The western model is broken | Pankaj Mishra | The Guardian

Pankaj Mishra opines:

….economic power had begun to shift from the west. The Chinese, who had “got capitalism”, were, after all, now “downloading western apps”, according to Niall Ferguson. As late as 2008, Fareed Zakaria declared in his much-cited book, The Post-American World, that “the rise of the rest is a consequence of American ideas and actions” and that “the world is going America’s way”, with countries “becoming more open, market-friendly and democratic”.

One event after another in recent months has cruelly exposed such facile narratives. China, though market-friendly, looks further from democracy than before. The experiment with free-market capitalism in Russia has entrenched a kleptocratic regime with a messianic belief in Russian supremacism. Authoritarian leaders, anti-democratic backlashes and rightwing extremism define the politics of even such ostensibly democratic countries as India, Israel, Sri Lanka, Thailand and Turkey….

I don’t agree. This is not a conflict between East and West or between capitalism and communism/socialism, but between totalitarianism and liberal democracy — a people’s right to govern themselves. Western forms of liberal democracy are mostly flawed, with many governments effectively hijacked by special interest groups whose needs determine government priorities. Russia is just a more extreme example of the situation in Washington DC.

Only by evolving new forms of liberal democracy, with more direct representation, are we likely to ensure its survival. We presently see many attempts at establishing new democracies fail because too much power is concentrated in the hands of a single individual or group. Only when power is shared between all major parties/interest groups, as in the Swiss system, are we likely to improve the success rate. It will take time to learn these lessons, but history is patient. The timescale is measured not in years but in decades, if not centuries.

Read more at The western model is broken | Pankaj Mishra | World news | The Guardian.

Income inequality: Ask the wrong question, get the wrong answer

John Mauldin writes

That income inequality stifles growth is not simply the idea of two economists in St. Louis. It is a widely held view that pervades almost the entire academic economics establishment. Nobel prize-winning economist Joseph Stiglitz has been pushing such an idea for some time (along with Paul Krugman, et al.); and a recent IMF paper suggests that slow growth is a direct result of income inequality, simply dismissing any so-called “right-wing” ideas that call into question the authors’ logic or methodology.

The suggestion that income inequality stifles growth is a fraud, designed to promote a socialist agenda of redistributing wealth to the poor. We are currently experiencing slow growth because of the GFC, not because of rising income inequality.

The real question that needs to be answered is: which system best promotes growth and improves the living standards of the broad population? Evidence of the last 100 years is difficult to dispute. Socialism has an abysmal track record in uplifting the poor, while capitalism has fueled a massive upliftment in living standards over more than a century. High rates of tax on top income earners kills growth and redistribution to the impoverished does little to improve their living standards, whereas low tax rates encourage growth and raise living standards.

To recover from the GFC we need to allow capitalism to flourish instead of impeding it at every turn.

Read more at The Problem with Keynesianism | John Mauldin.

The importance of regulation

Capitalism without regulation is prone to excesses, driven by individuals pursuing their own self-interest. Price-gouging and provision of inferior quality goods and services are held in check by competition, but there are other aberrations against public morals, or not in the public interest, that require regulation. Historical examples would be the use of slaves, the opium trade, usury, prostitution, child labor, conquest and exploitation of primitive cultures, and sale of weapons or related technology to a nation’s enemies.

Regulation is also required to curb monopolistic practices, where competition is ineffective. There is much talk of the importance of free markets, but unregulated markets are not free. They are prone to cheating, corruption and abuse of market power. What is needed are efficient markets, where there are:

  • low barriers to entry for new participants
  • low transaction costs
  • equal access to information, at the same time

Stock markets are often quoted as an example of an efficient market. Regulation has contributed to this over the years by policing illegal activities such as insider trading, front-running, wash sales, pump and dump, price manipulation, squeezes, and disseminating false or misleading information. But lately the prevalence of high-speed trading has eroded investor confidence, as most market participants no longer have access to price information at the same time. If this continues, the onus is on regulators to allow competitors to set up efficient markets for investors.

Urban sprawl isn’t to blame: unsustainable cities are the product of growth fetish

By Brendan Gleeson, University of Melbourne

In a recent article on The Conversation Robert Nelson argues we are all morally culpable for unsustainable urban sprawl. He goes on to suggest we fix this by taking advantage of opportunities for higher density development in sparsely populated inner suburbs.

But his argument is based on a false opposition: mounting evidence shows that high density development in inner areas performs very poorly in terms of resource consumption and greenhouse emissions. The idea that outer suburbs are inherently less sustainable than inner ones doesn’t bear scrutiny.

