Musings on Marx, capitalism, austerity and future

All that is solid melts into air, all that is holy is profaned.

This is Marx quoting in The Communist Manifesto. It seems to describe well what is happening now in the world.

Occupy Wall Street is the visible symptom of societal sickness induced by “bad” capitalism. It highlights the fact that more and more people are starting to think Karl Marx was right about unregulated/loosely regulated markets. An image below does a pretty good notional mapping.

Marx welcomed capitalism’s self-destruction. He was confident that a popular revolution – a grassroots revolution of proletariat spreading from city to city – would occur and bring about a communist system, an egalitarian and fair system where everyone will have his/her chance to be heard, get an employment and lead a happy life.

He understood well how capitalism destroys its own social base, the middle-class. A self-sustaining middle-class is essential for any healthy and happy society. That was the greatest contribution of Henry Ford, who created the middle-class America.   As economists realize, middle-classes are the ones being most affected by bad economic practices on corporate/institutional levels and it is their movements that are currently showing their lion’s head.

Marx considered capitalism as the most revolutionary economic system in history. Hunter-gatherers persisted in their way of life for thousands of years, while agricultural and feudal societies have been in existence many hundreds of years. In contrast, capitalism (with its early roots in 9th century Muslim world) is evolutionary. It transforms everything it touches, making and unmaking societies,  industries, markets and companies.

Most importantly, capitalism also destroyed the very way of life which it preached and depended upon. In the UK, the US and other developed countries over the past 20-30 years, industries have stalled, markets stagnated, job security gone away and jobs outsourced or discontinued.

More and more people live from day to day, with little idea of what the future may bring. 18th-19th century middle-classes used to think their lives unfolded in an orderly progression. It seems no longer to be the case with middle classes of 21st century. There seems to be no upwards stairs. We’d be happy if we could stay on the same level.

While capitalism created and accelerated the industrial revolution, its detrimental effect, especially during last few decades, has given to most people unstable, precarious lives. Admittedly, middle-class incomes are higher then 100 years ago, but there is little effective control over the course of our lives/careers.

Unfortunately, Western governments are quite reactive. Their panacea to the crisis is austerity. Even rich from the West now ask for austerity. They don’t realize one important thing. In Victorian times, the rich could afford to relax provided they were conservative in how they invested their money. It is no longer possible in 21st century, where even the rich get bankrupt from one day to another even without any risky undertakings.

Austerity is a band-aid, a short-term relief against current economic and social sickness afflicting most of the developed world. In a time of zero-interest rates, spending/consuming cuts, melting savings, rising prices, and contracting industries, thriftiness and austerity will yield a negative return on money and over time erode the accumulated/preserved capital.

In a society that is being continuously transformed by market forces (capitalism), one cannot abide by or get used to traditional values (and life standards) for long time, risking to end up on the scrapheap. It’s a person who borrows heavily, who starts a business, who goes on creating jobs and initiatives that survives and prospers. That is the foundation of Schumpeter‘s ideology.

Being sympathetic to Marx’s cause but going one step further, Schumpeter realized the inherent self-destructive nature of capitalism and preached entrepreneurship and disruptive innovation to counter this effect by creating and recreating new economic values, in turn resulting in societal values and traditions. Schumpeter, while thinking that capitalism will cause its own demise, didn’t think it would be by means of communism. His idea, “creative destruction,” explains well why grassroots instability takes place and what the potential cure might look like.

Our single-minded focus on the expectations market will continue driving us from crisis to crisis to ruin—unless we act now.

Says Roger Martin, author of Fixing the Game. Perhaps, he is right. Perhaps, we need to lower our expectations. Perhaps, we need to love what we already have rather than want what we don’t. That and “creating incentives for individuals to act in mutually beneficial and productive ways” (Schumpeter would agree) is what might save the Western world.

Perhaps, there is still hope.

how capitalism relates to shminovation and bible

Innovation, shminovation. We’re obsessed with innovation. But why care about innovation? Perhaps because it’s comfortable to think innovation is panacea for our social stagnation or economic graveyard called capitalism? Indeed, if capitalism, it must be  messy to drive innovation.

Ask yourself, how many Fortune-500 firms breathe innovation? Only few. In them “innovation initiatives face their stiffest resistance after they show hints of success.

But, not all lost: creative capitalism + social  innovation = new social enterprise. Sure, capitalism. Even Bible indirectly condones value-based, compassionate capitalism, for which we need to be deliberate and motivated.

Oh, capitalism inspires poetry too.

From the second hot war into Cold War

May 1945. The WW2 was over.

The shattered financial and industrial worlds were given band-aid remedies in guise of Bretton-Woods (giving birth to IBRD, World Bank and IMF). Soon enough, few new states emerged (Israel), few split apart (India and Pakistan) and in few, liberal discontents led the way eventually winding up with democratic governments (Egypt).

One socialist regime, based on narrow-minded dogmatic doctrines, emerged from WW2 as one of the two strongest nations in the world. This nation had not only a large conventional military base, but was also in the middle of developing its own nuclear weapons (first tested in 1949).

The other victor of WW2 became a superpower not least due to the war itself. It advocated neatly idealistic doctrines, had a constitution spelling out loud the commitment to highest social and moral values, respect for human dignity and equality and adherence to human rights and law.

The first General Assembly of the United Nations met in London in January 1946, and created the United Nations Atomic Energy Commission. Part of their charge was to eliminate all weapons of mass destruction, including the atomic bomb.

America’s first effort to define a policy on the control of atomic energy was Acheson-Lilienthal report (1946). Its premise was that there should be an international “Atomic Development Authority” which would have worldwide monopoly over the control of “dangerous elements” of the entire spectrum of atomic energy. Drawing heavily on the information in the report, the US proposal (July 1, 1946) to the United Nations on international controls on nuclear material (named the Baruch Plan) was presented. It called for the establishment of an international authority to control potentially dangerous atomic activities, license all other atomic activities, and carry out inspections.

The Soviets rejected the Baruch Plan, since it would have left America with a decisive nuclear superiority until the details of the Plan could be worked out and would have stopped the Soviet nuclear program. They responded by calling for universal nuclear disarmament. In the end, the UN adopted neither proposal. Seventeen days after Baruch presented his plan to the UN, the US conducted the world’s first postwar nuclear test. Two atomic tests – code named “Operation Crossroads” – were conducted at Bikini Atoll in the Pacific. These tests explored the effects of airborne and underwater nuclear explosions on ships, equipment, and material. Almost 100 surplus and captured ships were used as targets, including the Japanese battleship Nagato (flagship of the attack on Pearl Harbor). These tests were witnessed by hundreds of politicians and international observers, and 42,000 military and scientific personnel. The two bombs used in Crossroads were identical in design and yield to the bomb used on Nagasaki. Crossroads put pressure on Soviets to pour significant amounts of money into research and development of their nuclear arsenal.

This is how the Cold War started. It had two main axes, which were usually typified by one or some of following doublets:

USSR took on the challenge and a nuclear arms race, which became the determinant factor during the next 50 years, ensued. Nuclear race was followed and paralleled by development of strategic triad by Americans. This race got a new spatial dimension, when Soviets launched the Sputnik into orbit on Oct. 4, 1957. John F. Kennedy, despite his short tenure as American president, made few speeches, which resulted in creation of, among others, Peace Corps, and first (American) landing on the moon. As  crucial ideological battle against oppression, McCarthyism became a prominent movement, a sort of a “witch hunt” for communists and communist sympathizers inside America.

As Marx’s tenets had instructed, communism did not stay home; it had be to spread worldwide to achieve utopia. Some countries had adopted communism to help realize that goal, including Warsaw Pact nations, Yugoslavia (1945 – 1992), DPRK (1954 – present), Yemen (1969 – 1990), Somalia (1969 – 1991), Cambodia (1975 -1989). The communist governments in all of these countries (except DPRK) collapsed right around the same time as the Soviet Union. Communism also rose to power in the nations, where it is still alive today, such as China (since 1949), Cuba (since 1959), Vietnam (since 1976), and Laos (since 1975).

The tension between America and the Soviet Union wasn’t just restricted to technological and economic races. Few full-fledged crisis erupted during the Cold War, including the Korean War (1950 – 1953), Vietnam War (1959 – 1975), the Bay of Pigs (1961) Invasion and the Cuban Missile Crisis (1962).

Then Gorbachev came in 1985 with his Perestroika (reconstruction). At that time, all means of production were state-controlled, a fact which discouraged the initiative and innovation. The Soviet system was not adaptable by itself and perestroika was therefore doomed from the start. Gorbachev did not have the political capacity to push the desired reforms through (one of the most significant being Law on Cooperatives). His half-hearted efforts eventually triggered the collapse of the Soviet Union, which was completely unexpected.
The political system, like the economy, rested on a foundation of lies. Political leaders from cities and regions fabricated domestic and foreign policy statistics, using propaganda, including the newspaper “Pravda.” This newspaper later became a symbol of hype about Soviet productivity. In 1991, the Soviet Union officially came to an end (under Yeltsin elected a year before) and split into republics.

When the Soviet Union dissolved, it led to a domino effect of communist nations collapsing.

Cold War was over as well.