a level. History has always been thus.

The most interesting part of the book is the contribution from Olympia Newton reporting on the rest of the conference. Most attendees apparently didn't agree with Mary-Alice, taking a much more pragmatic point of view.

Author Eva Gollinger said she didn't " 'share the same optimism that revolution is possible in the United States.' because 'it's very easy to change the channel. People are not poor and hungry in the U.S. like the were in Venezuela. You get two or three credit cards in the mail every day. There is poverty, but it's only in a few small sectors.' " (Italics mine. The conference took place when optimism about Venezuela still prevailed, hence poverty was spoken of in the past tense. How quaint!)

Ms. Gollinger's view seems more in accord with facts than Mary-Alice's.

Ms. Waters sees the struggle of illegal immigrants as central to the American Revolution. Recall that in 2006 (a year before the conference) there was a flash mob of Mexican high school students who demonstrated by the hundreds of thousands to protest deportations. Ms. Newton reports that Latin Americans were much less tolerant of these people than Ms. Waters would have you believe.
In various ways, several said that Latin Americans living in the United States are simply there to "get a piece of the pie."
"They are only there to get passports," said one participant. "Once they get them they will stop marching." Many spoke with barely concealed contempt for immigrant workers as sellouts who had bought into the "American dream" instead of remaining in Latin America to fight for political, economic, and social change.
This does seem like a truer description of immigrants than Mary-Alice's relentlessly downtrodden workers.

Then there was explicit antisemitism from "Leftist", Amiri Baraka, among others. Mr. Baraka recited one of his so-called poems.
"Who decide Jesus get crucified?" one poem asks. "Who knew the World Trade Center was gonna get bombed? / Who told 4000 Israeli workers at the Twin Towers / To stay home that day? / Why did Sharon stay away?"
Another "participant from Panama had said during the discussion that Jews are the main problem facing working people in the world today because 'they have all the money' and control everything."

Norton Sandler, representing the SWP, demonstrated appropriate courage. "[H]e spoke from the floor the next day and pointed to the deadly danger scapegoating and Jew-hatred posed for the working-class movement."

Whatever their intellectual failings, my former comrades have retained a moral compass.

Further Reading:

Wednesday, January 11, 2017

Book Review: Rise & Fall of American Growth

Robert Gordon's book The Rise and Fall of American Growth certainly doesn't need another review: see here, here, here, and here, for example. But I'm so inspired by reading it that I can't resist.

Whatever you think about Mr. Gordon's conclusions, the book itself is magnificent. He posits a miracle century from 1870 to 1970, beginning with the invention of the electric light, and concluding with the widespread adoption of central air conditioning. Prior to 1870, Americans lived lives more similar to medieval times than to our own. If not necessarily brutish, life was definitely nasty and short. Men's work was dirty and dangerous, while women's toil was unremitting drudgery. Children often died young.

By contrast, a household in 1970 had electricity, indoor plumbing, clean, running water, a car, television and radio, a refrigerator, washer and dryer, a telephone, and more. Nobody needs to share bathwater anymore. While there have been incremental improvements in all those devices, a modern family could move into an unrenovated, 1970s house and live quite normally. The only significant household appliance invented after 1970 is the microwave oven.

Similarly, workers have it much better off than before. They're employed in air-conditioned offices, in ergonomically-designed factories, and stores with break rooms and washrooms with indoor plumbing. Women don't have to sew their own clothes, or launder their husband's filthy clothes by hand, much less cook over an open fire. Today they can go work in the same climate controlled offices where their husbands are employed.

The result is a huge increase in productivity! Mr. Gordon documents it meticulously, and discovers that the largest productivity gain occurred during the decades from 1920 to 1950. That despite the Great Depression and World War II, or perhaps, even because of those events. For example, US manufacturers learned how to build one B-29 bomber every hour. That skill was not forgotten at the end of the war.

The central thesis of the book is that the miracle century can only occur once. The electric light has already been invented--that can't happen again. And likewise with the equally important internal combustion engine. Households can be networked (electricity, water and sewerage, telephone) only once, and while the network can be upgraded, the fundamental productivity change can't happen again.

In other words, we've eaten the low-hanging fruit. Productivity improvements such as occurred during the miracle century are once-off, never to be repeated. Hence economic growth will shrink from ~4% annually during the miracle century, to something around 1% today.

