G.A. Cohen against capitalism

It’s not clear to me that the “the origins are illegitimate and immoral, therefore the current system is immoral” argument really has much weight. But even on its own terms, I’m a bit confused. Cohen argues that the earliest owners of private property couldn’t have gotten their property from legitimate owners, that they just took their property. But surely it’s possible for a group to collectively decide that private property is a better and more productive way of distributing resources than sharing them. This is, after all, precisely what China, in some sense, did in the late 1970s. Even if you accept the social-choice problems involved, it’s not obvious that a minority that prefers a collective-ownership model should have preference over a majority that prefers private ownership. Collective ownership of property surely carries with it the right to dispose of that property as the group sees fit. Now, Cohen will want to say that this isn’t how the move to private property happened, at least in England. But it’s exactly how it happened in the U.S. — colonists had the opportunity to set up whatever system of property ownership they wanted, and they chose private property. So in Cohen’s terms it’s not obvious to me why the system would be considered illegitimate.

Supporting F. Blair Jerry lost me at around 8.30.
Government has become much better at making sure the public benefits immediately from collectively owned property, since capitalists obtain the right to exploit a public resource in exchange for royalties, licence fees or whatever payments to the state.

For example, publicly listed mobile phone companies did not “grab” the collectively owned “land” of radiofrequency spectrum – they paid huge sums to the state for the ability to deliver services at a profit for a limited period of time.

But surely it’s possible for a group to collectively decide that private property is a better and more productive way of distributing resources than sharing them.

And their descendants?

Hold on (here’s the link):

http://preview.tinyurl.com/63a33gv

It’s actually a bit more drastic than I thought.

“The decision by the twenty farmers in Xiaogang Village, Fengyang County, Anhui Province, in December 1978 to divide the land of the Production Brigade [i.e. commune] among themselves triggered one of the most significant reforms in recent Chinese history…Back then, these farmers were risking their lives to introduce this system of household responsibility. In the secret document that bore the signatures and fingerprints of the twenty farmers, they declared that, if the government disavowed their act, they were willing to be jailed or executed. Their only request was to have fellow farmers take care of their children until they were eighteen years old.”

“I’m not sure that the extermination of the pre-existing communalist population and expropriation of their lands is really the warm, fuzzy alternative to the enclosure acts that you seem to think it is.”

It’s not a question of warm and fuzzy. The extermination/expropriation of the Indians would obviously make any regime that existed on the North American continent today, regardless of its property system, morally problematic in Cohen’s sense. But given that Europeans did take over North America, and could have chosen to distribute property however they wished, the fact that they freely chose to adopt a capitalist system counters Cohen’s insistence that capitalism’s origins are inevitably coercive. Unless you want to argue that only capitalist regimes are interested in annexing the land of other peoples.

I’d also say that this whole thing is far less impressive than the introduction makes it sound. Cohen’s manner conveys the impression that he’s offering up a rigorous philosophical critique of the defenses of capitalism. But for the most part, what he offers instead are bald assertions from unprovable first principles, like “the capitalist system operates to ensure that people’s desire for goods is never satisfied,” with its implicit assumption that in a socialist state, there would be no longing for material improvement. I’m also mystified by his discussion of increased productivity and leisure. It’s certainly true that in a capitalist system, increased productivity is generally used to produce more goods rather than more leisure (although the experience of Europe obviously demonstrates that this is not a universal rule). But the choice isn’t between the “more goods produced by increased productivity” of the capitalist system on the one hand and the “more leisure produced by increased productivity” of the socialist system on the other, because socialism is simply unable to come close to matching capitalism’s productivity. The choice is therefore between “more leisure and a vastly lower standard of living” on the one hand and “more production and a vastly higher standard of living” on the other. Cohen may think people would prefer the former (this again is another one of his unproven assertions), but we had a pretty good test of this in 1989 (as well as in China), and it’s pretty clear what option people freely chose. Indeed, there’s something peculiar about praising a video claiming that, if they had their druthers, people would prefer communal ownership, when that video was filmed just before the fall of the Soviet bloc — an explicit collective democratic rejection of communal ownership.

/me grabs popcorn.

This is an *interesting* and loquacious troll.

But given that Europeans did take over North America, and could have chosen to distribute property however they wished, the fact that they freely chose to adopt a capitalist system counters Cohen’s insistence that capitalism’s origins are inevitably coercive. Unless you want to argue that only capitalist regimes are interested in annexing the land of other peoples.

This makes no sense whatsoever that I can see, any more than the fact that there are some odd numbers that are nonprime refutes the statement that all primes greater than two are odd.

‘ It’s not clear to me that the “the origins are illegitimate and immoral, therefore the current system is immoral” argument really has much weight. ‘

Well, I suppose the question is: What sort of ‘memory’ does the capitalist system have? How much do descendants of the primitive accumulators own?

