Saturday, July 14, 2018


Among many interesting articles in the current issue of Solidarity is this piece by Cyryl Ryzak, entitled Populism: What it is and what it is not. The post is a riff on a long article by John Judis, with which Mr. Ryzak ultimately disagrees.

The lead paragraph states the problem.
“Populism” is a magical word. Its mysterious power unites the Erdogan and Putin governments, Latin American leftists like Evo Morales and the late Hugo Chavez, the resurgent Right in Europe and the United States, Hungarian and Polish anti-communist parties, Podemos, the Eurocommunism of the tragic Syriza, the revitalizers of social democracy Bernie Sanders and Jeremy Corbyn – all under the same umbrella.
One infers that the word is nearly meaningless, and that only the most milquetoast centrist could escape the label (think John Kasich). Indeed, Mr. Ryzak's objection to Judis' piece is that it lumps too many people together; if Bernie Sanders and Donald Trump are both populists, then at very least there is a semantic problem.

But its use is not innocent, as Mr. Ryzak explains.
“Populism” has become a useful shroud for political opportunists. Every player gains from its obscurations except the Left. The so-called “center” can present itself as a necessary bulwark against the Right, while the Right itself can cloak its pathological character in either the righteousness of championing “the people” or the rebelliousness of opposing “the establishment”.
Thus the effort to resurrect populism as a meaningful term. He summarizes Mr. Judis' opinion succinctly.
“Populism” has both a left-wing and a right-wing variant. The former, represented today by Bernie Sanders and Podemos, organizes the “bottom” and the “middle” of society against the “top”, while the latter, represented by Trump and Le Pen, opposes both the “top” and “bottom” from the middle.
Which he then also criticizes.
Judis treats Left and Right as simply window dressing for the underlying “populism”. This has some superficial truth to it, yet it seems to me to quite a leap to say both are expressions of the same phenomenon. The character of “populists” on the Left and the Right differ fundamentally. They play completely different roles. They relate to the rest of society in different ways. We need go beyond their apparent similarities and grasp what they really stand for.
Mr. Ryzak distinguishes populism from two other ideologies. While populism champions the cause of some romanticized "people," Marxism is very clear about who those people are--namely the working class. Thus Marxism replaces a vague, moral (Ryzak's term) concept with a rigorous, socio-economic category. Therefore Marxists are not populists--we can exclude the latest leftist du jour, Alexandria Ocasio-Cortez, from the category.

Similarly, Mr. Ryzak doesn't count "organized chauvinism" as populist. He believes right-wing movements claiming to be populist will always betray their followers. Using George Wallace's movement as an example, he writes
When the ­­Wallace supporter became the Reagan Democrat, the union members among them got what they wanted against the deadbeats and welfare mothers, but in the process they surrendered true solidarity. They were powerless against Reagan’s anti-labor onslaught. “Right-wing populism” always ends in the betrayal of its popular constituencies. This betrayal is nothing more than the logical conclusion of a politics which emphasizes indifference to deprivation and oppression: the real masters find it easier to deprive and oppress everyone.
Presumably he'd class Donald Trump's populism in this category--Mr. Trump's followers are being betrayed, and really they're just plain stupid for supporting Trump. Or, as the modern phrase has it, they're deplorable.

Finally, Mr. Ryzak concludes with a definition of populism that is really very clever.
Populism has a moralistic character which tries to awaken the pre-existing egalitarianism of the “people”. While it can have tremendous power, morality is often not enough to forge a durable politics which can construct a better social order.
On the one hand, populism is defined by its vagueness--accordingly Marxism is not populist. On the other hand, populism has a moral claim--overt racism is immoral, and therefore is not populist. I like and agree with Mr. Ryzak's definition, and nothing I say here contradicts it.

