Capitalism, the Absurd System: A View from the United States
by Robert W. McChesney and John Bellamy Foster
Monthly Review
...
The question we should ask is: What is society actually like when the veil of money is removed, and the real face of power is seen? Is society, stripped of its ideological cover and reduced to nakedness, one of equality—where four hundred individuals in the United States (the Forbes 400) own almost as much wealth as the bottom half of the population (150 million people)?5 Is this a rational society, when a trillion dollars each year is spent on the U.S. military?6 Can it be justified when the system, according to modern science, is pointing to mass extinction of the species, quite possibly humanity itself?
Capitalism’s main economic claim to being an indispensable system is that it promotes economic growth, the benefits of which ostensibly trickle down to the vast majority. Today, however, in the mature capitalist economies, economic growth has slowed to a crawl (though sufficient to threaten the environment). The gains of labor productivity flow upwards by myriad pumps, after which they are seldom allowed to trickle down. The result is a deeply unequal society and generalized economic stagnation, associated with a dearth of effective demand—countered only in part by financial bubbles, which eventually burst with disastrous effects. In the past five decades, the U.S. economy has grown, but at slower and slower rates. The stagnation of the last ten years resembles nothing so much as the stagnation of the 1930s (i.e., the Great Depression years). (See Chart One). The same is true to varying extents for all the other rich, mature, capitalist economies.
This long-term slowdown is associated with growing structural inequality. The economic surplus generated by society is amassed more and more at the top. Worker productivity is much greater than it was back in 1975, but very little of this increased wealth actually goes to workers themselves. As Chart Two demonstrates, the wages of U.S. manufacturing workers have fallen rapidly during the last three and a half decades as a share of value added in U.S. manufacturing. The median wage of all nonagricultural workers has stagnated over the same period.
In this Les Misérables economy, it is hardly surprising that the general quality of life for most people has not improved—despite the continuing growth of overall social wealth and the increase in human productive capacities. The Happy Planet Index, developed by the New Economics Foundation, examines how “happy” a country is—as measured by a combination of life expectancy and life satisfaction in relation to its ecological footprint. In the 2009 Happy Planet Index, the United States—the very model of mature capitalism—ranked a dismal 114 out of 143 included countries.7 The “greed is good,” “shop ‘til you drop,” “whoever dies with the most toys wins” ethos that marks free market capitalism is not conducive to genuine human happiness. What it generates in ever-increasing levels—even among its more successful strata—is stress, heart disease, loneliness, depression, and the waste of human potential. “This crippling of individuals I consider the worst evil of capitalism,” Albert Einstein wrote in “Why Socialism?” in volume 1, number 1 of Monthly Review (May 1949).
A lot of this damage to individuals has to do with our lack of concern for collective needs. The physical infrastructure of the United States—the built environment of our cities, roads, railroads, bridges, public water and electrical systems, parks, etc.—is crumbling. The per capita ecological footprint of the United States far exceeds what can be sustained at a global level, contributing to rapid degradation of the earth system. Public education throughout the country is in marked decline. Much of what we produce is nonessential, indeed waste, including wasted labor. The United States has fully lived up to John Kenneth Galbraith’s observation half a century ago that modern U.S. capitalism generates “private wealth” and “public squalor.”8
Massive amounts of labor and resources go toward lethal military purposes, while an increasing amount of human labor and productive capacity lies idle. By virtually all accounts, economic stagnation will be the order of the day for at least a decade, maybe decades, to come. In March 2010, USA Today asked legendary financier Warren Buffett, the second richest individual in the United States: “What if…the U.S. economy goes into a prolonged period of stagnation and weakness, creating a Japanese-like lost decade or two?” Buffett answered: “As long as it isn’t a century, I’m OK.”9
Young Americans are entering an economy in which they have little or no creative or meaningful role to play. It is far truer today than when Paul Goodman wrote his 1960 classic, Growing Up Absurd, that there are “fewer jobs that are necessary and unquestionably useful; that require energy and draw on some of one’s best capacities; and that can be done keeping one’s honor and dignity.” Today even the most wasteful, alienating, and degrading jobs are difficult to get, with growing unemployment, and even faster growing underemployment.10
We face the situation in the next generation of the continued development of tremendous labor-saving technologies, many that are revolutionary in impact. Yet, instead of leading to a higher quality of life for all or most people, these new productive technologies will be deployed primarily to maximize the profits of those atop the system. They will appear, in some respects, to be the enemy of the workers and communities they help to displace. Likewise, in the coming generation, large swaths of our countryside will likely be torn up and developed for tacky residential projects and gated communities, while a good part of our cities and inner-ring suburbs rot. All of this, we are told, is basically unavoidable, the price we pay for having the privilege of living in a free society.
