Crony Capitalism

I am grateful to Solidarity for turning me on to Jack Rasmus, an independent scholar, trained economist, and Leftist who writes very well. I've bookmarked his homepage. This post is based on Mr. Rasmus' recent Solidarity piece, and a longer article he wrote for Z Magazine here. At the end of the latter, he offers 14 predictions for the US economy for 2013-2014.

I note that Mr. Rasmus and I agree on most of the facts in his article. That's reassuring because he's a real economist, unlike us rank amateurs over here at Trotsky's Children. The disagreements are relevant, however, and are less about economics than about politics.

I think he misstates the Republican position on tax reform. He says

That tax code bill will include massive additional cuts in corporate income taxes, especially in the top corporate tax rate and in taxation of multinational corporations, who are currently hoarding $1.9 trillion in cash with their foreign subsidiaries in order to avoid paying taxes. Corporations are eager to reduce their top corporate rate from 35% to 28% or less--a proposal which Obama has already agreed during his last campaign. They argue that the 35% rate is the highest among advanced economies. What they don’t say, and what the press conveniently ignores, is that US corporations actual effective rate is a mere 12% of total profits--the lowest among advanced economies. They also decline to mention that the 12% rate is about half of what they previously paid annually between 1989-2008.

He leaves out the corollary, namely the Republican proposal substantially cuts loopholes, and they claim it is revenue neutral. They also argue that Obama's counter-proposal, while lowering corporate tax rates, is not revenue neutral, but would in fact collect higher corporate taxes.

So I disagree with three of Mr. Rasmus' 14 predictions:

1) He predicts that corporate tax reform will pass this year. I think that's highly unlikely.

2) He predicts that there will be significant cuts to Social Security and Medicare. I'm not sure what he's referring to, but it may be associated with Obamacare. We'll see if that actually happens.

3) He thinks the Fed will start to taper.

So here's the stunning thing about the remaining eleven predictions: they could have come straight from the pages of ZeroHedge (ZH). ZH is a radical Libertarian blog that forecasts imminent doom and gloom for the US economy. Their favorite investments are gold, guns, and canned goods.

So this is strange. We have a Leftist who, at least in 11 out of 14 points, agrees with the right-wing blog ZeroHedge. What gives?

Presumably Mr. Rasmus subscribes to the Marxist myth: We're poor because the rich people stole all the money. ZH has it's own myth, perhaps not so succinctly stated, but it's roughly We're poor because the government is hopelessly corrupt and bankrupt. Instead of Karl Marx, their prophet is Ayn Rand. These two world views don't have much in common, but they agree on one very important point: crony capitalism is bad.

A crony capitalist is a company whose major income depends on collecting rents. The Post Office is a prime example--they are granted a monopoly over the mail box, and therefore can charge as high a rent as they like for first class mail. When was the last time the price of a postage stamp went down? Never--and that's because rent collection is a sure thing.

ZH argues that much of the financial industry is run by crony capitalists--witness Fannie Mae and Freddie Mac. And likewise with Goldman Sachs and the other too-big-to-fail banks. My Republican friends point to so-called green companies, such as Solyndra, as examples. The main Republican argument against Obamacare is that it turns our entire healthcare industry into a crony capitalist operation.

So the Tea Party and Occupy Wall Street (OWS) both rail against crony capitalism. But they have different conceptions of who a crony is. For OWS, the culprit has to be some rich, white guy, like an evil banker. The Tea Party will agree with that, but also regards unionized public employees as cronies. Their inflated pay and benefits are just as much a result of rent collection as the guaranteed profits of Goldman-Sachs. College professors like me are world-class experts at collecting rents, but do only a mediocre job of education. The OWS folks are bamboozled by union propaganda.

So this is why the Tea Party has a more accurate view of corporate tax rates. What OWS doesn't understand is that our current corporate tax regime very much favors crony capitalists. Big companies, like Amazon, J. P Morgan, etc., can hire the lawyers and accountants necessary to take advantage of all the obscure loopholes. Plus they can effectively lobby for more loopholes. The small fry competition, on the other hand, can't do that--they just end up paying the high corporate tax rate. So the current tax regime discourages competition and benefits the big, incumbent companies. That's why Amazon, for example, has recently changed its tune on collecting state sales taxes--they can afford to do it, but their competitors can't.

So the Republican proposal to lower tax rates and eliminate the loopholes is a point for the little guy. It's also good for consumers, since there will be more competition in the marketplace. The Tea Party wing of the Republican party understands that. It's a pity that OWS doesn't.

