Thursday, February 4, 2016

Let Them Die and Decrease the Surplus Population

"At this festive season of the year, Mr Scrooge, ... it is more than usually desirable that we should make some slight provision for the Poor and destitute, who suffer greatly at the present time. Many thousands are in want of common necessaries; hundreds of thousands are in want of common comforts, sir."
"Are there no prisons?"
"Plenty of prisons..."
"And the Union workhouses." demanded Scrooge. "Are they still in operation?"
"Both very busy, sir..."
"Those who are badly off must go there."
"Many can't go there; and many would rather die."
"If they would rather die," said Scrooge, "they had better do it, and decrease the surplus population."

This chilling recommendation by Ebenezer Scrooge in Charles Dickens A Christmas Carol is spoken of the “poor” in his encounter with the gentlemen from the charitable society.  While it sounds like the ravings of a pure sociopath in the 21st century, we miss the depth of commentary that would have attended audiences of the cognoscenti of the late 18th and early 19th century.  Then, the proper noun “surplus population” would have been known to mean those unemployed and under-employed who serve no purpose to the rent-based labor model of capitalism.  They were, in the minds of 18th century economists, better off dead than being a drain on mercantile profits.  This is because they added nothing in terms of marginal rents to be exploited for labor advantage and they did were non-responsive to price manipulations.  They were not just the “unaccounted for” – they were useless.  Ironically, the urban and rural poor of the 18th century were less valuable than slaves as they couldn’t even be commodified into chattel trade!

Goldman Sachs Group Inc. issued a recent note calling into question the efficacy of capitalism.  “We are always wary of guiding for mean reversion.  But, if we are wrong and high margins manage to endure for the next few years (particularly when global demand growth is below trend), there are broader questions to be asked about the efficacy of capitalism,” stated Goldman’s Sumana Manohar and her colleagues.  For the new players not familiar with the statistical principle of “mean reversion”, it’s most easily understood to refer to phenomenon that take on cyclical oscillations where period of high prices, for example, ultimately re-equilibrate with competition or increased supply thereby approaching commodity marginal value.  But in their analysis, Goldman accidentally indicts the already failed modern capitalist model by citing, as reasons for high profit margins, “strong commodity prices” (read – exploitation of impoverished and disenfranchised labor and resource regions where willful neglect of quality of life and land lead to extractive bonanzas), “emerging market cost arbitrage” (read – exploitation of poorly compensated labor), and other variables.  In short, the 18th century mandate that modern capitalism be predicated on imperialistic land and inhabitant exploitation is actually getting worse and incumbent businesses are the ones who, through bribery, corruption, incumbency paralysis, and patronage hold the only advantage to pressure “emerging market” countries’ leadership into allowing reckless endangerment of their land and citizens.  Goldman would be ideally suited to know about this given the extensive role they play in financing what Joseph Schumpeter predicted as the end of capitalism.  Schumpeter recognized that, drunk on power, influence derived from the control of capital and surplus profits, companies would take on corporatism where their own existence would be more important than the markets they once served.  “Entrepreneurship” and “innovation” in his forecast, would merely serve to create acquisition efficiencies for corporations and would not challenge incumbent products or services. 

Over the past several years, I’ve noticed an alarming trend in what is heralded as “innovation” – once the fulcrum required to tip the profit margin lever in the capitalist model.  In “Silicon” this and “Entrepreneurship” that, there’s been an increasing push towards incremental improvements to incumbent platforms.  We don’t come up with a new way to communicate, we come up with an app that renders an incumbent device more incumbent.  We don’t come up with a new enterprise model, we crowd-fund and crowd-source our way to market tests to offer shrewd companies insights into where the market is susceptible to “new”.  In homage to Frank Robinson, angel investors and venture capitalists fawn all over “minimum viable product” efforts while incumbency-threatening transformation is suffocated.  For Adam Smith’s corrupt system to work, it required capitalists who would take gambles on transformation where price or supply dislocation was possible. During the last 15 years, this impulse has been extinguished and corporatism has fully replaced capitalism in every quarter.

