"The Darwin Economy" by Robert H. Frank

Unlike the previous post where I cheered for Robert Frank’s book The Darwin Economy, I want to be a bit more critical about the book this time.

Before I begin, I want to say that I still cheer for this book, and it is one I ardently, enthusiastically, and wholeheartedly recommend.  If I had the chance I would buy lots of them and give them as gifts to my friends, neighbors, legislators, governor … you name it.  One of the greatest things about reading this book is that it becomes one of those events which invite you to revise your thinking on a rational basis.  And I never cease to marvel at the depths of Frank’s views on the economy.  It certainly has stimulated me to revise my own ideological views about how the economy works, and which solutions should be adopted to make this world a better place.  As a matter of fact, there are many areas in the book I will use for my Ethics course this semester (most of the students in my course are from Business Management).

That does not mean that I agree with all of the examples he uses in the book, nor do I agree with the way he portrays many aspects of what is a deontological view of Ethics.  Frank seems to promote a teleogical or consequentialist view of Ethics, while I use a deontological approach.

What is the Book About?

Before discussing what the book says, let me clarify what the book is not about.  When I showed the book to several on my friends in Facebook and Google+, some raised concerns about the subject.  They warned me of the possibility that I might fall into social darwinism.  Of course, whoever has read my educational material about what Ethics is and is not, knows that I would never fall into it.  Although I always begin the course explaining from a biological level how evolution made us have a moral sense, I strongly warn my students that Neodarwinism, as it is proposed today, only describes a whole process by which living beings reproduce, speciate, and change over time.  It does not intend to prescribe ethically what we should and should not do as rational moral beings.  As we shall see soon, Frank does not turn Darwinism’s description of biological processes into an ethical advice.

Originally, The Darwin Economy was going to be called The Libertarian Welfare State, which gives you an idea of what it is about.  Given that Frank was told that such a title would never sell in Europe, he changed its name to The Darwin Economy.  It was also written as a reaction to the almost inane (I would say “insane”) “dialogue” that seems to permeate all of political discourse in the United States.  Of course, most of us know Adam Smith as being the father of the science of economics as we know it today, yet Frank predicts that in a hundred years from now, the majority of serious and learned economists would name Charles Darwin as the parent of their discipline. Contrary to some misconceptions, Smith showed that, sometimes, if you let selfish people act in the marketplace, the “invisible hand” of the market will lead to good outcomes for society.  Frank points out that Smith would not recognize his own views if he ever read the proposals made by extreme libertarians today, who think that government should do nothing and that a free unregulated market will always lead to good outcomes.

Smith’s skepticism about a universal goodness out of selfish people stems from the fact that many business owners can join together and conspire to oppress the people, in which case, the government should intervene to prevent such conspiracies against the public.  However, one question we could ask is:  When does the invisible hand fail?   Frank finds the answer in Charles Darwin’s own work.  What drives biological descent with modification is precisely competition among individuals and groups.  Both the cheetah and the gazelle compete for survival by trying to be faster than the other.  The fastest member of each species tends to survive and reproduce, passing those genes along.  When that happens, individual and group interests are in harmony, since the prevalence of fast gazelles and fast cheetahs do actually benefit their respective groups as a whole.  In this case, we have “invisible hand”-like results.

However, Darwin also noticed that individual and group interests diverge.  This is the case with the bull elk (as you can see in the cover of the book).  Members of the species are polygenous, meaning that they take more than one mate if they can, to be able to reproduce.  Their male antlers are not really meant to defend themselves against other predators, but to win some fights with other males; whoever wins, will end up with as much as 100 females maximum.  So, whoever has the biggest antlers will end up with their mates and pass the genes along.  Yet, in this case, there is a problem.  If males with heavy antlers prevail, then such feature becomes a disadvantage from the group’s point of view, because they can end up being eaten by predators if chased in dense wooded areas.  In this case, individual and group interests diverge.  Such cases do happen in the economy, and when they do, the “invisible hand” of the market breaks down.

Bull elk are pretty much stuck with the situation, since their intelligence is not complex enough to make rational decisions about what to do with their antlers.  They are pretty much stuck with natural selection.  Yet, Frank does not suggest that we ought to be stuck with natural selection, not even market selection for that matter (which is what social Darwinism would suggest).  Instead, he points out that we, humans, as intelligent beings who actually can make rational decisions, we should collectively establish a mandate which benefits the group.

He uses the example of hockey players.  If you let players have the choice of not wearing helmets, all of them end up not wearing it.  This is not because they ignore the fact that helmet protects them (there is no cognitive error in the process), quite the opposite, they know that playing without helmets could increase the chance of being hurt during the game.  Yet, given the immediacy of seeing better, hearing better, and intimidating the opponents better ….  they are not too worried about a more abstract concern of harm.  Yet, if you ask them if they should be a mandate to wear helmets, they would all favor it.  Why is there a discrepancy?

If there is no mandate, the individual interest to win prevails, leading other players to do the same, since they are also thriving for their individual interest to win.  Yet, when they all do it, the result is that not one individual is in any advantageous position, yet everyone is worse off, since all of them are unprotected.  Hence, individual and group interests diverge.   A rule mandating helmets and prescribing a penalty for those who do not want to wear it, would make all players wear helmets, everyone would be in equal footing, and they end up better than if there were no mandate.

This is what happens with the construction of ever more expensive houses for the middle class, even when there is no increase in salary in real terms over the years, leading huge problems.  Those at the top earned more throughout the years, buying far more mansions, and spending considerably in them, even when they are no happier than before for doing so.  This consumerist behavior “trickles down” to those below.  As a result, the middle class competed for more and more expensive houses even when they had no real income growth.  This apparently benefited them individually, especially regarding status, but not as a group.  This inevitably leaves the middle class worse off.

[Note:  I highly recommend Robert Frank’s analysis on this very interesting subject in his book Falling Behind:  How Rising Inequality Harms the Middle Class.]

Frank suggests that a progressive consumption tax will discourage this sort of behavior, among others which create harmful activities such as carbon dioxide emissions which create global warming, while, at the same time, leading governments to have money to invest on roads, bridges, and other infrastructure and services people actually need.

Again, his whole argument makes a LOT of sense, and, in a way, I am completely surprised that this has not led to further policies for scrapping the income tax and payroll tax, and phasing in some of these progressive consumption taxes.  In another sense, I am not surprised, since many people in the United States are actually misled regarding how taxes and economic prosperity are related.  You need government to take care of bridges, dams, roads, and even the army.  As Frank argues, if there were no taxes, there would not be an army, without an army you couldn’t defend yourself against other countries which have armies, and if conquered by another nation you will end up paying mandatory taxes to that country.  Also, he shows in the book how lowering taxes has helped terrorist causes.  Many people are not aware that because of irresponsible tax cut policies, a lot of funds were cut  to keep nuclear missiles in Russia (the former Soviet Union) guarded. This means that terrorists may have far less barriers to reach them.  I wouldn’t be surprised if the mushroom cloud metaphor that George W. Bush talked about when launching the failed Iraq War in 2003 will be realized in some way any time soon.

Again, I enthusiastically recommend Frank’s book as being one of those bright lights which challenge people of all along the political spectrum to re-evaluate our own positions on the economy and politics.  None of what I will say in these series will ever change that.  In fact, I thank him for changing my mind about a lot of things.

Frank’s Ethical Position of the Discussion

Yet, there is a little difference I have with him regarding his approach to the issue of ethics.  I confess that I have still to read his book What Price the Moral High Ground?, which seems very interesting.  I want to react to Frank’s notion of ethics as he is pondering about the issue presenting Ronald Coase’s contribution to the discussion on what should be the relationship between the economy and the state regarding cases where the traditional ethical framework of perpetrator and victim seems inappropriate.  Surprise, surprise!  As a deontologist, I fully agree with Coase!

Frank alludes to the famous debate between the consequentialists (teleological ethicists) and the deontologists (deontological ethicists).  I happen to be the latter, Frank seems to hold a consequentialist approach.  Yet, he recognizes the following:

Consequentialists and deontologists have been at each other’s throats for millenia.  Nothing I say here could possibly settle the issues that divide them.  But because I will advocate policy claims that follow from Coase’s consequentialist framework, it’s important to emphasize that the two frameworks are less squarely in conflict than may often appear (pp. 94-95).

In many areas of ethical discussions, there seems to be a “battle” between deontologists and consequentialists, but I don’t want to give that impression in this case.  Ronald Coase’s views actually does make a lot of sense to me, but reasons very different from Frank’s views.  The purpose of my next blog post is to ponder about a deontological solution to some of the problems raised by Coase’s framework.

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Forgotten Observations Made by Karl Marx

Karl MarxOne of the names which arise the terror in the hearts of millions of conservatives is “Karl Marx”.  Yep!  The one and only!  Marx is the greatest economist of the nineteenth century.  Yet, the word “Marxism” is enough to stop any serious conversation about him …  and I underscore the word “serious”.  He was wrong in many things, especially his vocation for predicting the future of humanity, and his willingness to ignore some anthropological realities he actually acknowledged as being natural for all humans, except regarding humanity’s hypothetical life in his version of socialism and communism.  Yet, that does not mean he was not a genius in making a very deep and thorough analysis on capitalism, including its virtues and difficulties.  Many people who say have read his work, but actually never have, say that all of his work is just B.S.   I can count Jim Cramer of Mad Money as being one of them   Yet, this so-called “expert” has ruined many lives with his TV “advice”, especially when the stock market went downhill (Jon Stewart of the Daily Show is my hero for this reason:  see Interview 1, 2, and 3.)

Marx’s opus magnum, Capital, is one of the most thorough and insightful works you will ever read on capitalism.  In fact, if you compare Marx’s work to Smith’s, Marx was pretty much closer to what happens in capitalism.  On the other hand, contrary to what some people believe, Marx’s analysis of capitalism rests heavily on the works of Smith and David Ricardo.

This is because Marx would observe everything under a holistic or integral standpoint.  He inherited a great part of Hegel’s legacy, especially his dialectical view of things.  Hegel said that you should see the world as it is shown to you, then begin your analysis from the simplest concept which all things share, then look for its negation, then look how these concepts are harmoniously included in a greater concept, then such concept would also imply its negation, which would lead to a greater concept which include them, and so on … until you reach the whole of reality.   Marx used this sort of approach but with two basic differences:

  • Hegel focused on the growth and evolution of collective thought (which he called “spirit”), and would make the economy the physical realization of the spirit.  Marx saw that Hegel’s way of thinking was “upside down”, and that we need to straighten right side up:  since humans are basically animals struggling for scarce resources, the primary focus of humanity will be the economy, and collective thinking is the result or reflection of this economic process.
  • Hegel conceived oppositions within reality as being harmonious.  Marx conceived the oppositions in the capitalist mode of production as essentially non-conciliatory.  No matter how much you try to reconcile two opposing dynamics or class relations within capitalism, they will never be reconciled.

From this perspective, Capital will show capitalism as a logical chain organic relations and tense relations, and not a harmonious whole.  He was in the complete disposition to grant every single supposition made by the great economists Smith and Ricardo.  Yet, the intention of his work was to show that even in their own terms, capitalism, through these series of tensions, would eventually collapse.

As a result, Capital dedicates a lot of thought to analyzing these oppositions understood within a whole capitalist dynamic.  I will not work on Capital in this blog, but I will just mention one of the particular oppositions he discusses, and see how this relates to today’s reality.  You can have an introductory but very good analysis of Capital watching David Harvey’s videos on volume one, it is freely accessible on the net.  For now, I will focus on one particular opposition:  Money vs. Capital.

Throughout his work, Marx uncovers the reason behind the use of money.  Money, in the end, is the way with which we exchange commodities, which he elaborates in Chapters 3 and 4 of the first volume.  We don’t exchange oranges for TVs, nor chairs for tables.  Usually the exchange of commodities is made through money.  Capital is money, but it is a specific sort of money.  For him, capital is that money which is aimed at producing more money, hence to more capital.  If you store money in a safe and leave it there for 10 years, that money was not capital.  Yet, if you take that money and invest it in the stock market, then it becomes capital.  This leads to opposite and tense relations between two opposing forms of exchange of commodities:

  • Commodity-Money-Commodity (C-M-C):  This process leads to no increase in value, since commodity is exchanged for money, which is then exchanged another commodity.  If I sell a small radio for $12.99, and then with that money I buy a book, there is no added value to the process.  This is not capital reproducing itself, but just money exchange.  The sole end of the whole process is another commodity.
  • Money-Commodity-Money (M-C-M):  This is a different process, because its aim is not another commodity, but money itself.  Money is an end in itself.  This is what capitalism is all about …  money!  So, a businessman has some money, with it buys some commodities, for the purpose of creating more money.  Then money used this way is capital.

As we all know, the second process is better described as M-C-M’, which means that there was an increase in money (∆M), where ∆M = M’-M.  How was this money reproduced?  We discover, using Adam Smith’s own analysis with Marxian modifications, that one of the commodities bought by the capitalist is the labor force of the proletariat in exchange for the salary (nominal labor price).  The proletariat itself, through the working process, will create more value, which means that the money will increase at the end of the process.  Added value leads to increase in money as a result of the production process (aka ∆M) which is the surplus value, freely appropriated by the capitalist.  This accounts for the phenomenon of hoarding, which defines capitalism as a system of accumulation of wealth.

Let’s look a bit thoroughly at this part of Capital, because, within it, there is a very important criticism to another economist called Jean-Baptiste Say (1767-1832), who was made famous by a formulation known as Say’s Law. Say correctly saw that every purchase is a sale, and every sale is a purchase.  Say’s Law states that at the end of the day, the market should level out and there would be no increase of wealth:  at the very end of the day supply and demand are equal.  A bad businessman, he stated, does not hoard, since he or she needs to spend his or her profits in the marketplace.  Many people in the nineteenth century held this to be true, but Marx explicitly refuted it (many people actually miss footnote #11 in Chapter 4 where he quotes Say).

