Archive for the ‘Capitalism’ Category

The Myths of Big Corporate Capitalism

July 15, 2014

Consumer advocate Ralph Nader. (photo: Meet the Press)
Consumer advocate Ralph Nader. (photo: Meet the Press)

By Ralph Nader, The Nader Page

13 July 14

 

arge corporate capitalism is a breed apart from smaller scale capitalism. The former can often avoid marketplace verdicts through corporate welfare, strip owner-shareholders of power over the top company bosses and offload the cost of their pollution, tax escapes and other “externalities” onto the backs of innocent people.

Always evolving to evade the theoretically touted disciplines of market competition, efficiency and productivity, corporate capitalism has been an innovative machine for oppression.

Take productive use of capital and its corollary that government wastes money. Apple Inc. is spending $130 billion of its retained profits on a capital return program, $90 billion of which it will use to repurchase its own stock through 2015. Apple executives do this to avoid paying dividends to shareholders and instead strive to prop up the stock price and the value of the bosses’ lucrative stock options. The problem is that the surveys about the impact of stock buybacks show they often do nothing or very little to increase shareholder value over the long run. But they do take money away from research and development. And consumer prices rarely, if ever, drop because of stock buybacks.

Apple’s recent iPhone is produced by 300,000 low-paid Chinese workers employed by the Foxconn Technology Group. They are lucky to be paid $2 per hour for their long work weeks. It would take $5.2 billion a year to pay these Chinese iPhone workers about $10 per hour.

If the $130 billion from Apple’s capital return program was put into a foundation, it could pay out, at 4% interest, $5.2 billion year after year. Compare $130 billion of “dead money” to the $1 billion in “live money” Tesla Motors has spent on research and development to produce its revolutionary electric cars.

Forget marketplace competition when it comes to the abuse of the monopoly patent system for medicines, steeped in taxpayer-funded basic research, and its obsolete rationale for encouraging innovation. Welcome to the $1,000 pill – yes the price of Gilead Sciences latest drug, Sovaldi, which is used to treat hepatitis C, a liver-destroying virus. It is said to have fewer side effects and a higher cure rate than its counterparts. Taken daily at a cost of $1,000 a pill, the twelve-week treatment that is recommended for most patients costs $84,000 and a twenty-four week course of treatment for the hard-to-treat strain costs or $168,000.

Use of this drug is beginning to break the budgets of the insurance company payers. Representatives from Doctors Without Borders has said that a twelve-week course of treatment should cost no more than $500. Gilead did not sweat out the research and development of this drug. Gilead simply bought Pharmasset – the company with the patent on this drug. Not surprisingly, Gilead stock has surged upward, oblivious to surging public criticism.

Some overseas countries are not so submissive to the “pay or die” corporate edict. The nonprofit group I-MAK (Initiative for Medicines, Access and Knowledge) has filed a challenge to the patent, claiming that Sovaldi is based on “old science” with “a known compound,” thereby not meeting India’s stringent requirements for patentability.

Additionally, economist Jamie Love has developed an alternative to such “pay or die” patent monopoly prices while keeping rewards for true innovations (http://www.keionline.org/).

Another example of corporate greed and waste is the astounding story of the White House trying to procure the replacement of is aging presidential helicopter fleet, which further undermines the myth that big corporations are more efficient than government. Under the George W. Bush administration, the Navy put in an order for 23 new helicopters from AgustaWestland, working with Bell Helicopter and Lockheed Martin. The price in 2005 was to be $4.2 billion. Three years later the price of the contract zoomed to $11.2 billion or $400 million per helicopter (about the price of an Air Force One 747).

Congress’s Government Accountability Office (GAO) and the Air Force criticized the contractors and their subcontracting practices. As is usual, Lockheed complained that the cost overruns were due to government modifications.

In June 2009, the Navy terminated the contract after spending $4.4 billion and taking delivery of only nine of these (VH-71) helicopters. By December 2009, the White House and the Department of Defense officials washed their hands of this debacle. By that time, the projected cost had risen to $13 billion. In total, the bungled enterprise wasted $3.2 billion and this presidential procurement effort has to start all over again.

By comparison, $3.2 billion is greater than the combined budgets of Americorps, Public Broadcasting, public housing (Choice Neighborhoods), the Arts (NEA), the Humanities (NEH), the Peace Corps and the worker safety programs of OSHA.

Imagine if there was similar squandering of those budgets: there would be indignation roaring from Congress! When it comes to the defense industry, well that’s just business as usual, complete with the golden handshakes with the Pentagon for the almost certain cost over-runs.

Big corporations should not be allowed the myths of competitive, productive, efficient capitalism – unless they can prove it.

 

“Free Trade” Champions Betray Us All

July 3, 2014

(Photo: Flickr / cc / Caelie_Frampton)Wisconsin Congressman Ron Kind has apparently never met a free trade agreement he didn’t like. Note it is always a “free trade” agreement, never a “fair trade” agreement.

Free trade defines an agreement that has as a first (and sometimes only) priority, the best interests of corporations namely, their profits. At what expense those profits are taken is apparently of little concern to the trade negotiators and in particular the corporate representatives that are active participants in the otherwise secretive Trans-Pacific Partnership (TPP) negotiations.

Fair trade on the other hand would put the interests of people and the environment ahead of corporate profit. Fair trade would protect jobs rather than off-shoring them as has historically happened after passage of all free trade agreements.

Environmental protection under fair trade would also trump corporate profit— destructive strip mines, mountain top removal, groundwater pollution, air pollution, all these byproducts of the less restrictive environmental protections, that again, always happen when free trade agreements are ratified, would have to be prohibited.

Free trade has no consideration for cultural preferences because it has no consideration for people. Japanese farmers and consumers prefer to grow and eat their traditional varieties of rice, not imported rice— that should be their right, not so under the TPP.

Food safety standards under free trade would, by design, fall to the lowest common denominator. Lower safety standards on food imports, like lower labor safety standards, reduce operating costs and thus increase corporate profit.

Pharmaceutical companies would be granted extended monopoly patents, thus increasing health care costs and access to generic medications.

Banking interests insist on and will get, Financial Service Agreements that would severely limit the ability of governments to restrict the trade of risky financial products or in general their ability to regulate “too big to fail” banks.

Another secretly negotiated free trade agreement the Trade in Services Agreement (TISA) which deals extensively with financial services, would actually further deregulate financial institutions and scrap much of the re-regulation that followed the world financial meltdown of a few years ago.

Perhaps most distressing to the U.S. economy, free trade agreements have always forced workers into a downward wage spiral. Jobs tend to flow to wherever wages are the lowest. The TPP would set the stage for member countries like Vietnam with its $2.75 daily wage to become an even lower cost labor alternative than China.

Free trade proponents like Rep. Kind who co-chairs the Friends of the TPP Caucus note that the U.S. is running a trade surplus with many of the small countries that it has bilateral trade agreements with. True enough, but it is hardly relevant to use bilateral trade statistics with a small country like Columbia as an argument for joining the TPP, a group that would comprise 40% of the world trade. And considering all the positive spin about trade surpluses from bilateral agreements with small nations, the U.S. still ran a trade deficit of over $470 billion in 2013.

