News From the SWP

I've been ignoring the Socialist Workers Party (SWP) because their paper--The Militant--has not caught my fancy recently. They're following some labor issues that haven't interested me; they waste a lot of pixels on Cuba; they tout ancient books that don't look to be very relevant today. This week's issue, for example, has a long excerpt from American Labor Struggles 1877-1934--surely of purely academic interest.

For all their interest in labor struggles, it was weird that they waited until this week to comment on the defeat of the Amazon union effort--an event that happened on April 9th. I purposely postponed my own account (dated May 1) so to include their response, but I gave up on them. As it turns out author Susan Lamont adds nothing new to the conversation, so no update from me is needed.

The big news is that the pandemic-postponed Active Workers Conference will happen this year from July 22 - 24. Historically these have occurred in Oberlin, OH, and are known informally as "Oberlin Conferences"--a very long tradition in the Trotskyist movement. Some reminiscences of my time at Oberlin are here. 

But these days the Oberlin brand is hopelessly tarnished given the eponymous college's failed and dishonorable crusade against a small-town bakery. So this year's "Oberlin Conference" will instead take place at Wittenberg University in Springfield, OH. Springfield is a mid-sized, struggling, rust-belt town 26 miles east of Dayton International Airport. I, being a geography buff, find it an odd place to hold the affair--so please let me indulge my geography itch to explain why.

I surmise that the Oberlin site was originally chosen because it was close to the Cleveland branch. Indeed, I recall at one such shindig we adjourned to a big hotel in that city for a large campaign rally. The Cleveland comrades played a key role in organizing the event every year. Further, Oberlin was within a couple hours drive of branches in Detroit and Pittsburgh, and not that far from Chicago. Folks from further afield could fly into Cleveland airport (though we Portland comrades drove).

Today the Party has no branches in Ohio, the Detroit branch also no longer exists, and Pittsburgh is a four hour drive from Springfield. The closest branch is Louisville--a three-hour ride. So Springfield seems remarkably inconvenient. Further, while Dayton airport is close by, it is smallish and rather expensive to fly in to. I checked connections from the West Coast (SEA, SFO, LAX--this is how I waste my time) and they're horrible. The layover time in Chicago is as long as five hours.

The closest large airport is Cincinnati (CVG), a bit under two hours away. That's a Delta hub, and nonstop flights are available from LAX, though from SEA or SFO a connection is still necessary. The fares are lower as well. While I didn't check, being a Delta hub CVG is probably easier to reach from Atlanta, Miami, or Texas.

So were I in charge, Wittenberg wouldn't be my top pick. The criteria are: 1) a small-campus setting, 2) near an existing branch, 3) not too far from a major airport, 4) in the Midwest--because that's centrally located wrt SWP branches. There are four branches that meet the Midwest criterion: Chicago, Louisville, Pittsburgh, St. Louis.

• Chicago is a logical choice--definitely centrally located and certainly a big airport. There are a bunch of colleges in the suburbs or further afield that would be an easy reach. Lots of options here, but Chicago is a big city and doesn't really have the "vacation" vibe that is essential to the Oberlin experience.
• Louisville doesn't have a major airport, though CVG is only about 90 minutes away. Otherwise it's a fine choice. The city is charming and the surrounding countryside is lovely. There are lots of colleges both in town and out of town. St. Meinrad's--a Catholic seminary in Indiana--is glorious. Hanover College--halfway between Louisville and Cincinnati--is gorgeous.
• Pittsburgh has a big airport, and the region doesn't lack for colleges. Allegheny College in Meadville has a beautiful campus--but there are many others to choose from. The scenery is spectacular, and the airport offers many nonstop flights. But it's too far east to be easy for comrades driving from places like Minneapolis, Lincoln, St. Louis, or even Chicago.
• St. Louis is literally in the middle of the country, and has the best location. The airport is major. It's an easy drive from Louisville, Chicago, Lincoln, or even Minneapolis. There are plenty of colleges around.

Were I geography czar, I'd pick a college within 50 miles of Louisville. There are plenty to choose from.

In a campaign statement by Roger Calero, The Militant advocates for a two-state solution in Israel/Palestine. They distinguish themselves from their Trotskyist brethren in not being antisemitic--to their everlasting credit. They rightly describe Hamas as "the reactionary Islamist group that rules Gaza" --certainly true as far as it goes. I'd be less diplomatic and use the f- word banned from this blog.

Mr. Calero also criticizes the Israelis, writing

The spark for today’s crisis is the refusal of the Israeli government to halt attempts to evict 300 Palestinians from 13 households in Sheikh Jarrah, in East Jerusalem. Regardless of who “owns” the homes, Palestinians have lived in them since the 1950s.

While the Israeli government portrays this as a private landlord-tenant dispute, Palestinians rightly fear that allowing the evictions would open the floodgate to more, and to Israeli government refusal to ever accept East Jerusalem as the capital of a Palestinian state.

Fair enough--it is not antisemitic to note Israeli sins. But as The Militant points out, the Hamas leadership, by launching hundreds of militarily-useless rockets randomly aimed at Israeli cities and towns with the intention of killing civilians, obviously is not representing the best interests of their own people. Of course the Israeli army has to respond in force--any government would do that. For good or ill, the Israelis are acting rationally. Hamas is just a bunch of irrational, semi-suicidal crazies.

The other papers on my Beat are spouting the same-old the Jews are evil, imperialist, colonial-settler, apartheid-mongering, out to gratuitously murder Palestinian children for no reason other than that they enjoy it crap. I've responded many times--by now my answer is predictable. A good example is here.

My friend and former comrade Brian Williams pens a piece entitled Witch hunt against Trump, political rights continues. It's a rousing defense of former President Trump's civil liberties--so rousing in fact that I'm beginning to wonder if they're joining the Republican Party. If so, welcome aboard--but you'll have to cut back on the Cuba enthusiasm.

