Posts Tagged With: capitalism

CAPITALISM’S CONTORTIONS

The best example of unbridled capitalism here in the U.S., has occurred within the last 10  years in the oil and gas industry, through a process of hydraulic fracturing, or better known as fracking. This process, which uses millions of gallon of water, and a huge array of chemicals, allows energy companies to drill horizontally into shale rock in a manner that releases vast amounts of oil and gas, previously thought to be unreachable. It has supposedly been a huge economic boon to energy giants such as Exxon, as well as to local economies where this type of shale rock is located. For example, North Dakota, previously known only for its cold and snow, found that huge deposits of shale subject to fracking lay beneath its frozen tundra. Hence, energy companies have made a mammoth investment in fracking these ND deposits. Tens of thousands of new jobs were created, as the unemployment rate in that state became virtually non-existent. The same held true for Texas which already had developed an enormous oil and gas industry. Many other states similarly cashed in on the action. With new, huge oil deposits being brought to the surface, the U.S. was able to significantly cut back on importing oil, especially from the volatile Mid-East. Hundreds of thousands of new jobs were created across the country. The price of gas at the filling stations dropped significantly, helping middle-class consumers. Sounds great, doesn’t it? Well, not quite.

Due to the vagaries of the way capitalism functions, serious problems soon started afflicting the oil and gas industry. Because of all this new oil that began flooding the market, the price per barrel, which was over a hundred dollars about 2-3 years ago, has now dropped to less than $50. While this sounds great for car owners, it’s not so great for Exxon and other oil companies, as well as oil exporters such as Saudi Arabia, Iran and Russia. Who cares, as long as I can get cheap gas at the pump, might be your first reaction. Well you should care, because as a result of this world-wide oil glut, thousands of workers who thought they had secure, well-paying jobs in the fracking industry, have suddenly found themselves unemployed. The oil industry has had to significantly reduce its oil exploration and development, laying off a ton of people. And its not just energy companies. By reducing oil extraction and exploration, less orders for heavy rigs, drilling equipment and other huge and expensive machinery have also occurred, causing the producers of such heavy metal to also cutback their payrolls in order to stem the tide of red ink. Adverse reactions from cheap oil have reverberated throughout the entire U.S. and Canadian economies. Under a capitalistic system, what’s good for the goose is apparently not always good for the gander.

While the world has always experienced capitalism to some degree, this form of economic wealth distribution didn’t swing into high gear until the industrial revolution of the 19th century. Huge industrial developers  realized that vast fortunes were to be made by exploiting low and middle-class workers in the energy, railroad and other industries, as well as in the banking and securities trading markets. Most of you are familiar with the term “coolie wages” denoting minuscule amounts paid to low-income workers. But how many know that the term dates back to the middle of the 19th century when people from China and India were imported into the U.S. to perform back-breaking labor for little or no pay. Labor that most Americans didn’t want anything to do with.

Chinese workers were first imported into the U.S.during the 1849 California gold rush. These “coolies” were often victims of thugs and bigots, and were relegated into the most menial of jobs for little or no pay. They lived in the most dismal of shantytowns and ate scraps of food left over by others. Their life-expectency was obviously quite short. In 1865, more Chinese immigrants were imported to help build the Central Pacific Railroad, and were required to perform back-breaking work from dawn to dusk, while earning the most paltry of livings. Far less than what white workers earned while putting in much fewer hours. One could say that our continental, coast-to-coast railroad system was built on the backs of such coolie labor. One could also say that the very cornerstone of our capitalistic system is built on a foundation of exploitation.

Of course, over the past century and a half, the rough edges of U.S. and European capitalistic societies have been considerably smoothened by government welfare, retirement and health care programs. Although there is still significant worker exploitation, those that can’t compete (such as artists, musicians, writers, etc.) or are too old to function under a competitive, labor-intensive, meritocracy demanded by capitalism are often provided for by their government, at least to some extent. More so in Europe than the U.S., however. Those that advocate for capitalism point out that the alternative, i.e. socialism, has been a huge failure wherever its been tried. That’s true for the old USSR, Cuba, North Korea and a few other places. But the Scandinavian countries such as Norway, Sweden, Denmark and Finland have incorporated much socialism into their economic operations, and seem to thrive quite well. My own belief is that socialism requires people to work for the greater good; and that humans have not yet evolved to that point. They will work for themselves and their families, but not for the greater good. That will require about a few thousand more years of human evolution.

Winston Churchill once said that democracy is the worst form of government, except for every other that’s ever been tried. Substitute the word capitalism in place of democracy, and you’ve about hit the nail on the head.

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CAPITALISM’S CASUALTIES

I haven’t writing for awhile, mainly because of doctors appointments, (that senior thing again) and going away for the Thanksgiving Day thingy. Now all that is past, so I thought I would write about one of my favorite topics, as the title explains. It should be a quick and easy read, however. As Elizabeth Taylor said to each of her 7 husbands – I won’t keep you long.

