Sunday, October 4, 2015

Trotskyists on Economics

Here is a roundup of recent Trotskyist opinion on economics, broadly interpreted.

Consider first Socialist Action's article headlined Scientists Say: End Fossil Fuel Use Now. I guess that means I won't be able to heat my house this winter. And I should probably forget about going to work on Monday, as that entails driving a car. Oh, and I'm not allowed to use a thorium reactor, either.

So maybe I shouldn't take author Christine Frank so literally? Perhaps she'd be willing to give me thirty days to wean myself off of hydrocarbons? Maybe even a year, though who knows, all of Antarctica might melt before then.

As it turns out, Ms. Frank's solution ignores her imaginary deadline.
The only way to stop further environmental devastation by a greedy capitalist class that refuses to give up its fossil-fuel-based economy is to nationalize the entire energy industry and put it under democratic workers’ control. At the same time, we must ensure a just transition with retraining, union wages, and full benefits for all workers making the shift from the production of dirty fuels to clean, renewable energy.
Even if you could accomplish all of this before the End Of The World, it's not clear to me that democratically empowered workers are going to vote for collective suicide, e.g., freezing to death in the winter. But then Ms. Frank never had much of a brain for practicalities.

Socialist Action is obviously not serious about convincing anybody who doesn't already agree with them. Their website is principally dedicated to the psychological amusement of their own comrades.

Equally ridiculous is the article by Socialist Action's Marty Goodman entitled Syriza Wins, Greek Workers Lose, about Alexis Tsipras' reelection as Greek prime minister following his abrupt turnabout on the memorandum. The correct path for Greek workers, according to Mr. Goodman, is to support the Trotskyists in the ANTARSYA coalition--you know, the ones that got 0.85% of the vote. (Mr. Goodman hilariously mentions that this is an improvement over last time!)

The Left breakaway from Syriza that supported Grexit did much better, getting somewhat less than the 3% necessary to enter parliament. Such a smashing success, per Mr. Goodman, is attributable to their supposedly bourgeois insistence on continued capitalist rule.

The fact is that the overwhelming majority of Greeks want to stay in the Euro. And no wonder, as the alternative is instant poverty. When Tsipras' negotiation failed to produce the expected free unicorns, Greek voters--sadly but predictably--settled for the only remaining option. Mr. Goodman's thesis that the election was somehow unrepresentative is delusional.

I try to take my Trotskyist friends seriously, but these Socialist Action articles are just stupid--there's no other word for it.

The folks over at Solidarity hold the same opinion as Ms. Frank, but they are better informed and more honest about what it entails. Reprinting a piece from the Bureau of the Fourth International (whatever that is), they lay out the unvarnished truth.
To save the climate: 1) 4/5ths of known reserves of fossil fuels must remain underground; 2) the energy system based on these fossil sources (and on nuclear power) must be destroyed as quickly as possible, without compensation; 3) production which is harmful, unnecessary, or based on planned obsolescence must be abandoned, in order to reduce the consumption of energy and other resources; 4) the despotic and unequal productivist/consumerist system must be replaced by a renewable system, one that is efficient, decentralized, social and democratic.
This requires nothing less than the disemployment and mass impoverishment of the majority of the world's population. Of course if that's what's necessary to Save the Planet, then certainly we should all go along--even democratically elected workers must agree.

The Militant's masthead includes the slogan "published in the interests of working people." Socialist Action and Solidarity will both claim similar sentiments. But their relentless insistence on mass poverty will never win the support from anybody who actually has to work for a living.

More serious is an article in Solidarity by Kevin Lin, entitled Chinese Strikes in Manufacturing: From Offensive to Defensive? Mr. Lin obviously knows something, and that right there makes the piece worth reading. He describes strikes at manufacturing companies in China, including at a footwear factory and a clothing & leather company. Some were successful and others not so much.

His thesis (and I simplify it here) is that in the previous decade strikes have been for higher wages and better working conditions--demands that Mr. Lin terms "offensive." More recently, however, unrest has been caused by company closures, severance packages, and demands for workers to relocate. These are "defensive" because while they protect workers, they don't improve standards of living.

Mr. Lin claims that because of the weakness in the Chinese economy, defensive struggles will now prevail. I think he's right.

