The Rules of Capitalism

by Allister J. Marran

The philosophical theologian Paul Tillich once wrote, ‘The fundamental virtues in the ethics of a capitalist society are economic efficiency, developed to the utmost degree of ruthless activity.’

The rules of capitalism put profit over everything else. Everything else. Nothing is sacred or taboo.

It is a complex man-made set of rules, it does not exist in nature, and requires its servants to ignore common sense and its obvious dangers and pitfalls.

It is a giant pyramid scheme of investors and producers at the top, and consumers down below, that requires the base to constantly grow, which is why we now have eight billion plus people on a planet that has very limited resources. It demands infinite growth cycles when raw materials are in short and finite supply.

To ensure its ongoing sustainability, we have constantly to create hype about new products that nobody wanted or asked for in order to make another sale, with built in obsolescence so that we can sell a new model again tomorrow.

Marketing costs for products and services often far exceed R&D and cost-of-production budgets, in order to convince you to fill your house to a large degree with, call it ‘trinkets’, ‘junk’.

The over-mining, over-fishing, over-production, and mass pollution is not sustainable. That's simply a fact.

While every scientist on earth is predicting doom and gloom for future generations, the economist disagrees, and tells us to put out heads in the sand, and ignore the signs. Keep calm and keep spending.

There is another thing. In its appetite to compete, capitalist economics has now become the science of scarcity.  In order to compete, we need to optimize—and optimize everything we possibly can. We strive for less wastage, smaller margins of error, faster turnover.

This means that we sail ever closer to the wind. Let one thing go wrong—a computer hack, a bacterial contamination, a military invasion in a faraway place—and millions of people’s livelihoods and even lives may be imperilled.

As capitalism multiplies the dangers, so it multiplies our vulnerability.

This generation, our generation, the ones who were told by the scientists and experts to just look around and heed the obvious warnings, will be known as the idiots who could have stopped it but chose greed over life, profit over common sense.

We have no water where I live, because the rains haven't come for nearly 10 years. The world is cooling where it's hot, and heating up where it's cold. Smog sits over the cities, and poison infects our water sources. Landfills are full, and growing fuller every day. Our oceans are being fished to extinction, and good farming land is being paved over and cleared for urban development and new roads and highways.

Having stuff, and being able to read and write, and exploit a man-made system, does not make a person smart. If people can't see beyond their basic, immediate, satiating needs and zoom out to see the bigger picture of an exhausted ecosystem with resources heading to zero, and the only world we will ever have struggling to cope, then perhaps we were never that smart or evolved in the first place.

We do not have a divine right to rule this planet. We are just the next animal to over-evolve and get to the top of the food chain. It's an awesome responsibility which sees us on a perilous perch which can be toppled if we do not proceed with caution and humility.

Just ask the previous mantle holders, those fearsome and magnificent dinosaurs, how tenuous that grip on the top dog spot is.

We can’t ask them, of course. They are extinct.

Thought Experiment: How do you Price the Office Parlour Palm?

Posted by Martin Cohen

Here's one of a collection of short puzzles that might be considered an A-Z of the tricks of high finance: Not so much 'P is for Parlour Palm' though as 'C is for Cheap Collateral'.

This is the idea that if a bank agrees to loan the office parlour palm to the next door bank for a million dollars, and in return to rent their aspidistra for a million dollars, they both can update their asset sheets accordingly!

Now that's magic. But it was also the basis of the B for Bubble that brought down most of the world's banking system in 2008!

Of course, banks don't do silly stuff like buy each others' pot plants. But they do buy each others' packaged securities. And for many years, these packages became more and more complex, and thus more and more about buyer and seller agreeing on what mysterious qualities made the deal realistic. We know where that ended up: with thousands of dodgy loans to people who had no income or maybe had even died being bundled up and sold as top quality assets. Banks are plagued by problems with so-called ‘ghost’ collateral that disappears or is pledged to several lenders at the same time! After the crisis, the European Central Bank looked at the use of such devices and in a discussion paper wrote:

"the use of collateral is neither a sufficient nor a necessary condition for financial stability."*

The logicians could not have put it better!