Populism's "people" need further elaboration. I suggest that populism always champions the middle class--not in the Marxist sense of being petty bourgeois, but rather as upholding righteous, American values. We all know what those are: work hard, support your family, pay your debts, save money. Your reward will be a chicken in your pot, two cars in your driveway, a house in the suburbs (with a pool if you want it), all located in a neat, clean, crime-free neighborhood where you can trust your neighbors. In a word, the American Dream.

Restoring that vision is what Trump means by "Make America Great Again."

The vision certainly has racial implications--the American Dream applies disproportionately to white people (and Asians). But it's not racist: my neighborhood fits that description to a tee--and most of my neighbors are Black. A friend of mine is a recent immigrant from India--he is so determined to have his daughters inherit the American Dream that he refuses to serve Indian food in his house. He's more Trumpian than even I am!

Trump's populism opposes the "elites," or at least those who want to regulate the middle class out of existence. Be it through higher taxes, or "climate mitigation", or zoning laws, or raising gas or electricity prices (one of Obama's goals), the elites are the economic enemy of the middle class. They are also often a cultural enemy, promoting "politically correct" values that do not lead to a middle class lifestyle.

Likewise, Trumpians also distrust the lower class--people who don't support their families, engage in petty crime, have a negative net worth, vandalize public property, or live off taxpayers' largesse. The lower class (in Trump's world view) are not defined by income as much as by values--call them lumpen values. Trump is very much against lumpen values.

And that informs his attitude towards immigrants. He wants to admit people "who love us," as opposed to those who come from "shit-hole countries." The language could be more civil, but the sentiment is widely shared. Do we really want a large influx of dirt-poor, illiterate, traumatized single mothers from El Salvador? Are those people who are going to Make America Great Again? Yes, sympathy and charity are important--everybody feels sorry for those Salvadoran women. And in small numbers it's alright to help them out. But as a nation we can't routinely allow the large-scale immigration from such a population.

On the other hand, immigrants like my Indian friend are warmly received. He really loves us (maybe too much so).

Some politicians are champions of the lumpen class: Al Sharpton, Louis Farrakhan, Maxine Waters.  Many others campaign on their behalf--Hillary Clinton foremost among them. After all, the Dems can't win without Lumpen support. Those candidates, by undermining middle-class values, are definitely not populist.

Mr. Ryzak places Bernie Sanders in that same class, saving his best line for last:
To remain on a level where Bernie Sanders and Donald Trump can both be described as “populist” is along the lines of saying a person is experiencing emotion without specifying whether they are feeling love or hatred.
And it is true: Bernie campaigned hard on a Lumpen platform--that all problems should be laid upon the government, and personal responsibility counts not at all. But his supporters? Maybe not so much. Yes, they certainly thrilled to Bernie's message, but it seems it was only virtue-signaling. For the Bernie Bros were academics, grad students, their hangers-on, and other people from the upper middle class. In reality it's hard to imagine a more middle-class audience. Beyond which Bernie never pretended to be a Marxist.

So message notwithstanding, Bernie's campaign was as populist as Donald's, though much less successful.

Further Reading:

Friday, July 13, 2018

The North Star Ceases Publication

The North Star has apparently ceased publication. At least their URL ( no longer works. Founded in order to reinvigorate Trotskyism by the lights of Bert Cochrane, it sought a non-sectarian Left. If anybody knows if they've moved someplace else, please let me know. Meanwhile, I've removed them from This Blog's Beat.

Further Reading:

Sunday, July 8, 2018

Oberlin 2018: Part 2

For Part 1, see here.

John Studer and Terry Evans author a second long piece about the recently completed Oberlin Conference. It covers a grab bag of different topics, and so comes off as more disjointed than their first article. A lot of it isn't worth commenting on: they're still on the US lost the Cold War shtick, to which they now add that the Cold War wasn't really about defeating the Soviet Union anyway. These ideas are just silly.

I was hoping this second article would shed some light on the status and future of the Socialist Workers Party (SWP). It didn't. All I can do is read between the lines. We'll get to that in a minute--first some politics

Under the heading "Liberals attack workers' rights," Studer & Evans cite two pundits--first, the ever popular Paul Krugman, and then the more egregious Bryan Van Norden.