The Militant also reports on labor unrest, this time in the US. As usual, they're the best reporters on my Beat. Alyson Kennedy files from East Chicago about the contract negotiations between the United Steelworkers and ArcelorMittal. After describing the weakness in the global steel market, she writes,
“We are in for a long fight,” Darrell Reed, a member of Local 1010’s grievance committee, told the Militant. “I’m not optimistic that the latest negotiations will get us something we can live with. Both active and retired members have to stand together. Health care is a major issue, especially for retirees. For some of them the company’s offer means not having enough money for food after paying for health care.”
Mr. Reed has it right. Margins in the steel industry are razor-thin, and companies have no ability to raise prices. Further, even as the workforce shrinks, the number of retirees continues to grow. And contrary to Marxist opinion, benefits for retirees do not come from the capitalists' margins, but instead are paid out of the salaries of the employees. That's why it's going to be so hard to keep active and retired members on the same page--they're both competing for the same pot of money.

Actually, it's all of a piece--the unrest in China, the dispute in the steel industry, and even the demand for $15/hour. For higher wages for Walmart employees means that savings have to come from elsewhere--either by hiring fewer workers in America, or by pinching suppliers. But the suppliers are Chinese workers, who end up footing the bill. That's why their strikes are increasingly defensive, and also increasingly unwinnable.

The only winners are American consumers, who will get cheaper prices. All the workers--whether in the US or China--are really on strike against the consumer. And it's a battle the unions will never win.

The Militant, at least, does not always demand Instant Poverty Now.

Further Reading:

Saturday, September 26, 2015

People Who Won't Be President

I won't become president in January, 2017. And neither will any of you, my readers.

We're in good company, joining this list of distinguished others who will also never be president: Ben Carson, Hillary Clinton, Ted Cruz, Carly Fiorina, Rand Paul, Bernie Sanders, Jill Stein, and Donald Trump. Let's consider them in alphabetical order.

Ben Carson is a very nice man. I like him, and I'd enjoy having him as a house guest. He's gotten himself in trouble recently by suggesting that he'd never vote for a Muslim. Actually, I agree with him on that. The statement is analogous to what many on the Left say when they object to voting for a Mormon or a Catholic. Such preferences are the right of every voter, including Ben Carson. Note Mr. Carson did not say that Muslims are prohibited from being president.

But Mr. Carson is clearly out of his league. He has no experience relevant to being president, and it shows in the debates. He has maxed out on his poll numbers. He'll fade in the stretch.

Hillary Clinton is a crook. She can't tell the truth, neither about Benghazi nor her e-mail server. Worse, she's got Richard Nixon's trait of looking like a liar even when she is truthful.

If she wins the nomination she will lose the general election by a landslide. But I predict she will drop out of the race before the Democratic Convention. I think her candidacy is increasingly untenable.

Ted Cruz is a crank. I have suggested that he represents the stupid wing of the Republican Party. I don't agree with his position on immigration. His foreign policy suggestions are not serious. He takes the most radical possible position, winning the enthusiastic support of the most extreme Republican base. But he'll never win over the majority of Republicans, much less the general electorate. He's unelectable outside of Texas. (And after this campaign he may not even win re-election there, either.)

Carly Fiorina is a naif. She reminds me of Sarah Palin--an attractive candidate on the surface, but completely unprepared for the attack ads. Like Ms. Palin, Ms. Fiorina has no clue what's coming at her. It will start with her Republican opponents if, by some fluke, she actually wins a primary. And if she survives that the Democrat smear machine will take her apart limb from limb. Like Ms. Palin, there won't be a stitch left on her reputation when they're done.

But she won't get that far. Though it's great having her on the debate stage.

Rand Paul is an ideologue. He has tried very hard to leave his father behind and become a more mainstream, electable Republican. But he can't do it. He just doesn't believe in any credible foreign policy, often sounding to the Left of President Obama. He is very smart and articulate--great fun to listen to. I agree with 90% of what he says, but the remaining 10% is a deal-breaker. Judging from the polls, my Republican comrades agree with me.

Bernie Sanders is a clown. He's the Democrat analog to Ted Cruz--a charlatan appealing to the Progressive faithful. His promises are so outlandish that there is no way he could keep them if he tried. For example, he thinks we'll get richer if we restrict trade: in his world Americans won't be allowed to buy products from Canada, China, Mexico, or Central America. That's bad for American consumers, no doubt. Of course then we won't be able to sell products to those countries, either. That's bad for American workers.

People earn money by selling stuff to other people. How can you earn money when it becomes illegal to buy and sell?

Jill Stein is a fool. I don't understand why she is running. Her program is mostly indistinguishable from Mr. Sanders, except that she is completely oblivious to even the most obvious economics. Indeed, her demand to equalize incomes in America reduces to Poverty now for everybody--even the 1%.

For example: "Create millions of jobs by transitioning to 100% clean renewable energy by 2030, and investing in public transit, sustainable agriculture, and conservation."

Note to Jill & Bernie: it is easy to create jobs. You can just hire folks to dig holes in the ground and then fill them in again. That's what they did during the New Deal. That's what they've been doing in China. But jobs like that don't make anybody any richer. Them's prison jobs.