And does it matter? Even if we had an equal and therefore ‘just’ initial distribution of property, there is a sort of spontaneous symmetry breaking in the dynamics of capitalism (sorry, physicist here) whereby society divides into two major classes (at least in the classical model.) Some individuals can move between classes, but it is structurally impossible for everyone to do so — regardless of their virtue, thrift, etc. Cohen makes this argument in the ‘Structure of Proletarian Unfreedom’, which is better than this (though I liked the schmoos.)

What a mess.

I don’t understand his point about private property. Because raw materials come from the earth, anything derived from raw materials should not be owned privately? That premise is underwhelming enough, but it also gets muddled by his description of pre-capitalist family farmers. Who owned the products produced by those idealized family-farmers in pre-capitalists societies? Oh, who cares… It’s an all an irritating oversimplification.

But then there’s his point about artificial scarcity. Capitalism creates scarcity? It’s amazing how little that particular Marxist syllogism corresponds with reality.

Finally, the fact that people work for a living is not a capitalist phenomenon. I know, I know.. He’s not complaining about working for a living, but about the exploitative dynamic whereby people rent their labor… Yeah, that’s working for a living. Sorry, it happens in Cuba too.

Honestly, the whole argument is so dated. I consider myself far left of center, but at this point, I think “capitalism” is more an abstraction than an actual thing.

I know I’m out of my depth on this forum, and I’m very good about never posting, but then the terms are already so poorly defined, what do you do with this mess? “How can anyone think that this is a system which promotes human benefit when it projects the message that the only way to self esteem is to be the owner of a BMW…”

Cohen’s argument about original possession was just a reply to a version of defense for capitalism. How much it means to him isn’t explicitly stated, and it would be unfair to hold him responsible for inflating its importance.

The above nitpicking is ludicrous. The fact that the vast majority of the population has never been exposed to or even contemplated the concepts presented here is the reason that capitalism, only a few months ago brought to its knees by its own excess, is busy staging a comeback as though nothing had happened. This presentation should be broadcast several times a day on every television and radio station.

But then there’s his point about artificial scarcity. Capitalism creates scarcity? It’s amazing how little that particular Marxist syllogism corresponds with reality.
I think you are misunderstanding the claim. The claim is not that capitalism creates the situations we call scarce, the claim is that capitalism created the concept of scarcity in its modern, economic sense.

The word scarcity used to refer to exceptional situation. Periods or places where people couldn’t get the amount of food they would normally consider enough. That concept has an opposite: a period of plenty, when there is more then you need.

But its modern economic meaning assumes that demand, for everything, is in principle infinite. Scarce resources are always scarce. All you can do is create more or be more efficient, but that doesn’ t make the resource non-scarce, because there will always be demand for more . And it’s not restricted to food or other directly needed stuff, everything is scarce.

This economic way of looking has been part of a greater movement towards a more rational, scientific approach of the world. And the result of that movement has of course been an enormous increase in our efficient use of resources, and in our ability to create more resources. Presumably, seeing every situation as one of scarcity is a very useful drive to create and provide more.

But this creates a paradox that is arguably rather central to capitalism: the combination of an industrialized society with a capitalist economy can create something very close to what people used to call plenty, but only if we don’t think there is plenty, but that things are scarce. A central assumption of every modern society is that there is not “enough” of nearly everything, and we spend most of our energy and time on making more stuff. We measure the well-being of societies by GDP numbers. But at the same time, every firm needs a marketing department to create demand for its products.

hartal: I don’t now whether it is sad or amusing that you think that a piece of advocacy like this should address the Minsky financial hypothesis or why you presume to think your know what Jerry Cohen’s views were on the possibility of future capitalist crisis (or, in the other thread you’ve contributed to that you think that undergraduates shouldn’t be permitted to graduate until they’ve read the academic tomes you approve of – list provided). I doubt that you understand the kind of commenter you are, but I do. You are henceforth permitted exactly one (1) contribution to any thread which I initiate here at CT – and keep it short.

“But its modern economic meaning assumes that demand, for everything, is in principle infinite. Scarce resources are always scarce. ”

Erm, no, not really. Economics is about scarce resources, yes. But we don’t then go on to claim that all resources are scarce. We don’t talk about the economics of seawater because the supply is so hugely larger than demand that it’s effectively infinite.

Economics only comes into play when a resource really is scarce: when it isn’t scarce we’re not really talking about economics.

Yes, but the number of things we consider scarce enough to use economics on has grown a lot. That’s the paradox.

The oceans are still pretty big, but near-shore seas have economic zones, shipping lanes, fishing quota, pollution limits etc. They are clearly not big enough anymore to consider as an endless resource.

Why, why, why, why, why, why, why, why do people continue to confuse ”capitalism” and ”market economy” – the are two completely different concepts.

What is “capitalist competition”? How would it change if the factory was owned by the workers instead of the capitalist? I don’t see why it would change one bit – and that’s why getting rid of the capitalist (in favor of market socialism) is a no brainer.

