Capitalism IS A Zero Sum Game - It's Time Its Apologists Understand That

Despite Bernie Sanders' campaign bringing some degree of enlightenment to the 2016 presidential race (by making it okay to criticize capitalism), much more needs to be done. That includes holding its sundry apologists to account for the loose thinking, and false logic they consistently display.. One such case emerged in the August 15th issue of The Economist in a review of John Plender's book: Capitalism: Money, Morals and Markets.

The anonymous reviewer observed how "capitalism lacks defenders while protests against it have fresh vigor" forgetting that most of those protests have not occurred in the mainstream media but in the marginal media or blogs, as well as on the streets. Hence, it's debatable how much of an impression has been made.

What we can say is that when an illustrious person like Pope Francis speaks out on capitalism's ills, or a Thomas Piketty (in his books) then it's more likely the mainstream news takes note - but more often than not criticizes the critics for their short sightedness. Thus, in the review of Plender's book do we see a faint damning of ancient critics like Socrates who "declared that the more men think of making money, the less they think of virtue."

Which is probably true for most humans, just look at the tallies of those who win giant Powerball jackpots then blow them on booze, drugs, unwise gambling or unwise investments (often in the same category as the previous one).  Money -sighted people then, as I've often found, are basically two dimensional operating on the existential axes of time vs. money and seldom express an original thought outside this reference frame,

Gordon Gekko, of 'Wall Street'  movie fame,  may be something of a caricature but his basic persona is often replicated in many of the Street's money men (bond traders, investment bankers - once referred to as "big swinging dicks" by one of them in a FORTUNE piece, or plain old stock brokers.)   Their failure in morals then, if it transpires, usually occurs by virtue of a failed larger vision or perspective. One that transcends their yearly bonus and where they will spend their grand vacation or how - killing protected lions in Zimbabwe, or going on a week -long million dollar golf binge at a St. Kitts resort, while their wives enjoy $250k each rose and wine wraps - with or without cucumbers.

Usually, the defenders of these guys just plain fail to see the vast harm of which they are capable. Consider just the credit meltdown and freeze of 2007-08. How many attribute the cause to the correct source? Very few! Usually the lazy media (often right wing) blames it on poor dopes who had maybe $100 in an account but were offered sub-prime mortgages by unscrupulous scheisters (such as depicted in the film, 'The Big Short'. Based on the excellent book by Michael Lewis).

Seldom (either) do they look at the pseudo-intellectuals or “quants” that helped develop the Gaussian Copula formula (see embedded graphic at top) who were quite confident that when they applied it to the development of credit default swaps (a bastardized form of credit derivative)  they’d be virtually home free. On account of the lingo used and the complex nature of the underlying formula – few ordinary mortals would figure them out before it was too late.

To refresh memories, these nasty devices were geared to enable commercial banks (the ones that hold your passbook savings) to leverage their assets to preposterous ratios, sometimes as high as 33:1.  In other words, their generation of profits would largely be based on phantom money – since they lacked the reserves to make good if the bets (which is what the credit defaults swaps were) failed. In the meantime, the Gaussian formula itself allowed the credit derivatives to be sliced and diced numerous ways to package them throughout ordinary securities such as collateralized mortgage obligations.  The failure of the credit agencies themselves to be onto the junk bond nature of CMOs and allowing the presence of one fraction of ‘AAA’ bonds in each – then designating the whole AAA - led directly to the collapse of the credit markets in 2008.

 Since then  it’s become ever more evident why elite economics is a failure and can’t even be regarded as a science like Physics, or even in a “pre-scientific phase” . If it had then the main practitioners of the dismal science ought to have been able to predict the effect of their CDS on a vulnerable home debt market. They didn't.

 In the case of the Gaussian copula, invented by David X. Li  -  while working at JP Morgan Chase and articulated in his (2000) paper: ‘On Default Correlation: A Copula Function Approach”  -  it wasn't even a true mathematically sound equation analogous to those used in physics or celestial mechanics.. It was more an intellectual Frankenstein monster that never should have seen the light of day any more than a four-headed baby with a pointed tail. For example, Li's misuse of the distribution functions (F_A(1)) and (F_B(1)) would appall any genuine mathematician or physicist. Each is actually based upon significant uncertainties via survival law distributions which can vary enormously. There is no way to normalize any probability based on (T_A, T_B so there is no way to equate Pr[T_A, T_B] to anything on the left side. The equal sign is dangerous recklessness masquerading as math. Did the illustrious economists or "quants" know any of this when they cranked out credit default swaps? Or assigned the bonds in which they were buried AAA ratings? The evidence of failure to predict the 2008 credit crash shows they didn't.

