Second Thoughts on "Free Enterprise"

After thinking about Nick Hanauer's TED presentation the last few days I went back to some of my older blog posts. The following was first posted in October of 2009 and looks at the realities (good and bad) of globalization. 

Here are the main points; you can read the whole thing to get more nuance:

1. What we call globalization is just the labor market on a larger scale -- and if we don't share the jobs, somebody's going to take them by force.
2. Successful entrepreneurs leverage a system that rewards them for driving prices down by subsidizing the cost of the goods and services they sell to us -- McDonalds is able to sell cheap burgers because of farm and tax and transportation (etc.) subsidies. 
3. Perhaps inevitably, businesses that have achieved success will do whatever is necessary to guarantee future success -- including taking advantage of subsidies and cheap labor and regulations that protect the stays quo. Capitalism is fundamentally hegemonic/monopolistic, but now on a global rather than market scale.
4. Labor -- the human beings who do the work -- are a fungible commodity. Workers are on the books as a liability, not an asset. Productivity gains go to shareholders, not stakeholders.
5. This is not up for argument. It's already the received wisdom by the global financial/political elites. But there is still a "What's next?" question to be answered.

Entering the Summer of 2012, our eyes are on Greece and Spain in Europe, but the of capitalism may also be found in places like Bangladesh or Singapore or, god forbid, Somalia.


The piece was meant to be provocative, somewhere outside the dialog at the time. I'm pleased (or saddened) to find it still current. Let me know if you think we've learned something.

WHY FREE ENTERPRISE ISN'T (October '09)

Among the inescapable lessons drawn (by me) from the current economic tsunami are:

•  Globalization is absolutely necessary: if we want to keep every ambitious or desperate third-worlder from coming to where the jobs are (here), we have to send at least some of the jobs to where they are. 
• Globalization means that the American working middle class is history: it was their jobs that got sent wherever.

This is not happenstance. There is a key human, behavioral imperative in operation. It is a trait, an instinct perhaps, which has allowed us to compete so successfully with the other species in our environment. We (you and me) would not be here without it. And it could easily be  the imperative that cause the collapse of our global society.

In virtually every human culture we know about, humans demonstrate competitive behaviors, played out in the acquisition of money and/or power. Not every individual is driven by this, certainly, but most cultures reward that minority of individuals who are the most competitive personalities large amounts of control over everyone else. You can argue that ethnic and political cultures gained strength to the degree that they formalized the ascent to power (to prevent endless battles) and balanced the interests of the power elite (who may be less competitive than their founders) with the interests of the plebes (some of whom may be more).

If that balance is lost, the natural urge to dominate is by definition more unbridled, even manic.  The American economy has gone through several cycles of this excited, almost pathological activity in its history. We have been shrugging it off as a necessary aspect of an efficient free market. Sounds good. But the definition of "free" is what is at the center of this.

It was a blog posted by Robert Singer on disinfo.com that got me thinking about what free market really means (at least in this version of capitalist democracy) with the statement:

"You don’t eat the hamburger at McDonalds because it’s a dollar: It’s a dollar to get you to eat it."

 Singer's point is that Ray Croc could sell a hamburger cheap because the grain (which made the bun and fed the cattle ground into the patty) was subsidized -- farmers could sell it for less than it cost to grow. That was because somebody -- taxpayers -- paid them a subsidy that made up the difference.

Now, Ray Kroc could have sold the burger for a higher price and have gotten rich that way. But the genius of Ray Kroc is that the burger he sold bought him both your dollar and a powerful piece of the market. This was about Ray versus everybody else slingin' burgers. Which was mostly diners and cafes run by moms and pops and small entrepreneurs -- gone. The dollars he got from us let him buy a lot of real estate  -- the asset value of McDonalds is primarily in the land the stores sit on, not the number of burgers served. The burgers pay the mortgage. Or perhaps we all do.

Singer sees this an example of the "downward manipulation of prices," a deliberate strategy supported by the Federal Reserve and big finance from its inception:

"Butler’s investigation has identified JP Morgan Chase, one of the founding members of the Federal Reserve, as the prime suspect, in the “ongoing intentional, not accidental” great crime of keeping the price of commodities low so the middle class can afford the American dream, a nightmare for the planet."

It's the same strategy employed by Standard Oil (and all its offspring) and the agribus monoliths, in terms of domestic policy and building reliance on chemical fertilizers and engineered seed. And it's the same strategy, but now leveraging global IMF inequities, that WalMart employs to use low-paid, off-shore labor to supply the goods that will purchase our domestic dollars.  A subsidy here, a controlled wage there, every little wrinkle lets me buy more customers.

But for now, we should know that every piece of food, virtually every consumer item, is paid for in unseen ways -- by manipulated commodity pricing, and by the use of virtual slave labor to work our farms and factories.

The lesson: if you want to win, you've got to own the market, and one way to do that is to decouple everything from value, make it only about price. It's anything but a "free market," unless you mean that by becoming the dominant player you are now free of pesky rivals, other than those that play by your rules. And the players are now global, concentrating huge capital wealth among a tiny fraction of the world's population. Local communities, national societies and cultural ties mean virtually nothing to them. If you buy the competitive thing, at that level it may only be about dueling with the other big players, mano a mano.

Along the way, in our particular culture, we have undervalued skill and knowledge, and have created a glutted workforce that will take slave wages rather than no work at all. And Wall Street continues to reward those companies that add to the unemployment role, because workers are simply costs, and costs must always be cut.

There was a time when slash-and-burn agriculture was probably key to human survival. It provided sunlight for earth that was rich with the ash of the burned plants. But after a year or two the fertilizer was consumed. It took decades for the biomass on that patch to build to the same level of nutrients. Not a big problem in a big forest with few people.