Mr. Krugman maintains the country is being led astray not so much by Mr. Trump as by his followers: the so-called deplorables. They've earned that moniker, in his opinion, and if they're not out-voted in the next election "America as we know it is finished." The Militant takes this as an insult to working people, who indeed built this country and have every right to their opinions.

In a limited sense I agree with Mr. Krugman. Trump's supporters (many of whom are workers) are not being radicalized (as Studer & Evans imply) but are instead being flattered and entertained. Which doesn't mean they're behaving irrationally. But Krugman is so certain of his own judgement and moral virtue that he can't imagine that anybody who disagrees with him could possibly have an honest opinion--they must instead be either crooks or dupes.

This very intolerance and willful ignorance is what makes Krugman so obnoxious. He thinks he knows better what is in people's best interest than the people themselves.

The very title of Mr. Van Norden's piece gives the game away: The Ignorant Do Not Have a Right to an Audience. Needless to say, Mr. Van Norden is a pin-headed academic at Vassar College and obviously does not get out very much. He needs to go talk to people from other walks of life. He'll learn that people know more about their own lives than he does.

Neither Misters Krugman nor Van Norden have the foggiest clue what Trump is all about. The Militant's criticism is right on the money.

Under the heading "Women's rights and working class," Mary-Alice Waters makes the following unbelievable claim.
The subjugation of women “isn’t inherent to human nature,” Waters said. Its origins aren’t in conflicts between men and women but “entwined with the way communal structures of preclass society disintegrated. 
"Subjugation" is surely the wrong word--women are not always or even mostly subjugated. They didn't die by the tens of thousands in the trenches of World War I, for example. But the point is taken--women's roles in society are very different from that of men. Sometimes they're subjugated.

But it is at least partly "inherent to human nature." Given the evolutionary importance of reproduction, and given that men and women play different roles in that process, it is inconceivable that there aren't biological differences in body structure, brain structure, personality, and so on down the line. And in fact, there is--male and female bodies, brains, and hormones differ. By a lot.

One trivial example that crossed my radar screen recently makes the point. Of the hundred top chess grandmasters in the world, 99 of them are men. (Lone exception is Judit Polgar.) I won't claim to know why this is, but surely part of the explanation is biological. There is no way that socialization or male prejudice by themselves could have generated such an asymmetry.

So what's the future of the Party? Off hand they mention that a "year ago the SWP had just begun rebuilding industrial fractions." That's news to me--maybe I missed something? For the past many years the Party has just been "talking socialism," and abstaining from any actual "class struggle." I guess that's changed.

Otherwise the efforts of the Party are only briefly described.
These ranged from joining strikes and others workers’ and union battles, to activities supporting working people in Puerto Rico combating the devastation of U.S. colonial rule; from campaigning in workers’ neighborhoods with the Militant and books by revolutionary leaders; to participating in book fairs in the Kurdistan region of Iraq, the Philippines, and Cuba — and much more, as described each week in this working-class newspaper.
Beyond this is a short description of efforts at Pathfinder Press, led by Holly Harkness. Two new comrades are introduced to us--elsewhere in the issue the death of Wendy Lyons is reported. So net recruitment is one.

Why the paucity of news? One look at this picture (accompanying Studer & Evans' article) explains a lot.
Inset, SWP leader Mary-Alice Waters at question and answer session, above, on her conference talk, “Private Property and Women’s Oppression: The Working-Class Road to Emancipation.” Hands in air during lively discussion at the session, including an exchange on Waters’ explanation that the #MeToo exposés by prominent Hollywood performers are not a step forward in fight for women’s emancipation.

Mary-Alice Waters (inset), despite dying her hair (!?), still looks every bit the septuagenarian she is. Her audience seems only slightly younger. Indeed, I think they average about my age--66. Sorry, but these are not the cadre who are about to rebuild American unions. Not gonna happen.

