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"Unbridled Capitalism Will Lead to Very Real Problems"
Apr 17, 2006
"Unbridled Capitalism Will Lead to Very Real Problems"

Harvard economist Kenneth Rogoff discusses the dangers of unbridled capitalism, the greed of corporate CEOs and a fundamental problem with the United States economy.

04/17/06 "Spiegel" --

SPIEGEL: Professor Rogoff, the US economy is surging forward, while President Bush celebrates high growth rates. But most Americans believe they are living in a recession. Who is right?

Rogoff: I too have asked myself whether people have gone crazy. But the fact is that the share of wages in total growth is shrinking.

SPIEGEL: In other words, most people are not benefiting from the recovery and are justifiably disappointed?

Rogoff: The working population's share of national income remained constant for 100 years. That's why Marx's theory that only capitalists benefit from capitalism and workers are exploited was completely wrong. Nothing could have been further from the truth. Workers earned more as economies grew.

SPIEGEL: Is this no longer true?

Rogoff: There has been a noticeable decline in the labor factor in all wealthy countries in the past 20 years. The rich are getting richer, but those at the lower end aren't moving ahead as quickly as the capitalists.

SPIEGEL: So Marx was right after all?

Rogoff: We're still a long way away from that. Workers are not being exploited. But if their share of growth doesn't increase, this could be a potential cause of social tension worldwide. The point is that so far attempts to reverse this trend in the US have failed. Boeing employees achieved barely anything by going on strike (editor's note: last autumn). Instead, the workers are now in a weaker position -- both in aviation and in other industries.

SPIEGEL: Meanwhile, corporate CEOs and Wall Street bankers are cashing in on record bonuses.

Rogoff: There has never been a better time to get rich. It's quite astonishing how much money people make in the hedge fund business and in the private equity field, and how well-off affluent families really are. Given these contradictions, it comes as no surprise that average Americans have a different perception of the economy than (US President) George W. Bush and his friends. They can play around with statistics as much as they want, but it's clear that we have an unfair distribution of wealth.

SPIEGEL: That hasn't seemed to bother anyone, as long as the dishwasher-to-millionaire dream still exists.

Rogoff: I tell my children that a man like Bill Gates has a personal fortune of $100 billion. They can't even comprehend that. Then I explain that he has more money than some countries. If we have these extremes, I can't understand why we should get rid of the inheritance tax. It hasn't harmed the economy, and it has evened out the distribution of income across generations.

SPIEGEL: Billion-dollar tax cuts for the super-rich -- such as eliminating the inheritance tax -- are meant to generate growth for all. Conservatives like to say that a rising tide lifts all boats.

Rogoff: The New Orleans disaster made it painfully clear what happens to people in deep poverty: they don't even have a boat. Even more tax cuts are the wrong approach, as long as we don't even have universal health insurance for children. I think that's outrageous.

SPIEGEL: Are these injustices the price for lower unemployment and strong growth in the United States?

 

Rogoff: This unbridled capitalism in the United States can't be sustained socially. It leads to tensions. If we experience another five years like the last five, we will start seeing greater social friction. After all, people aren't looking at how they're doing, but rather at how their neighbors are doing and at their own place in society. These huge inequalities are not a particularly desirable characteristic in our society.

SPIEGEL: Are Western corporate CEOs driven by globalization, or do they themselves use the situation to their advantage?

Rogoff: We react to market forces and we try to protect jobs -- that's the image many managers have of themselves. They have no idea why people are so furious with them. Look at corporate takeovers where outgoing CEOs get a $50 million settlements and 5,000 workers are let go. That kind of thing happens all the time. On the one hand, it shows that we have a flexible economic system and we permit change. On the other hand, it's completely naïve to think that this doesn't create tensions.

SPIEGEL: But don't companies and countries that oppose globalization end up hurting themselves?

Rogoff: There are no easy answers. Of course it would be suicidal to nationalize our industries, for example. But those who say the economy is growing and everything's just great are simply unwilling to acknowledge these cracks in the system. Incidentally, this gap is much bigger in China. It's the 21st century along the coastline, but if you travel to the interior, where two-thirds of all Chinese live, you'll experience the 18th century. These are incomprehensible inequities. They have an extremely raw form of capitalism.

