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Forum Post: Predatory Capitalism and the System's Denial in the Face of Truth

Posted 4 years ago on July 5, 2014, 8:54 p.m. EST by LeoYo (5909)
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Predatory Capitalism and the System's Denial in the Face of Truth

Saturday, 05 July 2014 09:28
By CJ Polychroniou, Transform! | News Analysis


Contemporary capitalism is characterized by a political economy which revolves around finance capital, is based on a savage form of free market fundamentalism, and thrives on a wave of globalizing processes and global financial networks that have produced global economic oligarchies with the capacity to influence the shaping of policymaking across nations.

As a result, contemporary advanced capitalist societies are plagued by dangerous levels of income and wealth inequality, mass unemployment, rising poverty rates, social polarization, and collapsing social provisions. Furthermore, democracy and the social contract are under constant attack by the current system and there is an ongoing pressure by the corporate and financial elite to convert all public goods and services into private goods and services.

The rising inequality in advanced capitalist countries is well documented. Most recently, Thomas Piketty’s publishing sensation Capital in the Twentieth-First Century, translated into English and published by Harvard University Press, provides massive data showing a widening gap between the rich and the poor, thus questioning not only the claim that the capitalist economy works for all but also underscoring the point of how dangerous the current system is to democracy itself. Indeed, a few years ago, Larry M. Bartels’s Unequal Democracy: The Political Economy of the New Gilded Age, published by Princeton University Press, pointed to the same gap between the rich and poor in the United States under Republican administrations.

The way wealth has changed in the United States over the last few decades, with those in Generation X and Generation Y accumulating “less wealth than their parents did at the same age 25 years ago”, is also demonstrated in a study produced by Eugene Steuerle, et. al. on behalf of the Urban Institute in Washington DC. And in a recent Strategic Analysis released just this past spring by the Levy Economics Institute with the title “Is Rising Inequality a Hindrance to the US Economic Recovery?”, the authors, Dimitri B. Papadimitriou, et al., demonstrate through macro modeling simulations that the current processes of inequality in the United States are unsustainable and that, if they continue, will result in weak growth and increased unemployment.

As for the problem of mass unemployment, the facts speak for themselves. Five years after the alleged end of the global financial crisis, the official unemployment rate in the US remains as of May at 6.3% (it averaged 5.8% from 1948 until 2014) while in the eurozone the official unemployment rate as of May 2014 stood at 11.6%. In the periphery of the eurozone, which has been hard hit by austerity policies conceived in Brussels, Frankfurt and Washington as part of the international bail-out programs that went into effect when several eurozone periphery countries reached the brink of bankruptcy after the global financial crisis of 2008-09 reached Europe’s shores, the official unemployment rates has reached stratospheric levels: 27% for Greece; 25% for Spain; 15% for Portugal; and 12% for Ireland, the nation with the highest emigration rate in all of Europe and whose government was actually asking the unemployed as of recently to leave and take jobs in other European countries.

In Greece, six years of an austerity-caused depression have shrunk the nation’s GDP by a quarter. Yet, both European Union (EU) officials and their lackeys in Athens have been trying hard to convince Greek citizens that a “success story” is under way because the enforcement of a draconian fiscal adjustment which dropped the standard of living back to 1960 levels produced a primary surplus. In the meantime, the debt-to-GDP ratio has reached an all-time high, rising from less than 139% in 2009 to nearly 180%.

Ireland’s public debt, which stood at 25% of GDP in 2008, grew to nearly 65% by 2010 and climbed to over 125% by the end of 2013. Yet German Chancellor Angela Merkel also hailed Ireland’s experience with austerity as a “tremendous success story”. Portugal’s public debt, which was slightly less than 70% in 2008, jumped to over 100% by 2011 and then to over 130% by 2013. That’s another “success story”. And Spain’s public debt has surged to nearly 95% of GDP, standing at close to 1 trillion euros – three times as much as it was at the start of the crisis in 2008 – and is projected to go over 100% by the end of 2014.

In short, all the bailed-out eurozone countries are sinking under the weight of debt while unemployment spreads like the plague – the result of the “voodoo” economics that the witch doctors of the EU and the International Monetary Fund cooked up in order to formulate the so-called “rescue” plans. However, according to national government and EU propaganda, everything in the periphery is working in compliance with the strategic plan for helping those countries exit the crisis.

Denial of reality, deception and distortion are traditional tactics used by the powers-that-be and their elite intellectual acolytes. We also saw this in the reaction of major media outlets like The Financial Times, Bloomberg, and Forbes Magazine, to name but just a few, to the publication of Piketty’s book. The Frenchman either adopted a flawed methodology, or got his data wrong, or is simply engaging in anti-capitalist propaganda. Indeed, as yet another commentator of the Financial Times stressed, with the belief that he hit a gold vein, upon reviewing Capital in the Twentieth-First Century, even if Mr. Piketty’s data about increasing inequality in capitalist societies are correct, he is not telling us why inequality is bad! In other words, Mr. Martin Wolf was essentially pondering about just what is so wrong with predatory capitalism making the rich richer and the poor poorer?

As actually existing capitalism has given up any pretext of being a “socially responsible” socioeconomic system and caters almost solely to the needs and interests of the rich and powerful by enforcing policies that are detrimental to the rest of society, the defenders of the status quo will get even more dangerous by denying the ugly truth about predatory capitalism. They don’t want to hear that actually existing capitalism is a system that favors passionately and defends ruthlessly the interests of the 1% over those of the rest of society. Doing so might jeopardize the goal of the elite to roll back the course of history to the detriment of the working populations so they can further enrich themselves and act like the new rulers of the world.

This piece was reprinted by Truthout with permission or license.



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[-] 3 points by LeoYo (5909) 4 years ago

Giant Corporations, Giant Failures

Saturday, 05 July 2014 10:33
By Richard D Wolff, Truthout | News Analysis


General Motors recently released the report it commissioned from the huge Jenner & Block law firm. The latter's chairman, Anton Valukas, investigated how and why GM failed - for over 10 years - to recall cars it produced while knowing they had defective ignition switches. The eventual recall of 2.6 million Chevrolet Cobalt cars in February, 2014, followed 13 deaths GM linked to those defective switches (many others were injured, and government officials believe there were more fatalities).

GM's chief executive, Mary Barra, admitted publicly this April what Valukas wrote in his report: GM failed systematically to identify, take responsibility for, and act properly in the face of life-threatening defects in millions of automobiles it sold since 2002. On June 16, 2014, GM recalled an additional 3.16 million defective vehicles across seven of its models. GM's total recalls in North America so far this year exceed 20 million vehicles.

Lessons from so major a failure go far beyond GM leaders promising to fix their internal operations. As the Valukas report documents, many layers of the GM bureaucracy routinely ignored evidence of defective ignition switches and their risks to customers' lives. None of thousands of engineers and executives - even those who had recognized the problem or mentioned it to other GM officials - was able or willing to achieve the recall decision until 2014. Chief executive Barra attributed this failure to a "pattern of incompetence and neglect." Five years ago, GM announced another failure, its own bankruptcy, and got the US government to bail it out with $ 49.5 billion in taxpayers' money. We paid collectively to save a corporation whose chief describes its activities in terms of a "pattern of incompetence and neglect."

Despite such catastrophic failures over the past decade, we permit, and indeed subsidize, the continued operation of GM by the same bureaucracy. To date, a total of 15 engineers and other employees have been dismissed from GM for failures related to the faulty ignition switch. No one was fired because of any explicit responsibility for bankruptcy. GM had a total of 219,000 employees as of 2013.

GM's plunge into bankruptcy shook the entire economy. That same corporation persistently produced and marketed life-threateningly defective vehicles. Yet no serious steps are taken to correct actions that far exceed any reasonable standard for allowing such enterprises to continue. Are we a society that cannot recognize or deal with antisocial behavior when the culprits are large corporations?

Punishing more individuals is not the point. That would change little in the internal corporate system of rewards and punishments that produced GM's behavior. After all, GM leaders all knew the company risked major, punishing damage (loss of sales, profits and market share, law suits from victims, extremely negative publicity, government investigations, etc.) by not recalling vehicles that killed, injured, or endangered people, yet they did it anyway. The market simply did not adequately discipline GM. The corporation believed it could control its markets (by mountains of advertising, via political influence at federal, state and city levels, using massive, costly legal maneuvers, and so on).

Running the firm into bankruptcy and selling unsafe vehicles happened because GM saw both series of actions as more advantageous and less dangerous to them than other options (from earlier recalls, to sharply reduced payouts to executives and shareholders, to public discussion of mass-transportation alternatives to producing cars and trucks). In such calculations, GM is not atypical among large corporations. That is why damaging the environment; bureaucratic oppression (the "suck-up-and-kick-down" system); moving jobs to low-wage countries; producing poor quality outputs; paying their top executives and shareholders huge amounts and deepening the divide between rich and poor; crippling public revenues by shifting operations to foreign tax havens; and so many other antisocial consequences flow from those corporations.

The major lesson of GM's failures is that we cannot afford to leave such corporations in charge of producing the goods and services we all depend on. Similarly, can we allow that system to keep purchasing our major parties and politicians to secure its immunity from real accountability? The answer is that we can and should do better than a system so obviously failing.

What is to be done? One basic problem is the link between jobs and incomes. The layers of GM bureaucracy looked the other way, did not pursue what they knew, avoided making waves inside the company etc. because they feared for their jobs and incomes. Especially in an economy with high unemployment and job insecurity, acting in socially responsible ways becomes too risky personally. If employees knew that their companies' failures would not necessarily jeopardize their personal incomes, we could expect far more socially responsible behavior from many more of them.

If government guaranteed personal incomes even when individuals had to move from one job or enterprise to another, those individuals could better face and fix the failures where they work. Making families' incomes depend on their jobs pressures job-holders not to rock the corporate boat even when they know they should. We ought to disconnect our citizens' incomes from their particular jobs (national discussions of this idea have increasingly engaged the Swiss and others in Europe over recent years).

Another lesson from GM's failures is the need to broaden the community of people making key economic decisions. If the citizens of Detroit had had real participatory power over GM decisions, GM might have kept more facilities there and thereby avoided urban collapse. If GM customers had more institutionalized participation in corporate decisions, concerns about faulty ignition switches might have gained hearings sooner and so saved lives and avoided vast financial losses.

Here lies yet another argument to shift from private, capitalist corporations (governed by major shareholders and the boards of directors they select) to cooperative enterprises (governed democratically by workers, surrounding communities, and customers/consumers). Such cooperatives would democratize enterprises in ways likely to make their economic decisions far more socially responsible.

Copyright, Truthout.