---

https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2107.en.pdf

On Classism and Inequality

Posted by Keith Tidman

In various forms, and to many degrees, classism, meaning prejudice against people belonging to a particular social class, and social inequality are pervasive, pernicious, and persistent. And they are unbreakably bound: classism and inequality engage one another in a symbiotic, mutually reinforcing relationship. The two phenomena are therefore best explored together.

The casualties of classism, predominantly poorer, less educated, working-class people, not uncommonly internalise the discrimination, resenting and yet accepting censure at the same time. The victims may find it difficult to dismiss the opprobrium as unjust — they might, in resignation, wrongly see it as fitting to their station in life. The 19th-century German philosopher Friedrich Nietzsche attempted to rationalise why, dismissively stating that: 

 “The order of castes is merely the ratification of an order of nature.”

At the same time, class has appeared hard-wired across generations within families. For many, there are no or few available strategies to exit the cycle they’re caught up in. Measures of influence, power, wealth, job status, and knowledge — along with verdicts about decency, heritage, behaviours, habits, and who deserves what — are the filters through which stereotypes and biases pass. Identity, labels, entitlement, and rationalisation are among the tools instigators use to perpetuate classism. Their claim to merited privilege becomes the normative standard. That standard, however, can run into the immorality of social and economic inequality that’s arbitrary, often non-merit based, and stems from self-indulgence.

Appropriately, the 18th-century Scottish social philosopher Adam Smith pushed back against Nietzsche’s dismissiveness, laconically offering the optimistic, affirmative view that:

 “... the  difference of natural talents in different men is, in reality, much less than we are aware of.” 

A notion that all people, of all classes, can build on. 

Yet classism and inequality aren’t figments; they are real social constructs that bear concretely on citizens’ lives. Certain groups, believing their economic and sociopolitical advantages endow them with higher class rankings, enjoy yet another consequential privilege: they get to pull the levers on how government, the law, institutions, entitlements, and cultural foundations are designed and operate, and whom those levers favor. This instrumentalist perspective serves as a means to acquire additional benefits. The privileged are adept at influencing the running of nations and leveraging the hand they get to play. They project their influence on society in ways that primarily attend to self-interests, with modest resources to be shared among the rest.

The effect of those residual resources doesn’t make inequalities right, or more bearable or fixable; the effect is duplicitous. In a paradoxical way, the privileged exert a powerful, dominant grip, while dexterously advancing their interests. The exercise of power often happens veiled — though it needn’t always do so, as out-in-the-open brazenness is no barrier to political manipulation. An offshoot among the privileged is increased self-determination and sovereignty over choice — their own and their nation’s. Distrust of the financially oiled powerbrokers — among those who feel disenfranchised and denied fairness and opportunity — emboldens disunity and strident polarisation. Sometimes the outcome is the rise of extreme factions on both the left and right of politics, clashing over matters of both policy and heart-felt beliefs.

The underprivileged classes see that, in an increasingly and perhaps irresistibly and irreversibly globalised world, there’s merely a larger platform on which those already holding capital, and the levers of influence that accompany it, extend their gains all the more. The so-called common good isn’t always seen as an enlarging, sharable pot — where zero-sum resources go only so far and are seen to be acquired at the expense of other groups. The less-advantaged members of society might question whether equality and merit really matter, as opposed to an unfair 'legacy' grip on claims to influence, wealth, and power. 

Liberal economics promises the opportunity to rise among the ranks, though serving as more an aspirational, albeit elusive, brass ring. Identity — such as race, ethnicity, gender, national origin, language, and history — is integral. Identity serves as a means to decide how to share access to rights, choice, fairness, justice, goods, safety, and well-being — and ultimately recognition and legitimacy in the marketplace of ideas — according to the governing arrangement. Yet inequality endangers these benefits.

As an ideal, the observation by the 18th-century French philosopher Jean-Jacques Rousseau is still highly relevant to the debate — duplicated around much of the world — over class, inequality, the public good, sociopolitical advantage, and nations’ responsibility to rectify egregious imbalances:

“It is therefore one of the most important functions of government to prevent extreme inequality of fortunes; not by taking away wealth from its possessors, but by depriving all men of means to accumulate it; not by building hospitals for the poor, but by securing the citizens from becoming poor.”

