To do More With Less

ABC News and Current Affairs has a proud tradition of excellence and impartiality in journalism.

That's why I am loath to criticise that organization. However, I regret to say that their reporting quality seems to have fallen dramatically.

In these pages I have already commented on occasions where the reporting was less than stellar (see here and here).

Again, I'm forced to comment on a quite deficient report: last Monday (29-08-2011) 7:30 segment entitled "Industry Calls for Fair Work Review", by Hayden Cooper.

The segment was introduced by Chris Uhlmann thus:

"Pressure's growing on the Federal Government for a review of the nation's workplace laws. Businesses of all sizes, industry bodies and economists have told 7.30 the system lacks flexibility and they fear Julia Gillard's re-regulation of the industrial landscape could cause serious problems in another downturn. As Hayden Cooper reports, the Reserve Bank governor says he's getting the same message."

During the segment, Mr. Cooper talks, among others, to workers from an unnamed tea house in Canberra, to Scott Norris (general manager of Norris Cleaning Company Pty Ltd), Steve Knott (Mines and Metals Association) and Chris Evans (Workplace Relations minister). I'll limit my observations mainly to Mr. Norris and to the tea house workers.

It's interesting that of all business managers in Australia, Mr. Cooper chose to talk precisely to Mr. Norris.

Don't get me wrong: Mr. Norris' opinions are as valuable as anyone else's. However, I would have thought that a long time supporter's view of Work Choices and opponent of Fair Work and would be biased... against Fair Work. But what do I know about journalism, right?

Had Mr. Cooper or his production team done something as simple as a Google search (see here) they surely would not have failed to notice the first item returned by that search was the 2007 submission (PDF format document housed by the ACT Parliament) Mr. Norris issued to the Select Committee on Working Families in the ACT in Relation to the Workplace Amendment (Work Choices) Bill 2005.

Now, if Mr. Cooper or his production team were too busy to do a Google search, it seems excessive to expect of them to actually read the submission, where Mr. Norris candidly admits not only his opposition to amendments to the WorkChoice legislation, but also to having problems with the LHMU (union currently known as United Voice, covering cleaners, among other workers) for the union's "abusive" initiative to promote a Code of Best Practice among employers and endorsement of those employers who do sign the Code:

"Over the past few years, I have found the LHMU to be more and more unapproachable, and they have made it clear that they intend to make life very difficult for companies such as ours who refuse to sign their 'Code of Best Practice' document."

But even if Mr. Cooper had known about Mr. Norris' submission, or the LHMU, would he have reported that United Voices still promotes a campaign called Clean Start? By the way the Clean Start's objectives don't seem to me to make life difficult for companies like Mr. Norris':

"Cleaners are committed to quality cleaning in order to provide a safe and pleasant environment for Australian families. However, many of us have no job security, have experienced or witnessed harassment and sometimes do not receive our proper salaries. We therefore support the Clean Start campaign as the way to improve our industry nationally and meet the high standards that are expected of our work. We deserve better."

Incidentally, given Mr. Cooper's question to Mr. Evans (Workplace Relations minister):

"Hayden Cooper: But is it [my comment: Fair Work Act] fulfilling the promise? The current Workplace minister believes it is. [my comment: Mr. Cooper asking now the minister] Do you concede that your workplace relations laws are causing real distress for many small businesses?"

The viewers are left to wonder if Mr. Cooper considers a company that employs "140 people at his four decade-old cleaning business" a small business, when even under the much more "flexible" provisions of WorkChoices a small business was defined as one employing at most 100 people.

But let's leave the cleaning contractor aside.

Mr. Cooper opened his report by representing how busy the tea house young ladies were:

"Hayden Cooper: But for the workers, it's busier than it used to be. This business was set up when there were no penalty rates on the weekend. Now, there are. And meeting the extra cost means something has got to give and the staff are doing more with less.
"Justine Lejano, employee: There has been, like, kind of a noticeable change in how many people are working and we've had to, like, cut back on the longer shifts and less people working, which has been a bit of a struggle 'cause, as you can tell, it gets kind of busy. So, it's a bit hard.
"Hayden Cooper: It's a story that's repeated in small and large businesses right across the country, as employers complain of a system that's inflexible and costly."

Mr. Cooper probably doesn't know it, and maybe it would be too much to expect he did, but when "staff are doing more with less", as he said, bosses and economists alike say "staff are being productive". See here.

And the original and generalized outcry by bosses and economists, alike, was that Australian labour productivity had fallen. I could look for examples, but Mr. Cooper kindly saved me the trouble:

"Hayden Cooper: But it's not only small business that's complaining. The mining sector fears the return of union access is crippling productivity and it worries that rising wages in some operations could filter through to others."