I hate to associate Mr. Rasmus with OWS. Occupy is a mostly incoherent movement of very limited political consequence. Mr. Rasmus is much smarter. But in this case he's channeling the OWS line, and this explains the differences between his 14 points, and those the Tea Party might propose. His opposition to Republican corporate tax reform is misguided.

One final clarification--I don't think ZH properly represents the Tea Party. ZH's claim to fame is doom and gloom, not just free enterprise. There is no reason why a Tea Partyer has to be so pessimistic. I'm not--I am very upbeat about the US economy, as described here.

Further Reading:

• Are Rich People Rich?
• Anarchy!
• Luddites Against Fracking

BRICS

There is the old joke about Puritans--that they are never more miserable than when somewhere, somebody is having fun.

Marxists are like that. Nothing gets their goat more than if somebody should dare to raise their head above the muck of poverty. The slightest increase in wealth brings forth thundering condemnation: inequality, "imperialism", planetary despoilation, violations of indigenous rights, etc. You can't win with these people.

Today's Marxist in question is Mr. Louis Proyect, who writes a post entitled Leftist Support for BRICS: A Faith-Based Initiative. It's a very long article, and includes a piece by Bobby Peek entitled Brics lessons from Mozambique.

BRICS stands for Brazil, Russia, India, China, and South Africa. Diplomats from these five countries convened in Durban, issuing a Statement that Mr. Proyect mocks (accurately) as

...written by the same people who write those advertising supplements for the Sunday NY Times on “The new and dynamic South Africa” with pictures of wineries, gamboling elands, and a Black family in a BMW. The article starts off with the cheery affirmation: “As the global economy is being reshaped, we are committed to exploring new models and approaches towards more equitable development and inclusive global growth by emphasising complementarities and building on our respective economic strengths.”

The Statement is Dilbert-quality copy, to be sure. By contrast, Mr. Proyect takes great pleasure in telling us about the great extent and horrifying depths of poverty still present in Durban. And true enough, the Statement, while not necessarily wrong, is certainly not the whole story. But Mr. Proyect's criticism is deeper--his argument is that, because of poverty, the diplomats' efforts to overcome poverty are intrinsically immoral and hypocritical. Why should this be true?

Mr. Proyect's beef against the BRICS can be summarized in three sentences:

• The BRICS are not socialist, nor are they a waystation to socialism.
• The BRICS are "anti-American" not because they oppose capitalism, but because they compete with the US in the capitalist game of thrones.
• The BRICS are behaving like imperialists now, and in the future may become globe's primary, imperialist powers.

The first two statements are undeniably true. The third statement includes a prediction that I think is unlikely to happen, at least not in this century. The point of Mr. Proyect's article is to criticize Leftists who want to cozy up to the BRICS because they're anti-American, and thus represent the lesser evil. His argument is that relying on the BRICS to create a better world is a dead-end, or, in the words of his title, a "faith-based initiative."

Except that the BRICS (or at least the BIC) do represent a better world, albeit not a socialist one. Arguably the most important event of the 20th Century is that 400,000,000 people were lifted out of poverty in China. You can blame Deng Xiao Ping for Tienanmen all you want, and you can (as I do) extend significant credit to people like Malcom McLean and Sam Walton. But the fact remains that the little Communist was a fraud--he wasn't a real Communist. He took the capitalist road, with earth-shaking success.

Our friends in the Socialist Workers Party and Socialist Action still haven't accepted this fact. They maintain that Chinese wealth is just a Potemkin Village, with the same few people walking through the shopping malls for the benefit of the Western media. But they're wrong, and Mr. Proyect is honest enough to know that they're wrong. The BRICS are important precisely because they have made enormous strides in reducing global poverty. Why is Mr. Proyect against that?

So now we come to the tirade against development in Mozambique--the case made by Bobby Peek. Mr. Peek writes

South Africa is extracting 415 megawatts of electricity from Mozambique through the Portuguese developed Cahora Bassa Dam, which has altered permanently the flow of the Zambezi River, resulting in severe flooding on a more frequent basis over the last years. In the recent floods earlier this year it is reported that a women gave birth on a rooftop of a clinic, this follows a similar incident in 2000, when Rosita Pedro was born on a tree after severe flooding that year.

He goes on to complain that

• Somebody in Melbourne is getting rich (and--horrors--probably having fun, too).
• That dams are capital intensive.
• That the electricity is going to South Africa.
• That India, Brazil, and Russia are also making investments in Mozambique.

I find it very strange that Mr. Proyect quotes Peek's article in the same post where he complains about poverty in Durban. After all, turning out the lights in Durban is hardly the solution to poverty. Where does Mr. Proyect suggest Durban's power should alternatively come from? Coal-fired plants? Nuclear?

