Sunday, August 20, 2017

We Need a Social Revolution

Governments and corporations cannot restore social connectedness and balance to our lives.
In the conventional view, there are two kinds of revolutions: political and technological. Political revolutions may be peaceful or violent, and technological revolutions may transform civilizations gradually or rather abruptly—for example, revolutionary advances in the technology of warfare.
In this view, the engines of revolution are the state--government in all its layers and manifestations—and the corporate economy.
In a political revolution, a new political party or faction gains converts to its narrative, and this new force replaces the existing political order, either via peaceful means or violent revolution.
Technological revolutions arise from many sources but end up being managed by the state and private sector, which each influence and control the other in varying degrees.
Conventional history focuses on top-down political revolutions of the violent “regime change” variety: the American Revolution (1776), the French Revolution (1789), the Russian Revolution (1917), the Chinese Revolution (1949), and so on.
Technology has its own revolutionary hierarchy; the advances of the Industrial Revolutions I, II, III and now IV, have typically originated with inventors and proto-industrialists who relied on private capital and banking to fund large-scale buildouts of new industries: rail, steel manufacturing, shipbuilding, the Internet, etc.
The state may direct and fund technological revolutions as politically motivated projects, for example the Manhattan project to develop nuclear weapons and the Space Race to the Moon in the 1960s.
These revolutions share a similar structure: a small cadre leads a large-scale project based on a strict hierarchy in which the revolution is pushed down the social pyramid by the few at the top to the many below. Even when political and industrial advances are accepted voluntarily by the masses, the leadership and structure of the controlling mechanisms are hierarchical: political power, elected or not, is concentrated in the hands of a few at the top. Corporations are commercial autocracies; leadership is highly concentrated and orders are imposed on the bottom 99% of employees with military-like authority.
Social Revolutions Are Not Top-Down
But there is another class of revolution that does not share this hierarchical structure, nor does it manifest in the large-scale, top-down power-pyramids of the state and private corporations: social revolutions are bottoms-up affairs, lacking centralized leadership and hierarchical control mechanisms.
Social revolutions eventually influence the state and private sector, but they do not require the permission, funding or leadership of these hierarchies; as a rule, social revolutions drag the state and corporate sectors forward, kicking and screaming, as the social fabric and values of the populace change and the state and corporate sector cling to the status quo.
Examples of recent social revolutions include the civil rights movement of the 1950s and 60s, the Counterculture of the 1960s, and the gay rights movement. The leadership of the state resisted each revolution, and was essentially forced to adapt to the new social order as it became mainstream.
Once corporations figured out ways to profit from the transformed social order, they quickly introduced new products and fresh marketing: all-Caucasian advertising, for example, gave way to targeted ethnic advertising and mixed-race national advert campaigns.
When social revolutions are suppressed by the state, they may spark a political revolution as the socially oppressed come to see the overthrow of the autocratic political order as a necessary step towards liberation.
In other cases, social revolutions may have little immediate impact on the political stage. Faith-based social secular movements--for example, the Second Great Awakening in the early 19th century-- were not overtly political; their eventual political impact (temperance, woman’s rights and support for the abolition of slavery) may manifest decades later.
In summary: social revolutions may generate political waves, but they need not be overtly political to do so, nor do they rely on political, financial or technological hierarchies to transform society.
The Decline of Social Groups and the Erosion of the Social Order
Robert Putman’s 2000 book Bowling Alone: The Collapse and Revival of American Community, documented the decline of social connections and what we might calling belonging in American society with reams of data. This erosion of social bonds is not limited to social groups such as bowling leagues; it is secular, spanning every social type of connection from family picnics to community and neighborhood groups.
If we extend Putnam’s findings to the core human bonds of family and friendships, we find the same fraying of social ties; people have fewer close friends, are more isolated and lonely, and family relationships are increasingly superficial or characterized by alienation.
The factors feeding this broad-based decline of connectedness and social capital are many: the nation’s economic mode of production has changed, requiring two incomes where one once sufficed, and globalization has increased both the demands on those with jobs and the number of adults who have fallen out of the work force.
This winner-takes-most economy has been accompanied by the rise of political divisiveness, a brand of politics that fosters us-versus-them disunity and the erosion of common ground in favor of demonized opponents and all-or-nothing loyalty to one party or cause.
The technological revolutions of broadcast television and radio homogenized the mainstream media even as they provided superficial substitutes for social engagement. The technologies of social media, mobile telephony and narrowcast echo-chambers of uniform opinion have created even more addictive forms of distraction that are not just shredding social connectedness—they’re destroying our ability to form and nurture social bonds, even within the family.
This dynamic was explored in a recent essay in The Atlantic, Have Smartphones Destroyed a Generation?
Any careful observer of present-day family life would add that the addictive draw of mobile telephony has also damaged the parents’ generation and the family unit itself.
Cui Bono: To Whose Benefit?
Longtime readers know I often begin an inquiry with the time-tested question: cui bono, to whose benefit? Who has benefited from the erosion of the social fabric and social capital, from the politics of divisiveness and the mass addiction to the technologies of superficial connectedness?
While we can take note of soaring corporate profits, and draw a causal connection between these profits and the modern-day “always connected to work” lifestyle of high-productivity corporate employees, it’s difficult to argue that corporations have benefited directly from the loss of social capital that characterizes American life.
Rather, it seems that the corporation’s relentless pursuit of narrowly defined self-interest, i.e. maximizing profits by whatever means are available, has laid waste to boundaries between work and home life as collateral damage.
In a similar fashion, purveyors of smartphones and the software and content that render them so addictive don’t necessarily benefit directly from the destruction of intimate, authentic social bonds, but they certainly have prospered from the feeding of the smartphone addiction. Once again, the loss of authentic social connectedness is collateral damage.
While it seems quite clear that political groups have fueled divisiveness to their own benefit, does the state (government in all its forms) benefit from the fraying of the social order? It’s difficult to discern a direct benefit to the state, though it might be argued that a fractured populace is easier to control.
But the erosion of the social order has gone beyond fracture into disintegration, and it’s hard to see how class wars and social disunity benefit the state, which ultimately relies on some measure of social unity for its authority, which flows from the consent of the governed.
It's Time To Take Our Future Back
In Part 2: Rescuing Our Future, we focus on the self-evident truth that governments and corporations cannot restore social connectedness and balance to our lives.Only a social revolution that is self-organizing from the bottom-up can do that.
And we detail out the specific steps each of us can and should take to develop the values and skills required to form and maintain authentic social wealth—the wealth of friendship, of social gatherings, of belonging.
It takes courage and independence to swim against the toxic tides of our economy and society. The good news is that true wealth is within reach of everyone. The steps we each need take are clear; it's just a matter of having the will to invest the time and effort.
Do you have it?
Click here to read the report  (free executive summary, enrollment required for full access)
Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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Thursday, August 17, 2017