But Mr. Gordon's thesis does not just rely on anecdote and statistics. He brings some solid economic reasoning to the task as well. The growth in GDP is typically decomposed into three terms, which are then added together. Those are 1) the growth in the size of the labor force; 2) the growth in the total capital stock; and finally 3) the growth in TFP, which concerns most of the book.

TFP stands for total factor productivity, but that's really a misnomer. A more apt name is the Solow residual, named after Robert Solow, who invented the concept. But residual is the important label, and that means everything that is left over after you've accounted for the principal factors.

So economic statistics are always a bit dismal--hard numbers are hard to come by. For example, Mr. Gordon demonstrates conclusively that government statistics systematically overstate inflation--not because they're evil, but just that inflation is really hard to measure. Simple concepts such as real GDP growth are fuzzy--beset with uncertainties such as the inflation rate. And likewise with growth in labor and capital investment.

Nevertheless, within some error margin one can estimate growth as a function of labor. Add one additional worker x, and y amount of additional output will be produced. Similarly, buy a new machine for that worker to use, and output will increase all the more. Thus GDP growth as a function of the size of the labor force and as a function of capital investment can be reasonably estimated.

But there are some factors in GDP growth that are not a function of either labor or capital. For example, fine weather will produce a much larger agricultural output, regardless of how many workers or tractors the farmer employs. A change in government regulations may make it cheaper and easier to manufacture widgets, as can also a change in global trading networks. None of these can be expressed by the principal components (labor and capital), but are instead are left over as a residual, aka a fudge factor, known as TFP.

Among other things, TFP collects any errors that accrue in measuring labor and capital investments. I propose that it be renamed TFF: total fudge factor.

But the total factor productivity moniker is longstanding, and not irrational. While nobody denies any of the items that I've designated TFF, most of the residual is attributed to new technology. Buying a new abacus may improve the productivity of your new accountant at the margin, but replacing the abacus with a computer makes for a whole new ball game--productivity will make a giant step upward.

And Mr. Gordon is certainly on solid ground when he attributes to the miracle century to new technology. The rest of the fudge factor is either small or it cancels out. For example, despite the Great Depression, TFP growth continued unabated throughout the 1930s. There is no other reasonable explanation for this other than technology.

He also makes a strong argument about why TFP growth has decreased since 1970: apart from the digital revolution there's been very little new technology. While digital technology (computers, internet, etc.) caused a large spurt in TFP from 1994 to 2004, since then it's petered out--yet another revolution that can no longer be repeated.

So his book is a tour de force in economic history, and well worth reading just for that reason. The problem, insofar as there is a problem, is when he starts predicting the future. He's what might be called a techno-pessimist. I think he's too pessimistic--I believe AI and driverless vehicles will have a much larger impact than what he predicts. But then my crystal ball isn't any better (or worse) than his--we'll just have to wait and see.

Nevertheless, in addition to declining TFP growth he details four headwinds to American economic growth. One of these is rock solid, namely demography. The US labor force is not growing very fast, and soon may actually decline. This is partly because the baby boomers are retiring, partly because men are disproportionately leaving the workforce, and even workforce participation by women is declining slowly. Further, immigration rates will slow down (regardless of what Mr. Trump does).

If labor force growth declines, then economic growth will decline with it. No way around that.

The second headwind is debt. Government has run up huge debts. Not just the federal deficit, though that's bad enough, but social security and Medicare are increasingly burdensome obligations. States and municipalities are committed to pension payments that are unsustainable. Debt has added to economic growth today in exchange for reducing growth in the future. And Mr. Gordon's reasonable prediction is the future economic growth will be reduced. I agree with this conclusion as well.

The third headwind is education--we're no longer making progress in increasing the percentage of high school or college graduates. I think he's just wrong here. Our country invests way too much in education. I've written about that elsewhere.

Finally, he mentions inequality. This is a bit of a category error--he doesn't claim that inequality will per se inhibit growth, but rather that the proceeds will not be evenly distributed. "When we consider the future of American growth, we care not just about the growth of average income per capita, but also about growth of income per capita for the median American household" (p. 612).

I think the inequality problem is overstated. The proper comparison is not income, but rather consumption. The CEO may earn 1000x more than the worker, but he doesn't consume 1000x as much. He certainly doesn't eat much more than the average employee, and he can only drive one car at a time. Maybe he's 10 or 20 times richer than the working stiff. Not a big deal.

In summary, whatever you think about Mr. Gordon's conclusions, this is a superb book and well worth your time.

Further Reading:

Wednesday, January 4, 2017

One State or Two?

