Logic of Automation, Part 2 (and Constraints to Capitalism)

I had previously described a complex model in the logic of automation (Liu 2017), which involved consumer finance, which is an important channel for understanding the potential fallout of the automation of jobs. I exclude this option in the more simpler version of the automation model, which is depicted below.

Screen Shot 2018-06-20 at 10.52.47 PM

If workers are getting displaced by technology, as is the case in most production sectors, these workers are then pushed into non-production sectors that are labor-intensive and don’t require much technology (as is the case with caring occupations in health care and education). The competition for remaining jobs increases and allows employers to pay very low wages. Perhaps political pressure will result in a rise in the minimum wage, though this can come at the risk of less employment, because employers with low profit margins would have to bear the burden of higher labor wages, while the highly productive monopoly sectors get away with high profits. Lower wages ultimately limit the extension of more automation, because it competes with high technology costs. Only when Rifkin’s vision of a zero marginal cost society is realized will technological cost be so low that workers have to sell their work below subsistence level if there is no further political intervention to distribute the gains of technology.

What could prevent the realization of a dystopian vision of technology? It would be Say’s Law according to which supply creates its own demand. Any increase in profits and savings arising from technological expansion is translated to higher consumer/ corporate savings, which will spur more investment and more consumption (either of the same or, after saturation occurs, in a different product). In that case, demand for labor increases, which will push up wages, which will increase the pressure for more automation.

Even if we assume that the capitalist game can continue indefinitely, it still entraps most of us as hamsters in the wheel. In the case, where the displacement-competition vision gets realized, workers are structurally too weak to advance their interests, and capitalists who make enough profits with cheap workers might slow down automation, which keeps us in a low-wage trap. Though to be fair, wherever capitalism has existed the long-term trajectory is an upward push in wages and a pushing along the innovation frontier. But even if we assume there are no problems with Say’s Law (e.g. corporations do not hoard their cash with share buybacks but decide to invest it in new consumer markets, or consumers are willing to work hard and spend their extra cash in consumer items as opposed to saving it or working less), workers hoping to gain power against employers are beaten back by innovation and automation, which in a private ownership economy tends to strengthen the power of the capitalists.

With the self-sustaining cycle of capitalism going through crisis and regeneration, we are- in the absence of sustained social movements to break that logic- unable to impose a universal basic income or other means of fundamentally decommodifying our life. A UBI that is high enough to sustain a basic lifestyle could be consolidating capitalism by providing a floor of consumption to the masses, but could also challenge it, because an integral part to capitalism has been the commodification of wage labor, which can only be guaranteed if the “whip of hunger” (as per Max Weber) hangs over the masses of the proletariat. This is a condition which the UBI would substantially undermine.

The regenerating cycle of capitalism can only be broken if the zero marginal cost society comes into fruition or if resource/ climate/ population constraints engender perennial stagnation. The capitalist economy can only persist if commodification and high exchange value (i.e. prices) get realized, but the point of automating production and making it nearly free to produce goods is that goods no longer fetch any exchange value even as use value goes through the roof. One of the greatest benefits of the modern information society is the free availability of information via Wikipedia, which is written by the collective commons, i.e. anyone who has any knowledge about any topic and can add his knowledge to it. But despite the immense use-value of Wikipedia, to the extent that knowledge is made available for free, there is no exchange value, and, thus, it can’t be added to the GDP, which is the basis for economic calculations including those of profit. Some might argue that the contemporary rise of artificial intelligence means the proliferation and creation of new unheard of markets, i.e. another lease of life to capitalism. But who knows? Once technological systems are in place and produce things at the cost below subsistence wages to workers, why would it stop? Once the robots do all the work, it becomes questionable anyway why subsistence wages have to be high, which would only be the case if Zuckerberg, Bezos, Musk and Co. own the entire economy.

But maybe the capitalism defenders are right in that no internal contradiction of the capital valorization process will produce the downfall of capitalism. In that case, the only obstacles for capitalist expansion are quasi-external, which are related to population, resources and the climate. One important driver for the growth of capitalism is the “human resource”, which government statisticians measure as the total size of the labor force available for the capitalists. Historically, capitalism has depended on a continuously growing population to realize economic growth because the population provides the base for both the labor force and the consumer market without which no economy can expand. It might be that a stagnant population furnishes continued sources of economic growth, but that only works if the existing population continuously refines its material tastes by continuing to work harder and find new ways to spend more money. In countries like the US, the absurd result of that thinking has resulted in the proliferation of super-size meals and an obesity epidemic, which has resulted in a decline in the quality of life for the chronically overweight/ obese population. Another element is the planned obsolescence of letting cell phones slow down or dysfunction after 2-3 years of use, thus forcing us to endlessly buy the newest cell phone, regardless of the huge waste that we produce with the discarded phones.

I would argue that capitalism has not gotten rid of population growth dependence, because countries in Europe have stemmed the much-feared demographic aging and decline only by allowing in more immigrants, which is somehow backfiring with increased xenophobia and right-wing populist support. Japan does not worry too much about multiculturalism, but they face structural economic stagnation with very low birth rates and almost no immigration. Abenomics has been sold as a promising bag to restore Japanese economic growth, but that is focused on doubling down on public debt-fueled investments and quantitative easing, but the real economy is still driven by the depopulation and subsequent dying of economic activity in the Japanese countryside.

From a global perspective, the world will not be suffering from a shortage in population, which is expected to peak at somewhere around 10 billion, perhaps by the end of the century, assuming that the secular decline in the fertility rate in the less developed countries continue. But once this peak has happened, capitalism can no longer be saved by the number alone.

A growing population with a rising standard of living has increased resource needs. And here we are talking about everything from food to fossil fuels, iron ore, cobalt, zinc, various other minerals and metals to something as basic as water. It could be argued that we are still decades away from running out of any natural resources, and even if some resources run out, humans have been smart enough to find new ways of generating new resources. The long-feared peak oil concerns had been muted since the US came up with fracking to get to new oil and gas. Human ingenuity, thus, works another lease on life to capitalism. But I expect resource struggles to increase, which could result in outright civil war and other means of armed conflict. There is generally no free-for-all as capitalism still relies on real growth of good consumption.

Lastly, climate change has produced an insurmountable externality to which world leaders have no real response other than vague, voluntary commitments to reduce CO2 production (as in the Paris accords), which is undermined by Trump’s decision to withdraw the US from that climate agreement. Essentially, the use of fossil fuels has resulted in the creation of modern civilization as we know it today, but has also produced the greenhouse effect, which traps the heat of the sun inside the earth atmosphere, thus contributing to global warming. Climate change is an externality in the economic sense, because the full cost (environmental and social) of climate change is not borne by the polluters but by later generations, including those people that are not even born yet.

The only way how capitalism defenders go about discussing climate change is that the energy transition to a low fossil-fuel economy (primarily nuclear power with its attendant flaws, and solar power) could decouple material economic growth with the deleterious effects of human-induced climate change. One really has to have strong faith to believe in that, and for the sake of humanity one has to pray that these people are right, but I suspect they are wrong. John Bellamy Foster and his co-authors claims that there is a contradiction in the simultaneous satisfaction of material growth needs and immaterial effects on the climate. In that case, environmental curbs on pollution could fatally hamper economic growth.

At this point, climate change is no longer an abstract academic discussion, but is reflected in the decision of individuals to pack up and leave their home territory in search for a better and safer life. A recent documentary I watched showed the great lengths that sub-Saharan African refugees go to climb the fence and reach the Spanish outposts on the north African coast bordering Morocco. The EU responds by intensifying the building of external border walls and paying the Moroccan authorities to prevent these refugees from jumping the fence, which has become mortally dangerous. Remarkably, refugees are not deterred. Instead of continuing to languish in makeshift camps in Morocco, their strategy involves aggregating in large numbers and then attempt to storm the barricades and fences all at once. Moroccan and EU police will try to fend off as many refugees as possible, but some of them will inevitably slip through. Once they reach EU ground, they are entitled to apply for asylum.