Why invest in public transit when nobody wants to ride public transit? Most of the trains and buses in this country move around empty. But Jill wants us to dig more holes.

Some of my Trotskyist friends support her over Mr. Sanders solely because she doesn't have a (D) after her name. This is like their support for the Syriza opposition that just got 3% of the vote in Greece. That's what they call a "realistic" path to socialism.

Donald Trump is a fraud. So he's gonna kick out 11 million illegal aliens in two years, and then let most of them back in via an "expedited" process. Why? How? Who is paying for all that?

The man's a great entertainer and skilled TV personality. But he's already wearing thin. By the time real Republicans have to cast real votes, he won't get 10% of them, if that many.

Mr. Trump, far from being a Republican, represents the stupid wing of the Democrat party. We're being trolled, and eventually we'll wise up and push him aside.

The viable Republican candidates are Marco Rubio, Jeb Bush and Chris Christie. The only viable "candidate" for the Democrats is Joe Biden, if he wants to run.

I think it's going to be a Republican year.

Further Reading:

Thursday, September 17, 2015

Refugees in Hungary

Louis Proyect writes a complex (perhaps even incoherent) post comparing 1956 Hungary with Syria today. I won't presume to summarize it here, but one theme is a polemic against the stupid Left (my term). These are Leftists who support Assad today, or who supported the Soviet invasion of Hungary in 1956. I call them stupid (perhaps violating my rules for this blog) because they let Barack Obama do all their thinking for them--whatever the US government supports they must oppose, and vice versa, regardless of any other considerations.

Mr. Proyect's opinion (which I share) is that the rebels in 1956 were on the side of angels, and that the murderous Assad regime is a major cause of the refugee crisis emanating from Syria. Where he and I disagree is on the responsibility of European nations to accept large or even unlimited numbers of these refugees. Specifically, he condemns Hungary's Prime Minister Viktor Orban for coddling fascists and mistreating Syrians.

Mr. Proyect puts the rap sheet this way:
But it is Hungary that takes the cake apparently. 
  • It put a razor-wire fence on the border with Serbia to keep refugees out. 
  • It put up billboards (in Hungarian no less) warning anybody who made it through the razor-wire fence that “If you come to Hungary, don’t take the jobs of Hungarians!” 
  • A TV news photographer kicked and tripped refugees running away from the police. The station she worked for was connected to the far-right Jobbik party that lines up with the “axis of resistance” on Syria, opposing “the systematic attempts of the West to find a casus belli for an armed intervention against the Assad government.” 
  • At an internment camp for refugees in Hungary, cops threw bags of food to them as if they were hungry animals. 
Since the refugees are only interested in making their way to Germany or Britain, the xenophobia is likely a strategy to mollify Hungary’s burgeoning ultraright groups like Jobbik and their voters.
Of course even as Mr. Proyect penned those words Germany closed its border with Austria, forcing Austria to secure its Hungarian border. Anticipating this, the Hungarians built the razor-wire fence.

Mr. Proyect is correct in saying that "Hungary takes the cake." The country really is more xenophobic than most in Europe, and accordingly its fascist movement, Jobbik, is stronger. But he's wrong to condemn Mr. Orban. I think he should read an article by George Friedman that describes the tightrope that Mr. Orban has to walk. The Hungarian body politic will simply not tolerate a large refugee influx, and were Mr. Orban to allow that it would quickly lead to Jobbik taking power.

I do not speak Hungarian, but over the years I have probably spent cumulatively several months in the country. I think two observations clarify why Hungary is more refugee-averse than most countries.

Mr. Proyect--ace historian--probably knows about the Treaty of Trianon, though I'll hazard most of my readers do not. But I will guarantee that every Hungarian schoolchild is intimately familiar with it. When I visited Szeged, a city a few kilometers from the Serbian border, the first thing my host told me about the place is that it was historically at the very center of Hungary. For prior to the Trianon agreement in 1920, Hungary included most of Vojvodina (Vajdasag in Hungarian), a bit of the Croatian coast, and all of Transylvania (Erdely). Today's Slovak capital, Bratislava (Pozsony), was once the seat of an Hungarian empire.

Hungarians feel, almost to a person, that the Treaty of Trianon was a grave injustice. Sober people, undoubtedly including Mr. Orban, have come to terms with it. But much of the population--especially those whose families came from the former lands--remain very bitter. This is the root of Jobbik. Their principle concern is to retrieve lost lands, especially Transylvania, for Hungary. The Trianon Accord is a big reason why "Hungary takes the cake."

