Rotten Capitalism

Surprise, surprise…intelligence is not something the...

Tue, 16 Jul 2013 23:05:35 -0400

Surprise, surprise…intelligence is not something the government does, its something private companies do. And they make bilions of government contracts. But how successful have they been and is this really worth your tax dollars?

The 4 headwinds for American society: Demography, Education,...

Thu, 25 Apr 2013 00:07:31 -0400

The 4 headwinds for American society: Demography, Education, Debt, Inequality.

At least 3 of them are completely in our hands to chance. The latter is the one this blog focuses on.

How much do you love your country?

Sun, 14 Apr 2013 20:05:35 -0400

How much do you love your country?

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Sat, 30 Mar 2013 09:27:09 -0400

Richard Wulff gets it to the point: “banks looting their...

Tue, 26 Mar 2013 00:57:12 -0400

Richard Wulff gets it to the point: “banks looting their costumers”. Whereever you look, the normal citizen pays the bill of bank risk. Capitalism for the poor, Socialism for the rich. Head I win, Tail you loose. Call it what you want to call it, its just insane what our system has become.

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Mon, 04 Mar 2013 00:00:37 -0500

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One should never underestimate the USA. Despite of government...

Thu, 28 Feb 2013 20:55:29 -0500

One should never underestimate the USA. Despite of government gridlock, see how Jennifer Granholm has a new idea how to kickstart the US economy and move towards clean energy.

P.S: Sorry, there have been no updates lately, have been really busy with life.

Alain de Bottom discusses an important point on the overall...

Sat, 02 Feb 2013 20:37:00 -0500

Alain de Bottom discusses an important point on the overall debate about inequality. Since we live in a rationalized and completely humanized world, we claim success as truly our own achievement. Logically, failure is also completely our own fault. But is this really true?

This question is important, because it results in the way we see society and we believes inequalities exist. If we believe the poor are poor because they were not able to get rich, yes, because they were lazy and therefore they deserve their situation, then we do not need a social system. If we however, think that some people are more lucky than others, and those who were not that fortunate deserve help, then again we will be making a strong point for a social system.

Looking at the debate about inequality within the US or globally, one can see that at this fundamental point the opinions differ substantially.

Noam Chomsky. So many wise things this man has to say in his...

Sun, 13 Jan 2013 16:10:23 -0500

Noam Chomsky. So many wise things this man has to say in his short interview. If just many more would think like him.

This may look funny, trivial and for some stupid, but it...

Mon, 07 Jan 2013 17:55:25 -0500

This may look funny, trivial and for some stupid, but it actually points to a really different philosophy. One is about providing equal opportunity and the other about providing equal outcome. Of course, in the case of tallness, which is clearly not someones fault, this is easy to measure, but there is other factors to discuss. What about effort? Motivation? Do you wanna provide free education for everyone for example or only to the best?

Providing equality in society is actually harder than it seems at first look…

The Economist editor Zanny Minton-Beddoes on why inequality,...

Thu, 03 Jan 2013 14:41:45 -0500

The Economist editor Zanny Minton-Beddoes on why inequality, which is happening since decades, has become a political issue.

Richard Wolff and Chris Hedges offer a bleak outlook for US type...

Tue, 01 Jan 2013 16:24:48 -0500

Richard Wolff and Chris Hedges offer a bleak outlook for US type capitalism. And indeed, we are still halfway into a so called recovery, but inequality has risen and much of the jobs newly created are in low-wage sectors and were lost in middle-wage sectors.
This is a very important point if one looks at unemployment figures. Somebody who for example has a Bachelors degree and works as a waiter maybe technically not unemployed, but actually de facto is. So its not only about the number of jobs, it is especially about the quality of jobs.

Looking at capitalism as a system, one has to not only look at the pure and cruel form the US provides. Many other countries also have a capitalistic system, but combined with a strong social component like Germany or the Scandinavian countries. This leads to a much more balanced society, which is also more sustainable.
One of the biggest hurdles is, however, that one has to accept that an more equal society does also mean less excellence. In other words, what makes the US so attractive is that as a high performer you can enjoy perks, on the cost of the rest of the country whereas in countries like Germany high performers feel stopped by the system. Or to say it even differently, the US takes a lot of credit to be the number one in many things, which is because a small percentage of the population can rise to the top on the cost of the others.

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Sun, 30 Dec 2012 16:18:58 -0500

One way reducing the cost burden for society is simply use...

Sat, 29 Dec 2012 13:18:42 -0500

One way reducing the cost burden for society is simply use car-sharing. In this talk the founder of Zipcar, Robin Chase, will talk about how Zipcar is the car you always wanted and could never have: get all the good sides, but none of the bad sides. It also shows how “zipsters” (those who use car sharing services like Zipcar) drive a lot less than normal car users, because they have to pay all the cost immediately since they are not hidden in the price of the car, insurance and all other fees. When most people see the fees of $10 per hour they are at first shocked, but the reality is that most are actually paying even more using their own car, just they don’t realize it. So even if you use Zipcar a lot there might be still a long time until it is more costly then owning your own car. Plus, additionally do not forget the time you are spending for maintenance of your car.
Chase goes even one step further with her latest project in France, where she started Buzzcar, a company where owners can provide their own cars for car sharing.

However, still the external costs discussed before remain, it is just that there is less cars on the street.

Looking at them from an objective point of view, cars are very...

