Tag Archives: capitalism

Welcome to the Piketty revolution: “Capital in the 21st Century” is a game-changer (even if you never read it)

Anyone who’s anyone (and many more who aren’t) has written something this week about “Capital in the 21st Century,” the new treatise on income inequality by French economist Thomas Piketty.

The book was actually published early last month by Harvard University Press, but arrived to fanfare only within the insular, if august, community of economic policy researchers. So, on arrival, it might have seemed like the 700-page tome, with its academic tone and laboriously documented historical analyses, was destined to a life of obscurity. But then something strange happened. People — regular people — started to buy it in droves. By the time “Capital” surged to the top of the charts this week — so many physical copies of the book were sold that Amazon actually ran out of inventory — Thomas Piketty had become the most famous economist this side of Paul Krugman, celebrated on the left and reviled on the right.

At this point, a review or discussion of “Capital” is almost a rite of passage for an aspiring wonk. (You can read this writer’s here.) But the one question that hangs over Piketty’s meteoric rise is, in a way, the most obvious one: What does any of this actually mean?



First off, Piketty is a symbol of the increasing consensus among academic economists and political scientists about inequality and democracy. This consensus, which has been demonstrated in innumerable studiesreports and books already, establishes a few propositions: Inequality has been increasing in the United States over the past three decades. This inequality has been defined particularly by an explosion among the very top, be it the 1 percent or the 0.1 percent (or even the .01 percent). This concentration of economic power has coincided with an increase in political power for the wealthiest Americans. There are still some ideologues who dispute these points, but there are ideologues who still disputeevolution and global warming — best to move along.

Second, Piketty puts conservatives in a rather awkward position. Conservative values, like “opportunity,” “family” and “tradition” — which are broadly supported by Americans — were once the backbone of the Republican Party. Today, that tradition has been jettisoned by the GOP in favor of becoming a subservient vessel for the richest of the rich. Some conservatives have argued that inequality isn’t a problem because government transfer programs — Social Security, Medicaid, Medicare — reduce inequality. This is certainly true, but these are the same transfer programs conservatives are so eager to cut! So if conservatives wish to make this argument, they must implicitly accept that transfer programs work to alleviate inequality, and therefore that cutting them will increase inequality.

Other conservatives, like Kevin Hassett at the American Enterprise Institute, have arguedthat the increase in income inequality has not led to increase in consumption inequality. That is, while incomes have diverged, because the wealthy save more, the poor and middle class can still afford to keep up in purchasing consumer goods. This isn’t true: Numerous studiesfind that consumption inequality has increased along with inequality. However, if the poor have been able to buy goods, they are only able to do so by increasing their debt-loads, which means that wealth inequality will increase concomitantly. (There was a day when conservatives would fear an increase in debt and a large propertyless class. Today, they cheer it on!) In both of the aforementioned conservative arguments, the right reveals the depths to which it will happily sink to gain the patronage of the wealthy.

Third, Piketty points us again to the most important facet of inequality — the inequality of capital. Capital — the ownership of assets that allows individuals to attain wealth and exploit labor — was what Marx worried about. As he wrote in “The Communist Manifesto” of the members of bourgeois society: “Those of its member who work, acquire nothing, and those who acquire anything, do not work.” Today, the debate over income inequality is framed often as the distinction between the salaries of mega-CEOs and minimum-wage workers. This inequality is certainly disturbing; a recent Demos report finds that the compensation of fast food CEOs was more than 1,200 times the earnings of the average fast food worker. But salary is only one part of compensation. Piketty reminds us that a far more potent driver of inequality is the passive accumulation of capital that is only exacerbated through inheritance (see chart below, from Piketty).

This distinction is important, because it reveals the true depth of Republican hypocrisy. While they talk of the value of hard work, they cut taxes on the various parasites whose only source of wealth is the labor of others. They wish to reduce income taxes to 25 percent and, more disturbingly, eliminate capital-gains taxes altogether. That means more wealth inequality, because the percentage of Americans who owns stocks is decreasing(and capital is even more unequally distributed than labor). When their policies are examined objectively, they help not even the 1 percent, but a much smaller portion of society — the 0.01 percent that make their money through capital accumulation and exploitation, rather than of honest labor.