Mr. Williams even goes a half-step further than I would, defending Rudy Giuliani against the likely unjustified search warrant on his home. And they're probably right--the warrant was unjustified. But I'm mad at Mr. Giuliani right now, for a more incompetent legal team a presidential campaign has never had. Trump's electoral college loss in 2020 was due in significant part to the lawsuits that his lawyers never filed in a timely fashion. Mr. Giuliani only got around to it after the election was over, when it was too late.

I understand the injustice of it all, but I can't work up too much sympathy for Rudy Giuliani. Sorry.

Further Reading:

• Oberlin, 2018
• Oberlin, 2016
• The 47th SWP Convention

Elise Stefanik

Elise Stefanik is one of New York's own, and as such I'm partial to her. She represents my adopted state.

She grew up in suburban Albany, where her parents run a lumber supply business. She graduated from Harvard College, i.e., she's among the smartest people on the planet. Following graduation she went to work in the Bush White House doing foreign policy stuff. After Obama's election, she returned to Albany to help run her parents' business. When in 2014 Democrat Bill Owens decided not to run for re-election for Congress from New York's 21st district, she bought a house in Willsboro (Essex County) and ran for the seat. She won, and has won every re-election since by convincing margins. She was the youngest congressman (30) when first elected. She since got married and lives in Schuylerville (Saratoga County).

She's now running for House Republican Conference Chair to succeed the politically tarnished Liz Cheney. Her credentials are political backslapping, prodigious fund raising (I think she's among the dollar leaders), and, unlike Liz, her vocal and unwavering support for Trump during both his impeachment hearings. That has earned her strong support from DJT, and also from Steve Scalise, the House minority whip. Kevin McCarthy doesn't seem to like her very much, though he's decided not to oppose her.

But a lot of people (incl. the Club for Growth) have come out against, calling her too liberal. They do have a point:

• She is a squish on abortion. While she consistently opposes any taxpayer funding for the procedure, she's against making it illegal.
• She opposed Trump's withdrawal from the Paris Accords. She's trying to stake out middle ground in climate issues.
• She opposed Trump's troop withdrawal from Syria, and I assume she opposes our pending withdrawal from Afghanistan.
• Like the entire NY delegation, she opposed removing the SALT deduction.
• She opposed reallocating DoD funds to pay for the border wall (though I don't think this was because of opposition to the wall).
• She supported the LGBTQ rights bill.

In other words, say her detractors, she's no better than Liz Cheney.

Despite her support for the president, she clearly is not a Trump Republican. She isn't even a Reagan Republican. I think one has to go back to Calvin Coolidge to find a good analogue.

Calvin was born in Plymouth Center, Vermont, barely 75 miles from where Elise now lives. He attended college at Amherst in Northampton, MA. In those days Amherst was a legit good school for men, cultivating the rock-ribbed, Republican attitudes for which New Englanders were famous. Following college he apprenticed himself to a law firm (he was the last lawyer president not to have attended law school), and then lived in Northampton for the rest of his life, except for the time that he spent in the Governor's mansion in Boston or in the White House in DC. I'm informed by the excellent biography by Amity Shlaes.

Cal ran as vice-president under Warren Harding. The latter was a gregarious, happy, intelligent man whose campaign slogan was "Back to Normal." By that he meant undoing the near dictatorship of Woodrow Wilson, inspired by WWI. Wilson was as close to a fascist president as America has ever had, and surrounded himself by a coterie of like-minded people, e.g., Henry Ford and Charles Lindbergh. He curtailed both civil liberties and economic freedoms, and Harding's campaign promised to undo all of that. Harding won easily.

Unfortunately, Harding had one great flaw: he couldn't say NO. The result was people walked all over him and his administration became grossly corrupt, topped off by the Teapot Dome scandal. I think Harding would eventually have been impeached, but fortunately for the country he died first, and in 1923 the vastly more competent Silent Cal took over. Coolidge stuck to the same principles--shrinking government, counting every penny in the government fisc, and undoing all the civil liberties restrictions. The result was the roaring economy for which the '20s are famous.

So what is this Rock-Ribbed Republicanism so ably represented by Coolidge?

• Pragmatism. Rock-Ribbed Republicans do not go for Grand Eternal Schemes. Just solve today's problems as they come along.
• Moderation. No radical proposals. Put together viable coalitions.
• Thrift, bordering on asceticism, in both government and personal budgets.
• "City on a Hill." The USA is an exceptional country and therefore has exceptional responsibilities. We can't just abandon the rest of the world. We must live up to our high standards.
• High moral principles. For Coolidge that meant personal virtues; for modern politicians it's more likely to mean social justice virtues, such as LBGTQ rights,

Obviously, Elise isn't the same as Calvin Coolidge--we live in different times, and she's a different person, not least female. But if history doesn't repeat, it's easy to see the rhyme. She holds pragmatic, moderate positions--ones likely to piss off the extremes, such as Club for Growth. I'll bet she's a believer in balanced budgets--were she in charge we'd have no $2 trillion spending bills. She lives modestly, and there's no hint of corruption in her background.

Elise obviously has political ambitions beyond Congress. She aspires to statewide and/or national offices, and rumor has it she's considering a run for governor in 2022. I don't think the presidency is off her radar screen--she certainly has the smarts to pull it off. Let's consider her options.

• Her biggest hurdle for statewide office is not that she's a Republican, but rather that she is from Upstate. Her district is in the far northern reaches of New York, surrounding the Adirondack Park. Its population is nearly 60% rural. Her constituents are as far removed from the problems of New York City as it is possible to be. Needless to say, all postwar governors have built their political careers Downstate, in or near the City. The northernmost recent governor--George Pataki--hailed from Peekskill, in Westchester County. Beating a Downstate Democrat for statewide office will be a stretch, no matter how smart she is.
  
