CAN CHINA INNOVATE ?

CAN CHINA INNOVATE ?

     The immense weight of China dominates much economic prognostication these days. Will it overtake the USA and become the dominant power of this century ? What are its strengths and weaknesses ? In the November 18 edition of Time Magazine Michael Schuman looks at this question from the perspective of China's need to learn innovation. Not simply to produce. This is one area in which it is well behind the USA, to the great comfort of American apologists.

      China is facing a period of transition and needs to adjust.

     "China is a victim of its own success....The country can no longer rely on making lots of stuff; China has to invent things, design them, brand them and market them. Instead of following the leaders of global industry, China has to produce leaders of its own."

     China has taken steps to address the needs of its new stage of development, but it has a long way to go. Chinese labour is no longer the dollar-store market of the world. Chinese firms are beginning to outsource to other countries. The author looks at one instance, that of Speciality Medical Supplies who tried this year to shift production to India. Their Chinese workers revolted and held the American manager hostage in his office for six days. Tsk !

     Labour costs in Mumbai would have been 75% less than in Beijing. Wages in China are growing, courtesy of demographics and a shortage of skilled labour. Companies such as toymaker K'NEX are even beginning to "reshore" production back to the USA as other financial factors put pressure on the shrinking labour-cost advantage of China versus America.

     There is also the problem of China's slow adoption of cutting-edge technology. The failure of China's auto industry to make an impression in world markets is illustrative. Failure to adapt has resulted in a 49% rate of initial defects in Chinese-made cars. Ooops ! China has overtaken South Korea as the world's largest shipbuilder, but its vessels are built on older models while the Koreans have moved on to the lucrative markets of supermassive container ships and vessels for energy exploration.

     What innovation there is in China generally builds incrementally on existing technology rather than groundbreaking ideas. The Chinese educational system is good at skill-building but poor at instilling creativity. Chinese engineers tend to be conservative and every concerned about possible consequences of failure. Especially when new ideas are involved.

     China is also notably deficient in marketing. As the author says; "Chinese executives are too fixated on their production and not enough on their customers.". This may be a hangover from the Marxist mode of management, and new Chinese entrepreneurs are indeed trying better ways to sell their products to the world. Jazzed up with a veneer of the exoticism of Chinese culture.

     China lacks management skills, and those who have them can often command relatively huge salaries. Some firms have responded by making their businesses top heavy. What they lack in quality they try to make up for in quantity. Perhaps this managerial over-oversight is also a Marxist leftover.

     Yes, China has had almost miraculous economic growth, but there are many problems that still hold the country back. This article is a good overview of some of them. It's valuable even though it is replete with "evidence" that is only anecdotal.

A Freer Market

A FREE-ER MARKET
       One of the perpetual myths of our so-called capitalist society is that we have the closest approach to a "free market", and that this is all to the good as it connects with our other freedoms. Is this true ? Certainly some like the left libertarians who are in favour of an actual free market would disagree with the idea that our present system is approximating an such thing. The left libertarians are actually quite the dissidents as not just apologists for the present order but "critics" such as academo-Marxists assume that free market describes the present state of things. The proof of the assertion that we don't live in a free market I will leave to the left-libs with their criticism of the many monopolies that states grant to certain insitutions and individuals but not to others. I can do more better than recommend the works of Kevin Carson, an outstanding modern exponent of their views.

     How a real free market differs from what we call it today can be found in what is called dynamic pricing. This goes along well with internet marketing as it consists of constantly chaging prices to reflect an actual "market in the here and now". Obviously not all goods can be sold in such a way, and the ability of this much closer representation of marginal utility to the purchaser says nothing about the various advantages (monopolies) granted to some venders but not others prior to placing the commodity on the market.

     I came about this interesting development in a recent (Jan 21/2013) issue of Time Magazine. The article was titled 'This Offer Won't Last: Why Sellers are Switching to Dynamic Pricing' (page 56). I strongly recommend this article on how our version of a "market" is evolving back to how town markets used to be and still are in many minor ways

HUMOUR:

TRICKLE DOWN ECONOMICS

PERSONAL:

WHAT I LIKE ABOUT THE OCCUPY MOVEMENT PART FIVE:

One thing I am certain of about the Occupy Movement (much more certain than how it will all end up) is that it has finally leapfrogged over the leftist concerns of the last few decades and their petty territorial politics. Those who are not leftists will be puzzled by this formulation. Others who are comfortable in leftist ghettos will be offended. Many of us who identify with a "left tradition"will be more than happy that someone has broken the silence.

What do I mean by the puzzling formulation above ? I mean that the "left" in the past few decades has surrendered any hope of reaching the majority and has become quite comfortable with drawing academic income (or worse quango income). For its personal comfort it has abandoned any idea of large scale social change and has become satisfied with the- let's call them for what they are- "opportunities for corruption". All that is required is to continue to pump out the same old propaganda about the "unique oppression" of social group a to m.

Yeah it makes money for some, but that's all it does. Suddenly there comes a political movement out of nowhere that deliberately tries to address the vast majority of the population and their concerns. WOW; it's like being transported 70 years into the past.

Will it last ? Your guess is as good as mine. The Occupy Movement walks a tightrope between the hell of political co-option and the opposite hell of ineffective militancy. It's a golden mean. Wish them luck.