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Is Piketty’s book more likely to be purchased and sat on a coffee table than read? Certainly. The same can be said of “Das Kapital,” though no one would attempt to deny its immense political impact. Keynes’ “General Theory of Employment” — the ur-text of modern economic policy — also wasn’t widely read by the masses, but no book has had a more potent or prolonged influence on the world economic program. The idea of a dense, academic tome setting the public alight is not extraordinary, but rather quite ordinary. The list can certainly be expanded. It’s unlikely that public fully understood the “Origin of the Species,” the Pentagon Papers, “Silent Spring,” “The Kinsey Report,” “Democracy and Education” or “The Course of Positive Philosophy” at the time of their publications, but their impact on society, because of the movements they either fomented or supplemented, is undeniable.

“Capital in the 21st Century” is such a book. For decades, Americans have been aware of the fact that “growth” was no longer benefiting them and their children. We have noticed that the benefits of new technology and of our labor have been flowing to a very few, and that those same people then dictate policies to consolidate their wealth even further. Our voices are not heard, as both political parties, to differing extents, have become subservient to those with wealth.

If nothing else, “Capital” will finally bring questions of “who gets what” back to the center of economics. Economists will no longer be able to couch tax cuts for the rich behind a veil of jargon, disguising power relations as mere economic efficiencies. We forget, if we ever knew, that the earliest economists were philosophers and historians first — and that economics was always considered to be a question of politics.

The Founding Fathers feared that inequality and the conflict between capital and labor would undermine the nascent American government: John Adams, for example, wrote that “property monopolized or in the possession of a few is a curse to mankind.” And even Adam Smith — he of the “invisible hand” — worried of men who “monopolize economic power and undermine the government.” The solution proposed by America’s founders was widespread capital ownership. As Adams writes, “The only possible way then of preserving the balance of power on the side of equal liberty and public virtue, is to make the acquisition of land easy to every member of society.” Later, Abraham Lincoln said, “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” Lincoln and the Founders would have been disturbed to learn that one family, the Waltons, now owns more wealth than the bottom 48 million families in America combined; and that wealth inequality is again back to the levels last seen in the days of “The Great Gatsby.” (See chart below, from Saez and Zucman.)

Piketty supplies us with the basis for a new narrative. In this narrative, the postwar period — in which rapid growth produced broad-based, equally shared growth — is unique, not an inevitable product of capitalism. Piketty believes this postwar lull in violent inequality to be an inevitable coalescence of population and war. I believe it was brought about by a powerful labor movement and an epochal crisis of capitalism, coupled with wartime solidarity. Either way, such equality will not come again without action (and it’s unlikely we could grow our way to equality). Money will not remove itself from politics. Power cedes nothing without demand.

The owners of this country, those who profit off of lung cancer, environmental degradation and political capture, are very worried that we learn their tricks. They did not create wealth, they stole it, and continue to accumulate it. As Marx noted, the default position of capitalist societies is ever more inequality and accumulation. Although he is far from a Marxist, Piketty has reaffirmed this truth. The only question that remains is the question Nikolai Chernyshevsky asked in 1863, “What is to be done?”

Originally published on Salon.

Young people are rising up around the world, but not in America

Last weekend, a Maybach limousine pulled up to the Venetian casino and resort in Las Vegas. Out stepped Sheldon Adelson, billionaire Republican donor, for his four-day Republican convention. Donors and politicians, from Chris Christie to Scott Walker and Jeb Bush, shook hands and exchanged promises among the gleaming lights of the most gaudy city in America.

It’s a story that we’ve heard so often it’s beaten us into a stupor: wealthy businessmen sliding their arms around our politicians and co-opting the political process. It’s not even surprising anymore. But it should be; it should piss us off.