Let me take this opportunity to comment on the new on-line look of The Militant. Generally I like it. The paper definitely needed a facelift. There is a lot of useful information readily available, including copies of the International Socialist Review from the 1970s. I'll probably take a look at those.

Two small quibbles, and then a big one. I wish the issue date were more prominently displayed on the home page. One would more easily know what one is reading. And then the "Features" column on the right of the home page should be more clearly labeled. It does NOT contain articles from the current issue--that's very confusing to the novice visitor. That said, it's nice to have that Features column there.

The big complaint is that it's still a newspaper. All a visitor can do is read--there are no comments, no likes or dislikes, no space for guest commentary (from outside the movement), and apart from the very tightly curated Letters to the Editor, no room for any feedback at all. It's as if they were afraid of something.

So it's not a webpage. It's not an organizing tool. It's not a way to get people involved. It's not the center of a thriving community. Instead it is Truth from on High--all you can do is read it and sigh I sure am glad they understand everything!

Further Reading:

Sunday, July 1, 2018

Oberlin, 2018

A second post on the conference can be found here.

Here is the banner above Jack Barnes' lectern at the 2018 Active Workers Conference, held in Oberlin, OH, June 14-16. (The Militant's account is authored by Terry Evans and John Studer.)

It nearly duplicated the proclamation decorating last year's conclave; only the phrase "Build the Labor Movement" has been added.

For the Party (Socialist Workers Party, SWP) sees a revival in the American labor movement, citing the wave of teachers' strikes last Spring. I think they exaggerate the significance. While the strikes won some pay raises in several states, there is no broader legacy. That moment has passed, besides which the last thing the world needs are stronger public employee unions!

As I said in my Oberlin, 2017 post, I have absolutely no idea how the Party can go any "deeper" into the working class (which, for the most part, doesn't even exist anymore). They've been trying that trick for 40+ years now, to no noticeable effect. I think they need a new slogan.

As for the "rulers' deepening political crisis," count me skeptical. Yes--doubtless the mainstream media, along with many pundits whose opinions I otherwise respect, are bemoaning our increasing polarization. For which there is at least some evidence, such as the personal threats and harassment against Trump administration officials.

Then again, I recall one of my first political acts, standing with a large crowd (mob?) outside a hotel in downtown Portland where Richard Nixon was spending the night during a visit to our city. We shouted slogans like "Hey tricky Dick, you better run you better hide, we're still united on the other side!" That seems hardly more civil than anything directed toward Sarah Huckabee Sanders.

And is the assassination attempt against Congressman Scalise any worse than the more successful efforts of the Weather Underground or Black Panthers? I don't think so.

So I don't buy the increasing polarization or near civil war scenarios. This is just politics as usual. The difference is the 24 hour news cycle, cell phone cameras, twitter feeds and social media generally. Everything gets all blown out of proportion. If anything--to borrow from Tyler Cowen's book--we've all become much more complacent.

Get past the slogans, however, and the Party's positions are a lot more interesting. I'm astonished with how much I agree with them! Indeed, remove some rhetorical flourishes and it's almost as if I'd written Mr. Barnes' speech myself.

For example,
The prospects opened by the Singapore summit between President Donald Trump and North Korean head of state Kim Jong Un, which concluded two days before the SWP gathering, are good for the working class, Barnes said — not just in the U.S. and Korea, but in Japan, China, and across the Pacific and the world.
Of course that's true--only a Democrat full of sour grapes could disagree.