• On the other hand, her gender and pragmatic moderation make her the suburban woman's ideal candidate. Upstate notwithstanding, she's gonna poll well on Long Island and in Westchester County. Will that be enough to put her over the top? It will take a miracle, but it could happen.
• On the third hand, by his very brashness Trump was able to appeal to Black and (esp.) Hispanic voters. Elise's district, by contrast, is 90% white, and only 3% African-American. New England and Upstate New York is a part of the country uniquely inhospitable to Black folks. Cal never had to worry about that--but Elise does. Most New England politicians have the same problem, e.g., Elizabeth Warren and Bernie Sanders.

I think the Republican Party needs to be a bigger tent than narrow Trumpism, and a champion for Rock-Ribbed Republicanism is a good thing. My biggest beef with her is the climate change shtick, which I think is mostly fake news. But I trust her enough to believe she's not gonna do anything really stupid, like ban airplanes or prohibit fracking. I admire her for standing up for Trump during the impeachment witch hunts--Coolidge-style loyalty counts for something.

To win a nationwide contest she'll have to expand her coalition beyond New York/New England. That's a big hurdle--Yankees aren't popular in much of the country. Just ask Liz Warren or Bernie about that.

So even though I'm more in the Trump camp, I still support her bid for Conference Chair. I will happily vote for her against any Democrat, though I won't promise to support her in a primary. You Go, Girl!

Further Reading:

• Book Review: The Cult of the Smart
• Book Review: Donald J. Trump
• Boring Jeff Mackler Runs for President Again

Amazon Defeats the Union

The Retail, Wholesale and Department Store Union (RWDSU) tried to organize the Amazon warehouse workers in Bessemer, Alabama, and they failed. The vote was 1798 against and 738 for the union, from a total of 5698 workers.

I get my information from several articles at Left Voice (LV - here, here and here), from Socialist Resurgence (SR - pdf, see p. 4), from Vice (here) and from the Wall Street Journal (WSJ - here and here).

My correspondents give several reasons for the loss. First, they claim that Amazon cheated. There was an "illegal" USPS mailbox set up at the employees' front door to make it easier for them to mail in their ballots--but gave the impression that the company would check the ballots. Employees were required to attend meetings where the union was denigrated. The size of the bargaining unit was inflated to include supervisors and managers, and workers were subject to a barrage of text messages. The WSJ partially disputes some of these points, and I doubt--even if true--that any of this could have swung the election to such an overwhelming extent. If the workers really wanted a union, none of these tactics would've mattered.

Second, the loss is blamed on "business unionism." That is, the union tried to organize from the top down, and failed to do the grass roots work necessary to sway the vote. LV's reporter, Tatiana Cozzarelli, relates that, as a reporter, she found it nearly impossible to interview actual Amazon workers. They weren't involved in organizing activity at all. The union dismissed this, saying that they were keeping them under wraps to prevent retaliation. But to me (and apparently also to Ms. Cozzarelli) it was because the workers just weren't interested. The lopsided vote, along with the large number of non-voters, bears out this hypothesis.

Finally, the WSJ suggests that workers didn't think the union could do anything for them. They already get, as starting wages, $15/hour, which in Alabama is pretty good scratch. Amazon recently announced that, while keeping starting salaries the same, it was raising wages nationwide of many employees by as much as $3/hour. The workers didn't believe a union could improve on that, and then would take a cut off the top for union dues.

Amazon has a reputation (probably never entirely fair) of treating its employees like disposable commodities--as casual labor. If somebody quits, a new worker could replace them easily enough. But this is no longer true, for two reasons.

• There is a labor shortage in this country. Demand for labor is strong as we recover from the pandemic, and the supply of workers is diminishing for demographic reasons.
• Amazon is automating its warehouses. This means that it needs fewer employees, but they require higher skills. They need to work well around complicated and potentially dangerous machinery.

The result is Amazon has to pay higher wages, it has to provide some kind of career track, and it has to cover medical and retirement benefits. It's doing all those things. This is no longer a job for casual labor. Amazon can and will raise wages as much as needed to make sure it has the labor force it needs. If wage increases are what workers are after, they don't need a union--and the workers knows that.

So instead of promising wage increases, the union offered better working conditions. LV guest contributor Michael Goldfield describes it as "dignity."

And, there were not clear sets of public demands the union put forward, just dignity, etc. They should have said, if the union is certified, we will ask for $20 or so per hour, union safety and health committees, longer and more frequent breaks and lunch periods, less monitoring by computers and supervisors, no discussion of output and breaks without a union steward present, etc., demands that could have been developed at public meetings of workers, not to put in stone the examples that I have given.

Unfortunately, this dignity thing is expensive! And not just that--it destroys Amazon's entire business model. The company can't run a business paying employees to take longer breaks, extended lunch periods, and endless discussions with shop stewards.

But the real clinker is the "monitoring by computers and supervisors." Amazon has invested millions in equipment--robots if you will--and it's the robots who drive the speed of work. The investment is wasted if the employees purposely slow down the line. From the company's point of view this is complete non-starter. If the workers can't work, then Amazon will just pick up its robots and move them some place else.

The bargain is: you (worker) promise to arrive on time, every day, and to work as hard as you can during your shift. In return, we (Amazon) will pay you as much as you need to make that happen. For all that, Amazon is doing its best to improve working conditions within the constraint of running an efficient shop, e.g., by rotating workers from job to job to reduce repetitive motion problems.

What the union really asked for was the right to sabotage Amazon's business. The workers, by overwhelming margin, understood that for what it was, and rejected it. Because they realized that a secure future with a solid paycheck, health and retirement benefits will not be forthcoming if the business is destroyed.