CANADIAN POLITICS:

THE RICH GET RICHER:

Oh my, is this "news" ? During good times the rich pull ahead as they manage to grab the fruits of expansion. In bad times guess what ? They keep pulling ahead. Good or bad they will get their paws into the till. Here's an interesting item about the widening of inequality here in Canada.

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Canada’s wage gap at record high: OECD
tavia grant
From Monday's Globe and Mail
Published Monday, Dec. 05, 2011 5:00AM EST
Last updated Monday, Dec. 05, 2011 7:56AM EST
The gap between Canada’s rich and poor is growing amid shifts in the job market and tax cuts for the wealthy, according to a study that shows income inequality at a record high among industrialized nations.

A sweeping OECD analysis to be released Monday shows the income gap in Canada is well above the 34-country average, though still not as extreme as in the United States.

Income inequality is a hot topic these days, as mirrored by the Occupy movement’s concerns over the growing gap between the rich and the rest. Protesters aren’t the only ones preoccupied with the disparity; prominent figures from Warren Buffett to Nobel Prize-winning economist Joseph Stiglitz have also fretted over the growing gap, exacerbated by the recession and weak recovery.

“Income inequality increased during both recessionary and boom periods, and it has increased despite employment growth,” said Stefano Scarpetto, the Organization for Economic Co-operation and Development’s deputy director of employment, labour and social affairs, during a presentation of the report.

A growing wage gap carries significant economic consequences. Countries with greater income inequality tend to see shorter, less sustained periods of economic growth, an IMF paper this fall concluded.

“Greater inequality raises economic, political and ethical challenges as it risks leaving a growing number of people behind in an ever-changing economy,” the OECD paper said.

Its 400-page analysis, entitled Divided We Stand: Why Inequality Keeps Rising, a follow-up study to one released in 2008, delves into reasons behind the growing gap.

Canada in particular has seen a widening chasm since the mid-1990s. OECD research shows the average income of the top 10 per cent of Canadians in 2008 was $103,500 – 10 times than that of the bottom 10 per cent, who had an average income of $10,260, an increase from a ratio of 8 to 1 in the early 1990s.

The richest 1 per cent of Canadians saw their share of total income rise to 13.3 per cent in 2007 from 8.1 per cent in 1980.

Moreover, the richest of the rich – the top 0.1 per cent – saw their share more than double, to 5.3 per cent from 2 per cent. At the same time, the top federal marginal income tax rates tumbled – to 29 per cent in 2010 from 43 per cent in 1981.

Two factors explain Canada’s growing gap: a widening disparity in labour earnings between high- and low-paid workers, and less redistribution.

“Taxes and benefits reduce inequality less in Canada than in most OECD countries,” the study said.

Shifts in the labour market are a key reason why the gap is widening, Mr. Scarpetto said. The prevalence of part-time and temporary contract work is eroding wages. Technological progress has been more beneficial to high-skilled workers, while the gap in men’s earnings in particular is growing ever wider.

The gap in hours worked is growing too, as in other OECD nations. Since the mid-1980s, annual hours of low-wage workers in Canada have fallen to 1,100 hours from 1,300 hours, while those of higher-wage workers fell by less, to 2,100 from 2,200 hours.

Rising self-employment also played a role, as the self-employed typically earn less than other full-time workers. This explains more than one-quarter of the increase, the report said.

Taxation is another factor. Before the mid-1990s, Canada’s tax-benefit system was as effective as those of the Nordic countries in stabilizing equality, offsetting more than 70 per cent of the rise of market-income inequality, the report said. The redistributive effect has declined since then, so that taxes and benefits now offset less than 40 per cent of the rise in inequality.

The OECD report isn’t the only analysis of Canada’s growing income gap. A September study by the Conference Board of Canada found income inequality has been rising more rapidly in Canada than in the U.S. since the mid-1990s. Its analysis of 18 countries found that Canada had the fourth-largest increase in inequality between the mid-1990s and late 2000s.

There are social implications too, with more academic research linking income inequality with poor health outcomes. Last month, a study by Montreal’s public health agency found an 11-year difference in life expectancy between men who live in its poorest neighbourhood and those its richest.

The OECD report makes a slew of suggestions on how to narrow the gap. Taxing the rich more is one, along with closing loopholes and ensuring compliance with tax rules.

More importantly, the report said labour market outcomes could be improved by investing more in people – through education, skills training and job retraining programs. “More and better jobs, enabling people to escape poverty and offering real career prospects, is the most important challenge.”

CANADIAN LABOUR - CANADIAN POLITICS MANITOBA:

A MODEST PROPOSAL FOR THOMPSON:

Out here in the middle of nowhere the news has been hot as the infamous Vale Inco of Sudbury strike fame has decided to close their smelter in Thompson Manitoba citing both a lack of nearby refinable ore and difficulty in meeting federal pollution control regulations. Some may see this as a "feint" designed to get either an exemption from the regulations or yet another government subsidy to meet them. Yet, believe it or not, I'm inclined to believe at least part of the company's rationale as it makes little sense to truck ore half way across the country to be processed in northern Manitoba. This latest move, however, may be a cause for regret for Thompson members of the USW when they didn't go on a sympathy strike with their brothers and sisters in Ontario (and the still striking miners in Labrador).