Already long gone are the heady days when thousands gathered in New York City’s Zuccotti Park and around the country. The leaves have since settled and in a lot of ways things are back to normal. We have crushing student debt at the tune of $1 trillion, education is unaffordable, there is a lot of work to do but (paradoxically) few jobs and new policies that could help our generation are languishing in Congress. Myopic politicians are more concerned with the next election than doing what’s right for our futures.

“Workers of the World, Unite. You have nothing to lose but your chains!”

So ended one of the most revolutionary political documents ever penned. And while the world has seen myriad revolutions — most recently in Latin America, the Middle East and Ukraine — revolutionary activity in Western Europe and the United States has never been sustained. So where is the revolution to enact change and usher our generation into a better tomorrow? Where is the battle cry to secure our future?

Jesse Yeh looks out across the UC Berkeley campus. He does just about anything to avoid debt, using the university’s library instead of buying textbooks, scrounging for free food at campus events and occasionally skipping meals. Image Credit: AP

If complaints were kindling, our generation would have a bonfire going. We will likely see slower economic growth, more unemployment and greater inequality than our parents. For all the social progress, retrograde attitudes remain powerful. The government feels more and more an extension of the free market, rather than a bulwark against it. And global warming, still denied by large swaths of the population, threatens not just economic growth, but also ecological collapse. Our current course could cause the earth to warm by as many as six degrees Celsius, which would create millions of refugees, stir up conflict and dramatically increase the incidence of natural disasters.

Why, then, have we not launched a sustained, revolutionary movement to wrest back control and set us on a better course? The most prominent movement, Occupy Wall Street, produced much in the way of slogans. But compared with the Tea Party or the leftist movements of the ’40s and ’60s, it has done little to change policy.

Here are three reasons we have not seen a revolution, even though it’s sorely needed:

Money has become political power.

One important factor is that economic power increasingly influences the political sphere. A recent Demos report, Stacked Deck, finds that Adelson and his wife gave more money in 2012 to influence elections than the combined contributions of the residents of 12 states.

Research by Larry Bartels finds that individuals with higher socioeconomic status have more influence on legislative outcomes than the poor and middle class. Martin GilensDorian WarrenJacob HackerPaul Pierson and Kay Lehman Schlozman have all recorded similar findings — in politics, money talks. A recent study finds that, sure enough, members of Congress are far more likely to meet with donors than constituents.

Sheldon Adelson listens as New Jersey Gov. Chris Christie speaks during the Republican Jewish Coalition Saturday in Las Vegas. Several possible GOP presidential candidates gathered as Adelson, a billionaire casino magnate, looks for a new favorite to help in the 2016 race for the White House. Image Credit: AP

When money talks, it doesn’t speak for us.

This problem is compounded by the fact that the wealthy don’t have the same priorities as the rest of us. Benjamin I. Page, Larry M. Bartels and Jason Seawright find that the very wealthy are far less likely than the general public to believe that “government must see that no one is without food, clothing or shelter,” and that “the government in Washington ought to see to it that everyone who wants to work can find a job.”

These divergences, combined with the fact that the wealthy are far more likely to be politically active because they are more likely to see results, tilts the economy toward the interests of the wealthy.

The quintessential example is the minimum wage, which 78% of Americans believe should be “high enough so that no family with a full-time worker falls below official poverty line.” However, only 40% of the wealthy agree — and the minimum remains stubbornly below the poverty line.

The wrong narrative has taken hold.

Money also shapes narratives and ideology. Baruch Spinoza, a 17th century Dutch philosopher, argued that “those who believe that a people … can be induced to live by reason alone … are dreaming of a fairy tale.”

We see the world through our ideology and what’s taken hold is the idea that the free market will give us what we deserve and that’s fair. But it’s not fair. This ideology often does not reflect the interests of the poor, but rather those who shape the narrative: those with money and power. A young economist, also known as Karl Marx, noted in 1848, “The ideas of the ruling class are in every epoch the ruling ideas.” If we’re not here to help create an equal and fair society, then what the hell are we doing?