This illustrates an important point: the incentives for the union differ from those of the employees. The workers benefit from higher pay and benefits, and reasonable attention to working conditions. 

The union, meanwhile, benefits most by increasing the total number of employees--for union dues increase more by employee number than by salary level. That's why they want to gum up the works as much as possible, for by minimizing worker productivity they maximize headcount. Apparently Amazon employees saw through this scam, too, and understood that their long-term future is not well served by sabotage.

I think the traditional union with contractual bargaining rights is a dead letter. It's very expensive, it leads to an unaccountable bureaucracy, and has incentives that don't correspond to the employees'. A strike to form a union benefited first and foremost the RDSWU--and that's why Ms. Cozzarelli couldn't find many workers involved in the effort.

More successful will be an informal employees' association, similar to what the West Virginia teachers had when they won their strike. An association travels light--it doesn't suffer under the legal and bureaucratic constraints of a legal union, it needs little or no staffing, doesn't need to pay dues to an "international," and is under no contractual or legal constraints.

My Trotskyist friends might call this suggestion-box unionism. And they'd be right in those cases where labor-management relations are good. But if there's any conflict, an association could make life very difficult for their employer. Recall that the West Virginia teachers' association actually called a strike--despite not being a union. Note that Amazon has a reputation for treating workers poorly--no union is necessary to make that case if the charge is true. The company would be forced to respond--as it is currently doing.

By voting down the RDSWU, the workers at Amazon's Bessemer warehouse showed they are much smarter than the college professors and grad students who write for Left Voice and Socialist Resurgence give them credit for.

Further Reading:

• Book Review: The Cult of the Smart
• "A Program to Unify the Exploited and Oppressed"
• Unionizing Hotels?

Peak Bitcoin?

Have we reached peak bitcoin?

Yes--I think we have, at least for this year.

I feel very strange saying that, seeing as I've been an enthusiastic bitcoin bull for many years. But now I'm bearish and have recently sold half my hoard. The reasons are various--some concern our current circumstances, but others reflect a changed understanding I have about the whole crypto phenomenon.

There is the old market saw: Buy the rumor. Sell the news. The idea is that the market goes up as rumors swirl, but by the time they actually become true the trend is already priced in. Then it's time to sell--or at least stop buying.

For months two big rumors have been making the rounds. First, big institutions have started buying bitcoin--most famously Tesla purchased $1.5 billion worth. Other companies are following suit, and many of the big money-center banks are jumping aboard. Options and other derivatives now widely available, and it's just a matter of time before an exchange-traded fund (ETF) is offered.

In other words, institutional involvement in bitcoin is no longer a rumor--it's a fact.

The second rumor--now news--was the prospective IPO of Coinbase. Coinbase is the largest crypto exchange in the United States--it's the place to go if you want to buy or sell bitcoin. Its going public represents a coming of age--the crypto debutante has arrived at the ball. And come of age it did--Coinbase is now traded on the NASDAQ and has a market cap of about $62 billion. Unlike many new public offerings, it's a profitable company.

The Coinbase reality has not quite lived up to the hype. Bitcoin rose to nearly $65,000 per coin leading up to the IPO--afterwards it fell to about $51K (now back up to $54K). Coinbase is priced in--the news will no longer move the market by much.

So the two big rumors that have been driving the bitcoin market for the past six months or so are now priced in. What's taking their place? Nothing that I can see. Yes, there are stories about progress in the DeFi space, or in Lightning applications. Have you heard of those? No? I didn't think so. They're just rumors of rumors--vaporware, if you will--without enough substance to push up the price.

That could change--and eventually I think it will. But for now there are few reasons to think bitcoin will go up.

A second reason I'm now bearish is precisely because of the aforementioned institutions. Institutional investors--banks, pension funds, insurance companies, hedge funds--behave differently from retail investors like you and me. We retail folks make one-directional bets--we buy the coin because we think the price is going up. If it goes down, we're pissed.

Institutions don't always do that--they make two-directional bets so that they can profit whether bitcoin goes up or down. They lose money when the price doesn't move much at all. How they do this is complicated--and since I'm not an institution I don't follow all the details--but it's got a lot to do with options and short-selling. The point is, they're not betting on bitcoin, instead they're betting on the volatility of bitcoin.

So bitcoin is wonderful for volatility investors--it goes up ten-fold one day, and crashes 80% the next--and institutions make money both on the way up, and then again on the way down. It's good work if you don't mind sitting in front of a computer screen 24/7. What they're really doing is arbitraging volatility--or oversimplifying it another way, they buy low and sell high.

The result is that bitcoin's low prices get higher, and the high prices get lower--the institutions squeeze the volatility out of the system. Thus bitcoin is now unlikely to crash by 80%--aren't you happy? But the other side of the bitcoin is also true--it's unlikely to go up by 1000%, or maybe not even 50%. In other words, bitcoin just becomes another boring investment, kind of like gold. OK, maybe not yet that boring, but it's getting there.

So I think reality has squashed the upside, and institutions have limited the downside. It's not gonna go up because nothing is driving the market, and it's not going down because institutions are buying on the dips. So there's little left for the one-directional, retail investor like me, and what is left is mostly on the down side. I think bitcoin is in a trading range, perhaps between $40K and $60K, and absent some big new rumor it will stay there until at least the New Year.

I finally came out as a bear after hearing a talk by Raoul Pal (paywalled) entitled The Exponential Age: Crypto's Fast and Furious Rise. As the title suggests, it's a breathless argument for the continued steep rise in cryptocurrencies, including bitcoin. We're all gonna become billionaires if we just hodl long enough! I thought it was way over the top, and it convinced me that the coin had topped out.

