Arguments for capitalism, refuted (part 14: debt, healthcare, & banking stats)

Today, we’ll tackle debt, healthcare, and banking-related statistics. The American capitalist economy is distinguished by its extremely high levels of unnecessary private debt, in part because higher education, healthcare, and housing aren’t treated as human rights.

Debt

Healthcare (all these stats will get much worse if the Republicans repeal Obamacare; market-based healthcare systems are a nightmare)

Banking

Here and here are two articles on how Wall Street has gobbled up the economy.

  • Unbanked: 7% of households (2015) = 9 million households 
  • Underbanked: 19.9% of households (2015) = 24.5 million households
  • Size of the financial sector relative to the economy as a whole: 30% of corporate profits
  • Check out this graph of financial sector size over time taken from James Kwak’s blog.
  • Bailout money paid because of 2008 financial crisis: $16.1 trillion. See also here and here.
  • Yearly government subsidy to Wall Street: $83 billion – this is basically the same as Wall Street’s total annual “profits.” IN OTHER WORDS, WALL STREET MAKES NO MONEY. THE PROFITS ARE SUBSIDIZED BY THE TAXPAYERS.
  • 1 in 3 bank tellers are on welfare because the big banks are too stingy to pay them a living  wage. This costs taxpayers around $900 million a year. So we provide Wall Street extra corporate welfare on top of the $83 billion a year and the $16.1 trillion from the 2008 crisis.
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Arguments for capitalism, refuted: waste, malnutrition/hunger, and homelessness statistics

Here’s another comprehensive article on poverty.

Today, we’ll delve into the statistics related to food waste, hunger and malnutrition, child poverty, and homelessness, all of which are caused by a system that cannot rationally distribute resources so that everyone’s basic human needs are met and that “human rights” is more than just a slogan. Think of all the unnecessary pain and suffering, much of it endured by children. Human beings deserve better, especially in the richest country in human history. These are global problems, but we’ll focus on the American statistics mostly. The numbers speak for themselves.

Food waste

  • Annual American food waste: 35 million tons in 2012
  • Percentage of food that is wasted in the United States: 40% (cost of $165 billion)
  • Global food waste: 33%, estimated yearly cost: $400 billion

Hunger and food insecurity

Child poverty

  • American people in poverty between 18 and 64 (2015): 24.4 million (12.4%)
  • American children below 18 in poverty (2015): 14.5 million (19.7%) – in other words, 1 in 5 American children are poor
  • Child poverty, as measured by UNICEF (2012): 32.2% of American children (1 in 3 American children are poor); US is 36th out of 41 wealthy countries
  • Percentage of children in low-income families: 43%

Homelessness

  • Estimate of number of Americans who are homeless:  564,708 people on any given night
    • 36,907 (6.38%) are children
    • 47,725 (8.33%) are veterans
    • 269,991 (47.6%) are disabled and unable to work.

Arguments for capitalism, refuted: inequality statistics

Today, we’ll address inequality. Let me warn you that what you’re about to read is really ugly. Here’s an EPI fact sheet on poverty and inequality.

  • The 12 richest people in the US have more wealth than the bottom 50% of Americans (= roughly 160 million).
  • 2015 GINI index (a measure of income inequality, 0 = perfectly equal, 1 = perfectly unequal): 0.479

Income inequality, in general (stats from here)

  • Top 1% share of income in 2015: 22.03%
  • Top 10% share of income in 2015: 50.47%
  • Bottom 50% share of income in 2014 (2015 figures not available): 10.09%

Wealth inequality, in general (stats from here)

  • Top 1% wealth in 2014: 37.24%
  • Top 10% wealth in 2014: 72.18%
  • Middle 40% (10%-50%) wealth in 2014: 27.15%
  • Bottom 50% wealth in 2014: 0.06% (NO, YOU’RE NOT MISREADING THAT. The bottom 50%, because of debt and massively unequal income distributions, have pretty much zero wealth.)