One result of the Treaty is that the Hungarian rump state--modern Hungary--is practically monoethnic. Of people declaring their ethnicity to the census bureau, 98% claim to be Hungarian. The largest minority are Roma, and they are certainly not integrated into the society.

This leads to the second reason why Hungary is different. Hungarian is not an Indo-European language, and is radically different from all other languages in Europe, apart from Finnish. It is very distantly related to Turkish. Even an international word such as police in Hungarian becomes an unrecognizable rendorseg. Hungarian is a famously difficult language to learn, and likewise, for Hungarians learning English is a real challenge.

So don't let those talented, multi-lingual Hungarian expats fool you--very few people in Hungary speak any language besides Hungarian. In the northwest corner of the country, near the Austrian border, German is widely spoken. In Budapest, German and tourist English are often understood. But outside of that it's pretty exclusively magyar.

Mr. Proyect's account of the billboard in Hungarian doesn't surprise me at all.

The result is the country is isolated. Hungarians' understanding of the outside world is limited. They don't travel much. I believe that the level of political discourse is correspondingly very shallow. It's an atmosphere that breeds paranoia and xenophobia. Yet again, "Hungary takes the cake."

Under these circumstances it is truly impossible for any Hungarian government to accept even a small number of refugees. One doesn't have to be a fascist to turn them away. I think Mr. Proyect is too hard on Mr. Orban. He is not a fascist, but he is Hungarian, and he knows the country he lives in.

Note: My daughter got married over the Labor Day weekend. That, along with the house guests that have only recently departed, accounts for the sparse blogging.

Further Reading:

Saturday, August 29, 2015

Stock Market Decline Signals End of World

Newsflash: Stock markets sometimes go down. Recessions occasionally happen.

The Militant's Brian Williams ruins an otherwise perfectly good article with breathless predictions of catastrophe. At the end, his soothsaying is completely detached from reality, as even he admits. The article's final words:
Whether the stock market will continue to tumble this week, or take a breather, the capitalists have no answer to the crisis of their system. The crisis will deepen.
Facts be damned--we're doomed no matter what.

For all that, The Militant is the only paper on my regular beat that takes economics seriously. Mr. Williams does a creditable job as their lead reporter on the issue, and this article is no exception. He's got the facts mostly right.

This is both true and important:
World trade in the first half of 2015 has tumbled to the lowest level since 2009. Steel, oil, iron ore, copper, aluminum and nickel are contracting. The Bloomberg Commodity Index, which follows a basket of 22 raw materials, is at its lowest point in 16 years.
In China, where production is mostly geared for export, exports dropped 8 percent in July from a year earlier, and auto sales dropped 7 percent. Manufacturing in August shrank at the fastest pace since 2009.
And finally there's this, though I'd put a different spin on it.
“The trigger was most likely the sudden deterioration of leading economic measures, energy prices, and industrial commodities, both in the U.S. and globally,” investment analyst John Hussman wrote in his weekly column Aug. 24.
I think these facts get to the nub of the issue and the news is not good. I, too, think that the economy is in for a rough patch. I predict a recession, and mostly for the reasons Mr. Williams cites.

So no question that global trade is declining, and when trade declines we're all getting poorer. If international trade is shrinking, then it's hard to imagine that trade within national borders (domestic trade) is growing. So Mr. Williams is right to suggest that the Chinese economy may very well be in recession, government statistics notwithstanding.

Mr. Williams adduces that this conclusion also follows from the fall in commodity prices. But here he is in error, as summarized by Scott Sumner's catchy phrase Never reason from a price change. For prices can change for two reasons: either slack demand means there is a contraction in the amount consumed, or cheaper production has increased supply leading to lower prices that way. The former is an adverse demand shock to the economy, while the latter is a beneficial supply shock.

The decline in oil prices is due to American fracking--that is a supply shock. By making oil cheaper it benefits all users of oil, i.e., all consumers. It makes us richer. That cannot be the cause of recession.

On the other hand, nobody has been fracking for iron ore. While the world's supply has greatly expanded over the years, the current price decline looks to be due to shrinking demand, notably from China. This is an adverse demand-side shock, and will result in a shrinking of the economy, possibly leading to recession.

Mr. Williams conflates these two effects--he's reasoning from a price change. The fall in commodity prices is, in fact, a complicated phenomenon whose effects probably cancel out.

Nevertheless, the hard truth is that China cannot continue to grow at a rate substantially faster than the global economy, which looks to be in the 3-4% range. China has maxed out because it has fully deployed its excess agricultural labor force into the cities, and it is a country in long-term demographic decline. It's growth rate going forward will not be significantly faster than that in the US or Europe.

