Category: Things I think about

William Pfaff chimes in with an enlightening piece about the riotous protests going on in France, positing observations about the differences between the modern (American) model of capitalism and the previous model that the French are trying to protect:

The earlier model said that corporations had a duty to ensure the well-being of employees, and an obligation to the community (chiefly but not exclusively fulfilled through corporate tax payments).

That model has been replaced by one in which corporation managers are responsible for creating short-term “value” for owners, as measured by stock valuation and quarterly dividends.

The practical result has been constant pressure to reduce wages and worker benefits (leading in some cases to theft of pensions and other crimes), and political lobbying and public persuasion to lower the corporate tax contribution to government finance and the public interest.

In short, the system in the advanced countries has been rejigged since the 1960s to take wealth from workers, and from the funding of government, and transfer it to stockholders and corporate executives.

The second change Pfaff discusses is the effect of globalization and an internetworked environment, demonstrating the widening segmentation of the employers and the employed. Essentially, and certainly this is true in larger organizations, the “faceless masses” that occupy the millions of cubicles in Western workplaces now cost too much to maintain. What with health care, benefits and the cost of physical space, it simply makes more sense to move the engine of the economy to cheaper, more “accommodating” (and less developed) countries:

We need go no further with what I realize is a very complex matter, other than to note the classical economist David Ricardo’s “iron law of wages,” which says that in conditions of wage competition and unlimited labor supply, wages will fall to just above subsistence.

There never before has been unlimited labor. There is now, thanks to globalization – and the process has only begun.

It seems to me that this European unrest signals a serious gap in political and corporate understanding of the human consequences of a capitalist model that considers labor a commodity and extends price competition for that commodity to the entire world.

Truly the economic theories that have dominated the landscape for the last century are in need of a serious rethinking. And if not, then we must refactor our institutions and indeed, our civilization, to deal with the obsolescence of formerly dependable insulating walls that kept economies independent and serving of the local geographic population. As those walls now no longer exist, the socialist system is in jeopardy of withering away completely and the striation between those who have and will continue to have more and those who never will in capitalist systems means that we’re in for a rough ride ahead (bubble or not).

Surely as the internet diffuses power throughout the world’s connected, those folks lacking economic mobility or the opportunity and privilege that others speak of freely will take to this new medium to make their voices heard and, perhaps, make their struggles felt — offline. It’s happening in France now; though none can say if it’s a short term anomaly, it does seem that a great deal of unrest is pervading the societies of the world as modern capitalism colonizes new markets. I can’t help but consider what this means and what the 21st century will look like as territorial conquest fades from relevance and ideological domination becomes the new tell tale indicator of power and influence.