There is one argument for bitcoin that until a few weeks ago I subscribed to, but now I think it's wrong. The claim goes that bitcoin will eventually replace the dollar as the world's reserve currency. At first glance that seems reasonable, but on closer examination it completely falls apart.

Bitcoin will never become the world's reserve currency. Indeed, the very term is a misnomer.

There are two parts to this reserve currency business, and it's important to keep them straight. The first is the currency in which world trade is denominated--currently it is the US dollar, or more precisely, US dollars deposited in foreign banks known as eurodollars. If the only constraint on global trade was denominating it in the proper currency, then yes, bitcoin could solve all our problems. So could gold, or euros, or even toothpicks. The choice of currency is at some level arbitrary.

But that's not the essential feature of a reserve currency. A reserve currency has to finance global trade, not just denominate it. To oversimplify, some countries run trade surpluses while others run trade deficits. The surplus countries have to lend money to the deficit countries. In part this is just an accounting principle--the balance of payments has to balance.

Suppose Thailand ran a surplus in it's trade with Paraguay. Then for that bilateral trade to continue Thailand would have to invest in Paraguayan government bonds--along with all the other countries with which it ran a surplus. This is completely impractical. What happens instead is that Paraguay borrows money from a bank, while Thailand lends (deposits) money to that same bank--and the bank makes sure that all the numbers worldwide add up to a zero net balance of payments.

So what do you want in a bank? It has to be solvent--nobody wants to invest in a bankrupt bank. It has to be honest--that is the bank can't trade too much on its own account. And it has to be secure--no bank robber is gonna get away with the cash.

So who is the bank for today's global trade? It's the United States of America. We're definitely solvent--don't let anybody ever tell you otherwise. We're completely self-sufficient in food and fuel. Indeed, we have most of the natural resources we need. We have lots of people--the third largest in the world. Our population is younger than any other developed country.

We're (relatively) honest. For the most part we don't play favorites among nations, and when we do (e.g., impose sanctions) it's to widespread international complaint. We're honest in major part because international trade is a small percentage of our GDP--again, the smallest of any large nation. We're so self-sufficient we don't need to cheat.

And we're certainly secure--we have by a big margin the world's most powerful military. And our geography is a huge advantage--neither of our neighbors is a geopolitical rival. Nobody is capable of invading us. We have no territorial disputes with anybody.

Bitcoin is a computer program. The USA is a country. It's an apples & oranges comparison--and it should be obvious that bitcoin can't finance global trade any more than little green pieces of paper could do so by themselves without the full faith and credit of the USA. A so-called reserve currency isn't really a currency at all--it's really a very big bank. Only the USA is big enough to fit the bill.

I think crypto technology will dramatically change finance and property transactions, and so it will make things cheaper and better for everybody. Bitcoin is an indirect investment in that change, and as such it will gain value. That's why I'm still long-term bullish. But the rhetoric has gotten way out of hand, and expectations need to come down a few notches.

So I've sold half my stake--and I'm keeping the other half in case I'm wrong, and also for whatever long-term gains still remain. Though I think the big gains from crypto are probably behind us.

Further Reading:

• Book Review: Life After Google
• The Future of Bitcoin
• Let Them Eat Little Bits of Green Paper

Keith Leslie's International Report

Socialist Resurgence (SR) held a convention meeting on March 13th, and issued the usual, Trotskyist-style reports: a Political Report by Erwin Freed, and an International Report by Keith Leslie. The topic for this post is the latter.

Readers may recall Mr. Leslie from our discussion of the long and excellent monograph he wrote while he was still a member of Socialist Action, entitled China: A New Imperial Power (pdf). In those days he was known as "Comrade Keith," and while I credited him with considerable erudition, I faulted him for putting too much weight on the word imperialism--a mostly meaningless term.

Unfortunately, the same error leads him astray in the International Report. He is so convinced that the US is an "imperialist" power, and that China aspires to be an "imperialist" power that he completely misses the historical dynamic. So let's just ignore the word imperialism and try to make sense of things as they really are.

Here's a key graf:

The election of Joe Biden heralds a new effort by U.S. imperialism to halt or reverse the phenomenon of its declining global power. The Trump administration sought to reinvigorate U.S. standing through brash unilateralism, disruption of existing agreements, and trade wars waged on every front, including against both traditional allies and opponents in Europe and Asia. Meanwhile, it suffered a series of embarrassing reversals such as the failure of a U.S.-backed coup effort in Venezuela, a partial withdrawal of military forces from Syria, which provoked wide backlash in bourgeois circles, and a negotiated truce in the trade war with China.

The first sentence is partly true. Following WWII the US contributed about 50% of gdp; today the value is a bit over 25%. But this is only relative decline--in absolute terms the US economy has grown like gangbusters. It's just that the global economy has grown faster because it started from a much lower base. In particular, China went from zero to hero once it got over the whole Revolution-Mao-Tse-Tung-mass-murder thing.

The Trump administration, far from trying to "reinvigorate U.S. standing" intended precisely the opposite. His goal was isolationism--and for good reason. To wit:

1. The US depends less on foreign trade than any country on earth (for which data exists) besides Afghanistan and Sudan. Our total trade (imports plus exports) amount to only 26% of gdp. Even Cuba (at 27%) relies more on foreign trade than we do. By comparison, China is at 36%, Canada at 65%, and Germany at 88%. (The leader is Luxembourg at 382%, but for obvious reasons small countries have a greater dependence on foreign trade than big ones.)
2. Yet, despite our relative self-sufficiency, we have been financing global foreign trade through the Eurodollar system. This is known colloquially as "the dollar is the reserve currency." 
3. Owning the reserve currency has some big advantages (we can unilaterally sanction anybody we want), but it comes with a huge disadvantage--we have to run permanent and large trade deficits. That's because everybody else needs dollars in order to finance their trade, and the only way they can get dollars is to sell into the US market. Thus our imports are nearly unlimited, while our exports are capped because our trading partners are hoarding dollars to use as a global currency.