In a front page article by Naomi Craine entitled "UN Israel vote registers blow to Palestinian national fight," The Militant (SWP*) opposes the recent UN resolution condemning Jewish settlements on the West Bank.
The resolution states in part that “the establishment by Israel of settlements in the Palestinian territory occupied since 1967, including East Jerusalem, has no legal validity and constitutes a flagrant violation under international law and a major obstacle to the achievement of the two-State solution.” 
The vote in fact registers a blow to the decades-long struggle of the Palestinian people against national oppression. It reinforces the dead-end course of the Palestinian Authority and Hamas leaderships to rely on Washington and other imperialist powers to pressure Tel Aviv, while shackling the Palestinian masses as passive bystanders. It gives a boost to forces in Israel pushing for greater inroads into Palestinian territory.
This odd reasoning is consistent with Trotskyism, which accepts as a given that nothing United States supports can help the working masses, in this case Palestinians. The solution for Palestine is not reliance on the "imperialist powers," but instead mass action on their own account.

The article then wanders far from traditional Trotskyism.
It [the UN resolution--ed] reflects the absence of any Palestinian leadership fighting for a way forward — a negotiated agreement that includes recognition of the state of Israel, coupled with recognition of a Palestinian state, as it exists today, as a stepping-stone to the fight for a single, contiguous homeland for the Palestinian people. Only this fight can provide the basis for advancing the interests of working people of all nationalities in the region today.
Or in other words: The Militant proposes the following plan 1) recognition of the State of Israel by Palestinians; 2) the recognition of a Palestinian state in a two-state solution; and 3) a long-term, utopian goal of a democratic, secular Palestine/Israel from river to sea.

There are many things to criticize here, not least the mere impracticability. But it gets one, huge, thing glaringly right: it is NOT antisemitic.

All the other grouplets I follow argue that the State of Israel should be wiped off the map. Here's how Socialist Action (SA) puts it.
Only a democratic and secular Palestine extending throughout the historic territory of the Palestinian people, with full rights guaranteed for all regardless of nationality or religion, can effectively replace the current system of settler-colonial domination. 
The resolution also ignores and limits the right of Palestinians to resist the illegal occupation. It calls for confiscation of “illegal” weapons and equates the right of Palestinians to self-defense and military resistance to colonial occupation with “terrorism.”
The first paragraph is the usual prophylactic against charges of antisemitism. After all, how can anybody in favor of a "democratic and secular Palestine" be an anti-Semite?

But the second paragraph puts a lie to the illusion. Palestinians, on this telling, are "occupied", and have an unlimited right to resist the occupation. By any means necessary! Which leads inevitably to supporting Hamas--an archetypal antisemitic organization if there ever was one. Indeed, for me it's a litmus test: if you support Hamas, you're an anti-Semite, whatever else you might say. And SA enthusiastically supports Hamas!

The key difference is this: for the SWP the utopian outcome comes last, and only after both Israel and Palestine are recognized. Or put another way, nobody in the SWP is gonna be driving the Jews into the sea.

For SA, the order is reversed--the utopian solution is a prerequisite before anything else can be discussed. And in the meantime Hamas and allies have unlimited authority to drive as many Jews into the sea as possible. Because, occupation, don't you know.

Since we're speculating on utopian outcomes, let me propose one of my own. The model is my own experience. I moved to New York 32 years ago. I was not born here. By SA's lights I am, therefore, an occupier. After all, what right do I have to live here if I wasn't born here? Indeed, I have even less right than an Israeli Jew has to Israel because not only was I not born here, but neither were my parents or my great-grandparents, or any of my ancestors.

Yet New Yorkers accept me as one of their own. They let me buy a house here, and I'm even registered to vote!

Regarding the "occupation", Ms. Craine provides us with some actual data.
Some 580,000 Israeli Jews now live in these areas beyond the 1967 border, in settlements scattered throughout the West Bank and in housing developments built up around eastern Jerusalem, ringing the city’s Arab neighborhoods. These include 123 settlements authorized by Tel Aviv and about 100 unauthorized outposts, carving up Palestinian land right up to the border of Jordan.
Wikipedia breaks it down a bit further. In 2015 the Israeli population in the West Bank excluding East Jerusalem was 388,000 people. In addition, as of 2003 (the most recent data provided by Wikipedia), the Jewish population in East Jerusalem was 176,000.