To see the power of wealth in shaping perspectives, we can turn to new research by Andrew J. Oswald and Nattavudh Powdthavee. Compared with those who did not win the lottery, the researchers find that lottery winners in the U.K. are more likely to switch their political affiliation to the right after winning and believe that current distributions of wealth are fair. The rich are biased toward believing that the current society is just (called the “just world hypothesis”).

To take one example of how much our narratives have changed, it’s worth remembering that Americans once believed in high taxes on estates to ensure high levels of opportunity and competition. Americans did not want to live in a Jane Austen society of wealthy and snooty aristocrats and prided itself on the fact that the wealthy had earned their wealth.

Lamenting on the death of this model, Richard Hofstadter wrote, “Once great men created fortunes; today a great system creates fortunate men.” The Waltons and Kochs, parasites living off their parent’s work rather than creating their own fortunes, are examples of how the old story of the “self-made man” is increasingly out of date. Yet it sticks around because politicians keep repeating it, members of the media keep broadcasting it and suddenly we’re all talking as if a tale worthy of Hollywood is somehow fact.

There’s another disturbing narrative that’s closely linked to the others: economic growth comes from the wealthy (“job creators”) and growth is the palliative for inequality. While the former was always dubious, there was a time when economic growth was broadly shared (see chart). However, the ’90s and 2000s produced ample growth that accrued largely to the richest members of society. The wealthiest 1% have also accrued 95% of the benefits of the current recovery. These benefits aren’t serving the wealthy because they work harder, but rather because they own assets (like stocks) and the Bush tax cuts dramatically increased the returns to such assets. There was a time when the old story that economic growth benefited everyone was true, but it no longer reflects reality.

It’s time for a new story.

How we’re going to get there.

Sadly, until recently there has been no real resistance to the power of money and false narratives. Democrats and Republicans have generally adhered to a neo-liberal consensus that government is bad and markets are good. It was Bill Clinton, not Ronald Reagan, who declared the “end of big government.”

Few politicians are willing to argue that government is good, that the social safety net needs to be expanded, not contracted, and that “freer markets” may not solve our most grievous social ills. Since the rise of “New Democrats,” who are happy to shred social security and Medicare in the name of deficits and are unwilling to take a stand on climate change, there has been no real “left” in the country.

Traditional bastions of leftist resistance, like unions, found little support from the Carter and Clinton White House. Regulations in the public interest, like those enacted to prevent another Great Depression or protect the environment, were rolled back with equal fervor by Democratic and Republican administrations. Young people realize this, and Pew Data show we are far more skeptical of the idea that there are major differences between the Republican and Democratic parties.

We are disenchanted with concentrated economic and political power and feel, rightly, that alone, they can do nothing. We find few politicians representing our interests, and almost none outside the grip of economic elites. We are bombarded with false narratives, but have yet to see a new one take hold. This very alienation from the channels of power only makes our movements more ineffectual — we have many Sartres, but few Debses or Naders actually fighting for change.

Image Credit: AP

It’s time for a different narrative.

The story we’re going to build and spread using the world’s greatest communications platform questions the idea that we can have unlimited growth in a finite world. This story will remind us that the engine of economic growth has always been a strong and open middle class. This story will reject racism, xenophobia, sexism and homophobia in favor of an open and tolerant society. This story is a uniquely Millennial story.

It is our story. It is the story of a generation that will be worse than its parents. It is the story of a generation looking for jobs where few exist. It is the story of a generation burdened by debts we did not create. It is the story of a generation on the verge of taking over. This here is planting season.

We will have to fight to make our story heard. We will have to mobilize to make it happen. We have occupied parks; let us occupy statehouses, campuses and the media. For too long we have, in the words of John Mayer, waited on the world to change. But, as Frederick Douglass noted, “Power concedes nothing without a demand.” We cannot simply imagine a better world, we must make it happen.

It begins with a new story.

Originally published on Policymic.