Also, China can no longer export its way out of recession. It is simply too big--the world is not big enough to consume all of China's output. So China will have to grow domestic consumption to maintain growth. There's a lot of room for that--Chinese are still poor people--but they're going to have to make substantial changes to their political and economic institutions for that to happen.

So the world has to readjust to diminished, long-term growth prospects in China. Another word for that is recession, which is what I think will happen. But contra Mr. Williams it does not auger the end of the world. Why? Because while Mr. Williams correctly cites the overproduction of commodities as a drag, that is only a small bit of the economy. Services make up almost 80% of the American economy, and over 40% of the Chinese economy. Commodities have little effect on the service sector, and hence are a relatively small contributor to growth.

The headline article in the same issue of The Militant is also relevant. It concerns the looming expiration of union contracts with the steel industry: ArcelorMittal, USSteel, and ATI, among others. At the latter, workers have been locked out at a plant near Pittsburgh. The piece--actually a series of articles by multiple authors--reports on labor actions happening around the country.

The issues focus around pensions, healthcare, overtime, and working conditions. Plants near Birmingham and Philadelphia are closing. "The price of steel has dropped sharply in the past year," consistent with Mr. Williams' analysis.

So it is very clear that there will be fewer steel workers in the future than there are today.
  • There is too much global manufacturing capacity. Some plants have to close.
  • Workers will become more productive--jobs will be lost through automation.
  • Competitors from overseas and non-union mini-mills will reduce the competitiveness of closed-shop companies.
Thus the union's battle is already lost. It is only a question of how long they can hold out.

Here is a poignant demand.
Workers now pay no premium and have a total annual deductible of $600 for family coverage, Arabia told the Militant. ATI is demanding a $214 monthly premium with a $6,000 to $8,000 deductible. “It’s a plan designed to keep people from using it,” Arabia said. “Plus new hires will get only a health savings account of $500 per year, and no pension, just a 401(k) plan.”
Organizers clearly hope that capitalists will pay for continued pension and health benefits. But capital never pays operating costs (unless the firm is going bankrupt). Capital is for investment. Operating costs will always be borne by either the customer (higher prices) or by the employee (lower wages). As the size of the workforce shrinks, the existing employees will shoulder an ever growing burden paying pensions for retirees.

Just ask the United Mine Workers how that has worked out.

Further Reading:

Friday, August 21, 2015

Book Review: Walmart

The Retail Revolution: How Wal-Mart Created a Brave New World of Business, by Nelson Lichtenstein, is a marvelous book. Published in 2009, I wish I had read it years ago.

Despite Mr. Lichtenstein's credential as a Leftist college professor unduly critical of Walmart*, this is not a hit piece. Though I have no independent ability to judge the facts, there was little in the book that didn't ring true to me. While Mr. Lichtenstein does not hide his own perspective, he makes a good faith effort to accurately represent the opinions of others, especially the company. Better than that cannot be expected.

The key question, to my mind, is this: Is the world a better place because of Walmart? Mr. Lichtenstein asks that question only indirectly, quoting Hillary Clinton.
"Is Wal-Mart a good thing or bad thing for America?" Hillary Clinton, who had served six years on the Wal-Mart board, answered cautiously. "Well, it's a mixed blessing," she said, noting both the inexpensive goods the company brought to rural America as well as the controversy over the company's health insurance program and its failure to promote women to management ranks.
Well, of course. Nobody can seriously claim that Walmart is an unalloyed good with no demerits. But still, if you add up the balance sheet I think the answer to that question is pretty obvious. The company substantially raised the standard of living for millions of people in rural America by selling quality goods at low prices. It invented a whole new way of doing retail, eliminating wholesalers, middlemen, and jobbers, thereby reducing costs. It provided jobs to hundreds of thousands of low-wage workers in the US. And it started China on a path to becoming the world's second largest economy.

The world is unequivocally better off because of Walmart. I think if you pushed Mr. Lichtenstein to the mat and forced him to answer he'd agree with that.

Mr. Lichtenstein evades the question by taking us on a grand tour of all the demerits--a fascinating and informative read to be sure. But at the end of the day it's something of a red herring. For example, he describes in great detail the unfortunate lives of women workers in Chinese factories. They work very long hours for low pay in tedious jobs under dangerous conditions. Factory fires occasionally kill hundreds. The government imposes apartheid-style rules on them (hukou) preventing them from becoming residents in the cities where they work.

It's terrible, awful, no-good. We should all be happy that circumstances in China are gradually changing for the better. But Mr. Lichtenstein's description, while not inaccurate, is somehow irrelevant.

He misses the mark in two ways. First, he blames almost everything on Walmart. If it weren't for the Bentonville behemoth squeezing suppliers and turning a blind eye toward illegal factories, then none of this would have happened. Instead, Mr. Lichtenstein implies, our Chinese friends would be earning $15/hour working in bright, airy factories, all while smiling and singing songs, just as depicted in those socialist realism posters.