The other point, unrelated to “capitalism”(except by the probably different distribution of wealth), is whether an unregulated market economy will maximizes welfare. It probably (certainly) wouldn’t. But that’s a different topic. That’s equally problematic under e.g. socialism.

Dr. Bertram:
Why don’t you read Cohen’s book on Karl Marx’s Theory of History to see yourself how he reconfigures or explicitly discards Marx’s theory of capitalist crisis? Then we can answer the question of whether Cohen’s Marx would actually be of much use to understanding or making sense of the economic events, post 2008. I have already argued that Cohen’s rather unpersuasive reply to the morally self-assured capitalist in this video misses the actually defensible argument that Marx made. Notice that you did not speak to that.
I was also rather bothered by the smug dismissals by many commentators here of Milanovic as someone so analytically challenged that he does not deserve a fair and full reading; that is why I suggested that some readings about the nature of third world poverty and global inequality should have been required for the posters here.
Perhaps you don’t understand what kind of academic you are that you will henceforth be censoring me?

Well these pleasantly rare videos reignite the always thorny question of what the contemporary socialist / Left project should precisely be pursuing. All that viably remains, it seems to me, is the notion of industrial democracy. Politically, this seems most achievable through the state subsidisation of democratically-controlled firms, or worker cooperatives. (If such a viable alternative becomes reality, surely workers will leave capitalist firms in droves?)

As far as political philosophical justifications go, I suspect socialists and sympathisers may be able to mount a case for subsidising worker cooperatives by appealing not to a perfectionist argument in favour of the Marxian ideal of non-alienated labour (although I think that line has a lot of potential), but simply to the doctrine of liberal neutrality. That is, if we agree that the state should not endorse contested notions of the good life, then, since it already subsidises hierarchical capitalist firms, thereby making them artificially profitable over alternatively structured firms, it should subsidise democratically-controlled firms to make them a viable option for workers. Robert Nozick overlooks such dominance by capitalist firms when he asserts that, because we don’t see many cooperatives around, workers mustn’t value cooperative production in the way that socialists suggest.

As Cohen notes, there are obviously going to be lots of design conundrums. Even in a market socialist world where the state leases productive assets to cooperatives such that workers receive resources of roughly equal value, you are still going to have a (non-exploitative) managerial hierarchy that could potentially form its own political class and influence state policy. Roemer proposes a mechanism whereby workers can hire and fire managers to keep that in check. There is also the possibility of market monopolies arising and even exploitation occurring between cooperatives, which I guess could be rectified through taxation measures. The ultimate idea behind these firms, of course, is that workers should collectively decide how to distribute output; according to need or desert, or perhaps a combination of both. The obvious issue there is that I wouldn’t trust them to do so aptly without the guidance of a political economist / someone or thing skilled in optimisation.

But technical issues relating to design don’t detract from normative justification.

Forgive me as I’m a lowly undergrad philosophy/polisci student and no Marxist (also not a hysterical Marx’s philosophy = Stalin’s policies type either, though)…but wasn’t that exactly Marx’s point, that the scarcity IS artificial? I’ve just finished reading selections of his for a class, and he certainly gives capitalism credit for its unprecedented ability to create a BUNCH of stuff. I think his critique is more that it doesn’t entirely fairly allocate said stuff. I’m fairly left of center but I don’t think anyone but the far right could claim that to be entirely false. Now, how often capitalism gets the distribution “wrong” is up to you – a Marxist will probably say “always, at least to an extent” – but very few will claim that capitalism is “bad at simply producing large amounts of things” or that “unfettered capitalism always distributes things as fairly as possible.”

The other point, unrelated to “capitalism”(except by the probably different distribution of wealth), is whether an unregulated market economy will maximizes welfare. It probably (certainly) wouldn’t. But that’s a different topic. That’s equally problematic under e.g. socialism.

Maximize it compared to what? If we take a theoretical utopian optimum with a benevolent all-knowing government able to internalize all externalities, then the answer is clearly no. A realistic case, however, must take into account useless lack of information, populist measures, corruption, idiot voters, idiot politicians, etc. Take the U.S. government for example: when GDP growth is positive, the fiscal multiplier is between 0 and 0.5. Add the tax multiplier on top of that, and it’s probable that for every additional dollar the government spends, GDP is decreased.

Which leads us to the question: is a small government, which fixes what it can fix while leaving the rest untouched, sustainable? Democratically, the answer is pretty clearly no. Perhaps a dictator would fare better, but that’s obviously problematic over the long term. As such I’m pretty sure an unregulated market economy will maximize welfare.

it’s probable that for every additional dollar the government spends, GDP is decreased.

The data don’t support this assertion. Since WWII, high US government outlays (and high tax rates) have been correlated with high growth. As Professor Krugman tirelessly observes, there is no factual support for the notion that government investment has been counter-productive. How many Enrons and Bear Stearns will it take to topple the invincible private sector myth?