We are told that establishing free trade zones will lower tariffs across the globe while encouraging higher labor and environmental standards. Say what? Tariffs are basically a non-issue having been nearly eliminated by previous trade deals while labor and environmental standards will be pushed to the lowest level possible, not elevated.

The Wisconsin State Journal calls Kind “a strong voice for free trade and the prosperity it brings to Wisconsin”. Think about that, how many manufacturing jobs have left Wisconsin and been offshored due to free trade; Johnson Controls, AT&T, Georgia Pacific and Harley Davidson to name a few.

Farmers are told free trade will increase sales of agricultural commodities worldwide making us more profitable. Generally, farmers do not export, grain companies, food processors and livestock packers export and they import –– it all depends on global prices, but generally they make a hefty profit on both ends.

Agricultural commodities are bought wherever they are the cheapest and sold where they are the most profitable. Free trade pits farmer against farmer to see who will produce the cheapest, just as it pits workers against each other in a race to the bottom.

The Friends of the TPP would do well to look at the history of free trade agreements and decide if they really like this status quo, these agreements that profit corporations at the expense of people and the environment. Or perhaps they might do a better job of serving their constituents by supporting fair trade that brings everyone up rather than always seeking the lowest common denominator.

Where the World’s Unsold Cars Go To Die

May 19, 2014

Tyler Durden's picture

In the past several years, one of the topics covered in detail on these pages has been the surge in such gimmicks designed to disguise lack of demand and end customer sales, used extensively by US automotive manufacturers, better known as “channel stuffing”, of which General Motors is particularly guilty and whose inventory at dealer lots just hit a new record high. But did you know that when it comes to flat or declining sales and stagnant end demand, channel stuffing is merely the beginning?

Presenting…

Where the World’s Unsold Cars Go To Die (courtesy of Vincent Lewis’ Unsold Cars)

Above is just a few of the thousands upon thousands of unsold cars at Sheerness, United Kingdom.  Please do see this on Google Maps….type in Sheerness, United Kingdom.  Look to the west coast, below River Thames next to River Medway. Left of A249, Brielle Way.

Timestamp: Friday, May 16th, 2014.

There are hundreds of places like this in the world today and they keep on piling up…

THE WORLDS UNSOLD CAR STOCKPILE

Houston…We have a problem!…Nobody is buying brand new cars anymore!  Well they are, but not on the scale they once were.  Millions of brand new unsold cars are just sitting redundant on runways and car parks around the world.  There, they stay, slowly deteriorating without being maintained.

Below is an image of a massive car park at Swindon, United Kingdom, with thousands upon thousands of unsold cars just sitting there with not a buyer in sight. The car manufacturers have to buy more and more land just to park their cars as they perpetually roll off the production line.

There is proof that the worlds recession is still biting and wont let go.  All around the world there are huge stockpiles of unsold cars and they are being added to every day.  They have run out of space to park all of these brand new unsold cars and are having to buy acres and acres of land to store them.

NOTE:

The images on this webpage showing all of these unsold cars are just a very small portion of those around the world.  There are literally thousands of these “car parks” rammed full of unsold cars in practically every country on the planet.  Just in case you were wondering, these images have not been Photoshopped, they are the real deal!

Its hard to believe that there are so many unsold cars in the world but its true.  The worse part is that the amount of unsold cars keeps on getting bigger every day.

It would be fair to say that it is becoming a mechanical epidemic of epic proportions.  If anybody from outer space is reading this webpage, we here on Earth have too many cars, why not come and buy a few hundred thousand of them for your own planet! (sorry but this is all I can think of)

Below is shown just a few of the 57,000 cars (and growing) that await delivery from their home in the Port of Baltimore, Maryland, U.S.A. With Google Maps look South of Broening Hwy in Dundalk for the massive expanse of space where all these cars are parked up.

The car industry would never sell these cars at massive reductions in their prices to get rid of them, no they still want every buck.  If they were to price these cars for a couple of thousand they would sell them.  However, nobody would then buy any expensive cars and then they  would end up being unsold.  Its quite a pickle we have gotten ourselves into.

Below is shown an image of the Nissan test track in Sunderland United Kingdom.  Only it is no longer being used, reason…there are too many unsold cars parked up on it!  The amount of cars keeps on piling up on it until its overflowing.  Nissan then acquires more land to park up the cars, as they continue to come off the production line.

UPDATE: Currently May 16th, 2014, all of these cars at the Nissan Sunderland test track have disappeared? Now I don’t believe they have all suddenly been sold.  I would guess they may have been taken away and recycled to make room for the next vast production run.

Indeed next to that test track and adjacent to the Nissan factory, they are collating again as shown on the Google Maps image below.  So where did the last lot go? This is not an employees car park by the way.

None of the images on this webpage are of ordinary car parks at shopping malls, football matches etc.  Trust me, they are just mountains and mountains of brand spanking new unsold cars. There is no real reason why you should be driving an old clunker now is there?

The car industry cannot stop making new cars because they would have to close their factories and lay off tens of thousands of employees.  This would further add to the recession.  Also the domino effect would be catastrophic as steel manufactures would not sell their steel. All the tens of thousands of places where car components are made would also be effected, indeed the world could come to a grinding halt.

Below is shown just a small area of a gigantic car park  in Spain where tens of thousands of cars just sit and sunbathe all day.

They are also piling up at the port of Valencia in Spain as seen below.  They are either waiting to be exported to…nowhere or have been imported…to go nowhere.

Tens of thousands of cars are still being made every week but hardly any of them are being sold.  Nearly every household in developed countries already has a car or even two or three cars parked up on their driveway as it is.

Below is an image of thousands upon thousands of unsold cars parked up on a runway near St Petersburg in Russia.  They are all imported from Europe, they are all then parked up and they are all then left to rot. Consequently, the airport is now unusable for its original purpose.

The cycle of buying, using, buying using has been broken, it is now just a case of “using” with no buying. Below is an image of thousands of unsold cars parked up on an disused runway at Upper Heyford, Bicester, Oxfordshire. They are seriously running out of space to store these cars.

It is a sorry state of affairs and there is no answer to it, solutions don’t exist.  So the cars just keep on being manufactured and keep on adding to the millions of unsold cars already sitting redundant around the world.

Below are parked tens of thousands of cars at Royal Portbury Docks, Avonmouth, near Bristol in the United Kingdom. If you look on Google Maps and scan around the area at say 200ft you will see nothing but parked up unsold cars. They are absolutley everywhere in that area practically every open space has unsold cars parked up on it.

Below is that same area in Avonmouth, UK, but zoomed out. Every gray space that you see is filled with unsold cars.  Anyone want to hazard a guess at how many are there…

As it is, there are more cars than there are people on the planet with an estimated 10 billion roadworthy cars in the world today.