Gender inequality (Stats come from a fabulous report by the American Association of University Women, which you should definitely check out for its extensive data and clear graphs)

  • In 2015, median annual earnings in the United States for women and men
    working full time, year-round:

    • women: $40,742
    • men: $51,212
  • 2015 earnings ratio = $40,742/$51,212 = 80%
  • 2015 pay gap = [$51,212 – $40,742]/$51,212 = 20%

Racial income inequality (Graphs taken from a fantastic Demos study)

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Racial wealth inequality (Graph and data taken from a fantastic Demos study)

  • Median white family wealth in 2011: $111,146
  • Median Latinx family wealth in 2011: $8,348 
  • Median black family wealth in 2011: $7,113  

A good read on racial income and wealth inequality is here.

And here’s another graph, taken from the Pew Research Center:

Wealth Inequality by Race

Arguments for capitalism, refuted: statistics on poverty

I’ve been treading lightly in terms of providing data and statistics, but in the next few posts, I’ll be providing statistics on the economy and political system. Today, we’ll address poverty.

  • Official poverty rate: 13.5% (2015) = 43.1 million people
  • Percentage of Americans who are either poor or low-income: 50%
  • Percentage of population WITHOUT $400 readily available for an emergency: 47%
  • Percentage of households with NOT enough savings on hand to cover 1 month of lost income: 55%
  • Percentage of Americans who DON’T have 6 months’ expenses on hand for a major emergency: 75%
  • Percentage of households fitting at least one of the three following categories: savings-limited, income-constrained, or debt-challenged: 70%
  • Are the American poor better off than the poor in other developed countries? No.

Arguments for capitalism, considered and refuted (part 12: opportunity cost, creation of new wants)

The pro-capitalist story ignores opportunity cost and the subjectivity that lies behind consumption. What do I mean by these terms?

Opportunity cost is a measure of what’s lost by not using a particular resource in another (and better) way than it’s currently being used. It’s a variation on the theme of wastefulness. In the case of capitalism, there are many opportunity costs that add to the costliness of the system as a whole, as outlined in yesterday’s post. A short list follows:

  1. The cost of having wealth and income so distributed as to relegate millions to poverty and all the problems associated with not having enough money
  2. The cost of all of the money wasted on advertising, money which wouldn’t need to be spent if products were distributed in a different way and elections weren’t open at all to private money (Does the advertising industry employ people? Yes. But could they be meaningfully employed otherwise, or simply be freed to enjoy leisure? Yes.)
  3. The cost of having food so distributed that a third of it is wasted annually

The pro-capitalist story assumes that people just have preferences. It ignores the fact that preferences are actually plastic and can be molded and shaped by advertising, mass media, schooling, etc. People can be convinced that they “need” things that they don’t actually need. In fact, part of the whole point of capitalism is for capitalists to discover new things that the people with money are willing to pay for, regardless of whether those things satisfy genuine human needs.

Capitalism thrives on artificially creating wants. It blurs or altogether erases the distinction between needs and wants. Some wants are perfectly acceptable. Obviously, we shouldn’t be limited to only satisfying the basic needs necessary for continued bodily existence and health. But as long as there are people whose basic biological needs go unfulfilled, it’s a travesty that we have a system which licenses and encourages people to spend many billions of dollars a year on thoroughly unnecessary things which don’t appreciably add to human happiness. Societies only have so much wealth, and all wealth, being the product of social labor, is fundamentally the same, contrary to the public/private distinction the pro-capitalist story would have us uphold. The way that societies choose to put their public and private wealth to use says a lot about their morality and about the reasonableness of their economic and political systems. A moral, rationally constituted society would make sure that everyone had enough to be happy.

Delving into the psychological, anthropological, and sociological research on happiness would take far too long for us to do now; I might do it at some later date. But I hope my point is clear. Not all markets should exist. In short, just because there is demand for something, that doesn’t mean there actually should be a market for that thing.

 

Arguments for capitalism, considered and refuted (part 11: view of society, boom-and-bust cycles)

Anyone who tells you that the 2016 Democratic Party platform was the “most progressive” in American history is LYING (or MISINFORMED). Consider the 1940 Democratic Party platform, which says: “We have attacked the kind of banking which treated America as a colonial empire to exploit; the kind of securities business which regarded the Stock Exchange as a private gambling club for wagering other people’s money; the kind of public utility holding companies which used consumers’ and investors’ money to suborn a free press, bludgeon legislatures and political conventions, and control elections against the interest of their customers and their security holders. We have attacked the kind of business which levied tribute on all the rest of American business by the extortionate methods of monopoly.”