Be that as it may, let's assume the die is cast. the following article from the Winnipeg Free Press shows how cynical the federal Conservative government is in regards to the people of Thompson. Business interests trump all after all. Meanwhile here in Manitoba the local Conservatives are playing politics claiming that the provincial NDP government should "have anticipated" the closure. Did their friends in Ottawa anticipate it ? Maybe they did, but they certainly don't care. After all smelter workers and natives rarely vote Conservative anyways. Bugger them as long as Vale gives donations to the Party and offers soft jobs to its nominees.

MOLLY, HOWEVER, HAS ANOTHER PROPOSAL. ONE THAT ACCEPTS THE NON-VIABILITY OF THE SMELTER, BUT ALSO ONE THAT WOULD PRESERVE AND PERHAPS EXPAND JOBS. SURE IT WOULD INVOLVE SOME POLITICAL COURAGE, AND SUCH COURAGE IS UNLIKELY FROM OUR PROVINCIAL GOVERNMENT. IT IS STILL, HOWEVER, SOMETHING WORTH CONSIDERING. SEE THE ADDENDUM TO THIS POST.

Meanwhile here is the item from the Winnipeg Free Press.

MAMAMAMAMAMA

Thompson's loss of jobs Canada's gain: Clement
Miner downsizing in Manitoba, investing $10B elsewhere
By: Mia Rabson and Larry Kusch


OTTAWA -- He's sorry for Thompson but a $10-billion investment in mines is good for the rest of Canada, Industry Minister Tony Clement said Thursday in the House of Commons.

Clement was responding to a question from Churchill MP Niki Ashton about a plan by Brazilian mining company Vale SA to close the Thompson nickel smelter and refinery by 2015.

It will result in the loss of 500 jobs in Thompson, about 40 per cent of the Vale SA workforce in the northern Manitoba city.

Clement told Ashton he would speak to the Manitoba government about it and said his officials would meet with her to get "all the facts on the table."

Then he said the news might be bad for Thompson but there is good news for the rest of Canada -- a $10-billion investment in Vale's other operations in Sudbury, Ont., Long Harbour and Voisey's Bay, N.L., and Saskatchewan that will result in 1,000 permanent jobs.

"The context of this, however, is that the announcement that is so affecting her community in a negative way is also part of a larger announcement where thousands of jobs will be created throughout the rest of the country," said Clement. "I know she has to defend her people. I understand that, but this is good for Canada in the overall."




Ashton was incensed by Clement's response. "The guy is not committed here," said Ashton. "Manitobans are just as Canadian as people in Sudbury, in Long Harbour and Voisey's Bay."

The Thompson smelter and refinery will be closed because there is a shortage of mineral reserves for it to process. Vale SA also decided it could not meet tough new federal sulphur dioxide emissions standards that would require it to cut emissions from the Thompson smelter by 88 per cent in five years.

Ashton said if its federal standards involved, clearly the federal government can be part of the solution.

Ashton said Clement needs to show he is committed to the people of Thompson and that he should be the one to bring Vale SA to the table to figure out how to save the smelter and refinery.

"He's a cheerleader for Vale and isn't standing up for Canadian workers who are losing their jobs," Ashton said.

Manitoba Premier Greg Selinger flew to Thompson for a meeting Thursday morning with city officials. He said it's premature to discuss any incentives the province may offer Vale SA not to close the refinery.

"We first want to meet with them and find out what their thinking is and ask them to consider alternatives (to closing the nickel smelter and refinery)," said Selinger.

The premier said he was confident the province would be able to arrange a meeting with the company soon.

"When we do, we'll sit down and see what they have to offer and what their thinking is and also put the case forward for why Thompson is a good place to do business."

Opposition Leader Hugh McFadyen criticized the province for failing to anticipate Vale's decision. He cited a 2005 Free Press article that said Thompson would only be processing ore from Newfoundland until Vale's smelter there was completed.

He said it would have been easier to mitigate the impact of Vale's announcement on the northern Manitoba community if Selinger "hadn't failed so miserably to anticipate (Wednesday's) announcement."

mia.rabson@freepress.mb.ca larry.kusch@freepress.mb.ca
MAMAMAMAMAMA
MOLLY'S MODEST PROPOSAL:
Let's accept the idea that the Thompson smelter is an essentially bad idea. It is both uneconomic and heavily polluting ( without either government exemptions or subsidy). Let us also, however, understand that the smelter has benefited from decades of government subsidies in terms of unpaid infrastructure and low power rates (smelters don't operate on 60 watt bulbs). Does the Province of Manitoba owe Inco's heir, Vale Inco, anything ? No !!! If anything the balance is all on the other side. However, to be generous let Vale strip the premises of whatever they want except things that might contribute to a more appropriate use. Chalk up the premises and such amenities to the decades of subsidy.


What would be such an alternative use ? The answer is just a little (little in Northern terms) bit down the road in Flin Flon. The Flin Flon operation for growing medical marijuana is due to be closed in 2012 due to a dispute between the operators Prairie Plant Systems and the 'landlord' Hudson bay Mining and Smelting. This operation produces Canada's 'medical marijuana' crop (to my understanding of poor quality). What I would suggest is that the province of Manitoba, the City of Thompson and the United Steelworkers representing present workers in Thompson make a bid to convert the smelter to a new facility for growing this crop. I further recommend that the ownership of this facility be tripartite between the above mentioned parties.


Is this advantageous to the Province ? Yes ! The energy subsidies to such an operation would be far less than those for a smelter. Is this advantageous to Thompson and the workers ? Yes ! Jobs are preserved, and the local economy thrives. Here is where political courage comes into play. In Canada the Narcotics Control Act is a federal law. Yet, just as in the USA where California has all but legalized marijuana by "over-defining medical use" it is within the powers of a Canadian province as they have responsibility for health to act likewise. It is also a fact that the RCMP are contracted by the Province and are thus subject to directives from the Province as to what law enforcement priorities they should have.


With an expansion of the present piddling Canadian marijuana growing operation it is entirely feasible that all the jobs in Thompson could be preserved, and let me say that the new jobs would be a lot more pleasant than the old ones. We will say nothing about "medical tourism" for now except to briefly mention it. Who would oppose such an enterprise ? Certainly Conservative politicians and organized crime (whose prices would be undercut tremendously). Perhaps Conservative politicians and organized crime are two words for similar things. Perhaps even crime and policing costs in Winnipeg would drop dramatically. But Conservative politicians would be very unhappy about that because it would undercut their "market share" of the vote just as it would undercut the "market share" of the marijuana trade of the gangs..


Does the provincial NDP have the courage to do such a thing ? I doubt it, but it is a policy worth considering. Perhaps the only realistic way to save jobs in Thompson.

CANADIAN LABOUR:

CANADIANS WANT PENSIONS INCREASED:

We live in interesting times. Corporations and the governments that represent them across the "developed world" are frantically trying to pare back the gains that working people have made over many decades. Some of this is an attempt to reduce labour costs to maintain competitiveness in the face of rising industrial producers such as India, China and Brazil. It is also partly an attempt to redistribute the social surplus that flows through government from ordinary people to those corporations that might be said to be "national" (though governments are generally pretty poor judges of such things) once more because of foreign competition. It is also, however, a genuine fiscal crisis of the state that has been building for a long time and has been exasperated by the recent stimulus spending that many governments have engaged in.

Many things, excluding corporate giveaways of course, are being cut back, but pensions have proven to be a particularly sore point as recent events in Greece, Spain and especially France have shown. It seems that the population of many countries have been willing to (sullenly) accept such things as long term stagnant wages and the virtual end of good chances for the social mobility of their children. As I said, sullenly, as resentment over such loses for ordinary people has led to a revival of class based politics in many places, despite its premature obituary pronounced by many pundits left and right.

The attack on pensions across the world seems to be the straw that broke the camel's back. To date the gradually growing realization that things aren't going to get any better has been tempered with an assurance that they wouldn't get significantly worse. If, however, the 'promise" of at least some comfort on retirement is withdrawn it is little wonder that open rebellion has broken out in many countries. Here in Canada where everybody except right wing "think"(sic) tanks agrees that the federal pension system is financially sound the mood of the general population is actually that pension benefits should be increased not reduced. Such a mood will provide a great barrier to the federal government following the European model of cutbacks no matter how much the neocons now in power there would dearly love to do so.

Here's an article from the Canadian Union of Public Employees (CUPE) about a recent survey of what Canadians think should be done about our pension system.

CPPCPPCPPCPP

Western Canadians support increase in Canada Pension Plan benefits
Nov 4, 2010 09:02 AM


More than three quarters of western Canadians support increasing Canada Pension Plan benefits, according to a new national survey. Eighty percent also support increasing federal payments to senior citizens and four in ten believe the government is moving too slowly in reforming Canada’s pension system.

The Future of Pensions poll was completed by Environics Research Group in late August for the Canadian Union of Public Employees and the Public Service Alliance of Canada. The national poll surveyed 2,020 Canadians and has a margin of error of +/-2.2 per cent 19 times out of 20. Responses from British Columbia have a margin of error of +/-6.2 per cent 19 times out of 20, and responses from the Prairies have a margin of error of +/-4.4 per cent 19 times out of 20.

“From coast to coast, Canadians support higher CPP benefits," said CUPE National president Paul Moist. “Western Canadians are sending a clear message to federal and provincial politicians who are currently studying ways to improve the CPP."

The survey asked western Canadians their views on saving and their expectations for retirement. While many have set up a Retirement Savings Plan or a Tax-Free Savings Account, 35 per cent in British Columbia and 30 per cent on the Prairies acknowledge that they are not saving for retirement—mostly because they cannot afford to.

Only one in four western Canadians is fully confident that they will be able to save enough to live comfortably in retirement, and three in 10 believe they won’t have enough to live comfortably, with lower income being the most pessimistic.

“Western Canadians are concerned with their capacity to retire in comfort,” said John Gordon, National President of PSAC. “If action is not taken now, poverty will become a dire reality for more and more elderly Canadians.”

Poll respondents also overwhelmingly support increasing Old Age Security and Guaranteed Income Supplements for those living below the poverty line. OAS and GIS payments amount to only $11,000 per year.

The survey also asked respondents for their preference on different types of pension plans. Despite the economic downturn, those currently part of workplace pension plans believe their pension benefits are safe. But more than 70 per cent prefer a defined benefit plan, which guarantees a fixed amount of benefit when you retire, to a defined contribution plan, where the benefits paid out depend on the performance of the investments in the fund.