Mr. Barnes suggests the President is following the SWP's advice.
Trump has also raised withdrawing some of the 28,500 U.S. troops stationed in South Korea — a proposal he first mooted during the 2016 elections — in exchange for the North Korean government taking steps to dismantle its nuclear missile program. The SWP calls, Barnes said, “For a Korean Peninsula, Japan and surrounding skies and waters free of nuclear weapons.”
 Beyond Korea, I'll take partial issue with this statement:
The current White House, Barnes said, has ceased acting on the false premise, one that has guided the last several Democratic and Republican administrations alike, that “the U.S. rulers can dominate the world unopposed in the mistaken belief they won the Cold War.” While Washington maintains massive military superiority over other world powers, it can no longer simply impose U.S. capital’s will through bloody wars — wars that have now gone on, from Syria to Afghanistan, for more than 17 years. Instead, the current administration is seeking to advance U.S. imperialist interests by moving to end some longstanding conflicts and pull in its horns to a degree, at least for now.
I agree with Mr. Barnes that the US is withdrawing from world conflict, and is no longer willing to act as the world's policeman. But I object to the idea that this is from a position of weakness. We supported our allies during the Cold War because we needed them. Now that we've won that conflict we no longer require their services--they'll have to fend for themselves. Then, as Peter Zeihan points out, fracking changes everything. We're no longer dependent on Persian Gulf oil, and accordingly our willingness to compromise with Iran about nuclear weapons is greatly diminished.

But that's a minor point. Outcome of the Cold War conflict notwithstanding, Mr. Barnes describes US policy reasonably accurately.

The Party's account of the situation in Syria is confusing, but then Syria is intrinsically confusing. They are certainly right that Russia and Iran are not natural allies. Then again, Russia and Israel aren't natural allies either, as Mr. Barnes seems to claim. Surely Israel and Turkey have a common interest in Syria, and they'd share cause with the USA but for the Kurds, whom Americans staunchly support.

But the Kurds are a Persian people, whom Turkey regards as a fifth column. I think eventually the US will throw the Kurds under the bus and reestablish a strong alliance with Turkey--as a counterweight to Russia. Which pushes the Russians back into an alliance with Iran. And then the Egyptians and the Saudis,...??

Oh, alright. The whole thing is a headscratcher. The Party's account is no worse than any other. All I can say for certain is that Bashar al-Assad--the progenitor of the entire disaster, and for a long time the key to its resolution--is today irrelevant. He is entirely at the mercy of whatever foreign power holds sway over his country.

The article devotes only one sentence to Israel.
Washington also sent President Trump’s son-in-law and White House Adviser Jared Kushner to Israel, Saudi Arabia, and Egypt in late June to discuss the next stages in advancing its Mideast peace plan, Barnes said.
I'll take it as an opportunity to remind readers that the Party's position on Israel is now quite sensible. They have sharply distanced themselves from openly antisemitic groups like Hamas. Instead--like me--they understand that a better life for Palestinians does not imply the complete destruction of Israel. Indeed, there are some obvious win-win solutions for that conflict, and it is only groups like Hamas that refuse to consider them.

That brings us to the final paragraph:
Despite the U.S. rulers’ intentions, these moves — from Korea to Moscow to the Middle East — can have positive results for the working class and toilers, helping to open much-needed political space to organize; to gain class-struggle experience against their respective capitalist ruling classes; to strengthen ties of workers solidarity across imperialist-stoked national and religious divisions; and to take steps toward the building of new working-class leadership.
I don't know what that's about. I think it's meaningless Trotsky-talk. Unlike Mr. Barnes, I have no telepathic connection to "U.S. rulers", and I can't tell you what their intentions are. But if you get rid of phrases like that, and other words like class struggle, imperialist, working class, etc., which collectively add nothing to the conversation, I think the Party's analysis of world affairs corresponds closely to mine.

Further Reading:

Sunday, June 24, 2018

Affirmative Action

This article is inspired in part by a piece by Louis Proyect, here. We reach the same conclusion, but his reasoning seems illogical to me.

I've never been a huge fan of affirmative action. True, I never strongly objected to a racial preference for African-Americans. At least in that case one could justify the policy as a remedy for past discrimination. My problems begin mainly when it extends well beyond African-Americans to include other minorities and--especially--women. Hispanics, for example, were never enslaved or put-upon any more than any other ethnic group--e.g., the Irish. Women are completely undeserving of the benefit.