The subject is capitalism, which every single person is involved with, whether they like it or not. Or more explicitly, those that have been victims to the many downsides of capitalism. Capitalism, as we know it today, was kicked into hi-gear by what historians refer to as the Industrial Revolution; which is generally accepted to have taken place from the mid-18th century thru the mid-19th century. Although, of course, the Industrial Revolution has been ever on-going. The latest manifestation, for about the last 30 years, has been in the electronics industry with the proliferation of home and business computers, I-Pods, tablets, and, of course, the latest consumer craze – grossly overpriced cell phones.

To set the mood, picture that since the beginning of time until late into the 1700s, the societies of most of Europe and North America were rooted in agriculture. Farming was the primary industry throughout both continents. Farmers would grow their own food, and what was considered excess would be sold in local markets. Whatever manufacturing that existed at the time, such as the production of clothing, tools, furniture, and horse drawn carriages, etc., were often made in people’s homes or small workshops. But the Industrial Revolution remarkably and dramatically changed all that. It started in England, where a previously manual labor-based economy transitioned into a machine and factory-based type of mechanization. It then spread to North America with the mechanization and factory creation of the textile industries, the development of iron-making techniques and subsequently steel, and the increased development and use of refined coal. Trade expansion was dramatically increased through the introduction of canals, improved roadways, and, of course, railroads. The development of all metal machine tools in the early 1800s facilitated the manufacture of more production machinery in an ever increasing proliferation of factories. Production of goods began shifting from a manual labor-based effort, to that of factory machinery- driven assembly lines. The world began changing in profound ways.

The Industrial Revolution marked a major turning point in human history. The cost of producing those products that were on the market at that time dropped significantly with the introduction of factory mechanization. People who had known nothing farming all their lives began moving off  farms and into cities where most factories were located. As small as pay scales were for factory workers at the time, they were still better than eking out a meager and back-breaking existence by continually tilling the land. In fact, average income began to experience unprecedented sustained growth. In the two centuries following 1800, the world’s per capita income increased over 10-fold from where it had been from the previous 10,000 years. As Nobel Prize winner Robert Lucas wrote: “For the first time in history, the living standards for the masses of ordinary people began to undergo sustained growth. Nothing like this economic behavior has happened before.”

That’s the good part of capitalism. Now for the bad. The fundamental cornerstone of capitalism is based on a few people with extraordinary talent exploiting the masses that don’t have similar talents. Exploitation is the very foundation of capitalism. For example, in the 19th century, a guy named John D. Rockefeller came to understand that energy was the very lifeblood of the Industrial Revolution. He further came to know that oil could be a relatively cheap and plentiful source of energy to fuel factories and homes. The rest, as they say, is history. He founded a giant oil discovery and refining empire starting with Standard Oil, and made billions (in today’s money.) While his employees who often put their lives on the line drilling for or refining oil, earned chump change. Same with Andrew Carnegie. To be fair, though, both John D. and Andrew, in later life, set up charitable trusts and started giving away their money almost as fast as they made it.

Other bad examples abound and are too numerous to list them all. For instance, sweat shops sprung up like weeds where textiles were manufactured. They employed mostly women, who had to slave over sewing machines, in the most narrow confines of non-ventilated of spaces. Since the air on these factory floors was both stale and hot, they weren’t called sweat shops for nothing. Children were often employed in these sweat shops, as young as six. It wasn’t until Teddy Roosevelt became President in the early 1900s, that Congress finally passed legislation prohibiting the employment in these sweat shops of anyone under the ripe old age of 14. Since safety regulations were non-existent back then, it was not uncommon for fires to break out in these sweat shops killing many workers. Or how about coolie wages, which I assume most of you have heard of. Coolie wages got it’s name from what workers who built transcontinental rail lines in the 19th century were paid. Most of these workers were immigrants from Asia (mostly Chinese) and were paid little more than slop that was passed off as food and sleeping quarters, for their back-breaking labors. Needless to say, life expectancy among the working class did not extend into longevity.

The institution of slavery, particularly in the South, and in the British territories was based on obtaining the cheapest of labor costs, a fundamental principle of capitalism. The picking and manufacture of cotton was the prime industry of the American south, and slavery offered plantation owners the lowest possible labor costs. That’s why it took a bloody civil war to get rid of it. In today’s world, much, of course, has greatly improved in terms of wages and working conditions for virtually all workers. But millions of what would be well paying jobs in the U.S. have been shipped overseas where labor is far cheaper, in accordance with the rules of capitalism. That’s why the American economy is limping along with high unemployment. Average per capita income has steadily headed downward for middle-class families for the last 30 years, not only here, but in most of Europe as well. Perhaps the leaks in capitalism’s well-crafted dike have sprung into gushers.

Well, I’ve kept you longer than I intended, but I would like to mention one other thing. The new catholic pope, Francis, very recently came out with a paper critical of capitalism. He specifically mentioned “trickle-down economics” as being particularly injurious to the poor. Or to those who, for whatever reason, cannot function well in a capitalist society. And here, all along, I thought trickle-down economics was the cornerstone of the Republican Party’s platform.

 

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LIVING ON $7.25 AN HOUR

Back almost a century ago, Henry Ford had established the assembly-line method of production for his Model T-Fords, which sold for $500 apiece. (He had famously quipped that the buyer could acquire his cars in any color they wanted….as long as it was black.) Then in1914, Ford decided that that it was a smart and profitable move to pay his assembly-line workers a “living wage,” which was all of $5 per day. Until then, his plant workers were earning slightly more than half that. (It also says reams about the erosion of the dollar’s buying power, if a century ago one could lead a lower middle class life-style by earning $5 a day.) Ford also reduced the normal work day from a 9 to 8 hour shift. Columnists speculated that that Ford’s motive was to put more money into his workers pockets so they could buy more of his cars. But there was much more to it than that. By nearly doubling his worker’s salaries, and creating better working conditions, Ford created a fierce loyalty among his assembly-line employees. This resulted in far less turn-over, which, in turn, resulted in far less recruiting, hiring and re-training costs. In the end Ford made a bundle by treating his employees with a greater degree of decency than other similar employers at the time.

All this came to mind because of recent discussions about paying low-end workers a living wage, which some estimate to be about $15 an hour in this day and age.  As we all know, the current federally mandated minimum-wage is $7.25 an hour. It was last raised in 2009, and don’t look for the current highly dysfunctional and polarized Congress to be increasing it anytime soon. So, at $7.25 an hour, if one is lucky enough to have obtained a 40 hour a-week job, one would thus earn the magnificent sum of $290 a week.  Before deductions, which would likely bring it down to about $250 a week. So, do you think you can live on about 1000 bucks a month. That would have to pay your rent and utilities, and maybe put some food on the table. You would also need money for transportation and an article or two of clothing, since garments tend not to last forever. And maybe even cable, and a cell phone. Of course, this assumes that a 40-hour a week job is obtainable, which is becoming less and less likely, since companies are turning more and more, with the speed of light, to part-time employment. This is so they can avoid paying their employees health care benefit costs, or heavens forbid, comply with Obamacare mandates.

So if you tend to be toward the low end of the totem pole, employment-wise, and are having trouble meeting you monthly bills, maybe you can turn to Robert Iger  for some financial assistance. Perhaps, if you ask nicely, he would help you out with some short-term loans. After all, he’s pretty well-off, financially. You see, Robert Iger is the CEO of Walt Disney-the company that produces all those cutesy cartoon movies. As head of Disney, he’s pulling down a mere $37 million a year. Think he can afford to throw a few shekels your way? If not, you can always turn to Mark Parker, who’s the CEO of Nike. He’s only making $35 million a year, so he may be more reluctant to fork over some cash to help out with your monthly bills. Of course, all this is small potatoes compared to the $96 million a year that Larry Ellison is compensated for as head of Oracle, the computer hardware and software giant.  I wouldn’t, however, factor into your monthly budget, any hope of obtaining financial assistance from any of these CEOs. Because the larger question is whether any corporate executive, no matter how productive they may be, is worth tens of millions a year in compensation. Especially when many of their workers are likely struggling financially because they’re in low-paying jobs.  Such are the inequities of our capitalist system, however. So when people talk about paying a “living wage” these days, of maybe $15 an hour, such actions could result in these multi-millionaire CEOs of having to shave a few million off their yearly compensations. Perish the thought.

Also on this Labor Day, one has to consider the job situation in this country, or to be more precise, the lack-of-jobs situation. Political foes of this Administration readily point out the high unemployment rate that currently exists, after nearly 5 years of Obama being in the presidency. And the rate is high, standing at 7.4% with about 11.5 million workers that are seeking jobs being unemployed. But there are other factors at play in our capitalistic society. Large American, multi-national corporations currently employ about 21 million workers in the U.S. but have shipped about 10.3 million jobs overseas, where, of course, labor is much cheaper.  Apple, for example, whose products like the IPhone are so enamored by so many people, has shipped thousands of jobs to China, where many of these IPhones are manufactured. After all, if a widget costs $5 to produce in this country, but only 75 cents in Bangladesh, why not set up a factory over there. If just half the jobs that American manufacturers shipped to foreign countries were brought back here, the unemployment rate would be so low that people would be dancing in the streets. Think such an event can occur, given the rules and mandates of our capitalist society?

So let’s raise a bottle of beer to all you minimum wage earners struggling to make ends meet. After all, some states mandate a minimum wage higher than $7.25 an hour. In California it’s $8, while Washington state has the highest minimum wage at $9.19. Of course, Georgia is still stuck in a 1950s time warp at $5.15 an hour. Perhaps, however, some capitalist along the way might come up with the idea that paying his employees a truly living wage is not only a matter of common decency, it can also be highly profitable. The way Henry Ford figured it out a century ago.

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