Tag: contradictions of capitalism

The Scorpion & the Frog

By Daniel Margrain

Image result for scorpion and the frog, pics

In the famous anti-capitalist fable, a scorpion, eager to get to the other side of a stream and unable to swim, pleads with a frog to allow him to ride on his back, across the stream.“Certainly not,” said the frog. “You would kill me.”

“Preposterous!,” replied the scorpion. “If I stung you, it would kill the both of us.”

Thus assured, the frog invited the scorpion to climb aboard, and halfway across, sure enough, the scorpion delivered the fatal sting.

“Now why did you do that,” said the frog, “you’ve killed us both.”

“I am a scorpion,” he replied, “this is what I do.”

A century ago, the Russian Nicolai Bukharin argued that the growth of international corporations and their close association with national states hollows-out parliaments. The power of private lobbying money draws power upwards into the executive and non-elected parts of the state dominated by corporations.

The growing concentration and internationalization of capital causes economic rivalries among firms to spill over national borders and to become geopolitical contests in which the combatants call on the support of their respective states. As professor Alex Callinicos put it:

“The… system embraces geopolitics as well as economics, and…the competitive processes….involve not merely the economic struggle for markets, but military and diplomatic rivalries among states.”

In refining Bukharin’s classical theory, Callinicos argues that capitalist imperialism is constituted by the intersection of economic and geopolitical competition which, if left unchallenged, will lead to the death of democracy and, ultimately, the capitalist system itself.

What corporations do is strive to maximize the returns on the investments of their shareholders. As Milton Friedman put it, “The social responsibility of business is to increase profits.” Unfortunately, if corporations are unconstrained by law or regulation, they can, by simply “doing what they do”, suck the life out of the economy that sustains them. Like cancer cells, lethal parasites, and the scorpion, unconstrained corporations can destroy their “hosts,” without which they cannot survive, much less flourish.

Society and the environment to the corporations and complicit actions of governments, is what the frog is to the scorpion. The CEOs of the giant corporations, together with governments, compete against each other, globally, for the limited resources of the planet. While the actions of the corporations are beneficial to their CEOs and shareholders, they have detrimental impacts for humanity and society as a whole.

Karl Marx

In his analysis of the capitalist system over a century-and-a half ago, Karl Marx in The Communist Manifesto articulated the processes that were to lead to the growth of the corporations: “The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere” he said. Marx describes, powerfully, the workings, impulses and aggressive dynamism of an economic system in which the units of production increase in size and where their ownership becomes increasingly concentrated.

It takes an effort on the reader’s part to remember that the passage quoted above was written before the search for oil absorbed the Middle East transforming it into a contemporary battlefield, or that globalization began stamping its mark on a thousand different cultures. The accuracy of Marx’s analysis exemplified in the exponential growth of the corporation in the century following his death, is a testament to his magnificent intellectual vigor and groundbreaking dialectical insight.

Where Marx’s analysis has yet to be realized is in terms of his expectation that the working class would become increasingly radical and ultimately revolutionary. What was impossible for him to predict was the emergence of broadcast media and, by extension, the capacity by which it has been able to disorientate the masses by redirecting revolutionary impulses into identity politics, passivity and leisure pursuits.

Also Marx’s analysis has not been borne out in terms of the extent to which workers have been coerced into an acceptance of capitalism by their economic dependence on employment and the repression of revolutionary movements that sought to overthrow the capitalist system. These workers have also been incorporated through their organizations into the political structures of capitalist societies, and are seduced by the flood of inexpensive imported goods often created by sweated labour, that capitalist production has provided.

As bad as the suffering is for many who endure poverty within the countries of the advanced capitalist states today, it is not sufficient enough in scale – as was the case in the 1930s, for example – to threaten the capitalist economic system. But although its true to say Marx’s expectation that oppressed and exploited workers would overthrow capitalism has not been borne out by events, this does not invalidate his analysis. Marx wasn’t deterministic. He viewed the working class from a position of what he perceived they were potentially capable of becoming in the right socioeconomic circumstances.