Yet, the reality — whether in liberal democracies or in patriarchal autocracies, and most systems of governance and social philosophies in-between — has seldom worked out that way. Classism and inequality continue to march conspicuously in unison and without remedy, their rhythms bound irremediably together, each still used to justify and harden the shape of the other.

The Unelected Super-Rich Showing Brits to the Exit

Posted by Martin Cohen

On the 23rd of June 2016, the UK votes on whether or not to 'leave' the European Union and regain full control over its own affairs instead. At least, that's how the argument is put by those in favour of the move. 

For humdrum workers in industries that actually import or export products or materials to the EU, it only means higher tariffs and complicated paperwork. For bosses it means increased costs and uncertainty – and reduced investment. But for one group, it does indeed promise a splendid new dawn of 'freedom'. This group is the super-rich, and they work in financial services in the City of London.

For them the battle lines with the EU were drawn after the crash of 2007/8 which so nearly collapsed the entire Western banking system. The response, apart from pouring billions of taxpayer dollars, euros and yes, British pounds into the pockets of the injured speculators, was increased regulation.

And so the dirty secret, as I see it, of Brexit is the financial services industry jockeying for 'lighter touch' regulation. But this issue has not been given prominence - instead we have talk about conventional business, trade flows, workers rights and currency rates. A constant complaint has been that EU laws are made by people who are unelected – which is simply not true. The real levers of power in the EU remain firmly in the hands of the national governments. But no one is interested in how the EU really works, they just want to stop the 'migrants'.

The UK is obsessed with keeping out migrants. Indeed, waves of Somalis, Afghans, Iraqis and now Syrians are rather alarming – and certainly include a whole host of issues about conflicting social values. But what people mean by this is fellow Europeans. People who are better educated that the average Brit, and far more cultured, all they want to do is work hard and be useful members of the community. But many British resent or even hate them in just the same irrational way as uneducated whites hate people of colour. Because they're 'different'. This is why the British are such poor members of the Union, and if they vote themselves out of it in June, it will be this kind of nationalism that will have won it for 'Leave'.

But giving 'the great unwashed' – the lower classes – this power is not usually done. Indeed the UK is primarily voting in a rare referendum because for decades leading the (ruling) Conservative party has been impossible without assuaging the demands of a noisy Europhile group. Even now, if the UK Parliament had an unencumbered vote, they would not hesitate but to continue working within the EU. In this way, the unelected bosses of the hedge funds and spread-betting firms who have been backing the 'Leave' campaign  are driving the British where they want.

These are people like Richard Tice, co-chair of Leave; Crispin Odey, Peter Cruddas, a former Conservative Party Treasurer; Stuart Wheeler of IG; Michael Hintze, Conservative donor; not to entirely forget Edi Truell, Brexiter and again a major Conservative donor.

For these city speculators – 'value trashers', in City jargon – the possibility of the pound plummeting, of share prices collapsing, of market and political dislocations with dire and unpredictable consequences – all represent big opportunities and easy money.

Market disruption is excellent news for them, and so will any longer-term  post-Br exit dislocation.

And so, to sum up, the 'real story', as I see it, of Brexit is the worst elements of the financial services industry jockeying for 'lighter touch' regulation. It's the poachers tricking the rabbits into letting them be the gamekeepers.

The Unelected Super-Rich Showing Brits to the Exit

Posted by Martin Cohen

On the 23rd of June 2016, the UK votes on whether or not to 'leave' the European Union and regain full control over its own affairs instead. At least, that's how the argument is put by those in favour of the move. 

For humdrum workers in industries that actually import or export products or materials to the EU, it only means higher tariffs and complicated paperwork. For bosses it means increased costs and uncertainty – and reduced investment. But for one group, it does indeed promise a splendid new dawn of 'freedom'. This group is the super-rich, and they work in financial services in the City of London.

For them the battle lines with the EU were drawn after the crash of 2007/8 which so nearly collapsed the entire Western banking system. The response, apart from pouring billions of taxpayer dollars, euros and yes, British pounds into the pockets of the injured speculators, was increased regulation.