No, it isn’t. It is the price we pay for living in a capitalist society. It is a system in which the “need” of the wealthy to make profit drives everything else, and it is increasingly leading to irrational and disastrous results.
To Read the Entire Essay
Showing posts with label John Bellamy Foster. Show all posts
Showing posts with label John Bellamy Foster. Show all posts
Sunday, June 06, 2010
Tuesday, May 25, 2010
John Bellamy Foster and Hannah Holleman: The Financial Elite
(I just got a subscription to Monthly Review and articles like this is why I support their efforts)
The Financial Power Elite
John Bellamy Foster and Hannah Holleman
Monthly Review Press
Only twice before in the last century—after the 1907 Bank Panic and following the 1929 Stock Market Crash—has outrage directed at U.S. financial elites reached today’s level, in the wake of the Great Financial Crisis of 2007-2009. A Time magazine poll in late October 2009 revealed that 71 percent of the public believed that limits should be imposed on the compensation of Wall Street executives; 67 percent wanted the government to force executive pay cuts on Wall Street firms that received federal bailout money; and 58 percent agreed that Wall Street exerted too much influence over government economic recovery policy.2
In January 2009 President Obama capitalized on the growing anger against financial interests by calling exorbitant bank bonuses subsidized by taxpayer bailouts “shameful,” and threatening new regulations. Journalist Matt Taibbi opened his July 2009 Rolling Stone article with: “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Former chief economist of the International Monetary Fund, Simon Johnson, published an article in the May 2009 Atlantic entitled “The Quiet Coup,” decrying the takeover by the “American financial oligarchy” of strategic positions within the federal government that give “the financial sector a veto over public policy.”3
The Financial Crisis Inquiry Commission, established by Washington in 2009, was charged with examining “the causes, domestic and global, of the current financial and economic crisis in the United States.” Its chairman, Phil Angelides, compared its task to that of the Pecora hearings in the 1930s, which exposed Wall Street’s speculative excesses and malfeasance. The first hearings in January 2010 began with the CEOs of some of the largest U.S. banks: Bank of America, JPMorgan Chase, Goldman Sachs, and Morgan Stanley.4
Meanwhile, the federal government has continued its program of salvaging the banks by funneling trillions of dollars in their direction through capital infusions, loan guarantees, subsidies, purchases of toxic waste, etc. This is a time of record bank failures, but also one of rapid financial concentration, as the already “too big to fail firms” at the apex of the financial system are becoming still bigger.
All of this raises the issue of an emerging financial power elite. Has the power of financial interests in U.S. society increased? Has Wall Street’s growing clout affected the U.S. state itself? How is this connected to the present crisis? We will argue that the financialization of U.S. capitalism over the last four decades has been accompanied by a dramatic and probably long-lasting shift in the location of the capitalist class, a growing proportion of which now derives its wealth from finance as opposed to production. This growing dominance of finance can be seen today in the inner corridors of state power.
The Money Trust
Anger over the existence of a “money trust” ruling the U.S. economy reached vast proportions at the end of the nineteenth century and the beginning of the twentieth. This was the time when investment bankers midwifed the birth of industrial behemoths, launching the new era of monopoly capital. In return, the investment banks obtained what the Austrian Marxist economist Rudolf Hiferding, in his great work, Financial Capital (1910), called “promoter’s profits.”5 Hilferding and the radical economist and sociologist Thorstein Veblen in the United States were the two greatest theorists of the rise of the new age of monopoly capital and financial control. Veblen declared that “the investment bankers collectively are the community custodians of absentee ownership at large, the general staff in charge of the pursuit of business….[T]he banking-houses which have engaged in this enterprise have come in for an effectual controlling interest in the corporations whose financial affairs they administer.”6 In the prototypical merger of the period, the creation in 1901 of the U.S. Steel Corporation, the syndicate of underwriters that J.P. Morgan and Co. put together to float the stock, received 1.3 million shares and over $60 million in commissions, of which J.P. Morgan and Co. got $12 million.7
The 1907 Bank Panic, during which J.P. Morgan himself intervened in the absence of a central bank to stabilize the financial sector, led to the creation in 1913 of the Federal Reserve System, aimed at providing banks with liquidity in a crisis. But it also led to charges, first issued in 1911 by Congressman Charles A. Lindbergh (father of the famous flier), of a “money trust” dominating U.S. finance and industry. Woodrow Wilson, then governor of New Jersey, declared: “The great monopoly in this country is the money monopoly.”