Also from Wikipedia, the Arab population in the West Bank (in 2012, not including East Jerusalem) was 2.7 million. That means Jews made up about 14% of the total West Bank population. Jews are no demographic threat to the Palestinian people in the West Bank. By comparison, 20% of Israel's population is Arab.

So here's the utopian dream. Draw a boundary between Palestine and Israel--I'd pick the 1967 border with an exception made for East Jerusalem, but whatever. People who live on the Israeli side are Israeli citizens. As just mentioned, approximately 20% of Israeli citizens are Arab. And people who live on the Palestinian side are Palestinian citizens. We just noted that roughly 14% of Palestinian citizens would be Jewish.

So what's the problem? The only issue is that each state--Israel and Palestine--has to guarantee the protection of its minority citizens' rights and property. Israel has mostly done that for its Arab population. Palestine, meanwhile, is still possessed of murderous passions, requiring large portions of the West Bank be reserved for security.

What's wrong with Jewish settlers being citizens of an independent Palestine? If only Palestine joined the civilized world...oh well. We can all dream a utopian dream.

My utopian dream is not substantially different from that of the Socialist Workers Party. And neither of us are antisemitic.

*The Militant is published by the Socialist Workers Party (SWP).

Further Reading:

Sunday, December 25, 2016

Trotskyist Psephology

Psephology -- the study of election returns -- is not in the Trotskyist wheelhouse. For them, apart from the one-and-done variety that elect people like Castro to 50-year terms, elections are "bourgeois," and unimportant. Not worth discussing.

Except this year. Trump's election has upset the apple cart. The standard Leftist line is that a plurality of American voters, especially including the working class slice, are racist/sexist/homophobic/fascist. Of course that's a depressing conclusion, which the grouplets I follow are now trying to walk away from.

Socialist Action (SA) has made the most dramatic retreat. A current article by Mark Ugolini, argues that instead of being racist, etc., workers are just plain stupid. They've been completely bamboozled by Trump's claims to help the working class. Instead he's just a craven capitalist out to stuff the pockets of his own class, determined to betray his supporters by demolishing Obamacare, gutting Medicaid, eliminating pensions, and in general being an all around bastard.

And what of Trump's supposed racism, etc.? Today that gets downplayed. Mr. Ugolini writes:
Despite the virulent expressions of racism and sexism displayed by Trump during the campaign—which gave a swift boost to the ultra-right fringe—and the steady stream of insults, rants, and repulsive behavior, millions responded to his populist-sounding message. These voters viewed Trump as an agent of change—someone capable of shaking things up, who in a distorted way embodied their distrust and hatred of a political system and a news media that ridicules, belittles, and ignores them.
Racism and sexism are today just a sideshow. Trump won "despite" that.

How different that is from what Jeff Mackler wrote back in October, 2015.
No doubt Trump’s rants find fertile soil in a small layer of the overall electorate, but even less in the general population, some half of which increasingly does not bother to vote. 
But Trump’s backwater histrionics are not new to the increasingly polarized and crisis-ridden world capitalist scene. Overtly far-right, if not neo-fascist, views are similarly expressed in France, England, and across Europe. In the former two nations such right-wing parties have, for the first time in nearly a century, outpolled the traditional capitalist stalwart parties of the status quo. 
Trump is the American reflection of overtly racist and neo-fascist ideology— if not a conscious experiment with it. His racist rants in some instances have encouraged the use of violent physical attacks by his disaffected followers, who find his scapegoating of the oppressed to their liking.
Mr. Trump hasn't changed--he wasn't a fascist then and he isn't a fascist now. As Scott Alexander eloquently points out, he's no more racist than the average 70-year-old white guy. He's certainly no more racist than any former president (barring perhaps Mr. Obama).

The American people haven't changed, either. They're no more stupid today than they were ten years ago. By SA's lights they must be true idiots, falling for the same scam every four years as predictably as the sunrise.

Solidarity, having made a French Turn into the Green Party, were fully invested in the Jill Stein campaign. In a statement from the Steering Committee of Solidarity they acknowledge that she was not successful.
Meanwhile, the Green Party--the most visible alternative to the left of the Democrats--seems to have won less than 1% of the vote in the Presidential race; a result both disappointing to those seeking to build the Greens as a party of the left, many of whom named 5% of the vote as a goal, and totally insignificant compared to the numbers of Democrats and independents who either stayed home or, worse, jumped ship to vote for Trump.
While they're still quick to accuse Mr. Trump himself of racism, they try hard to get his supporters off the hook.
The outcome of the election is, no doubt, in part an expression of white supremacy. But it’s more than that: many commenters have already pointed out that the rustbelt battleground states that arguably cost Clinton the election were areas where Obama performed significantly better among white voters in 2008 and 2012 than Clinton did in 2016, complicating any suggestion that the results are simply about the racism of white voters.
This is essentially the same argument as SA makes--the American People were bamboozled into voting against their own self-interest. They're only slightly more specific about why, blaming "neoliberalism"--a catch-all term that is approximately a synonym for all evil.

