Musings Report #44 11-2-13 What Lies Beyond Capitalism and Socialism?
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What Lies Beyond Capitalism and Socialism?
Having just returned from three weeks in quasi-socialist France, and working my way through the yet-to-be-published book "Does Capitalism Have a Future?" by Immanuel Wallerstein et al., I am wondering what lies beyond the current versions of capitalism and socialism, both of which are failing for structural reasons.
I will summarize the arguments set forth in "Does Capitalism Have a Future?" in a separate Musings, but for now it's enough to mention the dynamics I have covered in depth on the blog for years: financialization, the end of paid work, and the triumph of state/cartel capitalism.
As for socialism, it seems self-evident that it too has reached the end of its historic road. Though socialism is widely considered the compassionate ideology and capitalism the uncaring one, both reward and reinforce the negative human capacity for exploitation and dependence.
Is it compassionate to offer people a subsidized living but few opportunities for work and self-worth? Is it compassionate to bleed dry those contributing to the upkeep of society so others can live for free off their efforts/skills? It seems self-evident, at least once you descend from the abstract to the lived-in world, that any system that rewards exploitation and dependence is not truly compassionate.
(Side note: since my brother has long lived (and operated a small business) in France, we share the expense of family get-togethers by trading visits: he and his wife came to the U.S. in 2012 and will visit again in 2014, and my sister and I went to France in 2011 and 2013.)
Since I started visiting Paris in 1990, I think I have a decent baseline for comparing the present to the recent past. That said, real-life experience has persuaded me that the only way anyone can truly understand another country is to 1) marry into a family and live there for many years AND 2) start and operate a small business there.
Since my brother has done both, my foundation of experiential information is much deeper than any acquired as a visitor or even part-time resident with no family or small-business ties. (Working for Corporate America and being stationed in Paris, Tokyo or Shanghai does not provide a truly realistic picture of France, Japan and China, either.)
Back in 2004 I wrote a piece for the S.F. Chronicle newspaper on housing in France which referenced the ubiquity of cash/black market construction services. An English gent who resided part-time in northern France huffily wrote me that he'd never seen any black market activity in France. I had to chuckle at his naivete and superficial grasp of the reality of small business in France, where everyone has to book at least a third of their revenues off the books just to survive.
Social charges are around 65% and you pay in advance based on the previous year’s earnings. If you have a lousy year, tough luck--you pay up front based on your last year’s income. Income and other taxes are paid out of what's left. Needless to say, there isn't much left for most small businesses.
A recent news item about an immigrant gent who was skimming 10,000 euros a month in welfare for his three families raised a fuss. Meanwhile, on the other side of the ledger (we need more tax revenues), a proposed junk-fee tax on trucks (above 2,500 pounds, the sort used by farmers and artisans) roused a mob of 1,000 farmers and artisans in Brittany. This caused the government to back down on that particular revenue-enhancement scheme, but since taxes have increased some 70 billion euros over the past few years to support statespending, the pain felt by small business and households is very real.
Small business isn't the only sector under siege. One of our French family members works for a global U.S. pharmaceutical corporation in Paris, and the firm has slashed headcount (i.e. laid off people) in the past few years, despite the rigorous difficulties of doing so in France.
My wife and walked about 50 miles during our last week in Paris, essentially walking across central Paris (in terms of kilometers walked) every day. We covered a lot of ground in a variety of districts (arrondissements), including the 1st, 2nd, 3rd, 4th, 5th, 6th, 7th, 8th, 10th, 11th, 14th, 16th, 18th, 19th and 20th. (There are 20 AR in central Paris.) This includes the touristy areas as well as tonier neighborhoods (8th and 16th) and grittier immigrant neighborhoods (the 19th and 20th).
It's easy to tell if you are outside a tourist area: the people you interact with do not speak English, period. Sales clerks might know the numbers 1 to 10 and a few phrases, but maybe not.
An extraordinary number of young men are loitering about in many areas of Paris, clearly at loose ends and not knowing what to do with themselves. This is the structural problem with the current version of socialism: it depends on the private sector to provide jobs for 60% of the populace but squeezes the private sector so hard to pay for the 40% who depend on the state that private jobs are scarce.
Looking at the aimlessness of those without work and little prospect for work, I cannot see this system as either compassionate or sustainable.
What shocked me since my last visit in 2011 was the number of well-fed beggars on the street. I’m not referring to street musicians on the Metro (subway) or drunks bedding down in Metro stations, but to able-bodied men and women sitting on sidewalks or milling about with a cup. Everyone knows housing and entitlements are generous, so nobody can go hungry and be homeless unless they are outside the system.
I did not see a single French person give a centime to the ubiquitous beggars or even to street musicians. The begging is apparently aimed at tourists. The French all know the system provides for everyone, so why give cash to beggars?
I suspect it’s not need but the opportunity to skim some extra cash that’s behind the begging. If you have nothing else to do all day, why not? I also saw pup tents on the sidewalk in some areas, just like in the U.S. My brother says these are people who choose not to enter the system and live by its rules, for probably the same reasons many avoid homeless shelters and services in the U.S.
Meanwhile, small flats in Paris cost between 350K to 800K euros ($500,000 to $1,000,000), depending on the size and neighborhood. The average wage is around 1,400 euros ($1,900) a month: those with advanced degrees and good corporate jobs might earn 1,800 euros ($2,400) a month. Our family members in their 20s/30s report that their friends have moved out of central Paris because they can no longer afford to live there, unless they work for the state and have secured a subsidized state-owned flat.
This is clearly a society whose core dynamics are destabilizing, not just from the ills of capitalism but from the equally intrinsic ills of socialism.
I don't see any sustainable future other than a community-based form of capitalism. Readers ask me to fill in what this means, and that is something I'm working on. It's currently book 3 in my workload, meaning there are two other books preceding it in the assembly line.
Summary of the Blog This Past Week
Correspondent Daniel G. recently suggested that the Musings would benefit from a summary of the previous week's blog entries, as not every reader has time/interest in visiting the blog daily. This is an excellent suggestion, so here goes:
Unaffordable Recreation and the Ratchet Effect November 1, 2013
Instability Start on the Margins October 31, 2013
What Real Estate Bubble? Oh, You Mean the One That's Bigger Than the 2007 Bubble? October 30, 2013
System Reset 2014-2015 October 29, 2013
The Gathering Storm October 28, 2013
In terms of traffic, "System Reset" seemed to be the hot topic, with about 13,000 visits, not counting the 15K+ on Zero Hedge and the unknown number on other sites.
Best Thing That Happened To Me This Week
Returned home in one piece. Also noteworthy: on the flight home from Paris to SFO (San Francisco), the route took us over Greenland. It was one of those rare days when the cloud cover had vanished and we were able to see a splendid "other world" of snow-covered craggy mountain ranges and ice flows as far as the eye could see. It was truly an extraordinary sight. When we cross a great ocean or the top of the world, it reminds us that our part of the planet is a relatively modest part of the whole.
Market Musings
The stock market is entering its historically best 2-month period, November and December, when the Santa Claus Rally typically brings stocks higher. Betting against this rally is tough unless there is a definitive break of key support levels.
Of more interest to me is the dollar index (DXY), which is represented by the UUP etf.
The dollar sagged below support just long enough to trigger calls of a breakdown, but it has since recovered back into the trading range. Could the dollar surprise to the upside? Even a return to the upper trading range would make a profitable trade.
From Left Field
Berlin’s ‘system error’ free shop -- everything in the store is free, and freely given -- interesting "degrowth" model for shopping (via John D.)
From Anonymity to Scourge of Wall Street (via Joel M.) A onetime engineer who earned his law degree at night has been behind the government’s campaign to punish Wall Street for the financial crisis.
Counties Made for Horse and Buggy Reject Savings (via Joel M.) "As population drops and infrastructure decays, officials and residents concerned about the loss of jobs and identity resist shrinking their government." The ratchet effect in action....
Thanks for reading--
charles