We literally cannot make enough of them. Below are seen just a few of the thousands of Citroen’s parked up at Corby, Northamptonshire in England. They are being added to daily, imported from France but with nowhere else to go once they arrive.

So there they sit, brand spanking new cars, all with a couple of miles on the clock that was consummate with them being driven to their car parks.  Below is the latest May 2014 Google Maps image of unsold cars in Corby, Northamptonshire.

Manufacturing more cars than can be sold is against all logic, logistics and economics but it continues day after day, week after week, month after month, year in year out.

Below is shown a recent (April 2014) screen grab from Google Maps of the Italian port of Civitavecchia.  All those little specks are a few thousand brand new unsold Peugeots.  Just collecting dust and maybe a bit of salty sea spray!

Below, all nice and shiny but with nowhere to go.  Red and white and black and silver, purple, pink and blue, all the colors of the rainbow and be they all brand new.  Indeed all the colors of the rainbow are down there on those cars, making pretty mosaics, montages of color and still life.  Maybe that is all they will now ever be, surreal urban art of the techno production age.  Magnificent metal boxes, wasting space and saving grace, all sitting still, because its business at mill.

All around the world these cars just keep on piling up, there is no end in sight.  The economy shouts out quite loud that nobody has the money anymore to spend on a new car. The reason being that they are making their “old” cars go on a lot longer.  But we cannot stop making them, soon we will run out of space to park them.  We are nearly running out of space to drive them that’s for sure!

Below, more cars mount up in the port of Valencia in Spain. They will not be exported as there is nowhere for them to go, so they just sit and rot in their colorful droves.

Gone are the days when the family would have a new car every year, they are now keeping what they have got.  It may be fair to say that some  families still get a new car every year but its the majority that now do not.

The results are in these images, hundreds of thousands if not millions of cars around the world are driven from their factories, parked up and left.

Could we say that these cars have been left to rot!  Maybe, as these cars will certainly rot if they are not bought, driven and cared for.  It does not look like they will be sold any day soon, many of them have been standing for over 12 months or even longer and this is detrimental to the car.

Below, as far as the eye can see, right into the background, cars, cars and more cars. But what’s beyond the horizon?  Have a guess…Yes that’s right…even more cars!  All brand new but with no homes to go to.  Do you think they will ever start giving them away, that may be the only radical solution.  Who knows, you could soon be getting a free car with every packet of cornflakes.

When a car is left standing idle, all the oil sinks to the bottom of the sump, and then corrosion begins to set in on all the internal engine parts where the oil has drained away.

Cold corrosion is when condensation builds up in the cylinders and rust forms in the bores. The engines would then start to seize and would need to be professionally freed before they could be started.  Also the tires start to lose air and the batteries start to go flat, indeed the detrimental list goes on and on.

So the longer they sit there the worse it slowly becomes for them.  What is the answer to this?  Well they need to be sold and that just isn’t happening.

The epidemic is not improving, it is getting worse.  Car manufactureres are constantly coming out with new models with the latest technology in them.  Hence prospective buyers of, for example, a new Citroen Xsara Picasso want the latest model, not last years model.  Hence all the unsold Citroen Xsara Picasso cars from the previous year will now have even lesser chance of being sold.

The problems then just keep on mounting up.  In the end, the unsold cars that are say 2 years old will have no alternative but to be either crushed up, dismantled and/or their parts recycled.

Some car manufacturers moved their production over to China, General Motors and Cadillac are examples of this.  They are then shipped over in containers and unloaded at ports.  However they are now being told to put a big halt in their import into the U.S.A. as they just can’t sell them in the quantities they would desire.  Consequently Chinese car parks are now filling up with brand new American cars.  Well nobody in China can afford them on their meagre pittance wages, so there they will stay until our economy improves…which it might do in a few generations.

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Capitalism Unable to Deal with

May 3, 2014

Farangis Abdurazokzoda
Inter Press Service/News Report
Published: Saturday 3 May 2014
“Markets can be excellent tools for certain purposes, but they do not have a social conscience, environmental ethic or long-term vision.”
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It is time to craft new politics and economic policies to address the sustainability crisis, according to the latest edition of a flagship report by the Worldwatch Institute, a think tank here.

The global community has delayed addressing the issues associated with rapid climate change and environmental degradation for too long, according to the 294-page report, “Governing for Sustainability”.

The report, which marks the Worldwatch Institute’s 40th anniversary, highlights the challenges imposed by the existing economic and political order. For instance, it criticises neoliberalism for undermining democratic processes by granting a strong political voice to corporations, whose profit-maximising nature traditionally takes little account of environmental health and sustainability.And it is this failure in governance that has resulted in the most alarming environmental challenges that we face today, the institute warns, from water shortages to climate change.

“The unrestrained flow of money into the political process essentially undermines democracy,” Michael Renner, co-director of the report, told IPS.

“We need to rethink many of our basic economic assumptions and mechanisms, and aim not only for a better and wiser distribution of resources, but also a better sharing of available work. This can’t be accomplished via conventional forms of capitalism.”

In part, the report promotes so-called B corps – or benefit corporations – that “aim not only at doing well but also doing good”. B corps are new forms of for-profit entities designed to benefit their social and environmental stakeholders – those affected by the business’s operations – as well as their profit-seeking shareholders.

“This emerging movement is still a small phenomenon relative to the total global economy, but it continues to expand, led by mostly small and medium-sized companies in the United States,” Colleen Cordes, director of outreach and development for The Nature Institute, a research and advocacy organisation, told IPS.

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Still, Worldwatch’s Renner expresses some scepticism that even B corps will be able to meet sustainability goals in the long term.

“Many of the companies subscribing to these principles are still quite small, and a big question is what will happen when these firms grow larger,” he says. “Can they remain anchored to the public interest within a broader system that remains ruled by the tenets of capitalism?” 

The traditional ways in which democratic societies have made important decisions, he says, have been upended.

“Markets can be excellent tools for certain purposes, but they do not have a social conscience, environmental ethic or long-term vision,” Renner notes.

“It’s difficult to know what can successfully change this situation, but it would appear that a mass grassroots mobilisation is needed to provide some sort of counterweight to the money-driven politics that is now in command.”

Drastic measures?

Of course, the drive to maximise profit is not exclusive to corporations. Developing countries often voice discontent about the environmental regulations that industrialised countries impose on trade, for instance, as these regulations are make it more difficult for them to attain higher economic development and growth, at least in the short term.

Renner believes that it is possible to develop and yet avoid the environmental degradation that often follows economic growth – for instance, as widely seen throughout today’s China.

“We need to facilitate a process of ‘leap-frogging’ that allows developing countries to move to much-cleaner alternatives right away,” he says, giving the example of renewable energy.

“A poor country like Bangladesh succeeded in installing 2.8 million solar home systems in rural areas, generating some 100,000 jobs in the process. That’s much better than continuing to subsidise coal and kerosene, and that’s the kind of success story that’s worth learning from and emulating.”

Still, multiple counter-examples to the Bangladesh experience could be more affluent countries that have made little to no meaningful progress in combating the sustainability crisis. The report lists several countries that have seen rollbacks in this progress.

For instance, while Australia had previously pledged to reduce greenhouse gas emissions by five percent under 2000 levels, it has now reversed course and could cause national emissions to increase 12 percent by 2020. Japan, too, has abandoned its 2020 target for cutting national emission to 25 percent below 1990 levels.

And Canada is investing heavily in developing carbon-intensive tar sands deposits, an issue that has become a political hot potato here in the U.S.

Meanwhile, with little agreement on what global steps should be taken to address climate change, it is perhaps not surprising that the concentration of carbon dioxide in the Earth’s atmosphere is now at an all-time high. In fact, over the past decade, carbon dioxide emissions have steadily increased at around 2.7 percent annually – in the process, tripling the carbon emission rate from the previous decade.

Such statistics reinforce the sense that only a drastic change in the global economic and political governance will be able to change course.

“There is a chance we can prevent the worst disruption in climate change, as well as other sustainability challenges such as erosion or fresh water access. But these need to be addressed now,” Tom Prugh, another co-director of the report, told IPS. “The more we delay, the more irreversible our imprint on the environment will be.”

Purposeful ineffectiveness

Many other observers have connected these delays directly to a political and economic ineffectiveness brought about purposefully over the past several decades.

“Long before the climate crisis was the greatest market failure the world has ever seen, it was a massive political and governmental failure,” David Orr, a professor of environmental studies and an adviser to President Barack Obama, at Oberlin College, told IPS.

According to Orr, the U.S. and U.K. administrations of Ronald Reagan and Margaret Thatcher, buttressed by conservative economists such as Friedrich Hayek and Milton Friedman, strongly undermined the role of the government. The effect was particularly potent in those parts of the government dedicated to public welfare, health, education and environment.

“The public capacity to solve public problems has diminished sharply,” Orr says, “and the power of the private sector, banks, financial institutions and corporations has risen.”

Yet for The Nature Institute’s Cordes, a key answer to this situation will come down to the day-to-day role individuals and families.

“We need to focus our attention on urgent issue of how to govern our countries, but also our families and ourselves,” she says. “It’s time for us to think critically before we make decisions with regard to what we buy, where we work, and evaluate our footprints.”

Capitalism is not working – analysis of 200 years of data shows worsening inequality is an inevitable outcome of free market capitalism

April 16, 2014

APRIL 14, 2014

What are the grand dynamics that drive the accumulation and distribution of capital? Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. In Capital in the Twenty-First Century, Thomas Piketty analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings will transform debate and set the agenda for the next generation of thought about wealth and inequality.

UPDATE : A look at the reviews of other economists to the Piketty work and a look a central Piketty prediction that global growth will collapse from 2020-2100.

Piketty shows that modern economic growth and the diffusion of knowledge have allowed us to avoid inequalities on the apocalyptic scale predicted by Karl Marx. But we have not modified the deep structures of capital and inequality as much as we thought in the optimistic decades following World War II. The main driver of inequality–the tendency of returns on capital to exceed the rate of economic growth–today threatens to generate extreme inequalities that stir discontent and undermine democratic values. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, Piketty says, and may do so again.

A work of extraordinary ambition, originality, and rigor, Capital in the Twenty-First Century reorients our understanding of economic history and confronts us with sobering lessons for today.

The book draws on reams of data from the United States and numerous other countries. Most of the data comes from income tax records and estate tax/inheritance records. The sheer quantity of data that underlies Piketty’s conclusions is unprecedented, and as a result his work deserves a great deal of credibility.

While the book is quite long, the major conclusion can be summarized very briefly: Piketty has found that, over the long run, the return on capital is higher than the growth rate of the overall economy. In other words, accumulated and inherited wealth becomes a larger fraction of the economic pie over time. This happens more or less automatically, and there is no reason to believe this trend will change or reverse course.

Piketty argues that the reduction in inequality in developed countries after World War II was a “one-off” that was driven entirely by political choices and policies. It did not happen automatically. Those policies have now been largely reversed, especially in the United States. As a result the drive toward increased inequality is likely to be relentless.

Piketty’s solution is a global wealth tax. While this seems politically unfeasible, he argues that it is the only thing likely to work.

[From the New Yorker] – At first, Piketty concentrated on getting the facts down, rather than interpreting them. Using tax records and other data, he studied how income inequality in France had evolved during the twentieth century, and published his findings in a 2001 book. A 2003 paper that he wrote with Emmanuel Saez, a French-born economist at Berkeley, examined income inequality in the United States between 1913 and 1998. It detailed how the share of U.S. national income taken by households at the top of the income distribution had risen sharply during the early decades of the twentieth century, then fallen back during and after the Second World War, only to soar again in the nineteen-eighties and nineties.

With the help of other researchers, including Saez and the British economist Anthony Atkinson, Piketty expanded his work on inequality to other countries, including Britain, China, India, and Japan. The researchers established the World Top Incomes Database, which now covers some thirty countries, among them Malaysia, South Africa, and Uruguay. Piketty and Saez also updated their U.S. figures, showing how the income share of the richest households continued to climb during and after the Great Recession, and how, in 2012, the top one per cent of households took 22.5 per cent of total income, the highest figure since 1928.

The question is what’s driving the upward trend. Piketty didn’t think that economists’ standard explanations were convincing, largely because they didn’t pay enough attention to capital accumulation—the process of saving, investing, and building wealth which classical economists, such as David Ricardo, Karl Marx, and John Stuart Mill, had emphasized. Piketty defines capital as any asset that generates a monetary return. It encompasses physical capital, such as real estate and factories; intangible capital, such as brands and patents; and financial assets, such as stocks and bonds. In modern economics, the term “capital” has been purged of its ideological fire and is treated as just another “factor of production,” which, like labor and land, earns a competitive rate of return based upon its productivity. A popular model of economic growth developed by Robert Solow, one of Piketty’s former colleagues at M.I.T., purports to show how the economy progresses along a “balanced growth path,” with the shares of national income received by the owners of capital and labor remaining constant over time. This doesn’t jibe with modern reality. In the United States, for example, the share of income going to wages and other forms of labor compensation dropped from sixty-eight per cent in 1970 to sixty-two per cent in 2010—a decline of close to a trillion dollars.

Some people claim that the takeoff at the very top reflects the emergence of a new class of “superstars”—entrepreneurs, entertainers, sports stars, authors, and the like—who have exploited new technologies, such as the Internet, to enlarge their earnings at the expense of others in their field. If this is true, high rates of inequality may reflect a harsh and unalterable reality: outsized spoils are going to go to Roger Federer, James Patterson, and the WhatsApp guys. Piketty rejects this account. The main factor, he insists, is that major companies are giving their top executives outlandish pay packages. His research shows that “supermanagers,” rather than “superstars,” account for up to seventy per cent of the top 0.1 per cent of the income distribution. (In 2010, you needed to earn at least $1.5 million to qualify for this élite group.) Rising income inequality is largely a corporate phenomenon.

Many C.E.O.s receive a lot of stock and stock options. Over time, they and other rich people earn a lot of money from the capital they have accumulated: it comes in the form of dividends, capital gains, interest payments, profits from private businesses, and rents. Income from capital has always played a key role in capitalism. Piketty claims that its role is growing even larger, and that this helps explain why inequality is rising so fast. Indeed, he argues that modern capitalism has an internal law of motion that leads, not inexorably but generally, toward less equal outcomes. The law is simple. When the rate of return on capital—the annual income it generates divided by its market value—is higher than the economy’s growth rate, capital income will tend to rise faster than wages and salaries, which rarely grow faster than G.D.P.

If ownership of capital were distributed equally, this wouldn’t matter much. We’d all share in the rise in profits and dividends and rents. But in the United States in 2010, for example, the richest ten per cent of households owned seventy per cent of all the country’s wealth (a good surrogate for “capital”), and the top one per cent of households owned thirty-five per cent of the wealth. By contrast, the bottom half of households owned just five per cent. When income generated by capital grows rapidly, the richest families benefit disproportionately.

80% tax on imcome over 1 million dollars a year and net worth tax

Given that inequality is a worldwide phenomenon, Piketty aptly has a worldwide solution for it: a global tax on wealth combined with higher rates of tax on the largest incomes. How much higher? Referring to work that he has done with Saez and Stefanie Stantcheva, of M.I.T., Piketty reports, “According to our estimates, the optimal top tax rate in the developed countries is probably above eighty per cent.” Such a rate applied to incomes greater than five hundred thousand or a million dollars a year “not only would not reduce the growth of the US economy but would in fact distribute the fruits of growth more widely while imposing reasonable limits on economically useless (or even harmful) behavior.”

Piketty is referring here to the occasionally destructive activities of Wall Street traders and investment bankers. His new wealth tax would be like an annual property tax, but it would apply to all forms of wealth. Households would be obliged to declare their net worth to the tax authorities, and they would be taxed upon it. Piketty tentatively suggests a levy of one per cent for households with a net worth of between one million and five million dollars; and two per cent for those worth more than five million. “Or one might prefer a much more steeply progressive tax on large fortunes (for example a rate of 5 to 10 percent on assets above one billion euros),” he adds. A wealth tax would force individuals who often manage to avoid other taxes to pay their fair share; and it would generate information about the distribution of wealth, which is currently opaque. “Some people think that the world’s billionaires have so much money that it would be enough to tax them at a low rate to solve all the world’s problems,” Piketty notes. “Others believe that there are so few billionaires that nothing much would come of taxing them more heavily. . . . In any case, truly democratic debate cannot proceed without reliable statistics.”

Reality of attempts to implement wealth taxes

The nations of the world can’t agree on taxing harmful carbon emissions, let alone taxing the capital of their richest and most powerful citizens. Piketty concedes as much. Still, he says, his proposal provides a standard against which to judge other proposals; it points to the need for other useful reforms, such as improving international banking transparency; and it could be introduced in stages. A good place to begin, he thinks, would be a European wealth tax that would replace the property tax, which “in most countries is tantamount to a wealth tax on the propertied middle class.” But that may be utopian, too. If the European Union moved ahead with Piketty’s proposal, it would produce a rush to tax havens like Switzerland and Luxembourg. Previous efforts to introduce wealth taxes at the national level have run into problems. Spain, for example, adopted a wealth tax in 2012 and abolished it at the start of this year. In Italy, a wealth tax proposed in 2011 never went through. Such difficulties explain why governments still rely on other, admittedly imperfect, tools to tax capital, such as taxes on property, estates, and capital gains.

In the United States, the very idea of a new wealth tax looks like a nonstarter politically, as would the notion of raising the top rate of income tax to eighty per cent.

SOURCES – Amazon, Guardian UK, New Yorker, youtube

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Eight Headlines the Mainstream Media Doesn’t Have the Courage to Print

April 8, 2014

The following are all relevant, fact-based issues, the “hard news” stories that the media has a responsibility to report. But the business-oriented press generally avoids them.

1. U.S. Wealth Up $34 Trillion Since Recession. 93% of You Got Almost None of It.

That’s an average of $100,000 for every American. But the people who already own most of the stocks took almost all of it. For them, the average gain was well over a million dollars — tax-free as long as they don’t cash it in. Details available here.

2. Eight Rich Americans Made More Than 3.6 Million Minimum Wage Workers

A recent report stated that no full-time minimum wage worker in the U.S. can afford a one-bedroom or two-bedroom rental at fair market rent. There are 3.6 million such workers, and their total (combined) 2013 earnings is less than the 2013 stock market gains of just eight Americans, all of whom take more than their share from society: the four Waltons, the two Kochs, Bill Gates, and Warren Buffett.

3. News Sources Speak for the 5%

It would be refreshing to read an honest editorial: “We dearly value the 5 to 7 percent of our readers who make a lot of money and believe that their growing riches are helping everyone else.”

Instead, the business media seems unable to differentiate between the top 5 percent and the rest of society. The Wall Street Journal exclaimed, “Middle-class Americans have more buying power than ever before,” and then went on to sputter: “What Recession?…The economy has bounced back from recession, unemployment has declined..”

The Chicago Tribune may be even further out of touch with its less privileged readers, asking them: “What’s so terrible about the infusion of so much money into the presidential campaign?”

4. TV News Dumbed Down for American Viewers

A 2009 survey by the European Journal of Communication compared the U.S. to Denmark, Finland, and the UK in the awareness and reporting of domestic vs. international news, and of ‘hard’ news (politics, public administration, the economy, science, technology) vs. ‘soft’ news (celebrities, human interest, sport and entertainment). The results:

  • Americans [are] especially uninformed about international public affairs.
  • American respondents also underperformed in relation to domestic-related hard news stories.
  • American television reports much less international news than Finnish, Danish and British television;
  • American television network newscasts also report much less hard news than Finnish and Danish television.

Surprisingly, the report states that “our sample of American newspapers was more oriented towards hard news than their counterparts in the European countries.” Too bad Americans are reading less newspapers.

5. News Execs among White Male Boomers Who Owe Trillions to Society

The hype about the “self-made man” is fantasy. In the early 1970s, we privileged white males were spirited out of college to waiting jobs in management and finance, technology was inventing new ways for us to make money, tax rates were about to tumble, and visions of bonuses and capital gains danced in our heads.

While we were in school the Defense Department had been preparing the Internet for Microsoft and Apple, the National Science Foundation was funding the Digital Library Initiative research that would be adopted as the Google model, and the National Institute of Health was doing the early laboratory testing for companies like Merck and Pfizer. Government research labs and public universities trained thousands of chemists, physicists, chip designers, programmers, engineers, production line workers, market analysts, testers, troubleshooters, etc., etc.

All we created on our own was a disdainful attitude, like that of Steve Jobs: “We have always been shameless about stealing great ideas.”

6. Funding Plummets for Schools and Pensions as Corporations Stop Paying Taxes

Three separate studies have shown that corporations pay less than half of their required state taxes, which are the main source of K-12 educational funding and a significant part of pension funding. Most recently, the report“The Disappearing Corporate Tax Base” found that the percentage of corporate profits paid as state income taxes has dropped from 7 percent in 1980 to about 3 percent today.

7. Companies Based in the U.S. Paying Most of their Taxes Overseas

Citigroup had 42% of its 2011-13 revenue in North America (almost all U.S.) and made $32 billion in profits, but received a U.S. current income tax benefit all three years.

Pfizer had 40% of its 2011-13 revenues and nearly half of its physical assets in the U.S., but declared almost $10 billion in U.S. losses to go along with nearly $50 billion in foreign profits.

In 2013 Exxon had about 43% of management, 36% of sales, 40% of long-lived assets, and 70-90% of its productive oil and gas wells in the U.S., yet only paid about 2 percent of its total income in U.S. income taxes, and most of that was something called a “theoretical” tax.

8. Restaurant Servers Go Without Raise for 30 Years

An evaluation by Michelle Chen showed that the minimum wage for tipped workers has been approximately $2 an hour since the 1980s. She also notes that about 40 percent of these workers are people of color, and about two-thirds are women.

Here’s one more possible and welcome headline: Progressives Unite Behind Wealth and Wall Street Taxes.

Supreme Court Traitors Sell Out America Again With McCutcheon Decision

April 3, 2014
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Supreme Court Building with a Facade. I took this photo last summer. It seemed like a look the current court deserves.
(image by rob kall)

Today the five Supreme Court psychopathic scum who vote together for corporations and against people, for big money and against democracy vomited out a decision that could be the one that irreversibly puts the nail in the coffin of American democracy and the middle class.

Roberts, Scalia, Alito, Thomas and Kennedy are florid traitors who have opened up the floodgates for total debasement of the political system. While Citizens United made it easier to funnel money from outside the US, today’s McCutcheon decision will enable any wealthy person to funnel money from foreign people, companies, agencies and governments, including Al Qaeda, including BP, including North Korea and Iran and Israel, into any election.
It’s simple. Say I’m a billionaire. I open an account in, for example, Germany. The government of Iran wires $5 million to my account, or, they use a few intermediaries to hide the source of the transfer.  I make donations totalling $5 million, from a different US account, to four senatorial campaigns, ten house of representatives campaigns, six gubernatorial campaigns and half a dozen judicial campaign.
There is no way to stop such a process. It will happen. It has happened. The only way to stop it is to put limits on  how much an individual can give and to not allow corporations to influence elections at all.
Alan Grayson has submitted legislation to prevent foreign money being used in elections. But it’s hard for me to see how it is possible to detect and prevent the kind of scenario I’ve described.
The US has always had a corrupt system and the wealthy have always been able to buy influence legally and illegally. Now, the traitors in the supreme court have opened the floodgates and the flood will come from outside the US as well as from within.
There is no way to characterize the five justices as anything other than traitorous, psychopathic scum.
They should be in jail, not re-making the laws of the land.
And if you are still under the delusion that electoral politics is the way to make change happen, the depth of your detachment from reality has just been made much deeper. It will take strong non-electoral actions by masses of Americans to undo what these traitorous psychopaths have done. Today we have seen true evil. Sadly, most of the people who usually talk about evil, Evangelical Christians, have no clue that their votes have enabled this heresy.

 

Rob Kall is executive editor, publisher and website architect ofOpEdNews.com, Host of the Rob Kall Bottom Up Radio Show (WNJC 1360 AM), and publisher of Storycon.org, President of Futurehealth, Inc, and an inventor . He is also published regularly on the Huffingtonpost.com

Listen to over 200 of Rob’s Podcast interviews here.

Rob is, with Opednews.com the first media winner of the Pillar Award for supporting Whistleblowers and the first amendment.
With his experience as architect and founder of a technorati top 100 blog, he is also a new media / social media consultant and trainer for corporations, non-profits, entrepreneurs and authors.

Rob is a frequent Speaker on the bottom-up revolution, politics, The art, science and power of story, heroes and the hero’s journey and Positive Psychology. He is a campaign consultant specializing in tapping the power of stories for issue positioning, stump speeches and debates, and optimizing tapping the power of new media. Watch me speaking on Bottom up economics at the Occupy G8 Economic Summit, here.

See more Rob Kall articles here and, older ones, here.

To learn more about Rob and OpEdNews.com, check out A Voice For Truth – ROB KALL | OM Times Magazine and this article. For Rob’s work in non-political realms mostly before 2000, see his C.V..

 
And here’s a one hour radio interview where I was a guest- on Envision This, on 10/23/13. And here is the transcript. 

And Rob’s quotes are here.

To watch me on youtube, having a lively conversation with John Conyers, former Chair of the House Judiciary committee, click here Now, wouldn’t you like to see me on the political news shows, representing progressives. If so, tell your favorite shows to bring me on and refer them to this youtube video.

Rob’s radio show, The Rob Kall Bottom Up Radio Show, runs 9-10 PM EST Wednesday evenings, on AM 1360, WNJC and is archived atwww.opednews.com/podcasts Or listen to it streaming, live atwww.wnjc1360.com

Rob also hosted a health/mind/body/heart/spirit radio show– the Rob Kall Futurehealth radio show. Check out podcasts from it atfuturehealth.org/podcasts

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-My articles express my personal opinion, not the opinion of this website.

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First-Ever Political Study of Top 1% Has Found Extreme Conservatism, Intense Political Involvement

April 2, 2014
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From http://www.flickr.com/photos/60513726@N03/7751205588/: Billionaires
Billionaires
(image by Michael Fleshman)

 

A year ago, to little public notice, the academic journal Perspectives on Politics published a landmark study, “Democracy and the Policy Preferences of Wealthy Americans,” by Benjamin Page, Larry Bartels, and Jason Seawright; which reports that, among the American aristocracy, there exists pervasive extreme conservatism, and also a virtual non-stop involvement in politics by them — in other words, it finds the same two things that writers have hypothesized to exist among aristocracies throughout all of human history. But, for the first time ever, these researchers have now attached precise numbers to these two hypotheses, and have established that this is the way aristocrats actually are. Consequently, the much-noted takeover of “Main Street” by “Wall Street” can be explained by the fact that the aristocracy are far more conservative, and also far more politically active, than the general population are.

73% of the respondents in this study were wealthier than $5 million. 36% were wealthier than $10 million. 22% were wealthier than $20 million. And 8% were wealthier than $40 million.

The wealthier the respondent, the more extreme was his or her extreme conservatism.

40% of the respondents had “Made Contact With” (which was a conspicuously undefined phrase in the study) the person’s U.S. Senator.

37% had made contact with with his Representative.

 

12% had, with a White House Official.

21% had, with an Official at a Regulatory Agency.