The key question is not where we accommodate growth; it’s our slavish pursuit of growth itself.

Urban accumulation

The metro fringe is expected to accommodate 40% of our national population increase in the next 15 or so years. Australia has for some time been experiencing record population growth, cheered on by business lobbies, and rationalised by the expertise they buy. Not all of it is corporate conception, or undesirable: the fertility spike and commitment to a humane migration program are also contributors.

The urban sustainability crisis betrays not bad consumption patterns but the awesome success of accumulation. Our cities express the ceaseless economic expansion imperative and its politico-cultural expression, which Clive Hamilton has memorably described as the “growth fetish”.

We have sprawl in every possible physical form – from low density suburbia to the vertical sprawl produced by market driven compaction. It is a fallacy to describe the latter as sustainable.

The existing urban footprint simply cannot absorb the human increase. It is a physical, social and political impossibility. And the underlying imperative of accumulation will drive excessive urban expansion in its various forms.

Risky business

The physical form of cities and suburbs has little influence on overproduction and its social and ecological consequences.

We are, as Nelson correctly implies, in the tightening grip of a species crisis. As the German sociologist Ulrich Beck describes it, we live in a World at Risk – from climate warming, resource depletion, economic default, and social breakdown. The ecological crisis may be the gravest of these as it appears to be moving with wild speed and threatens to upend the planetary order entirely. But it cannot be divorced from the other calamities which all derive from a human modernity that, as Beck states, is devouring itself.

The looming human catastrophe is not a moral crisis or a consequence of ethical failure. It is the product of a political economy that has defined, if not always exclusively, the process of modernisation through the past five or so centuries. The long haul of capitalist accumulation has brought us to the abyss of species threat.

It is wrong to explain this historical process in moral terms. This merely distracts attention from the role of capitalism as a driver of growth. As the philosopher Slavoj Žižek put it recently, “The point of emphasising morality is to prevent the critique of capitalism”.

Capitalism is a force for ceaseless accumulation driven by valorisation (value creating value). It is hard-wired to expansion, and can never be reconceived or reformed as a “steady state” economic order. It expands or it dies.

And therein lays its marvellous, terrifying power. It is a human order set in epic contest with the natural order, scaling ever upwards the heights of risk. One day it will reach the precipice of possibility and a structural transformation will ensue. Humanity will survive this, as it has all other historical transformations, but we do not know what new social dispensation will be possible in its wake.

Weathering the storm

It is simply impossible to dramatically change the urban form in the timescales of looming climate and resource emergencies. Absent war or massive calamity, cities resist sudden change. We cannot design our way out of a crisis generated by the underlying political economy that has driven modernisation for centuries.

However, good planning and design are vital to the project of making our cities as safe and resilient as possible. Elsewhere I have urged us to reconceive cities as lifeboats that will carry an increasingly urbanised humanity through the storms that lie inevitably in our path.

It is only fair that we break from our long habit of malign neglect and cut the outer suburbs an appropriate share of national resources. The investment should be in a massive suburban overhaul to realise the latent environmental potential of the low density form. In quest for resilience, households should be assisted towards self-sufficiency in water, energy and food production.

Paul Mees’ important Australian book, Transport for Suburbia, shows decisively that good public transport is possible in the low density form. We must lament the intellectual and political idiocy that has convinced us that it cannot be made to work in the suburbs.

The outer suburbs simply aren’t the source of our mounting environmental problems. And neither is social delinquency a helpful way of thinking about what is a long run failing of the market economy. We have to prepare the lifeboats for what lies ahead.

Brendan Gleeson does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

The Conversation

This article was originally published at The Conversation.
Read the original article.

Colin Twiggs:

I agree with Brendan Gleeson’s defense of suburbia, but what concerns me is the focus on sustainability in terms of energy usage and a critique of the economic system. No doubt these are important, but I would like to see more attention given to the health dangers of high-density living, both physical and psychological — from the impact on childhood obesity to feelings of isolation, increased aggression and pathological behavior in inner city environments. Biologists as far back as Konrad Lorenz (Civilized Man’s Eight Deadly Sins) have warned of the dangers of over-crowding and their impact on aggression levels.

Lorenz also warned of the ‘avalanche’ effect of positive feedback from technological development and how this could create an environment where humans struggle to cope. Prof. Gleeson I believe is trying to make a similar point when he refers to a ‘growth fetish’.

Capitalism is a force for ceaseless accumulation …… It is hard-wired to expansion, and can never be reconceived or reformed as a “steady state” economic order. It expands or it dies.