The Tea Party’s perverse leftist fantasy

The left has spilled pages of ink and innumerable pixels wondering why the middle class votes against its interests, debating the effect of the Democratic Leadership Council, and which candidate would be the best presidential contender in 2016 (one of us is guilty ofsuch indulgences). Lefties have harangued Barack Obama, even suggesting that Richard Nixon was more liberal. By doing this, the left has has succumbed to right-wing ideas about social change – that it comes from great men, rather than collective action.

Throughout history, we can find examples of this mythos. FDR, the liberal hero, was not a Nietzschean overman, he was confined by his circumstances. Economics professor Richard Wolff argues that he could only raise marginal tax rates to 90 percent, create a vast array of make-work programs and push through a universal pension because capitalists were so terrified of a mobilized left.

Similar outside pressures also account for the widespread myth that Nixon was a leftist. As Erik Loomis noted discussing Nixon’s environmental record, “Richard Nixon was however a very shrewd politician operating in the time of the postwar liberal consensus.” That is, no matter how conservative Nixon was, he simply could not veto the bills before him without either being overridden or digging deep into his limited cache of political capital. In the same way, no matter how much Obama may want to pass universal health care or gun regulations, he cannot. The central lie of the DLC was not neoliberalism, but the idea that the presidency mattered. By shifting the focus to an almost sacrosanct view of the presidency, the left has forgotten about movement building to fawn on “progressive heroes.”

Consider the press around Bill de Blasio, the newly elected progressive mayor of New York City. For the most part, it has succumbed to the “great man” narrative, and many New Yorkers wait with baited breath for him to single-handedly obviate income inequality. But de Blasio’s success was not his alone, and his governance will not be either. As Harold Meyerson documents, it was the Working Families Party, which spent decades building a progressive infrastructure in and around the city that de Blasio needed to win and it is WFP defense attorneys, city council members and public advocates that will make his time as Mayor successful.

 

If a Democratic president sits in the Oval Office it may well be due to the tireless efforts of organizations like National Employment Law Project, Demos, Project Vote, Common Cause and others that register voters, build coalitions and sue states just to get them to comply with laws on the books.

The best palliative for this great-man obsession is “The Lego Movie.” In the movie, the “Master Builders,” await a prophesied “special” to destroy Lord Business. When they finally meet the special, Emmet, they find him entirely banal. Eventually, they realize there is no savior, and that they must use their own talents and abilities, contribute what they can to create an emancipatory movement. Such is the debacle of the left. Our hero, long prophesied, has come, and though he is extraordinarily capable, there is simply no way that he can single-handedly end all wars, pass immigration reform, save Social Security, stop the rising oceans and slash rising inequality.

In “The Lego Movie,” the opposition was not only wrong about who would bring change — they were wrong about how change would come about. The Master Builders thought they were going to use their existing institutions and infrastructure. Although they did not use manuals, they still loathed to deviate from the prepared plan. It is Emmet’s insight that the plan is fatally flawed – there is no need for a vanguard party, but rather a mass collective action. His insight is scorned by the council who expected to simply storm Lord Businesses’s offices again, even after Metalbeard’s failed assault. For us as for them, the existing institutions and infrastructures are only part of the equation. Sheldon Adelson votes, like you and me, but he also spent more than the residents of 12 states combined on the 2012 election cycle. In their recent study, Larry Bartels find that the wealthy are not only more engaged in terms of voting, they are also more likely to vote, donate money to campaigns, attend rallies and meet with or call candidates. The left cannot continue storming the Presidency and expecting change.

The right learned the lesson of 1930s and began a mobilization of their own, one which has become so powerful it is almost unseating them from power. The Tea Party is, in nearly every way, a leftist movement. It is based on a perversely egalitarian sentiment, a “makers and takers” narrative, and leftist mobilization. Many may be surprised to learn that the Republican primary candidate who raised the largest percentage of his money from large donors was the most moderate: Jon Huntsman. Like the communists and socialists of the post-depression years, the Tea Party has obliterated the paradigm, pushing change from outside the political system.