The construction of border walls in the era of Trump might sound like a popular and viable option, but it isn’t really. Even if the Europeans and Americans were to lose all common sense and humanity and create land mines and set up machine gun positions against desperate, unarmed refugees, that is not a reason for them to stop their trek if they see their choice between starving at home/ being jobless or risking their lives on the trek. What is even more disturbing is that the refugees that decide to take off tend to be the relatively better off, as it requires existing social networks and some money for the dangerous transportation to become a refugee in the first place. Most people, even those being desperate and economically down and out, can at most move a few kilometers, not even really leaving their country, which may be marked by rampant official corruption, natural catastrophe and/or civil war. With the population pressure being the greatest in sub-Saharan Africa, I expect the push to Europe to increase. Any dreams about a fortress Europe fail.

In conclusion, the automated future might provide another lease of life to capitalism, or it could fatally undermine it along with other constraints related to population, resources and climate change.

Advertisements
Posted in Uncategorized | Leave a comment

The Return to Incivility

Nga Than (2018), good friend of mine and Vietnamese researcher based in Germany, recounts her experience with two racist German teenagers, who said to her that foreigners have to leave Germany:

This incidence was different. It challenged my physical appearance, and it left a permanent psychological disturbance. It took place in the neighborhood of Friedrichshain in East Berlin, where the majority voted for the Green Party, or the Linke in the last state election. I didn’t expect such a characteristically AfD behavior on the streets of the district. In the period of two years I had lived in Germany before, I never encountered such an incidence. Yet now as a tourist, the expression was directed to me, and it disturbed me tremendously. How daily civility has changed in this city!

It becomes worthwhile to think about where the rich societies of the world are going. In a timespan of a few years it is possible to normalize a discourse of detesting foreigners and blaming them for all the ills that exist in domestic society. One might argue that this has long been in the making. A lily-white German society had been transformed over half a century to a much more diverse and multicultural society, inviting many people of Middle Eastern and now also African and Asian origin to immigrate.

The official discourse had been rather welcoming of immigrants, imparting the cosmopolitan and technocratic consensus that an increase in the migrant population is structurally necessary to provide for the economic growth that maintains the pensions and the social welfare system.

But here the technocratic discourse will ultimately fall on deaf ears, because the native, domestic population consists of the many losers of globalization, automation and rationalization. The capitalist system creates so much economic dislocation and uncertainty that most workers can no longer be sure that they can live a similarly privileged life as their parents (many don’t). People in developing countries might criticize the rich developed country people of complaining about first-world problems. Even to have employment instability, precarious work arrangements or rising rents might be a nicer problem to have than drought, famine and civil war. But relative deprivation, which is a driver of human behavior, is about the comparison with people, who are physically close to you. A lower middle class person in Dortmund thinks about the run-down neighborhoods in Dortmund, and not in Bombay. The neoliberal technocrats have failed the working people, who use their frustration to vote against the establishment: Brexit, Trump, Five Star Movement.

Relative deprivation and economic frustration merely provide the fertile ground for the political opposition toward immigration, but it would not explain that this anger and this collapse in public civility would happen right at this moment. Randall Collins had analyzed how physical violence gets carried out, and he argues that it is a difficult thing to accomplish and happens mostly when there is overarching emotional dominance among the perpetators. Think of multiple rapists going at one defenseless female. Think of a dozen police officers beating a black guy lying on the ground. Once the violence happens the rhythmic entrainment between the perpetrator and victim, i.e. the emotional dominance and position of overwhelming strength of the former and the whimpering, surrendering pose of the latter, encourage the perpetrator to inflict even more and worse violence.

Is that analysis of the steps of violence useful to explain the growing incivility against foreigners? It is relevant to some extent. As I said, underlying tensions and resentment against foreigners has long existed in western society. Neoliberalism and the growth of foreigners take away the economic security of the domestic population, but the masses are not lashing out. The lashing out comes with permanent political agitation coming from a charismatic leader, who urges on his people that it is okay to hate the foreigners and to reclaim the country for your own people. The rhythmic entrainment, the use of body language for the escalation of a situation (which can be good or bad, e.g. sex or violence), happens on the campaign rallies of Marine LePen, AfD, Brexit, The Northern League, FPO and Trump. Finally someone speaks to their heart. Yes, these false preachers might have no real solutions, but they feel my problem. The technocratic establishment does not.

The very well-attended Trump rallies provided the fertile ground and legitimation for denouncing Mexicans as rapists and even to inflict physical violence on mostly non-white anti-Trump protesters. Trump encourages his minions, “Get him out of here,” referring to a protester in his rally. During one rally he encouraged his fans to take off a protester’s winter coat and send him out into the freezing cold. It is as if the protester was not a human being deserving of equal treatment and respect. What about after the elections? Post-Trump immigration officers feel vindicated to deny certain people entry into the country. Since his takeover, the refugee inflow has declined to a tiny trickle because of understaffing and increasing the already onerous vetting requirements. On an interpersonal level, viral Facebook videos show how white racists want all people to speak English in public or “go home”.

In Germany, the refugee crisis provided the fertile ground for the AfD, which began as a party of intellectuals, who worried about the benefits of the euro membership, and then devolved into a nationalist, anti-immigrant party, emphasizing Das Volk, the people. That’s how you become a big party. This Nazi discourse had long been suppressed, because of the German historical guilt, but economic dislocation and distance to the Nazi era means that the young Germans can now again be socialized in volkisch, nativist and xenophobic discourse. Once new behaviors become the norm, the escalation toward open violence against foreigners is only a matter of time.

The era of globalization and immediate interconnectedness also means that the nationalists, who provide the perception of security to the masses, celebrate each other’s political victories and spur each other on. If it’s okay to hate immigrants in the US, why is it not okay in Austria, Sweden or Greece? When Trump demands Putin to return to the G8 or praises Kim Jong-un as a great leader, the punditry and mainstream establishment claims to be shocked. How can the leader of the free world praise dictators? Perhaps because Trump does not care too much about democratic norms either. And why should he? The neoliberal establishment has done its best to make democratic elections virtually meaningless. Bill Clinton said in the 1990s that the Democrats would win elections based on neoliberal strategies that made the Republicans successful in the 1980s. Tony Blair’s New Labour had something similar in Britain. Thus, the big parties converge on a political consensus that there are no alternatives to neoliberal globalization and endless immigration. In the absence of Bernie Sanders on the ballot, people prefer a self-obsessed billionaire, who threatens to overturn the liberal order, over the establishment candidate. For people like the Hungarian premier, Viktor Orban, this globalist agenda is driven by George Soros, a rich philanthropist.

As nationalists in one country succeed, their claim to power becomes fair game in the other countries until there no longer is any liberal bastion. The legitimation of a raw public discourse makes immigrants and foreigners an unwelcome piece of meat that need to be extinguished from the territory regardless of how many years or generations they had spent there or how much taxes they contributed to the welfare state. The outrage and fight against xenophobia can only be successful when the civil society is strong. And it is still strong, providing the bulwark against an even more uncivil turn over the short run. But the cracks in civil society are appearing and becoming greater every day. It is not inconceivable to experience a return to a fascist regime, where the strong ruler promises security to the masses in exchange for the surrender of individual liberty.

The liberal order is dying, yet the complicated thing is that some aspects of it are worth preserving (dignity to the individual, universal human rights, freedom of speech), while some things are not (like a capitalist system focused on accumulation for the global 1%, and misery and insecurity for the rest of us). Trump is throwing more fuel to the fire by picking trade wars with the countries of the western alliance. The rise of Hitler in the 1930s was not unrelated to America’s Smoot-Hawley tariffs, which halted global trade integration and created autarkic fascist regimes bent on global military conquest.

What about the other countries? Theresa May still thinks Britain is stronger outside of the EU. Macron wants to double down on liberalizing the French labor market, but with Marine LePen ready to take over as most workers are bound to be disappointed. Merkel is limping on, but the two major governing parties are unpopular as ever with the AfD gaining ground in opposition. The Five Star Movement wants to challenge the existence of the euro and the Northern League wants to deport all refugees in Italy. We rarely get to choose how history is made, even though we are the only actors. In that statement, Marx is vindicated. We are not awaiting a liberal utopia but a tribalist nightmare.