To lay the blame for this ceaseless expansion at the foot of Capitalism is I believe misguided. Capitalism covers the full spectrum from intense competition in cities like New York to peaceful co-existence in rural communities such as Pennsylvania or the Outer-Hebrides. And we find a similar spectrum in Communist or Socialist societies. The underlying cause of the malaise appears to be the impact of high-density living — no matter what economic system — and the consequent breakdown of the individual’s sense of community and belonging. A study (can anyone recall the name?) done in Australia several years ago found that Australians living in small to medium-sized towns (10,000 to 50,000) enjoyed greater psychological well-being than their city or rural counter-parts. These towns seem to offer balance between community (belonging) and the spectrum of opportunities only normally available to larger communities. More effort should be made to identify the underlying causes of that well-being and attempt to replicate the benefits in both rural and city environments. Economic and energy efficiency are important, but first and foremost we need to create cities that are healthy to live in — from both a physical and psychological aspect.

Nations Must Prepare For Robots Destroying The Low-Skill Job Market | Business Insider

This opinion piece from the Economist proposes redistribution on a grand scale to remedy massive unemployment from mechanization of assembly lines.

If society wishes to avoid such an outcome, the only real option is redistribution and a lot of it. That, in turn, could be managed in a few ways. Society could make a go at raising the earnings potential of less skilled workers by investing heavily in education. That will strike many as the most attractive solution, but it is also one that will face limits. Not everyone can be educated to Google-engineer level.

More skilled or richer elements of society could effectively tax themselves by protecting certain job categories in order to maintain employment opportunities for the less skilled. So, driverless cars may soon be an operating reality. But society could pass laws banning or limiting AVs in order to protect certain jobs: taxi driver, for instance, or trucker. Depending on the size and organisation of less-skilled groups, that’s conceivably a benefit they could vote themselves.

This is why socialism does not work. The typical reaction of a central planned economy would be to increase taxes or outlaw technological advances in order to protect jobs. Capitalism coped comfortably with the mechanization of agriculture, introduction of the automobile and the computer. Should we have banned the use of tractors, automobiles and automatic teller machines to protect the jobs of farm laborers, ostlers and bank tellers? The first instinct of central planning is to protect the status quo — which is why socialist countries fail to grow. Visitors to communist bloc countries during the Cold War felt they were going through a time warp: the contrast with Western advancement was striking. A more recent example is the economic stagnation in Southern Europe. Without the creative destructive process that allows capitalist economies to adapt to changing needs, progress grinds to a halt and economic gridlock develops.

Adaptation to new technologies will not come from government think-tanks, ivory tower academics or even big business. It will come from thousands of start-ups, all trying to take advantage of the changes. And the millions of lost jobs will be absorbed into other sectors of the economy as new needs arise.

Larger profit margins from mechanization will be eroded by increased competition. Prices of manufactured goods will fall, leaving consumers with more money to spend. Man has unlimited wants and only finite resources. As Abraham Maslow described: when one need is satisfied, new needs surface to take their place. Increased consumption in other sectors — whether bigger houses, more flat screen TVs, or longer holidays — will generate employment opportunities.

Like evolution, the beauty of the capitalist system is its simplicity. Recent failures like the global financial crisis are not the fault of capitalism but the result of central planners — at the Fed and in government — attempting to meddle with the system. The road to hell is paved with good intentions.

via Nations Must Prepare For Robots Destroying The Low-Skill Job Market – Business Insider.

How Mitt Romney lost the unlosable election

William Bennett writes that President Obama won the 2012 election by winning 93% of the African-American vote and 71% of Latino votes, while Mitt Romney won white voters 59% to 39%, according to exit polls. If the GOP believe they lost the election because of race, they are destined to repeat the same mistakes over and over again. The key to their loss is that Obama won 60% to 38% among those who make less than $50,000 a year and among 18- to 29-year-olds he won 60% to 37%.

Capitalism is failing these two sectors of the population: low income earners and the youth. Poverty rates are highest among Black and Hispanic voters but young voters are also becoming disaffected, with almost half recent college graduates unemployed or under-employed. The seriousness of the situation is illustrated by the following statistic:

According to a Pew Research poll taken last year, 49% of Americans age 18-29 have a positive view of socialism while just 46% have a positive view of capitalism.

Mitt Romney might have sold his message to the middle-class and small business owners but he alienated the very people who suffered most from the economic downturn. He failed to define his campaign as a war against poverty and unemployment. Instead of looking the disaffected in the eye and telling them what he could do to get them a job, he spent his time preaching to the choir.

via Republicans lost the culture war –