On net, I think affirmative action is harmful at non-elite institutions like mine. The resulting feminization of college life diminishes the institution. (Note that at elite institutions the gender balance is rigorously kept at 50/50.) And partly because of affirmative action, identity politics now dominates campus life to a destructive degree.

So now an organization called Students for Fair Admissions is suing Harvard University for discriminating against Asian-Americans. And discrimination it certainly is. Based on test scores only, Asians should make up 43% of Harvard's freshman class, yet they're only granted 19% of the spots. By contrast, African-Americans get 10%, vs. only 1% in a test-only world.

Looks damning, doesn't it? It is often compared to the similar discrimination against Jews in the 1920s and 1930s, in that case giving a strong preference to gentile white students. Yet I don't think Harvard was antisemitic back in the 1930s, and I don't think they're anti-Asian today. In both cases I believe they acted for perfectly valid, honest reasons.

Harvard--and all other elite institutions--strives for a meritocracy. As The Hill points out,
Imagine a world where every student has their SAT score emblazoned on their forehead. Imagine one where a person’s worth is determined by their ACT score.
Indeed, merit based solely on test scores would be a very desiccated, narrow standard. No real college or university will want to use such a system (Cal Tech perhaps being an exception). Unsurprisingly, they come up with a lot of other relevant criteria--legacy students, athletics, special circumstances, and, sotto voce, ethnicity. Which leads to a conversation--just what is merit, anyway? And how is it supposed to be judged?

I can tell you how Harvard judges merit: by estimating how a student will enhance Harvard's brand. At very least Harvard depends on alumni contributions; I've read that Asian alums are relatively chintzy (don't know if that's true). Yankee blue bloods from New England are a safer bet.

And more, the College wants to maximize its influence on the larger culture--Asians, only 6% of the population, will never contribute 43% of the influence, no matter what the test scores say. Blacks, meanwhile, despite being only 12% of the population, have a disproportionate effect on our political, musical and cultural life.

That last paragraph suggests that Harvard wants a student body that roughly mirrors the nation--that's not affirmative-action-speak, but instead brass-tacks reality for a school that wants to lead American society. Of course they're inconsistent: they ignore the Scots-Irish, have relatively little use for Catholics, and frankly, disproportionately preference Asians. But over all, the goals of Harvard and affirmative action are roughly aligned.

I have no problem with Harvard's admissions policy. Indeed, I agree with the headline in The Hill:
Every college — even Harvard — has a right to build its own community.
This, of course, is simply an assertion of the First Amendment right to free association.

And that brings us to Barry Goldwater justifying his vote against the 1964 Civil Rights bill.
I wish to make myself perfectly clear. The two portions of this bill to which I have constantly and consistently voiced objections, and which are of such overriding significance that they are determinative of my vote on the entire measure, are those which would embark the Federal Government on a regulatory course of action in the area of so-called "public accommodations" and in the area of employment--to be precise, Titles II and VII of the bill. I find no constitutional basis for the exercise of Federal regulatory authority in either of these areas.
Mr. Goldwater was among very few Republicans to vote against the measure, and of course he was indelibly tarred as a racist because of that, despite making himself "perfectly clear." And let's face it--the times were against him. Jim Crow was such an egregious offense against the Constitution that no fair-minded American could oppose either fair accommodations or fair employment provisions.

And yet, Mr. Goldwater turns out to be right. Today institutions--and not just Harvard--are denied freedom of association, and are forced into all kinds of legal contortions to accomplish their perfectly reasonable (and non-racist) goals. The irony is that Harvard is trying to benefit--for its own reasons, and not out of charity--the very people whom the civil rights movement sought to protect.

Ideally, the Civil Rights Act of 1964 will be repealed (at least the offending sections) and First Amendment Rights will be restored. Fat chance.