Of course I know the answer. He'd just replace the gamboling elands with magically-empowered, free unicorns. Surely, amongst all of South Africa's game parks there are enough unicorns able to generate electricity out of thin air at no cost whatsoever, either monetary or environmental.

Marxists have no perspective. Pulling 400,000,000 people out of poverty is an accomplishment completely negated by one Mozambican woman forced to give birth on a rooftop because of a flood. That very same woman is cause to throw 3,500,000 residents of Durban into the dark. Yes, I hope we can take care of the poor lady, but sheesh--a little bit a business sense would go a long way.

Marxists believe in poverty--and not only Marxists, but all of the Left, much of the Democratic Party, and even a few of my Republican friends.

Down With Poverty!

Further Reading:

• Anarchy!
• Luddites Against Fracking
• 63rd & Halsted

The Man's Out To Get You

The only thing worse than being arrested is being ignored.

The world revolution has been on hiatus recently as The Militant has taken a three-week vacation. Of course it hasn't been all fun--they spent two days attending the Oberlin Conference. Presumably we'll hear more about that soon. In the meantime, the August 12th issue brings us up to speed on the current state of the working class.

The big, earthshaking news is that Jacob Perasso's house has been burglarized.

“I knew this was no ordinary robbery. This is what’s done when the authorities or their vigilante friends want to send you a message,” Jacob Perasso told the Militant, in an interview following a July 16 break-in at his house. Perasso was the Socialist Workers Party candidate for City Council District 4 in the May elections here and is active in support of workers’ struggles, fights against police brutality and other social protests in the interests of working people.

A picture of the crime scene is included.

“They are trying to intimidate us, but we are going to fight back," Perasso said, announcing plans to organize a broad international defense campaign.

An international defense campaign? Against who? Burglars? The police? Vigilantes? This is surely one of the silliest ideas ever to grace the pages of the The Militant.

The Socialist Workers Party (SWP) has a long tradition of fighting for civil rights. (The fact that they don't actually believe in civil rights is not the topic for now.) In 1941, several leading comrades were convicted under the Smith Act and sentenced to jail terms. The Smith Act made it illegal to advocate the overthrow of the US government, and was ruled unconstitutional by the Supreme Court in 1957. It clearly represented an overreach by the government, albeit one taken during a time of war. We can give comrades credit for their work against this law.

Beginning in the 1960s, the FBI (under J. Edgar Hoover) launched a campaign "aimed at surveying, infiltrating, discrediting, and disrupting domestic political organizations." This was dubbed COINTELPRO, standing for Counter Intelligence Program, and it was directed at a large number of Leftist, Rightist, and racist organizations. The program was totally out of line, and the SWP took the lead in fighting back. They filed a lawsuit in 1973 which they eventually won in 1986, receiving damages of $264,000. Once again, kudos to the comrades.

Now of COINTELPRO's aims, discrediting and disrupting legal political activity is surely not a legitimate function of constitutional government. The SWP was always very careful to act within the law, so however vile their ultimate purposes, the FBI had no right to do what it did.

On the other hand, I support the government's efforts to survey and infiltrate radical organizations. The Party has always assumed that they were government targets because of their program. That is, the Party believed it represented a political threat to the capitalist system, and government repression was a response to that threat. They viewed themselves as a political organization, not a terrorist cell, and not as a bunch of counter-cultural hippies. Accordingly, they were resolutely non-violent, and operated scrupulously within the law. I give full credit to the Party for their seriousness of purpose--of that there can be no question.

But the same cannot be said of every individual comrade. A small, minority party such as the SWP will always attract some nut cases. Whatever the pedigree of the organization, the nuts probably warrant observation--surely a legitimate police function. An example is Lyndon LaRouche, who started his disreputable political career in the SWP.

The matter comes up today with surveillance of mosques. The government has no right to obstruct or disrupt constitutionally protected religious worship. But they have an obligation to keep some of those worshipers under observation.

After COINTELPRO, the Party's civil rights efforts degenerated. This is probably because comrades just got too old, and the government stopped paying any attention to them. Fifty and sixty year-olds are not likely candidates for terrorism, no matter how nutty. The police have better things to do.

For a Party that believes its political program is an imminent threat to the establishment, ignoring them is the worst insult imaginable. Absent real repression, self-validation requires that they invent police repression, and so they have. There are two cases of note.

The first is the Mark Curtis case. In 1988 Mr. Curtis was arrested, tried and convicted for the sexual assault of a 15 year old girl in her own home. The Party defended this as a political case, stringing the project along for nearly a decade. There are two issues: 1) was Mr. Curtis guilty? And 2) was this a political case?

The jury convicted him, and I have no reason to doubt their verdict. This despite the fact that the Party turned the trial into a circus.

I am totally convinced, however, that it was not a politically-motivated case. The Party claims it was a frame-up--Mr. Curtis was lured to the girl's house by an anonymous and unidentified woman, only to have his pants pulled down by cops who were waiting for him there. After this he was charged with rape. This is a bizarre and unbelievable story. It would have been much easier to frame him just by throwing some drugs into his car.

And the second case is poor Mr. Perasso and his burgled house. There is just no way this is a politically inspired police action. It's a plain, old-fashioned burglary, pure and simple. Burglars (or so I read) are looking for cash, drugs, guns, and things that can be easily carried and fenced (e.g., cell phones). They are not going to steal e-readers (!?) or heavy, old laptops. Trying to turn this into a political case is just absurd.

The premise of this blog is that my Trotskyist friends are sane. The SWP is pushing their luck promoting this schizophrenia-worthy conspiracy theory--if they persist I'll just drop them off the radar screen. But as of now they still have the benefit of the doubt. The source of the fairy tale is less self-deception, but rather the story they tell themselves about the value of their organization. If you take away government repression, there's nothing left.

And that's why the world revolution depends on the fate Jacob Perasso's cell phone.

Further Reading:

• The Decline Of American Trotskyism
• Barry Sheppard: A Wasted Life
• Prisoners

Book Review: Filthy Rich In Rising Asia

The full title is How To Get Filthy Rich In Rising Asia, by Mohsin Hamid. A good review is here, though I would recommend actually reading the book first. I encountered this book via Tyler Cowen, who also enjoyed it, and who unsurprisingly thinks it's about economics.

The pretense is to be a self-help book, a guide to getting filthy rich in rising Asia, a premise that is imaginative, charming, and makes for great storytelling. A consequence is there are few proper nouns. None of the characters have names, nor does the country or the city where the novel takes place. You can imagine that it happens anywhere in Asia, but I found it useful to place it in Lahore, Pakistan, which is the author's home town.

The chapter titles are the stuff self-help books are made of. Some would do Stephen Covey proud, such as Get an education, and Work for yourself. Others are more...shall we say...Pakistani, like Be prepared to use violence and Patronize the artists of war.

Many reviewers compare the book to F. Scott Fitzgerald's The Great Gatsby. Somehow I missed that in high school, and so read Gatsby for the first time only a few months ago. The comparison isn't really very apt--both are about rich people, but that's about it. Fitzgerald hated them, and clearly believed the Marxist myth we're poor because the rich people stole all the money. Indeed, Gatsby was a gangster.

Hamid's rich man is more an accidental figure. He certainly isn't evil, nor (beyond petty theft) did he steal money. He just happened to be at the right place at the right time, and was smart enough to take advantage of it. Further, like most rich folks, he improved the lives of the people around him--his family, his employees and his customers. Not that he was altruistic or above cheating, but there is a thread of fair play that runs through the entire novel.

In the end, money comes and money goes. It's not even particularly good for keeping score. The success of the protagonist's life is measured in much more quotidian terms: love, friends, and family. Indeed, the subplot is a love story.

I'm not going to tell you the plot, but I will address three themes: ideologues, water, and graft.

The protagonist goes to university. In doing so, partly for self-protection, and partly for economic support, he joins an ideological group described as "bearded men." Their immediate mission is to stop drug use by their fellow students, a task they pursue with occasionally violent zeal. Our hero depends on them for help when his mother falls ill, but then becomes increasingly cynical and disengaged. He's about to get into some serious trouble, but makes himself scarce just in time. That's the end of his university career.

So that reminds me vaguely of my time in the Socialist Workers Party--absent the violence. Instead of being kicked out of school, I was simply ostracized by my former comrades.

Water is a central theme of the book. The government wants to build a special community, labeled Phase Ten. Here's what the retired brigadier says about it:

In ten, when you turn the tap, you'll be able to drink what comes out of it. Everywhere. In your garden. In your kitchen. In your bathroom. Drinkable water. When you enter phase ten, it'll be like you've entered another country. Another continent. Like you've gone to Europe. Or North America.

This utopian vision is vivid to me because of the year I spent in Uganda. The expense and effort that Ugandans of all classes spend securing enough potable water for the day is astonishing. School girls invest much energy lugging heavy jerrycans on their heads, sometimes for many kilometers. Ex-pat families, like mine, depended on the water tower behind our complex, and the expensive electricity needed to pump water into it. And even then we had to boil and filter the stuff before we could drink it--it was an hour-long chore I had to perform every evening.

In the US we take potable water for granted--we live in a blessed place. Pakistan--and most of rising Asia--is more like Uganda, and it is truly fitting that Mr. Hamid has chosen water as a central plot element.

Graft is endemic in Rising Asia, ranging from petty theft by employees, to bribery on a grand scale. The former is tolerated and functions as a social safety net. The narrator observes that a servant stays

because it is easy to skim money from you. You do not begrudge him this. You would do the same. You have done the same. It is a poor person's right.

Emergency expenses--e.g., for sick family members--is usually taken from employers, either by gift or by theft. Likewise, money is saved for retirement by skimming a little off the top. As such, graft in Pakistan appears to serve the same function as our social welfare state.

The important government bureaucrat collects a big bribe from our rising rich man. In this he is like America's tenured college professors--a person who is paid by virtue of his position rather than for any service rendered. (Like a college professor, he may actually perform a service, but his paycheck has nothing to do with that.) In a word, bureaucrats are the same everywhere--they are rent collectors. Perhaps there's a moral difference between the Pakistani official and an American college professor, but there isn't an economic difference.

Still, institutions matter. Though both American professors and Pakistani bureaucrats are parasitic rent collectors, the former operate under the rule of law. Their rent is predictably calculated. The latter follow the rule of the jungle--eat what you can steal. So the professoriate is at very least less damaging to the economy, and may actually be more productive (though that's hard to say).

Because of corruption and incompetence, the water and sewer lines never get built. Citizens depend on bearded street gangs for protection rather than any police department. Contracts cannot be enforced. Pakistanis are poor, and Americans are rich. Rising Asia--at least parts of it--is sinking fast.

Anyway, for a really good story, along with fresh insight into Rising Asia, How To Get Filthy Rich In Rising Asia is well worth the read. Highly recommended.

Further Reading:

• Are Rich People Rich?
• Liberals!
• Book Review: We The Enemy

Trotskyist Party Gossip

If you Google jack barnes swp, I come up third on the list, just after the Wikipedia article and Gus Horowitz's piece. Likewise, a search for spartacist league cult puts me at the top of the list. These and similar searches are among the most common sources of new readers to my blog.

I'm not proud. I've written three posts that are labelled Cults, which are the ones that these search terms select among. I've said in all three posts and I'll say it again--I don't think the Socialist Workers Party (SWP) is a cult. If I thought so, I wouldn't write about them at all. I think the best way to characterize them is as a social club with a mission, rather like the Elks or the Knights Of Columbus. Weird? Perhaps. Cult-like? No way.

For all I know, the Spartacist League is a cult. The fact that my passing reference to them in a single post shows up at the top of the search does seem to indicate the irrelevance of that rather pathetic organization.

Anyway, these searchers are not really interested in politics, but instead gossip. I call it Party Porn, analogous to the ruin porn so popular in Detroit these days. Were I a real reporter, I could probably earn a living digging up dirt on Barnes, Mary-Alice Waters, Steve Clark, Barry Sheppard, etc. Fortunately for them I'm not. I just repackage what I read elsewhere on the web, but apparently that's sufficient to earn me a high ranking on some popular Google searches.

So what is it about Jack Barnes that generates so much prurient interest? That's easy--everybody hates him.

Not everybody, of course, but a lot of people. Perhaps there are 20,000 people alive today who were at some point in their lives members of the Socialist Workers Party (SWP). Most of them left because they simply fell away. My good friend from that era now has no interest in politics whatsoever. So he doesn't really hate Jack Barnes. He's just not interested.

Others were members of groups that split from the Party. There are probably still a few Schachtmanites around, along with Cochranites, Wohlforthites, International Tendency folks, and then not to mention the whole Socialist Action (SA) crew. Even old-timers, such as Barry Sheppard, have left, as, apparently, has my old comrade, Mike Taber. These people are often vitriolic in their hatred for Mr. Barnes, a trait I attribute to envy.

Many, such as Louis Proyect, left the Party but retain their belief in Marxism, and continue to be politically active. Mr. Proyect famously published the speech Jack Barnes should have given in 1974--a speech that to me looks very much like the program for Solidarity. A consistent Marxist, he has refused to personalize the decline of the SWP, even to this very day, which instead he attributes to "objective forces." As such, he doesn't "hate" Jack Barnes as much as disagree with him. But he is not above calling the SWP a cult.

Many others left because they could no longer stand the rigors of being "worker-bolsheviks", whatever that means. For many years in the late 90s, the Party had a dual-track membership. Full members could vote, but so-called sympathizers had the right to contribute money and do work. Does anybody recall the name Ruth Cheney? I never met her, though I gather she was a comrade of mine in the 70s. In the event, she co-organized the Pathfinder Project in the 1990s as a sympathizer. These sympathizers have all fallen away, and I'm sure there are lots and lots of hard feelings. I suggest most of them "hate" Jack Barnes.

So Mr. Barnes elicits a lot of schadenfreude, which drives traffic to my blog. Could a college be successful if they inspired so much animosity among their alumni? Certainly not--the president would be fired long before it ever got that bad. And likewise, the SWP leaves a lot of money and talent on the table by alienating so many of their former comrades.

Unfortunately, few of Mr. Barnes' competitors would have done any differently. Certainly neither the Workers League nor the Spartacist League are any better when it comes to openness. And neither are many ex-comrades, such as Barry Sheppard. Mr. Proyect is correct--it isn't a failing on the part of a single individual. It is, instead, baked into the democratic centralist cake, at least as implemented by the SWP.

But there is one person who probably could have saved the SWP: Peter Camejo. He had the commitment, intellect, and personality to pull it off. He remained a Marxist up to the very end. He was a very smart man (MIT grad). And his personality was both charismatic and intellectually open.

I had an e-mail exchange with Mr. Camejo before he died. I wrote him with a reminiscence, saying that I was his chauffeur around Chicago and Milwaukee during his 1976 presidential campaign, and that was a job I very much enjoyed. I also said that, while my personal politics had changed, I still very much admired him as an individual.

Mr. Camejo wrote back--a very nice e-mail apologizing for not remembering me, and (jokingly) hoping that nobody I vote for will win the election. He also mentioned that he had cancer.

Compare this big-hearted response to that from Socialist Action. I wrote them (twice) asking for copies of the convention documents that they announced on their webpage would be distributed for free to all who asked. I asked, politely. And politely also a second time. They answered neither e-mail. This is sad.

Mr. Camejo would have been able to keep Party alumni involved with the organization, and on good terms. In a Camejo world, my blog might still be successful, but Party porn wouldn't be a traffic driver.

Further Reading:

• In Response To Blogger's Policy
• Marxism Without The Leninism
• The Decline Of American Trotskyism

A Nation Of Shopkeepers

There's a famous statistic that's trotted out whenever academics want your money. This version comes from Professor Robert Sternberg, who is now president of the University of Wyoming.

...93 percent of the employers surveyed said that "a demonstrated capacity to think critically, communicate clearly, and solve complex problems is more important than [a candidate's] undergraduate major." They were not saying that a student's major does not matter, but that, overwhelmingly, the thinking, problem-solving, and communication skills a job candidate has acquired in college are more important than the specific field in which the applicant earned a degree.

Just go to college--so the theory goes--major in women's studies with a minor in global musicology, and the corner office will be yours. Of course it's horsefeathers.

But what would you expect employers to say? We are looking for brainless nitwits who can follow simple directions. No employer, or rather no employee who represents the employer, will admit to being hired under the brainless nitwit program.

As it turns out, I have some experience with this. Some years back my campus organized students to help businesses better utilize green energy. It was a service learning project. We got an enthusiastic reception from local companies, and so warehouses were analyzed, blueprints were drawn, elaborate spreadsheets were tabulated, and teams of students worked hard to generate useful data.

And then, when all the planning, measuring and studying were done, nothing. When it came time to actually put capital behind these plans, none of the businesses--none--coughed up a dime. If you asked them, of course they'd say we support the environment. We're in favor of green energy. But real capital is invested for business reasons, not for propaganda, and in the interests of company survival they didn't invest frivolously.

What people say and what people do are two different things.

So my Trotskyist friends are smarter than academics (faint praise, but it's the best I can do). Consider this quote:

First of all, the turn capitalism has taken over the past few decades has knocked the stuffing out of our class, has ridden roughshod over its organizations and communities and has driven down its quality of life. More than this, there has been a proletarianization process engulfing and embracing many occupations and social layers once considered “middle class,” while at the same time technology and globalization have eroded the industries that were once at the heart of working-class employment, replacing them with jobs that pay less and are less secure. And all of this has contributed to a slow-moving, contradictory, but intensifying radicalization process, and out of this process have been emerging new struggles, new forms of struggle and a still-evolving crystallization of a new, diverse vanguard layer of the working class.

That's from an article by Paul Le Blanc (my former comrade in the Socialist Workers Party, not the president of the University of Southern New Hampshire), entitled Leninism for Dangerous Times. Now I don't agree with Mr. Le Blanc's characterization of events, but his description of them is far more accurate than Professor Sternberg's.

Mr. Le Blanc uses the term proletarianization, a mouthful that hardly connotes people with college-trained, critical thinking skills. Now I don't like that term, either, but it is certainly true that technology is de-skilling what was once intellectual labor. As I've suggested elsewhere, doctors and professors are ripe targets for automation. Add lawyers, accountants, pilots, and truck drivers to the list of jobs that are at least partially on their way out.

It is the academic's conceit that these skilled, well-paying jobs will be replaced by people with even more skills at even better pay, i.e., those with much vaunted "critical thinking" skills. The job that people like Professor Sternberg have in mind is a manager. Indeed, in the original conception a college education was designed to prepare you for the officer class, i.e., the people with the book learning necessary to manage other people.

But technology sharply reduces the need for managers. Organizations (outside of government or academe) are flatter than ever. Employees increasingly work from home, or from Starbucks, or from their cars, or in comfy Google-plexes with free food. Performance is monitored by the keystroke or by the dollars generated, not by some managerial assessment. The abilities of the women's studies major are, sadly, increasingly useless.

So how can one know what companies really want in employees if you can't believe what they tell you? Just ask yourself--what do you look for in a plumber? Do you care if he attended college? Are you worried about the quality of his general education program? Does it matter if he can factor a quadratic equation? Of course not. You want somebody with experience doing plumbing, and who is honest, personable, and reasonably good looking. And that's what employers want--a person with narrowly relevant skills, who is honest, personable, and good looking.

I think Professor Sternberg's plea for more money can be dismissed out of hand. On the other hand, Mr. Le Blanc's term proletarianization implies a de-skilling. That certainly is what is happening with some professions, e.g., medicine, but it is not happening across the board. Instead both computerization and, especially, globalization lead to increased specialization. Today, for example, it isn't enough to be a computer programmer. Instead you become specialized in particular sub-disciplines, such as database, or web programming, or bank software, or whatever. And the more specialized you become, the higher your pay, because the rarer your breed (at least until your career is rendered obsolete). This is not de-skilling. It's the opposite.

So Mr. Le Blanc actually makes the same error as Professor Sternberg--that the economy needs generalists more than it needs specialists. The professor deludes himself into thinking these generalists require some bizarre academic training, while Mr. Le Blanc thinks they're becoming de-skilled, proletarians. They're both wrong.

What we are really becoming is a land of petty bourgeois, skilled tradesmen. That still includes traditional skilled trades, such as plumbers, but there a lot of new ones out there. These include being the world-class expert in programming a particular IBM mainframe, or the ace salesman of food processing equipment to corn syrup producers, or the person who can fix any gas chromatograph-mass spectrometer around, or the guy who can repair 3D printers.

Unlike Mr. Sternberg's imagination, these people have skills instead of knowledge, which means they actually know how to do something. And unlike Mr. Le Blanc's fear, these people are neither cheap nor interchangeable, i.e., they are not proletarian workers.

Computers can do the math and store the knowledge. We won't be a nation of managers, analysts, or intellectuals. The modern college degree is generally useless in the marketplace. And robots can do the work that proletarians used to do. The union movement is dead and gone.

We are becoming a nation of shopkeepers. And that's not a bad fate--not bad at all.

Update: This post should note that Paul Le Blanc's article, Leninism for Dangerous Times, appeared in the current issue of Socialist Viewpoint. I've only highlighted a bit of it here, but read the whole thing--it's worthwhile. And kudos to Socialist Viewpoint for a good selection.

Further Reading:

• Future STEM Careers
• The End of Science
• Democratic Centralism

Are Rich People Rich?

Are rich people rich? That seems like an odd question to have to debate, but such a debate must be had, at least in our imagination.

In one corner we'll put Bill Whittle, a person my Trotskyist friends have likely never heard of. He produces charming videos that appeal to people like me who believe in free enterprise and constitutional government. Unfortunately, like most of the Internet, he mostly just preaches to the choir. He argues that rich people aren't all that rich.

In the opposite corner is Andrew Gavin Marshal, a Canadian-based, independent researcher who authors an article entitled World's Top Billionaires, reprinted in the current issue of Socialist Viewpoint. He argues that rich people are nothing short of filthy, stinking.

Mr. Whittle makes his case in a video produced in 2011 entitled Eat The Rich (based on data from here). He was responding in part to the Obama campaign's efforts to make the millionaires and billionaires "pay their fair share". The federal budget in 2011 was $3.7 trillion, and Mr. Whittle imagines how that might be paid for by "eating the rich". He manages to cover the bill by confiscating all profits from all Fortune 500 companies ($391 billion), all personal income above $250,000 ($1.4 trillion), and the entire net worth of the plutocrats, all billionaires and near-billionaires ($1.3 trillion). That added together is still $600 billion short of the full federal budget, but Mr. Whittle cobbles together the necessary amount from humorous odds and ends.

To pay the federal budget for one year, Mr Whittle (in his imagination) has confiscated the wealth of all the plutocrats, and in so doing simply liquidated the assets of many or most American companies. Of course there is no encore--it is impossible to repeat that trick for a second year. Compared to the federal budget, or for that matter, state budgets or even many municipal budgets, the rich just aren't all that rich.

Mr. Marshal disagrees. His report is full of data, none of which I take issue with (at least for the sake of argument). He says that 1% of the world's population owns 40% of its wealth, while the bottom 50% own only 1% of the wealth. In the US the figures are similar--1% own 36%, and the richest 400 people own more than the bottom 150 million people. He also claims that the world's super-rich have stashed as much as $30 trillion in off-shore tax havens--in a few minutes that won't sound like a lot of money.

While I'm willing to accept all of Mr. Marshal's data, I think he has an unjustifiably narrow view of wealth. He is considering only financial assets, which really is a small part of the universe. The total market capitalization of all publicly traded companies worldwide is about $55 trillion. That's the extent of Mr. Marshal's gaze, and it sounds like a lot of money, but it isn't.

To see how big the US economy really is, think about it this way. We have a $15 trillion GDP--that is, our annual return on investment is $15 trillion. If you assume a 5% return on capital, that means total capital equals about $300 trillion. Since the US is approximately 30% of the global economy, we can, in round numbers, suggest that total global capital is $1 quadrillion. The total public market capitalization--the universe which Mr. Marshal considers--is only about 5% of the total wealth.

So where is all this extra wealth that Mr. Marshal can't see? I'll suggest three places: houses, benefits, and skills.

I live in an average home, worth about $200,000. I hope to have it paid off before I retire, in which case it will make up about 40% of my net worth. Twenty odd years ago, I recall reading about Bill Gates building his new house at a then unprecedented cost of $30 million. That is less than 1% of his net worth. I believe Mr. Marshal ignores home equity in his calculations (not sure), and so isn't giving credit to the 60% of people who own their own homes--the majority of whom have paid off the mortgage. And as my example illustrates, even though Mr. Gates' house is far nicer than mine, as a percentage of wealth it's less important. If you include home equity, the fraction of wealth owned by the top 1% is less--probably significantly less--than 40%.

When I retire I expect to receive about $2,000 a month in social security. Mr. Gates will get no more than that (though at his current salary of $1/year, he may not receive as much as I do). For me, social security is as if somebody just gave me a trust fund worth $400,000. Thus you really need to add that to my net worth in order to compare apples to apples. Social security pays out about $871 billion annually, wealth that goes overwhelmingly to the 99%, but which is not included in Mr. Marshal's statistics. That's equivalent to a trust fund worth $16 trillion. Similarly, Americans have trust funds associated with Medicare, food stamps, disability, etc.

Finally, there is human capital, namely the skills and attributes that we have all acquired that enable us to perform socially valuable labor. These range from getting out of bed and showing up to work on time, to being able to play NBA quality basketball. Gary Becker estimates that 70% of American capital is human capital--that's $210 trillion. This reminds of the middle-aged, slightly pudgy, Black woman I saw during my early morning constitutional along the Las Vegas strip last week: she ran up the stairs rather than taking the escalator. Now there's a lady who conserves capital! Mr. Marshal gives her no credit.

So looking only at the narrow world of financial assets, then yes, Mr. Marshal is correct. The rich really are rich, and wealth inequity really is obscene. But that's not the right picture. Instead, one needs to pull the camera back far enough to encompass all capital. In the larger view, financial assets (in the form of publicly held corporations) shrink to only 5% of the total. The big picture includes government benefits, such as social security, and amorphous but very important things, such as human capital. These are distributed much more broadly across the population--it is simply not true that the top 1% own 40% of all assets. They're lucky if they own 4%.

Are rich people rich? This judge rules for the negative, and declares Mr. Whittle the winner of our debate. But high kudos to Mr. Marshal for good effort. His article is worth reading--here's the link again.

Further Reading:

• Why Trotskyists Don't Like Las Vegas
• Liberals!
• Viva Poverty!