Together, CUPE and PSAC represent more than 800,000 public sector workers across Canada. Both organizations have been advocating for retirement security for all Canadians.


Read The Future of Pensions Poll


For more information, please contact:

British Columbia
Barry O’Neill, president, CUPE BC 604-340-6768 (cell)
Patrick Bragg, PSAC Communications, 778-889-3486
Clay Suddaby, CUPE Communications 604-313-1138 (mobile)

Alberta
Jeffrey Vallis, PSAC Communications, 204-391-3067
Lou Arab, CUPE Communications, 780-271-2722

Saskatchewan
Jeffrey Vallis, PSAC Communications, 204-391-3067
Tom Graham, president CUPE Saskatchewan, 306-229-8171

Manitoba
Jeffrey Vallis, PSAC Communications, 204-391-3067
Mike Skaftfeld, president CUPE Manitoba, 204-470-1313

HUMOUR:

THE NOT SO INVISIBLE HAND:

HUMOUR:

RECESSION OPINIONS:

ECONOMY:

YOU GO DOWN THEY GO UP:

Here's an interesting item from the American Institute for Policy Studies. It seems that the recession is hitting some (workers) much harder than it is hitting others (corporate management). Here's the story. You can access the full report at the IPS website. Please note that the IPS names names and salaries and that they also want this news spread as far as possible.>>>

CPCPCPCPCP
Executive Excess 2010: CEO Pay and the Great Recession
By Sarah Anderson, Chuck Collins, Sam Pizzigati, Kevin Shih

The 17th annual executive compensation survey looks at how CEOs laid off thousands while raking in millions.
America’s CEOs had a terribly rough 2009. Or so the national and regional executive pay surveys released so far this year would suggest. “CEOs See Pay Fall Again,” blared one headline early this past spring. “CEO pay rankings dominated by large salary cuts,” read another in June. “Silicon Valley bosses,” summed up still another, “get pay cut.” Month after month, the headlines have pounded home a remarkably consistent message: Corporate executives, here in the Great Recession, are suffering, too.

Corporate executives, in reality, are not suffering at all. Their pay, to be sure, dipped on average in 2009 from 2008 levels, just as their pay in 2008, the first Great Recession year, dipped somewhat from 2007. But executive pay overall remains far above inflation adjusted levels of years past. In fact, after adjusting for inflation, CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century.

American workers, by contrast, are taking home less in real weekly wages than they took home in the 1970s. Back in those years, precious few top executives made over 30 times what their workers made. In 2009, we calculate in the 17th annual Executive Excess, CEOs of major U.S. corporations averaged 263 times the average compensation of American workers. CEOs are clearly not hurting.

But they are, as we detail in these pages, causing others to needlessly hurt — by cutting jobs to feather their own already comfortable executive nests. In 2009, the CEOs who slashed their payrolls the deepest took home 42 percent more compensation than the year’s chief executive pay average for S&P 500 companies. Most careful analysts of the high-finance meltdown that ushered in the Great Recession have concluded that excessive executive compensation played a prime causal role. Outrageously high rewards gave executives an incentive to behave outrageously, to take the sorts of reckless risks that would eventually endanger our entire economy. Our nation’s leading political players have sought, sometimes with grand fanfare, to confront this reality. Leading politicos have been railing against excessive executive bonuses and inappropriately high incentives ever since the economy nosedived. Various executive pay reforms and regulations have even found their way into the statute book. The financial industry reform package enacted this July, for instance, codifies into law several long-term goals of the executive pay reform community, most notably a “say on pay” provision that hands shareholders

the right to take nonbinding advisory votes on executive compensation. Will measures like these rein in excessive executive rewards? Will they begin to significantly narrow the corporate pay gap? That appears doubtful. The UK, for instance, has had a “say on pay” provision on the books since 2002, and that provision has not prevented a continuing executive pay spiral. Despite the recession, UK executive compensation sits substantially above pre-“say on pay” levels. To bring executive pay back down to mid-20th century levels, we need reforms that cut to the quick, that recognize the dangers banks and major corporations create when they dangle oversized rewards for executive “performance.” Some reforms that would move us in that direction are now pending in Congress. Others have yet to make their way onto the congressional docket.

We offer, in this Executive Excess edition, our first comprehensive analysis of all these reform proposals, those already passed, those still pending, and those promising initiatives not yet on our U.S. political radar screen. Our goal: to rate the reform steps already taken and highlight the steps we still need to take. Thorough executive pay reform, we remain convinced, holds an important key to our healthy economic future.

CANADIAN ECONOMY:

A SHINY GLOSS ON A DIRTY REALITY:

If you were to believe the popular press these days you'd think that Canada is forging ahead economically while the rest of the developed world is falling behind. God, you'd think we were China. The reality, of course, is quite different. Perhaps it speaks to the desire for optimism. Or perhaps it speaks to the laziness of reporters who lap up government pronouncements and regurgitate them as the unvarnished truth without any need of examination. Such is the great "surge" in job creation trumpeted to the skies in the last week. the reality is quite different. pretty well all this job creation is in part time work, and the actual number of hours worked continues to decline. Here's an item from the Progressive Economics Forum about this.

