Missing from my Thankful List: Capitalism

by lizard

Luckily I didn’t need Obamacare talking points to survive Thanksgiving dinner. Instead, after the turkey and stuffing and green bean casserole, I talked with my dad about the rampant systemic greed of capitalism.

I asked my dad if he thought his fellow Christians would ever condemn the greed driving our capitalist system off the cliff, and he immediately mentioned Pope Francis who, if you haven’t heard, is a capitalism-bashing badass:

Pope Francis has attacked unfettered capitalism as “a new tyranny”, urging global leaders to fight poverty and growing inequality in the first major work he has authored alone as pontiff.

The 84-page document, known as an apostolic exhortation, amounted to an official platform for his papacy, building on views he has aired in sermons and remarks since he became the first non-European pontiff in 1,300 years in March.

In it, Francis went further than previous comments criticising the global economic system, attacking the “idolatry of money” and beseeching politicians to guarantee all citizens “dignified work, education and healthcare”.

He also called on rich people to share their wealth. “Just as the commandment ‘Thou shalt not kill’ sets a clear limit in order to safeguard the value of human life, today we also have to say ‘thou shalt not’ to an economy of exclusion and inequality. Such an economy kills,” Francis wrote in the document issued on Tuesday.

“How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?”

Borgias beware!

Or, if you listen to Rush, beware Marxism:

“I’ve gotta be very caref(ul). I have been numerous times to the Vatican. It wouldn’t exist without tons of money. But regardless, what this is — Somebody has either written this for him or gotten to him. This is just pure Marxism coming out of the mouth of the Pope. There’s no such (thing as) ‘unfettered capitalism.’ That doesn’t exist anywhere.”

After referencing Pope Francis, I replied with my obligatory observation, which I’ve made here, that Millennials are apparently warming to the concept of Socialism. Forbes called the findings of the study that broke this bombshell stunning.

To bolster my argument, I cited the fact an openly socialist candidate won a seat on Seattle’s City Council. Her name is Kshama Sawant, and she’s ready to shake things up.

I lived in Seattle a good portion of my life, and my Dad still has a lot of friends who work in the area, so I feel comfortable reporting, based exclusively on my Dad’s description of his Facebook activity, that those in his peer group think Sawant’s call for Boeing workers to take over the factories is sheer lunacy.

A newly elected Socialist city council member wants Boeing machinists to take possession of an airplane-building factory if the company decides to move out of state.

“The workers should take over the factories, and shut down Boeing’s profit-making machine,” Council member-elect Kshama Sawant told union supporters earlier this week, according to KIRO-TV.

Sawant claims Boeing executives are taking part in “economic terrorism” considering out-of-state locations to build the new 777X airliner after machinists rejected a contract that would have guaranteed jobs in Everett for eight years.

Yeah, that’s probably a bit much, and because I’m kinda paranoid, I now wonder if Sawant isn’t some caricature of Socialism designed to poison the waters. Or maybe that was just a hallucinatory vision from my turkeymeat-coma.

Getting into the guts of what is happening, economically, is still very murky terrain for me. One of my go-to informers continues to be Michael Whitney, and his latest piece—Christmas Time on Wall Street—is a must read.

There is one particular nugget that Whitney finds and quotes, and it comes from economist James K. Galbraith, some no-name dude who apparently used this thing called “history” to explain why the Fed’s printing-press policy was going to fail. The title of the article he wrote in 2009 is “No Return to Normal” and here’s the quote Whitney uses:

“Roosevelt employed Americans on a vast scale, bringing the unemployment rates down to levels that were tolerable, even before the war—from 25 percent in 1933 to below 10 percent in 1936… The New Deal rebuilt America physically, providing a foundation … from which the mobilization of World War II could be launched…..

“What did not recover, under Roosevelt, was the private banking system. Borrowing and lending—mortgages and home construction—contributed far less to the growth of output in the 1930s and ’40s than they had in the 1920s or would come to do after the war. If they had savings at all, people stayed in Treasuries, and despite huge deficits interest rates for federal debt remained near zero. The liquidity trap wasn’t overcome until the war ended….. the relaunching of private finance took twenty years, and the war besides.