There are plenty of other government agencies, that like the Civil Rights Act were a good idea at the time, have long since outlived their usefulness. A good example is the USDA inspection regime. At the turn of the last Century, meat sold in stores was of abysmal quality. Refrigeration was rare and expensive, so much of it was rotten. Then it was often adulterated with chalk--adding to the weight without adding to the nutrition. Finally, the meat processing plants were filthy, as documented by Upton Sinclair's novel, The Jungle.

No wonder government regulators stepped in.

But today they should step out again--the whole inspection regime is ridiculous. Refrigeration is today both cheap and ubiquitous--no consumer will buy meat improperly kept. Beyond which social media keeps an hourly watch on any grocery or restaurant selling meat--the slightest offense, or even rumor of an offense, will bring instant retribution. The annual USDA inspection adds nothing to consumer safety while contributing significantly to costly bureaucracy.

I feel the same about municipal restaurant inspectors. Again, social media does a much better job at enforcing restaurant cleanliness than any semi-annual inspection regime. All the latter does is prevent poor people from selling street food, and provide many opportunities for corrupt income to the bureaucrats involved. I suggest getting rid of the entire enterprise.

Harvard's goals can in no way be considered racist--their very self-interest prevents that. There are perhaps 100,000 students in the USA in a given year who can benefit from a Harvard education. These can be identified by test scores by rendering applicants below a certain minimum ineligible. Beyond that minimum, I doubt a specific test score makes much difference. Given that Harvard only admits 2,000 students, surely they can find enough qualified members from any ethnic minority they want. Unlike the implicit premise of the Students for Fair Admissions, Harvard isn't accepting any unqualified students.

So I generally oppose Affirmative Action. I even oppose the Civil Rights Act of 1964! But I do support Harvard's legitimate claim to freedom of association, and believe they should be allowed to admit whomever they want for whatever reason they want. I hope the courts reject the claims of Students for Fair Admissions.

Further Reading:

Saturday, June 23, 2018

Hey, I'm on TV!

YouTube, actually. I'm interviewed by Vishal Kumar, CEO of Analytics Week. It's part of their series on the Jobs of the Future. I talk about my book, Your Future Job: Building a Career in the New Normal. The conversation also includes remarks about the state of higher education, and about how the job market will change as a result of artificial intelligence.

The link is here: . Enjoy.

Further Reading:

Thursday, June 14, 2018

Trade Wars

My friends over at Socialist Action (SA) deserve credit for penning a serious editorial about a potential trade war. To the paper's credit the article contains real facts and arguments--it is not just a throwaway rhetorical piece. Serious it may be, but it is wrong, as the headline proves: Working people have no stakes in a trade war. It deserves closer analysis.

Here, in bullet points, are what I see as the article's main takeaway messages.
  • The US economy is in relative decline as other countries (notably China) have grown market share.
  • Trump represents a segment of the ruling class that wants to reverse that decline.
  • Trump also represents union bureaucrats who want to bring back old-fashioned, blue-collar jobs.
  • Globalization leads to a "declining rate of profit" for capitalists, which is the ultimate source of all their difficulties.
  • Capitalists respond to the "declining rate of profits" by taking out of their workers' hides.
  • Or alternatively, capitalists try to restrain profit rates from declining by rolling back globalization, which is where Trump comes in.
The errors SA makes are common to all Marxists, so it is worth considering them in detail. There are fundamentally two things wrong with their argument.

1)  "Declining rate of profit," in SA's usage, is just wrong, if not completely meaningless.

2)  They completely ignore the consumer in their analysis. Since most consumers are workers, the major benefit to workers from globalization is entirely unrecognized.

There are two ways to measure profits. The most common way (used in the stock market) is Return on Investment (ROI--often expressed as the price/earnings ratio). Investors want to make a risk-adjusted return on their investment, and won't put money into a project where that's unlikely to pan out. There is no evidence that "profit" in this sense is declining at all. Indeed, the recently famous economist, Thomas Piketty, maintains that inflation-adjusted ROI has remained roughly constant at about 5% over the past couple centuries.

Indeed, there can't be any secular decline in ROI. If profits go down, then the stock price goes down, which lowers the total capital invested thereby raising the ROI. By this measure, a steadily "declining rate of profit" implies continuously declining stock prices, which has obviously not been the case.

The alternative definition of "profit", which is the definition I think SA actually intends, is as a fraction of operating cost, also known as profit margin. Margins vary widely from industry to industry and from company to company. Some companies--e.g., Walmart--have very low margins, but then make it up on volume. Indeed, since its very founding Walmart has set its margins at 3%. which is only pennies on the dollar. But multiplied over $500 billion in revenue it adds up to a lot--about $15 billion. Walmart's margins are fixed--they have been neither growing nor declining since the company was founded. It's one of their core business principles.

Other industries--like pharmaceuticals and technology companies--have very high margins. In the case of pharmaceuticals it is because research costs are very high and also unpredictable--the high margins compensate for risk. Apple, on the other hand, charges $1000 for an iPhone because they can get away with it.

There is no long term decline in profit margins. There can't be. If the margin gets too small then capitalists won't invest any more money in that industry. American television manufacturing is an example where the margins shrank to zero--and televisions are no longer manufactured in the US.

So I don't know what SA means by "declining rate of profit." I think they take a phrase from Marx completely out of context and then repeat it endlessly as though it actually meant something. But it's just a rhetorical flourish--nothing more.

More substantively, SA describes the alleged demerits of capitalism in great detail, while completely ignoring any of the benefits.
In their desperate struggle to fight the falling rate of profit, capitalists try to reduce costs by attacking trade unions and workers’ rights, by attacking pay and benefit levels, by attacking general social benefits such as education, medical, and pension benefits, by refusing to accept any responsibility for the massive environmental damage caused by cutthroat capitalist competition, and by transferring production to low-wage, unregulated areas both within and outside their own countries.
This paragraph is approximately correct as far as it goes. (I'd take issue with the "massive environmental damage" phrase, but that's another topic.) It is true that capitalists are in "cutthroat competition," and will do what they can to gain an edge on their competitors by lowering costs, specifically the cost of labor.

But what SA doesn't tell us is what all those capitalists are competing for. They're competing for market share--i.e., they want to sell as many goods to as many people as possible. Every time the cash register rings at Walmart, shareholders pocket 3%. Of course they want that cash register to ring as often as possible.

The very definition of capitalism is a system that wants to maximize consumption--that's how capitalists earn money.

So take Walmart as an example. By sourcing their products in China they were able to lower their costs. Since margins are fixed at 3%, that means the savings are passed directly on to the customer in the form of lower prices. Here are the consequences--all of them good:
  • Chinese manufacturing workers earn much more than they would back at the farm.
  • Walmart employees--despite generally being low-skilled labor--earn higher wages and enjoy better working conditions than they would if they worked at the Mom & Pop down the street.
  • Walmart's volumes increase, yielding more money for shareholders.
  • Walmart's customers get more and better products at cheaper prices.
That last item is what SA neglects to mention, and it's a really important point. Walmart has substantially raised the standard of living of most Americans, especially those at the bottom of the income distribution

It's best expressed by Sam Walton's original mission statement: "to give common folks the chance to buy the same things as rich people." Their current motto--"Everyday Low Prices"--renews the promise to keep margins at 3% and to pass all cost savings on to the consumer. That's what Walmart does.

What's wrong with that? Only my Trotskyist friends can object, and they do so only by ignoring the huge difference that stores like Walmart make in improving people's lives.

Trump and my Trotskyist friends essentially agree about trade--they both see it as a zero-sum game. For Trump if the Chinese sell something to us, they win and we lose. For SA, if the Chinese sell something to us, capitalists win and everybody else loses. Both of you are wrong--trade is always win-win, and free trade is good thing!

That said, there is something awry when the US runs huge trade deficits for multiple decades in a row. Something is out of balance. While I think Trump is addressing it in the wrong way, he is quite right to bring the issue to the fore.

Further Reading: