Tuesday, November 18, 2008

How to Save Capitalism - in case we want to

I’ve just been reading Harper’s Magazine –which I don’t usually do. But this month there are a number of articles on “How to Save Capitalism” – which I don’t normally advocate, either. But it seemed pertinent, and there are quite a few interesting ideas.

Joseph Stiglitz (“The Three Trillion Dollar War”), who I think some of our friends were praying would be Obama’s Treasury Secretary, has an almost impenetrable article on Wall Street and tulip mania in the 1600s – arguing that the long-neglected purpose of financial institutions is to *manage* risk, not just auction it off for fun and profit. That sounds hard to argue with. He has ideas about fixing this, like requiring the troublemakers to invest their own money with ours, but he doesn’t seem to me to get at the larger picture we’re grappling with at the moment.

(From the revised job loss figures for late summer (even more people kicked out of work even before this fall than they told us, which was already a lot), as if we didn’t already know it, that the recession was locked in well before the Fannie & Freddie extravanganza. Well over a million jobs lost this year – job losses may hit 300,000 a month by the end of December. Merry Christmas!)

Similarly Barry Lynn (“The Rise and Coming Fall of Global Capitalism”), who advocates abolishing stock options or at least reforming them so that corporate managers don’t get quite so much encouragement for short-term profits while if not giving away then selling (low) the proverbial store (e.g. GE CEO proposal to sell off their R&D! That must be right up there with a passenger on the Titanic selling his spot on a lifeboat?) Again, I think he makes a good case for the reform he’s advocating – it just doesn’t seem like enough.

And, Elizabeth Warren and Amelia Warren Tyagi (“The Two-Income Trap”) suggest something like a Consumer Product Safety Commission for financial ‘products’ – a “Financial Product Safety Commission” – to detoxify the financial environment. Probably a great idea, but the most interesting part to me was their story that “each year millions of credit-card offers go out with tiny print detailing ‘double-cycle billing’ and ‘trailing interest,’ terms which have enormous financial implications but are meaningless to most people.” Include me. What the hell?

Then they get more radical.

Michael Hudson (“Super Imperialism”) – after a short history of the rise and untimely demise of the progressive income tax – says tax the land. He says tax breaks on property and capital gains, plus tax deductions for mortgage interest amount to “powerful incentives for buyers to go into debt.” He says we should be taxing the privilege of owning land, not socially useful activities like producing and earning money. Especially, he says, tax “’unproductive’ incomes” like hereditary estates and monopolies – e.g. currently privatized natural resources, public airwaves, etc.

At first I thought, wait a minute! No tax deductions for mortgage interest? What will we struggling homeowners do? Then I remembered: those of us who are struggling don’t actually earn enough to itemize deductions anyway. Not sure how this ‘tax the airwaves’ idea would affect small operations like WEFT and WRFU, etc. but I’m sure there’s a way to tweak it. The solution might be as simple as a kind of standard deduction that effectively exempts small operations. Same could work for the land tax, really, when it comes to lower-middle-income folks trying to buy their first house … not their first *ten*, of course. (Can you really live in ten houses?)

James Galbraith (“The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should, Too”) jut comes right out and says we should “plan.” Dude!

No kidding, Galbraith is pointing out once again that the myth of ‘free enterprise’ is just that. It doesn’t exist. The trick is to acknowledge, I think he means officially, that the government always has and of necessity must and should intervene to manage and shape the direction of the economy. It isn’t clear to me exactly how he thinks we should do this, except that he says his idea “is not coercive” but based on budget priorities and such – to encourage the *kinds* of development we want. Clearly, I think, he’s right.

He seems a little short on what exactly those kinds of development are, too, but he mentions one example: a Federal Department of Energy and Climate, which would be “independent” of lobbyists and other evildoers – even Congress – (how?) and (miraculously) free to evaluate new ideas for renewable energy, etc. Our local experience, which may or may not be a useful guide, I think is that the ‘independence’ part is a humongous ‘if.’ To the extent to which city planners around here have been ‘independent’ of elected officials it seems to me they have been ‘independent’ of social considerations, even more than the elected officials: they just listened to developers and trusted their business school training. To the extent to which the planners have been ‘dependent’, well, it has depended on who was in office and what their (election-dependent) priorities were. I just don’t see it working this way.

Galbraith may have some great ideas, and he’s certainly right on about the faith-based nature of “free enterprise”. But it seems to me he’s trying to take a shortcut around the truly back-breaking work of this thing: the organizing, the building of public or cultural or national will, the social will, the social demand for radical changes like these. Maybe it’s because in the process a lot of good ideas will be shitcanned because the huddled masses don’t get them – in favor of gettig paid now. But that is the uphill battle. The biggest public relations industry in human history is against us, not to mention the monopolies on resources and organized violence currently aligned (maybe a little more loosely since last month) with property interests and so on. Tough question, but we can’t just skip it, IMO.

Finally, Eric Janzen (pres., iTulip Inc.) and Bill McKibben (“The End of Nature”) have I think related but different suggestions all to do with what kinds of development we want to foster. Janzen says we have to “reindustrialize”: and he’s talking innovative startups, publicly encouraged. McKibben says “localize”: farmer’s markets and other smaller, more localized economic developments make more sense (as we run out of oil, he says – not so sure that we are any time soon, but) and are much more deserving of public investment – *social* investment again – that ADM and the oil industry & co.

Janzen presents a more destructive version of a similar notion, in my view, advocating that we allow the financial and insurance sector, and the 4-million-job US auto industry to sink or swim on its own. Now. He’s not even just saying don’t bail them out; he’s saying withdraw the subsidies we already give them. No weaning, no methadone. Economic Armageddon.

I think that’s an even steeper ramp down to economic (and medical) depression, myself. You have to remember why we bother to discuss this at all. It’s not a board game. It’s people’s lives. And we don’t want to destroy this village in order to save it.

But in the long run I think Janzen’s got something there: he says in essence that our economy needs to be based on producing things and not just on insuring things that other people make and lending money to buy things that other people make, and then gambling on who will lose the most money when it all comes crashing down. Hm, you think?

He has a zillion ideas for startup businesses – that’s what he *does* – and the model is “public-private partnerships” (i.e. joint ownership). I’m skeptical of this on the scale and with the suddenness he seems to be proposing, at least in the contemporary capitalist context; seems like a tender box. I see armies of scam artists swarming to make living while the tourists wander the burning cities in a daze. But I think we can begin to reorganize our society along lines that are at least informed by these sorts of ideas.

McKibben, for example, addresses the human cost of some of these proposed changes. We don’t want to “beggar the populace,” he says. He’s a little slim on the specifics, but he says there are all sorts of schemes for rebates and discounts and things to ease the burden of yanking the carpet out from under tens of millions of individuals and families. They’d better be damn good ones, is all I can say. I like a lot of these ideas, but we must keep perspective. The biggest problem with the solutions we keep seeing come out of Washington (and downtown Manhattan, and Detroit, etc.) is that they ignore who they are (at least allegedly) *for*.

We must be the nagging reminders.

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