“A brief reflection on this history and present circumstances drives a plain conclusion: the full restoration of private credit will take a long time. It will follow, not precede, the restoration of sound private household finances. There is no way the project of resurrecting the economy by stuffing the banks with cash will work. Effective policy can only work the other way around.”(“No Return to Normal: Why the economic crisis, and its solution, are bigger than you think” James K. Galbraith, Washington Monthly)

Whitney is using this quote to deflate the idea that the Fed’s exclusive focus on bailing out the private banking system has delivered on the credit-expansion promises used to sell this policy. Without government movement on minimum wage, at the very least, growth will be kept to the corporate juicing of stock buy-backs. Here’s Whitney:

Anyway, from the looks of things, it’s going to be hard to inflate much of a credit bubble in any of the usual sectors: Housing, autos, credit cards or student loans. In fact, I would expect to see less money poring into these areas rather than more.

But if credit doesn’t expand, then the only way the economy is going to grow is if wages go up, the government increases its deficits, or businesses boost capital investment. So, what’s it going to be?

Well, we know wages aren’t going up, so we can scratch that baby off the scorecard right away. We also know that budget-slasher, Obama, is not going to do an about-face and launch another round of fiscal stimulus anytime soon. He’s going to keep hacking away government spending and safetynet programs until his sorry term is up and they ship him back to Chicago to work on his memoirs.

That leaves business investment, right?

Oddly enough, there is some good news on that front, although the details may come as something of a surprise. You see, corporations have been borrowing more but NOT to invest in their businesses. Oh, no. In fact, according to Westpac’s Elliot Clarke:

“…business investment has decelerated from over 9% in June 2012 to little more than 2% in June 2013 ….. From the Fed’s flow of funds data, it is evident that nonfinancial firms have been adjusting their financial structure, funding stock buy backs and acquisitions with borrowed funds. This is not only a recent phenomenon; it has been seen throughout the recovery…

This recovery’s business investment narrative then looks to have been all about US corporates maximizing reported profits (both by making the financial structure more efficient and through acquisitions) as opposed to expanding capacity….” (“How effective has QE been at stimulating credit creation?, Elliot Clarke, Westpac)

How weird is that? So, the Fed’s goofy monetary policies have turned the corporations into hedge funds. They’re no longer building factories, piling up inventory, or buying tools and equipment. They’re simply taking advantage of the surge of liquidity the Fed is pumping into the financial markets to buy back their own stocks and juice the price. Or course, none of this leads to more demand for funds, a stronger credit expansion, more hiring, or a sustainable recovery. All it does is goose equities prices paving the way to bigger end-of-year bonuses, which seems to be the objective.

This is the hot mess of late-stage capitalism. It’s insane. We absolutely need to consider other models of human organization.

That said, let’s hold off on taking over factories. Lasting change is a long game. That may not get you headlines, but the real work is not about getting headlines.

It’s about truly understanding how deeply our crony capitalist system is failing.

  1. Crow

    What is the Federal Reserve if not socialist? We don’t live in a capitalist economy in the U.S. What you call “chrony capitalism” is socialism. Social Security/Disability, Medicare, Medicaid, SNAP, LIHEAP, TANF, the FHA, Section 8, WAP, RAD, EITC, WARN, TAA, free & subsidized school lunch program, SFMNP, Headstart, VFC, unemployment, crop insurance, disaster insurance, farm subsidies, SBA loans, RD loans, thousands of grants…and these are simply the Federal socialist programs, do I really need to continue with the state and local programs? I get it. You’re upset because this isn’t what you thought socialism would be. The misery has been spread wide, but what about the wealth and power? It’s highly concentrated among those with close ties to politicians, the government, lobbyists, and the like. Does America still have some remnants of a capitalist system? Sure, but they’re fading daily and it didn’t begin under Obama. It’s been going on for a long time. Socialism, like capitalism, involved a fallible human element that’s not going away, and it appears as though that’s the part you have a problem with.

    • Steve W

      Crow, I see you haven’t a clue as to what socialism is. That’s OK you are not alone.

      If you were ever in the military you have been a part of the largest socialist organization in the world.

      We had a military from the start. We had socialism from the start. It’s OK. It works pretty well lots of the time.

      For instance, it worked to free us from British rule.

      Thank socialism for that.

      You are welcome.

    • lizard19

      welfare and socialism are not interchangeable concepts. socialism refers to an economic system where the state owns the means of production. welfare is tax generated public aid.

      crony capitalism refers to the mutually beneficial relationships between the state and the private sector. you could also call it corporatism, and that is absolutely how our current economic system is organized.

      • Crow

        I thought your affinity for socialism referred to European style “socialism” rather than Soviet socialism. Wow. You’re even nuttier than I thought!

        If the government owned the means of production, there’s not a chance we’d even be communicating right now. You really think bureaucrats and “democracy” could have created my iPhone or the WordPress app you use to spread this garbage?