@Anonymoose

You aren’t seriously denying externalities are you (or advocating the weaker form that government will fail so miserably that we might as well let anyone start e.g. a waste deposit wherever they please)?

But even as we go beyond the classical market failures – I think there exist a lot of additional issues.

I do not think society should be governed by some utilitarian technocrat king – but neither do I think that we all should be governed by the market. The market is the servant, the people is the king

There really isn’t even an half decent alternative to democracy.

Man, I’m glad \#37 didn’t get disemvoweled yet – Seeing some random internet troll attempt to excoriate Chris Bertram for allegedly not reading Cohen has got to be one of the funniest tone-deaf things I’ve seen on the ‘tubes in quite a while. And it’s the gear-up to U.S. presidential primary season, so that’s saying something.

Shmoo enthusiasts might like to know that Amazon currently has a few used $9 copies of the Li’l Abner Dailies 1948 volume, which (unlike some of the volumes with “Shmoo” in the name) contains most of Capp’s original Shmoo comics. These are sold by Powells, but not on Powells’ own website, as best as I can see. It looks like the folks who are republishing all of Capp’s work are covering about three years’ dailies per year, so it’ll be a while until these are newly republished, if ever.

(Thanks for posting these videos. Cohen is such a refreshing pleasure to listen to.)

Myles 41, but humans had been intelligently communicating their disagreement with being owned for thousands of years, and yet general concept of owning people was commonly accepted, until recently. OTOH, nothing prevent humans from intelligently communicating their disagreement with private ownership of land and cattle either.

The point isn’t how long people have been intelligently communicating their disagreement to own whatever, it’s that the two classes of assets you mentioned, slaves and women (not mutually exclusive), are autonomous beings in the modern consciousness; slavery was no longer acceptable once we have accepted the moral autonomy of the slave (antebellum slave-owners famously thought of their slaves as children, as an excuse to reject their moral autonomy).

Does property have autonomy? Clearly no. The question then is whether it should be owned by a person or klatch of persons (capitalism) or a less well-defined group or class of persons (non-capitalism). But that has literally nothing whatsoever to do with slavery or women’s rights, because the latter struggles were not about who owns them, or what form their possession took; it’s entirely possible (indeed, in the tribal days it would have been likely) that slaves were held by the collective community, but that offers no clarification whatsoever about the merits of capitalism, because it has nothing to do with it.

Unless you are proposing that we do not domesticate any cattle whatsoever (which is a fine position, but I don’t think you are advocating that) and release all animals completely from human ownership we are not talking about anything close to being parallel with the history of slavery at all; for anti-capitalists do not propose to rid themselves of all cows, but to rid of one class of cow-owners and replace with another.

@Anonymoose

Is this the case for e.g. Australia, USA, Sweden?

For whom in these countries does it apply – e.g. does it apply for a sick mother with three children? Does it apply for the poor in general? Does it apply for a rich person who happens to have a small preference for an clean environment, who prefeere not living next door to a waste dump or who doesn’t like to be extorted by his neighbor threatening to build one? Do you really think an unregulated market give pareto improvments to all (or any) of those above?

Does the regulations include material and nonmaterial ownership rights?

Are we facing an all or nothing choice? I.e. is the only way to get rid of bad policy to also throw out good policy?

@Myles

I still think you have to be a bit more specific if I am to understand why it wouldent be possible under market socialism.

Could you give a simple example?

Fair enough Myles. Sounds like my case for “the origins are not necessarily legitimate, even if the original privatization was commonly accepted from the very beginning” is not very convincing.

I still think you have to be a bit more specific if I am to understand why it wouldent be possible under market socialism.

Well to be honest I don’t know finance well enough to give a detailed answer, but here it goes: securitisation is about assets. You can’t securitise collectively-owned assets, because then it wouldn’t be collectively-owned assets (i.e. demutualisation).

Think about the worker-owned factory. How is it owned? It is owned by the workers. Could the workers trade their slice of ownership for another piece of capital, say, a house, or a truck? No. When feudalism ended, the big emphasis was on disentail. What is disentail? It is the ability to sell the land in return for currency, so the owner can use the currency to invest in something else that is more productive and that thus generates greater income. Entail, in a sense, is the same economic arrangement as a worker-owned factory: the land generates rent, just as the worker-owned factory pays the individual worker a portion of its income. But the worker, in the theoretical ideal, cannot cash in on his stake in the worker-owned factory (which relies to varying degrees on capital stock, owned by the workers in gross), just as the feudal landowner cannot cash in on his land due to entail.

(to be cont’d)

By the way, I think a reasonable argument can be made that the modern Japanese economy isn’t very capitalist at all, even though it’s free market. Indeed it’s probably much, much closer to market socialism than the Nordic economies. After all, major economic assets in Japan don’t seem to be fungible at all.

(also to be continued)

(cont’d)

The concept of fungibility is that, you can substitute another asset for one asset of the same value. This is very important, I think, for capitalism.