Are Profit and Healthcare Incompatible?

The only way to systemically lower costs is to make prevention and transparency the top priorities.
As I have been noting for a decade, the broken U.S. healthcare system will bankrupt the nation all by itself. We all know the basic facts: the system delivers uneven results in terms of improving health and life expectancy while costing two or three times more per person compared to our advanced-economy global competitors.
This chart says it all: the global outlier in low life expectancy and exorbitant cost is the U.S.
The profit motive is supposed to lower costs, not increase them. In the idealized model of a completely free market, the profit motive is supposed to lower costs as customers are free to choose the best product/service for the lowest price.
In U.S. healthcare, the profits are stupendous, yet the costs are even more stupendous. Rather than lower costs, the U.S. system of for-profit healthcare has sent costs spiraling into the stratosphere, to the point that the system's costs are threatening to bankrupt the government and the nation.
Why is this so? Karl Marx provided the answer in the 19th century. In the idealized model of free-market capitalism, those who provide superior services for the lowest price reap more profit than their less agile/productive competitors.
But as Marx observed, in real-world capitalism, open competition drives profits to zero. Every attempt to gain a competitive advantage in price increases supply and further commoditizes the product/service. This dynamic pushes prices down to the point that nobody can make a profit until competitors are driven out of business and a cartel or monopoly secures the market and controls supply, price and profit.
The most profitable structures in real-world capitalism are monopolies or cartels-- which is precisely what characterizes U.S. healthcare. The only way to maximize profits is to ruthlessly eliminate competition in the marketplace--which is exactly how the U.S. healthcare system operates: the pharmaceutical industry is a cartel, hospital chains are a cartel, insurance companies are a cartel, and so on.
In the real world of state-cartel-capitalism, competition is eliminated so cartels can maximize profits.
Do-gooders are always claiming that the system could be fixed by re-introducing competition-- this was the core idea behind Obamacare's insurance exchanges--but the do-gooders are blind to the core dynamic of state-cartel-capitalism, which is cartels own the machinery of governance via lobbying and campaign contributions. The state creates and protects the cartels, period.
In state-cartel-capitalism, there is no way to maintain real competition, as the cartels instruct the state to protect their monopolies/cartels. State reformers can try all sorts of complex reform schemes (ObamaCare) but they fail to lower costs because they all leave the cartel structure and cartel ownership of governance intact.
In the good old days of the 1950s and 1960s, U.S. healthcare was more localized, and the central state (federal government) wasn't the Sugar Daddy for the cartels. Hospitals were community hospitals (what a quaint idea in today's hyper-cartelized system) managed by physicians and administrators who saw their role as serving the community rather than arranging for $20 million annual salaries and millions of dollars in stock options.
This is why the cartels love Medicare For All proposals: the federal government--protector and funder of the cartels--will give the cartels a blank check not just for the 120 million people currently drawing benefits from Medicare/Medicaid but for all 325 million Americans.
Fast facts on Medicare and Medicaid (Center for Medicare and Medicaid Services)
Medicare Beneficiaries: 57.7 million
Medicaid Beneficiaries: 72.3 million
estimated dual Beneficiaries (drawing benefits from both programs): 10 million
Total Beneficiaries: 120 million
Medicare/Medicaid budget, 2015: $1.2 trillion
Total U.S. healthcare costs: $3.2 trillion, 18% of GDP
Department of Defense budget, 2015: $575 billion
source
Are profit and healthcare incompatible? In the real world of state-cartel-capitalism, the answer is yes: a profit-maximizing system fails to deliver prevention while pushing costs higher, eventually bankrupting the Sugar Daddy government and the nation.
Prevention, like a bag of carrots, is intrinsically low-profit. Illness, especially chronic illness, is highly profitable because the profits flow continuously from treatments, medications, procedures, tests, visits, hospitalization, home care, a constant churn of billing, etc.
The only way to systemically lower costs is to make prevention and transparency the top priorities. Prevention, community ownership of healthcare services, transparency and unfettered competition kill profits, period. Yet these are the only way to lower costs to be in line with our competitors.
You can reconfigure the system any way you want, but you have to eliminate cartels, cartel ownership of governance, opaque pricing, government blank checks and incentives for profiteering from chronic illness. If you don't eliminate all these, you've fixed nothing.