Thus, based on the young ladies example, I'd say that the Canberra tea house must be exceptionally lucky: it almost alone in Australia cannot complain about lack of productivity.

However, given that Mr. Cooper generalised that situation for other business, I would say that it's highly dubious that there is a genuine productivity problem.

So, maybe what bosses are demanding is not so much productivity, but "flexibility", after all. You know, the flexibility required to avoid "those rising wages in some operations [that] could filter through to other sectors".

In this sense, it's interesting to consider this fragment of the report:

"Hayden Cooper: Enter the Reserve Bank governor. In a climate of economic uncertainty, even he has now gone public, giving voice to some of these very concerns, and suggesting a review of the laws might help.
"Glenn Stevens, Reserve Bank Governor (Friday): But what people do say and, you know, this is what they say to me - I can't verify it, obviously, from their individual businesses - is they find it harder to get flexibility. They find it harder to negotiate flexibility. That is something that is - if that's true, then that I think is a matter for concern."

Curious then, but try as hard as I did, but I can't remember Mr. Stevens ever mentioning the need to review IR laws. Neither would I say he went public: that was not an statement he offered publicly without being prompted.

More curiously, though: the fragment containing Mr. Stevens answer mysteriously failed to include the following lines:

"What businesspeople say to me - and I think this would be a theme I have heard from a number of quarters - is not so much that wages are excessive and indeed at this point in time the aggregate data on wage growth which is probably fourish, a touch under maybe, is on a par with what we have seen over the years. What people say to me, I cannot verify it obviously, from their individual businesses is that they find it harder to negotiate flexibility. That is something that is said. If that is true that I think is a matter for concern... If they are wrong, then it would be good to get the heads together and show how the system is actually very flexible, because I think there are people whose instinct is that it has gone back the other way." See here. Emphasis added.

So, I'll be damned, but it's not higher wages, either!

But perhaps the most strange passage in the whole report is the statements by two of the young ladies towards the end:

"Hayden Cooper: As for the staff, it seems not everyone wants penalty rates if it means fewer hours as a trade off.
"Ashleigh Finch: I think it's a bit unfair, really, I mean, paying someone $40, $50 to wash dishes for six hours I think's not quite justifiable. I'd much rather work more hours and get paid less.
"Jess Girvan, Employee: I don't even know what I was on beforehand because I was just happy to come in and get some hours, so, it didn't really affect me that much. But now it's sort of they have to be paying people extra to stay on so now a few of us are sort of getting shifts cut, which is a bit annoying."

I may be really dumb, but I couldn't make much sense of Ashleigh's statement: I don't know anyone who'd much rather work more hours for less money. I can understand bosses liking that, but employees?

And my confusion only increases when she also complains about "paying someone $40, $50 to wash dishes for six hours": $6.67 to $8.33 an hour not quite justifiable?! Holy Mother of Christ!

So, let me ask a question, which I am sure Mr. Cooper can answer: is Ashleigh Finch an employee... or the owner of the place?

If you see the quotes above, copied verbatim from the 7:30 transcript, you'll see that 7:30 goes to great lengths to identify who the characters speaking are. But the transcript quoted above does not identify Ashleigh as an employee, although earlier she was indeed identified as such:

Screen capture from 7:30 website (30-08-2011).

So, could Mr. Cooper be misrepresenting the opinion of Ashleigh Finch as being that of an employee, when in fact she could be the owner?

Let me finish this by reminding that the need to do more (and better!) with less applies to the 7:30 journalistic team, as well, even though they work for a publicly funded organization.

And, as a taxpayer, I must say I am not impressed and I am starting to believe some 7:30 salaries might be "not quite justifiable".

Update:
31-08-2011 Added the screen capture for further evidence, corrected a mistaken reference to Fair Work act, noted that in an earlier part of the segment Ms. Finch had been correctly identified as employee and remarked that the ABC is a publicly funded organization.

To Ali, my Muslim Friend

When you migrate to another country, you need to learn some new tricks pretty quick. I had to learn some, on personal experience.

Sydney Harbour [1]

If you moved alone, the first thing you must realize is that you are, indeed, alone: you have no friends or family. Nobody knows you or cares much about you; and, let' be fair, it's not their fault.

Understanding this won't make things any easier for you: if you need help, you won't take it personally when other people refuse to help you, but understanding that won't get you any help, either.

And although I like to see myself as a self-reliant bloke, you know, the lone-wolf kinda guy, the day came when I needed help.

Let's not mince words here: some ten years ago, I was broke, days from being evicted from the place I rented. And I had nowhere to go. If I paid the utilities, I had nothing left to buy food. If I bought food, I'd had nowhere to keep it. Where would I leave my stuff?

Sydney is a beautiful city, but at times, that is not enough.