Posted in Uncategorized | 3 Comments

Book Review: David Graeber, “Bullshit Jobs” (New York, Simon and Schuster, 2018)

Five years after Graeber submitted his provocative essay “On the Phenomenon of Bullshit Jobs” he had now written up a 300 page book describing a phenomenon in contemporary capitalism, which requires further elucidation. Graeber’s simple argument is that the advancement of technology may have led to the displacement of production jobs (primarily in agriculture and manufacturing), but the number of total jobs keeps on increasing, because of the proliferation of bullshit jobs, which includes a lot of middle management, bankers, HR consultants, corporate lawyers, communications coordinators, PR managers, consultants. For Graeber, there are two definitions of a bullshit job: “if the position were eliminated, it would make no discernible difference in the world” (p.2), and a position where “the person doing that job considers [it] to be pointless, unnecessary, or even pernicious” (p.5).

For critics of Graeber, the two-pronged definition provides a fertile ground for critique. My job could make no discernible difference to the world, but I could think that it is useful. I met a private equity investor recently who thinks that her mergers and acquisition and leveraged buyout strategy create a win-win situation for all parties, even though workers are getting laid off once private equity enters the scene. To be fair to Graeber, his definition of bullshit jobs is quite strictly subjective, i.e. if a person thinks his own job is pointless, unnecessary or pernicious, then it is a bullshit job. The only way how you can attack that definition is by questioning how many people would think that, how many people do something valuable but think it is useless, or vice versa how many people do something useless but think it to be useful. Graeber cites two studies, a British survey where 37% of workers argued their job was bullshit and a Dutch survey where 40% of workers thought the same, but are these studies representative and meaningful?

As a social scientist and empiricist, we have an inclination to create objective measures to assign a bullshit score to occupations, though I doubt that any institute would want to fund such an empirical investigation, so we have to rely on the subjective evaluation of individual workers. The proof for bullshit jobs is in the pudding. If all the bullshit workers were going on strike, the system would not break down and life would continue as before. That automatically precludes doctors, teachers, police officers, firefighters, train operators etc. as bullshit job. The limitation in the social sciences is that we cannot organize such a grand experiment to test the bullshit job hypothesis, so we have to rely on the cultural stories that Graeber and other thinkers provide.

Bad jobs vs. bullshit jobs

One of the basic problems we might have with bullshit jobs is when people hear the word “bullshit” job, they mistake it for bad jobs, which happened to me twice, when I explained that concept to other people. A bad job is valuable work that is poorly paid and involves employer abuse and poor treatment. Think of home health aides or food service workers. A bullshit job is pointless, but may involve very high pay. Graeber, thus, points out an important problem in the labor market, which is that the pointless jobs can be paid well, while the valuable jobs are paid almost nothing.

In the framework of the mainstream economists, we are not entirely surprised about why that is the case. If you enjoy what you are doing, presumably because you think that your work is very valuable to the community, then you have a strong altruism preference, which works as a tradeoff with income. Because many people like altruistic work, the labor supply for these jobs is high, and equilibrium wages can be very low. On the other hand, if you do jobs that are troublesome and useless, then very few people want to do it, so the wages you command will be higher. In sociology, we also think that power plays an important role in compensation too, because women are relegated to unpaid housework, while men can dominate the exchange-oriented occupations, which command high incomes. Thus capitalistic exchange reproduces gender inequality.

To some extent there is a conflict with mainstream economic theory. This account does not jive well with the marginal productivity thesis, according to which every person is essentially paid however much they produce for the economy. But let us recall the original premise of Graeber’s argument, which is that the real production jobs are automated. There are some well-paid and productive jobs, for instance in the research wing of a technology company, developing the new technology, but their compensation is a fraction of what the company owners get. But if the production jobs are automated, then the bulk of the job creation would have to fall into service and professional work, i.e. the proliferation of middle management, which for firm accounting purposes is an addition to cost, not the generation of new revenue. Thus, the marginal productivity thesis is clearly not the basis upon which the payment of individuals is determined. For sociologists, this is not news, because we have long argued that tradition, network access and political power are other factors that influence compensation.

For Graeber, the generation of bullshit jobs is precisely about the degradation of corporate capitalism into corporate feudalism, where the drive toward greater efficiency is surpassed by the drive to pad the prestige and power of the feudal lords (or senior managers and administrators in contemporary parlance). The more inefficient corporate bureaucracies are, the more prestige is concentrated within each department and among each senior manager, and that itself becomes the end goal. The argument reminds us of Schumpeter, who argued that capitalism could ultimately decline as entrepreneurs get displaced by corporate bureaucrats, though I would object that corporate capitalism still relies on the capture of new markets and the generation of new surplus value, but that is what technology in the production sector is good for.

Five types of bullshit jobs

If at the surface of it, Graeber has convinced his readers that a huge bulk of the jobs in our economy are bullshit, then the next question is what the range of bullshit jobs are. There are five types of bullshit jobs for Graeber. Flunkies are jobs that make someone else feel important (doormen, receptionist); goons exist only because other organizations have them too (e.g. lobbyists, PR managers, telemarketers, corporate lawyers); duct tapers fix up problems that exist because organizations don’t want to create a permanent fix (e.g. software engineers creating free software with glitches, which corporations use and then have to hire these engineers to fix the glitches); box tickers certify that organizations are doing something, which they are not really doing (e.g. leisure coordinators, who send surveys to care home residents, knowing that these survey ideas will not become implemented); and taskmasters assign bullshit activities for other people or are unnecessary superiors (i.e. underlings can do the job without supervision; examples are higher ed administrators, sending performance surveys to measure “academic impact”).

Why do these bullshit jobs proliferate?

It’s about social control, at least for Graeber. Those at the top of the corporate pyramid control the flows of resources, and these flows do not have to be used for the maximization of more economic output, but bureaucratic busywork. As the number of people working below the top management increase, the reputation and prestige of top management increases relative to other departments and competitor firms. Graeber’s political account of the proliferation of corporate bullshit jobs blocks other accounts that are centered on economic efficiency. A job can only exist if it produces a profit for the employer. Period. But the creation of profit is a property of the entire corporate organization, which can be read in the quarterly investor reports, not of particular individuals. Therefore, it could very much be that a giant pharmaceutical company has a small staff of people that produce the actual output, i.e. the pharmaceutical product, a larger size of the staff that support the activity of this smaller staff, which are essential, like some managerial staff, janitors or food service workers. The rest of the organization, which involves middle management for Graeber, is completely unnecessary and exist as cost, even though their high compensation suggests that they are the most productive workers.

What are the implications of proliferating bullshit jobs?

Some optimists might claim that it is okay that bullshit jobs exist. Because people need something to do. But here the question is how that work is organized. If most of the jobs require us to be subordinate to the whims of an employer, then reproducing bullshit jobs has very worrisome implications, because it means that most of us are not allowed to figure out what we are really interested in or are good at, even though technological progress would permit us to do so.

The National Bureau of Economic Research papers are increasingly filled with papers that predict the rise of robots and artificial intelligence having huge effects on labor markets. The pessimists think that many jobs will disappear and people will struggle to find new work. Optimists argue that we have to run faster and train for new skills and jobs. But if Graeber is right both sides of the spectrum have it wrong, because robots can only take over the production jobs, while bullshit jobs for humans can increase indefinitely.  We are thus trapped as slaves to the system, and we can no longer find meaning in it, because production workers at least thought they were feeding, clothing, or sheltering people. There are no technical limits to how many bullshit jobs exist, only political limits, i.e. how socially acceptable is it to have a giant workforce of paper-pushers, ditch-diggers and box-checkers? There might come a time, when we have programmed the robots to do the bullshit jobs as well, but that is thinking one step too far ahead.

Solutions to bullshit jobs

For Graeber, the solution is to introduce a universal basic income, which if it is high enough to survive will shrink the supply of bullshit jobs. There might still be some people, who will continue working these bullshit jobs because of the prestige or high income, but it will be much fewer people. Those, who do should not be prevented from working bullshit jobs, but those, who do not want to work these jobs, should not feel that this is all they can do to pay the bills. Graeber is not a big fan of other solutions like a job guarantee (full employment) or short work schemes. In each case, Graeber, the anarchist, believes that there is a giant new bureaucracy that is required to steer people to work or to set limits to how much needs to be worked. In a full employment scheme, the generation of bullshit jobs (especially taskmasters) might become encoded in what the scheme entails. Central European countries that invest a lot of funds into labor market activation experience this growth to bullshit, because the unemployed are required to go training courses and get a stamp by an employer certifying they have applied for a job, and there are government bureaucrats, who have to oversee these unemployed people to make sure they are still hunting for work.