Scott Alexander provides convincing evidence that white supremacy is not a significant current in American politics. After presenting much data, he concludes
So the mainstream narrative [including Solidarity--ed] is that Trump is okay with alienating minorities (= 118 million people), whites who abhor racism and would never vote for a racist (if even 20% of whites, = 40 million people), most of the media, most business, and most foreign countries – in order to win the support of about 50,000 poorly organized and generally dysfunctional people [white supremacists--ed], many of whom are too young to vote anyway.
As it turns out, Mr. Trump received a larger fraction of the minority vote (both Hispanic & African-American) than either Romney or McCain. Whatever else Trump is, he is not a white supremacist.

The Militant's view is refreshingly different. The paper describes the Trump phenomena as more a split in the ruling class rather than stupidity by the workers. Quoting Steve Clark,
“For the first time in decades, the US rulers and their government have begun to fear the working class,” Clark notes. “More working people are beginning to see that the bosses and political parties have no ‘solutions’ that don’t further load the costs — monetary and human — of the crisis of their system on us.” The rulers “sense that mounting struggle — class struggle — lies ahead.”
So, according to Steve, desperate times call for desperate measures, and a radically different presidential candidate, one which a big part of the Republican establishment disowned, suddenly becomes the tribune of the bourgeoisie.

But The Militant has long insisted that Trump is not a fascist, as Naomi Craine wrote last April.
“Trump’s not a fascist, he’s a demagogic bourgeois politician,” said Naomi Craine, a leader of the Socialist Workers Party here, who spoke along with Kennedy. “He uses crude anti-Mexican and anti-Muslim rhetoric, and there’s a real edge to his comments on women.” 
What he proposes to do is not much different from the other capitalist politicians, however.
The paper argues that Trump accurately reflects the attitudes of most American workers, but the solutions he proposes are straight from the capitalist playbook. Far from being radical, he's just another capitalist candidate dressed up in proletarian clothing.

I think The Militant is closer to the truth than any other grouplet. Donald is certainly no fascist, as can be seen by his "ground game," or lack thereof. It has been assumed that a presidential candidate needs activists on the ground in an organized Get Out The Vote (GOTV) campaign. Hillary certainly had that. But Trump, with a staff only a fraction the size of Hillary's, never assembled a ground game.

Yet a ground game is just an incipient fascist gang if the candidate chooses to use it that way. Indeed, both Bernie and Hillary used their ground game in just that way on occasion. But Donald never did that, in part because he never organized a gang to begin with. So he's not a fascist.

The Militant is also correct that Trump has no "solutions." They're hardly unique in pointing that out. But the reason isn't some betrayal of the working class--rather it's that no solutions exist.

  • There is no solution to the health care problem in America that solves all the problems people want solved.
  • There is no solution to the regulatory state--there will always be both too much and too little regulation.
  • There is no solution to structural unemployment in this country.
  • Etc.
Even in a socialist society--especially in a socialist society--no solution to any of these problems will be found.

Let me end with a little psephology of my own. Why did Trump win the election? Simple. He both out-smarted and out-hustled Hillary.

Hillary is stupid, and I mean that in the literal, IQ sense of the word. Anybody who rises to high office has to be smart, and the 17 candidates who initially graced the Republican stage were mostly brilliant. I need only mention Rand Paul and Chris Christie to make my case. And Trump was smarter than most of them.

But Hillary just isn't in that league. She inherited her position solely by virtue of being Bill's wife. Of course being smart isn't everything--after all, Rand Paul isn't president. But it is a prerequisite, one that Hillary couldn't meet.

That's why she lost the election.

Further Reading:

Sunday, December 11, 2016

If You Really Care About The Poor

I'm not much of a stock picker. Indeed, my ability to predict the future is not very good -- though probably better than Jeff Mackler's or Christine Frank's ability to forecast the weather 100 years from now. Still, if you want a get rich quick scheme you're reading the wrong blog.