As the forest fills up with hungry people, slash and burn is probably not a good strategy, except it's always worked before. We know how to do it. It's someone else's problem.

At some point, we may change our short-term tactics to match long-term imperatives. Or the winners will just keep fighting over the remaining forest. For that kind of social disconnect, think London in 1870: toffs in the clubs, corpses in the East End.  I've seen articles/ads on Newsmax.com promising to give you the secret to being a "Robber Baron" in this financial crisis. Something to think about.

TED and the Conventional Wisdom

Over the last few years TED has established itself as a forum for new thinking, a platform for ideas that question (in many cases) the current conventional wisdom. A couple of months ago Nick Hanauer, who has been an enthusiastic entrepreneur for a few decades, and canny enough to make a pile of money, made a brief presentation to a TED audience.

Nick spoke as a capitalist, a person who uses his resources to build new businesses. His point was that capitalists do not create jobs. In fact, as a capitalist he knows that hiring people is one way to scare investors off. He made the point that it is delusional to think of capitalists as job creators -- the transfer of wealth to the 1% (and rising un- and under-employment) over the last few decades of lower marginal tax rates should prove that assertion.

TED, for reasons of its own, decided that it would not post the talk on its website. Nick, who has also been writing about our political culture for several years, pushed for posting. Yesterday, after the issue got picked up by some media outlets TED posted the presentation -- on YouTube -- and got about a quarter million view in the last 17 hours.

Despite TED's characterization of Nick's speech as "partisan" it comes across as low-key and fact-based -- a rich man who recognizes wealth is its own blessing and deserves no other favors. So why TED's insecurity about his talk? Is it a little too at odds with their conventional wisdom? Is TED just another arm of the MSM? Or is this a clever plan to get Nick's message beyond the TED auditorium?

Beyond that, can you think of a reason why this viewpoint, and perhaps Nick himself, is not given greater coverage and discussion in the media?



- Posted using BlogPress from my iPad

Reality vs. Rhetoric

Back a few decades, at the start of my second year as a Teaching Assistant in English, we were given a new course of instruction to follow. Instead of teaching "English Composition" we were to present "Rhetoric." The idea being, I think now, that a knowledge of rhetorical strategies would better equip our freshman readers with the tools to understand the difference between what somebody said and what was real. This was at the precise time that UC was under fire. New Governor, ex-second-billing actor Reagan had just fired Chancellor Clark Kerr in retaliation for the Free Speech Movements disruptions a couple of years before.

I don't think the curriculum change had anything to do with the political shift. And I certainly don't think our muddled approach to Rhetoric was was any more effective in raising political consciousness than what we had been doing -- reading, discussing and writing about the books that in various ways tried to explore what was both true and human.

At the same time, in the past few years I've used what I learned about rhetoric those many years ago to help understand one of the most vexing issues for progressives -- why have conservatives, over most the last 30 years, "owned" the political debate?

A few years ago, my friend Nick Hanauer had turned me onto the work of George Lakoff, a cognitive linguist and author of numerous books. many focused on the issue of language as apolitical tool, and on the values that are represented, sometimes subtly, focused on some key words and constructs. His term (used by many) was "framing." He exhorted those on the left not simply to harrumph and argue about these terms, but to find ways to reframe the argument. In other words, it's all about rhetoric as key to controlling reality.

At that point (2007), Nick, was trying to find ways for non-rightists to amend the framing of the political reality, was finishing co-writing and publishing "The True Patriot." The book draws quotes from key Americans, and intersperses them with an argument that neither the right nor left owns "patriotism." The book, in other words seeks to "reframe" the idea, the word in terms other than how the right was using it.

Also in my mind: in October of 2004 a writer in the NY Times, Ron Suskind, quoted a white House aide:

The aide said that guys like me were "in what we call the reality-based community," which he defined as people who "believe that solutions emerge from your judicious study of discernible reality." ... "That's not the way the world really works anymore," he continued. "We're an empire now, and when we act, we create our own reality. And while you're studying that reality—judiciously, as you will—we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors…and you, all of you, will be left to just study what we do."^[link]

In other words, again, Rhetoric trumps Reality. A sophistic talent for rhetoric is certainly a valuable tool in acquiring power (vide Shakespeare's Richard III, or Marc Antony in "Julius Caeser") or moving multitudes (Prince Hal in Henry V), but often it is a tool clever people can use to avoid really thinking about something and to make appeals to emotion and fear. (FWIW, there was much speculation that the "aide" was actually Karl Rove himself.)

And if power is your highest goal, I suppose you'd be a fool not to use rhetoric to destroy an inconvenient truth.

Until it doesn't work any more.

It may be possible that we are seeing that tipping point now. No matter how loud the voices of Tea Baggers, Birthers or Death Panelists, they are not creating any kind of mass movement, other than a vague unsease, if not outright disgust for the whole process and all the actors. We've been hearing the same scary claims, rhetoric if you will, since the '80s. There's a solid line that connects Lee Atwater (deceased) to Roger Ailes (Fox News) to Karl Rove. With Rove in sole control the right is in disarray. His key strategy has been ... to label the congressional health care debate "Obamacare" (there's framing for you) and to make claims that don't even survive half of the first news cycle. You can smell the desparation.

I'm all in favor of change, but the cold reality is that most people will resist making a decision about change until they are convinced things are so bad that any decision is better than the status quo. As weird as it seems right now I think we're still a way from any tipping point. And I think Obama does, too. But that's the thing about tipping points.

And if at some later stage we get to the point (after going through a little hell) that we are better at seeing the reality behind or beyond the rhetoric, that would be a good thing, wouldn't it?