To make a long story short, the only guy who helped me was a Shiite Muslim born in Lebanon. Not the Australian Government through its social security agency, nor the University where I was studying, or Christian-inspired charities. Not my friends (whom I can't blame: they had their own problems) or my family overseas (whom I felt ashamed to trouble with my problems).

Ali did.

I am not a religious man. I am agnostic about God's existence. I, however, don't believe in hell or heaven or other supernatural things. Further, I believe all religions are rather irrational.

But I also learned this: it's not religion, nationality, skin colour, age or gender that makes a decent person, decent.

My friend, Ali, is a good, decent man. Whatever else he is, this is what matters to me. And even though I pride myself on having repaid my friend the money he lent me, there is something I can't repay: his having had faith in me.

Thank you Ali.

Update:
For those who might share the idea that the real side of the Muslim communities deserves to be represented, if not in the mainstream media, at least among individual users, to have a look at the website of My Fellow Americans.

Image Credit:
[1] Sydney Harbour shot taken from the air, by Rodney Haywood. Wikipedia

Are Capitalists Happier? Huh?

Can't hear, can't speak, can't see.
Tosho-gu shrine in Nikko, Japan. [1]

Last Friday 12-08-2011, the post "Are Capitalists Happier?" signed by professors Ronald Rotunda, Vernon Smith and Bart Wilson, appeared at Reuter's The Great Debate Blogs.

In that post the authors purport to answer, on experimental evidence, the question: "Which kind of economy ultimately works better in the long run - capitalism or socialism?"

Once I learned of that post (h/t Occasional Links & Commentary), I posted a reply (16-08-2011), questioning the experimental design.

In my opinion their design badly misrepresents both socialism and capitalism. Thus, the apparent conclusions stated in the post do not follow and could even be reversed.

I also requested a link to a formal publication, in order to produce a more accurate opinion about the research.

As of Sunday 21-08-2011 (Sydney time) no answer had been posted by the authors, and I must assume none will be posted. Maybe they haven't seen my reply, or, having seen it, they don't intend to consider my observations.

In any case, I decided to reproduce the text of my reply (see below), so that readers can judge by themselves if my criticism is fair, or whether I am missing the point.

If the readers know more about the research, where I can get it and/or would like to comment, as usual, pertinent comments are welcome.

---------------------

My Reply:
Aug 16, 2011
9:47 pm EDT

While a Marxist, my personal approach to experimental economics is rather sympathetic. I, for one, am happy to acknowledge the many positive things achieved by researchers in this field (like Prof. Smith): in my view, the flaws demonstrated in the Homo economicus view of human behaviour, underlining the broader methodological individualism paradigm.

Also, unlike most Marxists, I tend towards empiricism.

With these two things in mind, it’s easy to understand that I find intriguing and exciting the idea of applying experimental economics to the question: “Which kind of economy ultimately works better in the long run – capitalism or socialism?”

What’s more, I welcome the proposition: “Using virtual economies, we can now literally recreate, in laboratory investigations, the state of nature and are no longer left to philosophical musings of first principles.”

Considering all these things, I respectfully must say that the desire not to rely on “philosophical musings of first principles” is not an excuse for not knowing what those first principles are.

And I regret to say, with due respect, that on the evidence of the text presented, the authors seem to have a poor understanding of basic terms.

Let me put an example where no “philosophical musings” intervene. If I understand the experimental setting, each experimental subject is equally endowed with the basic means of production: a capacity to produce (i.e. labour) and a “field” (i.e. land) where they can individually produce the blue and red commodities in some proportion of their choosing. (Although capital was not mentioned anywhere, this is not necessarily an objection, unless the authors intended their demonstration to apply to Marxist socialism).

They can also steal “from each other because, in the state of nature, no legal system protects private property”. Although not explicitly stated, I take it they can steal blue and/or red commodity from each other, but not the “field” itself.

To put it all in a more succinct way: there is absolute equality (including property of the means of production)

However, it’s a basic point of all forms of socialism that not everybody is equally endowed with the property of the means of production. Incidentally, the term “communism” itself alludes to an ideal state where land and capital belong to the community (which although not identical, somehow seems to correspond to your initial setting, ironically enough).

Although the authors do not seem to have it in mind, in the capitalist mode of production, for example, the fact that capitalists monopolise capital (while workers can only provide labour) leads to conflicts. Note the inequality in the initial endowments.

Likewise, in the feudal mode of production, the fact that feudal lords/aristocrats monopolise land, while serfs provide labour in exchange for the right to use a part of the land on their own behalf, produces conflicts.

Thus, the initial experimental setting of absolute equality seems singularly inappropriate to test whether socialism improves well-being: why should people strive to achieve equality, if they are already equal?

Although a more philosophically-oriented criticism would probably be unfair and outside the scope of this reply, I would recommend a revision of the notion of individualism underlying economic liberalism, as it has deep Hobbesian roots; unlike socialism, in all its forms, that emphasises equality, collaboration and at least some degree of “collectivism”.

Finally, I understand that the post I’m replying to is not a formal research report, thus there may be things “lost in translation”. If possible, a link to a publicly available formal report (maybe the working paper version) could help clarify the situation.

Thanks.

---------------------

Image Credit:
Three wise monkeys: Wikipedia

Naomi Klein on the London Riots

This is what Naomi Klein (h/t Occasional Links and Commentary) had to say about the London (or rather UK) riots:

Naomi Klein. [1]

"This is what Cameron got wrong: you can't cut police budgets at the same time as you cut everything else. Because when you rob people of what little they have, in order to protect the interests of those who have more than anyone deserves, you should expect resistance – whether organised protests or spontaneous looting. And that's not politics. It's physics." (Emphasis added. See here)

Unusually for me, I have nothing to add.

Photo Credit:
[1] Naomi Klein. Wikipedia

Mr. Zoellick's Bad Memory

Creditors have better memories than debtors.
Attributed to Benjamin Franklin

I don't mean to be disrespectful to Mr. Franklin, but I know of at least one case where a master creditor, a top world banker, has shown what looks like a remarkably faulty memory.
 

Robert Zoellick.[1]

Compare this statement by Robert Zoellick (former US Deputy Secretary of State and current president of the World Bank) on last Monday 15-08-2011 edition of the ABC's 7:30 Report:

Leigh Sales (interviewer): "Is this sort of economic volatility and the serious structural reforms that are required going to lead to a period of political instability in Europe?"
Robert Zoellick: "Well, you know, it's certainly not good for governments, but you can also see sometimes governments that make tough decisions, sometimes that's rewarded by the voters. (…) I think the British Government to its compliment sort of set a long-term strategy, and as you can see, it actually has helped it in bond markets and it's helped it with its ratings, but then it has to have the fortitude to maintain it."
LS: "Well there were some people last week arguing that it was the austerity measures in the UK that contributed to those riots that we saw and that it's to do with the tensions between the haves and the have-nots. How did you read that?"
RZ: "Well it's so striking to me because I work with developing countries and I see really poor people. And, to me, the idea that poverty leads people to riot is an insult to hundreds of millions of poor people that I work with around the world, who frankly want an opportunity, want to have an education, want to have a chance to climb up the ladder. So, I don't believe that was the fundamental cause. There's obviously other serious things going wrong with that segment of society." (Emphasis added).

And this BBC note ("World Bank warns of social unrest", 24-05-2009):

"Robert Zoellick has warned of the destabilising effects of unemployment.
"The head of the World Bank has warned that the global economic crisis could lead to serious social upheaval.
" 'If we do not take measures, there is a risk of a serious human and social crisis with very serious political implications,' Robert Zoellick said.
"He pointed to Eastern Europe, which faces the 'tricky situation' of fast-shrinking economies and protests.
"Mr Zoellick suggested governments should start preparing for high levels of unemployment."
" 'In my opinion, in this context, nobody really knows what is going to happen and the best one can do is be ready for any eventuality,' Mr Zoellick said in an interview with Spain's El País newspaper." (Emphasis added).

Either Mr. Zoellick, who is in Australia among the 40 US delegates for the 19th Australian American Leadership Dialogue ("The most significant exercise in private diplomacy ever undertaken in Australia", as stated in its website) completely forgot the El País interview (original available here, in Spanish), or has dramatically changed his mind since then.

Which is quite puzzling, considering not only the high levels reached by general unemployment in the UK, but the fact that unemployment among the young has increased since 2009, when Mr. Zoellick seemed to have considered it a potential cause of social upheaval, as evidenced by the April 2009 London protests to the G-20 meeting (see here).

Source: UK Office for National Statistics.

It makes me wonder if the other experts, mentioned here, who also warned about the possibility of social upheaval have either forgotten their warnings, or changed their minds.


Photo Credit:
[1] Robert Zoellick: Wikipedia

Conservatism and Insanity

Seen in the comments section of the 21-07-2011 ABC's Drum Unleashed piece "Obama's Re-Election Hurdles":

"(...) And by the way, I'm not a libertarian, I'm primarily a conservative with a few modest libertarian leanings on a few specific topics." (22 Jul 2011 8:17:09am)

Let's not nitpick: the differences between "libertarianism" (which the author uses as a synonym for Austrian "economics") and "conservatism" are of little consequence here.

What does it mean, then, to be a "conservative"?

Dictionary.com offers the following definition:

"con·serv·a·tive
"adjective
"1. disposed to preserve existing conditions, institutions, etc., or to restore traditional ones, and to limit change.