SPIEGEL: According to the 19th century English economist David Ricardo, free trade is good for everyone. According to his theory, the wealthy industrialized nations would simply have to concentrate on becoming even more technologically advanced to make up for their outsourcing losses in certain industries.

Rogoff: Ricardo was never right. Sure, there are more winners than losers, and winners profit to a greater extent than the losers suffer. But the assertion that everyone benefits simultaneously from free trade is simply incorrect.

SPIEGEL: Protectionism ...

Rogoff: ... is not a solution. We can't turn back the clock. But unbridled capitalism will lead to some very real problems. We will see that ever-increasing deregulation can lose political support among the population in the long term.

SPIEGEL: If entire industries are shifted to the Far East, how can new jobs be created in the West?

Rogoff: Our high-tech industries are raking in tremendous profits, but for 50-year-old steelworkers or people in the aviation industries, it's difficult or impossible to improve their situations. The problem -- at least in the United States -- is not that people can't find jobs. The problem is that they're no longer finding jobs that provide them with dignity and decent social status. This tremendous downward pull for unskilled laborers has been around for a long time. But now outsourcing is also beginning to affect people in mid-level and higher-level jobs -- those who had felt secure in their positions.

SPIEGEL: Are you saying that not even a first-class education can protect against competition from the Chinese?

Rogoff: You know, I was a chess pro in my younger days. Back then, the best player in New York could earn a pretty good living. But now the Indians and Chinese have become brilliant chess professionals. They get on a plane and play all over the world. This has led to dramatic pressure on incomes. Nowadays, the best chess player in Argentina can no longer make a living playing chess.

SPIEGEL: What's Germany's place in the globalized world?

Rogoff: Even if your economy grows a little this year, the trend is pointing downward. You need reforms in the labor market, in the tax system, in the area of corporate governance and in the education sector. Your school system is very good compared with the US, but your universities are not competitive.

SPIEGEL: You've already written off one of the world's biggest economies?

Rogoff: Please don't misunderstand me. If Berlin would finally enact some decisive reforms, it could surpass the United States in growth for 20 years. Germany has such incredible wealth --with its culture, its education and its highly qualified population. It would just have to flex its muscles a little to achieve growth rates of four to five percent in the coming years and turn itself into an economic miracle, as it did in the 50s and 60s. But that won't happen as long as you have this political paralysis.

Interview conducted by Frank Hornig
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Posted: Apr 17, 2006 4:28pm
Beyond Capitalism: Problems and Solutions
Apr 11, 2006
Beyond Capitalism: Problems and Solutions

By Charles Sullivan

04/10/06 "ICH" -- -- Too often my neoconservative detractors accuse me of being a whining liberal eager to point out problems but short on solutions. While I would argue that has never been the case, the following is one man’s attempt to not only clearly define some of our most pressing social problems, but also to provide practical solutions. These solutions, while not easy, can provide a way out of the hell we are creating for ourselves. There are no guarantees that any of them will work; although I believe they will if enough people participate. What I am certain they will do, however, is offer hope. To do nothing and allow matters to run their course is certain to destroy not only our country but also much of the world. That would be unforgivable.

During the height of the great depression of the late 1920-30s, Franklin D. Roosevelt changed the face of America by giving us the ‘New Deal.’ Roosevelt’s New Deal created the present Social Security system, the Securities and Exchange Commission and the Civilian Conservation Corps, along with a wealth of other programs of social uplift. These social programs were intended to lift the nation out of the depression and to put people to work rebuilding the nation’s crumbling infrastructure. Because of its benefit to working class people and to the common good, Roosevelt’s New Deal has been under assault since its inception: a process that continues to this day.

The idea of an American president giving aide to the nation’s working class was more than some conservatives could stomach. Roosevelt’s detractors declared that he was “a traitor to his class.” Between the years 1929-1933 the unemployment rate rose from 4% to 25%. Fortunately, Roosevelt’s economic policies worked as intended. They lifted the nation out of depression and put the nation back on its feet. Millions of the unemployed went back to work which in turn stimulated the economy. Social security is a concept borrowed from socialism in that it provides for the common good rather than the more customary privatized wealth of capitalism.

No one will ever accuse George Bush of being a traitor to his class. Bush’s self proclaimed political base consists of the wealthiest one percent of the population; and he has rewarded them handsomely for their financial support. You see, elites think of themselves as privileged; more deserving of wealth than the rest of us. The elite believe they are our moral and intellectual superiors as a right of birth, like royalty. Thus, in only a few years of transparent class warfare Bush has managed to turn the huge budget surplus he inherited into the greatest national debt in history. At the same time he has essentially bankrupted the nation both economically and morally. During this time of economic downturn suffered by working people (the fat cats on Wall Street are still making money), Bush has managed to provide enormous welfare to the rich by stealing from the poor. His every policy is detrimental to working class people while simultaneously beneficial to the wealthy. There can be no question about Bush’s class loyalty, or the class loyalty of those who preceded him into the White House.

One might suppose that Bush’s brutish behavior is aberrant. To the contrary, this is exactly how Plutocracy is supposed to work. Those in power maintain their positions of privilege by operating beyond the pale of the law; by enjoying advantages that the rest of us do not. Every policy enacted by Bush demonstrates his attitude of contempt for the common people, as well as for the rule of law. Mr. Bush sees himself as an emperor, not as a servant of the people. The emperor views the people as his servants. He takes from them what he wants and does not hesitate to send them to die in foreign conflicts not of their making. The defining character of the emperor is hubris that knows no bounds and a profound lack of respect for ordinary people in their daily struggles.

Bill Clinton, like those who came before him, exhibited many of the same traits as Bush. His policies were equally harmful to working class people, but he was more clandestine than Bush and a superior actor. Clinton passed welfare reform legislation that made life more difficult for millions of poor families; he bombed Kosovo relentlessly for seventy-eight days and nights, killing thousands of civilians; he maintained an economic embargo on the people of Iraq that resulted in the death of more than half a million people, most of them children. This is not a Democrat versus Republican or liberal versus conservative issue. It is a class issue; and it has always been a class issue. This is Plutocracy in action, capitalism’s finest frenzy. American history consists of thousands of similar episodes that have resulted in the genocide of millions of innocent victims in every part of the planet. Capitalism is what capitalism does; and what it does is not pretty or humane.

According to journalist Bill Moyers, 17% of Americans are living below the poverty line. The middle class is rapidly dissolving into the under class. Take home wages are falling even as worker productivity continues to rise. Workers are producing more goods and services, but their productivity is rewarded by lower pay and longer hours. Corporate CEOs are realizing obscene profits but workers are losing their pensions. Every penny squeezed from the workers means increased wealth for the corporation. Under capitalism, profits are king and people are just a disposable source of cheap labor.

Every year more families are falling deeper into debt. Last year Bush signed into law legislation that was written by banking and credit card industry lobbyists. The new law makes it very difficult for millions of struggling families to extricate themselves from the debt loads that stifle their ability to provide the staples for a good and decent life. Yet it remains comparatively easy for corporations to file for bankruptcy in order to discharge their debt loads and make a fresh start. Capitalism, as the name implies, values capital but not people or the public welfare. Money is all that matters.

Millions of working class families are spending the majority of their hard earned income paying credit card bills whose monthly balances are never reduced and in many cases are actually increasing. The unregulated credit card companies have recently doubled their minimum payment requirements, while also shortening the due dates period from thirty to twenty-eight days. These companies use further chicanery to insure that millions of card holders no longer have the ability to pay on time. This assures that the credit card and banking industry rake in billions of dollars by charging late fees and increasing interest rates as a response to late payments. This strategy of robbing workers provides instant wealth without lifting a finger to do any work—a privilege obtained through private ownership. This is clearly predatory behavior by which some of the wealthiest institutions on earth are fleecing the underclass and forcing them to live in debt slavery. This occurred when industry placed its own in key positions of government and then proceeded to remove every mode of consumer protection, exposing the raw flesh of consumers to the talons of corporate greed. The result has been disastrous for families and communities alike, but immensely profitable to the heads of the banking and credit card industries. This is what happens when money is valued more than people and above the public welfare.