Of these “contacts,” 44% were asserted to have been for private business reasons, such as to “try to get the Treasury to honor their commitment to extend TARP fund to a particular bank.”

99% of respondents had voted in 2008.

84% said that they were paying attention to politics “”most of the time.’ Asked how many days of the week they talk politics, the median response was five days. (More than one volunteered “all the time.’)” So, now, we know whose brains are connected to Adam Smith’s “invisible hand.”

“Fully two-thirds contributed money to politics, giving an average of $4,633 to political campaigns or organizations over the previous twelve months.” And, “A remarkable 21 percent … solicited or “bundled’ other peoples’ political contributions.”

What, then, were their political issues, which so obsessed them?

70% were opposed to more federal regulation of “Small business.”

87% were opposed to “responsibility of the government to reduce the differences in income between people with high incomes and those with low incomes.” Studies of the general public showed that the comparable percentage among the public was 54%.

83% were opposed to the idea that “our government should redistribute wealth by heavy taxes on the rich.” 48% of the general public were.

Next Page  1  |  2  |  3

 

Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.
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Supreme Court Traitors Sell Out America Again With McCutcheon Decision

April 2, 2014
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Supreme Court Building with a Facade. I took this photo last summer. It seemed like a look the current court deserves.
(image by rob kall)

Today the five Supreme Court psychopathic scum who vote together for corporations and against people, for big money and against democracy vomited out a decision that could be the one that irreversibly puts the nail in the coffin of American democracy and the middle class.

Roberts, Scalia, Alito, Thomas and Kennedy are florid traitors who have opened up the floodgates for total debasement of the political system. While Citizens United made it easier to funnel money from outside the US, today’s McCutcheon decision will enable any wealthy person to funnel money from foreign people, companies, agencies and governments, including Al Qaeda, including BP, including North Korea and Iran and Israel, into any election.
It’s simple. Say I’m a billionaire. I open an account in, for example, Germany. The government of Iran wires $5 million to my account, or, they use a few intermediaries to hide the source of the transfer.  I make donations totalling $5 million, from a different US account, to four senatorial campaigns, ten house of representatives campaigns, six gubernatorial campaigns and half a dozen judicial campaign.
There is no way to stop such a process. It will happen. It has happened. The only way to stop it is to put limits on  how much an individual can give and to not allow corporations to influence elections at all.
Alan Grayson has submitted legislation to prevent foreign money being used in elections. But it’s hard for me to see how it is possible to detect and prevent the kind of scenario I’ve described.
The US has always had a corrupt system and the wealthy have always been able to buy influence legally and illegally. Now, the traitors in the supreme court have opened the floodgates and the flood will come from outside the US as well as from within.
There is no way to characterize the five justices as anything other than traitorous, psychopathic scum.
They should be in jail, not re-making the laws of the land.
And if you are still under the delusion that electoral politics is the way to make change happen, the depth of your detachment from reality has just been made much deeper. It will take strong non-electoral actions by masses of Americans to undo what these traitorous psychopaths have done. Today we have seen true evil. Sadly, most of the people who usually talk about evil, Evangelical Christians, have no clue that their votes have enabled this heresy.

 

Rob Kall is executive editor, publisher and website architect ofOpEdNews.com, Host of the Rob Kall Bottom Up Radio Show (WNJC 1360 AM), and publisher of Storycon.org, President of Futurehealth, Inc, and an inventor . He is also published regularly on the Huffingtonpost.com

Listen to over 200 of Rob’s Podcast interviews here.

Rob is, with Opednews.com the first media winner of the Pillar Award for supporting Whistleblowers and the first amendment.
With his experience as architect and founder of a technorati top 100 blog, he is also a new media / social media consultant and trainer for corporations, non-profits, entrepreneurs and authors.

Rob is a frequent Speaker on the bottom-up revolution, politics, The art, science and power of story, heroes and the hero’s journey and Positive Psychology. He is a campaign consultant specializing in tapping the power of stories for issue positioning, stump speeches and debates, and optimizing tapping the power of new media. Watch me speaking on Bottom up economics at the Occupy G8 Economic Summit, here.

See more Rob Kall articles here and, older ones, here.

To learn more about Rob and OpEdNews.com, check out A Voice For Truth – ROB KALL | OM Times Magazine and this article. For Rob’s work in non-political realms mostly before 2000, see his C.V..

 
And here’s a one hour radio interview where I was a guest- on Envision This, on 10/23/13. And here is the transcript. 

And Rob’s quotes are here.

To watch me on youtube, having a lively conversation with John Conyers, former Chair of the House Judiciary committee, click here Now, wouldn’t you like to see me on the political news shows, representing progressives. If so, tell your favorite shows to bring me on and refer them to this youtube video.

Rob’s radio show, The Rob Kall Bottom Up Radio Show, runs 9-10 PM EST Wednesday evenings, on AM 1360, WNJC and is archived atwww.opednews.com/podcasts Or listen to it streaming, live atwww.wnjc1360.com

Rob also hosted a health/mind/body/heart/spirit radio show– the Rob Kall Futurehealth radio show. Check out podcasts from it atfuturehealth.org/podcasts

Follow me on Twitter

A few declarations.

-My articles express my personal opinion, not the opinion of this website.

Press coverage in the Wall Street Journal: Party’s Left Pushes for a Seat at the Table

Add this Page to Facebook!   Submit to Twitter   Submit to Reddit   Submit to Stumble Upon   Pin It!   Fark It!   Tell A Friend 

The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

The End of the Capitalist Era, and What Comes Next

April 2, 2014

Jeremy Rifkin is an economic and social theorist, writer, public speaker, political advisor and activist. (photo: WikiCommons)
Jeremy Rifkin is an economic and social theorist, writer, public speaker, political advisor and activist. (photo: WikiCommons)

By Jeremy Rifkin, Reader Supported News

01 April 14

 

he capitalist era is passing… not quickly, but inevitably. A new economic paradigm — the Collaborative Commons — is rising in its wake that will transform our way of life. We are already witnessing the emergence of a hybrid economy, part capitalist market and part Collaborative Commons. The two economic systems often work in tandem and sometimes compete. They are finding synergies along each other’s perimeters, where they can add value to one another, while benefiting themselves. At other times, they are deeply adversarial, each attempting to absorb or replace the other.

Although the indicators of the great transformation to a new economic system are still soft and largely anecdotal, the Collaborative Commons is ascendant and, by 2050, it will likely settle in as the primary arbiter of economic life in most of the world. An increasingly streamlined and savvy capitalist system will continue to soldier on at the edges of the new economy, finding sufficient vulnerabilities to exploit, primarily as an aggregator of network services and solutions, allowing it to flourish as a powerful niche player in the new economic era, but it will no longer reign.