Nevertheless, I do have a stock pick for you. It comes more under the socially responsible investing label than a road to riches. If I ever do take my own advice it's because I'm a sucker for a sob story.

Much has been said about how the economic bottom half of Americans are doing poorly. Trump ran his election campaign precisely on that premise, promising that he'd improve their lives. I doubt he'll be able to deliver.

I, for one, don't believe that the pain is as bad as Mr. Trump makes it sound -- I think most Americans are getting richer. And for those who really are falling deeper into poverty, it is to some extent their own "fault"--that last word in scare quotes because I certainly don't mean it too literally. But the fact is that among poor people, household size has been getting smaller due to divorce and/or never getting married in the first place. And some personal habits (drug addiction, sugary diet) are leading to poor health. All of these work against the larger trend of increasing wealth for most Americans.

Still, whatever the cause, there is no question some considerable number of our fellow citizens are not doing very well. Somebody needs to help them out.

The hero of the day is an unlikely fellow by the name of Todd Vasos. He's hardly self-sacrificing--his paycheck is over $925,000 annually, on top of which he gets stock options bringing his "total calculated compensation" for 2015 to just shy of $9 million.

Or, put another way, if his salary was divided among the 120,000 people who work for him, they'd each get a $75 bonus for Christmas. So it's not as though everybody else is poor because he's so rich.

Mr. Vasos is the CEO of Dollar General (DG), a company that sells about $20 billion worth of product annually, or about 2,200 times Mr. Vasos' compensation. The company's operating profit was about $2 billion last year.

Unless you live in the Pacific Northwest you are probably familiar with Dollar General. It's one of those "deep discount" stores that competes with Walmart for the very low-end consumer. I currently live within a mile of a Dollar General store, and drive by two others on my way to work in the morning. This indicates that I don't live in a very wealthy neighborhood. The company's strategy is to sell relatively few, fast-selling, off-brand items at very low prices. I shop there for things like toiletries, cooking supplies, cleaning supplies, and gift cards. They also carry popular food items--mostly packaged goods, but also milk, juices, and ice cream.

Last August the stock price of DG dropped dramatically, along with their competitors, Dollar Tree and Belo Five. ZeroHedge explains why:
Discount retailer Dollar General said it was cutting prices on its most popular items such as bread, eggs and milk, intensifying a price war among already commoditized products with retail giant Wal-Mart Stores to win back falling market share. It shares fell the most on record, plunging by 18% after the company missed on revenue, blaming aggressive competition, lower food prices and reduction in SNAP, or food stamp, coverage in 20 key states.
Perhaps increased competition from a resurgent Walmart is a culprit, but that's not the whole story.
But the biggest factor by far impacting the performance of both dollar stores was the sharp, adverse turn in the purchasing power of the lower half of US consumers. 
Both Dollar General and Dollar Tree said pressures on their core lower-income shoppers contributed to the same-store sales misses that both retailers reported. On today's conference call, Dollar General CEO Todd Vasos said that he was surprised to admit that while on the surface things are supposed to be getting better, the reality is vastly different for low-income US consumers: 
"I know that when we look at globally the overall U.S. population, it seems like things are getting better. But when you really start breaking it down and you look at that core consumer that we serve on the lower economic scale that's out there, that demographic, things have not gotten any better for her, and arguably, they're worse. And they're worse, because rents are accelerating, healthcare is accelerating on her at a very, very rapid clip" (boldface in original).
Let's consider these in turn:
  • Walmart--has hardly been resurging. It's sales are mostly flat, and for the same reasons reported by DG.
  • Higher rents--are happening largely because of local government restrictions on building, especially in states like California and New York. It has become increasingly difficult to build entry-level housing anymore. The cheapest new houses in my region cost north of $400K. Reducing or eliminating zoning laws (as happens in places like Houston) keeps housing prices low.
  • Expensive health care--is mostly because it is way over-regulated. It costs a billion dollars to bring a drug to market these days. Similar restraints exist for medical devices. I understand there's a tradeoff between cost and safety, but we've gone way too far on the way to safety.
  • SNAP & food stamps--are being reduced for all sorts of reasons, including limited state tax revenues, and increased pension costs for state employees.
Note that these problems arise mostly because of government mismanagement. If we had competent civil servants many of these problems could be mitigated. So much for socialism.

So what did DG do about this? "Dollar General, whose product selection prices are already among the lowest in the country, cut prices by 10% on average on about 450 of its best-selling items across 2,200 stores during the quarter, CEO Todd Vasos said on a conference call."