And embedded in the virus that was unleashed when mercantilism ceded its hold to capitalism was the toxin of necessary neglect.  By assiduously avoiding contact with the land and people which were the “efficiencies” derived from colonial and militant oppression and extraction, the general public could comfortably clothe, feed and amuse themselves without ever seeing the cost of contaminated water, inhumane treatment of workers, decimation of culture and community, and extinction of resources, flora and fauna.  In other words, for the capitalist system to work, moral opacity was necessary.  Not surprisingly, the observational retrospective piece by Goldman presumes that corporate profits are essentially valuable.  But this two and a half century assumption has not been sufficiently examined. 

Under capitalist dogma, profit is the arbitrage between the “cost” of production and distribution and the “price” that a consumer is willing to pay.  It is the seduction premium that is foisted upon a public willing to acquiesce to manipulated supply, frail egoic identification, or perceived need.  As the consumer is seduced into their portion of the calculus, so too is the enterprise willing to bankrupt its own sense of accountability or responsibility by intermediating those attributes of business most odious.  Celebrate the environmentally friendly electric vehicle so long as you don’t pay any attention to the lithium miners’ plight.  Carbon obsess your way into wind turbines so long as you don’t see the rainforests of Papua New Guinea that are clear cut for the toxic balsa timber.  Celebrate – with Goldman – the collapse of commodity prices while paying no heed to the environmental and social cost of extractive industries becoming more callous in their pursuit of metals and energy in more remote and unverifiable locations.  The less you measure the extinction costs which are “free” in the capitalist model – that matter, energy and effort that can be used and abused to extinguishment without any model for replenishment or reuse – the more “profit” seems to manifest.  Profit is the inverse economic function to all-in-consequence value recognition.  This is NOT an anti-enterprise statement.  Genuine innovation, genuine quality, genuine purpose-filled products and experiences can justify a PREMIUM which, unlike “profit” is the value acknowledgement willingly bestowed on enterprises who manifest value in line with socially desired outcomes.  And premium can exist on both sides of the antiquated business model.  As a supplier, I may offer goods or services to partners at an advantaged price because I prefer my affiliation with them.  As the distributor of goods and services, my transparency and honorable actions may engender greater reward and recognition than my thoughtless, mercenary alternative. 

And lest one misunderstand this commentary to solely apply to business and industry, allow me to bridge the following important social observation.  Many deeply personal and intimate relationships suffer from the same negligent accountability capitalist curse.  Profit in friendship, relationship, and intimacy can be often a seductive trap where one party seeks to benefit at the expense of the unacknowledged well-being of another.  The resulting imbalance can, like imperialistic business, lead to subtle and overt exploitation, resentment and ultimate extinction of relationships.  Unseen and unaccounted contributions by one party can render gifts of generosity, kindness and service which in their offering are freely and joyfully given and manipulate them into entitlement and expectation.  What once was generative and offered in love becomes resented and provided in dutiful drudgery.

Unlike Goldman Sachs’ recent note, I would argue that the capitalist ideal likely never got a chance to breathe.  The experiment largely born in the industrial age in the U.S., the U.K. and Germany was immediately co-opted by militarism and state-sanctioned privatization of Federal Treasuries (not surprisingly necessitated in each instance by sovereign debt resulting from expeditionary military exercises).  Apologists for capitalism fail to evidence its capacity to function without tyrannical extraction from colonial theft of lands and peoples thought to be too remote to matter.  Since the early 1800s, they’ve assiduously avoided accounting for extinction and waste of materials, community, culture, and energy.  And they’ve entirely neglected the damning evidence that the vast majority of genuine, transformational innovation has been stifled or extinguished by incumbencies that control capital, means of production and distribution, and governmental patronage.  In other words, irrational profit margins are not the harbinger of capitalism’s failure – they’re merely the forensic evidence of rigor mortis in the unborn fetus of imperial hegemonic delusions. 

When we account for it “all”, we’ll be able to discuss the persistent, generative, infinitely orthogonal cyclical efficiency of systems which are devoid of extinction, oppression and callous neglect for each actor in the ecosystem.  We will celebrate with premiums those actors and enterprises that model the most salutatory of ethical values rather than reward with indifference those who maximize seduction while preserving moral opacity and negligence. 


1 comment:

  1. Hear, hear Dave. Smacks a lot of Saul. For mine, it's a keepsake. Lovely to read: but, as Gramsci says:
    I’m a pessimist because of intelligence, but an optimist because of will.
    I will keep living in the way you speak and hope that the awakening comes in time. Thanks for what you do!


Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave