Category Archives: Capitalism

The economic life as a marbles game

When I was a kid every boy played marbles. Later my children did too, in their case with some girls also participating. It was an interesting schooling for the life to come.

The older guys had the most marbles to begin with, and at the end of the day the younger ones, less affluent, usually had lost the few marbles they had started out with. The older ones were also the strongest, so the outcome of any controversy about rules and other conflicts was given beforehand.

The reward for the small guys was the privilege to get to play with the big guys in the first place. And the fairness of it all lay in the fact that the younger ones one day became the older ones, thus able to retaliate for past inequities, bringing home large bags of marbles.

This game is a parable for life, except that in reality those who are poor from the start seldom get the chance to ever come on top, regardless of age. The well-offs in the world have the upper hand all the way, and the richer countries can indefinitely dominate the poorer and dictate terms.

This inequity plays out in trade rules. “Free trade” is a core concept seemingly promising the poor nations shelter under the umbrella of the rich world, which undertakes to open its borders to share its wealth. But just as in the marbles game, where the rules are the same for all, the real outcome is decided by wealth and strength.

The economic “sciences” provide convenient theories to prove that free trade brings prosperity to all. In the real world it’s an instrument serving above all the already rich nations. The most powerful are served the most. It’s no difference from the situation within nations: the rich have the most bargaining power to acquire even more wealth.

The mechanisms by which businesses in rich countries can use “free trade” to enhance their predominance are often equally simple and horrendous. One basic step is to overflow developing countries with cheap, heavily subsidized agricultural products. Thus imperialistic agribusiness effectively wipes out domestic farmers, and forces them to enroll the army of unemployed, serving foreign-owned industries with labor forced to work for pennies.

Absence of tariffs gives businesses in the industrialized world the opportunity to establish workshops in poor countries and profit handsomely on minimal wages. One result of this can easily be found in the numerous rust belts in the rich world, where material destruction leads to destitute societies where people lose hope.

Modern imperialism also uses free trade agreements to avoid all kinds of regulatory constraints, such as environmental regulations, laws ensuring workers security and other kinds of “unnecessary” obstacles to the ever growing profits. Other absurd clauses give corporations the right to sue countries that enforce laws which restrict possibilities to make profit.

The Nation provides a comprehensive and revealing text on the consequences for Central America of the free trade agreement DR-CAFTA. Recommended reading!

Brainwashed lemmings towards the cliff?

Questions! Questions!

Are we really striving with open eyes and clear minds towards a major war in Europe? In that case, for what? Don’t we see those dead children in Gaza, with their small white faces and their mutilated bodies? Don’t we see the horror beaming from the eyes of the physically and mentally maimed small ones, many still babies? And despite that let a war in Europe come closer by each day, when we so easily could stop the march towards disaster? Are we utterly crazy?

And yes we, the so called western democracies which we think of as God’s masterpiece, indeed have the tools to change this development; first of all since we are the prime instigators of the whole mess which all started 25 years ago.

When the Soviet Union lost its power, to a large extent through popular struggle, we happily seized the opportunity by helping to break away fifteen new nations from the former super power. Then we approached those nations in attempts to bring them into our power field. (Among those Ukraine was the chief prize, according to a US official.)

For more than 40 years we had been taught that Soviet Communism, with its ambition to conquer the world, was the prime rot that had to be destroyed at any price. NATO was formed for this sole purpose, it was said. Well, the dreadful Soviet Communism disappeared overnight, and thereby the Warsaw Pact, but nothing logical followed. Instead NATO grew and expanded. We had been lied to, obviously.

It turned out that no one really had imagined the Soviet Union capable of conquering anything. The actual enemy was in fact all kinds of egalitarian politics, which threatened to distribute other countries’ assets to their own populations, instead of deliver them to their rightful owners, namely us.

Now we had a crippled Russia which first of all had to be purged from any trace of egalitarian delusion. A handful of US experts in that field (and a Swedish one) helped Yeltsin and Gaidar to give the country’s valuable assets away to a bunch of oligarchs, then force a steamroller over the Russian industry, totally crushing half of it, and in the process drive ten million people into death. It all seemed to run smoothly.

But then came Vladimir Putin and destroyed most of the joy. He reclaimed some of the nation’s wealth from the thieves, restored the public finances so that doctors and teachers who had been working for months and years without salary could be paid. In the process he also put an end to the genocide of the 1990s. Since then Putin naturally has been reelected with large majorities for 14 years in a row.

This was of course too much for us to chew. In our eyes Putin became the villain of the world, and Russia took over the Soviet role as enemy no. 1. That’s when we started to strike our claws into Ukraine in a rather aggressive way, totally neglecting the old ties between that country and Russia, and disregarding the Russian wishes not to have its prime enemy close to its borders.

During this conflict western moral has deteriorated severely. We have openly cooperated with pure Nazis and spread Ukrainian demagogy, disinformation and the silliest propaganda. We have swallowed the almost Goebbels-like claims that Ukrainian authority’s murdering of their own citizens, women and children, must be blamed on Putin. Not a single moral principle we apply on others (for instance Assad) is applied on the Ukrainian government, which apparently is engaged in ethnic cleansing, as hundreds of thousands of Donbas citizens are fleeing for their lives, many of them to Russia.

This absolutely uncritical and apologetic attitude towards the Ukrainian strongmen is our contribution to enhancing the risk of a war in Europe. We put all demands for restraints on Russia; they must not just obey our orders, they must be deprived every right to national security, and their natural interests must be neglected.

There are “doves” like Henry Kissinger and Zbigniew Brzezinski who recommend US and EU to guarantee Russia that Ukraine never will join NATO. That should be considered a minor concession from the West, but certainly a major contribution to detente. The fact that not even these two older statesmen make any impression on the Obama administration raises doubts about US intentions. Is a dangerous war in Europe a realistic option for this administration?

Loan bubble in Sweden – promising a phenomenal burst

In July this year the Swedish National bank (Riksbanken) cut its key interest rate by two thirds, to reach the European norm 0.25 percent. The head of the bank – Stefan Ingves – had struggled to keep the rate high in his attempts to suppress the swelling bubble of private debt. He seemed to be one of the few economists in Sweden who really worried about that bubble. It’s just that he was accompanied by OECD, EU, the World Bank and other expert bodies who all have expressed serious concern and had given Sweden grave warnings. Finally Ingves had to give in to the majority of the board, who think that the debt problem should be dealt with by other means and by the government (which probably is correct since Ingves’ policy hasn’t prevented the bubble from growing pathologically).

As we have written earlier on this issue the amount of housing loans in Sweden have literally exploded during the last ten years, from 0.7 trillion SEK to 2.7 trillion, i.e. by 400 percent (1 USD = 6.8 SEK), and are still expanding. This increase is of course not even distantly founded on real economic factors. It has mostly been enabled by the banks emitting fictitious money. One important observation, never mentioned by economists, is that part of that imaginary money certainly has trickled into the economy and created a demand without much foundation in reality. We have hence lived beyond our means and the day of payment lies ahead, perhaps in the near future.

This trickle effect also puts some perspective on our Finance minister’s bragging about the Swedish economy, which apparently escaped the 2008 crisis better than many other countries’. It may have been a giant Keynesian experiment, except that the liabilities are private and has to be paid in real life by living creatures (not by state economies that can dribble with debts in different ways).

In the last statistics the debt increase had accelerated compared to the previous year. With the lowered rates now taking effect we can expect further aggressive uttering of loans by the banks. The other day I even had a letter from our large cooperative organization – Coop – trying to persuade me to accept a loan for a quarter of a million SEK, without any specific security. Everyone is eager to make some easy profits as long as it works. And when it doesn’t work anymore the banks rest assured that the taxpayers will save their stock holders from any losses. The same tax payers that will end up with a personal debt for lifetime if they aren’t among the least vulnerable.

Since politicians and economists can’t claim to be totally deaf and blind there has been some minor debate on the debt problem. But just shallow and scarce discussions, with the only exception of some miniscule measures guaranteed not to provide any real effects whatsoever. The present bourgeoisie government is expected to lose next month’s elections with a large margin, and it seems as if they willingly are handing over the problem to the Social Democrats.

In this rare debate one economist actually was admitted an op-ed in our main paper DN, one weeks ago. He dealt on some of the measures discussed, and strongly advised against one of them. We are in this country endowed with a tax reduction amounting to 30 percent of interest payments on all kinds of loans. One of the measures discussed is to repeal this right to reduction, an operation our economist strongly opposed. His argument was that such an action probably would trigger the avalanche and create the crisis it was intended to prevent.

Another aspect discussed is the norm for amortizing house loans. Those norms are extremely liberal here compared with most other countries. Since three decades house owners have de facto been relieved from paying any part of their loans whatsoever. Some demand for minor net repayments are now in place. Our economist’s argument generalizes to this measure, and to all others that has a substantive effect. A demand for repayment that really would impede increasing loans has to be of a magnitude that would tip too many house owners off the cliff and thus make the bubble burst.

It’s almost a law of nature that financial bubbles can’t be deflated in a controlled way. There is no smooth landing for a rocket. That’s probably one reason why our most distinguished economists are silent about the loan crisis. At best they are relying on the perfect market hypothesis, but probably they just prepare to keep hiding when the crash comes. Our politicians will probably put their heads in a bag and blame some previous government and the other parties.

Autumn and election years constitute a fruitful environment for financial crisis, both coming up soon in Sweden. Right now everything seems calm and under control, but that is also a precursor as good as any for dramatic events on the economic arena. I wouldn’t be surprised if the loan bubble here would burst any time soon, and if I had a house to sell I would already had done it.

If Communist atrocities are ideological, what about ours?

“Communism” was a word and a concept that in many ways formed the basis for the Cold War as it was fought by the West. In that function the word meant oppression, Gulag, torture, executions and most other horrors one could think of. From a very specific semantic perspective that’s of course true.

For a more precise definition of communism as an ideology one should rather consult Marx and the other founders of the doctrine. Then one immediately finds the central creed: “From each according to his ability, to each according to his need”. One also finds that communism was an emancipatory movement aimed at freeing workers from wage slavery. Solidarity, righteousness and equality were moral cornerstones of the ideology.

In real life it turned out to become something completely different. Lenin put an end to the Worker’s Councils as one of his first actions; then he installed the dictatorship of the Proletariat, thus sending anything that resembled real communism down the drain. He may have had his reasons; for instance that his regime otherwise may not have survived the civil war in which the reactionary side was strongly backed by large troops from western powers. But anyway: real communism disappeared in Russia before it had even started.

Still both East and West kept on using the false concept “communism”, but for contradictory reasons. Soviet used the word to benefit from the positive connotation it had been given by Marx and the Communist Internationals among others; the capitalist world used it to make people connect solidarity, righteousness and equality with the horrors taking place in the “communist” states.

And this way of using the word still goes on. I was provoked to write this postcard by a younger editorial writer – Erik Helmerson – in Sweden’s most important paper, Dagens Nyheter. Although he was barely more than a downy young man when “communism” disappeared from most of the world he is still obsessed with this phenomenon. With a gun pointed at his head, he writes, he would admit that Nazism was worse than Communism but he rejects both. This is a skewed and supposedly deliberate way to defame egalitarianism by equating it with an ideology whose very essence and core was the extermination of Jews, communists, mentally ill and other human beings they deemed to be inferior.

Some literate conservatives have realized the discrepancy in comparing Nazism and Communism on these grounds (maybe because they have read some books and thought for a while). Some of them have then chosen another line of defense, namely that a really Communist society cannot be achieved by other means than violence and coercion (“the road to Hell is paved with good intentions” is one popular excuse). The reason would be the conservative tendency to think that humans are born somewhat evil, and has to be coerced to become altruistic (which anyway, according to their world view, isn’t necessary at all).

Hopefully this tells us more about conservatives than about humanity as a whole. The idea that no noble ends could be accomplished without people being forced by a dictatorial power is not just utterly defeatist, but truly stupid. People in general wouldn’t say that such bad ethics apply to themselves, and the absolutism of the thesis is refuted daily by human activities around the world.

There is another corollary to Helmerson’s poor thinking that never appears in mainstream contexts. If Communism as an ideology has proven intolerable because of what dictators have made in its name, what about Capitalism, Christianity and other ones of our own doctrines?

During more than half the last century most of the atrocities in the world have been carried out by us in the white, capitalist and Christian world, lead by the United States. Our illegal and immoral wars have left millions of murdered human beings behind and devastated whole countries. We have supported dictators who have murdered further millions of their citizens; we have overthrown dozens of democratically elected politicians and installed vicious dictators, just to mention some the most obvious misdeeds comparable to those in the “Communist” world. If Helmerson’s logic and practice had any value the conclusion would have been that Capitalism and Christianity are criminal ideologies.

But luckily that’s not the case. The key to the question is that our anti-Communists also are anti-intellectuals to an appropriate degree.

Are there reasons to revise the old thesis that profit is theft?

We are in the season for economic reports from the Swedish business world, with their staggering profits announced to happy shareholders, as we simultaneously still read about a world where millions suffer from the latest catastrophe concocted by respected criminals in international finance corporations.

In a rather discrete article in my paper one could read the other day that the large companies in our country bestow their shareholders this year with almost 200 billion Crowns (SEK) in dividends alone (7 SEK = 1 USD). Total profits are thus considerably more than that. And this is just from the large companies.

Extrapolating to all companies and total profits one could estimate that each household in Sweden pays about the same amount of “taxes” to private businesses as they pay in taxes to the community, state and local. How this can go on year after year with only marginal comments in the main media should have been some kind of mystery, at least. But there are “explanations”.

The first line of defense is that we all provide the huge profits to capitalists on a voluntary basis. And yes, we are not forced by anyone to buy any goods or services… unless we don’t want to become homeless and live on the sidewalks. It’s rather difficult to survive without feeding the wolfs, although there are some alternatives in the margin, such as cooperatives and the like.

We can take the Swedish bank system as an example. There are four major banks which provide all necessary banking services in this country. For everyone with a normal private economy it’s almost imperative to apply to any of these four banks for services. And these banks don’t compete with prices. They charge too high interest rates on loans and offers too low on deposits, thus making huge profits, half of which they hand out to their owners this year.

If the four banks would arrange meetings in which they agree on this oligopolistic pricing, it would be illegal. But no meetings are necessary. They know perfectly well how to keep interest rates on profitable levels and how to prevent competition, thereby forcing an average household to pay the equivalent of one month’s salary in “taxes” to their bank each year. And we are all enough disciplined not to start any tax revolt in this case, in fact not even react in the most modest way.

Another line of defense for businesses when they practically steal from consumers to create profits is that some of the stolen property returns to ordinary people through pension funds, who are large investors in shares and bonds. That’s of course true but rather pointless. To first deprive people of money, only to give back some part of it, is in all circumstances to drain off wealth in benefit of a rich minority.

It’s a fact that Swedish industries are large exporters, thus that their profits in part are paid by foreigners. If this would be an argument it’s also true that there are many foreign companies operating in Sweden with the opposite effect. But it’s of course a lousy argument. Where the ordinary people who pay for the profits happen to live should be irrelevant.

We are made to believe that profit is a necessary concept in a capitalist society. But in fact profit is an anomaly within neoclassical economic theory. In that model the productive factors worthy of compensation are labor and capital, through wage and interest respectively. To become valid the theory presupposes perfect competition, which entails that economic actors will compete until the margin for profits is compressed to nil.

This inconvenient circumstance has of course bothered economists eager to defend the prevailing system, and numerous attempts have been made to extract something productive from the capitalists’ juggling with their money. But this is a problem just for a narrow world of theoretical discussion. In real life the disastrous shortcoming of the dominant economic theory is totally ignored. Profit is not just considered absolutely natural but indeed one of the most important indicators of the health of an economy.

Decay in Swedish school performance duplicated by health care

It’s been more than a month since my last postcard from Sweden. The reason for the pause is just that other activities have intervened and not that political developments here suddenly have turned in a radically different and positive direction. Not at all!

The parties forming our present government who are eagerly engaged in burying the old Swedish model probably sense that voters will through them out in the upcoming elections (in September). Thus they try to sneak in as much of their ideological stuff as possible, hoping that some of it may be irreversible.

I have reported on the plummeting Swedish ranking in the PISA studies, which indicates that our school system, once one of the best in the world, is more or less decaying. This deplorable process happens to coincide with radical privatizations of schools, followed by dismantling of resources like libraries, school nurses, special teachers for the children most in need and other cutbacks favorable for profits.

As one would expect we can now watch the “economic scientists” rush to save the tatters of credibility for capitalism in schools left by our right wing government’s experiments. Thus our most prestigious newspaper (Dagens Nyheter) the other day had an op-ed by three economists representing something called the Center for Market Reform of Education (there is no modesty or lack of resources when economic power strives to commercialize life in all its aspects).

The defense line that the three “scientists” draw is to reject simple correlations as proof of causality. (This is of course not a day too early, since simple correlation is the very oxygen that popular economics breathes.) The fact that privatization and plummeting outcome coincides is of course not a proof that the one causes the other. But there are other indications of causation between the two observations.

It has been established that private schools give high, false grades (unlike public schools), a temptation apparently hard to resist in a competitive business. If these grades then are being used to demonstrate good performance by private schools its naturally doubly fraudulent. I mentioned the dismantling of privatized schools, a confirmed and widespread phenomenon which hardly can lead to any quality improvements. Furthermore shallow testimony indicates that some private schools are popular among student by being pleasant and laid back, another attractive lure.

The Swedish decay is also visible in other sectors, one of which is health care. The CEO of the Swedish pharmaceutical companies’ trade association wrote the other day about the decline in health care indicators, despite the fact that a large majority of the population regards this area as one of the most important in politics. A measurement called Euro Health Consumer Index, rating the health performance in EU countries from the patients’ perspective, has recently been released. It shows that Sweden has fallen from 6th to 11th place in just the last year.

Another undeniable drop in our performance is revealed by the OECD statistics on life expectancy. From enjoying the forth longest life-span 20 years ago we have now fallen to eighth place. We have been used to see our country in the very top of all socio-economic rankings since ages. Now we are a former welfare super power in sharp decline. This is certainly not what ordinary people want, but it’s obviously an inescapable ultimate consequence of the adaptation to a “globalized”, neoliberal world, constructed by the economic powerful with the purpose to enrich the already rich at the expense of people in real need.

This is something really worth fighting against!