Contradictions of capitalism

In The Communist Manifesto, Marx describes capitalism at its beginnings as a revolutionary system, because it creates, for the first time in human history, the potential for liberation from want. Through the development of industrial production, it became possible for every human being to be fed, clothed and housed. But as Marx recognized, even in his time, capitalism would never achieve this society of plenty for all, because of the way production is organized, with the means of production controlled by a tiny minority of society – the ruling class – more widely known today as “the one per cent”.

Marx described the ruling class as a “band of warring brothers” in constant competition with each other – giving the system a relentless drive to expand. As Marx wrote in Capital: “Fanatically bent on making value expand itself, he (the capitalist) ruthlessly forces the human race to produce for production’s sake.” Capitalism’s insatiable drive, embodied in the growth of the corporation, has brought us in the 21st century to the edge of climate chaos and environmental destruction. This is the systems Achilles heel.

Marx’s dialectical understanding of how the capitalist system works, therefore, has contemporary relevance both in terms of explaining the growth of the corporation and its competitive drive to extract resources within the context of an environmentally finite planet. Left to it’s own devices, in the absence of any revolutionary struggle, the corporation, like the scorpion, will ultimately end up destroying its host – in the case of the former, humanity and society. In such a scenario, the contradictions of the system couldn’t be more stark.

Prisoner’s Dilemma, altruism & game theory

It should be noted that the frog/scorpion fable that is a metaphor for the propensity of capitalism to destroy the conditions upon which human life depends, does not portray a Prisoner’s DilemmaIn international political theory, the Prisoner’s Dilemma is often used to demonstrate the coherence of strategic realism, which holds that in international relations, all states (regardless of their internal policies or professed ideology), will act in their rational self-interest given international anarchy. A classic example is an arms race like the Cold War and similar conflicts.

During the Cold War the opposing alliances of NATO and the Warsaw Pact both had the choice to arm or disarm. From each side’s point of view, disarming whilst their opponent continued to arm would have led to military inferiority and possible annihilation. Conversely, arming whilst their opponent disarmed would have led to superiority. If both sides chose to arm, neither could afford to attack the other, but at the high cost of developing and maintaining a nuclear arsenal. If both sides chose to disarm, war would be avoided and there would be no costs.

In the frog/scorpion fable, the former had absolutely nothing to gain by carrying the scorpion to safety. From the perspective of the cynical outsider, the frog’s altruism is foolish because he would have lived had he not assisted the scorpion. Similarly, society, the environment and, indeed, the planet have nothing to gain by being accommodating to the corporation. To some, altruistic acts are consistent with the adage, “No good deed goes unpunished.”

But of course this cynical perspective is predicated on their being no mutual trust between two parties. Because the frog believed the scorpion when he said it was irrational to kill him, any intention to find a way to deflect earlier than the scorpion, hadn’t formed a part of the frogs reasoning. The frog’s actions were based purely on good faith and the acceptance of basic norms of behaviour. A rational approach in which both parties were set to benefit was understood by the frog to be a given. The frog hadn’t accounted for the fact that the scorpion was compelled to act in the way he did.

Similarly, corporate capitalists are compelled to ‘externalize’ environmental costs in order to maximize profits. It is the corporation, like the scorpion, that pulls humanity down. This kind of reasoning applies to other related areas. In the field of international relations, for example, the concept of the Responsibility to Protect (R2P) doctrine of ‘pre-emptive retaliation’, expresses nothing other than a strategy based on defecting early and decisively, even though such an action is highly irrational.

The rationale appears to be that any attempts at cooperative actions are, at some point, doomed to be beset by the actions that pertain to that of the scorpion. This presupposes that all potential and/or perceived foes act in a highly irrational manner akin to the pathological actions of psychopaths that lead to unnecessary harmful deflections instead of mutual cooperation that is beneficial to the greater good.