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Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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Wednesday, August 16, 2017

Why We're Doomed: Our Economy's Toxic Inequality

Anyone who thinks our toxic financial system is stable is delusional.
Why are we doomed? Those consuming over-amped "news" feeds may be tempted to answer the culture wars, nuclear war with North Korea or the Trump Presidency.
The one guaranteed source of doom is our broken financial system, which is visible in this chart of income inequality from the New York TimesOur Broken Economy, in One Simple Chart.
While the essay's title is our broken economy, the source of this toxic concentration of income, wealth and power in the top 1/10th of 1% is more specifically our broken financial system.
What few observers understand is rapidly accelerating inequality is the only possible output of a fully financialized economy. Various do-gooders on the left and right propose schemes to cap this extraordinary rise in the concentration of income, wealth and power, for example, increasing taxes on the super-rich and lowering taxes on the working poor and middle class, but these are band-aids applied to a metastasizing tumor: financialization, which commoditizes labor, goods, services and financial instruments and funnels the income and wealth to the very apex of the wealth-power pyramid.
Take a moment to ponder what this chart is telling us about our financial system and economy. 35+ years ago, lower income households enjoyed the highest rates of income growth; the higher the income, the lower the rate of income growth.
This trend hasn't just reversed; virtually all the income gains are now concentrated in the top 1/100th of 1%, which has pulled away from the top 1%, the top 5% and the top 10%, as well as from the bottom 90%.
The fundamental driver of this profoundly destabilizing dynamic is the disconnect of finance from the real-world economy.
The roots of this disconnect are debt: when we borrow from future earnings and energy production to fund consumption today, we are using finance to ramp up our consumption of real-world goods and services.
In small doses, this use of finance to increase consumption of real-world goods and services is beneficial: economies with access to credit can rapidly boost expansion in ways that economies with little credit cannot.
But the process of financialization is not benign. Financialization turns evertything into a commodity that can be traded and leveraged as a financial entity that is no longer firmly connected to the real world.
The process of financialization requires expertise in the financial game, and it places a premium on immense flows of capital and opaque processes: for example, the bundling of debt such as mortgages or student loans into instruments that can be sold and traded.
These instruments can then become the foundation of an entirely new layer of instruments that can be sold and traded. This pyramiding of debt-based "assets" spreads risk throughout the economy while aggregating the gains into the hands of the very few with access to the capital and expertise needed to pass the risk and assets off onto others while keeping the gains.
Profit flows to what's scarce, and in a financialized economy, goods and services have become commodities, i.e. they are rarely scarce, because somewhere in the global economy new supplies can be brought online.
What's scarce in a financialized economy is specialized knowledge of financial games such as tax avoidance, arbitrage, packaging collateralized debt obligations and so on.
Though the billionaires who have actually launched real-world businesses get the media attention--Bill Gates, Jeff Bezos, Steve Jobs, et al.--relatively few of the top 1/10th of 1% actually created a real-world business; most are owners of capital with annual incomes of $10 million to $100 million that are finance-generated.
This is only possible in a financialized economy in which finance has become increasingly detached from the real-world economy.
Those with the capital and skills to reap billions in profits from servicing and packaging student loan debt have no interest in whether the education being purchased with the loans has any utility to the indebted students, as their profits flow not from the real world but from the debt itself.
This is how we've ended up with an economy characterized by profound dysfunction in the real world of higher education, healthcare, etc., and immense fortunes being earned by a few at the top of the pyramid from the financialized games that have little to no connection to the real-world economy.
Anyone who thinks our toxic financial system is stable is delusional. If history is any guide (and recall that Human Nature hasn't changed in the 5,000 uears of recorded history), this sort of accelerating income/wealth/ power inequality is profoundly destabilizing--economically, politically and socially.
All the domestic headline crises--culture wars, opioid epidemic, etc.--are not causes of discord: they are symptoms of the inevitable consequences of a toxic financial system that has broken our economy, our system of governance and our society.