And so the dirty secret, as I see it, of Brexit is the financial services industry jockeying for 'lighter touch' regulation. But this issue has not been given prominence - instead we have talk about conventional business, trade flows, workers rights and currency rates. A constant complaint has been that EU laws are made by people who are unelected – which is simply not true. The real levers of power in the EU remain firmly in the hands of the national governments. But no one is interested in how the EU really works, they just want to stop the 'migrants'.

The UK is obsessed with keeping out migrants. Indeed, waves of Somalis, Afghans, Iraqis and now Syrians are rather alarming – and certainly include a whole host of issues about conflicting social values. But what people mean by this is fellow Europeans. People who are better educated that the average Brit, and far more cultured, all they want to do is work hard and be useful members of the community. But many British resent or even hate them in just the same irrational way as uneducated whites hate people of colour. Because they're 'different'. This is why the British are such poor members of the Union, and if they vote themselves out of it in June, it will be this kind of nationalism that will have won it for 'Leave'.

But giving 'the great unwashed' – the lower classes – this power is not usually done. Indeed the UK is primarily voting in a rare referendum because for decades leading the (ruling) Conservative party has been impossible without assuaging the demands of a noisy Europhile group. Even now, if the UK Parliament had an unencumbered vote, they would not hesitate but to continue working within the EU. In this way, the unelected bosses of the hedge funds and spread-betting firms who have been backing the 'Leave' campaign  are driving the British where they want.

These are people like Richard Tice, co-chair of Leave; Crispin Odey, Peter Cruddas, a former Conservative Party Treasurer; Stuart Wheeler of IG; Michael Hintze, Conservative donor; not to entirely forget Edi Truell, Brexiter and again a major Conservative donor.

For these city speculators – 'value trashers', in City jargon – the possibility of the pound plummeting, of share prices collapsing, of market and political dislocations with dire and unpredictable consequences – all represent big opportunities and easy money.

Market disruption is excellent news for them, and so will any longer-term  post-Br exit dislocation.

And so, to sum up, the 'real story', as I see it, of Brexit is the worst elements of the financial services industry jockeying for 'lighter touch' regulation. It's the poachers tricking the rabbits into letting them be the gamekeepers.

Brexit? What's really been going on in Brussels

Posted by Martin Cohen

What’s really been going on in Brussels? On the face of it, the UK Prime Minister, Mr Cameron, has taken Britain to the brink of rupture with the European Union over the issue of child support payments to EU citizens working in the UK, but whose children live at home. The arguments over this raged for two nights and two days, as Mr Cameron pounded the table and wagged his finger and threatened to pull the whole EU house down. Official European plans for a post-discussion English dinner, and then - even more sacrosanct! - English Breakfast were left in tatters.

And that means something serious is going on. Eventually the ‘migrants’ as apparently fellow EU workers are now to be called, lost the right to the full child support benefit, but retained the right to a miserly version phased on the cost of living in their home country.

You’d have to be either pretty stupid, or very ignorant, like the vast majority of English people itching to unshackle themselves from the world's largest free trade area, to think this issue really was what the best minds of the Tory party were concerned about.

What Would Happen If 3-D Printers Could 3-D Print Themselves?

Posted by Matthew Blakeway

“In the future, [the human species] will refuse to put themselves at the service of pirates. They will become what I call transhumans – who will give birth to a new order of abundance” ―Jacques Attali.

The French philosopher and economist Jacques Attali* predicted in the 1970s that the music industry would collapse. Within twenty years, he was basically proved right. If something is freely or cheaply replicable, then economic theory predicts that its value will trend towards zero. Ever since we were able to record our friends’ vinyl LPs on cassette, the ability of musicians to earn a living from recorded music was doomed – and so it turned out to be. Musicians today earn less and less from selling recorded music. I myself, as a writer, am acutely aware that it is getting harder to make a living, even in a world where people are reading more.

Now Attali is making the same predictions about manufactured goods. 3-D printing, while it still is a relatively new technology, opens the door to being able to scan a wide variety of objects into a 3-D printable file and e-mail it. Many manufactured products may become infinitely reproducible, their value trending towards zero. It has already been done, if only experimentally. We already have 3-D printed musical instruments, camera lenses, weapons – even 3-D printed refrigerators and cars. It isn’t inconceivable that we all will be able to upload 3-D printable files for such items which we can print at home and assemble Ikea-style. We could then tweet the link so that everybody else can have one.