 

All of which supports Chris Hedges’ condemnation of these mental zombots, i.e. p. 98, The Empire of Illusion:

“They cannot grasp that truth is often relative. They base their decisions on established beliefs such as the primacy of an unregulated market or globalization, which are accepted as absolutes.”

 

In other words, these money men and derivative inventors inhabit a self-confected, solipsist world of illusion devoid of critical empirical testing or critical thought. I mean, Jeez, if any one of these so-called geniuses would have just taken the time to understand WHAT he was doing in applying the Gaussian Copula to credit derivatives he’d likely have seen it was the equivalent of a physicist taking a tiny piece of special relativity and trying to inject it into areas that had no relevance because the primary criterion (speeds near c, the speed of light) were not being  met.

But see, at least physics has and uses empirical testing before advancing – so the odds are less that physicists will make asses of themselves. Not so with these economic, political elites.   Unlike astronomers,  who can accurately predict the position of Jupiter or Mars in 2050 or the next lunar eclipse or occultation of a star, the economists can't even predict simple stuff in their immediate domain - say like forecasting the growth would be 3.2 % in 2011 when it was only 1.7%

 

Remarkably, Plender is aware of the cost of high finance on capitalism's rep and this is pointed ou by the reviewer (p. 75):

 

"It's not just that few people can see the benefits of complex financial products like credit default swaps. He adds that 'bankers have undoubtedly done their best to give capitalism a bad name. The extraordinary scale on which big banks have been rigging interest rates and foreign exchange markets and ripping off their customers is almost beyond comprehension."

 

Fair enough, but it still doesn't let the system itself off the hook, which breeds these tactics and the money men who use them.  This leads to a blindness about perceptions of capitalism.

 

For example, the reviewer's claim - echoing Plender- that the financial crisis was the latest example of "the inherent stability of capitalism", i.e. "allowing it to benefit from creative destruction". In fact, the financial crisis was just the opposite, a glaring example of capitalism's instability.  We actually came within a hair's breadth of another Depression and only barely escaped because the political system and party in control at the time was enabled by votes to use taxpayer money (nearly $897b) to bail the system out and interject liquidity.

 

In the same manner, if a series of nuclear reactors were to "nearly melt down" - governed by the same computerized control algorithms - one would not argue or assert the "system is stable" or "shows stability".  But no one - after all the taxpayer money was spent - came after the clowns that nearly wrecked the financial system, leaving it open to future predations.

Why do we keep paying attention to these clowns? Just because they have Harvard, or Cambridge or Stanford or whatever degrees after their names? Mainly, yes – and also because the politicos who achieve high office tend to install them in their cabinets so instead of being relegated to some corner office behind the walls of ivy, they have the ear of Presidents and Prime Ministers. These clowns can then help determine national policy which is usually to the detriment of the rest of us.

At root of it all, which none of them or the bought out media will tell you, is that the trillions of bucks circulating in the capitalist markets represents  FORCE. A force that can crush opponents underfoot, including presidential campaign opponents who dare to bring its nefarious consequences (to our electoral system) to light.

They also don't want too much exposed because they know deep down as capitalism ramps up it generates millions of losers a year, not to mention destroys what's left of our natural environment. As Naomi Klein has pointed out, it's no coincidence that a capitalism has spread and consumerism reached exponential levels, the planet's atmosphere has been laid waste to via the Greenhouse effect.

The Economist reviewer's claim then that (ibid.):

"For all its faults capitalism has raised the living standards of billions of people since the 18th century and improved their life expectancy"

Is only a half truth, since it ignores the other side: that this enhancement of living standards and life expectancy has come at the cost of the planet as a habitable future abode. These long lived consumers (no longer seen as citizens) now plunder the planet to the tune of the equivalent of 1.5 Earths' worth of finite resources per year. They are driven by capitalist-based advertising to do so, as it generates ever more 'wants' as opposed to fulfilling actual needs. Thus, every manjack has to have his own car to drive and pollute  with CO2. Every unused computer or 'Barbie' tossed into the landfill - along with soiled diapers and plastic bags - creates ever more waste and hazards.

It is no surprise that pollution and cancers have reached a peak now as ever newer weedicides and pesticides have to be created - not to mention GMO crops - to feed a growing population in which food sources must keep up with numbers.