When the US contributed 50% of global gdp, financing the reserve currency was a tolerable expense, and the advantages outweighed the cost. But now the shoe is on the other foot--especially since the US is nearly self-sufficient, and including Canada and Mexico almost entirely self-sufficient. Trump decided (rightly in my opinion) to stop financing global trade, and as a corollary to repatriate manufacturing back to the United States (so we don't have to import the products). Hence all the tariffs on everybody.

If we're gonna withdraw from foreign trade, then there's no reason for us to be the world's policeman. Thanks to fracking, we no longer have much interest in the Persian Gulf--the US Navy has largely withdrawn from that venue. Likewise neither the Indian Ocean nor the Mediterranean are of much concern for us. There's no reason for us to have troops in either Afghanistan or Syria--or for that matter in Germany or the Korean peninsula. Trump--left to his own devices--would have withdrawn US troops from all those locales. Beyond North America and the Caribbean, only the North Atlantic, the North Pacific, and the South China Sea remain important trading routes for us.

Put bluntly, the United States has not been acting like an "imperialist" nation. Quite the opposite. Mr. Leslie is pounding square pegs into round holes.

Now let's look at it from China's perspective. (My view is heavily influenced by Peter Zeihan, whose books I reviewed here, here, and here.)

This is what Mr. Leslie has to say:

For its part, China is facing a new series of obstacles to its investments abroad. A number of stops along the Belt and Road Initiative have run into serious issues, with infrastructure falling behind schedule, large debt loads piling up, economic returns underachieving expectations, and a few messy defaults in progress. These experiences reflect the relatively poor investment locations that China has had access to as a newly emerging power. As Chinese capital licks its wounds from this first round of setbacks, it seems likely that the BRI will not succeed, at least in the immediate future, at shaping global economic and trade flows as hoped. China will be forced to increasingly compete with other powers to access more stable investment locations, or intensify its international political and military presence to better secure its existing ones.

Everything he says is very true--I don't disagree with a word of it. But he misses the elephant in the room, and that is--unlike the USA--China is NOT self-sufficient.

• China can't feed itself. According to Mr. Zeihan, their productivity per acre is declining because of a move toward mechanized farming. Recently they've had some bad luck--a major swine flu epidemic, and serious flooding in the Yangtze river basin. China has to buy food on the open market--and for this they need dollars. Mr. Zeihan suggests they're on the verge of famine. China has begun an anti food-waste campaign.
• China depends on foreign energy--especially from the Persian Gulf. While China possesses huge reserves of shale gas, the American fracking method won't work in their geology. So for the moment they have to import most of their energy--and for that they need dollars.

The bottom line is that China urgently needs dollars--and just at a time when the US is no longer providing them. They're trying to turn the RMB into a reserve currency, but this has failed--less than 2% of global trade is settled in RMB. More--China does not run huge trade deficits and has no intention of doing so--so there aren't enough RMB in global circulation to work as a reserve. No major food exporter--the US, Canada, Argentina, Brazil, Europe--is willing to accept RMB as payment.

So Mr. Leslie completely misreads the situation. Far from seeking to be an "imperialist" power (whatever that means), the country is desperately trying to keep the wolf from the door. Mr. Zeihan thinks they won't succeed--and I'm increasingly inclined to agree with him.

Conventional Wisdom has it that tariffs are a tax on consumers--prices will go up to reflect the cost of the tariff. But in the case of China this has proven false. They are so desperate for dollars that they're not willing to raise prices and so lose market share. They're simply eating the losses so that they can procure enough dollars to feed themselves.

The situation is that serious.

Further Reading:

• Book Review: Capitalism Alone
• China and the United States
• What Marxists Don't Understand About Economics

Socialist Action Believes American Children Should Freeze to Death

James Fortin, a journalist for Socialist Action (SA), pens an article entitled The Capitalist Criminality of (Un)Natural Fracked Gas. It is complete nonsense, buttressing SA's reputation as a pro-poverty grouplet. Indeed, the logical conclusion is that American houses should not be heated, and children should be allowed to freeze to death. It's the socialist way.

The rot starts at the top:

Exxon Mobil, fifty years ago, was the first to obscure and lie about the dangers that fossil fuels pose to the climate. But such criminal “traditions” carries on to this day. Pittsburgh EQT, the largest supplier of U.S. gas, pumping about 4 billion cubic feet a day, says on its website as of this writing: “Clean burning natural gas is an important part of our country’s energy mix, and we are proud to be a major producer of natural gas and even prouder to produce it in an environmentally responsible manner.”  Whatever the claim, the record on natural gas says otherwise, overwhelmingly.

If anybody is lying about fossil fuels, it's SA. Solar and wind (S&W) combined produce less than 4% of America's energy, while fossil fuels are responsible for 80% (nuclear, biofuels and hydroelectric make up most of the difference). It is literally impossible for S&W contribute much more than 10% of total electricity production. Germany has gone the farthest with this, with S&W comprising 11.9% of total electric power, but they have the costliest electricity in the world, at 38.1 cents/kwh. Compare that with Oklahoma's 8.8 cents/kwh.

Unlike what Mr. Fortin claims, cheap electricity does not just benefit Exxon Mobil. How many children would freeze to death if Mr. Fortin turned off gas supply? How many people would lose their jobs if factories had to pay double or triple their current electric bill?

Mr. Fortin admits that gas has ended most coal consumption in the US, and also that it is a much cleaner fuel. As a result, US CO2 emissions have declined steadily since 2005.