Back to the arguments for capitalism. The two parts of the pro-capitalist story we’re going to debunk now are as follows:

(1) Society is the aggregation of all private citizens and private firms.

(2) The boom and bust of the market, the shifts that drive businesses out and result in periodic crises which destabilize entire societies, is simply part of the process of “creative destruction” that capitalism requires.

In response to (1), society is more than just private firms and private individuals. Our government and public agencies are a key part of what makes civilization possible, and political participation is an important part of what makes us human. Treating the public sphere as secondary or unimportant is a strange and unjustified capitalist prejudice. The private wouldn’t be able to exist without the public. The word “individual” used to mean “unable to be divided (from the whole).” Individuals need the public realm just as much as they need the private realm of family, friendship, and love to fully realize themselves.

In response to (2), and following up on the post where I listed just some of the many market failures of capitalism, the boom-and-bust cycle is (1) incredibly wasteful and pointless, and (2) extremely costly. People pour their time, energy, money, and passion into businesses which end up getting shoved out of the market by big-box corporate leviathans with far more resources. Workers at small businesses are thrown into unemployment, small business owners are impoverished, and culture is lost when everything is homogenized, as happens when capitalist markets move towards their oligopoly/monopoly phase.

Human beings actively create economic and political systems. To create a system which then escapes your own control seems to me the height of folly. To treat the market as a god issuing decrees from on high is simply absurd. Yet this is what capitalism does when it turns “the business cycle” into a timeless “truth,” severs the link between the real/productive economy and the financial/monetary economy, and accepts that “animal spirits” will wreck the economy every now and again. We throw away millions of tons of food a year even as millions of children suffer from malnutrition and die of hunger. People languishing for want of food, clothing, and shelter in the midst of plenty and overproduction is the absurd condition capitalism creates. We are capable of creating a system that achieves a permanent steady state without periodically plunging itself into devastating and prolonged crises.

The 2008 financial crisis is estimated to have cost the US economy over $22 trillion. As any good capitalist would do to determine economic viability, let’s do a partial cost-benefit analysis of capitalism. Add up the cost of all the recessions and depressions over the course of capitalist history. Now, add to this the opportunity cost of the inefficient allocation of social resources in the form of people working unnecessary jobs, unnecessary competition between nearly identical private firms, advertising spending, overhead costs for corporations, the production and conspicuous consumption of luxury items, etc.

Leave out costs related to market failures: the moral, environmental, and health-related/psychological costs and costs associated with economic underdevelopment due to poverty, homelessness, the lack of adequate early childhood care, educational inequality, racism, sexism, heightened levels of anxiety and stress, the under-regulation or non-regulation of important products, and all the other ills that plague capitalist societies. Even if you ignore these many costs (and environmental costs alone are enormous and possibly unmeasurable) and stick simply to the costs associated with inefficiencies of capitalist economic structures, I find it really, really hard to imagine how capitalism doesn’t end up in the red. On the positive side of the ledger, “innovation” just doesn’t cut it, especially when most capitalists only “innovate” products that benefit the small fraction of the population with enough disposable income to buy them.

 

Another interlude

Check out an interesting blog post from Adam Tooze on income growth over the last forty-ish years here.

Here are some more notable quotes from Marx, taken from his masterwork Das Kapital:

  • Capitalism is unnatural, actually a product of history: “One thing…is clear – Nature does not produce on the one side owners of money or commodities, and on the other men [human beings] possessing nothing but their own labor-power. This relation has no natural basis, neither is its social basis one that is common to all historical periods. It is clearly the result of a past historical development…” -Capital
  • Gains in productivity don’t translate into reduced work because the length of the workday is a matter of class power: “[I]n the history of capitalist production the determination of what is a working day presents itself as the result of a struggle, a struggle between collective capital, i.e., the class of capitalists, and collective labor, i.e., the working class.” -Capital
  • Capitalism is irrational and creates useless jobs to keep people busy even after gains in productivity mean that workers could enjoy much more leisure: “The more the productiveness of labor increases, the more can the working day be shortened; and the more the working day is shortened, the more can the intensity of labor increase. From a social point of view, the productiveness increases in the same ratio as the economy of labor, which…includes not only economy of the means of production, but also the avoidance of all useless labor. The capitalist mode of production while on the one hand enforcing economy in each individual business, on the other hand begets, by its anarchical system of competition, the most outrageous squandering of labor-power and of the social means of production, not to mention the creation of a vast number of employments, at present indispensable, but in themselves superfluous.” -Capital
  • Capitalists view workers as mere tools: “[I]t is self-evident that the laborer is nothing else, his whole life through, than labor-power, that therefore all his disposable time is by nature and law labor-time, to be devoted to the self-expansion of capital. Time for education, for intellectual development, for the fulfilling of social functioning and for social intercourse, for the free play of his bodily and mental activity…moonshine!” -Capital
  • How capitalism reproduces itself: “[Capitalism]…reproduces and perpetuates the condition for exploiting the laborer. It inecessantly forces him to sell his labor-power in order to live, and enables the capitalist to purchase labor-power in order that he may enrich himself. It is no longer a mere accident, that capitalist and laborer confront each other in the market as buyer and seller. It is the process itself that incessantly hurls back the laborer onto the market as a vendor of his labor-power, and that incessantly converts his own product into a means by which another man can purchase him. In reality, the laborer belongs to capital before he has sold himself to capital. His economic bondage is both brought about and concealed by the periodic sale of himself, by his change of masters, and by the oscillations in the market-price of labor-power. Capitalist production, therefore, under its aspect of a continuous connected process…produces not only commodities, not only surplus-value, but it also produces and reproduces the capitalist relation; on the one side the capitalist, on the other the wage-laborer.” -Capital
  • Wealth for the few and poverty for the many are directly connected under capitalism: “Accumulation of wealth at one pole is…at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital.” -Capital

A brief break: some quotes from Marx on capitalism & explanations

I don’t have much time to write today, so I’ll give you a Marxian interlude. Here are some quotes from Marx, one of the most eloquent detractors of capitalism, preceded by brief explanations:

  • Capitalism forces people to practice asceticism instead of enjoying life: “The less you eat, drink, and buy books; the less you go to the theatre, the dance hall, the public house; the less you think, love, theorise, sing, paint, fence, etc., the more you save – the greater becomes…your capital. The less you are, the less you express your own life, the more you have, i.e., the greater is your alienated life, the greater is the store of your estranged being.” -Economic and Philosophical Manuscripts
  • Capitalism generates incessant uncertainty: “Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned…” -Communist Manifesto
  • Capitalism enslaves (factory) workers: “Not only are [proletarians] slaves of the bourgeois class, and of the bourgeois State; they are daily and hourly enslaved by the machine, by the overlooker, and, above all, by the individual bourgeois manufacturer himself.” -Communist Manifesto
  •  One explanation for the ideological hegemony of capitalist economics: “The ideas of the ruling class are in every epoch the ruling ideas…The class which has the means of material production at its disposal has control at the same time over the means of mental production, so that thereby, generally speaking, the ideas of those who lack the means of mental production are subject to it.” -German Ideology
  • The democratic socialist ideal, in brief: “The life-process of society, which is based on the process of material production, does not strip off its mystical veil until it is treated as production by freely associated men [human beings], and is consciously regulated by them in accordance with a settled plan.” -Capital

 

Arguments for capitalism, considered and refuted (part 10: an incomplete list of market failures)

The third part of the pro-capitalist story is this: guided by changes in price, supply and demand interact until they reach the most beneficial equilibrium, the equilibrium that yields the greatest utility for consumers (private citizens) and producers (private firms).

To pretend like markets self-regulate is to ignore the plethora of market failures we’ve seen. Market failures are so common that one might even call them the norm. If the goal of markets is to supply people with the right amount of the right things, many of them fail quite spectacularly; here’s an incomplete list. In the future, I’ll have a post exclusively devoted to damning statistics on capitalism; what follows will just be a taste:

  • Consider higher education, which people want and need, both as a basic human right and because of the economic advantages it gives them. The American market produces over $1 trillion in student loan debt, which is then a crushing burden for millions of people for decades of their lives, and it discourages or flat-out turns away millions of poor students. Under our current market system, a good college education is a commodity that you only get if you can pay for it.
  • Or think about healthcare markets, which regularly bankrupt people and even under Obamacare left roughly 27 million people uninsured and many millions more underinsured. 40,000 people a year died needlessly before Obamacare, and we’re likely heading back to those days with the repeal of Obamacare.
  • Relatedly, consider the pharmaceutical industry, which rakes in billions of profits even as people suffer and die because they can’t afford treatment.
  • The financial industry is especially heinous. Almost 30% of Americans are unbanked or underbanked, meaning they don’t have regular access to savings and checking accounts. The banking sector, due to its rampant speculation, also produced the 2008 financial collapse. Wall Street nickel-and-dimes us all with ATM fees (which don’t exist in the UK and other civilized countries), overdraft fees, and more. The big banks don’t even pay their tellers a living wage. About the only thing Wall Street consistently produces, so far as I can tell, is chaos and misery, even for highly-paid high-ups.
  • There is high demand for secure, well-paying jobs; markets consistently fail to deliver: over the last 20 or so years, even in “good” economic times, the real unemployment rate has hovered at around 7%, which translates to over 10 million people without work.
  • People want affordable shelters to call their own. 12.7% of housing units in the US in 2016, 4th quarter, were vacant, which means that 17.2 million housing units were empty. Meanwhile, there are around 550,000 homeless people at any given time in the US, and about one-third don’t even have shelters to sleep in. And individual mortgage debt is at $1.27 trillion.
  • Global warming is the biggest market failure in human history. Rather than producing green energy and technological advances necessary for building a sustainable society, energy markets have yielded decades of deception and climate denial from fossil fuel corporations and have blocked the development of alternatives to oil, coal, and gas.

So please, let’s not kid ourselves. Supply and demand don’t magically harmonize. Markets are blind and irrational.

Capitalist arguments, considered and refuted (part 9: taking apart the pro-capitalist story)

The second part of the pro-capitalist story is this: If the state doesn’t “interfere” (again, I’m using scare quotes quite intentionally), the market will efficiently maximize social utility. Guided by changes in price, supply and demand interact until they reach the most beneficial equilibrium, the equilibrium that yields the greatest utility for consumers (private citizens) and producers (private firms).

As we’ve discussed, the division between “the state” and “the market” is artificial. Government economic activity isn’t “interference”; it’s normal. Pro-capitalists assume for some reason that the private sector is more “efficient” than the public sector. But they usually assume this without demonstrating it. And without actually looking at real-world data, there’s no good economic reason to assume this. Corporations are huge organizations with large bureaucracies, immense amounts of paperwork and internal red tape, and convoluted hierarchies. They are no better than our government in all these respects, despite conservative attacks on supposed government waste and inefficiency. And complicated laws and regulations in the case of our government are often imposed by pro-corporate politicians to protect the corporations from competition. Politically speaking, the public sector is preferable to the private sector because, even if our government isn’t responsive to citizens right now because it’s controlled by corporations, there are theoretically more ways for citizens to exercise influence over decisions and ensure that there is democratic accountability.

Government programs are also intended to promote citizens’ wellbeing as opposed to profiting off them, as in the case of private corporations. Directly providing services through our government cuts out a whole layer of inefficiency in the form of private-sector middlemen. Using our government for education, healthcare, water and utilities, banking, mass transportation, and social security programs, fully funding these all these programs, and guaranteeing universal rights to these benefits is more sensible than providing these services through a patchwork of private corporations and agencies which are more interested in profit than people.

Government action isn’t “interference.” And regardless of the government’s action or non-action, markets don’t magically arrive at the ideal equilibrium for society. The pro-capitalist story assumes that we’re talking about perfectly competitive markets. But there are very strict requirements for markets to be perfectly competitive, and these requirements are rarely, if ever, seen in the real world. There needs to be no collusion between firms, and all firms have to be small enough that none has enough power to set prices by itself. There must be perfect information for both producers and consumers. In practice, this is far from true. Many markets are oligopolies or private monopolies; many corporations are big enough to set prices by themselves. In some markets, it seems highly likely that corporations are colluding with one another to set prices and fleece consumers. And many markets have information asymmetries (the corporations know more than the consumers about their products). Just think about the mess that we call a healthcare system in the US.

Next, we’ll continue discussing whether capitalist markets really reach the most socially beneficial balance of supply and demand.