To Read the Rest of the Essay
The Financial Power Elite
John Bellamy Foster and Hannah Holleman
Monthly Review Press
You mean to tell me that the success of the [economic] program and my reelection hinges on the Federal Reserve and a bunch of fucking bond traders?
—President Bill Clinton
Only twice before in the last century—after the 1907 Bank Panic and following the 1929 Stock Market Crash—has outrage directed at U.S. financial elites reached today’s level, in the wake of the Great Financial Crisis of 2007-2009. A Time magazine poll in late October 2009 revealed that 71 percent of the public believed that limits should be imposed on the compensation of Wall Street executives; 67 percent wanted the government to force executive pay cuts on Wall Street firms that received federal bailout money; and 58 percent agreed that Wall Street exerted too much influence over government economic recovery policy.2
In January 2009 President Obama capitalized on the growing anger against financial interests by calling exorbitant bank bonuses subsidized by taxpayer bailouts “shameful,” and threatening new regulations. Journalist Matt Taibbi opened his July 2009 Rolling Stone article with: “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Former chief economist of the International Monetary Fund, Simon Johnson, published an article in the May 2009 Atlantic entitled “The Quiet Coup,” decrying the takeover by the “American financial oligarchy” of strategic positions within the federal government that give “the financial sector a veto over public policy.”3
The Financial Crisis Inquiry Commission, established by Washington in 2009, was charged with examining “the causes, domestic and global, of the current financial and economic crisis in the United States.” Its chairman, Phil Angelides, compared its task to that of the Pecora hearings in the 1930s, which exposed Wall Street’s speculative excesses and malfeasance. The first hearings in January 2010 began with the CEOs of some of the largest U.S. banks: Bank of America, JPMorgan Chase, Goldman Sachs, and Morgan Stanley.4
Meanwhile, the federal government has continued its program of salvaging the banks by funneling trillions of dollars in their direction through capital infusions, loan guarantees, subsidies, purchases of toxic waste, etc. This is a time of record bank failures, but also one of rapid financial concentration, as the already “too big to fail firms” at the apex of the financial system are becoming still bigger.
All of this raises the issue of an emerging financial power elite. Has the power of financial interests in U.S. society increased? Has Wall Street’s growing clout affected the U.S. state itself? How is this connected to the present crisis? We will argue that the financialization of U.S. capitalism over the last four decades has been accompanied by a dramatic and probably long-lasting shift in the location of the capitalist class, a growing proportion of which now derives its wealth from finance as opposed to production. This growing dominance of finance can be seen today in the inner corridors of state power.
The Money Trust
Anger over the existence of a “money trust” ruling the U.S. economy reached vast proportions at the end of the nineteenth century and the beginning of the twentieth. This was the time when investment bankers midwifed the birth of industrial behemoths, launching the new era of monopoly capital. In return, the investment banks obtained what the Austrian Marxist economist Rudolf Hiferding, in his great work, Financial Capital (1910), called “promoter’s profits.”5 Hilferding and the radical economist and sociologist Thorstein Veblen in the United States were the two greatest theorists of the rise of the new age of monopoly capital and financial control. Veblen declared that “the investment bankers collectively are the community custodians of absentee ownership at large, the general staff in charge of the pursuit of business….[T]he banking-houses which have engaged in this enterprise have come in for an effectual controlling interest in the corporations whose financial affairs they administer.”6 In the prototypical merger of the period, the creation in 1901 of the U.S. Steel Corporation, the syndicate of underwriters that J.P. Morgan and Co. put together to float the stock, received 1.3 million shares and over $60 million in commissions, of which J.P. Morgan and Co. got $12 million.7
The 1907 Bank Panic, during which J.P. Morgan himself intervened in the absence of a central bank to stabilize the financial sector, led to the creation in 1913 of the Federal Reserve System, aimed at providing banks with liquidity in a crisis. But it also led to charges, first issued in 1911 by Congressman Charles A. Lindbergh (father of the famous flier), of a “money trust” dominating U.S. finance and industry. Woodrow Wilson, then governor of New Jersey, declared: “The great monopoly in this country is the money monopoly.”
To Read the Rest of the Essay
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