In response to a question from a journalist, Mr. Vasos explained:

Q. I understood the issues with SNAP and deflation, but is there a piece of this that's just related to the consumer job – labor market getting better, so that consumers spending a little bit better and they're trading up? Is that not possible?
Vasos: I am not going to say, it's not possible, but we have not seen that in our data. Once again, remember that over 60% to 65% of our sales and consumer base is on that lower demographic area that – of the economic scale. And when you keep that in mind, her life hasn't gotten any better. And that's really that customer that we're serving the most, and that we're intent on making sure has enough money and enough products inside her house to be able to feed her families.
And the reaction?
And when we're out in stores and we drop prices like we do, I can tell you, I've been out in stores in the middle of the aisle and heard customers come up to our store manager in tears and thanking them for being there and thanking them for the prices that we offer in a real convenient nature for her, where she can walk to the store, because she can't afford anything else. When you hear that, that really brings home where this core customer is.
So there you have it. A multi-millionaire does more to prevent starvation than (probably) all the free food-banks in America. He accomplishes this by running an efficient, self-sustaining business that buys the products as cheap as possible and passes the savings on to their customers--along with paying 120,000 employees.

And my Trotskyist friends are going to complain that the guy earns an exorbitant salary? I think they have their priorities screwed up.

If you're against poverty, buy a 100 shares of Dollar General.

Down with poverty!

ZeroHedge includes this picture of one of Mr. Vasos' customers.
dollar general.jpg (569×398)

Further Reading:

Wednesday, November 23, 2016

Louis Proyect's Elites

I am very happy that Trump won the election--enough so that I'm at least temporarily coming out of healing hibernation to pen this article. Plus I've recovered partial use of my left hand.

On one level this election pitted the Elites against the Hoi Polloi. The case was wonderfully made in a rant by the very talented Micheal Moore, intended as a trailer for his movie, Trumpland. Mr. Moore has his facts wrong--as do my Trotskyist friends--but he certainly gets the emotion right. A vote for Trump is a big "f*** you" to the establishment.

So there is something odd about Louis Proyect's blog. As of this writing he hasn't posted any serious analysis of the election. Yes, there is this article, which ultimately is about whether Jill Stein's 1% is significant. And then there's this, a profanity-laden piece about the history of the Democratic Party. Mostly he's retreated to movie reviews. But nowhere does he explain why Trump won the election. Why did 46.6% of the electorate (and excluding California a majority) vote for a fascist/racist/misogynist/idiot? How is it that the Republicans morphed into the party of the working class, while the Democrats were endorsed by all the sophisticated, right-thinking people?

He claims to be on the side of the working class, but it sure looks like he sides with the elites. I think he's befuddled, which explains his silence.

I infer that from this movie review he authored post-election. I don't read his movie reviews--not because they're bad, but just that I'm not interested. I haven't read this one either, but the first paragraph caught my attention.
Around this time every year I begin to be deluged by DVD’s and Vimeo links geared to the sort of middle-brow films that Hollywood studios submit for consideration to members of New York Film Critics Online for our annual awards meeting in early December. If you’ve ever seen something by Merchant-Ivory, you’ll probably know the kind of movie I’m talking about.
So I don't own a DVD player, I know nothing about the December awards, and I've never heard of Merchant-Ivory. When I watch movies (seldom) it is purely for escapism. So I am (at best) a "middle-brow" movie-watcher--the very kind Mr. Proyect so summarily dismisses.

And of course he's right to dismiss. He knows much more about movies than I do, and there is no reason why he should be held hostage to my (poor) taste. Indeed, when it comes to movies Mr. Proyect is a member of the elite. And despite my disinterest, I'm very happy there is a movie elite--were there not, even the movies I watch (syrupy rom-coms) would be less good.

Even in politics one has to place value in elites. After all, you want people in government who actually know something, and perhaps are even competent. Filling the halls with proletarian ignoramuses inevitably leads to disaster, as the Bolsheviks discovered beginning on October 8th 1917. "Peasants with Pitchforks" makes for a nice slogan, but you don't really want them in power. Much better is somebody from Goldman-Sachs.