In the old days workers referred to the Plutocrats as parasites—a term that continues to describe them perfectly, as revealed by the above example. Despite what we are told, none of the institutions of this country exist to serve the people. In fact, they are arrayed against us like a nuclear arsenal. Not even the police or the militia exists to protect the people. In times of social unrest such as labor strikes, civil rights marches and anti-war rallies, the police and the militia have always protected the property owners; the oppressors rather than the oppressed.

One suspects that most citizens have never thought about their country in these terms. Why would they? History books and the corporate media portray a different America. But despite all the allusions to freedom and democracy, ordinary Americans have always been preyed upon by wealthy Plutocrats. This is simply the history of our nation recorded in deed. America’s wealthiest and most prominent families, including names like Bush, Mellon, Dulles, Rockefeller and Kennedy have amassed their extraordinary wealth and political power through slave labor and by the ruthless exploitation of the working class. It was John D. Rockefeller, Jr. who had the poor families of miners evicted from their homes and forced them to live in tent colonies in Colorado. It was Rockefeller who hired agents of the Baldwin-Felts Detective Agency to pour machine gun fire into those tents. It was he who had the tents doused with kerosene and set ablaze, killing five men, two women and twelve children. The event known as the Ludlow Massacre occurred on April 20, 1914. Rockefeller was never punished for his crimes.

The ignorance of labor history, in combination with the lies propagated in the corporate media foster the notion that the fortunes of men like John D. Rockefeller were amassed through hard work and superior intellect. They were not. The Ludlow Massacre is not an anomaly of labor history—far from it. This is how fortunes are amassed in America. George Bush, Dick Cheney and all the others are simply continuing a history of Plutocratic rule. The tradition of ruthless exploitation continues in the Middle East and beyond. Fortunes continue to be amassed on the spoils of war by the CEOs and investors of America’s defense contractors. Plutocrats everywhere are raking in billions, including the Bush family and the bin Laden’s. The events in Iraq bear an eerie similarity to the Ludlow Massacre of 1914. George Bush and John D. Rockefeller have much in common. So do the dead of Ludlow and Iraq. Such are the spoils of class warfare.

The working class people of yesterday, as now, had no protections to insulate them from the predation of wealthy Plutocrats like George Bush and John D. Rockefeller. Like the victims of hurricane Katrina, we are on our own. The neocon cabal that is running the world is turning back the hands of time. Working class people the world over are being exploited and pitted against one another as they always have. Wages are falling, layoffs are on the rise, and more workers have to put in longer hours to keep their heads above water. Parasites like Bush and Rockefeller will bleed us dry if we do not rise up and fight back. The struggle between the ruling class and the working class continues.

Inevitably, the question arises: What can we do to protect ourselves? First we must read and understand labor history as the class struggle that it is. We must recognize that we are living under Plutocratic rule rather than a Democracy. Men like George Bush and Rockefeller are the product of capitalism—an economic system that is inherently unstable and unjust. An abundant supply of cheap oil and the massive consumption of frivolous goods and services is all that keeps capitalism afloat. Cheap oil is running out and when it does it will certainly bring about a global economic collapse that will be the death knell for capitalism. With the demise of capitalism a great emancipation of the working class will be possible. But we do not have to wait for economic calamity to begin freeing ourselves from wage and debt slavery.

Every good and decent citizen who wants George Bush and the neocon cabal removed from power can and should immediately initiate that process. I am convinced that it is possible to remove these robber barons from office with minimal personal risk, and by completely lawful and non-violent means. With total solidarity this could be accomplished in no more than six months and possibly much sooner. I am calling for every American and world citizen of conscience to immediately reduce their consumption of goods and services to the bare minimum. By withdrawing our economic support from the system that produces the inequity that is the source of most human misery, we can bring it to its knees. We must enact an economic embargo, a boycott of the very system that enslaves us as a class; and we must maintain that embargo until Bush is removed from office and the workers are emancipated from the chains of capitalism.