Short-work might be a successful labor market strategy, though Graeber thinks it won’t destroy enough bullshit jobs. Capitalists can be driven to cut work hours only if they can cut the pay of their employees as well, and that tends to be difficult because wages are downwardly sticky. In a more coordinated market economy it might be possible to rearrange work hours, but even Germany has only done that during the recession. I myself have become increasingly skeptical of finding labor market-centric solutions to employment problems. In a very dystopian development we can have the proliferation of bullshit jobs along with the proliferation of unemployment and underemployment, which the declining labor participation rate of prime-age (25-54) males in the US shows, and that is because we need fewer and fewer production workers, and there might be limitations to how many bullshit jobs are created. It is in this context of the rise of bad jobs that most young people become grateful to work any kind of job, even if it is substantially meaningless.

I don’t argue that labor market-centric solutions are impossible to attain, but it requires a lot of creativity and you have to get the capitalists to agree to it in a private ownership-based economy. In that context, I don’t find it likely that the proliferating logic of bullshit jobs can be challenged sufficiently. I agree with Graeber that the universal basic income would provide a solution that could realize the condition of freedom, which is currently a luxury of people with accumulated, independent fortunes.

Posted in Uncategorized | Leave a comment

Troubled Land Reforms in South Africa

When in February Cyril Ramaphosa replaced Jacob Zuma as president of South Africa, he said that land reform became a major priority. The ANC (African National Congress) government had campaigned on land reform when the apartheid regime, which separated blacks and whites and discriminated the former group, was abolished in 1994. Back then whites made up 9% of the population and owned 85% of the land, while today they are only 8% of the population but still own 73% of all the land. There has been some expansion of black-owned land as in KwaZulu-Natal and Limpopo (Crowley 2018), but the sad reality is that nearly half of all black South Africans are living below the poverty line of 992 rand (75 dollars) a month, about 20% of colored people (i.e. mixed race), and negligible proportions of Asians and whites (Chutel 2017).

The slow pace of land reform comes from the government policy of “willing buyer- willing seller”. The government was unwilling to force white landowners to surrender their land. But the slow pace of reform and the electoral pressure for the ANC to accelerate the pace of land reform resulted in calls for land expropriation as early as 2006. These calls for land expropriation were not formally taken up until December 2017, when an ANC conference stated that they wanted to amend the constitution to allow for land expropriation without compensation. This move has a precedent in Zimbabwe in the early-2000s, which had deleterious effects on the economy, as the land was primarily reallocated to the cronies of the government, who used it for their personal patronage, i.e. leasing it out to other people without caring whether these farmers were competent in running the farms. The attendant economic decline (reinforced by giddy foreign investors, who don’t like expropriation of private property) convinced the Mugabe regime to put on the printing press to pay its bills, which resulted in hyperinflation and the abandonment of the Zimbabwe currency in favor of the US dollar.

Even in South Africa itself, land reallocation that has taken place the past 25 years have not borne much fruit. 5% of white-owned land had been transferred to blacks (Lahiff 2008). The government invested 60 billion rand in land reform projects, which had resulted in a 79% decline of crop production and job loss of 84-94% (Wikipedia, “Land Reform in South Africa”). Without sufficient equipment, financing and know-how, land reallocation to blacks is not going to result in economic stabilization. Ramaphosa and his government have promised that they are not going to repeat the mistakes of Zimbabwe, but how can they be so sure about it?

The white farmers are naturally outraged about the proposal for land expropriation, though they are politically sidelined. Within the South African parliament only the Democratic Alliance (DA), the main opposition, is a vocal opponent of land expropriation, and two of the past three leaders of the DA have been whites. The DA emerged out of the white liberal, anti-apartheid political opposition against the ruling National Party, which held onto power until the end of apartheid. The DA has therefore been considered a white party, though for obvious reasons (whites are only about 8% of the population) they deny this claim. With Msumi Maimane, the DA received its first black leader in 2015.

The presence of another political party shook up the political process. The Economic Freedom Fighters (EFF) was founded in 2013 by a faction of the ruling ANC, which championed far-left black nationalist causes and felt that the ANC was too accommodating to the interest of the wealth-owning whites. In their first parliamentary elections, they promptly took 25 out of 400 seats, which made them the third-largest party. To effectively prevent a loss of votes in the next elections, the ANC has begun to copy the rhetoric of the EFF and accepted their demand for land expropriation. This political dynamic is very troubling for whites, who might still hold most of the economic property, but no longer wield a dominant influence in the political process.

The struggle over land reform allows for a brief examination of South Africa’s troubled racial history, which has been even more oppressive than in the US, which will also make it clear how land expropriation has arrived on the national agenda.

2.5 million years ago, the territory of what is now known as South Africa contained the Australopithecines, a forbear of the homo sapiens. Modern humans moved to South Africa in the Middle Stone Age about 125,000 years ago. The first human indigenous culture were the so-called Khoisan people, which now form a racial minority, and are called “colored” in the census classification system. Khoisan is a combination of San and Khoikhoi, two separate but related tribes. The San were hunter-gatherers while the Khoikhoi were pastoral herders. The Bantus, who originate in western Africa and are darker-skinned than the Khoisan, went on migration waves all over sub-Saharan Africa from 1000 BC onward, and have reached South Africa by about 300 AD. Being more organized and militarily dominant, the Bantus drove away the Khoisan people, who were forced to move to more arid areas.

But the real trouble only came with European colonial expansion. The Portuguese used their shops to explore the coastlines in southern Africa in 1488. They were trying to discover a better trade route to the Far East, which would otherwise have to go through the Middle East. They set up the Cape of Good Hope at the South African coast, which became an important haven for trade with the Far East. But the Portuguese did not arrive in large numbers. This changed with Dutch colonization, which began as early as 1652. The Dutch West India company set up permanently in the Cape, also taking advantage of trade routes to the Far East. Upon encountering the Dutch, two things happened to the Khoisan people. Firstly, they were decimated by smallpox, an old European disease against which the Khoisan people had no resistance or medicine. Second, as the Dutch became greedy for more and more land. They fought three wars with the Khoisan to steal their goods and land and drive them out.

As the colony lacked agriculture, the Dutch brought over farmers from the homeland. As their numbers grew, they expanded northward to occupy land, which was previously held by black people. In order to work the land, the Dutch also brought over slaves from India, Indonesia, East Africa, Mauritius and Madagascar. (The British later brought even more Indians to South Africa.) The Dutch were later also joined by Germans and French Huguenots. The racial mixing that happened among all these groups created the racial category of ‘colored’ people that were ranked lower than whites but higher than blacks under apartheid.

When the French invaded the Netherlands in 1795 and the newly founded Batavian Republic (in the Cape) became loyal to the French, the enraged British demanded a Batavian surrender to the British. When France lost the Napoleonic wars in 1805, the British inherited the Cape. The British had little interest in the interior of South Africa and held onto the Cape as a strategic site for trade with India, the crown colony of the British empire. When Britain enforced an English language policy in 1815, when they formally bought the Cape from the Netherlands, the Dutch settlers felt sidelined and oppressed, and so they trekked to the north competing with blacks for land first in a trickle from 1805 onward and then in a huge stream from the 1830s onward. The Dutch were also upset that the British banned the slave trade on which the Dutch settlers relied on. The Dutch founded three independent states that lived for a while (Republic of Transvaal/ South African Republic, Orange Free State and Natalia) before being crushed and incorporated by the British toward the turn to the twentieth century.

One ethnic group of the Bantu, the Zulu, were able to establish an empire with a centralized military that broke from clan traditions (which is a precondition to centralization). Their leader Shaka kaSenzangakhona had seized power in 1818, and went on an expansion drive of conquest, killing and pillaging in the surrounding regions. Shaka was killed by a dynastic intrigue in 1828, and his successor Dingaan was less militaristic. The Dutch and later the British ultimately put an end to Zulu expansion. When the Zulus attacked Dutch cattle and killed a group of Dutch settlers, the Dutch retaliated by killing 3,000 Zulu warriors in 1838. More importantly, the 1879 Anglo-Zulu war eliminated the Zulu empire as an independent political unit, though the Zulu had won the Battle of Isandlwana. But the British were clever enough to re-fashion their attacks with the help of Zulu collaborators who were opposed to centralized Zulu rule.