Yet, the focus many people place to the M-C-M’ process in Capital makes them ignore Marx’s discussion of the C-M-C process in Chapter 3 of Capital. C-M-C is still an important part of the capitalist system. Although this process is not distinctive of capitalism (or a bourgeois category), it is an important component, since Say’s Law could be regarded as valid in this process, but Marx will refute this view as well:

  • C-M:  There must be an exchange between money and a commodity in order to be able to buy another commodity.  In an amusing passage, Marx says that commodities love money, but “the course of true love never does run smooth”.  The price of the commodity is partially dependent on prices in the marketplace.  So, any independent seller will, in fact, be ultimately dependent in the market.
  • M-C:  Money will be exchanged by the commodity.  Marx makes the observation that those who have money in their hands, and only those people, can buy commodities.  To what extent?  Well … to the extent that for whatever reason, if too many individuals do not want to exchange their money for a commodity, the circulation of commodities ceases to be.

It is here where Marx explicitly mentions Say’s Law as a dogma of faith held by many economists.  Marx recognized that every sale is a purchase and every purchase is a sale …  BUT no one needs to purchase just because he or she just sold.  You can hold on to the money and not buy absolutely anything with it for a while.  So, the C-M-C process is not one process, but two processes in tension with each other, forming a dialectical unity.  When a lot of people decide, for whatever reason, to hold on to money and not exchange it for commodities, then there is a fatal crisis in the capitalist system, because the circulation of money stops. Say’s Law basically predicts that the market should level down, that crises are only apparent crises, that there cannot be any generalized crisis in the capitalist system.  Many economists held on to this view for a long time.  Yet, as Marx points out, there can be a crisis if money holders stop circulation.

Despite this strong an accurate criticism, Marx’s observation was largely ignored by other economists, maybe because they regarded Marx as an eccentric radical.  Say’s Law was still believed by economists in general, until John Maynard Keynes came along in the 1930’s.

John Maynard Keynes

In the 1930’s, Keynes writings became generally important mostly due to the Great Depression.  President Franklin Delano Roosevelt was an intuitive Keynesian, and later Keynes proved Roosevelt’s approach was the right path.  Keynes proved Marx correct, even though he would never mention the “M-word” in his works to associate this criticism with Marx’s views.  Instead he used his own term:  “the liquidity trap“, which is the fact that in periods of perceived crises, many people decide to hold on to their money and purchase as little as they can in the marketplace.  This would subsequently lead to a shrinking of the market, more layoffs, more people holding on to their money, and so on … leading to the market’s downfall.

Contrary to the Tea Party’s thinking about Keynes … he was not a Marxist.  Actually Marx would reject Keynesian solutions, given that Marx wanted to end capitalism, while Keynes wanted to use a sort of socialism to save capitalism.  Whether he read Marx or not is up to debate, although many people really suspect that he did.  Yet, he was also part of those economists who refused to say the “M-word” explicitly for fear of being accused as communist, Marxist or anything of the sort.  Today, of course, the Tea-partiers will accuse you of being a Marxist if you so much imply that government should spend some money in better toilets in the U.S. Capitol, but that is another story.

Yet, for Keynes the situation is clear.  For economists, national income includes the variables of consumption, investment, and government spending.  The question is:  which of these three variables would lead a nation out of recession or depression?  Keynes pointed out that consumers would never lead the way, precisely because of the “liquidity trap”.  People will hold on to their money as much as they can in a time of crisis, where there is little opportunity for jobs and the risk of being victim of debt becomes a real problem.

For Keynes, private enterprise will not invest either.  As we have seen with Adam Smith, you can only create jobs in relation to the size of the market, and Keynes knew that very well.  If the market is in crisis and is shrinking, then the only choice of the private sector is to layoff many of its employees, which would worsen the situation since it contributes to the market’s downfall.

Hence, there is only one variable in this equation which can turn things around, and that is government spending.  Government has the ability and the motive to do so.  Some attribute the end of the Great Depression to the New Deal, others to the United States’ participation in World War II.  In either case, it was government spending which saved the day in the end.

Yet, there is a reality regarding government spending in times of crisis:  it needs to tax.

The (Mis)Use of Tax Holidays in the Midst of a Recession

Yet, apparently all of the “no-brainer” proposal made by Keynes in his works is rejected by many politicians today in the U.S. and Europe.  Instead of giving government greater powers to spend on creating markets, provide for the poor, and so on, the suggestion which is prevalent in many industrialized countries is to cut back government “spending”, increase tax subsidies and extend tax holidays.  Yet, as we saw in Part 1 of these series where we used Adam Smith as our main reference, that will not work.  If I pay less taxes than last year, but my market size keeps shrinking, the only place the extra-money is going to go is my pocket.  The problem with reducing taxes in the midst of a recession with no strings attached is that it makes the wealthy be more wealthy.  This is the reason why “trickle-down economy” does not work.

Some Thoughts on Taxes and the Recession

However, I do grant the right-wing some criticism to tax policy.  For example, one of the characteristics of taxing is that it diverts resources from whatever it taxed.  The reason for this relies on the fact that people in general will avoid paying taxes on whatever it is taxed on.  This will not always be this way.  Taxing on profits won’t stop a capitalist from profiting if the tax rate is still competitive enough in relation to other cities, states, or countries.  However, it can prevent job creation, if job creation itself is taxed.  This is the problem of the great mistake of the payroll tax (especially PAYG), which actually prevents job creation by forcing employers to pay taxes directly related to employing a worker.  That is the last thing we need during recession.

Income tax is another bad idea for the same reason, especially a component which is the savings tax.  Why in the universe do we want prevent people and corporations from saving money in banks when we need to create incentives to save money and, thus, have capital to invest?

What about taxing stuff which is harmful?  It has been shown that taxing cigarettes and alcohol actually does persuade many people not to do both, because it would increase their cost.  What about progressive taxes on housing as a way to persuade people not to buy expensive houses?  As it has been shown, part of the housing crisis is due to the fact that people in the middle class had a tendency to buy more expensive houses because other people were buying more expensive houses.  This tendency actually does “trickle down”. The liberalization of the housing market is what got us into trouble in the first-place.  In a time like this, ordinary poor and middle class people could actually benefit from having a non-expensive house which they can pay little or no taxes on, while those who do have money will pay more as they want bigger houses and mansions.  If rich people want to spend on expensive housing, they will have to pay taxes, and those taxes can indeed help government achieve what it wants regarding recovering the economy.

However, as pointed out in an article, tax-exemptions on corporations and the wealthy has led to lack of government funds to actually invest in things we need to finance.  Starving the government in order to pay debt is a wrong approach.  Many highways in the U.S. need urgent repair.  Some states have let them erode to gravel, while others are using gravel instead of asphalt to keep the road “in shape” (cheaper … right?!)  Robert Frank, the economist, states that if a repair costs 6 million, it may well be that, if the problem is not solved, it may cost $30 million two years from now.  If this is the case, then starving the government to pay debts will make government end up with more debt.

If you do not believe me, believe our Republican Puerto Rican government, whose policies on starving the government left about 20,000 people unemployed (“government is the problem”) in order to pay the public debt.  Yet, such government measures had two very bad effects:  it shrunk the market, which led to more layoffs in the private sector; and the public debt rose from about $50 billion in 2009 to more than $65 billion at the end of 2011.

The shrink-government-to-incentivize-private-sector approach to the economy failed miserably during these years.  As many economists, like Francisco Catalá Oliveras, have pointed out, the problem of government size has little to do with the systemic problem of the economy in Puerto Rico.  Yes, government size was great in relation to the private sector, but not necessarily to the size of the population.  Ireland prospered immensely having relatively the same government size as Puerto Rico’s in proportion to its population, yet the size of the private sector was double of the size of Puerto Rico’s.  The problem may not have been that the government is too big, but that the private sector is too small.  Ironically, after the implementation of a Republican program in Puerto Rico to shrink the government “to create more private enterprises”, ended up by having the effect of making the private sector much smaller!

On the other hand, Latin America is becoming increasingly a prosperous continent, mostly because it is made up of countries which have had a more Keynesian approach to the problem.  Of course, Venezuela is socialistic, but more Marxist in its approach to the economy.  Although it is doubtful that the economy has “prospered” on this basis, it has made a lot of investment in infrastructure and government services which might come in handy in a future with or without Chávez.  Similar countries such as Bolivia have taken these initiatives, which have led to an economic growth, the same in Ecuador.  There is hot debate on whether these approaches will lead to further prosperity, given their aggressive approach towards capitalism itself.   Yet, there can be no doubt at all that the Keynesian approach made by countries like Brazil and Argentina has paid off big time!  Argentina fell into a very deep recession with the implementation of the same neoliberal policies which, right now, are going to be implemented in many European countries.  The Kirschners, who hold on to Peronist ideals, approached the economy from a Keynesian philosophy, and its economy is now growing.  Brazil’s philosophy is socialist, but more a democratic-socialism these days, business friendly, while simultaneously regulating its economy, especially in relation to its national resources.  Today, it is becoming an economic super-power.

On the other hand, the United States is stalled thanks, in part, to a President who is not aggressive enough with the financial sector, and a Republican Congress which is not willing to compromise much because it wants the President to fail.  Its systemic corrupt government is not making things better either.  European countries are taking the bitter pill of starving the government in order to pay debts, but Greece, Italy, Portugal, Spain, are doing worse after taking such measures.  Will the neoliberal measures work to save the European Union?

For what is worth, if any incentives are to be offered, it is recommended to look for those which do not depend on tax, and depend greatly on government investment.  People underestimate how important it is to keep the infrastructure working:  roads, electricity, water, investing in buildings, the environment, and so on …  these are all factors which make opportunities to invest attractive, and would save corporations lots of money in relation with a scenario where these things are non-functional.

The high costs of health-care in the U.S. will need massive government investment, especially from the federal government, either through public option or government-run universal health care.  In 2001 it was reported that about 50% of U.S. bankruptcies were related to health care costs, in 2007 it was 62%, making it the leading cause of bankruptcies (see this report, this one, and this one).  A serious public option (not a watered down version that we have today) or universal health care would actually reduce government spending on health care (not increase it) as well as health-care costs.  This can create incentives to private industry in two ways:  making employers pay one third to half (perhaps even less) of what they spend today on health care for their employees, and stimulating a policy of preventive medicine which could increase their employees’ health making them more productive.  Simultaneously, the relatively cheap cost of health care would make government spend less on it, and more on other things which need to be addressed.

Of course, for preventive health care approach, there needs to be government intervention in the food industry, which could lead to lower costs in health care for both government and private health care facilities.  I will let Elizabeth Kucinich (a woman I consider a goddess, with whom I am totally in love with –platonically speaking–) explain this to you.  (BTW … This video shows how tax subsidies keep killing us :-S)

One dollar taxed on harmful behavior is one less dollar taxed in useful activities.

So, let’s tax the right things.  The tax policies must be rebuilt from the bottom up, since much of it is not helping the economy, but not-taxing is not an option.  Yes, I am proposing “social engineering” … yet everything we do collectively is social engineering, if it is not government, it will be businesses and corporations who will do it … and, as I have said before, corporations do not think about your welfare … nor do they have the structural means to think about you.  Government does!  In democratic societies, we should assume the responsibility to tell government through various means (not just elections) to adopt the best tax policies to benefit all of us.  Better let social engineering by democratic governments shape us, than entities and businesses which will socially engineer to exploit society without government restraint!

References

Catalá, F.  (2007).  Elogio de la imperfección.  PR:  Ediciones Callejón.

Frank, R. H.  (2011).  The Darwin economy:  liberty, competition, and the common good.  Princeton:  Princeton University Press.

Keynes, J. M.  (2010).  Essays in biography.  Palgrave Macmillan.

Marx, K. (2002).  El capital.  (8 vols.).  P. Scaron (Trans.).  México:  Siglo Veintiuno Editores.  [El capital.  (8 vols.).  V. Romano-García (Trans.).  Madrid:  Ediciones Akal].

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Does Tax Exemption Create Jobs? Not Really! – Part 2

On January 9, 2012, in Economy, by prosario2000

American Corporations are not Loyal to the United States

The United States is a very strange country.  It is apparently one of the few countries (or perhaps the only country) in the world where people defends an economic system on the basis that it is the “national way of life”.  If you don’t defend laizze-faire capitalism, then you are not a patriot. Usually, countries try to adopt the most efficient economic systems and adapt according to their reality of their internal and external markets.   Not the United States!  This even reaches the level of being detrimental to Americans in general.  Individualism is one of those national myths which many Americans try to stick with, and one basis to reject taxes:  “It is my money!  …  Mine! Mine! Mine!”  Yet, this clearly goes against the direct benefit of the people who subscribe this statement.

In June, Stutsman County residents rejected a measure that would have generated more money for roads by increasing property and sales taxes.

“I’d rather my kids drive on a gravel road than stick them with a big tax bill,” said Bob Baumann, as he sipped a bottle of Coors Light at the Sportsman’s Bar Café and Gas in Spiritwood (Etter, 2010).

On the other hand, the American right-wing has an irrational love for Adam Smith’s “invisible hand of the market”, a fetish which, as we have seen in our previous post, would make Smith pale.  There is an unfounded belief that markets always lead to a better society as a whole, a bold belief which Adam Smith, as a good ethicist, never held in his lifetime.

Yet, as many of the patriotic Americans show a commitment to the laizze-faire capitalism, American corporations never ever show their loyalty to the United States, especially its people.  Unnoticed by the news (especially corporate news in general) is the fact that corporations consistently betray the United States.  For instance, during World War II, American companies invested heavely in Nazi Germany and Fascist Italy when these regimes were in power.  One prominent business man is Prescott Bush, the grandfather of George W. Bush, had very profitable deals with Hitler at the time.  Corporations like Coca-Cola, IBM, among others did so too.  The situation is no different today.  BP has made deals with Iran’s government (here is the TIME report).  General Electric, Halliburton, Conoco-Phillips may have operations in Syria, Iran, and Lybia (see the 60 Minutes report here).  In 2010, about 300 American corporations were approved by the U.S. government to make business deals with Iran (see New York Times report here).

While this is happening, many American corporations keep closing doors in the mainland to move overseas.  Many people in the conservative spectrum of U.S. politics rightfully denounce these moves as being detrimental to the American people.  Yet, they consistently keep electing the sort of government which is willing to grant all sorts of freedoms to the same U.S. corporations which keep trading with the enemy and are willing to go overseas leaving Americans out of work.

Capitalism may have the uncompromisiing loyalty of the American people, but capitalism has no such uncompromising loyalty to Americans in any way.  Why is this the case?  As Napoleon Bonaparte once said in 1815:

When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.

At the end of the day, corporations in general are about the bottom line, how much money can they deliver to their shareholders at the end of any given quarter …. that’s it.  Their loyalty is to the shareholders, not the American people.  Many on the right accuse Chomsky on being unpatriotic when he says that privatization does not mean that you give a public institution to some nice person, but means to give a public institution to an entity totally unaccountable to the people.  Since he is an anarchist, such accusations hardly keep him awake at nights.  Yes, usually private institutions can do things efficiently, but, people always miss the point about what is this efficiency about: corporations are efficient in order to create wealth for its shareholders, they are not efficient to create wealth for the people.  I have to keep reminding people that corporations are legally bound to place their shareholders interests above everything else, even the public good.  Unrestricted corporate activity will do no good to the American people.

So, if this is the case, then why the heck should Americans be uncompromisingly loyal to American corporations?  If they lay off people, as we have said in our previous post, it is because of a shrinking market, or an enhanced technology, or the bottom line.  If they move overseas, it only means one thing, they would profit more overseas than in the mainland.  If they trade with the enemy, it is because they find such opportunities profitable.  It is all about money … not about you!

 

Tax Exemption in Puerto Rico, our Experience

As a Puerto Rican, I have studied the economic experience of Puerto Rico under U.S.’s rule, especially after World War II.  After the war, our governor Rexford Guy Tugwell (one of President Roosevelt’s great advisors) engaged in a program whose sponsor was Teodoro Moscoso, a businessman who looked for a way to use Puerto Rico’s position as territory in relation to the Internal Revenue Code in order to attract U.S. capital.  The basic mechanism to carry out this ambitious program to industrialize Puerto Rico was using tax exemptions.  Any U.S. subsidiary or corporation established in Puerto Rico would enjoy tax exempt profits under Section 931 of the U.S. Internal Revenue Code.  This was the beginning of a radical move of the government to stir the Puerto Rican economy away from agriculture and more to an industrial and urban way of life.  This kept progressing during successive administrations until 1976, when additional incentives were created, such as tax exemption on repatriation of profits to the U.S. mainland.  This was Section 936 of the Internal Revenue Code.

For many years, Puerto Rico was placed at the very top of the list of countries which attracted U.S. capital overseas.  Yet, that is no longer the case.  As I pointed out elsewhere, Section 936 was eliminated due to global concerns.  The world changed.   Why was the U.S. so rich during all of these years.  Very simple!  Although I know this subject is controversial, the New Deal, Roosevelt’s Keynesian approach to the U.S. economy, paid off.  Also, the U.S. involvement with World War II paid off enormously, and government injected a great deal of capital to the economy, which made it recover.  U.S. investments world-wide were mostly involved with extracting natural resources from other countries.  Europe in general was destroyed during World War II, so was Japan and China.   India was still poor mostly because of all the years under Brittish subordination.  For all practical purposes, in the democratic-capitalist block, the United States was the sole player in the world with its own prosperity.

For that same reason, Puerto Rico also prospered, it experienced exponential economic growth, but not economic development (the reason for this last statement will be explained in detail in a future blog post).  For all practical purposes, corporations had all the reason in the world to establish themselves there, not elsewhere.  Puerto Rican labor force was (and still is) of the highest quality, and it was also cheap.  The infrastructure was one of the best, because, during World War II, the local and the federal governments invested heavily on roads, electricity, water supply, among others.  The local government also provided buildings to fascilitate production in Puerto Rico, as well as a national bank (Banco Gubernamental de Fomento) which invested heavily on attracting capital and providing financial support for these companies.

Yet, in the 1980s there was an air of change.  Already the U.S. Congress was making statements about the fact that tax-exempt corporations working under Section 936 were not producing the amount of jobs projected by its partisans.  Quite the opposite, the economy of Puerto Rico seemed to stall, while U.S. corporations evaded billions of dollars in taxes using U.S. territories.  This is the decade when the term “corporate welfare” was widely used in Congress for years to come.  Again, the failure to create jobs did not stop these corporations from investing in Puerto Rico.  Up to 1993, Puerto Rico still was at the very top of the list of countries which attracted U.S. capital.  This began to fail in 1995, when President Clinton approved the elimination of Section 936’s tax benefits.

Why was it eliminated?  In part, it was because after the collapse of the communist block, corporations wanted to invest heavily world-wide without any sort of restriction, and countries involved in free trade agreements would resent Puerto Rico having all the advantage in a new globalized market.  Europe was no longer in ruins, but became an economic power enough to rival the U.S. dollar.  Japan was another economic superpower, whose Yen also rivaled the U.S. dollar. Free trade agreements were being signed all over the place, in Asia, and America. This would make many industrialized countries participate in free trade agreements in order to let corporations freely invest in new countries, sometimes with tax exempt status.  More markets were created around the world than ever before, as countries started to compete with each other as tax havens for corporations to evade tax payments to their respective governments.

As a result, U.S. corporations started leaving Puerto Rico to establish themselves on countries like Ireland, which became an economic super-power in Europe, and Singapore which became another big economic powerhouse in Asia.  Under the current circumstances, corporate tax subsidies don’t work anymore.  Puerto Rico kept choosing the strategy of corporate tax subsidies, with no beneficial results in any way, and major political parties keep adopting these non-sensical policies despite repeated statements made by reputed and serious economists that this is the wrong path to take (see Collins, et al., 2006, which is a study made by economists from the Brookings Institution and the Center for the New Economy).  Even the renowned independentista economist, Francisco Catalá Oliveras, has repeatedly recommended to tax those foreign corporations which are going to leave anyway.  This is a no-brainer!  If, no matter which program of tax subsidies you give them, these corporations will leave soon anyway, why the heck not tax them?!  There is no loss in this specific scenario, and Puerto Ricans would have everything to gain.  Needless to say, the Puerto Rican government did not revoke their tax subsidies and refuse to tax them.

Unfortunately, in the early nineties, the amount of capital proceeding from 936 corporations added up to $13 billion, in 2001, it was reduced to $1 billion.  In the new neo-liberal fever, Puerto Rico also sold its public phone company, which used to produce lots of revenue for the government.  It privatized its own health care system and implemented an HMO-like model, which greatly increased health care costs.  It partially privatized the water company, driving its costs higher.  It is no surprise that under the tax subsidies model, and the sour pill that our governor, Luis Fortuño made us take (i.e. following his Republican conviction that government was the problem and that about 20,000 employees should be fired), Puerto Rico’s debt increased to a new record high of $65 billion.  It is trying to keep up the system unsustainably using non-recurring funds (mostly coming from loans) to finance recurring operations.  The financial services which grade credit are primarily concerned about the value of government bonds in the long run, especially those regarding the University of Puerto Rico and pension funds.  In November 2011, Wasmer, Shroeder & Company, strongly advised its investors to watch out for Puerto Rican bonds in a report whose title speaks a thousand words:  “Puerto Rico:  Greece of the West?”  A lot of our loss of capital which Pueto Rico could tax without any sort of loss is diverted to the Cayman Islands …  the joke is on us, Puerto Ricans!

Since the Puerto Rican government granted corporate tax exemptions, government is still unable to address many of the problems it had effectively, especially roads, electricity, water supply.  The average tax contribution of foreign companies to the Puerto Rican government is about 4%.   In Ireland it is 12.5%, while in Singapore the average is about 10%.  Even with its meltdown, Ireland is still in a much better economic shape than Puerto Rico at the present moment.  There was a contraction of Singaporean economy by a 0.8% in 2008, but it recovered, showing a 14.5% growth of its GDP (2010), even when we are still not out of world-wide recession.  Isn’t it interesting that most of the time, countries which have mixed economies and tax the rich usually have much better services, goods and jobs, than those which do not?  Some of these successful countries are:  Singapore itself, Finland, Denmark, New Zealand, Switzerland, the Netherlands, Canada, and Norway.  These also happen to be among the least corrupt governments in the world, and many of them happen to be social-democratic governments.

I ask …  what the heck is the basis to say that taxing corporations would drive down the economy?

 

Singapore’s Use of Tax Subsidies

The signficant difference between Singapore and Puerto Rico becomes apparent when you realize that the latter has relied its economy almost completely on tax exemptions without creating a single job in recent years, except part-time jobs with lower wages.  Yet Puerto Rico has an extremely low labor force rate (which, in 2011 fell below 40%, one of the lowest in the world).  Again, does tax exemption create jobs?

Singapore is another sort of country.  Yes, it is ruled by an authoritarian government which tries to control its ethnic diversity and the economy.  Yet, its authoritarianism is not the main explanation for why it has been so successful over the years.  The vast majority of authoritarian governments around the world are doing worse off than Singapore.  What is its secret?

Simply speaking, they do not rely exclusively on tax exemption to foreign corporations.  Yes, they do use tax subsidies to attract foreign capital, but they don’t give those tax subsidies forever, and not to whoever appears at its doorsteps.  Many countries in the world which compete as tax havens, usualy make the mistake of extending tax holidays for big foreign corporations, a strategy which usually does not lead to better improvement of their populations.  The competition among countries make them give more tax benefits and provide other incentives in detriment of their own people.  Yet Singapore is another story.  If you own a company which wants to take advantage of Singapore’s tax subsidies program, your plan better lead to job creation and the general economy’s improvement.  No program which benefits you as business man is unconditional in Singapore.  Yes, tax subsidies are increasing in Singapore as it is lowering its tax rate on foreign corporations, yet this is also being planned as a bigger progressive tax policy, where rich people actually have to pay more.

Contrast the Republican (especially Tea Party) way of thinking with President Lee Kwan Yew.   President Lee tells the story of when representatives of a German company were concerned that after several calculations, they would find more profitable to leave Singapore to another country, that they would love for Singapore to lower further its tax requirements and extend them.  President Lee talked to his advisors on the matter, and in the next meeting, he looked at the documents with the proper research and said:  “You are right.  Singapore apparently is too expensive for you, and you would find it profitable to invest elsewhere.  However, I will not lower taxes for your benefit.  May I help you with your luggage?”

On the other hand, instead of relying on tax subsidies, what Singapore has done is to diversify every aspect of the economy.  Even if it doesn’t have lots of natural resources, they have agriculture, producing good of all kinds, inviting young company matrices to be established in Singapore, it has an air line, a governmental universal health care system (one of the best in the world), high quality roads, electricity, and water utilities, it has not abolished assistance to the poor (even though poverty level in Singapore is significantly lower than other countries in Asia), with low unemployment rate (2.2%), low cost housing, and so on.  It relies basically on exports, which is one of the highest in all of Asia.  Needless to say that it is one of the most environmentally friendly countries in the world. They intensively train their labor force for new jobs available in the market place as the economy and world reality keep diversifying and changing.  I may add that it has also a very aggressive savings program (sometimes to 40% of earnings), which continually nourishes the economy.  This is the key to Singapore’s economic success ….  not total reliability on tax subsidies which are, after all, only temporary and conditional.

 

We are in a Different World, Tax Exempt Status Should Not be the Norm

No longer is tax exemption one of the top criteria corporations use to establish themselves in any place in the world.  Yes, it was a strong force for many years, but not not now.  The opening of the global market has made multinational corporations to multitask production in key countries in the world, although this situation keeps changing over time.  Tax subsidies are no longer the main path to attract corporations in the United States, except in some specific cases.  Usually many of the companies asking to establish themselves anywhere in the U.S. are either companies providing goods and services which would provide them anyway without any tax-exempt status, or could be companies providing products to consume, which would also provide them anyway without tax-exempt status.  WalMart has been one of those megastores which have lobbied extensively in state governments, and even municipal governments, for tax subsidies.  Once a WalMart is established somewhere in a commercial strategic zone, it destroys the competition which is usually made up of tax-paying smaller or medium-sized stores.  This inevitably leads to low wages, the prevalence of part-time jobs, no funds for fire departments, for police, for public education, and so on.  In other words, those cities and states end up being worse than before.  The same thing happens with other mega-stores which compete with others such as WalMart.

Usually, the norm is that if a corporation plans to move to another state or overseas, will do so regarless of whether it is given tax-exempt status or not.  Usually tax subsidies are the result of lobbying by corporations, which basically means that a legalized bribery is in order to support or oppose certain government policies.  Lawrence Lessig, in a very thorough and well-researched book about problem of corporate lobbying and how it is destroying democracy, makes the point very clear that the reason why many decent politicians are so easily corrupted within the system, it is because the system itself is corrupt.  The book is called Republic, Lost, and I highly recommend its reading.

Lawrence Lessig"Republic, Lost" by Lawrence Lessig

For all practical purposes, governors and Congressmembers are dedicating themselves almost fully to raising funds, much of which come from people associated with the corporate sector.  Even when a candidate may know for sure that tax exemptions will not create jobs, he or she will favor it to pay back a corporate favor (often without being conscious of doing so).

