Both articles suffer from the same fundamental flaw: they assume that capitalism is in a crisis.
Obviously that's completely wrong. The global economy is running strong, with no recession on the immediate horizon.
Mr. Evans writes,
For decades, as capitalist profit rates have tended to decline, the bosses have been plowing their cash into speculation — or hoarding — rather than investing in capacity-expanding plant equipment and employment.There's a contradiction here: where does the cash hoard come from if profits are declining? Putting more cash into "speculation" requires cash to begin with, which can only come from profits and/or wages.
As I've said many times, "profit rates" is an ambiguous concept, and in no meaningful way can they "tend to decline." They're certainly not declining now! Still, Mr. Evans is correct after a fashion--there are relatively few opportunities for investment today and therefore there is a savings glut (Larry Summer's term). This leads to low interest rates and a corresponding rise in asset prices, including bitcoin.
But this has nothing to do with a crisis in capitalism. There are at least two other explanations.
1) Demographics. The American population is barely growing at all, and arguably our labor force is shrinking. Fewer workers require less capital, and thus because of continued high profits there is more spare cash left over.
2) Technology. More industries are being computerized. Moving parts (and labor) are being replaced by computer chips--e.g., carburetors supplanted by electronic fuel injection. Computer chips are cheap, which means much less capital is required.
To buttress his case Mr. Evans cites that financial whiz kid, Jack Barnes, specifically a piece written in 2002. Mr. Barnes
explains speculative bubbles are “a manifestation of what Marx called commodity fetishism, the illusion that commodities and capital somehow have a social meaning in their own right, independent of the social labor that went into creating them, a life of their own.”I think that's gibberish. It sounds like Mr. Barnes advocates a return to a barter economy.
The value of any object is a collective hallucination. A dollar is worth a donut only if a donut is worth a dollar. Both Dunkin' and I imagine that to be true, and hence a market is made in donuts. If they don't want to sell me a donut at that price, or if I don't want to buy one, then donuts will no longer "have a social meaning in their own right," whatever that means.
A Loonie coin is a token, sustained by collective hallucination. However, only Canadians share that imagery. Bring Loonies south of the border and you'll find they won't buy you a donut or anything else. We don't hallucinate about Loonies down here, and per Mr. Barnes we have a better grasp on reality. Does that mean Canadians don't "have a social meaning in their own right?"
Bitcoin is also a token. It has value as long as people believe it has value. There are reasons for people to hallucinate that, which I detailed in my previous post. I do not believe bitcoin's value will go to zero.
By the way, today bitcoin touched $10,000, or nearly a 50% drop from its all-time high. If bitcoin was in a bubble, then it certainly isn't in one now.
Here is Mr. Williams' lede:
While the big-business media has boasted that retail sales were up during the 2017 holiday season — 3.8 percent higher than the year before — the crisis of the bosses in the retail industry continues to unfold as growing numbers of U.S. retail and apparel companies face increasing debt, bankruptcy and competition.On the one hand he acknowledges consumers are doing well--we got 3.8% more stuff than we got last year. Hurray!
Yet the retail industry is supposedly in crisis, suffocating under debt, bankruptcy and competition.
Later in the article he cites leveraged buyouts as a major culprit, by which speculators took companies private by foisting on them enormous debts. These capitalists, he tells us, made short-term gains while somehow (mysteriously) escaping the long-term losses.
There are two ways of financing any business: debt and/or equity. How capital is structured makes a big difference to the investor, but on net it makes little difference to the firm. The Coase Theorem says that financing via debt or equity or some combination won't matter at all except insofar as transaction costs are different.
That is, an insolvent firm will go bankrupt no matter how it's financed. Either the company will default on its bonds, or the share price will head towards zero. The net outcome is precisely the same. Conversely, a successful company will have a growing share price, or be able to float new bonds at very favorable rates.
So the problems in the retail industry have nothing to do with leveraged buyouts--they'd be just as much in trouble if they relied on selling shares. Toys "R" Us went bankrupt only because technology rendered the company's business model obsolete. A big-box toy store can't compete against Walmart on price, nor against Amazon on selection and convenience, nor with the corner Ma & Pa store on sales of high-end, bespoke items for a niche market.
When was the last time Mr. Williams has ever been to a Toys "R" Us store? I'll hazard never. Even I, when my children were still children, never went to Toys "R" Us. So why should a whole bunch of employees sit around all day waiting for no customers to walk through the door? It is surely much better--for them and for society alike--if their labor is invested in something useful. Or, in Mr. Barnes' precious phrase, doing something that has "a social meaning in [its] own right."
This is the problem with socialists: they're Luddites. No progress is allowed. However novel and revolutionary Sears, Roebuck or Toys "R" Us may have been in the past, we now need to keep them on no matter what--frozen in amber.
Let the companies go bankrupt. So what of the bondholders lose their fortune. Surely Mr. Williams doesn't feel sorry for them--and neither do I. In today's economy (4.1% unemployment) the former employees of those companies will be instantly reemployed more productively. The workers will make out just fine.
The big winner will be consumers--people with children who like to buy quality toys at cheap prices and maximum convenience.
Further Reading:
No comments:
Post a Comment