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Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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Sunday, August 13, 2017

Are We Already in Recession?

If we stop counting zombies, we're already in recession.
How shocked would you be if it was announced that the U.S. had just entered a recession, that is, a period in which gross domestic product (GDP) declines (when adjusted for inflation) for two or more quarters?
Would you really be surprised to discover that the eight-year long "recovery," the weakest on record, had finally rolled over into recession?
Anyone with even a passing acquaintance with the statistical pulse of the real-world economy knows the numbers are softening.
-- Auto/light truck sales: either down or off a cliff, depending on how much lipstick has been applied to the pig.
-- Restaurant/dining sales: down.
-- Tax receipts: down.
-- Retail sales: flat, stagnant or down, depending on the sector and if the numbers have been adjusted for inflation/loss of purchasing power.
-- Rents in high-rent regions: finally softening after years of relentless increases.
-- Consumer debt: hitting new highs.
-- Corporate profits: stripped of gimmickry, stagnant or down.
Those who study recessions know that employment often tops out just before the economy rolls over into recession. Strong employment is the last gasp of an expansionary phase.
There are several fundamental reasons why we might be in a recession that manages to avoid the official definition. The starting place is the artificial nature of the eight-year long "recovery" since 2009; in the view of many observers, the economy never really exited the 2008-09 recession.
Those in this camp look at fundamentals, not the stock market, which has been held up as a proxy for the real economy, when in fact it is only a proxy for financialization and official selection of the market as the (easily manipulated) signifier of economic vitality and prosperity.
Recessions are supposed to clear the financial deadwood--failed enterprises are liquidated, borrowers who are in default are bankrupted, and bad debt is wiped off the books via the acceptance of losses.
The story of the "recovery" 2009-2017 is that these clear-the-deadwood dynamics were suppressed. Rather than accept painful losses, the authorities saved bankrupt banks and encouraged a Zombie Economy in which zombie borrowers and enterprises are kept alive via low-cost loans and the masking of default via financial trickery: student loans that are non-performing, for example, aren't labeled "in default;" they're placed in a zombie category of forgiveness without actual writedowns of the debt.
If households can no longer afford to pay interest on new debt, the "solution" in a Zombie Economy is to offer them 0% loans. If corporations need to roll over debt, the Zombie Economy "solution" is the companies sell near-zero yield bonds to credulous investors.
If households can no longer afford to buy homes, the Zombie Economy "solution" is for federal agencies such as FHA to offer near-zero down payment mortgages and guarantee private lenders against any loss.
When these agencies get into trouble due to the horrendous costs of encouraging uncreditworthy borrowers to take on debt they can't afford, the "solution" is for the taxpayers to fund yet another $100 billion bail-out.
The stark reality is fulltime jobs, productivity and profits are all subpar. As I have noted many times, wages for the bottom 95% have gone nowhere since 2000 when adjusted for inflation. Households can no longer afford more debt unless it's at near-zero rates of interest.
Fulltime employment--the bedrock of consumer spending and borrowing--has barely moved in eight years. Part-time waiters can't afford to buy homes or new vehicles.
Wealth and income can only be generated in the real world by increases in productivity. Unfortunately for the "recovery" narrative, productivity is tanking.
Corporate profits are also going nowhere.
In essence, the "recovery" economy is a zombie economy living on great gulps of new debt that it can't service. As sales, profits and tax receipts weaken, eventually employment weakens, too, as employers trim costs by cutting positions, hours worked, etc.
Eventually, zombie borrowers give up trying to service unpayable debts, zombie companies close their doors, and the illusion of "growth" collapses in a heap of corrupted numbers and false signifiers.
The "recovery" game will shift to massaging GDP so it ekes out .1% "growth" every quarter until Doomsday. The Zombie Economy can be kept alive indefinitely--look at Japan--but it not a healthy or vibrant or equality-opportunity economy; it is a sick-unto-death economy of fake narratives (growth is permanent) and fake statistics (we've revised previous numbers so that, surprise, GDP is still positive.)
If we stop counting zombies, we're already in recession.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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