The evidence has shown consistently that tax reduction as general policy leads to a worse state of affairs.  There is no evidence at all that a general policy of lower taxes make states or the U.S. as a whole any better.  As one of the millions of examples I can show in this blog, I want to use the one manifest evidence about how lowering taxes lowered quality of life, while many corporations and rich people were made richer.  In 1978 a referendum was carried out, the people of the State of California approved Proposition 13, which basically limits taxes on “real property”, which led to lower tax rates for California.  What was the inevitable outcome?  The effects of Proposition 13 is described extensively in Peter Schrag’s Paradise Lost:  California’s Experience, America’s Future.

"Paradise Lost" by Peter Shrag

This is a non-partisan thorough analysis on the degrading economy of California ever since Proposition 13 was passed.  Shrag sums up his conclusions:

Californiaś schools, which, thirty years ago, has been among the most generously funded in the nation, are now in the bottom quarter among the states in virtually every major indicator–in their physical condition, in public funding, in test scores–closer in most of them to Mississipi than to New York or Connecticut or New Jersey. . . .  Its once celebrated freeway system is now rated as among the most dilapidated road networks in the country.  Many of its public libraries operate on reduced hours, and some have closed altogether.  The state’s social beneefits, once among the nation’s most generous, have been cut, and cut again, and then cut again.  And what had once been a tuition-free college and university system, while still among the world’s great public educational institutions, struggles for funds and charges as much as every other state university system, and in some cases more (Shrag, 1999, p. 8).

The right-wing is obsessed against taxes, because it leads to government waste.  The lesson of the famous “Bridge to Nowhere” is an iconic and symbolic illustration that this indeed occurs.  And much of the right-wing in 1978 advocated for Proposition 13 on the same basis.  The lesson to be learned here, though, is that when you cut taxes to eliminate government waste, you also cut taxes which eliminate valuable government programs, especially those which help to create more jobs and better address the needs of the population.  Yes, many people abuse government programs, but as the economist Robert H. Frank points out, the problem is not whether these programs are abused by the people or the government (sometimes they are), the real issue is that eliminating these programs would create far more costly problems for government in the long run.  The starve-states-to-pay-debts policy is bad for this specific reason.

More evidence that cutting tax on corporations does not necessarily lead to more jobs is the evidence gathered by the non-profit organization GoodJobsFirst.org, which tracks the effect of government subsidies for U.S. corps (download the PDF version here).  I also highly recommend Greg LeRoy’s The Great American JobsScam, an excellent book on how corporations in general manipulate the public into thinking that lowering taxes will create jobs, and shows ample evidence that they do not.

Why should anyone feel any patriotic duty to a system which, set completely free, is actively working against the American people?  Why should market fundamentalism equate the “American way of life”?

If you didn’t understand anything I have argued here, I leave you again with Bill Maher to explain it to you in a way you will understand:

 

Some Thoughts on Ireland

We all know that during most of its history in the twentieth century, Ireland had a systemic economic problem.  Yet, after a consensus made by the private sector, the public sector, and workers, everyone sacrificed a bit of their own interests to make Ireland work.  The result was a booming economy.  It even became a country with higher GDP per capita than the UK.

Yet, it made one crucial mistake, mostly due to the side effects of uncared boom economy:  it deregulated the banking system, and assumed the neoliberal position that losses in the market should be adopted by the government, which non-surprisingly led to its current collapse in the market.  Privatize profits, socialize losses.

This is an important observation to make, since the rise of Ireland’s economy is the product of intensive cooperation between different sectors of society.  As Charles Darwin discovered in his life time, and as scientists who favor the idea of group selection point out, cooperative societies will usually survive better than non-cooperating societies.  Unfortunately the formulae being applied to Ireland in this recent Irish economic recession has nothing to do with cooperation.  Basically because of the right-wing leadership in the European Union, Ireland is now required to adopt neoliberal measures, including tax subsidies and government cut on social programs in order for it to pay its debt.  The fact that Ireland is tied to the ever declining Euro makes matters worse.

I think that Ireland should ignore the European Union’s request, and create a new national consensus to deal with the problem without cutting taxes, nor by eliminating social benefits.  I agree with Paul Krugman that the measures taken by Iceland are the way to go (see also his article “The Path not Taken” and “Eating the Irish“.

 

References

Collado Schwarz, A.  (2009).  Soberanías exitosas:  seis modelos para el desarrollo económico de Puerto Rico.  PR:  La Voz del Centro.

Collins, S. M., Bosworth, B. P., Soto-Class, M. A.  (2006).  The economy of Puerto Rico:  restoring growth.  Washington, D.C. & PR:  The Center for the New Economy and Brookings Institution Press.

Dietz, J. L.  (2007).  Historia económica de Puerto Rico.  PR:  Ediciones Huracán. (There is an English version available:  Economic history of Puerto Rico:  institutional change and capitalist development.  US:  Princeton University Press.

Etter, L.  (2010, July 17).  Economic crisis forces local governments to let asphalt roads return to gravel.  WSJ.com.  Accessed in:  http://online.wsj.com/article/SB10001424052748704913304575370950363737746.html.

Irizarry Mora, E.  (2011).  Economía de Puerto Rico.  México:  McGraw-Hill.

LeRoy, G.  (2005).  The great American jobsscam:  corporate tax dodging and the myth of job creation.  San Francisco, CA:  Berrett-Koehler Publishers.

Shrag, P.  (1999).  Paradise lost:  California’s experience, America’s future.  CA:  University of California Press.

Lessig, L.  (2011).  Republic, lost:  how money corrupts Congress – and a plan to stop it.  NY:  Twelve.

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This article is part of a series of articles on the subject of evolution, ethics and spirituality:

Parts: I, II, III, IV, V, VI (1), VI (2), VII, VIII (1), VIII (2), IX (1), IX (2), IX (3), X (1), X (2), X (3), XI (1), XI (2), XI (3), XII, XIII, XIV, XV, XVI, XVII (1), XVII (2), XVIII, XIX, XX

Evolution, Ethics, And Spirituality: Part XXI — The Stuff You Give Away without Losing (I)

(The entire analysis from here on is based on this proposal by the philosopher André Comte-Sponville with some modifications of mine)

Comte-Sponville's Stratified Model

Gossip!

Bah! I hate celebrities! Hmmm … let me correct that. I hate all the gossip about celebrities. I’m not interested in reality shows about celebrities either. Don’t people realize that when there is a camera around, the show is not "real" anymore?! I can care less about celebrities’ marital life, divorces, drinking habits, drug habits, religious habits, etc.

Let me correct that. Actually I am drawn to that kind of information, but I think that the situation in Afghanistan, Iraq, Egypt, Japan, and so on are more important than celebrities. I also believe that we should think more seriously about many economic and social issues. We can leave celebrities’ scandals aside. However, in commercial TV in general, the discussions about all of these subjects is retarded, mostly for people’s entertainment. That’s why I hated MySpace when it turned into Celebrity Gossip land. Who cares?! I wonder if people actually saw Lions and Lambs and thought deeply about its message.

Yet, one of the reasons (but not the main one) why TV networks are so darn successful in ratings is that they have studied the psychology of people who watch. And they know how to make people interested in the small things in life: about celebrities, fashion, baseball, and fishing. Not that at least baseball or fishing have no merit of their own, or are not worth watching or knowing, but we have to wonder about the news priorities in people’s minds. A great part of it is media manipulation, sometimes in ways we can’t even suspect. Hey … it’s a game!

Much of our "needs" are artificially created by these networks. It is, as Chomsky says, it is the philosophy of futility. Part of those artificial needs is …. knowing about celebrities … gossip!

But let’s confess it, we are suckers for this kind of gossip. Who wouldn’t want to know when is the next Youtube video Tom Cruise is going to appear doing or saying something crazy. Think about when Tom Cruise revealed on Oprah that he was going to marry Katie Holmes.

and aaaaaallll the fun after that!

Oh! Oh! And did you enjoy that famous Tom Cruise Scientology video? Everyone thought he was crazy for real! I really loved watching this …

… and all of the fun after that!

Oh! C’mon … you loved these videos! Didn’t you?! Yes, and I did too.

Yet, there is something wildly peculiar about this Tom Cruise-Scientology video which was not funny in the long run … at least for a lot of people. Issues about this particular video in Youtube would unleash something that would really … really cost a lot for Master Card, PayPal, Visa, Amazon.com, even PostFinance, a Swiss bank. Recently it has become a headache even to some homophobic fundamentalist hate-groups in the U.S. In fact, the consequences of this video is of international proportions.

Now … why the heck would a weird Tom Cruise-Scientology video have such huge consequences? Well … that’s part of the problem. The common ground for all of these events is simply Anonymous …

Cultural Problem-Solving Branching

Do you recognize this mask?

Mask of V for Vendetta

This is the famous mask of V for Vendetta, a great movie. Today, this mask also represents Anonymous. And by Anonymous, I don’t refer to an unknown author, but to a group, an organized group of unknowns on the net. Usually hackers who are engaged now in "hackivism". This is their flag:

Flag of Anonymous

The organization appeared in 2003 more or less as a form of entertainment, until they started focusing on some targets, practically for purposes of criticisms or social reasons. Yet, the Tom Cruise-Scientology video led Anonymous’ hackivism and activism to a whole new level.

This video upset the Church of Scientology, because it was never meant to be disseminated in Youtube, and they made a copyright claim on it. Youtube removed it from the Internet in January 2008, but in that same month, Anonymous sent a message through Youtube against the Church of Scientology because of Internet censorship. After that, they flooded the Church of Scientology with DDoS (denial-of-service) attacks, phone calls, faxes, and so on.

The Church immediately threatened them, and accused Anonymous of being a group of cyberterrorists and child molesters.

Note: Anonymous itself has nothing to do with child molestation. The problem is that the Church of Scientology tends to accuse its opponents of being child molesters. That’s their favorite accusation when they harass people.

After an appeal made by Mark Bunker, a movie producer and director, Anonymous dedicated itself to make peaceful protests against the Church of Scientology. This operation is called Project Chanology, which is a whole operation of protest and orientation on the web about the harms of that particular Church.

But why the mask? It is very well known that the Church of Scientology has practiced a policy of harassment against protesters. L. Ron Hubbard, the Church’s founder, established that people labeled by the Church as "suppressive person" were fair game. If you attack the Church of Scientology, and they declare you a suppressive person, be aware that it will literally engage in an intelligence operation and see who you are, where you live, they’ll sue you to bankruptcy (regardless of whether the accusations are true or not), and even go to your boss to tell him or her that you are a "child molester", or an "alcoholic", or an "adulterer", etc. Hence .. the mask! A very carefully chosen mask. The members of Anonymous hide from Scientologists who might harass them, and let them know that Anonymous is protesting, and what they stand for.

Yet, this whole new level of Anonymous activism drives that group to a whole new level of hackivism that even have corporations and governments extremely worried … far more worried than Wikileaks as a matter of fact. When Wikileaks was censored on the Internet by Amazon, Master Card, and other companies, Anonymous went on to hack their servers, and drive those companies and governments crazy.

This is just one illustration of what happens in culture. One single video can generate lots of fun, criticisms, activisms, hackivisms, you name it. Each solution formulated within our culture can generate several branches of a problem-solving process (in Popperian terms).

Cultural Evolution

As I have argued before, this resembles Darwin’s description of speciation, but in other ways it is not a Darwinian version of evolution. I already mentioned in one post that culture is mostly (although not completely) Lamarckian, but there are other differences between evolution by natural selection and culture.

Darwinian evolution occurs because of lack of resources, if there were no scarcity of available energy in nature, there wouldn’t be any "struggle for existence". There is in principle scarcity of resources a species can thrive with. Species compete for those resources and adapt accordingly. Yet, culture is different. Cultural objects have a peculiarity due to our inherent drive to know stuff. We are driven to gossip, because the information gives us an adaptive advantage in case it is true. Each gossip is delicious, and we enjoy it when we hear it. The media knows all of this very well. Youtube thrives on it. Our pseudo-need to know about the latest gossip about celebrities happens to be a result of an adaptation … of a Darwinian sort. Yet, the way culture spreads and operates is different from Darwinian processes.

What is "knowing" (in an informal sense of the word)? To "know" is essentially to grasp information with our minds. That’s all cool, until you realize what is particularly different than species competing for scarce resources …

Giving Away your Cake, and Keeping It! (To Eat It … of Course)

If you don’t understand what information has to do with scarcity (or lack of it), let me quote you Thomas Jefferson (in a letter to Isaac McPherson in 1813):

If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.

There may be scarcity of food or territory, but there is no scarcity of information. This observation made by Thomas Jefferson, was observed by many people before him, particularly St. Augustine. As a great Neo-Platonist that he was, St. Augustine did recognize the abstract meaning grasped by souls (minds) and is shared by everyone.

What I am saying right now is being grasped by you, dear reader, and you can tell everyone else about it. Maybe you can tell your friends to read these words, and there will be more minds grasping my message. But get this! It doesn’t matter how many people grasp the information, I will never lose it

Let me correct myself again … I can lose it if I ever have Alzheimer’s, or am treated with shock therapy … or, as it happens so many times, I forget!

Yet, as G. W. Hegel, Karl Marx, and Karl Popper recognized, culture has a pretty good way of having a life of its own. Each new information shared by many heads generates a Popperian problem-solving process far more aggressively and faster than in nature. In the realm of living things, natural selection is restricted because of scarcity of resources, and its problem-solving process is mostly improper. But in culture, the problem-solving process is a proper one, it is abstract, and it is understood by many minds. Each idea, concept, or expression has a way of generating a whole series of results … just like a Tom Cruise-Scientology video.