To some extent, conflict was fueled by the European desire for expansion and was undergirded by their fixed notions of private property, which had no precedent in traditional African societies. When the Europeans seized the land from blacks, they encountered resistance from them, which induced a series of frontier wars, also known as Xhosa Wars, which were won by the Europeans. The Basotho people, for instance, fought against the Orange Free State for territory, whereby both sides practiced destructive scorched-earth tactics with the Dutch being far superior in their military technology and agricultural productivity, which brought the Basotho to the brink of starvation. They signed a peace treaty in 1858 and again in 1866 (with some hostilities in between). Ultimately, Basotho was incorporated into the British empire and gained independence as Lesotho in 1966.

The Dutch were equally ruthless in their war with the Ndebele. After having killed 28 Boers (Dutch) accused for cattle rustling (stealing), the Ndebele retreated into the mountain caves. The Boers followed the Ndebele and laid siege on the caves, which resulted in the death of 1,000 to 3,000 Ndebele. By the time the remaining Ndebele surrendered, they were captured and enslaved by the Boers. The Bapedi were another black ethnicity under siege by first the Dutch and then the British from 1876 to 1879. Cut off from supplies, the Bapedi were forced to surrender.

The British Cape Colony became an autonomously run part of the British Empire. They had their own parliament and non-racial laws, which was unusual for that time period. The discovery of diamonds (1866) and gold (1886) in the Transvaal and Kimberley, Dutch and black-held territories, and the ambitious Cecil Rhodes becoming Prime Minister of Cape Colony (1890-96), changed the quiet equilibrium. Rhodes got rid of the multi-racial franchise and sent British troops to conquer the Dutch-held territories, resulting in the two Anglo-Boer wars. The first war (1880-81) was won by the Boers, which forced the British to recognize the South African Republic and the Orange Free State, but the second war (1899-1902) was won by the British, which resulted in the dissolution of the Boer states and the British takeover of the Boer colonies. What was even worse for blacks was that they were conscripted and coerced to fight and die on behalf of either the British or the Dutch.

It was first the European greed for land followed by the greed for diamonds and gold, which had created severe military conflicts and the displacement of blacks. The gold discovery had attracted British, German and Austrian industrialists, which also included many Jews. The industrialists attempted to recruit black laborers, who refused to work in those dangerous and onerous conditions. They then turned to Chinese laborers, attracting 53,000 Chinese indentured servants who were willing to work in the mines for lower wages than was offered to Africans.

The Chinese were an ambiguous category, sometimes regarded as colored sometimes as Asian (which is reserved for Indians and South Asians), but were clearly discriminated under apartheid as they were non-white. The arrival of Taiwanese immigrants, especially businesspeople, in the 1980s created the weird situation that that the Taiwanese were considered honorary whites, while the Chinese were regarded as colored people. The end of apartheid restored civil rights to the Chinese, which coincided with the massive increase in immigration from mainland China, which swelled the Chinese population to over 400,000.

With the British victory in the Anglo-Boer war, the British set out to unify the country as South Africa in 1909, and in 1913 passed the Natives Land Act, which allocated a paltry 8% of the land to blacks, and 90% to whites, who were 20% of the population. This law was the basis for later laws on apartheid. British and Dutch tensions did not disappear, as South Africa developed two political parties, the pro-British South African Party and the pro-Dutch National Party. Dispossessed Boers attempted an uprising against the British in 1914, which the British successfully crushed. In the two world wars that were initiated by Europeans (chiefly the Germans), South Africans of all races were again called upon to serve in these wars, which had also resulted in the death of many blacks.

While South Africa as a nation solidly fought on the side of the British, i.e. the Allies, the Nazi Germans were able to infiltrate and nurture a pro-German Afrikaner-nationalist (i.e. Boer) movement, which were the Ossewa Brandwag (OB), which was later absorbed into the National Party that instituted and ruled over apartheid South Africa. The Afrikaner Weerstandsbeweging (AWB) was another white supremacist group emerging in the 1970s, which was inspired by OB and the Nazis.

The National Party, which was briefly in government from 1924 to 1938, and then without interruption from 1948 to 1994, formally instituted apartheid in 1948. But it was not a new system, but rather an extension of discriminatory policies implemented by the Boers and the British since the 1850s. The 1970 Homeland Citizens Act established homeland reserves,  or Bantustans, which concentrated the black population while driving them out of cities, which whites monopolized for themselves. The forced segregation and inferior economic status of blacks not surprisingly created discontent, which culminated in the 1976 uprising, which resulted in a harsh military crackdown and a strengthening of white police and military at all levels of South African government. A large chunk of the South African government budget was devoted to military and security spending.

The UN had not approved of apartheid, and passed a 1966 resolution which held apartheid as a “crime against humanity”. A 1973 apartheid convention was passed with 91 votes for and four against (Portugal, South Africa, UK and US), which resulted in a suspension of South Africa’s UN membership. A 1977 Security Council resolution barred arms export to South Africa. The tacit support of the US, which thought that South Africa was a bulwark against communism, and the military support from Israeli arms manufacturers were crucial in maintaining apartheid. The US supported the South African regime for attempting to prevent communism in neighboring countries like Angola and Mozambique. Cuba had militarily supported the Angolan communists, while South Africa supported the Angolan nationalists. The Angolan Civil War had resulted in the deaths of between 550,000 and 1.25 million people.

Apartheid was not simply about segregation, but also racial tensions and hostilities. Extra-judicial killings in the 1980s that were sponsored by the state led to hundreds of killings. The Truth and Reconciliation Commission, which was tasked to review the number of deaths during the apartheid period, found that 4,500 deaths were caused by the Inkatha Freedom Party (IFP, a Zulu nationalist group led by Mangosuthu Buthelezi), 2,700 by the (white) South African police and 1,300 by the ANC.

The ANC was the main political movement that opposed apartheid, though there were other organizations like the Pan-African Congress (which was explicitly anti-white) and the United Democratic Front (which used rent boycotts, student protest and labor strikes to fight apartheid). The key strategy against apartheid (at least initially) was passive resistance, which was influenced by Mahatma Gandhi and his Indian struggle for independence. The South African government reacted with harsh crackdowns and by the 1960s, the ANC and PAC were pushed into the underground.

External changes in the form of the end of the Cold War, ultimately, led to the downfall of the apartheid regime. The collapse of the Soviet Union meant that the ANC would no longer get weapons and funding, and the US no longer saw an incentive to support the apartheid regime. Domestic political opposition in the US similarly made it difficult for the US administration to continue supporting the apartheid regime. President Frederik de Klerk and ANC leader Nelson Mandela negotiated the end of apartheid laws in June 1991, and an election for 1994, which restored the franchise to black South Africans. The ANC and the IFP were also permitted to participate in the election, such that ANC (in a common ballot with the labor confederation COSATU and the South African Communist Party) promptly received 63% of the vote, while the ruling National Party (NP) dropped to only 20%.

Under a common agreement, Nelson Mandela was tasked to form a national unity government, which included the National Party and the Inkatha Freedom Party. Mandela gave the two deputy president positions to Thabo Mbeki (ANC), who succeeded Mandela, and F.W. de Klerk from the National Party. De Klerk ultimately withdrew from the government in 1996 after being disappointed that constitutional changes did not guarantee National Party rule until 2004. Interestingly, Mandela also reappointed Derek Keys as finance minister and Chris Stals as central bank governor, who had previously served under de Klerk’s rule. It was clear to political observers that Mandela cared mostly about continuity in economic policy to maintain the economic status of South Africa, and that meant not to antagonize whites with land expropriation.

When the ANC was still in opposition it had demanded land expropriation, which was an electoral strategy to get the black electorate to support the ANC. Once in government one might argue that Mandela was tied by the coalition agreement with the NP, which would have blocked any radical moves toward land expropriation. But even more importantly, Mandela’s temperament was moderate, calling for racial “reconciliation”, i.e. no extreme moves to antagonize wealthy whites. Out of the more than 5 million whites in South Africa, 800,000 skilled whites permanently left South Africa, mostly migrating to other English-speaking countries (AUS, NZ, UK, US, Canada), citing concerns of personal safety after the end of white rule. Their emigration came to the chagrin of Mandela, as he feared that South Africa will be left with only impoverished blacks.

Dire fiscal and economic circumstances in the post-apartheid era also constrained political action. The South African government had a foreign debt of 86 billion rand (or 14 billion dollars) when the apartheid regime ended, which tied up 20% of the national budget for debt repayment. AIDS turned out to be another financial burden, as the spread of AIDS resulted in over 5 million people being infected by the disease, and the national health services being unable to cope with burgeoning health care needs. In 2014, 47% of South Africans (mostly black) were still living in poverty, which provides fertile ground for opposition to the ANC government that failed to deliver on economic development.

The ANC dashed any hopes for a socialist transformation (nationalization of industries, higher taxes on wealth, land expropriation) once elected to power, and stuck to broadly neoliberal policies, which meant the hope to attract foreign capital and secure the private property of investors, who themselves see little incentive to fund mass job creation. South Africa’s primary export items are gold, platinum, coal and iron ore, which are hardly commodities that could transform the country to a high-income economy. It is also questionable whether foreign investors can be attracted with the poor availability of basic infrastructure like reliable electricity. South African economic growth was boosted during the initial post-apartheid years, but declined substantially since the 2008 economic crash, reaching 0.3% in 2016.

The lack of economic development naturally breeds distributional struggles, which are aggravated by the influx of refugees from the rest of Africa, ranging from countries like Zimbabwe, Burundi, Congo, Rwanda, Eritrea, Ethiopia and Somalia. Native people’s perception of competition for jobs, business opportunities, public services and housing result in xenophobic attacks against refugees and migrants.

Popular legitimacy for the government is also impaired by perceptions of corruption, which ensnared Ramaphosa’s predecessor Jacob Zuma. Zuma gave government contracts to the Gupta family, a South African family of Indian descent, running a business empire for computer equipment, media and mining. Zuma also appointed people to the government cabinet that were suggested by the Gupta family. The Gupta family in turn funded the election of Zuma, gave him other gifts and appointed family members of Zuma into highly paid positions in the company. Trade union leader Zwelinizima Vavi had called Gupta the “shadow government” of South Africa. Zuma’s corruption was one of the reasons that the ANC no longer supported Zuma, so he was replaced by Ramaphosa.

Thus, we arrive in today’s difficult political dilemma, where the perception of a lack of economic progress is combined with a lack of political trust in the ANC, which has held power for the past 24 years. As they sense political support among blacks slipping away, who are hungry for progress and redistribution, and the opposition EFF expose the ANC for being too accommodationist to whites, the ANC will seek to copy the strategy of the EFF to prevent electoral leakage to the EFF. In my native Austria, the conservative party gained 7 percentage points and won the elections on the basis of copying the rhetoric of the right wing FPO, focusing on excluding refugees and unwanted migrants from the polity. This strategy worked astoundingly well in the context of the refugee wave that came to Europe.

It may not not sound fair for white South Africans to lose their land simply because their forbears had driven out blacks from their ancestral homeland and solidified this injustice with formal apartheid laws. But in a largely rural population, the attainment of land is often a precondition for better economic livelihood. The poverty of blacks that are concentrated in shantytowns cannot be overcome unless they are given a stake in society, either via good jobs or access to fertile land. On the other hand, access to fertile land should not result in less production, which could happen if blacks do not receive enough funding, equipment or training to upkeep modern agricultural practices. As an outsider, there is no easy solution for it, because whites are unwilling to turn over the keys to their farm and then provide blacks with the support to run the farm, which whites think belongs to them.

Japan is cited as being a successful case for past land reform. The post-war American occupation of Japan had allowed authorities to hurt the interest of powerful landlords, who used to lease out land to farm laborers and small farmers and collect huge rents. The government forced the landlords to sell their land to the government, which in turn sold it to the farm laborers, who could benefit from ownership over land without the payment of rents to landlords. Japan had been successful in radical land redistribution. Obviously, the ANC is not an external party like the US, but it would have to be the responsible entity to force the sale of white-owned land, but crucially do it with (fixed) compensation. The harder part will be how to get the new black landowners to produce at high levels of output. This would convince me that any land reform has to take place gradually, which will piss off all sides (whites for being gradually squeezed out and blacks for feeling that it moves too slowly).

A forceful acquisition of white-owned land could also result in a further emigration of the remaining white population in South Africa. Mandela was right to be concerned about the outflow of talent, which South Africa-still one of the wealthier economies of sub-Saharan Africa- can ill afford. Whether Mandela’s moderate legacy can be preserved is largely questionable as he is dead, and the country will have to figure out what it wants to do in the years ahead. In the absence of employment generation or the establishment of industry, it is questionable whether existing social tensions and inequality along racial and class lines can be overcome.

Posted in Uncategorized | Leave a comment

Goolsbee is Wrong on UBI

In the debate surrounding whether or not we should have a universal basic income it is at least heartening that even critics take that proposal seriously. One may think of Mahatma Ghandi’s statement that “first [your enemies] will ignore you, then they laugh at you, then they fight you, then you win”. We are somewhere between stage two and three.

The economist (and former White House economic adviser under Obama) Austan Goolsbee (2018) adds his voice to the UBI debate.  He has proffered three counterarguments to UBI:

First, if you accept the economists’ basic labor supply model (that people value leisure and so generally need to be paid to work) then there are likely to be some sizable number of people who are working only because they absolutely have to.

In other words, we pay a UBI and universal laziness will break out. There are really two counter-arguments, which each cut in a different direction. The first is to directly question the economist assumption, which is that a UBI will make people more entrepreneurial and look for better employment opportunities while refusing the horrendous and most exploitative employers, who either have to improve working conditions or hike wages or do both to keep their workers. On the face of it, the selfishness assumption of economists is that people will retreat en masse into the private sphere and watch Netflix all day long. There might be a few people who do that, but for the vast majority of people, who are trying to find some meaning in their life, it does not seem like a plausible outcome. In fact, given that health and retirement benefits are tied to the job, potentially entrepreneurial people are prevented from taking the leap under the current regime.

The second counter-argument is related with the premise of the UBI. If we already assume that work is replaced by artificial intelligence, then to go out and demand the same high rates of employment participation with a 40 hour workweek is entirely outdated. In a time of economic abundance, it might even make sense for people to drop out of the paid labor force and do something more meaningful with their lives than to be controlled by a nasty employer. Read poetry, write a novel, read books, compose music, take up athletics, grow a garden, care for aging parents, go mountain hiking, do whatever. David Graeber also points out that a sizeable fraction (35-40%) of the workforce believe that their jobs have no useful purpose, and merely serve to keep us busy bees controlled by an employer. We can dispute how high that figure really is, but to the extent that they exist, we do want to get rid of these jobs, which a sufficiently generous UBI could accomplish.

In a telling piece of evidence Graeber (2018: 157) cites President Obama, who justified his choice not to push for single-payer health care, which could cut out administrative waste:

Everybody who supports single-payer health care says, ‘Look at all this money we would be saving from insurance and paperwork.’ That represents one million, two million, three million jobs [filled by] people who are working at Blue Cross Blue Shield or kaiser or other places. Wha are we doing with them? Where are we employing them?

What the president is saying is that it is better to keep us as wage slaves than to maximize efficiency in the system and compensate the losers with a UBI so they can do things that are enjoyable to them. If we accept the Graeber hypothesis about bullshit jobs, then I don’t find it problematic at all to have a receding labor supply after introducing a UBI.

To be fair to Goolsbee, it is not him, who moralizes on the declining labor participation of low-skilled workers, but the general public, which he is simply channelling in his essay. But again, why is it so problematic that people are pushed out of undesirable work? If they are so essential, yet not automatable, then wages would have to increase or if the community does not want to pay more for essential services, the state will have to tax the profitable industries to subsidize essential and low-skilled work.

Second, for a given amount of money to be used on redistribution, a UBI likely shifts money away from the very poor. To oversimplify, if you have $50B to alleviate poverty, the targeting approach followed in most countries today might use the $50B to help the poorest/sickest 25m people and give them the equivalent of $25,000 of benefits each. With a broad-based UBI, the same $50B would be spread out. It might involve, say, 100m people getting $5000 each.

The point that the poor will be hit hardest by a UBI really depends on what the size of the program is going to be and whether other social services are reduced. Social Security, for instance, could be folded into a UBI, which means that any SS payouts we currently have flow into a UBI without an increase in cost for that segment of the population (mostly seniors and disabled). For general poverty reduction efforts, the US really has a paltry welfare state. The mix of Food Stamps, Medicaid and in rare cases TANF (only for mothers with young children and only with a five-year lifetime limit) is nowhere near enough to care for the poor. It is thus, disingenuous to dock a UBI budget on current levels of social welfare spending, which has to substantially increase, perhaps to 20% of the GDP to be universal and alleviating poverty for the neediest. But the difficult politics of the UBI suggests that it is not clear whether UBI will turn out to be so generous.

Converting to a UBI and abolishing the in-kind safety net will lead to a situation where some people will blow their UBI money in unsympathetic ways—gambling, drugs, junk food, Ponzi schemes, whatever

Goolsbee’s moral imagination, while a popular trope, assumes the worst form of behavior among the poor. It is this moral imagination of the depravity of the poor, which created an in-kind transfer benefit system, which I don’t deny should exist. Single-payer health care has to be implemented on top of UBI, and they should not be seen as unachievable tradeoffs. But that is where another problematic assumption in Goolsbee’s argument crops up, which is- as with point 2- that there is a limited amount of resources to care for the poor, which is just not true given that his entire essay is framed around the rise of artificial intelligence, i.e. the creation of economic abundance for humanity.

It is as if there is a cognitive dissonance, whereby economic developments are assumed to be very advanced while as soon as he talks about social policy, he again assumes a backward economy of the nineteenth century, where the idle poor have to be put into workhouses (while the idle rich landlords or -the modern equivalent- heirs, stock market investors, hedge fund managers and real estate tycoons can enjoy their fortunes which they always had). Goolsbee is not the only economist, going down that path, but without taking the AI economy to its fullest conclusion, the prejudice against the UBI as a policy solution will persist.

Posted in Uncategorized | Leave a comment

Israel and Palestine: A Seemingly Never-Ending Conflict

When Donald Trump had decided to move the US embassy from Tel Aviv to Jerusalem it happened to the dismay of many Palestinians, who had been protesting extensively against Israeli authorities controlling them in a chokehold, which is most severely the case in Gaza. Gaza is a densely populated strip of land, which is suffering from severe economic isolation coming from the heavy Israeli sanctions, control of borders, airspace, sea access and finances. Israel had justified this stance because of the fact that the Hamas, which has effectively controlled Gaza since 2006, had sent rocket fire and suicide missions targeted at Israel and not recognizing the state of Israel. But the strength of force is often quite one-sided, because the overarching power in the form of an occupying army and economic controls are exclusive to Israel.

Border protests in Gaza have begun in March 30 of this year and demanded that Palestinian refugees and their descendants be given the right to return to Israel and now to oppose the movement of the US embassy to Jerusalem. The outcome of the border protest thus far is that 111 Palestinian protesters (mostly children) had been killed and 12,000 had been injured. In comparison, 1 Israeli soldier had been wounded and none killed.

There is a bad catch-22 in Gaza, because as long as Hamas does not recognize the state of Israel and angry Palestinians are protesting against their blockade, Prime Minister Netanyahu has the excuse to crackdown militarily. But quieting down is also not a viable option given the continued chokehold of the Israeli authorities. For Hamas, the end game is to return to pre-1967 borders, which was the year when Israel had taken the West Bank and Gaza, which are territories that it effectively controls (despite the Israeli withdrawal from Gaza in 2005). This is not so realistic given that there are so many Jewish settlements interspersed in the West Bank. The end game for Netanyahu’s Israel is to build more settlements in the West Bank and suppress any discontent in Gaza with military presence if necessary.

This attitude is merely a recipe for a further never-ending conflict, which reaches back as early as the late-19th century, when the number of Jewish settlers (mostly from Europe being shaped by Zionism) increased, thus competing for spaces with the Arab population. The conflict intensified with the declaration of the state of Israel (following on the heels of the Holocaust), the conquest of territories beyond what the UN mandate had provided, the 1967 conquest of Gaza, West Bank, Sinai and Golan Heights, and various Intifada (Palestinian protest, resistance) since the 1980s.

With regard to the resolution to the conflict, the bygone era where peace was possible seem far away. Gone are the 1990s, when Yitzhak Rabin (Israeli prime minister) and Yassir Arafat (Palestinian Liberation Organization chief) sat down to sign the Oslo Accords, which allowed for the creation of a Palestinian political authority which was recognized by Israel. Gone are the early-2000s, when there was some chance to negotiate a two-state solution during the Camp David Summit. Now there are no pretenses of compromise, as Hamas refuses to recognize Israel, and right-wing Netanyahu’s hold on power over the past decade has made any overtures to compromise impossible. The Trump presidency has added more fuel to the fire, as he gave the American right-wing evangelical voters and rich Jewish donors to his campaign (especially Sheldon Adelson) what they wanted: the cancellation of the Iran nuclear deal, which they hope could weaken Iran’s increased regional influence (like in Yemen, Iraq, Syria or Lebanon); and now the movement of the US embassy to Jerusalem, which sends the message to the Palestinians that what the international community regards as a politically divided city really belongs to Israel.

The lack of an even-handed approach by the US (which was never even-handed given the huge military aid to Israel and the refusal of UN security council sanctions against Israeli transgressions such as on the settlements) will result in more conflict, as the weaker side (Palestinians) receive no fair stake in the table. Lacking a stake, they feel they have nothing to lose by protesting, fighting Israeli security authorities, carrying out suicide attacks and throwing Molotov cocktails. The deteriorating economic situation, following the original Israeli withdrawal of 2005, the election victory of Hamas in 2006 and the Israeli blockade and sanctions, had created a veritable humanitarian crisis. The only thing that props up the Gaza economy is foreign aid, chiefly from US, EU and the Arab League.

Outside observers might argue in Samuel Huntington fashion that the driver of conflict is religious and cultural. Jews and Muslims can’t get along with each other based on different interpretations of sacredness. But this is a rather strange explanation as the Northern Irish who were divided by sectarian lines (Protestant-Unionist vs Catholic-Republican) reconciled with the Good Friday Agreement and no one would nowadays claim that these religious divisions are salient.

While it is true that the Jew and Muslim divide was the beginning of the conflict and became the socially reinforced mental divisions in daily interaction, the real trouble comes from the question of who wields political power. In a peaceful state, the multitude of factions, tribes and interests rotate in power, emphasize national unity when holding political power and respect the rights of the political minority. In a civil-war state, the political leaders of one group mark themselves off from another group, and then argue that the other group has no right to exist, or at least not in this given territory. Another problem is the endless cycle of retaliation, as the death of one of my relatives needs to be avenged by the death of your relative. The cycle of hatred and violence can only be broken if powerful external actors broker a peace, and when the internal actors, i.e. their political leaders, believe that it is possible to negotiate peace and a lasting two-state solution. But with an erratic Trump foreign policy such a rational foreign policy appears to be unfeasible.

Posted in Uncategorized | Leave a comment

Warpath in Iran vs. Peace in Korea?

In a rather confusing turn of events, we might see a resolution to the Korea conflict, but might be drifting into war over Iran. There are very different strategic considerations which would favor each political outcome, but there is sufficient evidence to suggest that the arbitrary behavior of US president Trump plays a substantial role in this uncertainty in international relations. Pre-existing political fault lines in addition to short-term political calculations of Trump will shape how the contemporary political challenges are dealt with, and it will really be anybody’s guess how it will turn out.

Up until last year, we had been contemplating the escalation toward a world war based on the heated verbal exchange between North Korean leader Kim Jong-un and Donald Trump (Liu 2017). Kim was threatening to attack a US island, while Trump had responded with off-the-cuff remarks to inflict ‘fire and fury’ on the North Koreans (which was not incidentally the chosen title for the Michael Wolff expose book of the Trump administration), then doubled down in the UN speech by promising to inflict the “total destruction” of North Korea if “rocket man” didn’t know how to behave himself, i.e. continue to do ballistic missile and nuclear tests.

But in a surprising turn of events, Kim decided to de-escalate. Now that he had acquired nuclear capacity, he thought he would have an effective bargaining chip to get South Korea and the Americans to hand them more economic concessions. Another argument is that the mountain where the atomic tests have taken place has collapsed, thus making it technically difficult to continue the tests (McCurry, 25 April 2018). Kim promptly cancelled all future nuclear tests and scheduled a meeting with the South Korean president Moon Jae-in on the Demilitarized Zone (indicating the continuing war status between both Koreas).  Moon is eager for hammering out a peace agreement, very much unlike his predecessors. It was the first meeting of each country’s leader since 2007, when there were futile talks to get the North Koreans away from nuclear weapons. Perhaps this time it will be an earnest attempt toward reconciliation, though we should not forget that it cannot be in Kim’s interest to surrender toward reunification.

Any attempt toward reunification would be led by South Korea, which not only has the larger relative population, but also the economic wealth to support a deeply impoverished population in the north. It would be similar to German reunification, though the burden on the south will be larger, as the west to east population ratio in Germany was 3-1 while in the south-north in Korea is only 2-1. In the first stage of reunification, West Germany sent its civil servants to occupy the bureaucratic positions held by East Germans. They then created a “Treuhandfond”, which took over the unproductive East German industries and sold them off, which resulted in massive job cuts, which was quite a bad welcome of East Germans to capitalism.

To cushion the difficult economic adjustment, the federal government also imposed a solidarity tax on West German taxpayers, which has generated 343 billion euros in subsidies to East Germany, a large portion of which is concentrated on paying welfare, maintaining city services, strengthen universities and build infrastructure. West German taxpayers are hoping to get rid of the solidarity tax nearly 30 years since inception, yet East German economy per capita is only 72% of West German levels, so it is hard to argue for less support to the East (though the critic of the West is that a declining fraction of the solidarity tax is flowing to benefit the East, and more goes toward other projects and budget consolidation, Chase, 9 November 2017).

The Koreas are still quite far off from contemplating reunification, but it won’t come cheaply. And if Kim is unwilling to hand over power, it will take some time before reunification is possible. It could just be that the Kim regime is temporarily bluffing to buy themselves some more time until they have developed a new nuclear testing site. But Donald Trump sells himself as the savior by agreeing to meet with Kim in Singapore in June. Secretary of State Mike Pompeo has already traveled to Pyongyang for a personal encounter with Kim to prepare the ground for meeting between the two leaders. The goal is to denuclearize the Korean peninsula and declare an end to the Korean War, which is still happening on the books (and sometimes Korean soldiers along the DMZ get killed because of altercations).

For China, a denuclearized Korean peninsula may be hailed as a good outcome, which could contribute to more stability in their backyard. On the other hand, the prospect of good North Korea-US relations and potential reunification could push US troops up to the Yalu river along the border of China. Russia has had to make that experience after all the former Warsaw Pact countries have joined NATO (exceptions are Belarus and Ukraine, though the latter now has a pro-western government with active NATO collaboration). China will, therefore, hope to continue having a place in the bargaining table.

If the picture in Korea is slightly optimistic, then why is it deteriorating in Iran? The 2015 Iran nuclear deal (Joint Comprehensive Plan of Action), which was negotiated by Iran along with the US, UK, France, Germany, Russia, China and the EU, had required Iran to give up its nuclear program, enrich very limited amounts of uranium (primarily for industrial purposes) and allow full monitoring by foreign agencies. In exchange, the economic sanctions on Iran would be lifted. From the US perspective, the deal was negotiated by President Barack Obama and his secretary of state John Kerry. In the campaign trail, most Republican presidential candidates, including Trump had vowed to overturn the Iran nuclear deal, because they thought that the restrictions on uranium enrichment were not strict enough. They had bemoaned the time limit on the provisions (gas centrifuges are restricted for 13 years). But clearly this was an excuse. The Iran nuclear deal had just been cancelled by the US. Why is Trump so hawkish on Iran?

First, he had fired Stephen Bannon as personal adviser and appointed John Bolton as national security adviser, which gives an indication of wanting to be more confrontational. Bannon represented the white nationalist wing, which campaigned for domestic nation-building and shunning foreign political interventions. These vague promises generated the enormous primary and general election support for Trump, which put him into the White House. Bolton, on the other hand, has been calling for war against Iraq and later against Iran. He openly touts regime change in the Middle East. Any sane leader would keep him as far away from any position of power as possible, but George W. Bush and now Donald Trump have put him in charge. Second, the budget request, which increased the public budget deficit to over $1 trillion, included enormous funding increases for the military. Why would you invest in the military if not for war?

A third important factor is related to geo-political considerations of Israel and Saudi Arabia. Both countries hate the Iranian regime, and think that their outsize political influence, military/ logistical/ financial support in Lebanon, Syria, Bahrain, Yemen and Iraq have undermined the interests of Israel and Saudi Arabia. Israeli prime minister Benjamin Netanyahu has openly torpedoed the Iran nuclear deal, seeing it as unwarranted support for an enemy regime. The US has traditionally sided with Israel and Saudi Arabia, which was no different from the Obama administration, though Obama was often willing to ignore the hawkish positions of their allies in the region.

Fourth, Iran had converted their oil transactions from the US dollar to the euro (Jalili, 18 April, 2018), which could undermine the reserve currency power of the US dollar. When Saddam Hussein quit the US dollar in favor of the euro in 2000, he was invaded by the US only three years later upon which oil trade became reported in dollar again (Liu 2014). To some extent, the US had to blame itself for this step, because continued US sanctions, which the EU had long ago lifted created more currency uncertainty between the Iranian rial and the dollar, so it was more predictable for the Iranians to switch their trade accounts to the euro.

But what are the prospects for war? It appears to be much slimmer than in the case of Iraq.  First, Iraq was a weaker military power than Iran. Iraq only had 25 million people when it was invaded, while Iran stands at 80 million. Second, during the Iraq invasion the Bush administration could still cobble a multinational coalition of troops from 46 countries, including big countries like UK, Japan, Spain and Italy.

But who will support a war with Iran now? When Trump won the elections, German chancellor Angela Merkel promptly gave a speech to assert that the EU had to rely more on its own and less on the US. Trump’s disparaging comments on NATO were driving her statement. French President Emmanuel Macron would favor continued rapproachment with Iran, partly because of the Iranian shift to euro trading. The Iraq War had not been in the interest of the EU, but now it will be even less so. China and Russia have already indicated their continued support for the Iran agreement.

The key link will be the EU. EU foreign commissioner Federica Mogherini issued a statement supporting the continuation of the Iran nuclear deal. Foreign minister of Iran, Javad Zarif, had been dispatched to Europe to confirm the continuation of the nuclear deal. Some critics suggest that the deal can’t be kept alive without the support of the US, but the Paris climate accord also continues without the US. The crucial player is the EU, which by refusing to surrender on the terms of the agreement can neutralize US actions. Trump might be expecting that the Iranian regime will break the agreement and enrich uranium, which would give Trump the justification to start an Iran War. The irony can’t be lost on observers. Step one: give up the agreement. Step two: motivate Iran to enrich uranium. Step three: declare war on Iran. Pour out the gas canister, light the fire and burn down the building, while blaming it all on the other party. This is how deranged the US political leader is.

What will be the ripple effect of the US pulling out of the Iran deal on North Korea? What signals are sent to Kim Jong-un? Trump thinks that the crackdown on Iran will remind Kim to be compliant with Trump’s request for denuclearization, but if anything the opposite incentive is created. By abrogating on an international agreement, there will also be no reassurance for Kim that his compliance with US demands will not result in a US abrogation. This might kill any multilateral agreements to solve the Korea crisis.

One can only hope that the international problems in Iran and North Korea can be contained to manageable levels, though this sounds only feasible when all parties take on a more rational frame. It is startling that one wishes back Henry Kissinger (despite the many deaths he was, in part, responsible for causing all over the world) in an era of Donald Trump.

Posted in Uncategorized | Leave a comment