It seems that in Japan economic assets aren’t actually fungible; theoretical valuations of assets and businesses exist, but they have less relation to the mechanisms of the actual Japanese economy. Predictably, it makes the stock market much less useful as an economic mechanism of exchange, because meaningful exchange isn’t actually happening.

@ predicted objection
PS: No – I don’t think yunkers suggestion is state capitalism. China, Soviet etc. is state capitalism because the people don’t even have indirect control over the economy. But sure – it surely isn’t utopia either – not by a long shot.

The simplest (most similar to capitalism) is arguably Yunkers pragmatic market socialism. He essentially replace the capitalist by competing investment firms – who’s incentive structure and investment funds is decided through the democratic process. These investments firms would also decide on the management of the firms (so it is a VERY indirect form of socialism). They could also trade companies among eachother.The wider legal framework, e.g. taxes and regulations, would be determined as it is today.

I think there’s actually a very good real-world parallel to what you are talking about, and it’s the keiretsu. It’s not exactly democratic, but I doubt democracy would make the outcome any better than it is now. It also happens to be, effectively, less capitalistic than some of your market-socialist proposals. And I would argue that a good part of Japan’s persistent economic problems are actually due to this kereitsu system, which really is the substance behind the capitalist facade of the Japanese economy, in which, strangely enough for a supposedly capitalistic economy, there is very little fungibility of productive assets.

Cool! Do you have any suggested reading?

None. The Economist trafficks a lively business in jeremiads against the Japanese economic system, but I presume you want not wrathful jeremiads but actual information.

I think that your proposed investment-trust system is close enough to capitalism as to make little difference (indeed that’s what pension funds and sovereign wealth funds are), but it will have the same distortionary effect as the Japanese system in pushing private money toward real estate as the only reliable asset class. The most recent and obvious case is China, where newly minted millionaires have scrambled to take their money out of business and put it into Shanghai condos (that are sitting vacant), because they couldn’t trade their money into better productive investments.

One thing I liked about his argument on the legitimacy of capitalism is that it didn’t focus on the injustice of the original taking and usage (“what gave them the right, not merely to use the world, because that’s okay…”) but the intergenerational nature of what it was they took (“…but to establish permanent, bequeathable private property in it?”) It probably reflects my own naivete that I hadn’t thought enough about this, but the idea that moral human beings can claim a piece of the physical world for all eternity is kind of odd. The legitimacy of private property, then, isn’t about the individual making a claim against a community, it’s about whether the living should be compelled to obey the dead.

Also I don’t understand why it would force them to put money into real estate (which, by the way, a market socialist investment found probably shouldn’t deal with at all).

Real estate is where you put your money if you want it to grow but you can’t trust the economic system to take good care of your money if invested in business.

@chris

How could you possibly differentiate between inherited and gifted wealth? I can’t see any difference whatsoever between giving a homeless guy a dollar and giving your kids a hundred thousand. Unless you’re a utilitarian or something, but then inheritance is the least of your problems.

I can’t see any difference whatsoever between giving a homeless guy a dollar and giving your kids a hundred thousand.

Aside from five orders of magnitude, neither can I — neither of the recipients did anything to earn it. Of course, the homeless guy is much more likely to need the money (although your kids might need *part* of it, if “kids” is really the right word you’re probably already providing them quite a bit of support in kind).

If 100,000 different people each give the homeless guy a buck, then he has an unearned income of $100,000 and should be taxed accordingly. But that’s very unlikely because if he really made that much, he probably wouldn’t stay homeless. (Although actually, a lot of the US homeless have major mental health problems, sometimes substance abuse too, and money might not be sufficient for them to find and keep housing, even if there’s some available on the local housing market.)

the idea that moral human beings can claim a piece of the physical world for all eternity

I meant to say mortal human beings

But aren’t you then proving that the system will be inefficient by assuming it will be inefficient? And didn’t we see the same thing in the capitalist west?

That’s BS. In the West, when you put money in the NYSE, you are investing in companies that at least pretend to seek to increase the value of the bundle of money you just put in. Whether you believe it to be so is entirely beside the point. In the Tokyo market, you are putting the money in companies that explicitly do not seek to maximise shareholder wealth to anywhere near the same extent. Millions of people can believe that the listed companies of Nikkei will seek to maximise wealth, but that is not a belief based on reality. And indeed, it is a belief refuted by reality.

What we are talking about here isn’t what shareholders believe; what are talking about is what the corporate managers actually do, and what Japanese managers do is treat the object of growing shareholders’ money like dogshit, much more than Western managers ever would dare to do. This is an objective fact. And it has nothing to do with assumptions, because the entire structure of the Japanese economy is predicated on corporate managers treating shareholders like dogshit. That is a fundamental basis of the Japanese economy in its present form.

Also: “feudal-paternalistic” – sounds like Japan alright?

Try actually working for a large traditional Japanese company for a month and come back and tell me it’s not feudal-paternalistic.

“In the West, when you put money in the NYSE, you are investing in companies that at least pretend to seek to increase the value of the bundle of money you just put in. Whether you believe it to be so is entirely beside the point. In the Tokyo market, you are putting the money in companies that explicitly do not seek to maximise shareholder wealth to anywhere near the same extent.”

The US stock market hasn’t made any real (inflation adjusted) gains in more than 10 years. So the “pretend” is quite justified.

It is not so much that there is any tangible difference in giving money to one individual over another, but there is a significant difference in authority which the giver has over how the money is spent. You exercise control over your children.

I see it as the inability for people to divest from themselves moral authority over other peoples actions and place it in some more explicitly/consciously structured institution e.g. welfare. Perhaps this is because they haven’t had much reason to be convinced that such a system could be created.

@ 39:

So just what then is your assessment of G. Cohen’s account of “historical materialism”? I’ve not bothered to read it myself, but, from secondary accounts, I don’t care for it’s “vibe”. (Big hint: reductionist materialist determinism + technological voluntarism = Stalinism).
Hartal is a generally intelligent and literate commenter, from what I’ve seen, not just here, but on other blogs. I don’t think he deserves “disemvowelment” simply from academic pique.

Well, a minute of googling shows why I’m not a tax lawyer- the gift exception is a bit more complicated than I say above, and depends on various factors, but the general point is that gifts are not taxed unless they are above a fairly large amount (I think now that it’s $13K per gift for a single person, but one can get more if the gifts are from different people) and I don’t see why money given to panhandlers wouldn’t count as gifts, from a quick look. Not that this is relevant to an of the main discussion here.

@myles, I actually did what you propose above: work for a few months for a traditional Japanese conglomerate, founded in 1918. The head office in Japan was very Japanese, but as far as I could tell no more paternal-feudalistic as HQs get in general. According to the permanent staff, the previous non-Japanese owner was worse to work for in most respects.

Of course, they might restrict their feudalism to their Japanese subsidiaries and employees, but that wouldn’t make much sense in your explanation from their capital structure.

Can anyone point me towards Gerald’s explanation of what he might mean when he indicates that capitalism itself promotes unsatisfiable demand in order to perpetuate itself? I don’t doubt the effect, but I personally would apportion it to the part of human nature that seeks social prestige through material wealth and am interesting is what his take was. Thanks in advance.

Can somebody send me the link to Cohen’s Against Capitalism video transcript. I would really appreciate it. Thanks in advance. My email is aluceromontano@gmail.com

This is great; thanks very much. Are there other people making clear, cogent, anti-capitalist arguments? I’d never heard of this guy – who else am I missing?

In particular, http://en.wikipedia.org/wiki/Analytical_Marxism And I’ll shut up now.

And here is the Marxist Encyclopedia definition of capitalism:

“The socio-economic system where social relations are based on commodities for exchange, in particular private ownership of the means of production and on the exploitation of wage labour. ”

This definition is syntactically ambiguous, stylistically awkward, and, in two words, a mess.

103:Thank you, grammar nazi, for missing the point

Commodities, private ownership, wage labour are in there. Shareholder democracy kinda ain’t.

I think what’s interesting actually is to compare it with companies that have multiple share classes and multiple voting shares. You could say that even multiple-voting stock structures are more capitalistic than the Japanese system, as it’s an affirmation of corporate legitimacy deriving from some of the shareholding.

Myles, I have been working. One book I just glanced at calls the Japanese system “corporate capitalism” that essentially anthropomorphises (?) the corporation. And whether or not this is a neo-Feudalism (in the sense of custodial fiefdoms managed at bequest of the crown?) is interesting and important, especially because it feels like the US, for instance, is moving in the same direction. I see Morgan Chase as run more to the benefit of Jamie Dimon than for the stockholders, even JD doesn’t own Morgan.

My problem is that I have never focused on the forms of ownership as being central to capitalism, whether it be Rockefeller or a million shareholders, but on commodities, wage labour and capital accumulation and reproduction. And so the Soviet Union was called a “State Capitalism” system.

State Capitalism

State capitalism has various different meanings, but is usually described as a society wherein the productive forces are controlled and directed by the state in a capitalist manner, even if such a society calls itself socialist.[1] Corporatized government agencies and states that own controlling shares of publicly-listed firms, thus acting as a capitalist itself, are two examples of state capitalism. State capitalism has also come to refer to an economic system where the means of production are privately-owned and the state exerts considerable control over the allocation of credit and investment.

Within Marxist literature, state capitalism is usually defined in this sense: as a social system combining capitalism — the wage system of producing and appropriating surplus value in a commodity economy — with ownership or control by a state.

“capitalism — the wage system of producing and appropriating surplus value in a commodity economy” ..for another definition that shows the problem I have

If Japan is some kind of State Capitalism, Corporate Capitalism, or something else, you may have some difficulty with a class analysis. But there are rich people in Japan, so I think I can work with it.

By the way, this is really, really wrong:

I see Morgan Chase as run more to the benefit of Jamie Dimon than for the stockholders, even JD doesn’t own Morgan.

For 2010, JPMorgan Chase had profits of $17 billion on revenues of about $102 billion. If this is what “not running the company to the benefit of shareholders” looks like, I should like every single company in the world not the benefit of the shareholders.

Myles, JP Morgan also gave out 800 million in dividends in 2010, out of that 17 billion in profits.

the term is practically meaningless.

No, Myles, wage labour and commodification remain, and are very bad things.

I do want to thank you for making me think about where the surplus goes in Japan, and how important the surplus and ownership might or might not be. I don’t really know enough about G A Cohen to criticize him, but this appears to be another case of a socialism that focuses too much on the distribution of the surplus, and gets too close to welfare capitalism.

I think people who benefit most must be de facto owners, i.e. people who control it. Ordinary shareholders control nothing, so they mostly benefit coincidentally, and to the extent where their class-action lawsuit is not likely to succeed and harm the real owners.

Myles: I can see that a company like Shell, which pays out essentially all its profit in dividends, can count as run for the benefit of the shareholder. I can see that a company like ARM, which pays out no dividends but whose shares have gone up by a factor six over a decade, counts as run for the benefit of the shareholder.

But I don’t see how a company the price of whose shares has dropped over a decade, whilst not providing a dividend larger than the return you’d have got by keeping the money in a bank account, can remotely count as run to the benefit of the shareholders.

I’m not really sure what Myles is trying to argue but I’m curious about this. A shareholder who has held JP Morgan shares for the last ten years has lost money despite the fact that JPM has, on paper, been fantastically profitable during that decade.

Well, I just looked up the JPM stats, and the puzzle has been solved. There are essentially two parts to this.

The important part is the $800-million dividend figure is a temporary measure due to the financial crisis. It’s based on a quarterly dividend of ¢5 a share, or ¢20 a year. Before the crisis, however, it had been consistently paying about ¢34 quarterly a share, or about $1.36 a year. Which, on a stock price of around $40 or so, isn’t too horrible (although it’s not good either) and in any case much better than you could have reasonably expected in overall return from Japanese companies, as a shareholder.

Another thing is that JPM currently has a price/earnings ratio of about 11. In the long term, either the price rises or the earnings fall. I think the former is a lot more likely. With regard to Japanese companies, it’s not really the same situation. The fundamental matter is that Japanese companies aren’t very profitable at all.

I think people who benefit most must be de facto owners, i.e. people who control it. Ordinary shareholders control nothing, so they mostly benefit coincidentally, and to the extent where their class-action lawsuit is not likely to succeed and harm the real owners.

Entirely possible in the case of companies that used to be partnerships, although again, as with everything, it’s a lot worse in Japan where the very concept of maximizing profit (for anybody) has gone completely out of the window in favour of completely deranged schemes to maximize market share and company bulk and factory size.

By the way, a pretty good example of the Anglo-American capitalism pushing back on Japanese-style, mindless management-aggrandizing rush for market share can be found in the current struggle between Oak Street Capital and Red Robin (the gourmet burgers chain).

Among the demands of Oak Street is one that might be relevant to the Japanese debate in particular: the request that Red Robin “stop opening new locations until the existing stores are profitable again.”

http://dealbook.nytimes.com/2011/01/24/activist-investor-oak-street-issues-demands-to-red-robin/

<blockquote cite=""To be honest I am a bit lost too, but basically I think it’s imperative in the Anglo-American economies that at some point the companies answer to the shareholders. That’s the linchpin of the system. Without it Anglo-American capitalism is pretty absurd.

Maybe it is.

The fundamental matter is that Japanese companies aren’t very profitable at all.

If that is the case, does that speak for or against them? By the official numbers, US companies have “recovered” their profitability (http://www.good.is/post/corporate-profits-are-up-jobs-are-down/). Strangely, I don’t see many people celebrating. Of course we know about inequality and all that. But what is happening seems even worse than the usual. The premise that the capitalistic quest for profit maximization drives some sort of economic progress – a premise that of course most of us don’t believe in anyway – gets a bad beating from at least the history of the last decade.

If that is the case, does that speak for or against them?

Well, I honestly don’t know if it speaks for or against them. I do know what the theoretical implications are for investment and so on, but I haven’t seen it in evidence. So I don’t know.

On the other hand, I would really fucking hate to be someone stuck investing in Japanese securities for one reason or another.

And I mean, you do have to look at a farther horizon. The Japanese economy has been doing a lot worse than the U.S. or European ones in the last two decades, and even in the last few years, one was nonetheless amused to find out whose economy fell the quickest when the economic crisis hit? Not the American or British one, but the Japanese one. So they always get the short end of the stick.

I don’t mean to treat lightly your point, but I think you’d be a somewhat more convinced by the merits of Euro-American capitalism if you were more familiar with just how bad things were in Japan even when the rest of the world was doing relatively OK.

Personally, I am not hung up about lecturing Japan about the evilness of its ways or whatever cause the Economist comes up with. I merely view Japan as another society who’s volunteered for a natural experiment in alternative economic systems. Which is fine. And especially so, given that if and when they fail, we will have learned the relevant lessons.

Amusingly, the millionaire former PM, Taro Aso, has all his money invested in land rather than investments in the productive Japanese economy (a $40-million Tokyo estate, for one). He seems to rather disbelieve in the Japanese economy himself.

one was nonetheless amused to find out whose economy fell the quickest when the economic crisis hit? Not the American or British one, but the Japanese one

This was said about both Germany and Japan. It’s an artefact of being heavily export oriented. World trade tanked, Exportland did too. We heard a lot about how this showed the financial model was still great. Germany is now doing very well indeed. The people who said at the time that Germany was doing so badly, etc, now seem to be huge fans of Angela Merkel.

Germany is now doing very well indeed. The people who said at the time that Germany was doing so badly, etc, now seem to be huge fans of Angela Merkel.

But Japan is decidedly not doing well, even now. Germany is rather different from Japan because of the Mittelstand, and also that its larger companies seem to be better managed financially than Japanese ones.

By the way, there are informal limits on corporate aggrandisement in Germany. There’s practically nothing restraining Japanese companies from endless and insane expansion schemes; after all, Japanese bankers are well-known for cravenly bailing out extinct dinosaurs if they go bust.

“Do you think a 10% gross margin is impossible and evidently fraudulent?”

I though that was 17%. And yes I think it stinks. Revenue has declined but profits jumped (http://www.nytimes.com/2011/01/19/business/19place.html).

All told, the banking industry’s profits rose to about $70 billion in 2010, with about $20 billion coming from the release of loss reserves, according to estimates by Foresight Analytics, a research firm. That is nearly a sevenfold increase in net income. Revenue, on the other hand, is down about 1 percent, to about $790 billion.

How are these profits “earned”? How do these guys manage to increase their profit margins during a recession?

How are these profits “earned”? How do these guys manage to increase their profit margins during a recession?

piglet, I advise you to try to keep track of the gradual retreat in your positions. First it’s claimed that Western companies don’t maximize profit anymore than Japanese ones and it’s all the same anyhow, then it’s claimed that it’s not at all benefitting shareholders, then it’s finally claimed that the profit is illusory. You are going around in circles, I seriously doubt you have any clue about the subject, and it’s pretty clear that at least some of your beliefs are propped up by sheer mumbo-jumbo.

“First it’s claimed that Western companies don’t maximize profit anymore than Japanese ones, then it’s claimed that it’s not at all benefitting shareholders” – Actually, what I said is:
– The US stock market hasn’t made any real (inflation adjusted) gains in more than 10 years.
– A shareholder who has held JP Morgan shares for the last ten years has lost money despite the fact that JPM has, on paper, been fantastically profitable during that decade. Granted shareholders in many other companies lost even more money but still one wonders where all the profits went.

Your response to that was that the Japanese stock market performed even worse, which I am not disputing but is beside the point.

“then it’s finally claimed that the profit is illusory” – I do think it is in the particular example of JPM, which was your example. You could of course have chosen to give the profit figures of some of those companies that are directly competing with unprofitable Japanese conglomerates. And explain why they sell so much more stuff to us than our experts in profit maximization manage to sell to the Japanese.

“I would have liked to hear him delve into why the firm reduces headcount rather than hours when demand is outstripped by productive capacity.”

Kurzarbeit.

“As I noted before, Japanese industrial managers pursue market share and corporate bulk at the expense of profit.”

Or maybe they operate in a competitive market where profit margins are low because that’s what you’d expect from a competitive market?

This is fucking insane. I am talking about whole sections of corporate activities that are literally bleeding cash.

Is that performance bonuses for losing money and stuff like that?

The binge drinking, presumably, is constant and common to both cultures.

Spoken like someone who knows fuck-all about Japanese corporate culture. Perhaps it has not occurred to you that within Japanese corporate, binge-drinking after every workday isn’t a personal choice, or even a corporate or hierarchical one, it’s a societal imperative.

The competition over which managers of which culture shit most efficiently on which workers must be fierce.

Spoken truly like someone who has never heard of the term “freeter”, and certainly has never heard of the term dame-ren.

I am just amazed by the sheer, pigheaded stupidity of people who clearly have no fucking clue what goes on in Japan, yet feel qualified to opine ponderously on how great the Japanese economic model is, with no modicum of embarrassment at being exposed for their untrammeled ignorance.

Myles, aren’t you the one opinionating the most ponderously on the Japanese economy?

“[F]ree{lance arbei}ters”? In other words: Arbeit macht frei. Forget about your cultural comparisons for a moment. After all, we’re all work-objects now. Industrial output depends upon the people who put out for the people whose freedom depends upon the work produced by the people they crap on.