        You can’t determine truth by popular vote.

        • lizard19

          I’m providing some definitions about the terms we’re using, Crow, because you seemed confused, for example calling the Fed socialist, which it’s not because it’s not technically “owned” by the state. you seem to think anything the government does is socialist simply because it’s done by the government.

          I think the term crony capitalism more accurately describes our current political/economic system, and it’s that system which is breaking down for the vast majority of people as wealth continues to consolidate at the top while the class war is waged against the poor.

          as for the government not being able to create anything of value, how about that internet thing?

          • Crow

            Congratulations, you’ve named one innovative thing the government has created. Although to pretend like the internet was created for social good rather than war and destruction is quite laughable. Sure, the government created it…and then private industry turned it into a tool for social good, prosperity and innovation.

            I’d challenge you to name ten more society-changing innovations created by the government. We all know there are thousands upon thousands crafted by individuals and private organizations.

            Was the USSR not the proof you need that socialism doesn’t work? Is China not evident enough? What more do you need for you to realize that restoring fair, properly-regulated capitalism is far superior to tearing down the whole system and ensuring the vast distribution of poverty?

            • lizard19

              it wasn’t an innovation, but I’d argue the G.I. bill was society changing. also, all of NASA’s space toys, that stuff seems to be pretty innovative.

            • Ten “society-changing innovations”??? Are you so dense you don’t even have a basic grasp of history?

              Here, let Mariana Mazzucato inform you a little bit:

              Hmmm… I don’t know why it listed me as anonymous. this is JC.

            • Crow’s belabored point is ridiculous.

              Hi “Crow.” I-90. Where do you think it came from? Did your anti-regulation ideological buddies, the billionaire Koch brothers, give it to us?

              A great deal of modern medicine, from diagnostic machines to medications, have been developed by the government and given to the for-profit industries, like those funding PhRMA, from which to make exorbitant profits. Vaccines.

              Sewage treatment, which along with those advances in medication and vaccination programs, has probably doubled our life spans in just a couple hundred years.

              When Bush was engineering his 9/11 cover up (for being asleep at the wheel), part of his plan was to foment hysteria about Saddam’s supposed WMDs, “wagging the dog.”

              So to counter the non-existent threat, he ordered billions of doses of Cipro. The cost would have been almost $6 a pill, but with a lot of whining, corporate flag waving and fanfare, the price was dropped to a bit under $5. Meanwhile the government of India offered the drug to us at 11 cents a dose, which we declined.

              Buy American.

              Fire departments. Easy to forget if your house isn’t in the path of a forest fire.

              Air traffic control, advanced radar.

              Medicare, Medicaid, VA and Indian Health Services.

              National parks.

              Flood control, though Bush screwed that pooch before Katrina.

              The satellites that give us weather predictions and response, GPS locators and the internet connections that allow many of those I-phones to operate. (I was on a Coast Guard search and rescue shop near Bermuda in 1957 when Sputnik was launched, by the way. All it did was go “beep-beep,” but it launched the government effort that culminated in the moon landing not that many years later).

              Universal K-12 education and the public university system that produces most of that basic research.

              Will that do?

              If it doesn’t, please enumerate all the ways that sucking at the government teat has improved your own life.

              • mike

                Vent much. It’s BOOSH and teathuglicans.

                LIz is correct to rail agin crony capitalism, both teams engage in this , they both use the arguement that it’s good for a certain group of people, (yo, crony capitalist types red or blue).

                If you are actually trying to extoll the merits of our public education system nationwide you believe in unicorns and fairy dust. It’s not that bad here but when you look over the landscape your assertion is hilarious.

          • Crow

            By the way, spouting off the technicality that the Federal Reserve is not “owned” by the government isn’t helping anyone. Oh sure, it’s just an “independent” central bank that derives its power from Congress, but nobody really “owns” it. What a crock. It’s the Federal Government’s central bank.

  2. Already 13% used, the 21st Century is not easy to describe. Negri had Hardt offered an interesting view in 2000 called Empire. http://newleftreview.org/II/5/gopal-balakrishnan-hardt-and-negri-s-empire

  3. lizard19

    I’m going to respond down here, Crow.

    I’m glad you acknowledge there is a role for government to play in providing regulatory oversight of the private sector. too bad a consensus of Democrats and Republicans continue fighting against doing anything that may challenge the primacy of Wall Street.

    regulated capitalism is obviously preferable to crony capitalism, but continuing with capitalism means continuing with growth, and we are hitting ecological limits to growth. cancer eventually kills the host, ya know.

    there is a book that describes this phenomena quite well: The Lorax, by Dr. Seuss. check it out.