(...)

"4. (often initial capital letter) of or pertaining to the Conservative party."

In other words: a conservative is someone who dislikes or fears change; things must be done the way they are done now, or the way they were done in the "good old times".

In a world in crisis, we should remember this quote:

"The definition of insanity is doing the same thing over and over again and expecting different results." Attributed to Albert Einstein.

What Next?

"The Fortune Teller".
Mikhail Vrubel. [1]

So far, as the sharemarkets start to calm down, it appears Australia and the world dodged the bullet.

Locally, superannuation funds and its account holders must have suffered considerably.

However, last Tuesday 09-08-2011, the press was reporting what could have been the first local negative effect of the financial turmoil:

"MARGIN calls sparked by Australia's five-day share rout have surged to levels not seen since the middle of the global financial crisis, forcing thousands of investors to dump shares or top up with cash to avoid a forced sell-off.(...)
"Bendigo Bank confirmed that more than 1000 of its clients had received margin calls in the past two days of trading.
"The Commonwealth Bank also reported a surge in margin calls since Friday(...)
"The latest figures show about $19.2 billion is tied up in margin loans across Australia, well down from a peak of $41.5 billion in the December quarter of 2007." (See here).

Thankfully, the sharemarket convulsion apparently was brief enough and did not trigger a substantial number of margin calls and as the local market started to regain ground, pressure lifted from those leveraged portfolios.

Making allowances for the effect this had on private sector balance sheets and discounting new catastrophic news (all of which might be a foolhardy thing to do!), volatility should subside gradually.

It may be a little too soon to tell, but it seems the sharemarket convulsion did not create an analogous to the "credit crunch", like the one observed in 2008/09, as feared by Paul Mason.

Does this leave us with business as usual?

Not necessarily. For one, consumer confidence was affected, at a moment when the local economy was already losing steam. This, by the way, was the main risk expected by Ross Gittins.

More importantly, by itself the sharemarket convulsion did not test the Australia/US+Europe "decoupling" theory.

Let's remember that in 2008/09 all the largest economies agreed to apply fiscal stimulus. This sustained aggregate demand, which flowed among other places, to China and developing economies, and these countries were happy to indulge by producing and importing.

Today, a similar agreement would be much more unlikely, for a variety of reasons: political ones (the US politically-induced aversion to deficits and public debt) and institutional ones (the Eurozone nations' decision to transfer their money-issuing sovereignty to the ECB).

As even well-known bulls appear to concede, fiscally constrained US and Europe seem headed to a long period of stagnating growth, at best. For Australia that means that growth would have to come essentially from China.

Will China be able to sustain its growth by switching to internal demand? That seems to be the question now. Bulls seem to take that for granted, and they might well be right.

But, then, again, that was the question then.

If China were not able, would Australia escape the bad example set by the US?

Update:

13-08-2011: An abundant crop of analysis today:

Peter Hartcher's "Winning global confidence" tops the list. Lots of interesting facts, mixing political ones with strictly economic analysis.

The black spot in Hartcher's analysis (common to about all analysts, for that matter), becomes particularly prominent here:

"In three important ways, however, Australia's situation is weaker. In 2008, the federal government had no debt, only assets. Today, its debts are modest by world standards, yet they are real and would pose a constraint on stimulus spending.
"This is why the Gillard government should not see a global downturn as an opportunity to relax its stance and justify deficit - although in a serious downturn that would be inevitable - but why it needs to redouble its efforts to pare spending."

I wish Hartcher had a look at billy blog!

----------------

Ian Varrender's "Our Lucky Country rating under threat as the dragon tires" gives an altogether different perspective:

"Buckle up. That bumpy ride we experienced this week was just the beginning. (...) 
"When it comes to being The Lucky Country, we are it, if only because we are in the least worst situation of any other rich nation. But the frenetic growth of the past 15 years has ended. That's something we need to get used to".

Varrender reckons China may have considerable difficulties expanding its internal demand. I guess next week we'll see if I was too optimistic (isn't that ironic?).

----------------

Ross Gittins's "The real action is taking place in developing world" sees things in the exact opposite way: he deposits a lot of faith in developing economies, and backs this faith up with some evidence.

Is this evidence conclusive? He seems to think so:

"No prize for having guessed the punchline: the rich countries likely to do best over the rest of this troubled decade are those most closely plugged into the developing world.
"Heard of a poor, cautious, sorry-for-itself country called Australia? It sells less than 10 per cent of its exports to Europe and only 5 per cent to the US, but about two-thirds to developing countries."

I guess we, like the blind man, will have to wait and see.

----------------

A much simpler analysis, during the week, was Jessica Irvine's "Rating cut won't count for much".

Don't get me wrong: I am a believer that simple is beautiful. Consider me an Ockham's razor fanatic.

As Hartcher, Irvine should read billy blog.

The bond behaviour she described can be explained in much simpler terms: there was no real economic risk. Whatever risk was present, it was politically induced and politicians of both persuasions will first cut age pensions and unemployment benefits than touching debt service.

Deep down, bondholders knew this. Paul Krugman has had a wonderful time making fun of the mythical "bond vigilantes" who were supposed to punish American profligacy.

This way, the first half of the piece, addressing the US downgrade, scores some good points, and misses some others.

The second half, though, addressing the general outlook for lil'ol Oz, which is what concerns me here, is pretty good.

----------------

Image Credit:

[1] "The Fortune Teller", by Mikhail Vrubel: Wikipedia.

Les Misérables

It's puzzling to see a piece that gets so close to the truth, ending up missing the point completely:

"This [my comment: the British unrest] is not a political rebellion; it is a mollycoddled mob, a riotous expression of carelessness for one's own community. And as a left-winger, I refuse to celebrate nihilistic behaviour that has a profoundly negative impact on working people's lives. Far from being an instance of working-class action, the welfare-state mob has more in common with what Marx described as the lumpenproletariat." (Emphasis added)

Except for the "mollycoddled" and "welfare-state mob" things, Brendan O'Neill, who authored that piece, is right on the money there.

Note the word "lumpenproletariat" above. Contrary to widespread belief, Marx never thought there were only two classes:

"Of all the classes that stand face to face with the bourgeoisie today, the proletariat alone is a really revolutionary class. The other classes decay and finally disappear in the face of Modern Industry; the proletariat is its special and essential product." (See here)

Lumpenproletariat (also the "dangerous class") is a term used by Marx to collectively describe the bottom-most layer of society; in Marx's words: the "refuse of all classes" (refuse in the same sense that guts and bones are the refuse from a cow's carcass).

You see, Marx wasn't particularly charitable or even sympathetic towards the lumpenproletariat.

Think, for instance, of individuals who neither own capital, nor can insert themselves in the labour market.

Reduced to mere immediate physical survival (and in Marx's time, they had no social security) these individuals tended to lack class consciousness and often resorted to criminality: "vagabonds, discharged soldiers, discharged jailbirds, escaped galley slaves, swindlers, mountebanks, lazzaroni, pickpockets, tricksters, gamblers, maquereaux [pimps], brothel keepers, porters, literati, organ grinders, ragpickers, knife grinders, tinkers, beggars". (See here)

What distinguishes them from the proletarians is not necessarily poverty, but whether or not they make a living by selling their labour.

Joan Robinson put this in a more sober way: "the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all". (See here)

M. Jauvert arrests Fantine. [1]

So, if the proletariat is capitalism's "special and essential product", the lumpenproletariat is an unavoidable by-product.

In this, Marx was painfully wrong and much too optimistic: in his view, reflected in the paragraph above, lumpenproletariat and the other classes were considered essentially a temporary anomaly, to be found only in the still developing capitalism, which Marx knew.

O'Neill, over one hundred years after Marx's death, rightly recognizes that the lumpenproletariat is far from extinct. Still, he fails to draw the logical conclusions from this:

"What we have on the streets of London and elsewhere are welfare-state mobs. The youth who are 'rising up' - actually they are simply shattering their own communities - represent a generation that has been more suckled by the state than any generation before it."

Cosette, 1862.
Emile Bayard. [2]

They are not "rising up", true. But it's not abundance that produces envy and leads to theft and robbery. You don't need to be a Marxian scholar to know it: you might be jealous of a clean set of clothing, if you are dressed in dirty rags; nobody wearing an Armani suit is jealous of the old homeless bugger's dirty, stinking clothes.

Nor is tender care that produces anger and violence.

O'Neill, a self-described "left-winger", should know better.

O'Nell rightly accuses the rioters for "shattering their own communities".

However, wasn't Baroness Thatcher (whom I believe was his compatriot), who famously decreed that community, society and solidarity were abolished? "They're casting their problem on society. And, you know, there is no such thing as society. There are individual men and women, and there are families." (See here)

The chronically unemployed, not needed in long-closed factories, the underemployed struggling to make ends meet; the migrants, ethnic minorities, women, young and the over-fifties, who have difficulty finding a stable, well-paid job, those are the human refuse produced by capitalism. And, boy, has capitalism been busy lately!

They are alone, too, as Baroness Thatcher advised.

And they have been left to accumulate, and rot, and ferment, because some metaphysical "Market" will eventually remedy their situation.

And while they await for the "Market", their mere presence reduces wages, and scares the hell out of what remains of the working class. The message is clear: this could be you.

The Spanish neologism "precariado" (PRECArio proletaRIADO: precarious proletariat) reflects this fear: those who walk over the tenuous line dividing proletariat and lumpenproletariat.

They also make us feel good about ourselves, decent people, going places: "There! We finally have someone we can look down to".

Deny them access to that modest social improvement represented by being a proletarian, remove their means of survival, and force them and their children to fight and you will not re-establish the capitalist order.

You will not get a workers' revolution, either: you'll only get more crime and mindless violence.

The Prime Minister, Mr. Cameron, said that his was a sick society. He's right.

The rioters and looters are harming those who already have little, that's true. Repress them, if needed. But be aware: excesses will generate more violence.

And know that repression is not enough. These riots are only a symptom of the true sickness: capitalism.

Your choice. Do what you have to do. By warning you, I did my bit.

Image Credits:

[1] M. Javert arrests Fantine. Wikipedia.
[2] Cosette: Wikimedia

Update:
12-08-11: I forgot adding the "welfare-state mob" phrase when I wrote the second paragraph.

Caracas, February 27, 1989.

The scenes below, from Al Jazeera in English, were posted in YouTube on 08-08-2011:

These other scenes, although posted in February 2007, are much older. They date from 27-02-1989:

"The Caracazo or Sacudón is the name given to the wave of protests, riots and looting and ensuing massacre that occurred on 27 February 1989 in the Venezuelan capital Caracas and surrounding towns. The riots — the worst in Venezuelan history — resulted in a death toll of anywhere between 275 and 3,000 deaths, mostly at the hands of security forces. The main reason for the protests were the neoliberal, pro-market reforms imposed by the government of Carlos Andrés Pérez." (See here. Emphasis added)

Carlos Andrés Pérez.

The then ruling party lost legitimacy. Two failed coup attempts followed and President Pérez was impeached, after a period of constant political turmoil. Eventually Lt. Col. Hugo Chávez was democratically elected.

It remains to be seen whether this was a happy ending.

Lt. Col. Hugo Chávez.

Let's hope British police have better sense than their Venezuelan counterparts.


Image Credits:

Hugo Chávez. Wikipedia.
Carlos Andrés Pérez. Wikipedia.

London Calling

What's behind the London riots, started at Tottenham, and that appear to spread?

The immediate answer is the killing of Mark Duggan, in apparently strange circumstances. A second answer is that there is a criminal element in the Tottenham/London riots.

And it's clear those are part of the answer.

But I'll suggest the relevant question is not that. The relevant question is: are those the only things behind those riots?

"Unemployment jumped by 44,000 in the final three months of 2010 to just under 2.5 million, meaning that 7.9 per cent of workers were out of a job. But the youth unemployment rate hit 20.5 per cent, following a 66,000 increase to 965,000, the highest figures since records began in 1992.(...)
"There were 75,000 people aged 18 to 24 who have not had a job for two years, the figures said. This was an increase of 43 per cent on a year ago.(...)
"Liam Byrne, the shadow Work and Pensions minister, said young people were being hit by a 'triple whammy' as the Government scrapped Education Maintenance Allowances, which allowed some students to stay in education; introduced increased university tuition fees and abolished the Future Jobs Fund - which Labour claim would have created 200,000 jobs." (See here)

I don't know for sure what the answer could be. However, given the figures above, I'll answer as The Guardian's Dave Hill, in his own opinion piece, reproduced locally by the SMH:

"I don't know what the answers are, but feel grimly confident that such a perfect storm of rumour, resentment and criminality could break in a dozen other parts of inner city London any day. These are nervous times."

London is calling and someone is bound to take the call.

Two Sides of a Coin

Chung-Kuo

How to evaluate what happened this week? The answer, I guess, lies somewhere between these two extremes:

1. We (especially we Aussies) are going bananas for no good reason (see here).
2. We (that is, all of us, regardless of place of residence) are potentially in deep shit, through a possible renewed credit crunch (see here).

The first view (which one could call "Aussie-centric") sustains that in Australia, unlike the US and Europe, an essentially benign internal situation could deteriorate because of undue pessimism, due to outside events.

Although Mr. Ross Gittins (the first piece's author) does not mention it explicitly, in a nutshell his idea is that Australia has decoupled from the American and European real economies. That is, the US and Europe are largely irrelevant for Australia's economic performance.

The mining boom ensures Australia that Aussie exports, largely destined to Asia (China and India), prop up our GDP [=C+I+G+(X-M)], through increased exports (X).

Apart from this international trade item, Mr. Gittins focuses his analysis entirely on Australia; he does not stop to consider the US and the Eurozone (perhaps because he considers them largely irrelevant for the purposes of his piece); maybe less understandably, Mr. Gittins does not seem to consider Asia in any apparent detail.

The second view, by Mr. Paul Mason (which one could call "Euro-centric") coincides with Mr. Gittins' views, in that the US, the Eurozone and Asia need be considered separately, but focuses on the US and the Eurozone, leaving Asia to a large extent outside of consideration.

Unlike Mr. Gittins, Mr. Mason considers international trade, but emphasizes on international finance potential linkages, which is where Mr. Mason appears to consider the global risk lies.

I can find rather apparent weaknesses in both views. For one, are there internal political constraints on national governments? Or, I haven't heard much about China lately; have the readers any precise information about it? (Mr. Mason says that Asia is important, but does not offer too many details about it: perhaps his Eurocentric perspective justifies his overlooking this point; however, in Mr. Gittins' view this should be a highly sensitive matter, although it goes unmentioned in his analysis).

In any case, I do not intend to argue for or against any of these views and I certainly don't want to influence the readers: you are free to make your own mind.

(Pre-publication!?)-Update:

As I finish this I've read that Standard & Poors cut the US credit rating.

Image credit:
Wikipedia

Capitalism Hits the Fan... Again

Deutsche Welle (Germany):

"Markets Fall After Barroso Raises Specter of Further EU Debt Contagion

"In a letter to EU heads of state, European Commission President José Manuel Barroso has warned that the eurozone debt crisis was still spreading despite agreement over a bloc-wide bailout fund."

The Guardian (UK):

"Asian Markets Tumble Amid Eurozone Fears

"Live Japan, Hong Kong, Australia, New Zealand, Taiwan, Indonesia and South Korea all see large falls
"Global stock markets panic after Wall Street losses
"Larry Elliott: Turmoil carries echoes of 2007
"Eurozone fears send banking shares plunging
"Dow Jones returns to losing ways
"Editorial: State of emergency
"Italian prosecutors turn fire on rating agencies
"Poll: are the euro's days numbered?"

El País (Spain):

"La Caída de los Mercados Asiáticos Hace Prever una Nueva Jornada Negra

"-Japón, Corea y Hong Kong abren con fuertes pérdidas.
"-Los mercados esperan un catalizador hoy en el previsible crecimiento del empleo de EE UU o en alguna medida de Europa.
"-Se extiende el temor a un parón en la recuperación
"-Suben las comisiones por la avalancha de liquidez".

The Sydney Morning Herald (Australia):

"$55b Wiped Off Market

"Aussie shares plunge at the opening, as investors reel over the state of the global economy."

And who's at fault? Go on, make a guess.

" 'One of the reasons [confidence] is beginning to erode is we have lost the reform energy that we had over a 25-year period.'
"In a reference to the politically fraught topic of industrial relations, Mr. [my comment: John] Howard said regulation of the labour market had taken the nation backwards." See here

Or this perfectly timed pearl of political and economic wisdom, by Paul Sheehan, published yesterday:

"What happened in Washington last week, embodied by the Budget Control Act and the brinkmanship that brought it into law, was a national failure. The bill is a bandage, when surgery is required.
"The financial markets tell the real story, and the conservative mothers have every right to be angry." See here.

I can smell a Nobel Prize somewhere near.

Witch Hunts Downunder?

I don't know Prof. John Quiggin personally.

I couldn't tell much about him as a person: whether he's tall or short; whether, surrounded by his mates, he digs into a good BBQ washed down with a cold beer or two, or whether he's a vegetarian and a teetotaller, instead.

I do know he is a distinguished Australian scholar, who makes himself available to the lay public through his blog, which I occasionally read.

By this limited interaction, I can say he seems to be a well-meaning, unpretentious bloke, with some progressive views (the kind of views that another well-known mainstream scholar, Prof. Paul Krugman, shares, for instance).

I can also honestly say that Prof. Quiggin's expertise does not extend to Marxian economics or politics. And at times, this shows.

In this context, I found the criticism directed towards Prof. Quiggin by Mr. Michael Stutchbury, from The Australian, surprising, misleading and disturbing: "an economist who is good in theory but on the far left in practice".

It's easy to understand why I find it surprising and misleading, given what I have already said about Prof. Quiggin. However, to make sure the message is not lost, let me state it clearly: he seems to be a decent bloke (maybe what Americans call "liberal"?), but he ain't no socialist, let alone a "far Leftist". Mr. Stutchbury's attack on Prof. Quiggin is as unfounded as it is ludicrous.

However, Mr. Stutchbury's accusation, coming in the wake of the Oslo-Utoya extreme-Right terrorist attacks, is disturbing, too. It sounds way too close to "cultural Marxist".

Mr. Stutchbury's piece could be saying much more about his personal politics, than what it says about those of Prof. Quiggin. And I call that disturbing.