For purposes of our discussion, I would like to place this cultural problem-solving process mostly in the techno-scientific realm. This placing has the defect that it places the other strata as being somehow "outside" of culture, when in reality they are also cultural processes. Yet, it has the advantage of treating cultural processes as a sort of economy, which operates on its own, and which is regulated by the juridical-political stratum (see illustration at the top of this blog).

Our distribution of physical wealth is an economy based on principles consistent with our human nature, following rules based on the idea that resources are scarce, and that selfishness should be the main driver of the economy. Yet, when it comes to an economy of information, the rules are different, because the objects being distributed by minds are not based on scarcity at all. Our selfish human nature is revealed in the distribution of scarce goods, but our generosity as part of our human nature is revealed when distribution of goods are not scarce. Interesting irony about our human nature isn’t it?!

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This article is part of a series of articles on the subject of evolution, ethics and spirituality:

Parts: I, II, III, IV, V, VI (1), VI (2), VII, VIII (1), VIII (2), IX (1), IX (2), IX (3), X (1), X (2), X (3), XI (1), XI (2), XI (3), XII, XIII, XIV, XV, XVI, XVII (1), XVII (2), XVIII

Evolution, Ethics, And Spirituality: Part XIX — The Tyranny of Angels

(The entire analysis from here on is based on this proposal by the philosopher André Comte-Sponville with some modifications of mine)

Comte-Sponville's Proposal with Modifications

Angelic Hierarchy

One of my all-time-favorite literary works is Dante’s Divine Comedy. Imagine all of what Dante revealed in that excellent piece of work:

  • Theology: Natural Theology, the Doctrine of the Trinity, Demonology, Angelology, Moral Theology, Bible (Christian) Hermeneutics, Theology of Grace and Sin, Anthropology
  • Natural Philosophy: Astronomy, Cosmology, Geology
  • Ethics: the Seven Deadly Sins, the Four Cardinal Virtues, and the Three Theological Virtues, Psychology
  • Mythology: Greek, Roman, Judeo-Christian
  • History: References to Historical Figures in the Past and During his Time
  • Social Criticism: Depending on What His Criticism is, He Places his Contemporaries are in Heaven, Purgatory, or Hell … these Criticisms include Economic, Political, and Religious

Apparently what Dante did was to place almost all of the knowledge available in his time in one poetic work. That is a big feat! Imagine that you want to accumulate all of current knowledge, all of natural science (physics, biology, chemistry, … ), social science (psychology, sociology, economy, politics), philosophy (including ethics), geology, geography, cosmology, the mythologies we have now gathered from around the world, all sorts of current beliefs, etc. … and express all of these in a poem, and in verse! That’s why Dante’s Divine Comedy is a classic, and will always be a classic.

There are many parts of the Divine Comedy which appeal to me, one of them is Hell … Who isn’t appealed by that? We want to know all of the gory details, which make it precisely interesting! Our minds frequently want challenge, rarely it is entertained by the absolute peace of Heaven (Paradiso). Yet, even if you look at Paradiso from a theological, philosophical, and historical standpoint, it becomes interesting too. One of the theological subjects I’ve been fascinated with ever since I was little was Angelology (the theology on Angels). St. Thomas Aquinas was the all-time expert on the subject, and I read all about the way Christianity conceived it.


(One of Gustave Doré’s Illustrations of the Divine Comedy)

Dante describes the hierarchy of angels, pretty much according to Christian tradition. From lowest to highest, this is the hierarchy: angels, archangels, principalities, powers, virtues, dominions, thrones, cherubim, and seraphim. Each angelic "choir" is in charge of one aspect of creation, or the activities of heaven: from the angels (or guardian angels) who care for humans and living things, to the seraphim, who contemplate the face of God and praise him for eternity.

This heavenly hierarchy seems to be always in ascendance, going up, from the simple offices given by God, to the most sublime.

Comte-Sponville does not discuss angels in his work. He is pretty much a spiritual atheist, although you can’t help notice a deep admiration he has for the most intelligent Medieval theologians and Christian doctrine in general. Yet, he discusses what he calls "angelisms". They are the exact opposite of barbarities (as we have already discussed), but are not less dangerous. Barbarities descend from one stratum to another, angelisms ascend.

Angelisms

The reason why angelisms, as cute the name Comte-Sponville names them, are not all that lovely is because they are forms of ridiculous, i.e. they are confusions of strata. Placed in power, they also become tyrannies. An angelism essentially cancels out the logic of the lower stratum to substitute it for the higher. Here are the angelisms he talks about in his work:

Angelism Scheme

Juridical and Political Angelism

In Popperian terms, the juridical and political angelism is the tyranny where the problems of the techno-scientific stratum are addressed by juridical-political solutions. As Comte-Sponville points out, this is a serious mistake (Comte-Sponville, 2004, pp. 123-126). He mentions the famous fallacy that many French incurred in when a particular slogan was adopted in an anti-AIDS campaign: "The end of AIDS is a matter of political will!" Comte-Sponville rightfully points out that this is not true, politics nor the law are going to solve the AIDS problem. It is essentially a scientific problem. Of course, people who would defend this slogan would say: "You smart@$$! You know what we mean!" He would respond: "Of course I know what you mean. Yet, usually we are too carried away with our slogans, thinking that if we choose such and such policy, eventually AIDS is a problem that will be solved." The state should support measures to fund all of those studies to solve the AIDS problem, but it should never be a problem handled by the government, but by scientists (Comte-Sponville, 2004, pp. 124-125).

A similar problem has to do with the current economy meltdown. It is true that we should choose the best politicians to deal with the problem. Yet, as much as you wish to vote for the very best, we cannot expect for them to solve the economy overnight! Our survival instincts misleads us, especially when we think that an extraordinarily complex and global problem can be solved by politicians we elect. It is not the case. This false impression that politicians can solve problems almost overnight, especially when our survival instincts on top priority, play very well during elections. If things go as bad as how it began or worse, the opponent of a current president or governor will use this to convince the public about how incompetent the incumbent president or governor is.

The only thing that should be taken into consideration in times like this is whether a politician has contributed to establish the appropriate economic external restrictions, and a limited intervention in the economy, in order to stimulate it and place it back on track. The economy is not solved by legislation per-se (which would be a juridical angelistic approach to the problem), but by how that legislation has an economic effect that will correct the economy. No simple task!

Comte-Sponville made similar statements in his work, regarding protests of the unemployed (Comte-Sponville, 2004, pp. 125-126). As much as governments wish to stop protests by legislation, they can’t. They have to use economic measures to solve the problem. The alternative, is a totalitarian state (and who wants that?!)

What citizens should be careful, though, is to be sure not to elect politicians committed to economic or political interests which could be adversely affected if the right thing to do threatens them.

Ethical Angelism

In the case of ethical angelism (Comte-Sponville calls it "moral angelism"), the problems inherent of the juridical-political stratum are solved by the ethical realm (Comte-Sponville, 2004, p. 126-127). In most cases, this is the well-meaning sort of policy adopted by many states around the world, yet, a wrong one.

"How do you solve the problem of war?" asks Comte-Sponville: "Humanitarian aid". "How do you solve the poverty problem? The creation of charities." Don’t get me wrong, even when politicians make the right choice, these charities are needed. Although we have to take into account for the way "faith based initiatives" can contribute to the public good, but at the same time, there are other organizations which are essentially rackets in the name of God or Christ which exploit this angelism to no end at the expense of the public good. Examples of this are Pat Robertson’s charities (see here and here), or even non-Christian organizations such as Narconon (not to be confused with Narcotics Anonymous or Nar-Anon).

There are many organizations in the United States, much of them faith-based, who try to assist drug addicts. However, drug addiction is linked heavily to crime in the States. In Puerto Rico, more than 80% of criminal activity is related to drug trafficking. In Mexico, both the U.S. and the Mexican government have lost their war against drug cartels. This cannot be solved by charities to rehabilitate drug addicts. The problem of drugs has a juridical-political origin: certain drugs are forbidden by law for sale or consumption. As a result, the market prices of drugs (which cost practically nothing to produce) skyrocket. Drug cartels create addicts out of society, mostly those marginalized by the economy, and since the whole enterprise is criminalized and unregulated, there is no official "justice system" in the juridical-political stratum … everything is solved by guns and bullets. In order for these addicts to pay for the drugs they consume, they have to vandalize, steal, and kill to get the money so that they can pay for the drugs. Besides, if they owe anything, the money will prevent the eventual breaking of the bones or the bullet in the head that is usually followed with not paying on time.

Hence, the solution to the problem of drugs, relies squarely on the juridical-political stratum, not on the ethical stratum. People want the government to assume an ethical stance on drugs for a variety of reasons, some good and some bad. Yet, the ethical angelism of forbidding drugs because they are unethical actually harms society.

The same can be said about prostitution. There is no question that selling women’s bodies for money is deeply unethical, undignifying, and degrading. Yet, keeping it criminalized and unregulated is the sure way to spread VDs, subject women to danger on the streets related to gang violence, needless to say subject them to genuine immediate threats to their lives due to either their pimps or their clients. Whoever has the naïve idea that prostitution will go away if we take them off the streets and place prostitutes in jail, just know that it has never happened in history, no matter how many governments (even totalitarian ones) have tried. Even an ethicist such as St. Thomas Aquinas resigned to the idea that they were a necessary ill for society. Charities won’t solve this problem certainly, although charities are needed to alleviate the problem (regardless of whether prostitution is legal or not).

Emotional Angelism

There is still another sort of angelism which I call emotional angelism (Comte-Sponville calls it "ethical angelism"), which consists of canceling all of our ethical responsibilities and duties for the sake of love. This, for me, is the most amusing of all angelisms, because Comte-Sponville uses the example of the hippies. Some people have a very naïve concept of love, and with John Lennon sing the song "all you need is love". Lennon is correct in a sense, if love is used to motivate our moral sense and act according to our ethical duties. Yet, the statement "all you need is love" can be abused to say that ethics is not necessary because "all you need is love".

As Comte-Sponville would respond to such statement:

"Stop believing for a moment that you are Jesus Christ! Start by fulfilling your duties in the [ethical stratum], register as voter in [the juridical-political stratum], and learn an occupation in [the techno-scientific stratum]. If you think that love is going to solve any problem in some of these strata, then you are deceiving yourself: you are proof of angelism" (Comte-Sponville, 2004, p. 128, my translation)

In every day language, we would tell to that hippy: "Move your ass, get a job, and have a life!"

For some reason, this angelism reminds me of a commercial I saw in The Onion. Hmmm.

References

Comte-Sponville, A. (2004). El capitalismo, ¿es moral? México: Paidós.

Dante, A. (1999). Divina comedia. (A. Crespo, trad.) Barcelona: Planeta. (My favorite version of the Divine Comedy to Spanish).

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Parts: I, II, III, IV, V, VI (1), VI (2), VII, VIII (1), VIII (2), IX (1), IX (2), IX (3), X (1), X (2), X (3), XI (1), XI (2), XI (3), XII, XIII, XIV, XV, XVI

Evolution, Ethics, And Spirituality: Part XVII — Two Big Mistakes in Twentieth Century (and the Twenty-First?) (1)

Introduction

Today we have a globalized world, where countries are joining together forming economic blocks, and whose resources are either exploited or shared among countries. Some blocks are created in order to create a solidarity among countries to recover from economic previous disasters, which is the case of European Union. There are other economic blocks which are created to create an internal solidarity among nations close in culture and geography, which are a response to what are seen as external economic threats. This is the case of Latin America, which has created two economic blocks which run parallel among countries: the Alianza Bolivariana para los Pueblos de Nuestra América – Tratado de Comercio de los Pueblos: ALBA-TCP (Bolivarian Alliance of the Americas), and Unión de naciones Suramericanas: UNASUR (Union of South American Nations). These were created as a solidarity of Latin American nations and as an economic defense against NAFTA, CAFTA, and other free trade agreements with North America (United States and Canada). African countries created the AFrican Union in order to see if the situation of instability in many African countries can change.

Although this tendency began before the end of the Cold War, much of it is a result of the end of the Cold War. With the fall of the Berlin Wall, and the crumbling of the Soviet Union, corporations everywhere had no obstacles to expand their capital. Yet, as I have said before, some countries are responding to these expansions of corporate capital, sometimes adopting also a capitalist path (such as UNASUR), but there are others adopting a more socialist approach (ALBA-TCP).

Aren’t we falling in the same errors of the past, but on a bigger scale? Let’s use the our Popperian modification of Compte-Sponville’s scheme to analyze this problem.

Popperian Modification of Comte-Sponville's Proposal

Marx’s Fatal Error

Certain people are wondering if I’m a Marxist. I assure you, I am not. Yet, I have used Marxian analysis before, because I think that Marx made a very serious, honest, systematic, and brilliant approach to capitalism as a system. You may love Karl Marx or hate him, but you can’t ignore him. Capital is still a must read for anyone who wishes to understand capitalism. Too bad that the media demonizes Marxian works so much that people reject them, even when they haven’t read it, and have absolutely no idea what it is about.

As I have stated before, if you wish to evaluate historical events using the materialist view of history elaborated by Marx, handle it with care, since it is very tricky, and, in many cases, it is either worthless or misleading. In other cases, it has been extremely valuable.

However, I’m not here evaluating Marx’s materialist view of history or historical materialism as a framework for historical explanation, but actually what it predicts. In the realm of prediction, the materialist view of history has failed altogether.

Marx described capitalism very accurately as the relations of production where the mode of production is social (collective), the mode of exchange is social (collective), but that the mode of appropriation is individual. One trait of capitalism is the massive scale of exchange of commodities, as well as its way of producing through division of labor. It’s not that one worker specializes in creating one commodity, but rather that a series of workers (a collective) produce one product. A car is created by workers in an assembly line specializing in one sole aspect of production. This lets production be efficient and faster, compared with previous modes of production.