(Source)

He also points out that cheap gas made investment in S&W uneconomic. Of course--why invest in something that's more expensive, and therefore wastes more resources and is likely worse for the environment? Raw materials needed for S&W manufacture include silicon, copper, aluminum, cadmium, manganese, molybdenum, and zinc, along with rare earth metals. These are expensive to mine and leave a lot of heavy metal waste in their wake. It is not clear that S&W is a green technology.

While understating the potential costs of S&W, Mr. Fortin hugely exaggerates the dangers of fracking. He writes,

Fracking operators have avoided disclosure of the chemicals used in their extraction process. Numerous studies though have confirmed evidence of cancer-causing chemicals such as benzene, toluene, ethylbenzene, and xylene contaminating groundwater in the area of the wells, and populations in the vicinity of wells experiencing disproportionate occurrences of respiratory, nervous, and immune system problems. A wide assortment of lesser impacts such as headaches, eye irritation, and dizziness have been found as well.

Mr. Fortin provides no source for this data. While the precise components of fracking fluid are kept as trade secrets, the major components are well-known: sand and soap. There is this:

Fracking fluids fall within such cryptic catagories as carrier/basefluid, biocides, scale inhibitors, solvents, friction reducers, additives, corrosion inhibitors, and non-ionic surfactants – which is a catch-all category for dozens of fluids like Naphthenic Acidethoxylate or Poly (Oxy-1,2-Ethanediyl), Alpha-(4-Nonylphenyl)- Omega-Hydroxy-, Branched.

While it sounds scary, most of these are just "soap." Indeed, the term surfactant is a generalization on the "soap" idea. "Solvents" is likely just a synonym for water. According to The Frackers (my review here), the industry has become very sensitive about being green, and tries to source all fracking fluid ingredients from consumer products. It is highly unlikely that anything very toxic is found in fracking fluid--certainly not as hazardous as the waste from S&W manufacturing.

The chemicals that Mr. Fortin lists are very unlikely fracking ingredients and are almost certainly not used. Benzene is a strong carcinogen and is banned from most industrial processes (and from undergraduate chemistry laboratories). Mr. Fortin, as usual, provides no reference nor context for his data. Similarly, his list of ailments is so vague and so common that it is unlikely that they're caused by fracking.

He also writes,

In one Texas location a study performed between 2012 and 2015 demonstrated that babies born to mothers who lived within 5 miles of natural gas flaring during that time frame were 50 percent more likely to be premature. In other areas excessive nausea, fatigue and cancer have been attributed to exposure to radioactive materials extracted from the fracked bedrock together with the natural gas.

Natural gas flaring comes from oil wells, not gas wells. The purpose of a gas well is to capture the gas, not to burn it off. So this is a silly charge. He may be correct that gas wells bring radioactive substances to the surface, but this has to be a minor effect. Is there any evidence of higher radioactivity around gas wells? I doubt it, and again, Mr. Fortin cites no reference. Here as well, the list of ailments is too vague and other possible causes too widespread for anything to be attributed to gas wells.

I'll cite just one more paragraph, full of hyperbolic claims. My responses are in red.

The attack on public health is part and parcel of the assault on the environment. With the development of fracking technology came the exploitation of shale geological formations where 75 percent of U.S. gas now originates, now found throughout the continental U.S. Obviously any resource extraction has some environmental impact. But fracking is less dangerous than coal mining, than the traditional way of procuring gas, and likely less destructive than the manufacture of S&W technology. A poisonous mix of patently secret  chemicals and massive amounts of water, under enormous pressure, are blasted into the fissures created thousands of feet below the surface. The list of chemicals is not secret, and they're not especially poisonous. The deadly concoction – presently with each well consuming over 14.3 million gallons of water on average – is pumped out and stored for treatment and further use. Fracking in total uses about as much water as American golf courses. Much of the water comes from deep underground, way below well-water aquifers, and is too saline for human/agricultural consumption. That the water is reused is a benefit. The fracked gas now being produced releases into the atmosphere carbon dioxide, nitrous oxide, carbon monoxide and methane, a greenhouse gas 80 times more potent than carbon dioxide, alone. Methane is natural gas, and is the product the frackers wish to sell. They obviously try to prevent its escape into the atmosphere. Unlike CO2, methane decomposes quickly in air. Side effects (have that read “cost of doing business”) include earthquakes, billions of gallons of water poisoned beyond repair, and despoilment of grasslands and forest. The earthquakes are a problem, but increasingly understood and perhaps avoidable. As said, the water is already saline before the frackers use it, and "despoilment" is a lot less than open-pit mining, as is done to obtain copper and other metals for solar panels and electric cars.

Not only is Mr. Fortin against fracking, he's also against pipelines. Indeed, he's against any kind of industrial infrastructure at all. He apparently believes that electric power and home heating will appear miraculously from the tooth fairy and free unicorns.

The man literally believes that letting children freeze to death is a price worth paying in order to prevent "climate change." Mr. Fortin and SA have their priorities all mixed up. They're subscribe to pro-poverty politics.

Unlike Mr. Fortin, I'm against poverty, and I hope it can be eliminated.

Further Reading:

• Jeff Mackler on Trump, Trade and China
• The Pro-Poverty Crowd
• Louis Proyect and the Pro-Poverty Girl

What's Happening at Socialist Resurgence?

For those of you who don't follow the ins and outs of Trotskyist grouplets, Socialist Resurgence (SR) arose from a split in Socialist Action (SA), as I described here. Nominally, the split was over some abstruse (and irrelevant) issue concerning Syria. In reality, I think the break-up was over leadership. Specifically, SA's chief honcho (and failed presidential candidate) is the incompetent, 80 year old Jeff Mackler. He has been national secretary since SA was founded in 1983.