CLCLCLCLCL
More Jobs, But Fewer Hours
July 9th, 2010
This morning, Statistics Canada reported that employment jumped by an incredible 93,200 in June. But the total number of hours worked actually declined. In effect, less work was divided up between more workers. (By contrast, a similar employment jump in April corresponded to a large increase in hours worked.)

Less Unemployment: A Central Canadian Story

The advantage of dividing less work among more workers is that it reduces unemployment. However, because the number of workers seeking employment also increased, 93,200 more jobs reduced total unemployment by only 31,200.

Furthermore, this welcome decrease in unemployment was entirely concentrated in three provinces: Ontario, Quebec and Manitoba. In the other seven provinces, both the absolute number of unemployed workers and the unemployment rate increased.

The New Jobs

Employment gains were evenly split between full-time and part-time work. There are 51,900 more private-sector employees, 25,600 more self-employed people, and 15,700 more public-sector employees.

Employment declined in goods-producing industries. All of the employment gains were in the service sector, especially retail and wholesale trade, support services and healthcare and social assistance.

Wages and Inflation

Perhaps reflecting job creation in lower-paid industries, wages were soft in June. Nationally, the average wage is up 1.7% over the past year, scarcely exceeding inflation (which was 1.4% in May).

Wages were anemic in Ontario and New Brunswick, rising only 0.8%, and almost completely flat in Alberta, edging up just 0.2%. Relative to inflation, workers in these provinces have taken a pay cut over the past year.

CANADIAN POLITICS- BRITISH COLUMBIA:

ANTI-HST CAMPAIGN IN BC:

Who would ever have thought that the Moll and the Zalm could agree on anything ? It's true. Ex-Premier Bill Vander Zalm of BC has launched a campaign to repeal that province's Harmonized Sales Tax (HST), and I have to say that I'm in full agreement, though undoubtedly for different reasons than Bill may have. Here's the story from the Straight Goods website. See the end of this article for my own opinions as to why I support such a campaign.

BCBCBCBCBCBCBCBC
"Fight HST" campaign launches

Group has 90 days to collect signatures for repeal.

by Bill Tieleman

Former BC Premier Bill Vander Zalm will launch the Fight HST citizens Initiative petition campaign to stop the Harmonized Sales Tax in BC Premier Gordon Campbell's own riding of Vancouver-Point Grey on Tuesday April 6.

The public rally April 6 marks the beginning of the 90 days that "Fight HST" has to collect the signatures of 10 percent of registered BC voters in each of the province's 85 constituencies for the Initiative petition to be accepted by Elections BC, says Fight HST Lead Organizer Chris Delaney.

"The HST takes money out of people's pockets but doesn't put a dime into healthcare, education or important services," said Vander Zalm



Vander Zalm says it was important to launch the campaign right in Premier Gordon Campbell's own riding, to send a clear message to the BC Liberal government.

"British Columbians don't want Premier Campbell's HST — not even in his own riding," said Vander Zalm. "If Premier Campbell and the BC Liberal MLAs don't listen to the people and drop the HST, he and his party are finished."

Vander Zalm says he is confident British Columbians will make the Initiative a smashing success after drawing huge crowds as he toured across the province over the past two weeks.

"British Columbians are fed up with the HST and fed up with the undemocratic way Premier Campbell and Finance Minister Colin Hansen are imposing a tax after promising they wouldn't do it," said Vander Zalm. "This citizens Initiative petition is the people's chance to tell Premier Gordon Campbell they want him to drop the HST — and demand that he drop it."

"The HST is the most hated tax ever because it is a cruel tax that takes money out of people's pockets but doesn't put a dime into healthcare, education or important services," said Vander Zalm.

In addition to Vander Zalm, speakers at the rally will include Delaney and "Fight HST" Strategist Bill Tieleman, founder of the NO BC HST Facebook protest group, which has more than 131,000 members.


Bill Tieleman, president of West Star Communications, is one of BC's best known political commentators and communicators. Read political commentary from Bill every Tuesday in 24 hours, Vancouver's free weekday newspaper (also online). Listen to Bill on Mondays at 10am on CKNW AM 980's Bill Good Show, in Vancouver, BC. Bill's email address is below.

Email: weststar@telus.net . Website: http://billtieleman.blogspot.com/ .

BCBCBCBCBCBCBCBC

Here's a report from the CBC on what happened at last night's rally.

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Vander Zalm's anti-HST rally draws hundreds in Vancouver
Several hundred concerned taxpayers turned out to hear former B.C. premier Bill Vander Zalm launch his anti-HST petition Tuesday night in Vancouver.

Vander Zalm's supporters filled the auditorium of Kitsilano Secondary School to hear him criticize Premier Gordon Campbell's surprise introduction of the harmonized sales tax just weeks after the provincial election last May.

The 12 per cent tax goes into effect July 1, replacing the seven per cent PST and five per cent GST.

"If you want to make something bad look good, you have to lie, and you have to lie over and over, and that's what's been happening," Vander Zalm told the crowd.

But not everyone who turned out Tuesday night agreed the tax would be bad for taxpayers. One man said his mother's benefits would actually increase under the HST.

But Vander Zalm challenged him, saying vulnerable people will still be hurt by the new tax.