But Walmart is just a link in the chain. Consumers (especially Walmart consumers) can't buy toys unless they're cheap. Walmart operates on very thin margins and has to squeeze its suppliers. Those, in turn, cut corners to maximize the business that comes their way. The subcontractors are under pressure to deliver on time and under budget. The Chinese government--more crooked than most--insists on its cut.

And Chinese workers are all to happy to go work in the factory. Especially considering the alternative: walking very slowly behind a water buffalo in some rice paddy somewhere, with no chance of ever having a better life.

Despite his prejudice, Mr. Lichtenstein does tell the truth:
Factory wages are low--about one hundred dollars a month--but far higher than in agriculture, and they are rising fairly quickly because of the labor shortage generated by the export boom in toys, garments shoes, and electronic devices.
Thank you, Walmart!

The second miss stems from Mr. Lichtenstein's misunderstanding about the role of capital. In 2015 Walmart earned about $16 billion on revenue of $486 billion, or approximately a 3% margin. My understanding (Mr. Lichtenstein doesn't tell us) is that the company has kept margins mostly constant over the years. That means as costs go down, then prices also go down instead of margins going up. The Walton family owns roughly 50% of the company. Therefore in round numbers, 1.5 cents on every dollar of sales at Walmart goes to them.**

So contrary to Leftist (and Mr. Lichtenstein's) imagination, the Waltons are not paying for Walmart employee's health insurance. They don't earn nearly enough money to make that possible. Shareholders never pay operational expenses. So who is paying that bill? There are only two other choices: the employees themselves, or the customers. Both of them are poor.

Progressives are simply delusional if they think health insurance is paid for by the shareholders. I think it is odd that Mr. Lichtenstein, along with most of the Left, is so upset about Walmart employees being subsidized by local governments, e.g., Medicaid or Medicaid-like programs. Surely taxpayers on average are richer than Walmart's customers. By saving their customers' money and pushing their employees onto the government's nickel, Walmart is helping poor people in ways that progressives should applaud.

Likewise, Mr. Lichtenstein happily recounts how local governments stick it to evil corporations:
In effect, these California cities were leveraging their zoning authority to recreate a set of mini-New Deals that ensured a more progressive distribution of the wealth generated by private interest ... But Wal-Mart would not play ball.
And good for Walmart! All of these extra costs that sundry civic corruptocrats thought were good ideas had to be paid for somehow. Those all come out of the hide of either customers or employees. Why does Mr. Lichtenstein want to make Walmart's employees poorer? A tax on Walmart isn't a blow to the wealthy--instead it's just ripping off poor people. And all the more so for Walmart since their customers are as poor as their employees.

Mr. Lichtenstein recognizes as much. In the new normal he envisions, Walmart will have to raise prices to cover the expenses of a "living wage," presumably not just for Americans but also for Chinese. He's never heard of market elasticity, i.e., when prices go up sales volumes go down. If Walmart could raise prices without hurting revenue they would certainly do so. The fact that they haven't means that they can't.

Walmart employees are precarious workers, which I defined as workers whose income depends sensitively on the market. That's true not just for the hourly employees, but also for Walmart's managers. Mr. Sam fired his executives with abandon when they no longer served the company. No loyalty there.

But unlike Mr. Lichtenstein, I think that precarious workers are our most productive citizens. They waste nothing! How different they are from government bureaucrats and professors who are immune from market forces. Those people are parasites.

The true road to wealth is not by government mandate or union featherbedding. No. Instead Mr. Sam got it right with his company's first mission statement: To give common folks the opportunity to buy the same things as rich people.

If you want to criticize Walmart, then the extent of their failure to live up to that aspiration is the place to start.

Down With Poverty!

*Mr. Lichtenstein hyphenates the company's name: Wal-Mart. However the firm no longer uses the hyphen. Except in quotes I use the current spelling: Walmart.

**The web, including Wikipedia, claims the Walton family collectively is worth $143 billion. But total Walmart equity is only $81B of which they own only half. And 50% of $80B does not add up to $143B, so something is wrong. I don't believe the $143B figure.

Further Reading:

Wednesday, August 12, 2015

Jeff Mackler's Greek Post-Mortem

The article by Socialist Action's Jeff Mackler reprises Syriza's humiliating capitulation to the Troika. Mr. Mackler gets some basic facts all wrong.