The problem extends way beyond SA. Gus Hall was national secretary of the CPUSA from 1959 until just before his death in 2000. James P. Cannon, founding leader of the Socialist Workers Party (SWP), led the organization from 1938 to 1953--though he retired long before he died in 1974. The SWP is now helmed by 81 year old Jack Barnes, who has served since 1972.

So Trotskyism has a problem--their leaders seem to think they own a birthright. There is no bench, no term limits, no succession planning. It's a conceptual flaw in the democratic centralism framework, and it's why the organizations always split after they grow beyond a certain size. I see no indication that SR has addressed--much less solved--this issue.

In commemoration of James Cannon's birthday, SR comrades Ernie Gotta and Erwin Freed pen companion articles about the relevance of his legacy for today. Mr. Gotta writes,

Cannon would likely conclude (I think this is obvious) that the revolutionary leadership of the working class in our present moment is in poor condition. He might suggest that our historic role in 2021 must be in reforging a revolutionary leadership in the U.S. with a deeply internationalist perspective. As we begin resolving the problems of revolutionary socialist leadership in the U.S. through fusions and regroupments, we’ll have to do the same internationally as well.

This is mostly Trotskyist gobbledygook, but a little meaning can be extracted. By "revolutionary leadership," he means the existence of a vanguard party. This is a disciplined organization that is possessed with the precisely correct political line so that it can steer the benighted working class around the dangerous shoals of reformism and ultraleftism until a workers' state beachhead can be established on the other side.

SR possesses at least a tinge of self-awareness in the realization that their organization--perhaps 50 comrades--is too small to qualify as a vanguard that's gonna overthrow the capitalist system. So they have connected with an umbrella group--the Revolutionary Socialist Network--consisting of leftover grouplets from the now defunct International Socialists (along with something derived from the Workers' League). It's a hodge-podge of sectarian grouplets that all believe in almost the same thing but for theological differences. And they can't agree on who their leaders should be--so I think unity is likely a lost cause.

Mr. Freed opines on the importance of the "revolutionary press."

The press is a central component of all Bolshevik organizations. As Cannon said, the purpose of the vanguard party “is deep-rooted in two of the weightiest realities of the 20th century: the actuality of the workers’ struggle for the conquest of power, and the necessity of creating a leadership capable of carrying it through to the end.” Cannon took seriously the paper’s role in realizing these actualities, which Lenin defined as “not merely a collective propagandist and collective agitator, [but also] collective organizer.”

The concept was likely unworkable even in Mr. Cannon's day, but today it is completely ridiculous. The idea is that a single publication (edited by Socialist Resurgence) will have so much credibility among the working class that they won't bother to read anything else. Perhaps that was vaguely realistic dream when each city had only one daily paper and two TV stations--a Revolutionary Press could conceivably gain status in that environment. But today--with 500 channels on TV, millions of channels on YouTube, along with blogs, Twitter, Facebook, Reddit, etc., etc.--the notion that the publication of some tiny grouplet like SR is gonna get heard above the noise is utterly absurd. Not gonna happen. Even the New York Times struggles in this environment, and nobody else has a chance.

Still, they're trying, and unlike their former comrades in SA, they're competent. Their webpage is as good as any of the grouplets--but you can see by the number comments (mostly zero) that their reach is not very far. SR consists predominately (as best I can tell) of graduate students--people whom Lenin would've called the intelligentsia, but whom I refer to as the lumpen proletariat. But they're educated, they write well, and they can organize things like a podcast.

I just listened to a podcast on Socialist Resurgence Radio, an interview between host Alex Coy and SR's resident economist, Osman Keshawarz (a grad student at UMass). I do not have a transcript, so apologies if I misremember something.

1. It's professionally done. The sound quality is excellent, the host is fluent and entertaining, and the guest is smart and well-informed. There is nothing to be ashamed of here. How very unlike the endlessly boring podcasts by Jeff Mackler, hacking his way through a monotone exposition of whatever (I never managed to sit through an entire episode).
2. Mr. Keshawarz, while competent, is still wrong. He thinks wealth accrues in a zero-sum competition between capitalists and workers, where the system is rigged so that workers inevitably lose. In truth, it's not zero-sum--the standard of living of everybody in capitalist societies has steadily increased since the dawn of the industrial revolution. This is because entrepreneurs, via a process of trial and error, try to find the most efficient uses possible for resources (labor, capital, raw materials). Accordingly, there is a continuous ratcheting up of productivity, leading to more wealth across the entire society.
3. Mr. Keshawarz is narrowly correct about the division of the producer surplus. That is, at any given time the producers (workers and capitalists) have to figure out how to divvy up the proceeds between them. But he completely ignores the consumer surplus, i.e., the benefit that accrues to consumers by reducing the costs of production as much as possible. It is the growth in the consumer surplus that drives the persistent increase in our standard of living across the centuries.
   

   

   (Source)

   
   
4. As mentioned, entrepreneurs seek to maximize social utility by a process of trial and error. The purpose of financial markets--in all their complexity--is to reallocate capital from inefficient enterprises to efficient, highly productive enterprises. Of course there is a lot more error than there are successes--most new ventures either fail, or end up as small businesses. Mr. Keshawarz apparently wants the 14,000 people employed by GameStop to keep their jobs forever, despite the fact that the company no longer makes any sense--the world has changed. Even he admits that those employees are today "ripping off their customers." It will be much better if that labor force is reemployed doing something else that is of greater value to consumers.

Anyway, SR is interesting. They write well. They know how to host a podcast. Whether or not they have the precisely correct revolutionary program is above my paygrade. But I am certain that their larger influence on American society and history will be zero.

Further Reading:

• Trotskyists on the Pandemic
• Socialist Resurgence Demands Steep Wage Cuts for Health Care Workers
• New Media: Socialist Action's Second Best Friend