“The Lego Movie” is in stark contrast to other “leftist” movies, like “Elysium,” that rely on “great men” to save humanity. “The Lego Movie” is not meant to be communist propaganda, but rather aims to obliterate the “hero narrative” that Joseph Campbell identified in “Hero With a Thousand Faces.” In “The Lego Movie,” Emmet is not “the special.” In fact, the the prophecy predicting such a figure was made up by Emmet’s mentor Vitruvius. But Emmet’s adventure over the course of the film still mirrors the Hero’s Journey narrative laid out by Campbell. However, somewhat contrary to Campbell’s outline, Emmet’s journey doesn’t change him. Instead, his journey changes those around him: his allies the Master Builders and the people of Bricksburg.

Christopher Vogler’s book “The Writers Journey” adapts Campbell’s Hero’s Journey to the craft of writing. In it, he discusses the various kinds of heroes seen in storytelling. Emmet fits into the category of “Catalyst Hero”: “A certain class of Hero is an exception to the rule that the Hero is usually the character who undergoes the most change. These are catalyst Heroes, central figures who may act heroically, but who do not change much themselves because their main function is to bring about transformation in others.” Emmet’s journey teaches the Master Builders and the greater Bricksburg population that everyone is special and should use their personal talents to work together.

In this story, the hero is not unwilling, but impotent; he is not called, but rather stumbles upon his fate; and he does not grow, but rather those around him do. This is a far more realistic description of the reality of Obama’s presidency the salvific narrative that surrounded his election in 2008. His failures remind us that it is not “Great men” who act as a force for social change, but rather great movements. Norberto Bobbio recognized that the central feature of the left was the belief in human equality. As Rousseau said, “the destruction of equality was attended by the most terrible disorders.” In  a brilliant bit, British comedian Robert Newman diagnoses the problem on the left,

When I first started getting involved with Radical-Direct-action-Non-hierarchical-Eco-autonomous-grassroots organisations, I didn’t understand the concept of no leaders. I thought I did; but I didn’t. And I’d go upto the nearest alpha male or alpha female and say, “Here’s what you should do – Why don’t you do this – It’d be great if you all did this – And when are you going to do this?” And they’d give you this look, that I never understood…

What this look meant was, “Yes, good Idea, why don’t you do it yourself? You print the leaflets, I’ll distribute them; you call a meeting, I’ll attend; you organize an action, we’ll come along”.

And from that moment, I realized that, my whole philosophical outlook changed. And from then on, instead of suggesting things other people could do, I stopped suggesting things altogether, in case they expected me to do them…

Such a problem won’t be found in “The Lego Movie,” where characters are exhorted to “start building” with whatever they have on hand. The left needs more middle class donors, giving not just to political campaigns, but unions and think-tanks. The left needs more writers, artists, policy analysts, historians and scientists. The truth, the one that no pundit will ever write publicly, is that it doesn’t matter whether the Democratic nominee is Warren or Clinton, what matters is whether there is a mobilized worker’s movement, student demonstrations and new and refreshed leftist thinking. McGovern didn’t end Vietnam; hippies did. We, the people, did.

Originally published on Salon. 

Do the 1 percent create jobs?

A friend of mine, AJ, posted this on his blog:

Open letter to Jamie Johnson, director of “The One Percent”:

Dear Jamie,

You are an arrogant idiot. Your perception of a “just” America is one that is far from free, and your efforts have hurt the poor much more than they have helped them. You foolishly talked to Milton Friedman in various clips from your documentary “The One Percent”, who gave solid reasoning for why we need wealthy people for job creation. He’s Milton Friedman! You just don’t argue with him when you’re an ignorant “non-economist”–especially disrespectfully. You’ve taken Kanye West as my least favorite person, and I sincerely hope you drop your disposition and ignorance and buy a simple economics textbook. Heck, I’ll buy it if you’ll read it. Let me know.

It’s as good as any example of a tendency I’d like to address again. The idea, at its heart, is whether cutting taxes on the wealthy will create jobs, and therefore the converse, will increasing tax rates on the wealthy (to finance a stronger social safety net) decrease jobs? No. A few reasons here. First you have the Stiglitz argument that Nick Hanauer has adopted: rich people need demand. But more importantly, the amount of investment in the economy doesn’t depend on tax rates, but how much investment there is to be had. At some point, cutting taxes is just pushing on a string. In a depressed economy with little private investments available, it makes sense to make public investments financed by taxes. But even in a non-depressed economy, there is no correlation between economic growth and marginal tax rates on the wealthiest.