Yet, according to Marx (as well as other classical economists), this labor accumulated in the commodity by the workers (the proletariat) adds value to the commodity. Part of the value is used as salary for the proletariat, part is used for rent, but another very, very important part of the value produced by the proletariat is appropriated by the bourgeoisie: the social class which owns the means of production. This is what constitutes the Marxian doctrine of the surplus value: the workers produce more than they are actually paid in salary. For Marx, the surplus value is that part of the value added by workers in the process of production that is not remunerated in salary, and is appropriated by the bourgeoisie.

As far as it goes, this is totally correct and the situation hasn’t changed much in this respect. Quite the opposite, the more the global market expands, the more people become proletariats, they are paid very low salaries for massive productions, and at the same time, the bourgeoisie (the stockholders and their allies) lobby in different countries to pay less "rent" (in the classic economic sense of the word). Hence the surplus value they receive in exchange is massive, literally in a global scale.

Another thing that hasn’t changed at all is class struggle. As I have pointed out before, Marx was totally right in this aspect. Natural resources and labor are in principle scarce resources. I point this time and time again so that people grasp the nature of this problem. If wealth were not scarce, there wouldn’t be any class struggle. Why? The whole value created by workers is itself scarce wealth. The bourgeoisie and the proletariat have two very different conceptions of what to do with it. On the one hand, the proletariat wants higher salaries in the form of higher wages, more health care benefits, more vacation time (with pay), more days off, and so on. Of course, that costs to the bourgeoisie, it is less value they can lay their hands on. On the other hand, the bourgeoisie wants more wealth in the short-term, which necessarily implies paying lower wages, not provide health care benefits, not granting any vacation time, etc.

As a result, there is class struggle. This concept of "class struggle" is far from being ideological. The denial of its existence is of ideological origin. What the so-called "first world countries" did during so much time is try to get the state to intervene in the midst of the economy to calm down the class struggle and make the economy more functional. In Capital (in the Epilogue to the Second Edition), Marx states that class struggle sometimes is calm, sometimes is more agitated, but it is always there. Nothing can be seen clearer than the recent union busting legislations in Wisconsin and Ohio in recent months. It has all been relatively calm between workers and corporate interests, but thanks to corporate lobbying, they are eliminating rights of workers to form unions. In Marxian terms, this weakens the proletariat, and opens the door to more exploitation of the proletariat by the bourgeoisie. Then workers respond massively to these union busting legislation in these states. Marx’s analysis in this respect is impeccable.

Yet, here is where Marx failed:

  • Marx assumed, brilliantly, that in a moment of serious economic depression (Engels would call it "economic crack"), the situation would agitate class struggle to the point of the proletariat rebelling against the bourgeoisie, a proletariat revolution.
  • Marx predicted that workers would establish what he called socialism, which is nothing more than the establishment of what he called the dictatorship of the proletariat. This notion of dictatorship should be understood correctly, because what he meant by the "dictatorship of the proletariat" was very far from what history would know as the dictatorships of Stalin, Mao or Castro. For Marx, the current democratic-capitalist condition is the "dictatorship of the bourgeoisie", where the bourgeoisie is the ruling class. "Dictatorship of the proletariat" means that the proletariat becomes the ruling class.
  • During socialism, the state (the proletariat in power) would take away the means of production of the bourgeoisie, and appropriate itself of the surplus value.
  • Marx also predicted that this socialism would be a transitional stage, where the proletariat would eventually transform socialism to communism. Again, "communism", as understood by Marx, is not understood in terms kin to the Soviet Union or the current Cuban government. For Marx, communism is a stateless society, a state of anarchy (correctly understood, not in a pejorative sense).

In this prediction we find the problem. For now, it is obvious that none of this became true. If you study the Marxist states which arose during the twentieth century, you realize something very important: none of these states resembled what Marx wanted. Take Russia, for instance. Marx’s idea of socialism is that it would be carried out in developed capitalist societies, since the only component to be changed was the mode of appropriation, from individual (to the bourgeoisie), to collective (proletariat). Yet, the term "state" here should be understood more in Rousseau’s sense of the word, not in the sense of "government". In Russia, what do we find? A country with only two industrialized cities: St. Petersburg and Moscow. Other than that, everything other region of Russia was pretty much in the feudal stage (in the Marxian conception of the economy). When Lenin assumed power, and then Stalin became head of state, the programs carried out by the Bolsheviks were totally different from what Marx had in mind, because of that reality. They made the political communist party the only legal party in government, created a new ruling class at the expense of the proletariat, and for all practical purpose established what is called today a "state capitalism", which competed with capitalist countries, especially the United States.

Yet, Comte-Sponville in his work invites us to go beyond that. He reminds us of a passage in Marx’s early work on historical materialism called The German Ideology, where Marx said, in categorical terms, that man is selfish by nature (Comte-Sponville, 2004, p. 94). Comte-Sponville accepts Marx’s anthropological comment seriously, but in my case I want to soften it a little bit. From an evolutionary Darwinian standpoint, it is reasonable to assume that humans in general are selfish when it comes to scarce resources, and I want to emphasize, underline, establish in bold-italics, etc. the phrase "scarce resources". Why do I do that? We are the sons and daughters of evolution, which means that within our own nature, there is a struggle for life, for survival. Therefore, this inherent selfishness in our nature as humans is what has let us thrive and survive for thousands of years. However, what happens when you give away things which are valuable but never scarce? What happens when you give away the sort of stuff that you will never lose by giving it away? As incredible as it may seem, there is such valuable stuff, and we will discuss it later. However, our natural tendency to give away stuff which isn’t scarce is to share it. Forbidding people from not sharing this stuff can lead to lots of social ills, including human rights issues.

Now that we have made the proper clarifications, Comte-Sponville is correct when he says that Marx lacks a proper anthropology to address the solution to the problem of capitalism, and class struggle (Comte-Sponville, 2004, p. 94). Let’s say for the sake of the argument, that the proletariat revolution occurred in a fully developed capitalist country. Let’s say also (for the sake of the argument) that the proletariat will carry out socialism exactly as Marx stated. The question is, would such socialism lead to the communism as Marx expected (a stateless society, without any social classes)? The answer is a decisive "no".

Comte-Sponville invites us to think about Marx’s anthropology at this stage. Humans are inherently selfish when it comes to distribution of scarce resources such as physical wealth. Yet, he says that for some reason the proletariat, whose members happen to be human, will give up their own instinctual selfishness to distribute wealth through socialism, which would lead then to communism: a stage where everyone is treated equally, where everyone would receive the wealth they deserve according to the amount of labor they have worked, where no need for coercion is necessary. Of course, Marx’s anthropology, when it comes to the proletariat, falls into the Funes Syndrome, which we explained in an earlier post. Communism a la Marx is not possible, simply because it would require every member of society to give up his or her own natural instincts towards private wealth. Huge problem! As it has been shown in Israel’s experience with the kibbutzim, it doesn’t matter how "collective" your mindset tries to be, there are little aspects of selfishness which pour out of you, things you want for yourself, there is self-interest, and there is more interest to take care of your kids rather than care for all of them! Not that you don’t actually care for them, but there is always that instinct that you want to care for your children more than others. The same happened with Fourier’s phalanstères, the same thing happened with other social experiments (Pinker, 2002, p. 256).

Marxism failed because the success of its theory depended greatly on the disposition of people to share wealth. The only way to establish a just and fair economy is by forcing people to share in a certain way. We are no longer here talking about mere coercions to make society functional, but rather to establish a dictatorship where people are continually forced to share wealth. And this explain perfectly why all efforts to establish a Marxist socialism are always accompanied by either dictatorship or authoritarian rule Comte-Sponville, 2004, p. 94-96; Pinker, 2002, p. 256). Not surprisingly, many so-called "Marxist" countries are now moving towards a more liberalization of the economy by legalizing many forms of private property in the capitalistic sense, some are even transforming themselves to capitalist countries, something which makes them "communist" in name only.

Capitalism works, precisely because much of it is based on our natural tendency to selfishness when it comes to scarce wealth. It is a system which constantly tells us to be greedy. It’s good! It works! Hence, it triumphed over Marxism in the end, and which is one of the reasons (not the only one) which resists proletariat revolutions from the inside. The bourgeoisie is effective when it comes to its rescue in times of recession or depression, even if it has to use Keynes to make it last.

From Comte-Sponville’s standpoint, Marx’s error was essentially to cancel out the requirements for the functionality of the capitalist economy, and moralize it through the juridical-political stratum (the state). In other words, Marx tried to moralize the economy. As we have said before, regardless of which economic system you use, the economy generates problems of its own, and has an internal logic which makes it work. Any economy, regardless of how effective it is in being "fair", is by its own nature amoral. What Marx tried to do is to apply ethical practice to the economy, and the end result was failure. Economies work because they are functional, not because they are ethical. So, here is an illustration of Marx’s error according to Comte-Sponville (with our revised Popperian modifications).

Marx's Error

References

Comte-Sponville, A. (2004). El capitalismo, ¿es moral? México: Paidós.

Marx, K. (2002). El capital. Tomo I/Vol. 1: Libro primero — El proceso de producción del capital. P. Scaron (Trans.). México: Siglo Veintiuno Editores. (Work originally published in 1867).

Marx, K. (2004). Manifesto of the Communist Party. [Webpage] Accessed in: http://www.marxists.org/archive/marx/works/1848/communist-manifesto/index.htm. (Work originally published in 1848).

Pinker, S. (2002). The blank slate: the modern denial of human nature. US: Penguin Books.

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Evolution, Ethics, And Spirituality: Part XIII — The Techno-Scientific Stratum

Introduction: A Peculiar Doctor

It is funny to see a comedy group like Los Rayos Gamma (literally "the gamma rays") make fun of politics. One of my favorite characters is one Dr. Rodas. He was an evil doctor, living like this evil scientist, speaking Spanish with an U.S. accent … with a very Dr. Frankenstein sort of appearance of his lab, damning all those damn Puerto Ricans to hell. And with him, there is a hunchbacked character called Igor (who does whatever Dr. Rodas says, but covertly he is pro-Puerto Rico). In Puerto Rico it was an instant hit, and when Los Rayos Gamma had their show on TV, they showed Dr. Rodas every now and then to criticize Puerto Rico’s relationship with the United States.

Yet, what many people don’t know is that this fictional character was actually based on a real person. Let’s meet this person. TIME Magazine dedicated an issue to him. His name, Doctor Cornelius Rhoads:

Dr. Cornelius Rhoads

Why on Earth would Los Rayos Gamma create a character out of him? And why the heck is TIME Magazine showing an inverted symbol of medicine, used as a sword, to trespass one very ugly looking human skull? As it happens, like Doctor Rodas, Dr. Cornelius Rhoads was known for his plan to kill Puerto Ricans. He was a renowned physician who worked in the Presbyterian Hospital of Puerto Rico for a while. He had been sent by the Rockefeller Foundation to do some work here "healing" patients, and also do some research. At that time, it was pretty common for north American doctors to visit Puerto Rico and practice there. But Rhoads was special.

In 1931, when he was about to complete his research, he decided to write a letter addressed to "Ferdie", or Dr. Fred W. Stewart, and in that letter, "Dusty" aka Rhoads, said:

As far as I can see, the chances of my getting a job in the next 10 years are absolutely nil. One is certainly not encouraged to attempt scientific advances when it is a handicap rather than an aid to advancement. I can get a damn fine job here and am tempted to take it. It would be ideal except for the Porto Ricans — they are beyond doubt the dirtiest, laziest, most degenerate and thievish race of men ever inhabiting this sphere. It makes you sick to inhabit the same island with them. They are even lower than Italians. What the island needs is not public health work, but a tidal wave or something to totally exterminate the population. It might be livable. I have done my best to further the process of extermination by killing off 8 and transplanting into several more. The latter has not resulted in any fatalities so far. … The matter of consideration for the patient’s welfare plays no role here — in fact, all physicians take delight in the abuse and torture of the unfortunate subjects. Do let me know if you hear any more news.

Sincerely,

Dusty

According to later testimony, apparently "Dusty" wrote this when he was enraged at the fact that someone stole something from his car. When lab workers in the Presbyterian Hospital found the letter and photocopied it, all hell broke lose. The letter reached Nationalist leader, Pedro Albizu Campos, who displayed it for all Puerto Ricans to see. Rhoads had to flee to the U.S., but remained protected by the Rockefeller Foundation, as well as the U.S. government.

You will find more information about it in this book.

Scientific Problems

Science is itself a rational discipline, one of the great proud daughters of philosophy. Yet, some use it for evil. Nazi Germany used scientists extensively to examine and torture all sorts of prisoners in concentration camps. Science was also used against people in the gulags in the Soviet Union. Dom Hélder Câmara, a Catholic bishop in Brazil, thanked Pope Paul VI for his determination against artificial contraceptives in his encyclical Humana Vitae, or else foreign corporations would make all sorts of experiments with Latin Americans. Even in the United States, the government and corporations made all sorts of experiments on Native Americans, minorities, poor white people, among other groups, including members of the military. Eugenics was one of those instances where active discrimination against minorities was disguised as science, and left a very, very dark history. The effects of the nuclear blasts still torment people in Hiroshima and Nagasaki. Genetics was used to argue against marriage among races in the U.S. and elsewhere.

Science can be terrible in so many ways. It is an amoral discipline too, but its end is not money, it is knowledge of the physical world. In and of itself, science is neither good nor bad. It is good in so far it provides knowledge, but how do you use that knowledge will make it ethically good, bad or evil. Yet unlike CEOs, many scientists do restrain themselves from something they consider to be unethical. Some corporate scientists or some scientists working for the government are not so lucky, though. Many times they are asked to distort a lot of material to suggest the public that certain products are not really harmful, or that climate change is not really happening.