Tue, 25 Dec 2012 13:41:28 -0500

Looking at them from an objective point of view, cars are very inefficient means of transportation. We are moving 1-2 tons of steel around to carry mostly only one human being. One would expect this very low efficiency would lead to very high cost, but somehow it doesn’t and still many, many people own cars. There is two reasons for that: a) owners underestimate the cost of cars, mostly only looking at gas costs on a daily basis and b) owners only look at the cost they are directly facing, which are internal costs.
However, society pays a huge price for cars, too. Cost of roads, air pollution and especially accidents. Just look at the latter, every car accident potentially leads to health care costs, which the society as whole has to pick up. Moreover, the costs of climate change are passed on to future generations.

A study by the TU Dresden by Prof. Udo J. Becker has now calculated, that for an average European car 1600,- EUR of these external costs are subsidized every year. This means with an average lifetime of 10 years, 16'000 EUR of cost of transportation are accumulating for every car which are not covered by the owners themselves, but from society as a whole and future generations!

Why are we subsidizing car travel to that extent? Imagine if car owners would pay the real costs for their travel. Once of a sudden public transport, car sharing, car pooling, biking and walking would be way more attractive. Furthermore, with increased use and demand for public transport there would be increased economies of scale driving down costs. But, again and again and again, the reason is simple: profit.
Every car sale generates profits for the whole car industry, for the insurance companies, for the banks who provide the financing and all other things car owners have to pay for. However, remember, it is not them picking up the whole bill, it is society who subsidizes all this very heavily. So as much as car owners are claiming they have to pay way to much, still they do not pay enough to cover the full cost.

This inefficiency is not sustainable and we have to overcome this problem, the sooner, the better. Merry Christmas!

Our societies are intellectual shanty towns. Our beliefs...

Sat, 22 Dec 2012 15:30:49 -0500

Our societies are intellectual shanty towns. Our beliefs about the world and each other have been created by same system that has lied us into repeated wars that have killed millions. You can’t build a sky scraper out of plasticine. And you can’t build a just civilization out of ignorance and lies. We have to educate each other. We have to celebrate those who reveal the truth and denounce those who poison our ability to comprehend the world we live in. - Assange

Most of the governments are democratic, more or less. Media is dependent on those who watch it. Indeed, we have the power if we start to act. If we watch DemocracyNow! instead of our filtered state televison, if we read Wikileaks instead of some roman bestseller book or watch a movie, if we support those who are in for the right reason and not waste our money on another product we don’t need in the false belief it will make us happy this world will change. Merry Christmas!

Is this what the US has become? A killer at home and abroad?

Tue, 18 Dec 2012 23:16:44 -0500

Is this what the US has become? A killer at home and abroad?

What about paying Walmart employees 25k?

Thu, 06 Dec 2012 00:12:00 -0500

As it has been said lately that Walmart rose up by paying “its workers so little they had to shop at discount stores like Walmart.”

Keep in mind that the federal poverty line is $19.900 and if you work 40 hours a week at Walmart you make even less than that. Yes, such a thing is possible in the US, especially if you successfully get rid of the unions! Now, of course we as consumers love Walmart for its cheap prices and certainly we can not be blamed for that. However, keep in mind that because of the poor wages Walmart workers are disproportionately reliant on safety net programs like food stamps and Medicaid. Ergo, the tax payer has to come up with deficit Walmarts policies created and so finally its again us paying, the consumers.

Now look at this:

If retailers would rise the wage to $25.000 and passed 50% of the costs through to the consumers it wouldn’t even make $20 we pay more per year. Which we could easily save by buying less of that cheap stuff we don’t need anyways. Doesn’t that make sense and would you agree to that?

The Economist just published an article where it argues that...

Sun, 25 Nov 2012 22:37:31 -0500

The Economist just published an article where it argues that unions are responsible for problems with the US economy.

In the public sector, by contrast, union membership has risen from 23% in 1973 to 37% in 2011. Governments have no competition, so they cannot easily go bust. The politicians who negotiate wage deals with public-sector unions are often funded by the same unions. This is one reason why America’s municipal finances are a mess.

Without any further explanation the author makes the point that the unions are responsible for financial problems of the municipalities. Why?

Walmart discourages its workers from unionising partly because it sees what has happened to firms like Hostess Brands, an 85-year-old company that entered liquidation on November 21st. […] Hostess’s baking operations are reasonably efficient, but its distribution is not. Union rules required cakes and bread to travel in separate trucks, and barred drivers from helping load or unload them. Nimbler firms were eating Hostess’s lunch.

Really?! The reason why Walmart and others discourage workers to join unions, is because they want to be prevent they go out of business? Lets see for example the story of Hostess. As we have learned in our previous post Hostess was already filing bankruptcy in 2009 and was then bought by Ripplewood, a private equity company. Workers made concessions and in the same time CEO pay went up 80% (!) to 2.25 million. Important details The Economist leaves away in his story.

So far the US has a system of ever more profits at the expense of its workers. However, in a globalized world, this will mean ever more jobs will be move abroad and if workers get paid less and less or drop out of the workforce, who will be the consumers of the future? As I summarized already earlier income inequality hampers economic growth. In the next post we will look in more detail how this applies to the Walmart story.

AlJazeera hosts a discussion on the case of Walmart where...

Thu, 22 Nov 2012 02:02:38 -0500

AlJazeera hosts a discussion on the case of Walmart where workers are protesting over their harsh conditions. Looking into the story, insight is given into a situation where workers have no right to union and generally their rights have vastly diminished over the years. The problem however is, that these workers are also consumers and at the end of the day, when just a few get very rich, this will not benefit the economy. Interestingly, the decline in union membership is perfectly matched with the decrease in income share of the middle class.

If we look at the political agenda in the time to come, however, it does not seem as if something will be changing. Moreover, the increase in part time work and immigrant workers has further weakened their positions. In this light, one can only hope that workers of Walmart can send a clear signal, that will motivate others to do the same.