Here's the big howler:
Greece today, as with all capitalist states, is ruled by an elite ruling class that long ago established the fundamental rules that govern social relations. Its highly profitable shipbuilding industry and related merchant-marine manufacturing stands second or third in the world. Yet these industries are virtually untaxed by the state. The same situation exists with virtually all major Greek private capitalist corporations and financial institutions.
A quick check of the CIA Factbook shows that Greece has no shipbuilding industry at all. The top four shipbuilding nations are China, S. Korea, Japan, and the Philippines, who between them manufacture over 90% of gross tonnage. Greece doesn't even show up in the top ten. Of course Greece has a large merchant marine, essentially a ferry boat service between their myriad islands, analogous to the highway department in most countries.

So it's hardly surprising that shipbuilding is untaxed. Even for the most devout revolutionary taxing a non-existent industry will prove to be a challenge.

But Greece does have a problem collecting taxes--tax evasion is endemic since Ottoman times. By far the biggest export industry is tourism, contributing 18% to GDP. This led to the humorous attempt by the government to ask tourists to rat out restaurants and hotels who didn't provide receipts.

More seriously, Mr. Mackler doesn't understand what "austerity" is. I don't totally blame him since most media reports are similarly unclear. But it's important to get this straight.

The problem Greece has is that it has been living off borrowed money. Germany has been by far the biggest lender, and some blame Germany for causing Greece's problems in the first place. (That's like blaming Budweiser for alcoholism.) Whoever is to blame, Germany is no longer willing to lend money to Greece except under very stringent conditions.

So when you're living off the credit card and the credit card is taken away, then of course your standard of living is going to go down. This accounts for the decline in GDP and living standards in Greece--nothing more.

Now Germany--as I think Mr. Mackler hints at--does not want to lend Greece any more money under any conditions. They prefer that Greece leave the Eurozone, after which Germany and other countries can provide humanitarian assistance--a gift rather than a loan, and money that remains entirely under the control of the donor. Though for a whole bunch of reasons, some of which Mr. Mackler alludes to, Germany didn't get its way. So the Germans are now on the hook for yet another bailout.

The conditions are that Greece run a primary surplus. That means they must meet their daily expenses without having to incur more debt. (If they have a symbolic amount left over to repay the principal, so much the better.) Then the Troika will provide Greeks with enough money to pay the interest on the debt already accrued. That is, it's really a bailout of European banks rather than Greek citizens. The advantage to the Greeks is they don't default, i.e., they remain members in good standing in both the Eurozone and the world economy. That's a huge advantage!

And that's the third thing that Mr. Mackler doesn't comprehend. Giving the world market the middle finger is a really bad idea. North Korea is the country that's gone furthest with that, and they're poor as rats. Cuba and Argentina aren't far behind. Greece is historically a trading nation. You can't be a trading nation if you promise up front that you'll never pay your debts. Welshing on world trade will drive Greece into African levels of poverty.

The Greek people understand that. They overwhelmingly do not want to leave the Euro. Whatever had to be done to avoid defaulting on their debt needed to happen. I think that's why the pushback against the Tsipras surrender has been so modest. Only random Trotskyist grouplets and sundry fascists have opposed it. Everybody else is smarter than that.

Fourth, Mr. Mackler doesn't quite understand Syriza's class character. He describes them as washed-up Stalinists, unrepentant liberals, and fuzzy-minded socialists--all people without the proletarian sensibilities necessary to lead a socialist revolution.

All true as far as it goes. But the key point is that Syriza represents government employees, i.e., the 40% of the workforce employed by the state. Since the government can't collect taxes and relies on borrowed money, they're the folks who are most hurt by cutting up the credit card. They'd also be most hurt by leaving the Euro. So frankly, Mr. Tsipras did as much for them as he could. At the end of the day that constituency wants to stay in the Euro, and that's what has happened.

So what would a true revolutionary leadership have done?
Had Syriza spent its first six months governing Greece looking to the working-class masses as its source of strength and power, the result might well have been inspirational to the workers of the rest of the oppressed European states and beyond.  
But instead of mobilizing its millions to challenge capitalist rule, to take over the major industries, to tax and/or expropriate the rich, to national the banks and major corporations, all under the control of the working masses, Syriza and its sycophants (blind and obedient followers) envisioned social change as a product of clever negotiations with the capitalist elite, employing leading intellectuals to press for modest reforms within the framework of capitalism. Greece’s working-class masses were shunted to the sidelines by the Syriza/ANEL government.
Given that the major industry doesn't even exist, this will not prove easy. The biggest money earner is tourism, which depends crucially on small restaurants and stores, along with foreign expertise and capital to run hotels and cruise ships. You can't nationalize this stuff!

All in all, Mr. Mackler's article is a waste of time.