The former premier also criticized the timing of the introduction of a harmonized tax that will apply to many good and services that were previously exempt from the PST, such as restaurant food, hair cuts and sports club memberships.

"We're in a recession folks," he said. "We were hoping to come out of it. We were hoping to come out of it soon, but these people in Victoria are only digging us deeper down.

"We're going to suffer. Industry and our businesses and all of us will suffer with it. It's a bad tax at a bad time for the wrong reasons."

Recent university graduate Katherine Chan agreed with that sentiment.

"I'm planning to get married, you know, buy a house, build a family, and, seriously, I can't even feed myself now. How am I going to, like, you know, support my own kids?" she said.

Thousands of volunteers collecting signatures
Vander Zalm is aiming to get rid of the tax by forcing the province to hold an initiative vote on the issue, but first, he needs to collect thousands of signatures on a petition supporting his draft bill.

So far, the veteran campaigner has signed up nearly 2,000 volunteers from ridings across B.C. to help him collect the estimated 300,000 voter signatures required to trigger an initiative vote, which is similar to a referendum.

Speaking before the rally, he said told CBC News he has seen a lot of hectic days in his 25-plus years in politics, "but I've never ever experienced anything like this."

"I have faxes coming in and going out till my fax machine is heating up. My telephone has never stopped ringing. And the e-mails? I hate to look at the computer," he said.

About 300 people signed the petition at the rally on Tuesday night, but volunteers have already begun collecting signatures across B.C.

Those organizing the petition have 90 days to collect signatures from 10 per cent of registered voters in every riding. Then Elections BC has to verify the signatures.

Once that is done, a legislative committee would then decide whether it will send a draft bill directly to the legislature for a vote or put the issue to a province-wide vote first.

But the provincial government has already said the HST is a federal tax, and an initiative vote wouldn't affect it.


Read more: http://www.cbc.ca/canada/british-columbia/story/2010/04/07/bc-anti-hst-rally-vander-zalm-vancouver.html?ref=rss#ixzz0kTxDjz2e

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WHY MOLLY LIKES THIS IDEA:

Here are a few reasons why I think the anti-HST campaign is a good idea. Some of these reasons, I'm sure, are shared by the traditional leftists over at Straight Goods. Others are unique to a libertarian socialist perspective.

1) Value added taxes (sales taxes) are regressive. They impact people at the lower end of income distribution more than they affect those with higher incomes. If we have to have taxes they should be progressive, affecting those with higher income more or at least equally distributed. Not only is a greater percentage of upper class income devoted to savings and investment, and therefore exempt from a consumption tax, but a higher percentage of their consumption is also exempt from same. Think tax shelters, consumption in foreign countries, "benefits" as opposed to salary/wages etc..

2) Value added taxes are invariably favoured by corporations and opposed by small business. This is especially the case with the Harmonized Sales Tax where it has been introduced in various Canadian provinces. This is because such taxes favours the large, just as it does with individuals, and reduces the income of small business. Think of the hairdresser who now has to charge 12% on their labour. Small business has no legal way of escaping this sudden increase in their prices and extra accounting costs- and resulting lower sales- while corporations, especially those producing for export have a multitude of such escape hatches, let alone the ability to simply pass on extra accounting costs to the customer.

3) In connection with this the introduction of the HST in various provinces has actually been a sly way of introducing extra categories of taxable items, most particularly making labour provincially taxable. This increases the general tax burden for the consumer, especially those in lower income brackets. Put truthfully this legislation that taxes things previously exempt from at least provincial tax (the major effect of harmonization) reduces personal consumption and adversely affects the major generator of new employment in most developed societies - small business. Such taxes thus have a depressing effect on the economy that is greater than that of another initiative such as simply increasing income tax.

4) While I don't think that the introduction of a referendum process in Canadian politics is a major democratic reform it is at least a minor step to making our society more democratic. Real democracy would involve a much more radical decentralization (and "de-statization"). BC actually has a referendum process in legislation, but any attempt to put it into practice has been stillborn in every case. This protest has the potential to actually make the process a reality rather than empty rhetoric. That would be nice to see. From the final sentence of the last article above the government of BC is already thinking of ways to weasel out of this law. What they say is, of course, an outrageous lie. The decision to sign up for the HST is very much a provincial matter.

5) Far too much of our politics has been "spectacularized" into image versus substance. This particular campaign is all about substance. It is also heartening that it seems to be gathering support from both the right and the left. One of the worst aspects of "politics as spectacle" is the creation of both a right and a left that rarely articulate policy but do spend their time in petty sniping and in creating fantastical images of each other. Campaigns such as this move beyond this artificial divide.

6) As a libertarian socialist, as opposed to the statist form of socialism that is the image of socialism in most people's minds, I know that socialism cannot be created through government but only by gradually reducing the role of government and increasing the role of cooperative and local institutions. Sooner or later this has to involve the shrinking of the fiscal resources available to government. The big question is in what order you pare away the functions of the state, not whether you prune them or not. There will be no miraculous revolution that suddenly turns government organizations into cooperative ones controlled by the people affected. It will be a long and slow slog. It might as well start with resistance to increases in the fiscal power of government. that's what this campaign is.

