Post-Capitalism

Stock markets are going up in the UK and US. But we are in a recession. Yanis Varoufakis says that this means that the value of companies is no longer correlated with profits and that this is unprecedented.

The price of shares is now being driven by speculators more than by results. We used to think of stocks as an investment. You put your money into a company to help capitalise it and that company pays you an annual dividend based on profits. This is how capitalism works (in this view labour is simply an overhead and does not have anything to do with making a profit).

Speculators are not investors. They are gamblers. They think in the short term. Aided by computers, the short-term can mean milliseconds as algorithms buy and sell shares 1000 times a second accumulating thousands of tiny short term gains to make huge profits over the long term.

This is not investment because the profit is not in the dividends, it is in the second to second fluctuations in price. Speculators can bet that the price with go up, which is a straight profit, but they can also bet that the price will go down (called "shorting") and still make a profit when the price of shares falls.

This speculation is now the dominant force in our stock markets and most of the money involved is, in fact, not doing any work at all in our economy. Rather it sits outside the economy not contributing anything except when the super-rich buy yachts and such.

And the speculators are mainly banks. Banks using the money that governments have been giving them ostensibly to invest in commerce. Here's how it works:

Every time the Fed or the European Central Bank or the Bank of England pumped more money into the commercial banks, in the hope that these monies would be lent to companies which would in turn create new jobs and product lines, the birth of the strange world we now live in came a little closer. How? As an example, consider the following chain reaction: The European Central Bank extended new liquidity to Deutsche Bank. Deutsche Bank could only profit from it if it found someone to borrow this money. Dedicated to the banker’s mantra “never lend to someone who needs the money”, Deutsche Bank would never lend it to the “little people”, whose circumstances were increasingly diminished (along with their ability to repay any substantial loans), it preferred to lend it to, say, Volkswagen. But, in turn, Volkswagen executives looked at the “little people” out there and thought to themselves: “Their circumstances are diminishing, they won’t be able to afford new, high quality electric cars.” And so Volkswagen postponed crucial investments in new technologies and in new high quality jobs. But, Volkswagen executives would have been remiss not to take the dirt-cheap loans offered by Deutsche Bank. So, they took it. And what did they do with the freshly minted ECB-monies? They used it to buy Volkswagen shares in the stock exchange. The more of those shares they bought the higher Volkswagen’s share value. And since the Volkswagen executives’ salary bonuses were linked to the company’s share value, they profited personally – while, at once, the ECB’s firepower was well and truly wasted from society’s, and indeed from industrial capitalism’s, point of view.

Thus post-capitalism is not a good thing.

"My difference with fellow lefties is that I do not believe there is any guarantee that what follows capitalism – let’s call it, for want of a better term, postcapitalism – will be better. It may well be utterly dystopic, judging by present phenomena." Yanis Varoufakis

Conservatives, Neoliberals, Liberals, and Trump.

This question appeared on Quora

Why don't conservatives do more to reach out and support the cities like zoning reform (housing), transit projects (transportation), economic revitalization (jobs) like urban conservatism? Why serve suburbs and rural areas but leave cities behind?

Here is my response.

It’s not so much to do with conservatism as with liberalism. Liberalism proper is the philosophy of the liberty of the individuals. Liberalism argues that individuals are radically free and thus the circumstances of their lives are the result of their own choices, regardless of the start they got.
We are currently on liberalism 3.0.

Liberalism 1.0 was classical or economic liberalism which emphasised individualism and the private sector. Liberalism 2.0 arose as a response to the failures of 1.0. The distinction is nicely summed up in Isaiah Berlin’s ideas of negative liberty and positive liberty. Liberalism 1.0 emphasised what Berlin called negative liberty, that is the removal of constraints on liberty. In particular the first liberals (an offshoot of Whiggism) argued the government should not interfere in commerce.

This led to poverty, corruption, and instability (aka The Great Depression) so social liberals (2.0) began to argue that positive liberty was also required. They wanted to removed barriers to economic participation such as lack of access to education, health care, or job opportunities. They argued that if the private sector was unable to or unwilling to undertake the kinds of activities you highlight, then government should step in.

Liberalism 3.0 or Neo-liberalism arose as a reaction against Liberalism 2.0. Neoliberalism argues that all commercial activities—such as house building, infrastructure, and investment—must be carried out by the private sector in response to demand. Their ideology is that only the pure logic of supply and demand will ensure a fair distribution of wealth in society.

Unfortunately Liberalism 3.0 still has Liberalism 1.0 as part of it’s kernel and so we are once again seeing poverty, corruption, and economic instability (e.g. the global financial crisis). Worse, Neoliberals openly attack and smear Liberalism 2.0 as the source of all our problems, conflating it with “communism” and extremism. In this view there is no role for positive liberty or for government in society.

The reason we associate these ideas with conservatism is an historical accident. Because these economic ideas are quite unpopular with the majority, the right-wing parties that first adopted them and opted for the more ideologically pure implementation struggled to win power. They were mainly socially conservative but had not connected with other conservative groups. In order to get Reagan elected in the US, Republicans made common cause with the previously politically inactive conservative Christians. They began to emphasise social conservative ideas like “family values” and frame their extreme right-wing economics in terms of “tax relief”.

On the other side Liberalism 2.0 became conflated with socially progressive approaches. Liberalism 1.0 had also been progressive in its time. Then it became mainstream and the norm. Liberalism 2.0 adopted a progressive attitude because their goal of equal economic participation lay in the future. But 2.0 liberals are not left-wing. Especially in the US they are centre-right, i.e. liberals interested in positive liberty.

Weirdly the most extreme right-wing economic policies come from the Republicans nowadays (and their counterparts abroad).

But here’s the thing. Most people vote on social issues rather than economic issues. So they vote conservative even though they don’t like neoliberal economic policies. And neoliberalism, liberalism 3.0, has become entrenched. At the same time a deliberate coup d’etat in universities in the 1970s ensured that only right-wing economics are taught to most students. Left-wing economists were elbowed out and struggled to get published or promoted. So now two generations of economists, think tanks and lobbyists, politicians and journalists have all been indoctrinate with the view that the only valid economics are right-wing. Even Democrat Presidents pursue right-wing economics while trying to implement socially responsible (and extremely popular) policies like universal healthcare.

And here’s the other weird thing. The neoliberals have developed an economic narrative that has social overtones, which is that the 2.0 Liberals cannot be trusted with the nations finances; they don’t understand economic realities (that is to say the ideology of neoliberalism); and any deviation from neoliberal orthodoxy is communism (re-activating the long held fear of the left). This makes economics a social issue.

And so even though neoliberalism the world over is bad for workers, bad for all but the growing number of billionaires, people keep voting for conservatives with a neoliberal agenda that they disagree with.

And the fact that a progressive black man got elected was too much for conservatives and neoliberals. Their fears all seemed to come true at once and created the backlash that Trump rode to power. The Trump-led republican party has zero interest in public works. And we see this in their response to the coronavirus. Govt’s role in their view is to facilitate businessmen making money. Mitch McConnell has become a multimillion since entering the Senate. Trump sees the Presidency as a personal business opportunity and is too busy trying to enrich himself to do anything for Americans. And the extreme conservatives and the extreme neoliberals are only too happy to go along with Trump.