Further Reading:

Wednesday, July 29, 2015

8 Reasons to Like President Obama

My friends on the Right are fond of dissing President Obama. Sometimes it's taken to ridiculous extremes: he's a traitorous Muslim who wasn't even born in the USA and wants to turn our nation into a Godless, communist state.

I don't much care for Mr. Obama. I think Obamacare is a disaster, I believe he's mismanaged much of our foreign policy, and I think his instincts about the virtues of government are wrong. The Affirmatively Furthering Fair Housing rule recently promulgated by HUD is a travesty.

But for all that he is not the devil incarnate. I do not believe he has single-handedly destroyed the Republic. Indeed, there are some things he's done that I support, and other things for which he has been falsely blamed.

So in the interests of both civility and fairness, here are some of the things I like about President Obama.

1) While there have been political scandals galore, I can't think of any examples where either Mr. Obama himself or any of his closest advisers are implicated in a personal scandal. No major figure in his administration has been caught with his hands in the cookie jar or with his pants down (though a partial exception may apply to Hillary and her e-mail). In this, Mr. Obama is more like the preceding Bush administration, and quite unlike the Clinton administration. Mr. Obama appears to be a man of considerably personal integrity.

2) Though his foreign policy has been incompetently conducted--often grotesquely so--many of his instincts look right.

Walter Russell Mead, for example, has long advised the President to actively support the moderate rebels against Assad, saying back in February, 2013,
President Obama had an opportunity to intervene in Syria before it spiralled so far out of control. Indeed, that was precisely what a number of his top military and political advisors urged the President to do: arm the moderate rebels and work with allies to boot out Assad.
Now it's too late, he'd argue--the moderate rebels have long since been sidelined and our influence has diminished to zero. It surely would've been better if we'd kept those moderates alive and well.

No doubt Mr. Obama's policy of benign neglect has been poorly executed--what drawing red lines and then erasing them. (He should never have drawn them in the first place.) But the strategy itself makes sense. The truth is that America has no dog in that fight. The moderate rebels never were a trustworthy bunch. The only reliable side in the war is the Kurds, and we've been doing what we can to help them out.

3) While I think our precipitous withdrawal from Iraq was a big mistake, given that, our policy is as good as can be expected. Some of my friends on the Right want us to take the fight to ISIS in some big way. That would involve another years-long war in Iraq, with thousands of American casualties, and with no imaginable exit strategy. And for what reason? ISIS is not really engaged against the United States--their enemy is Shi'a Islam. Conflict against us is for propaganda purposes only, involving pinprick, lone wolf attacks like that in Chattanooga. ISIS surely has no interest in provoking us to attack them head-on--they're smarter than that (at least I hope so).

4) And speaking of lone wolves, my Rightist friends want to glamorize them and turn them into Batman-style villains. While I have no doubt that the ISIS crowd warms to their antics, it is unlikely that these atrocities are organized from afar. They really are lone wolf attacks. We need to avoid making those losers look like heroes. The Obama administration is entirely correct in painting them as mentally-ill, cowardly, stupid idiots. The last thing we need is martyrs for a cause.

5) Mr. Obama's instincts on immigration are correct, as I've written before. We do need to find a way to legalize most of the undocumented people now living in the US--there is no other choice. We also need to greatly increase legal immigration while simultaneously restricting the illegal sort. However, I wish he hadn't implemented it as an executive order. Immigration is too important to manage administratively. It has to be worked out through the democratic process, however time-consuming and messy. His failure to do so leads to the rise of politicos like Donald Trump. Similarly, Obama is correct on free trade.

6) The President's policy on Cuba is absolutely the right thing to do. We should have started normalizing relations back in 1991. Though to be fair, our failure to do so is mostly the fault of the Cubans.

7) On the Iran deal I simply don't know enough to judge. If the sanctions regime is stable and can be maintained, then Bibi Netanyahu is correct and the Iran deal is a bummer. On the other hand, sanctions coalitions are intrinsically unstable and will eventually disintegrate (see, e.g., Cuba, where the coalition fell apart decades ago). It may be that sanctions against Iran are already in the process of disintegrating. In that case getting the best deal we can while it's still possible is a good strategy. But I don't know how solid the sanctions really are.

8) Mr. Obama is frequently blamed for making life worse for African-Americans. No doubt their financial and housing circumstances have deteriorated since Obama took office. But I don't think the President is the primary culprit. The problems are much bigger than him, and include structural changes in the economy, including, e.g., the decline in employment at both the post office and the military. While HUD's recent regulations will certainly make things worse for Black people, that hasn't happened yet; that's a landmine for the next president.

This is not an insignificant list, but it pales in comparison to what I dislike about Obama. Needless to say, I didn't vote for him in either 2008 or 2012, nor will I be voting for the Democrats in 2016.

Further Reading: