Capitalism’s great claim to being a superior form of organization for production and distribution of goods and services is that it is best able to account for costs and benefits: It produces that for which people are willing and able to pay.I do not disagree with Welsh, but I think he is wrong to blame "capitalism." Not that capitalism is blameless in creating the problem of climate change. I mean wrong in the sense that maps of the world in the eighteenth and nineteenth centuries were wrong: they provide a basic idea of certain incontrovertible facts, such as the existence of continents, and oceans, and major rivers, but they simply do not provide all the real details you need to get to where you want to go safely and expeditiously. For example: What kind of capitalism are we talking about here? Industrial capitalism? Or financial / rentier capitalism? American capitalism? Or German or Japanese capitalism?
People weren’t willing and/or able to pay to stop climate change. In part, this is because actors with money were able to obfuscate both the science and the situation, spending millions on doing so, and buying the political process. In part, it is because climate change’s worst effects were expected to take place AFTER the death of the people who needed to act to stop it.
If you were 30 in 1980, you are 66 today. If you were 40, you are 76. If you were in the decision making class, overwhelmingly allocated to those who were 50+ in 1980, you are 86 today.
People who were in their prime and during their decision-making days, when we needed to act on climate change, were making a DEATH BET.
They bet they would be dead before the worst results of climate change happened.
They will win this bet.
This was a RATIONAL thing for them to do. I want to repeat that, because too many people think “rational=good.” It does not. It was rational for them to discount a future they would not see.
Because statistics and data show clearly that the United States is becoming less capital intense. It is becoming, in other words, less capitalistic. This is a symptom, as well as a function, of the U.S. economy coming to be dominated by rentiers and usurers, rather than producers. Remember Mitt Romney and Bain Capital? Private equity operations like that—and there are many—force companies to borrow money to pay out fees and dividends, actually de-capitalizing those victim companies. Is that capitalism? And note that such looted companies are under intense pressure, by the financiers looting them, to drive down labor costs as much as possible, perhaps by relocating offshore. And, to skirt environmental and safety regulations, Which of course contributes to the causes of climate change.
So, the discussion in the comments to Welsh's article is quite as informative and provocative as the article itself. Indeed, almost all of what follows I originally wrote as a comment to Welsh's article.
I am annoyed by most discussions of economic history that use broad strokes, such a "class struggle," because it tends to let the great malefactors of wealth off the hook. It allows people who should be judged monsters, based on the economic devastation and privation their ideas and actions have caused, to instead be regard as great achievers at the pinnacle of their professions. People like the late Joseph Flom of Skadden, Arps, Slate, Meagher & Flom, who was the top legal adviser in corporate mergers and acquisitions from the 1960s until he died in 2011. In my judgement, Flom is one of the people most responsible for facilitating the acquisition and looting of USA industry by the dirty money of organized crime, and enshrining the "shareholder value" doctrine that has decimated the USA economy. But instead of being reviled and condemned, Flom has his name emblazoned on a building and a chair of Law and Business at Harvard University.
The numbers even show that mergers and acquisitions do not add “shareholder value: a March 2003 paper by the National Bureau of Economic Research found that large companies engaged in mergers and acquisitions actually destroyed $226 billion of shareholder wealth over 20 years. So why do they keep doing it? Because the executives are getting rich. Look at Amazon for example: Amazon does not make a profit. But Jeff Bezos has become a multi-billionaire. Yes, he has extracted billions of dollars for himself founding and running a company loses money. Oh, sure, you can usually buy something cheaper on Amazon than anywhere else. But is that a fair price? Fair to who? How many independent book sellers and music stores and other retailers have been driven out of business by Amazon’s low prices? How many entrepreneurs who owned those independent retail stores have had their dreams and spirits shattered? In May 2014, study by the Brookings Institution concluded that “The American economy is less entrepreneurial now than at any point in the last three decades,” according to the Washington Post story. “Overall, new businesses creation (measured as the share of all businesses less than one year old) declined by about half from 1978 to 2011.”
The roles of Flom, Romney, Bezos, and others like them, goes to the heart of why I prefer Veblen’s analysis of political economy to that of Marx’s. Marx’s agent of change is a nebulous dialectical materialism that becomes less applicable to reality the closer you approach heights of Marxist purism. But Veblen posits human greed and status-seeking as the primary agents of change of the Leisure Class. And Veblen finds those agents at work in all societies, whatever the way they have organized their economic systems, from basic hunter-gatherer economies, to advanced industrial economies organized on supposedly socialist or communist principles. Moreover, Veblen never forecasts an end to the workings of human greed and status-seeking; whereas Marx, Lenin, and others believed that basic human nature would be changed under the dictatorship of the proletariat.
Charles Beard’s 1913 book, An Economic Interpretation of the Constitution of the United States, is a favorite among lefties who dismiss the American Revolution as merely one group of white oligarchs displacing another group. Beard himself was dismayed to find that most people ascribed his views to his being a closet marxist. In response, in 1922 Beard wrote The Economic Basis of Politics, in which he compares Marx and Lenin to Madison and Hamilton, and concludes that it was USA’s founders who provide a better paradigm of human behavior and how best to govern it. Because, contrary to the popular misconceptions cemented in the public mind by decades of conservative, libertarian, and neo-liberal propaganda and proselytizing, USA’s founders were quite clear that unbridled concentrations of economic wealth were as much a danger to republican self-government as a standing army. Just look at the conclusion of Madison’s The Federalist # 10, in which Madison explains that political factions most often arise from economic interests: the primary role of government is to REGULATE those interests so that their actions conform to the Constitutional mandate to promote the General Welfare.
Last month I published on Kindle an abridged and annotated edition of a 1937 book, The Power to Govern: The Constitution -- Then and Now, by Douglass Adair and Walton H. Hamilton. In my Introduction, I wrote,
Arguing that the new American republic was merely a continuation of European mercantilism obscures the historical breakthrough represented by the creation of that republic, and its explicit Constitutional mandate to promote the General Welfare. Failing to see how this breakthrough represents a culminating triumph of the political and scientific Enlightenment over irrational and arbitrary power—ecclesiastical as well as oligarchical and monarchical—is a major reason the left today is so confused, disjointed, and ineffective.
The words “mercantilist” and “mercantilism” are generally used whenever government powers are used to promote a state’s economic powers. By specifying in the Constitution that government powers are used to promote a state’s economic powers in promotion of the general welfare, the American republic made a sharp break from European mercantilism, in which the welfare of a sole monarch or small group of oligarchs was often conflated with the general welfare of a state or nation.I believe that if the Constitutional mandate to promote the General Welfare were still fully operative, we would have addressed the problem of climate change in the 1980s–or at least we would have acted more forcefully to end our dependence on fossil fuels when the concept of peak oil was fully articulated in the 1970s. A recent series on insideclimatenews.org revealed that beginning in the late 1970s, scientists at Exxon had identified and begun warning against the impact of burning fossil fuels on the environment, including effects on climate.
The crucial question I think we must ask, therefore, is: What were the agents of change that drove the USA away from its founding principles as a self-governing republic, to become an oligarchy? I think it is brilliant to pinpoint the date at which the USA devolves fully into oligarchy as the adoption of TARP (see Ian Welsh's article), but at the same time pinpointing such an exact date obscures the fact that there has been a long, identifiable process that brought about the transformation from republic to oligarchy. Ian alludes to this process by mentioning Reagan and Thatcher, but behind them were a number of agents actively promoting and building the conservative / libertarian / neo-liberal movements. Jane Mayer’s new book, Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right, has been in the news the past few weeks because it identifies and dissects those agents, though the journalists last week chose to focus on Mayer’s expose of the Koch brothers.
Philip Mirowski and Dieter Plehwe fully exposed the workings of the Mont Pelerin Society in their book of a few years ago, The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective. Mirowski and Plehwe miss two crucial facts, however. First, they mention but do not explore the fact that the general secretary of MPS was Max Thurn. Who is he? The scion of one the richest, most powerful, and most ruthless of Europe’s oligarchical families, Thurn und Taxis. Secondly, they fail to note one of the peculiar characteristics of the economic doctrines of conservative / libertarian / neo-liberal thinking: it explicitly attacks what makes the American republic so remarkably different than any government before it: the Constitutional mandate to promote the General Welfare. As von Hayek puts it starkly in the title of his best known screed, The Road to Serfdom, that mandate is , the “statist slippery slope” to dependence on government largesse and tyranny. In promoting the ideas of MPS, Hayek worked closely with Ludwig von Mises, who had close connections to another of Europe's odious oligarchical families: the Hapsburgs.
The conservatives and libertarians deployed by these old European oligarchs have a very slick operation: claiming to be adherents of the “true intent” of the Constitution, while attacking the most important concept in the Constitution, the promotion of the General Welfare. The Confederacy largely copied the USA Constitution, but, crucially, eliminated mention of the General Welfare from its Constitution. The libertarian von Mises Institute has a June 1992 article on its website by Randall G. Holcombe which explicitly states this was an important “improvement”:
But the differences in the documents, small as they are, are extremely important. The people who wrote the Southern Constitution had lived under the federal one. They knew its strengths, which they tried to copy, and its weaknesses, which they tried to eliminate.According to Wikipedia, Holcombe “is a Research Fellow at The Independent Institute, a Senior Fellow and member of the Research Advisory Council at The James Madison Institute, and past president of the Public Choice Society. From 2000 to 2006 he served on Governor Jeb Bush's Council of Economic Advisors.” (Emphasis mine.)
One grave weakness in the U.S. Constitution is the "general welfare" clause, which the Confederate Constitution eliminated….
The Southern drafters thought the general welfare clause was an open door for any type of government intervention. They were, of course, right.
Immediately following that clause in the Confederate Constitution is a clause that has no parallel in the U.S. Constitution. It affirms strong support for free trade and opposition to protectionism: "but no bounties shall be granted from the Treasury; nor shall any duties or taxes on importation from foreign nations be laid to promote or foster any branch of industry."
….The Confederate Constitution prevents Congress from appropriating money "for any internal improvement intended to facilitate commerce" except for improvement to facilitate waterway navigation. But "in all such cases, such duties shall be laid on the navigation facilitated thereby, as may be necessary to pay for the costs and expenses thereof..."
Now, Veblen provides a comprehensive paradigm for analyzing and understanding old world oligarchs. Marx does not: he dismisses them as feudalists being swept off the stage of world history by the inexorable yet nebulous historical forces of dialectical materialism. But in point of fact, the example of Max Thurn and the Mont Pelerin Society shows us that that old world oligarchs are anything but “swept away.” Or, look at who occupies the interlocking directorships of the largest European companies. Who controls, for example, the largest block of stock in Royal Dutch Shell? By golly, it’s the Orange-Nassaus, the still obscenely wealthy royal family of the Netherlands.
Lest you think inquiring into the old European oligarchy is conspiracy-mongering, consider the logical end of conservative / libertarian / neo-liberal philosophy: Hans-Hermann Hoppe’s open call for a return to monarchism in Democracy--The God That Failed: The Economics and Politics of Monarchy, Democracy, and Natural Order. Admittedly, Hoppe is an extreme outlier: he opposed MPS on the grounds that MPS was “socialist”!
Another important, overlooked fact concerns the role of organized crime. Historically, the oligarchical families of Europe have used criminal gangs intensively in “regulating” the political game. Particularly interesting is the role of the fortunes made in the Opium War and trade in transplanting organized crime to USA. Besides the loyalists from the American Revolution, this is the root of the USA-UK “special relationship.” Take the time to look at the board of HSBC, which used to be Hong Kong and Shanghai Bank. It really is a wake up call when you assemble these facts alongside Veblen’s analysis of how the Leisure Class uses deceit, fraud, and force to secure its economic, political, and social domination. Correct me if I’m wrong, but I don’t think Marx provides anything nearly as precise and specific as Veblen’s discussion of deceit, fraud, and force.
This consideration of the role of European oligarchs allows us to go beyond a focus on just USA capitalism. I assume that Welsh is condemning capitalism not just in the USA, but all around the world.
The role of organized crime is the great untold story of what happened to the USA economy beginning with the 1960s and 1970s mergers and acquisitions “booms” and especially the 1980s leveraged buy-out boom. A large part of my animus toward marxism comes from this period, when I found to my dismay and disgust that marxists and socialists had no interest in breaking through their ideological purity to consider, let alone actively oppose and organize against, the role of dirty money in buying control of, then looting, USA industry. They were not interested in learning the names of the banksters and financiers, such as Kohlberg, Kravis and Roberts, who were buying control of USA industrial companies; throwing thousands of workers out of their jobs; and raiding employees' pension funds. Particular names were not important--what was important was the general mass movement of the proletariat, an inchoate and spectral historical force not much different than Santa Claus, because it would deliver the dictatorship of the proletariat like a beautifully wrapped present under a Christmas tree.
Returning to Exxon and the story that Exxon scientists identified the negative effects of fossil fuels s early as the 1970s, I think a large part of the reason why Exxon dropped its efforts to address these problems was exactly because corporate raiders such as T. Boone Pickens, Jr. and Carl Icahn–be it noted, using large amounts of dirty money–had begun raiding the oil industry in the late 1970s and early 1980s. Phillips Petroleum and Texaco were two companies that were destroyed in this process. Before that, it’s worth noting, Bartlesville, Oklahoma, where Phillips was headquartered, was a center of progressive politics in that state, thanks to the very high concentration of very highly educated scientists, engineers, geologists, and others residing in the town.
Interestingly, it has been reported that Icahn had funding connections to the Japanese yakuza, so that Japanese capitalism is now brought into the picture along side USA and European capitalism. And, of course, the history of the Opium and slave wars and trade brings much of the rest of Asia into the picture as well.
Maybe someday, when these basic facts are more widely accepted, some scholar will investigate what links, if any, there were between oligarchical families, organized crime, and the academic scribblers who promoted the “shareholder value” thesis. I think a long, sordid story will emerge. But is just part of the larger story of how the USA was destroyed from within by suffocating the impulse to promote the General Welfare.