Friday, February 21, 2014

The New Morality Of Capitalism

David Brooks tells us that the leader of the American Enterprise Institute, which is a major GOP think tank, has seen the light.  The GOP war against entitlements is a losing battle.  Its also silly for the GOP to pretend that everyone can be an entrepreneur.  Any form of work is noble as long as people feel that it is worthwhile.  We have to accept capitalism for what it is and imbue it with a more acceptable moral message.  So far so good.  However, the devil is always in the details.

One of the thinkers that Brooks quotes in this article states that the middle class has been proletariatized, and that the uneducated class has been left behind.  The implication is that the benefits of capitalism have primarily gone to the upper class.  But when Brooks discusses what should be done to make capitalism more moral, he asserts that the middle class has received most of the benefits from the government.  We should reduce the benefits that have gone to the proletariatized middle class in order to improve the well being of the uneducated class.  This has been one of David Brooks' favorite versions of class warfare.  That is, it is between the educated middle class and the uneducated class that has been left behind.  Somehow the accumulation of wealth that has been going to the super rich has been left off of the table.  It is David Brooks' reinterpretation of Marx.

One of the virtues of global capitalism, according the the leader of the American Enterprise Institute is that there are fewer people in the world that are extremely poor.  That is true.  We now have a global labor market, and some of the jobs that have been performed in rich countries, at higher wages, have moved to poorer countries at lower wages.  This has raised the living standards of many workers in poor countries, but it has also reduced the number of middle class jobs in rich countries.  It has also increased the profits of multinational corporations, which benefit from lower labor costs, and it has opened up new markets for their products as more workers in less developed countries increase their incomes. 

This takes us back to two of the problems discussed in this article.  That is, the need for more jobs in the US, and the proletarianization of the middle class.  Global capitalism may have redistributed income, and jobs, from the middle class in the US to workers in poorer nations.  In the process it has also redistributed income to the shareholders of multinational corporations who have increased their profits in the process.  Where are the new jobs going to come from in the US?

The problem of fewer jobs available in the US is raised in Brooks' essay but no answer is provided.  In fact, one of the job trends in the US is discussed, but that is more of problem than a solution.  Many of the innovative technology firms that have been formed in the US have become very valuable.  For example, Facebook purchased one of these companies for $19 billion (75% paid for with FB stock).  The problem is that Facebook and the company it purchased have very few workers relative to their market value.  The social media products that they provide are delivered to the public at low cost, but their market value is determined by the access that their products provide to advertisers.  Many of the new technologies in the US are being used to create new ways to sell products.  This has transformed the marketing industry but it has not created enough jobs to replace those that have been lost.  Marketing dollars are just being spent in new ways.

The takeaway from David Brooks' article is that some conservative leaders are aware of the problems that we face, and they are also critical of the simple minded approaches to these problems favored by the "party of the stupid" which is how a Republican governor referred to his party.  That may be a sign of progress.  It is not progress, however, to reframe these problems in a way that leads to the contradictions that are apparent in the new morality presented by David Brooks.

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