Piketty_Blog

Piketty_Blog

I want to plaster this chart up on every subway on the nation, because it shows, empirically, what the left has been saying for decades: cutting taxes on the rich doesn’t stimulate the economy. Why is this important? Well I was talking to my dad over the break, and I asked him why he voted for Bush, given the tax breaks for the rich. Once I established that these tax breaks primarily helped the rich, and hurt him by giving the government less money for say, Social Security or college loans, he told me this:

I just figured that the money being in the hands of someone who could invest it and create jobs, rather than me, who would just consume it.

We now know empirically that this simply isn’t true. For one, my dad can invest, he can easily take out money in the stock market, he could help me and my brother go college (or grad school). More importantly, he can spend! That creates opportunities to invest! That creates jobs! The rich want to place themselves at the center of the economy, but it’s the middle class that is the engine for growth. Don’t forget that.

Let’s talk politics quick. What my father is expressing is a classic example of what Engels would call “false consciousness.” Generally speaking, we would expect people to vote for their class interests, but often they don’t. Thomas Frank proposes that they are swayed by social issues. Steinbeck, proposes aspiration as the motivation (I have frequently invoked this as well). Other political scientists suggest that when material standards cease to become an issue, people vote symbolically (i.e. Bush is just like me!). But all of these arguments understate the extent to which the middle class is entirely unaware how misaligned the interests of the wealthy are with their interests. I find it hard to believe that prejudice against gays, aspiration and symbolism can explain why the middle class would forgo $19,000 in yearly income (how much more money the median family would have if incomes had grown proportionally over the last 30 years). That is, voters have not made rational choices, because they were deceived.

So we are back to the Marxist explanation: the central feature of all capitalist societies is obfuscating class interest and exploitation. As my mother said, “Sean, you should really tell people about this.” So I am. The rich have been screwing you. Your interests are not theirs. It’s as simple as that.

P.S. My ideas on history (and my Christianity) prevent me from being a full-on Marxist, but we really need to start understanding Marx as a classical, Enlightenment economist. This would make our public discussion of his ideas far less prone to the vulgarity * it descends to today.

*Classic sense

 

Five suprising things Marx got right

There’s a lot of talk of Karl Marx in the air these days – from Rush Limbaugh accusing Pope Francis of promoting “pure Marxism” to a Washington Times writer claiming that New York City Mayor Bill de Blasio is an “unrepentant Marxist.” But few people actually understand Marx’s trenchant critique of capitalism. Most people are vaguely aware of the radical economist’s prediction that capitalism would inevitably be replaced by communism, but they often misunderstand why he believed this to be true. And while Marx was wrong about some things, his writings (many of which pre-date the American Civil War) accurately predicted several aspects of contemporary capitalism, from the Great Recession to the iPhone 5S in your pocket.

Here are five facts of life in 2014 that Marx’s analysis of capitalism correctly predicted more than a century ago:

1. The Great Recession (Capitalism’s Chaotic Nature)

The inherently chaotic, crisis-prone nature of capitalism was a key part of Marx’s writings. He argued that the relentless drive for profits would lead companies to mechanize their workplaces, producing more and more goods while squeezing workers’ wages until they could no longer purchase the products they created. Sure enough, modern historical events from the Great Depression to the dot-com bubble can be traced back to what Marx termed “fictitious capital” – financial instruments like stocks and credit-default swaps. We produce and produce until there is simply no one left to purchase our goods, no new markets, no new debts. The cycle is still playing out before our eyes: Broadly speaking, it’s what made the housing market crash in 2008. Decades of deepening inequality reduced incomes, which led more and more Americans to take on debt. When there were no subprime borrows left to scheme, the whole façade fell apart, just as Marx knew it would.

2. The iPhone 5S (Imaginary Appetites)

Marx warned that capitalism’s tendency to concentrate high value on essentially arbitrary products would, over time, lead to what he called “a contriving and ever-calculating subservience to inhuman, sophisticated, unnatural and imaginary appetites.” It’s a harsh but accurate way of describing contemporary America, where we enjoy incredible luxury and yet are driven by a constant need for more and more stuff to buy. Consider the iPhone 5S you may own. Is it really that much better than the iPhone 5 you had last year, or the iPhone 4S a year before that? Is it a real need, or an invented one? While Chinese families fall sick with cancer from our e-waste, megacorporations are creating entire advertising campaigns around the idea that we should destroy perfectly good products for no reason. If Marx could see this kind of thing, he’d nod in recognition.

3. The IMF (The Globalization of Capitalism)

Marx’s ideas about overproduction led him to predict what is now called globalization – the spread of capitalism across the planet in search of new markets. “The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe,” he wrote. “It must nestle everywhere, settle everywhere, establish connections everywhere.” While this may seem like an obvious point now, Marx wrote those words in 1848, when globalization was over a century away. And he wasn’t just right about what ended up happening in the late 20th century – he was right about why it happened: The relentless search for new markets and cheap labor, as well as the incessant demand for more natural resources, are beasts that demand constant feeding.

4. Walmart (Monopoly)

The classical theory of economics assumed that competition was natural and therefore self-sustaining. Marx, however, argued that market power would actually be centralized in large monopoly firms as businesses increasingly preyed upon each other. This might have struck his 19th-century readers as odd: As Richard Hofstadter writes, “Americans came to take it for granted that property would be widely diffused, that economic and political power would decentralized.” It was only later, in the 20th century, that the trend Marx foresaw began to accelerate. Today, mom-and-pop shops have been replaced by monolithic big-box stores like Walmart, small community banks have been replaced by global banks like J.P. Morgan Chase and small famers have been replaced by the likes of Archer Daniels Midland. The tech world, too, is already becoming centralized, with big corporations sucking up start-ups as fast as they can. Politicians give lip service to what minimal small-business lobby remains and prosecute the most violent of antitrust abuses – but for the most part, we know big business is here to stay.

5. Low Wages, Big Profits (The Reserve Army of Industrial Labor)

Marx believed that wages would be held down by a “reserve army of labor,” which he explained simply using classical economic techniques: Capitalists wish to pay as little as possible for labor, and this is easiest to do when there are too many workers floating around. Thus, after a recession, using a Marxist analysis, we would predict that high unemployment would keep wages stagnant as profits soared, because workers are too scared of unemployment to quit their terrible, exploitative jobs. And what do you know? No less an authority than the Wall Street Journal warns, “Lately, the U.S. recovery has been displaying some Marxian traits. Corporate profits are on a tear, and rising productivity has allowed companies to grow without doing much to reduce the vast ranks of the unemployed.” That’s because workers are terrified to leave their jobs and therefore lack bargaining power. It’s no surprise that the best time for equitable growth is during times of “full employment,” when unemployment is low and workers can threaten to take another job.

In Conclusion:

Marx was wrong about many things. Most of his writing focuses on a critique of capitalism rather than a proposal of what to replace it with – which left it open to misinterpretation by madmen like Stalin in the 20th century. But his work still shapes our world in a positive way as well. When he argued for a progressive income tax in the Communist Manifesto, no country had one. Now, there is scarcely a country without a progressive income tax, and it’s one small way that the U.S. tries to fight income inequality. Marx’s moral critique of capitalism and his keen insights into its inner workings and historical context are still worth paying attention to. As Robert L. Heilbroner writes, “We turn to Marx, therefore, not because he is infallible, but because he is inescapable.” Today, in a world of both unheard-of wealth and abject poverty, where the richest 85 people have more wealth than the poorest 3 billion, the famous cry, “Workers of the world uniteyou have nothing to lose but your chains,” has yet to lose its potency.

 

This piece first appeared on The Rolling Stone.