Mr. Proyect, subconsciously at least, yearns for an elite, but it's the wrong kind of elite. His elite is not competent public servants, but rather people who claim to know what we want better than we do ourselves. Because of supposed climate change, for example, the American working class is required to fork over billions of dollars to third-world kleptocrats (or at least that's what the Paris accords require). Because cities are such charming places, Mr. Proyect's elites want to force us all into denser housing (aka tenements) so as to restore the mythical sense of community of yore. Mr. Proyect's elites are against almost all technological progress, from fracking to GMO agriculture. Their goal is poverty for everybody (except for the elite nomenklatura). And worse, our movie elites, instead of just making our movies better, want to force-feed us politically correct propaganda.

So who are Mr. Proyect's elites? Certainly they include people like Jill Stein, Bernie Sanders, Jeff Mackler, and--yes--Hillary Clinton. Mr. Proyect will undoubtedly complain that I put all these people in the same basket, and he is right that there are distinctions between them. Ms. Clinton, for example, is not merely elite in the sense I've described, but also claims (incredibly) to be a competent politician. As such, she's more willing to compromise with the status quo.

None of the rest make any concessions to reality. "Free college for all," insisting that American workers (e.g., Walmart employees) pay tuition for the children of the elite, is among their more ridiculous demands. Taxing the top 0.1% of the population into oblivion is not a viable way of raising anybody's standard of living. Putting the pharmaceutical companies out of business won't improve health care. Banning all technological innovation more consequential than an iPhone makes for a stagnant, poorer society.

We'll leave aside the explicit antisemitism, the rabid bigotry against religious people (especially Catholics), the unvarnished hatred of the Scots-Irish, and the deep suspicion that something traitorous is the matter with Kansas (and the rest of rural America). The fact is that Mr. Proyect's elites hate and fear most Americans. They do so because they claim to speak on our behalf, but at some level realize that we don't want to live in the way they prescribe.

So we voted for Donald Trump.

Now that's very strange. After all, far from being a Peasant with a Pitchfork, Mr. Trump is himself very proudly a member of the elite. He's made no attempt to hide it, flying around in his own plane, living in a gold-plated penthouse, and owning expensive, golf resorts. Notwithstanding the "blue-collar billionaire" moniker, Mr. Trump is just as elite as Misters Goldman and Sachs.

But that gets us back to where we started. I did say we need elites. I voted for him precisely because he isn't a peasant. He really does know something about how the system works and has connections to people who know even more. The difference between Mr. Trump and the rest of them is not his class. No, it's instead who he works for.

Because Mr. Trump can listen. He understands the plea of Middle America for some cultural stability. Not stasis, mind you, but at least a more modest rate of change. There is no question that globalization--hugely enriching overall, and in the long term good for everybody--is highly disruptive in particular times and places. One can't stop it, but perhaps one should slow it down. He realizes that the path to a richer society is to let people earn a living--be it by fracking, or mining, or trading securities, or building houses, or growing food. The obscene level of regulation prohibits citizens from earning an honest living.

Example: Does anybody remember the name Eric Garner? He was the poor fellow inadvertently killed by police officers in Staten Island. He tried to scratch out a living selling "loosies", i.e., individual cigarettes. This is illegal because the State of New York (I'm looking at you, Governor Cuomo and Mayor DeBlasio) needs the tax revenue from tobacco. So the cops went after him. Mr. Garner wasn't too bright and the scuffle led to his death.

The Left, including Mr. Proyect's elites, blamed Racism on the part of the police. But they've got the wrong "R" word. The real word is Revenue. Mr. Garner was killed for selling a legal product on a public street, not because he was Black, not because the cops are racist, but because Mr. Proyect's elites are against smoking, they need revenue, and anybody who gets in their way has to be dealt with mercilessly.

When Mr. Trump talks about deregulation, that's what he's talking about. Citizens (such as Mr. Garner) have a right to earn an honest living. The sniveling, hypocritical, selfish elites that populate Mr. Proyect's political universe don't understand that. They're too greedy, too self-righteous, too interested in some stupid cause (saving the planet, stopping smoking, overthrowing capitalism), to care about little people like Mr. Garner.

We can all be very grateful that Mr. Trump won the election.

Further Reading:

Sunday, October 9, 2016

Sympathy for Jack Barnes

Yesterday I took a fall and broke my arm. So now I share the same problem as Mr. Barnes, though he has many decades experience on me. Typing for me is now ridiculously slow--I'm sure Mr. Barnes can knock out essays in a jiffy. I suspect I'll get better at one-handed typing over the next few weeks. Right now I'm still in too much pain to work at it.

Anyway, this blog will probably be on hiatus for a couple of months. I simply can't take on Jack, Jeff, Bonnie, or Diane one-handed.