Yet, science in and of itself never asks itself ethical questions. That is not its field. What sort of problems do scientists deal with? They deal with scientific questions … Although this is the sort of truism that could make people stare at me and say "Duh!", it is not all that obvious. Recently there have been many authors such as Sam Harris who actually pretends to go around the naturalistic fallacy, and somehow infer truths of reasons (ethical norms) out of matters of fact. You cannot derive an ought from is, no matter what sort of thorough scientific reasoning you try to use. Science can inform us so that we can make informed ethical decisions, but from particular facts we cannot infer universal ethical norms.

As in the case of the so-called "business ethics", there is always the temptation to reduce the ethical level to another level. In business ethics there is an effort to reduce ethics to "whatever works for society" … especially "whatever works for business". In Sam Harris’ case, as in the case of other scientists who try to do the same, ethics is inferred from whatever operations happen in our brains, or whatever can be biologically "good" for us. Yet, all you will discover in the brain are neural impulses, how neurons and organs in the brain interact … nothing more. In cosmology you can study the special theory of relativity and know how Einstein reached through simple algebra the equation: E=mc². However, we will never find anything remotely resembling duty, honor, respect, dignity in the physical realm, nor do these form part of any scientific equation (physical, biological or otherwise). Again, all of this might be obvious to most of you, but you have absolutely no idea how many times I have argued with intellectuals and academics who want to establish a basis on good behavior on quantum physics. 😛 …

The problems dealt by scientists stimulate the curiosity on the scientist and enables them to research. Alas! Sometimes their research can involve inhumane treatment of animals, or even their abuse. It might involve things such as ruining forests and agriculture, as in the case with experiments with agent orange. It might involve the abuse of embryos. Although not properly sentient beings, there is a sense of offense or indignity to humanity with the fact that thousands of them end up in the trash can. Sometimes the research could involve experimenting on people without their consent.

Sometimes genuine and good research tends to give results which can have harmful consequences. For instance, recently the human genome was mapped, and many genes identified for what they do. We know that there are genes that predispose us to have cancer or other forms of illnesses. In the future, will we be dropped by insurance companies on that basis alone because of pre-existing conditions in our genes? What about being laid off because of a potential illness that a company or government knows will hinder you from being productive in the future? Should our genome be available to everyone?

Food for Thought: One particular scientist made his DNA sequence, his genome, available in the Internet. Some people have studied it thoroughly and have discovered that there is an 80% chance that during his adult life, this scientist will be bald. Well, this scientist is an adult right now, and practically everyone in the world knows how he looks like. Here is Steven Pinker … aka the scientist who rivals Einstein regarding hair:

Steven Pinker

Technological Problems

Last but not least, with the advance of science comes technology. Guns, computers, TVs, Nintendo, Wii, and so on are ethically neutral, and it would be drop dead obvious that these are all "good" in the sense that they can be useful. Yet, most people treat them as being ends-in-themselves, rather than means to an end. As in business ethics, and as efforts to reduce ethics to biology, some people define ethics in terms of a technique or a technical process that achieves a result. Yet, as with the economy, and as science, technological problems within itself do not include ethical problems. The matter of technological use is external or outside the technological realm. If your computer crashes, I assure you, no dignity or sense of duty will fix the problem, only a good technician with the right tools will do.

The Techno-Scientific Stratum

André Comte-Sponville conceived a stratum that is purely technical, which he originally wanted to call "economic-techno-scientific order". Yet, this name is too long, so he just called it the "techno-scientific order", or the tecno-scientific stratum. Essentially it is a set of sub-strata operating on their own, having their own problem-solving processes, and in many ways interacting with each other. We could represent our view of them this way.

Techno-Scientific Stratum

In this diagram, I essentially use a Popperian version of problem-solving scheme for each sub-stratum identified by Comte-Sponville as being part of the techno-scientific stratum. As we can see, these three sub-strata have their own problems, and their own ways to solve them within their own system. The techno-scientific stratum is solely composed of amoral fields, where their internal problem-solving process do not include anything about ethics or any other stratum. Notice that the way the economic, scientific and technological dynamics are not islands operating completely separately, but they all interact with each other. Each sub-stratum generates an external problem-solving process, which means basically that each sub-stratum can generate problems to other sub-strata.

An example of how one sub-stratum affects another is when scientists find some facts which could be inconvenient for a particular product by a corporation, which would later lead to banning the product and prospective loss of capital. Advances in technology can also affect the speed in which a corporation produces, hence generating more income. If a corporation does not adjust itself to new technologies, it will lose in the marketplace.

Also, this problem-solving relationship among sub-strata help us understand the way they interact. For example, the discovery of genes of the human genome has led to scientific processes to isolate them (through technology), and such way of extracting the genes are patented by a corporation (economy).

The model above implies that the whole techno-scientific stratum can also create external problems to other external strata, as we shall see in future blog posts.

At this stage of the discussion, the question is: should the techno-scientific stratum be limited? If we look at each sub-stratum as we have discussed here and in our earlier blog post, we can infer that the answer is yes. Not to limit the economy in any way, and leave it as a free-for-all sort of behavior will result in many forms of externalities which could seriously harm us and harm the ecosystem as a whole. If some limitations are not placed to the scientific enterprise, then the important sectors of the enterprise may result in researches which require experimentation on humans without their consent, animal abuse, contamination of an ecosystem, undignifying procedures, and so on. The same reasoning applies to technology, because we should decide which technology should be built and how it is used for the benefit of humanity.

The question now is, what will establish the limitations of the economy, science, and technology, in other words, the techno-scientific stratum. And here the laws and the state will limit it externally. This will be the subject of the next blog post.

Sources

Aponte Vázquez, P. (2005). The unsolved case of Dr. Cornelius Rhoads: an indictment. PR: Publicaciones René.

Comte-Sponville, A. (2004). El capitalismo, ¿es moral? Spain: Paidós.

Ferrer, J. J. & Álvarez, J. C. (2003). Para fundamentar la bioética: teorías y paradigmas teóricos en la bioética contemporánea. España: Desclée de Brower.

Popper, K. (1994). Knowledge and the body-mind problem: in defence of interaction. London & NY: Routledge.

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This article is part of a series of articles on the subject of evolution, ethics and spirituality:

Parts: I, II, III, IV, V, VI (1), VI (2), VII, VIII (1), VIII (2), IX (1), IX (2), IX (3), X (1), X (2), X (3), XI (1), XI (2), XI (3)

Evolution, Ethics, And Spirituality: Part XII — Imperfection and the Economy

A Divine Problem: Imperfection

It is very rare to actually read an economist who shows that he or she is well versed, not only in the economy, but also in philosophy, literature, science, politics, and so on. It is an absolute delight to read Adam Smith’s The Wealth of Nations, because it shows how brilliant is he as an economist and as a moral philosopher. I love to read Marx’s Capital because hidden in it there is allusion to today’s classics, such as Bram Stroker’s Dracula, or Mary Shelley’s Frankenstein. You notice that he has a taste for horror: ghosts, specters, werewolves "transmuting", etc. He also shows a lot of theological and philosophical knowledge throughout his writings. Yet, I fail to remember other more contemporary economists who express themselves this way. Smith’s and Marx’s works are classics and speak to all of us for this reason. Even those of Keynes speak to us and remain relevant. Yet, today, I’m sad to say that most economists are working as technocrats, and have forgotten that touch of Humanities.

Yet, I do think that there is one particular economist who, regardless of what he writes, he shows his intellectual depth, his acquaintance with philosophy, literature and history, and has a great economic insight. I want you to meet this Puerto Rican economist: Francisco Catalá Oliveras.

Francisco Catalá Oliveras

This is a renowned economist in Puerto Rico. The Center for the New Economy (CNE), an organization which works frequently with the Brookings Institution, uses to invite him to give speeches on the economic situation of my country, Puerto Rico. The banking sector and the foreign corporations hate him because he frequently suggests that we should raise taxes on foreign corporations investing in Puerto Rico. Of course, like the Tea Party movement in the U.S., who likes to label anyone it doesn’t agree with its economic policies a "Marxist", our banking sector and corporate industry label him a "Marxist", even though he isn’t. He is now a retired professor of the University of Puerto Rico, and works as advisor for labor unions, cooperatives, and the Puerto Rican Independence Party (PIP). He also advocates for independence for Puerto Rico as the key to its economic growth and better future. We will not be concerned with this particular subject right now, but I wanted to let you know his background.

Catalá is well versed in philosophy and literature, and part of his formation was his reading of Erasmus’ The Praise of Folly (in Spanish Elogio de la locura). Inspired by both literature and history, he wrote one of those books I wish there were a version in English for my English-speaking friends: Elogio de la imperfección (The Praise of Imperfection).

Elogio a la Imperfección

His whole focus of that book is what he calls the Funes Syndrome. Now, if you can’t find such a syndrome in Wikipedia or in any medical journal, don’t worry, he made it up.

Yeah, it sounds like a sort of psychiatric term, yet, its origin is literary. (Ah! There he shows his literary formation again!) He read a short story by the renowned author Jorge Luis Borges called "Funes el memorioso". In it he Borges tells the story of a man who had the perfect memory. He remembered EVERYTHING, even the minutest details … a sort of Adrian Monk, the famous detective played by Tony Shaloub. Yet, unlike Monk, this guy was not a hypochondriac, but rather an insomniac. Funes is tormented by the fact that he is in constant vigil, and his perfect memory enables him to remember everything simultaneously, and his recollections overwhelm him constantly. Ironically, Borges says, the guy could not think. Why is that? Thinking requires abstraction, and abstraction implies forgetting some things to take into account only a few of them. For Funes, there was nothing but immediate details, he couldn’t forget.

Now, what is the Funes Syndrome according to Catalá? It consists of two errors people frequently fall into:

  • The error of believing that perfection is possible in this world.
  • The error of believing that if perfection existed, it would be functional

While I was reading his amazing book, Catalá solved one of the problems which tormented theologians for a long while, one of the aspects of the theodicy problem (i.e. if God exists, then why is there evil in this world?) New atheists like Richard Dawkins cannot point out enough all of the imperfections in the world as a sign that there is no intelligent designer, and, that no God exists at all. Evolution is a messy process, supporting living beings on Earth involves a lot of waste. Our eyes are a mess, and, as I’ve argued before, our brain is too. Why the heck would God choose such a messy process to support living things? Kenneth Miller, who is himself a Roman Catholic, tries to solve it in many ways in his book Finding Darwin’s God. Other authors such as Darrel Falk or Francis Collins try to address that particular problem. Yet, the answer to this problem is so amazingly simple! A perfect world wouldn’t work!

If there is a reason why nature works so well to the point of letting life emerge constantly through evolution, it is because it is an imperfect "blind watchmaker". Why is our brain capable of reasoning? Because it is imperfect and it is all messy regarding how it distributes its functions among its own organs. Life is possible only because death exists. Without death, other living beings cannot arise. The natural creation of objects in the universe exist only because destruction exists. Our Solar System exists because an earlier star "died" and exploded. These things work precisely because the universe is imperfect.

Economists Dealing in Absolutes

"Only a Sith Lord deals in absolutes."
~ Obi-Wan-Kenobi
(Star Wars – Episode III: Revenge of the Sith)

Now, why would an economist in particular be interested in such a very important philosophical subject. The answer is that as an economist he has seen too much of his colleagues fall into the Funes Syndrome. Pro-corporate economists always point out how the powers of the state should be minimized and how the economy would do "just fine" without it. The less the power of the state has over the economy, the "more perfect" (so to speak) the economy would be, capital would flow happily, poverty would be eliminated from the Earth as Adam Smith predicted, and we would live happily ever after.

That doesn’t mean that the economic right-wing is the only one falling into the Funes Syndrome. Marxism does too. Marx is an excellent thinker when you see him diagnose capitalism as a system. Capital is still a work to be read, and look at our economic reality through its lens. Yet, when it comes to evaluate history from the materialist view he proposed, well…. take his proposal cum granus salis (handle with care!). And when it comes to implementing his version of socialism as a transition period to a more just society, such efforts are doomed to failure as history has taught us. We should be fair with him, though. No version of the implementations Marxist socialism resembled remotely what Marx originally had in mind. Yet, that can be a clue to the fact that Marx’s solution was a failure from the very beginning. Right and left-wing versions of Anarchism are no better when it comes to solving the problem. As studies of efforts to build communal life have shown, they all fail in one way or another, mostly because of internal conflicts and tensions within: secular socialist communal societies collapse after a median of two years, and religious communal societies last a median of twenty years (ref. Pinker 2002, p. 257; see Klaw, 1993; McCord, 1989; Muravchik, 2002; Spann, 1989). As the linguist and cognitive scientist Steven Pinker tells us what is wrong with this reasoning:

Studies of altruism by behavioral economists have thrown a spotlight on this sword of Damocles by showing that people are neither the amoral egoists of classical economic theory nor the all-for-one-for-all communalists of utopian fantasies (Pinker, 2002, p. 256).

Part of the failure of implementing any of these economic policies or solutions is that, sometimes, it completely disregards the necessary social conditions for them to be possible, and tries to implement their theories in an absolutist and perfect manner. In the case of those who wish to implement capitalism in the freest way possible, the elimination of state powers is only geared at less economic restrictions by the state. Yet, for some reason, this leads invariably to more state restrictions towards people. For many people this is a mystery, but in reality it isn’t.

Sometimes, blinded by ideology, we want to refuse to believe what Marx reminded us over and over again about the capitalist system: it carries with it the seed of class struggle. Class struggle as understood by Marx is not an ongoing street fight between the bourgeoisie and the proletariat. Class struggle is the result of the fact that wealth is scarce in principle, and the bourgeoisie and the proletariat have opposite interests regarding the way it should be distributed. So, when the state eliminates the restrictions on the economy, and lets the bourgeoisie and capital act the way it wants, it will necessarily lead to more poverty in the working class, and the poverty of people who are not proletariat because of the imperfections in the capitalist system, and depend on state assistance. Obviously, this leads to unrest, protests, and strikes (many times violent), which then require the state to become a militarized or police state.

As Naomi Klein (2007) has shown in her research, this is exactly what happened in Chile, when the Chicago Boys wanted to make Chile an economic blank slate, and start a pure and perfect form of capitalism from scratch after the coup against Salvador Allende. The result? A government under the Augusto Pinochet. It is said that Chile "prospered" under his government, but at the expense of human rights. Despite that, even Pinochet had to implement some socialist measures to alleviate or minimize social unrest. Similar repressive measures were made in many countries in Latin America which led to abduction of opponents of the regime, to killings of families, to outrageous forms of tortures. We can say this has happened in the United States during its history. Lousy history teaching in schools has made people forget completely what happened in the past when capital was free to rule with next to no state restrictions. Invariably it led to more misery, harsh living conditions, continuous violations of human rights which were rarely validated by the courts. If today you have Social Security, pensions, and other benefits, it is because of the huge fights which happened so frequently in the past.

The situation was no different under both the Clinton and the Bush Jr’s administrations, when much restrictions were stricken down. This led to reinforce all sorts of the most repressive sectors of government, especially the military, intelligence operations, and extensive surveillance. Unfortunately, these policies have continued and increased under the Obama administration, whose significant contribution to restricting the economy has been limited to health care, and even THAT is going to be struck down with current Congress or, perhaps, a future Republican (Tea Party?) president..

This does not mean that communism is paradise. As many intellectuals are realizing, even Marxists, communism led to many human rights violations. As Pinker (2002) points out:

The Nazi Holocaust was a singular event that changed attitudes toward countless political and scientific topics. But it was not the only ideologically inspired holocaust in the twentieth century, and intellectuals are only beginning to assimilate the lessons of the others: the mass killings in the Soviet Union, China, Cambodia, and other totalitarian states carried out in the name of Marxism. The opening of Soviet archives and the release of data and memoirs on the Chinese and Cambodian revolutions are forcing a reevaluation of the consequences of ideology as wrenching as that following World War II. Historians are currently debating whether the Communists’ mass executions, forced marches, slave labor, and man-made famines led to one hundred million deaths or "only" twenty-five million. They are debating whether these atrocities are morally worse than the Nazi Holocaust or "only" the equivalent (Pinker, 2002, p. 155; see also literature on this subject: Besançon, 1998; Chirot, 1994 Conquest, 2000; Courtois et al, 1999; Getty, 2000; Minogue, 1999; Shatz, 1999; Short, 1999).

This conviction is reinforced with the fact that today, as much as I sympathize with Venezuela’s Bolivarian government, as well as Ecuador’s government, there have been violations of human rights (although the majority of the cases never reach the level of repression of earlier right-wing governments in Latin America), which have been reported by Amnesty Intentional and Human Rights Watch. In the case of the latter, the head of this organization had been expelled from Venezuela.

How can it be that Marxism, an ideology whose goal is economic justice for all, reach this level of repression, genocide, murder, and so on?

Corporate Amorality

The economy is the result of two things: an evolutionary process, hence the biological constitution of humans, and culture. Groups of organisms have a sort of economy, an ecosystem. It is nothing more that a form of distribution of energy through a food chain. Plants get the energy from the sun, animals eat plants, and other animals eat these animals. Yet, unlike other animals, humans have intelligence and culture, which let us create ways of arranging a form of distribution of energy in the form of wealth, otherwise we wouldn’t be able to live.

To say that economic systems are imperfect is a truism, yet, it is not a trivial one. As we have seen, assuming that a perfect economy is possible can lead to disaster, especially when looked at from an ethical standpoint. And here we touch a very particular subject that sometimes is ill-addressed: the interaction between the economy and ethics.

Today it is a fashion to talk about business ethics. In universities we breathe it. The first time I was going to teach ethics in UPR in Cayey, and talked to some members of the Business Administration faculty, they asked me if I knew anything about "business ethics". That is because it is a new fashion in the business world. Some weeks ago I even received a book by José González Barja called Ética empírica para el éxito (Empirical Ethics for Success), which advocates for "business ethics" to lead people to "success" in the business world (or life in general). Of course, when I studied ethics, I studied philosophical ethics, but had no idea about the particulars of "business ethics". In my naïve attitude, I supposed that it was much like bioethics: the rational examination of biotechnological and medical production and practices from an ethical standpoint. The more I researched business ethics, and the more I talked about it with some of my colleagues in philosophy, the more I came to realize that this was not the case of "business ethics".

"Business ethics" is not a field of Applied Ethics, it only pretends to be. It takes its name too seriously. It stems from the genuine worry by businesspeople regarding the problem of low wages, the gap between the rich and the poor, environmental concerns, and so on. Yet, in its attempt to address these concerns, they make business ethics have as premise the following statement: "Only acting ethically, you will have success in your business". In other words, acting ethically will mean that in the end you will have more benefits, and more money. It is an ethics designed to legitimize business, because, despite the fact that this premise actually begs the question, it suggests that if you are successful, it is because you are behaving ethically. Nothing further from the truth!

Take corporations, for instance. A corporation is a group of people who ask for a charter to create a legal person, which will limit the investors’ (stockholders’) liability. Inherently, corporations have one end: how to produce the maximum wealth possible for the stockholders in the shortest time possible. In the U.S. it became a judicial decision to place the stockholder’s welfare above everything else, including the public good (Dodge v. Ford). The question is, why does the juridical system grant stockholders a limited liability, if ethics leads to financial success? In principle, there shouldn’t be any problems if that were true!

And what sort of person is a corporation? A key to that is what Baron Thurlow said: "They have no soul to save and they have no body to incarcerate." This abstract artifice, the corporation, cannot hurt or be hurt, it is not happy, does not cry, nor does it suffer. The only way it "suffers" is if it loses capital and profit. Does it act ethically at least most of the time? Not necessarily, but these are successful giants, and it is not because they are concerned for what is good. Lacking emotions and empathy, you are left with one sole conclusion: corporations are amoral entities. Don’t believe me? Let Dr. Robert Hare, an FBI consultant on psychopaths explain the whole thing for you.

Yep, you can actually be very highly successful, if you are a psychopath … not if you act ethically.

Many people, even my colleague philosophers, can be deceived by "business ethics", because they see the genuine ethical concerns by businesspeople, and I emphasize the word genuine. I’m not saying that CEOs are not worried about oppressive regimes, or the environment, or sweatshops, or child labor. Many of them are worried about that! They are themselves moral beings, they empathize, they want everyone to be happy, they are for world-peace! They can give you Miss Universe sorts of answers if they participated in that pageant, and mean it! In fact, many CEOs in their personal lives might dedicate their own resources to many good causes.

Yet, at the end of the day, the stockholder has all the judicial system on his side, and will demand of CEOs that they do everything they can to maximize profit now, not matter what. As a result, they will lay off workers, will establish sweatshops, exploit children around the world, contaminate the environment, lie to Congress, and so on. Why? Because there is competition, if you don’t do these things, the competition will squeeze you out, and your corporation is screwed. Corporate obligation is not ethical. Yes, there may be studies that show that paying a good health care or your employees will ensure that they will be more productive, but if my job as a CEO is to maximize profits now, then my duty is to give my workers in salary the minimum of the minimum, which includes no health care.

Don’t get me wrong! I’m not saying that corporations are "evil". There are many products, services, goods, merchandise, that are inherently good for us. Hey, I loved The Dark Knight, I love computers, and they are amazingly useful, and I love books like crazy. Yet, what does that imply? It implies the use of contaminants of the environment, copyright restrictions and penalizations against users who dare use even a small segment of a movie soundtrack, and cutting off trees for paper production… needless to say, paying authors little money in royalties. Corporations are not (ethically) good, but they are not evil either. They are amoral, hence they have no moral conscience, and also inherently irresponsible.

The fallacy of "business ethics" is that it businesspeople can actually make all of these ethical decisions in business management and have more profit because of them. This whole "field" is a humongous non-sequitur. Corporations are externalizing machines, as well as money-making machines. This is a problem for corporations because externalities are their essential trait. If you are not acquainted with the word "externalities", at least learn what it is: an externality occurs when a third-party (not consenting a specific transaction) has to pay for the transaction made by the other two. Due to competition, the maximization of profits, and market pressure, all corporations externalize: let somebody else pay for contaminating the environment, let somebody else pay for the layoffs, let somebody else die in wars while we profit from the oil, let someone else pay for our irresponsible behavior, establishing mortgage rates so high no one is able to pay, or let someone else pay for our bad decision for making the Hummer. If you don’t believe in "externalities" … well… listen to one of the Chicago Boys (Milton Friedman) and a corporate CEO of Interface Global (Ray Anderson) talk about it!

And in the case of Ray Anderson, I strongly sympathize with him. He is the face of a CEO who wants to really look for alternatives to save all living things on Earth. Go and buy his book Confessions of a radical industrialist, and see how he is trying to address environmental concerns. Yet, Interface Global, despite its best efforts, still has to externalize in many other ways, because … at the end of the day, a corporation is all about profit! Interface Global is doing a great job in trying to produce environmentally friendly carpet products, and Ray Anderson is trying his best to convince other CEOs to do the same for their companies. The problem is that it is almost certain to convince an oil CEO at a personal level that climate change is a real phenomenon, and that if we use solar panels, wind, and other alternative energy sources it would be better for humanity. Yet, as a CEO, if those alternatives bring much less income than with oil, then that means much less profit for the shareholders … which means that as a CEO he will do everything it can to bring down all sorts of alternative fuels. Don’t believe me? Just ask yourself Who Killed the Electric Car?, and why corporations are making sure that the only fusion project that is funded is the Tokamak, which hasn’t worked for over 25 years, while much more promising fusion projects which require relatively small funds, like the Focus Fusion Project are underfunded, or not even mentioned in the media!

Also, many people in the "business ethics" arena take refuge in Muhammad Yunus microlending strategy (the banks of the poor). Yet, the strategy itself is also amoral … for one simple reason … the economy itself is amoral.

Economic Problems and Ethical Problems

I need to clarify once again that when I say "amoral", I’m not saying "immoral". What I am saying with "amoral" is that an amoral being is not concerned about the ethical values of right and wrong, or good and evil. Just like nature, the economy is exactly what Dawkins said about nature: "no evil and no good, nothing but blind, pitiless indifference".

The capitalist system is amoral, a Marxist socialist system tries to be moral, but at the end of the day, for it to work, it has to become amoral. Contrary to the claims made by Ron Paul, there is no such thing as a "compassionate economy". The marketplace is the marketplace: all the problems which arise in an economy depend solely on supply and effective demand. No ounce of ethics get into it at all. Prices in the market do not respond at all to the notions of duty and dignity. These have no place in economic equations. If chocolate prices soar or they flunk, it will depend exclusively on supply and effective demand. There are no decent market prices, there are no evil market prices either.

No economic system is perfect … and it should be that way, no economic system will work if it were perfect! Let’s not fall into the Funes Syndrome. Yet, there is a sense that the economic system is screwed up because of problems which arise inside and outside the economy. From an economic standpoint (in theory) low wages are the result of a combination of criteria that the company takes into account in order to have significant profits and compete in the marketplace. From an ethical standpoint, depending on how low are low wages, they can become inhumane. From a political standpoint it is not good for the state (public) for corporations to do this. Yet, another externality is the cost to the state (public) if government is bribed by corporations or members of the bourgeoisie (to use a Marxian term).

How do we deal with the economic, ethical, and political frameworks?

Stratified Problems and Solutions Model

In the following blog posts I shall be working on what I will call the "Stratified Problems-Solution Model". This will consist of a blend of two proposals:

  • Karl Popper’s Problem-Solving Scheme: which we have discussed at length here and here: the evolutionary problem-solving scheme that Popper posited for epistemological growth, but now placed in the cultural realm in general.

Problem-Solving Scheme

(Generalized Problem-Solving Scheme)

Evolutionary Problem-Solving Scheme

(Popperian Evolutionary Problem-Solving Scheme)

  • The Stratified Model Proposed by André Comte-Sponville. Comte-Sponville is a French philosopher who has dedicated most of his life to make expositions on other philosophers and making ethical reflections on world affairs. His book Le capitalism est-il moral? (Is capitalism moral?) is one of those books which I’m sorry is not available in English. As far as I’m concerned there are only two versions: French and Spanish.

My proposal is nothing more than a slight modification of Comte-Sponville’s proposal with a Popperian touch and other things. It stems from a premise that due to the fact that no aspect of human life is perfect (including the economy), each stratum will generate two sorts of problems:

  1. The internal problems of each stratum.
  2. The external problems generated by a stratum.

This model I’m advocating for will propose a sort of interaction between strata. It will also identify the basic problem with many proposals made by so many thinkers to create "perfect" societies: level confusion. Level confusion is a categorical confusion that occurs when we want to understand or solve the internal processes of a stratum in terms of an external stratum or sets of strata.

The "field" of the so-called "business ethics" is bogus, because it is fundamentally a glorified level confusion: it states that you can act ethically in the internal dynamics of the economy to generate profit. Imagine that! So many universities and businesses have invested so many billions of dollars in something that is not possible. No business can be ethical, and acting ethically will not lead you to wealth.

Sorry for deflating "business ethics" in the minds of so many people.

Sources

Achbar, M. (Prod.), Abbott, J. (Ed.), & Bakan, J. (2005). The corporation. [Documentary]. Zeitgeist Films.

Anderson, R. & White, R. (2009). Confessions of a radical industrialist: profits, people, purpose — doing business by respecting the Earth. NY: St. Martin’s Press.

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