In concert with a global economic embargo on the goods and services of capitalism-general strikes, work slow downs and sick-ins should be organized. Random non-violent acts of covert sabotage might be carried out under favorable conditions. New and more radical unions must be formed that will champion the rights of workers and democratize the workplace. Workers must take ownership of the means of economic production or they will always be the slaves of Plutocratic rulers. This can only occur by organizing the work force globally. Workers must think globally but act locally.

Every participant in the economic embargo should only purchase Citgo gasoline and motor oils. Citgo oil is a product of Venezuela. Unlike the other oil companies, Venezuelan oil is nationalized; profits from its sales go directly to meet the needs of the people rather than into corporate coffers and privatized wealth. Exclusively purchasing Citgo products will not only aide the cause of Hugo Chavez’s Democratic Socialism government; it will reduce the profits of Exxon-Mobil, Shell and Texaco. These oil companies have atrocious records of environmental destruction, displacement of indigenous peoples from their land and a blatant disregard for the rule of law. We should not reward them with our treasure or our loyalty. Unlike Citgo, they share their obscene wealth with only a few shareholders and pocket the profits, while also gouging consumers at the pump. On the other hand, Citgo provides deep discounts on its products to the world’s poor. This demonstrates in very real world terms the difference between nationalized wealth and privatized wealth.

All of us should drive our cars minimally and only when absolutely necessary. Do not exceed the speed limit. We should utilize public transportation whenever possible and where it is available.

Fabulously wealthy companies like Wal-Mart and Target should be boycotted until they pay their workers on both ends of the supply chain a living wage and provide health insurance at no cost to their employees. Wealthy corporations must be forced to share more of their wealth with the employees who produce it. Both companies are strongly anti-union. Both routinely fire workers suspected of union activity. I speak from experience on this matter as a former Target employee.

Co-op America provides a list of proposed and ongoing boycotts and presents good background information on the rationale behind the boycotts. Co-op America’s motto is “Economic Action for a Just Planet.” Their web site address is: www.coopamerica.org/.

Finally, we need feet in the street day after day until Bush’s reign of terror ends. There are some good people who understand what must be done and are organizing toward that end. International Answer has organized some of the largest anti-war marches around the country since the Viet Nam war. Their web address is www.internationalanswer.org/. The World Can’t Wait Coalition is doing excellent work in this area. They are attempting to organize widespread civil disobedience and marches that will only end when Bush steps down. Their web address is www.worldcantwait.org/. After Downing Street is a good place for people to get involved. Their web address is www.afterdowningstreet.org/. Many who read this essay may have other resources to add to the list. You can do so by adding them to the comments area at the end of this article. Let’s get organized and take matters into our own hands. There are no knights in shining armor that are going to come to our rescue. We must do this work ourselves and we must begin immediately while there is still time.

All legitimate power must be derived through the people. Any government that does not represent and carry out the will of the people is illegitimate. This American government is not representing the will or the welfare of its citizens. Therefore, it is illegitimate. It is up to the people of this country to not only drive out the Bush regime but also the system that made his rise to power possible. If we do the former without also accomplishing the latter, the cancer will return because it is inherent in the system. Nothing meaningful will have been accomplished. The names will change but not the result. We have to go all the way or not at all.

If every person who believes in just government and shared wealth, rather than privatized wealth, would reduce their consumption to the bare minimum and maintain a strict economic embargo against frivolous goods, we could turn things around very quickly and without bloodshed. We must globalize worker solidarity. The impact would be both profound and immediate. Some people claim that Americans are too selfish and shallow to carry out a long term economic boycott. They may be right. But if we do not act to save ourselves and the world from unchecked capitalism we will deserve the fate that is in store for us. Let us begin this very moment. Spread the word to everyone you know.

Authors Bio: Charles Sullivan is a photographer, social activist and free lance writer residing in the hinterland of West Virgina. He welcomes your comments at earthdog@highstream.net
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Posted: Apr 11, 2006 1:05am

 
 
 
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