What’s undermining the capitalist system is the dramatic success of the very operating assumptions that govern it. At the heart of capitalism there lies a contradiction in the driving mechanism that has propelled it ever upward to commanding heights, but now is speeding it to its death: the inherent dynamism of competitive markets that drives productivity up and marginal costs down, enabling businesses to reduce the price of their goods and services in order to win over consumers and market share. (Marginal cost is the cost of producing additional units of a good or service, if fixed costs are not counted.) While economists have always welcomed a reduction in marginal cost, they never anticipated the possibility of a technological revolution that might bring marginal costs to near zero, making goods and services priceless, nearly free, and abundant, and no longer subject to market forces.

The near zero marginal cost phenomenon has already wreaked havoc on the entertainment, communications, and publishing industries, as more and more information is being made available nearly free to billions of people. Today, more than forty percent of the human race is producing its own music, videos, news, and knowledge on relatively cheap cellphones and computers and sharing it at near zero marginal cost in a collaborative networked world. And now the zero marginal cost revolution is beginning to affect other commercial sectors, including renewable energy, 3D printing in manufacturing, and online higher education. There are already millions of “prosumers” — consumers who have become their own producers — generating their own green electricity at near zero marginal cost around the world. It’s estimated that around 100,000 hobbyists are using open source software and recycled plastic feedstock to manufacture their own 3D printed goods at nearly zero marginal cost. Meanwhile, six million students are currently enrolled in free Massive Open Online Courses (MOOCs) that operate at near zero marginal cost and are taught by some of the most distinguished professors in the world, and receiving college credits.

The reluctance to come to grips with near zero marginal cost is understandable.

Many, though not all, of the old guard in the commercial arena can’t imagine how economic life would proceed in a world where most goods and services are nearly free, profit is defunct, property is meaningless, and the market is superfluous. What then?

A powerful new technology platform is emerging with the potential of reducing marginal costs across large sectors of the capitalist economy, with far reaching implications for society in the first half of the 21st Century. The Communications Internet is converging with the fledgling Energy Internet and Logistics Internet in a seamless twenty-first-century intelligent infrastructure — the Internet of Things (IoT). The IoT will connect every thing with everyone in an integrated global network. People, machines, natural resources, production lines, logistics networks, the electricity grid, consumption habits, recycling flows, and virtually every other aspect of economic and social life will be linked via sensors and software to the IoT platform, continually feeding Big Data to every node — businesses, homes, vehicles — moment to moment, in real time. Anyone will be able to access the IoT and use Big Data and analytics to develop predictive algorithms that can dramatically increase productivity and reduce the marginal cost of producing and delivering a full range of physical goods and services to near zero just like we now do with information goods. Lost in all of the excitement over the prospect of the Internet of Things is that connecting everyone and everything in a global network driven by extreme productivity moves us ever faster toward an era of nearly free goods and services and, with it, the shrinking of capitalism in the next half century. The question is what kind of economic system would we need to organize economic activity that is nearly free and shareable?

We are so used to thinking of the capitalist market and government as the only two means of organizing economic life that we overlook the other organizing model in our midst that we depend on daily to deliver a range of goods and services that neither market nor government provides. The Commons predates both the capitalist market and representative government and is the oldest form of institutionalized, self-managed activity in the world.

The contemporary Commons is where billions of people engage in the deeply social aspects of life. It is made up of literally millions of self-managed, mostly democratically run organizations, including educational institutions, healthcare organizations, charities, religious bodies, arts and cultural groups, amateur sports clubs, producer and consumer cooperatives, credit unions, advocacy groups, and a near endless list of other formal and informal institutions that generate the social capital of society.

Currently, the social Commons is growing faster than the market economy in many countries around the world. Still, because what the social Commons creates is largely of social value, not pecuniary value, it is often dismissed by economists. Nonetheless, the social economy is an impressive force. According to a survey of 40 nations, the nonprofit Commons accounts for $2.2 trillion in operating expenditures. In eight countries surveyed–including the United States, Canada, Japan, and France–the nonprofit sector makes up, on average, 5 percent of the GDP. In the US, Canada, and the UK, the nonprofit sector already exceeds 10% of the workforce. While the capitalist market is based on self-interest and driven by material gain, the social Commons is motivated by collaborative interests and driven by a deep desire to connect with others and share. If the former defends property rights, caveat emptor, and the search for autonomy, the latter promotes open-source innovation, transparency, and the search for community.

What makes the Commons more relevant today than at any other time in its long history is that we are now erecting a high-tech global technology platform whose defining characteristics potentially optimize the very values and operational principles that animate this age-old institution. The IoT is the technological “soul mate” of an emerging Collaborative Commons. The new infrastructure is configured to be distributed in nature in order to facilitate collaboration and the search for synergies, making it an ideal technological framework for advancing the social economy. The operating logic of the IoT is to optimize lateral peer production, universal access, and inclusion, the same sensibilities that are critical to the nurturing and creation of social capital in the civil society. The very purpose of the new technology platform is to encourage a sharing culture, which is what the Commons is all about. It is these design features of the IoT that bring the social Commons out of the shadows, giving it a high-tech platform to become the dominant economic paradigm of the twenty-first century.

The Collaborative Commons is already profoundly impacting economic life. Markets are beginning to give way to networks, ownership is becoming less important than access, and the traditional dream of rags to riches is being supplanted by a new dream of a sustainable quality of life.

Hundreds of millions of people are transferring bits and pieces of their economic life from capitalist markets to the global Collaborative Commons. Prosumers are not only producing and sharing their own information, entertainment, green energy and 3D-printed goods at near zero marginal cost and enrolling in massive open online college courses for nearly free, on the Collaborative Commons. They are also sharing cars, homes, clothes, tools, toys, and countless other items with one another via social media sites, rentals, redistribution clubs, and cooperatives, at low or near zero marginal cost. An increasing number of people are collaborating in “patient-driven” health-care networks to improve diagnoses and find new treatments and cures for diseases, again at near zero marginal cost. And young social entrepreneurs are establishing socially responsible businesses, crowdfunding new enterprises, and even creating alternative social currencies in the new economy. The result is that “exchange value” in the marketplace is increasingly being replaced by “shareable value” on the Collaborative Commons.

In the unfolding struggle between the exchange economy and the sharing economy, most economists argue that if everything were nearly free, there would be no incentive to innovate and bring new goods and services to the fore because inventors and entrepreneurs would have no way to recoup their up-front costs. Yet millions of prosumers are freely collaborating in social Commons, creating new IT and software, new forms of entertainment, new learning tools, new media outlets, new green energies, new 3D-printed manufactured products, new peer-to-peer health-research initiatives, and new nonprofit social entrepreneurial business ventures, using open-source legal agreements freed up from intellectual property restraints. 2014-03-31-FinalZMCSCoverArt.jpgThe upshot is a surge in creativity that is at least equal to the great innovative thrusts experienced by the capitalist market economy in the twentieth century.

While the capitalist market is not likely to disappear, it will no longer exclusively define the economic agenda for civilization. There will still be goods and services whose marginal costs are high enough to warrant their exchange in markets and sufficient profit to ensure a return on investment. But in a world in which more things are potentially nearly free and shareable, social capital is going to play a far more significant role than financial capital, and economic life is increasingly going to take place on a Collaborative Commons.

 


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