But the other perverse aspect is that capitalists love overpopulation because it means - n their minds- vast "markets" of global consumers to buy their ever larger quotas of crap, that ever lowers Earth's store of non-renewable resources.

Perhaps no one has better explained the connection of global warming, especially, to capitalism, than Naomi Klein. Readers who are interested should get hold of her book, This Changes Everything: Capitalism Vs. Climate Change.  Basically, as Klein argues, capitalism is unable to affect or alter  the course of climate change due to its dependence on fossil fuels and need for continuous growth. Also,  the time for marginal fixes has expired, thus forcing us to now make radical changes in how we live.

 We simply don't have the luxury of using all the carbon that lies in the Earth. Yet capitalism's never ending growth engine would demand we do so to support the expansion of new markets for exploitation and wanton consumption.  Failing to note that the more we take from the Earth the less real wealth we have left: a zero sum game.

A Church Rolling in Wealth - But Out of Touch With the Faithful?

It was during one of my Religion classes at Monsignor Pace High that I once more made Brother Stephen squirm with a question he wasn't expecting.  This had been in the context of the role of the laity in the Church and the economic problems often experienced, and reconciling this with the evident wealth at the Vatican. Anyway, my question to Bro. Stephen was: "How much do you estimate the net worth of the Catholic Church to be?"

Dumbfounded, he had to reflect for several moments as he placed a hand on his chin and you could almost see his computer-like brain doing the math. Then he replied:

"I would venture a guess at maybe several trillion dollars in today's currency but it could be more."

He was perhaps more than a little accurate, especially when - nearly 20 years later- all the scandals erupted at the Vatican Bank and many further details became known. (This was around the time "God's Banker" - Roberto Calvi - was found hanging under Blackfriar's  Bridge, London.)

The point here is that like a rotting fungus, the Church's immense wealth always lurks in the background of whatever other actions it takes, or doctrines it proclaims - especially via its Bishops. To the cynic, which I make no bones about being, there is the natural suspicion that the Church's legions of sexual mores are constantly pushed in order to protect its wealth. If the minds of the faithful can be kept focused on their shortcomings,  mainly sexual "sins" and failures - they won't be so preoccupied with the Church's enormous riches and what it's doing with them.

Consider as 'Exhibit A' the U.S. Conference of Catholic Bishops annual meeting in Baltimore. Now
look at the agenda items addressed to see where its priorities lay.  In this venue the bishops of the richest, most powerful (and increasingly unequal)  nation in the world, convened in a city wracked by generational poverty, and talked about pornography, contraception and gay marriage-   while incidentally addressing questions of minor liturgical importance. Poverty was not on the agenda. Why not?

Did they not pay attention to Francis earlier condemnation of economic inequality? See e.g. http://brane-space.blogspot.com/2013/11/bravo-to-pope-francis-for-warning-of.html

Did they not hear or process his warnings concerning trickle down nonsense integrated into modern Neoliberal capitalism? Or, could it be that once more they are confirming my suspicions of distracting attention from wealth-poverty-inequality  issues to belabor the faithful with pseudo-moral nonsense (compared to the major moral transgressions inherent in economic inequality)?

But a bit of history is useful. As brilliant and timely as Francis' message, it wasn't really original. In fact, this November marked the 27th anniversary of Economic Justice for All, a groundbreaking pastoral letter that condemned American poverty as a national moral scandal. Seen as a refutation of Reaganomics, the document received substantial media attention - along with severe conservative criticism-  when it was released in 1986.  The construction of the letter was remarkably democratic; economists and theologians were enlisted, drafts were released to the public.


A month later, the bishops of Maryland, the cradle of the Catholic Church in America, met at a soup kitchen in Baltimore to release a statewide plan intended to put its recommendations into effect. Tragically, Economic Justice for All proved one of the last pieces of social justice teaching of its kind.  At that time the Gini coefficient, a measure of economic inequality, was at about 0.37, compared to 0.49 now.

Concerned by its influence, and worried that “national churches,” or conflicting pieces of teaching, might develop if other conferences were left unchecked, the Vatican clamped down and clipped the conferences’ wings. By the 1990s, they could no longer publish pastoral letters that held “teaching authority” without near unanimity. From then on, things started to change around the bishop’s conference. More and more doctrinally conservative bishops were being appointed. The culture wars were raging. Then the sexual abuse crisis hit, and hit again, and the wagons circled.