Game theory, on the other hand, does not really take scorpions into account. It holds that people will defect because the future has no shadow and it is in their best interest to do so. Game theory fails as a tool when we are dealing with sociopathology or extreme denial.

The human dilemma is that all progress ultimately fails or at least slides back, that anything once proven must be proven again a myriad of times; that there is nothing so well established that a fundamentalist (of any religious or political stripe) cannot be found to deny it, and suffer the consequences, and then deny that he suffered the consequences.

Theresa May’s authoritarianism and her insistence on putting the short-term narrow self-interests of her party above the wider interests of the country, reflect a psychopathy, narcissism and sense of entitlement. She seems compelled to want to bring society down on its knees in order to satisfy both her own and her parties vanity. Her propensity to fiddle while Rome burns, is comparable to the actions of the scorpion. The British public can only hope she is put out of her misery before sinking the country entirely.

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Real Truman Show: The Corporate Urban Vision

By Daniel Margrain

The Thames in Southwark with City Hall, where campaigners gathered to protest against privatisation of public spaces in London and throughout the UK.

 

The 1998 film, The Truman Show, directed by Peter Weir, presents a character, Truman Burbank, who unknowingly stars in a 30-year soap opera/reality show about his own life, under a giant dome whose boundaries are hidden from him. The show is broadcast to a global audience of billions.

The fake town Truman lives in, Seahaven, is populated by a massive number of actors playing real people. Seahaven’s creator, director, executive producer, and ‘God’, Christof, is convinced that the deception is benign, because Truman’s life in the synthetic town is far happier than anything he could find in the real world.

Truman has no idea he is living inside a television studio, surrounded by actors. Nor does he know that some 5,000 cameras placed around the town of Seahaven record his life for the TV audience, 24 hours a day non-stop without commercial interruption. The only way that Christof can make money is through product placements which are woven, at times clumsily, into dialogue and scenes that Truman is oblivious to.

As the film progresses, Truman begins to suspect that his entire life is part of an elaborate set. It’s at this point that the shows audience begin to root for him in his quest to uncover his fake existence and to escape from the confines of his virtual reality prison. The viewing audience are able to relate to Truman’s plight because they recognize that they too are trapped by similar forces that they need to be rescued from.

The film works as a satire because the community in which Truman lives his fake existence is very much tied into a corporate dominated world in which the notion of illusion and reality are often blurred. ‘Product placement’ and testimonials for this emerging system of entertainment-marketing capitalism are being seamlessly woven into our lives.

Truman’s quest for freedom can be interpreted as the aspiration for authenticity and meaning within a world in which the increasing commodification of all things is a feature of modern life. Was Weir on to something? Is the world in which Truman inhabits more than just a piece of science fiction allegory?

Molded into a desired pattern

Every institution provides the people who are members of it with a social role – that’s as true to the role played by say, the church, as it is to the corporation whose goal it is to maximize profit and market share. Capitalism could not function if it were not for the fact that individuals are disassociated from both the products of their labour and from one another. Just like the God figure, Christof, public relations and advertising industries facilitate the process of disassociation by molding people from a very early age into a desired pattern.

To achieve this, corporations don’t necessarily advertise products, but advertise a way of life and a narrative of who we are as people. The aim is to persuade the masses that the corporation is virtuous, responsible for the good life and the belief that the future can only be better than the present; that modernity itself means human improvement. However, the contradictions inherent to capitalism are such that progress is measured by the speed at which we destroy the conditions that sustain life. The function of corporate branding is to persuade us that the ideology of progress will offset the decline in societal and environmental well-being.

Disney Utopianism

Many corporations have already recreated their branded visions as three dimensional representations of real life with this aim in mind. A company like Disney, for example, have taken this logic to the next level by building a “town” in the image of their brand – Celebration Florida – which it describes as a unincorporated community of almost 8,000 people, situated on 11 square miles of carefully engineered Floridian swamp.” The brand image of Celebration Florida is a themed all-American family friendly privatized branded cocoon set within a bygone era – the real life Seahaven.

Given that relations mediated between human beings increasingly appear to be the function of the commercial world, could the Utopian Celebration Florida model become a commonplace vision elsewhere? Moreover, can civilization survive on this narrow definition of how humans interact with one another?

The real-life experiences many of us engage in on a day-to-day basis, embodied in atomized living and the increasing engagement with virtual reality and robotics, is arguably closer to the allegorical fantasy of the Truman Show than many people are perhaps prepared to admit. Just as Christof wove product placements into dialogue and scenes as part of Truman’s constructed reality, the same processes form part of the marketing tools available to professional marketeers who weave product-placements into our everyday real lives.

Product placement

Professional marketeer, Jonathan Ressler CEO of Big Fat Inc. concedes that “real life product placement is just that – placing stuff in movies but the movie is actually your life.” In other words, it’s already the case that people are being subliminally targeted with branding by undercover marketeers on a daily basis. Ressler elaborates on these themes in the documentary film, The Corporation.  He claims that the public are subject to an average of eight or nine subliminal marketing messages a day and they therefore effectively act as brand bait and soundbites of knowledge for corporations.

According to Ressler, it’s fine if the masses want to be critical by cynically challenging the motive behind every human exchange, but adds that if the corporations “show you something that fits and something that works that makes your life better in some way, who cares?…Just say, thanks!” The implication seems to be that if an uncritical and undemanding public are happy with the commercial ‘comforts’ that the corporation is able to provide them and their families with, then logically there is no reason for people to want to absolve themselves of these comforts.

Reassurance

Familiarity and reassurance appears in some way to be hard-wired into the human psyche. This probably explains why, for example, many people who travel or settle in foreign lands tend to congregate and surround themselves with others of similar linguistic and cultural backgrounds.The corporate marketeers are thus able to exploit this situation for their own commercial ends.

Just as Christof sought to discourage Truman from leaving his inauthentic existence in Seahaven by warning him of the dangers that exist in the real world compared to the life of safety constructed for him, so it is that Celebration Florida spokesperson, Andrea Finger, is able to promote a highly successful Disney brand predicated on the notion that it “speaks of reassurance, tradition and quality.”

There’s an interesting Truman site by Ken Sanes who says the Truman Show tells us that “if we want to be free and have a chance at an authentic life, we will have to distance ourselves from the safety and comforts of our media-saturated culture and be willing to live in the world as it is”. This brings into sharp focus the contesting nature of authenticity; of identity and representation and what constitutes democratic urban space and its relation to forms of state power. I discuss these issues in more detail here and here.

Authentic spaces or corporate landscapes of power?

More broadly, the public’s perception of what constitutes an authentic space is often tied to what use the state puts them to. The line between private and public spaces in which large parts of towns and cities have been hollowed out, is becoming increasingly blurred. London’s Canary Wharf, Olympic Park and the Broadgate development in the City, for example, are public places now governed by the rules of the corporations who own them. Other privatized public zones in Britain include Birmingham’s Brindley place, a significant canal-side development, and Princesshay in Exeter, described as a “shopping destination featuring over 60 shops set in a series of interconnecting open streets and squares”.

Ultimately, corporations are shaping elements from the landscape of cities and towns and re-packaging them under the banner ‘urban renaissance’ predicated on place promotion and development with culture, heritage and conspicuous consumption in mind. The real life Disney Celebration Florida model that literally could have been borrowed from the fictional Truman Show, represents the apex of this concept. In her book Landscapes of Power, Sharon Zukin quotes a Disneyland planner:

“We carefully program out all the negative, unwanted elements and program in the positive elements…Disney succeeded on the basis of this totalitarian image-making, projecting the collective desires of the powerless into a corporate landscape of power.”

Is this kind of privatized and sanitized Disney- Truman Show-type environment the kind of model for society we ought to be encouraging planners to move towards?

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All original material created for this site is ©Daniel Margrain. Posts may be shared, provided full attribution is given to Daniel Margrain and Road To Somewhere Else along with a link back to this site. Using any of my writing for a commercial purpose is not permitted without my express permission. Excerpts and links, including paraphrasing, may be used, provided that full and clear credit is given to Daniel Margrain and Road To Somewhere Else with appropriate and specific direction to the original content. Unless otherwise credited, all content is the site author’s. The right of Daniel Margrain to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.

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Why the travails of Apple are symptomatic of a much wider problem

By Daniel Margrain

In the wake of the democratic decision of the British people to exit from the EU, it would paradoxically appear to be highly probable that the UK government will give away the kind of sovereignty the ‘Brexiteers’ claim to covet by signing an unadulterated TTIP deal with the United States government. At a point in time in which the UK government appears set to extricate itself from the ‘bureaucratic and unaccountable’ EU, the multinational conglomerate Apple is availing itself of Ireland’s tax system, the most favourable national tax regime in Europe.

However, the European Commission ordered Apple to pay the Irish government £11bn of back-dated tax that it has avoided. The Irish Cabinet agreed to appeal the European Commission diktat. Irish PM, Enda Kenny, ordered his ministers back from their summer holidays after the European Commission accused Ireland of breaching state aid rules.

But Independent minister John Halligan initially said that the Irish government should take the cash owed by Apple in order to fund hospital services in his constituency before eventually agreeing to the decision to appeal the ruling. The European Commission alleges that Apple’s effective tax rate in 2014 was a mere 0.005 per cent which means that someone earning £30,000 a year at an equivalent rate would pay just £1 a year in tax.

Meanwhile, the reaction of the British government to the impasse, was not to support the EU in its noble endeavor, but rather to remain on the sidelines in the hope that the situation would play out to their advantage, thus providing them with a potential opportunity to entice Apple with a ‘sweetheart’ ‘investment’ deal. Meanwhile, as Alex Callinicos  pointed out “Apple is playing the EU and the US off against each other over which gets the taxes it hasn’t been paying.”

It’s precisely the logic that overrides these kinds of shenanigans that explains one of the reasons why wealth inequality continues to rise to stratospheric levels, and why governments are witnessing a backlash against globalization. Over the past 40 years, the productive capacity that capitalism has engendered, allied to the ability of successive governments to transfer assets and capital from the public to the private sphere, has created an enormous concentration of wealth at the very top of society.

Britain is a country where armies of lawyers and accountants sift through mountains of legal paper work in order to justify on a legal basis those at the very top paying as little tax as possible. This has happened as a result of the restructuring of rules and regulations which provide corporations with legal loopholes with which to jump through.

In the case of Apple, profits are funneled into a ‘stateless company’ with a head office which, according to EU Commissioner, Margrethe Vestager, “has no employees, premises or real activities.” In other words, Apple’s resident European office for tax purposes doesn’t exist. It has no staff and no location so it doesn’t pay any tax on most of the money it earns outside the United States.

Ireland has been told that it must claw back the £11 bn of back taxes from Apple even though Ireland’s ruling politicians say they don’t want it. This is money which could be spent for the benefit of an electorate who these politicians supposedly represent. Irish finance minister Michael Noonan intimated that individual states, not the EU, are responsible for individual taxation policies. “It’s an approach through the back door to try to influence tax policy through competition law.”, he said.

But what use is a tax policy if it is not intended to benefit human kind? If tax havens like Ireland behave in a way that negatively affects the well being of humans by reducing the resources available to fund services and infrastructure of which the functioning of civil society depends, then such a tax policy is not worth the paper it is written on. Does Ireland look like a country that doesn’t need £11 bn?

Apple’s billions worth of profits generated in Europe and the Middle East are transferred to Ireland where the company pays tax on just 50m euros worth. The rest is sent to their non-existent ‘virtual’ head office. As of 2015, the company’s lightly-taxed foreign cash off-shore mountain of $187bn is the biggest of any U.S multinational.

 

How can Apple defend this state of affairs whilst simultaneously maintaining the moral high ground by claiming that any attempt to prevent such an immoral situation will be bad for the societies in which they operate?

The activities of a virtually non-existent tax-paying company like Apple is already bad for these societies. The reason the masses, as opposed to companies like Apple, are subject to tax at a fixed rate, is because the former, unlike the latter, are not in the financial position to be able to avoid it. Those who are least able to pay taxes are the ones who have it deducted from their wages in full at source.

It’s not the overreaching arm of the EU ‘interfering’ with the tax laws of individual member states that’s the problem, but the fact that multinationals pit one country against another to avoid paying as much tax as possible while availing themselves of everything the rest of us pay for. The ‘race to the bottom’ is one in which corporations are constantly on the look-out to ‘up-sticks’ in the search for ever cheaper tax havens.

The end goal is a scenario in which the corporations pay no tax at all, while the masses pay for civil society because corporations like Apple, Google and Starbucks don’t have to. The upward spiral of money from the many to the few is increasing at a rate of knots due to a form of state-managed capitalism that perpetuates it. Moreover, it is happening to the detriment of the whole of the human race.

Widespread public anger towards this kind of systemic corruption is stymied daily as a result of the distractions associated with TV light entertainment and sports programmes. All this is aided by a largely uncritical corporate-based journalism. The ability of the rich and powerful to lobby governments in support of their own economic narrow interests, often to the detriment of the environment and society at large, exacerbates the problem.

Shortly before becoming the UKs unelected PM, Theresa May, intimated that the Tory government she would go on to lead would instigate greater transparency between government and big business and that she would no longer tolerate the undue influence of corporate power on domestic UK politics and the corruption through the power of lobbying that this implies. However, less than two months later, the Guardian revealed that a £3,150 payment to the government will buy business executives strategic marketplace influence.

The privileging of a tiny minority of the wealthy and corporations in this way, can be regarded as nothing less than the usurping of democracy. The mass of the working poor whose exploited labour creates the wealth from which the rich benefit and who often vote for corporate-funded politicians diametrically opposed to their own interests, is indicative of the propaganda power of a corporate and media-dominated political and economic system.

With a corporate tax rate levied at just 12.5 per cent, Ireland is effectively prostituting itself to Apple who can legally say that legally they are doing nothing legally wrong. The conventional argument goes that if Ireland failed to attract corporations like Apple, then it would be places like Belize, Bahamas or any of the British tax avoidance dependencies who would. But this zero-sum game means that while this situation is great for the CEOs of the corporations and their shareholders, it’s terrible for everybody else.

Because of the unfair competitive advantage the multinationals are able to lever, shops close, factories shut down and local businesses go under. Companies like Apple not only have governments on their side and can buy and manufacture on a vast scale, but they are not subject to the relatively higher rates of tax small businesses are forced to pay.

This situation is compounded by the fact that the typical consumer will tend to look for the cheapest goods and services available which, as a result of economies of scale, the big corporations will be most likely to provide. In such an eventuality, the role that corporations play in society becomes more prevalent at the expense of the small business.

The logical corollary to this is that eventually everything will be sold by a few giant multinational corporations who will come to dominate the marketplace resulting in less choice for the consumer, as well as its monopolization by private capital. This process was predicted by Marx who understood that capitalism was an inherently contradictory system.

In order to gain a competitive advantage over their rivals, capitalists either need to introduce mechanization to speed up the production process, reduce wages or replace their existing workforce with a cheaper one. Here’s where the contradiction comes in: If all capitalists are engaged in this process, their workers will have less and less money so they won’t be able to buy what the capitalists are producing to sell.

The capitalists, therefore, are effectively ‘creating their own gravediggers’ as a consequence of there being less demand in the economy. How has the system managed to have kept going when people don’t have money to buy things? The answer is the emergence and widespread availability of credit. However, the problems of capitalism are now so severe, so systemic, so global, that many people are wondering whether the system is coming to an end.