    • Crow

      Capitalism is hitting ecological limits? Take a trip to China, buddy. Oh the wonders of socialism…coal-saturated air, toxic rivers, electronic waste filling entire cities, and dangerous jobs paying pennies an hour. North Korea seems like a great place too. I really thought you were smarter than you are. You know how corrupt and inept our government is. You really thinking feeding this system MORE power is the answer? You’re a sick dude.

      • Big Swede

        In Lizard’s utopian society just what would you do with the die hard 25 million capitalists?

        • lizard19

          Swede, I’m sure you know the globalists are planning an even bigger holocaust than that. according to the 10 edicts etched in granite on the Georgia guide-stones, the world’s population is not to exceed 500,000,000. you do the math.

      • lizard19

        you thought I was smart? that was your first mistake ;)

        seriously though, you are trying to depict positions I have not taken; I think the smart kids call that a straw-man.

        expressing dissatisfaction with a reckless capitalist system, and pointing out where there is increasing interest in alternative systems, doesn’t mean I’m advocating for imposing the warped state socialism of China.

        in fact, if you read the post, I’m also expressing concern that Seattle’s new socialist council person is acting a bit over-the-top with her call for workers to take over the Boeing factory.

        and if you read Whitney’s article, you may understand why the economic doldrums will keep getting worse.

  4. Great stuff, Liz.

    I’m not an economist, but this is no surprise. I’ve seen predictors for 50 years and I’ve seen rapacious corporations up front and personal doing precisely this.

    I vigorously opposed my union’s pre-primary endorsement of Clinton because I knew Republicans would give him his pre-Monica wet dream…NAFTA.

    They gave him MSN with China too, which killed any possibility for the Mexican economy to revive, as those maquilidoras tanked as the business moved to the Far East.

    Chairman Mao would have been delighted. We have brought the world’s biggest economy to its knees with little help from China, and were going down this road even before the arrival of the Douchebaggers.

    Nancy Pelosi voted for NAFTA, for Keynes’ sake!

  5. Big Swede

    Having the Pope lecture me about my capitalistic ways when most of their property is tax exempt is a little condescending wouldn’t ya think?

    By the way here’s a small summary of the church’s wealth. I assume the bulk of the church’s contributions for their purchase came from capitalistic countries.

    What do we know about the church’s finances?

    1 The symbolic value, in euros, of the buildings in Vatican City. The church uses this number to indicate they are priceless and could never be sold. They include: the Apostolic Palace, the pope’s official residence; the Sistine Chapel, best known for murals by Botticelli and Michelangelo, who painted the ceiling and the famous Last Judgment behind the altar; and St. Peter’s Basilica, the largest church in the world erected over the supposed burial site of the apostle St. Peter, the first bishop of Rome.

    716,290 The amount of Church-owned land, in square kilometres, across the globe — an area slightly bigger than Alberta. Properties include Vatican embassies, churches, cathedrals, monasteries, some schools and convents.

    10 Reported investment (in billions of dollars) in foreign companies by the Institute of Religious Works (the Vatican bank) in the 1990s. It has holdings in such industries as banking, insurance, chemicals, steel, construction and real estate. It only invests in companies that operate according to Catholic morals. For example, it will not invest in a pharmaceutical company that produces birth control.

    86 In millions of dollars, Peter’s Pence in 2011. The Vatican’s most important source of ready cash is made up of donations from parishes across the globe. The money is spent on humanitarian projects, including disaster relief, medical aid, and help to the poor in developing nations, children and refugees.

    22.4 In millions of dollars, the approximate value of almost one metric tonne of gold owned by the Holy See in 2008.

    308 In millions of dollars, the Vatican’s revenue in 2011. It spent $326.4-million, but ended the year with a $27-million surplus.

    31 In millions of dollars, the amount seized from the Vatican bank by Italian authorities during an investigation into money laundering.

    2 In billions of dollars, the amount paid out as settlements by the church for sex-abuse allegations in the United States.

    National Post

  6. Greg Strandberg

    I like what the Pope’s saying. Now, Nostradamus did tell us this would be the last pope, and I can see why. He keeps talking like that and they’ll just kill him. Do you think think what happened in ’78 was natural causes?

    I do hope he just ends the church or at least tries. Well, I guess I should say papacy as people can believe what they want. Really it’s just a corrupt institution that many of its members act idolatrous toward.

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