By 1996, meanwhile, genuine liberals had embraced the message implicit in Charles Reich's Opposing the System, regarding the unfettered reign of coercive markets. As Reich put it. p. 22:

---

A free market produces results that favor the health of society as a whole, because an essential balance is maintained. But in a coercive market, the balance is destroyed, the earning power of work and the standard of living of workers declines, and society as a whole is devastated while those with economic power gain an ever more unbalanced share of the nation's economic wealth.

And nailing the consequences some pages later (p. 103):

When society itself comes to be modeled on economic and organizational principles, all of the forces that bind people together are torn apart in the struggle for survival.

Community is destroyed because we are no longer 'in this together' because everyone is a threat to everyone else

Indeed, an atmosphere of pervasive conflict encourages every form of racial, religious and class hatred as group is pitted against group; it encourages violence and crime and strips people of kindness and compassion as these qualities become disadvantageous in an ever more warlike atmosphere.

Reich went on to show that it is economics upon which much of modern morality pivots. When people therefore must fight over a few scraps to keep their family together, they often are also more likely to turn to crime, prostitution, drugs, the whole nine yards. Economic health begets moral health, in other words. (Not the other way around, as proto-Calvinist capitalists like Charles Murray, Bill O'Reilly and others claim).


Meanwhile, the Catholic Bishops grew more and more out of touch with the economic woes which have now reached a crisis point with 48 million people on food stamps, nearly 27 million under-employed or unemployed and a minimum wage that is nearly THREE whole dollars LESS than it was in 1968, in terms of 1968 dollars.  Imagine then if the bishops had flexed just half as much muscle for certain “liberal” causes, equally deserving of Catholic concern, as they did for pet “conservative” ones. Imagine if they spent one tenth the time on economic inequality and the toxins of Neoliberal market worship - as they have on porn, or contraception.

It is not difficult to see if they had, a powerful moral voice for systemic economic change might have arisen. A voice of ecclesiastical authority supporting the Occupy Wall Street movement, for example, which might have protected that movement from being literally under the guns of the national security state. But the Bishops, flustered at the  sex abuse charges - were too preoccupied shuttling priestly pedophiles back and forth between parishes at the behest of Ratzinger and John Paul II.

More recently, the U.S. Council of Catholic Bishops has gone 'over the top' to display a disgusting economic conservative agenda in league with a backward morality on other issues. In 2010 they opposed the Affordable Healthcare Act, arguing that it might conceivably lead to federal funds for abortions. The year after that, in 2011, Paul Ryan’s budget came out, cutting $3 trillion from programs for the poor. Then-Chair of the Conference of Bishops, Timothy Dolan, sent a public letter to Ryan that many of us thought gave him cover for his budget. In other words, Dolan was aiding and abetting the further destruction of the poor.


Some might quarrel and believe this take is offensive and unjust, but they have pitifully short memories.  In the 2012 election cycle, Dolan went further, referring to Ryan as “a great public servant.” Prior to the election year, the Council of Catholic Bishops unanimously voted to declare religious freedom its 2012 strategic priority. In June of 2012 and 2013, periods of prayer dubbed the “Fortnight for Freedom” were held in response to perceived threats to religious liberty. Ah yes, "freedom and religious liberty" - perfect buzzwords for an agenda which, when translated, comes out: "FUCK the poor!"

Of course, the Neoliberal political atmosphere in this country didn't help matters, with so much media attention paid to the Obama "Deficit Committee" starring Alan Simpson and Ernest Bowles. Both were insistent on cutting Social Security and Medicare. While this committee may be moribund, its awful recommendations remain including a "chained CPI".  At the same time, the market worshippers have insisted there can be no increase in the minimum wage, and the Repukes have proposed $40 b in cuts to food stamps over ten years, while the Dems (who always choose the less offensive tactic) want $4b in cuts.  All this after the SNAP program was already cut by the sequester.

Can the Bishops still become changelings? Maybe, and perhaps also space aliens will finally land in D.C. and reveal their existence once and for all. What we do know, is that in June, a report was released detailing the emergence of a “small, but well-funded network” of conservative, Tea-party-like Catholic organizations pressuring bishops to gut the funds of community and anti-poverty organizations with any remote involvement to groups supporting same-sex marriage. Last year, meanwhile, a document entitled Work, Poverty and a Broken Economy, was scuttled when 85 bishops voted against it. 

Do these Bishops care more about the 16 million kids now going to bed hungry each night because of food stamp cuts, or more about the "evils of pornography"?

You be the judge!