CANADIAN ECONOMICS/CANADIAN POLITICS:

ANOTHER CORPORATE RIP-OFF:

The following, from the Progressive Economics Forum, certainly is grist to the mill of my long held contention that we no longer live in a society that could be styled "capitalist" (whatever the title of the article). I have termed our present society as "managerial rule" for decades, and I have yet to see convincing evidence that the traditional use of the c-word gives any greater insight. Usually it obscures very important phenomena. In my view We live in a society far removed from the "free market" that should be a defining aspect of "capitalism". Yes, I know that there has been over a century of leftist modification to the crude theory that Marx first presented in the 1800s, but as the years drag on this seems more and more to be like the addition of epicycles to try and correct the failings of the Ptolemaic model of the universe.

Understanding that most of the economy is now and has been for years outside of the simple supply/demand situation that would define pure capitalism is essential to understanding things like what is described below. No doubt our economy still retains some elements of capitalism. Even the most tyrannical Stalinist command economy had to have such elements, even if only as in the black market, simply to survive and function. Yet, both the theoretical owners of corporations ie the stockholders and the public in general are obviously defrauded by practices like those described below. If the "state" is an institution that operates "on behalf of the ruling class" then what the problem described below shows is that the managers of the corporations are the ruling class.

But enough of my theorizing. Here's the article.

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Stock options, the buyback boondoggle and the crisis of capitalism
As if there weren’t already enough reasons to eliminate the egregious stock option tax loophole, a column by Eric Reguly in this month’s Report on Business magazine highlights yet another. This reason helps to explain why we had such a booming stock market up to 2008, but little growth in real investment and productivity. ( One of the chronic and perhaps growing problems of managerial society- Molly )

First of all, the stock option deduction, which allows those recipients of stock options to only pay half the statutory rate of income tax on their gains is:
#Expensive, costing Canada’s federal government an average of almost $1 billion a year in foregone tax revenues annually during the past five year, according to Finance Canada’s tax expenditure accounts.
#Unfair, with the benefits going overwhelming to those with the highest incomes, including CEOs, as Hugh Mackenzie has outlined in his annual CEO pay report for the CCPA. For example as I showed a few years ago, this tax loophole saved Robert Gratton, former CEO of Power Corp over $24 million in federal income taxes, just on one year’s income. This is a major reason why some of the highest paid people in our society pay tax at a lower rate than ordinary workers.
#Distortionary and destabilizing, creating the misaligned incentives and pay structures that reward short-term risk taking that Bank of Canada governor Mark Carney identified as one of the key reasons for turbulence in the financial markets in a speech he gave two years ago.

But there’s an even more devastating reason why the tax loophole for stock options should be eliminated: it has been very damaging for the economy.

Research by William Lazonick, director of the Centre for Industrial Competitiveness at the University of Massachusetts, shows that stock buybacks–using a company’s funds to buyback its own shares–has swallowed up an enormous amount of the income of major US companies. Canadian companies have also put increasing amounts of their income into stock buybacks and not into more productive investments, as I outlined a few years ago.

The stock buybacks have resulted in pretty blatant stock price manipulation, boosting stock price value for these companies, and paying off very handsomely for those who hold shares, which includes most CEOs and senior executives, especially since they only pay half the rate of tax on these gains. It’s been great for shareholders and other employees who also own shares, at least in the short-term. ( But they pay off most handsomely for those who can control and anticipate the movements ie management - Molly )

The problem is that in the long-term it has bled the economy of real investment in the economy. As Reguly writes:
Every dollar spent on buybacks means one less dollar spent elsewhere-on R&D, on training, on equipment, on creating employment, on innovation. Ultimately, competitiveness and economic growth suffer.

This issue is related to the broader discussion we’ve recently had on this blog about the ineffectiveness of corporate tax cuts.

Lazonick ties this to a broader crisis of US capitalism’s “New Economy business model”, says we should ban stock buybacks where they are used to manipulate prices, and writes that the:
The government also needs to enact legislation that drastically reins in top executive pay, which means placing restrictions on stock-based remuneration, especially stock options.

We will soon see in the federal Throne Speech and budget what Canada’s federal government has planned to revitalize Canada’s economy coming out of this recession.

But if it is just more faith in the same old simplistic laissez-faire Advantage Canada framework without fixing any of these problems, it will have very little success.

AMERICAN POLITICS/ECONOMICS:

"CORNERED"-THE BOOK:

Here's a little book plug for something the people at Wake Up WalMart consider well worth reading.

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New Book Cornered Discusses Walmart, Destructive Monopolies:‏
Do you want the real story about who destroyed America's REAL economy?

We wanted to recommend a new book that just hit the shelves. In Cornered: The New Monopoly Capitalism And The Economics Of Destruction, New America Foundation's Barry C. Lynn takes an explosive look at how Wall Street financiers took advantage of the overthrow of our anti-monopoly laws to consolidate unprecedented powers.

They use these powers in ways that destroy jobs, degrade safety, crush independent businesses, forestall innovation, harm our environment, and threaten the political foundations of our democratic republic.

Not surprisingly, Walmart is a major player in this disturbing story. Lynn discusses Walmart as one of the quintessential examples of the destructive monopoly, arguing that Walmart needs to change its ways not just for the benefit of workers or communities, but for the entire economy.
Endorsements for Cornered:
Cornered has changed my view of what's gone wrong with American capitalism. Brilliantly argued and meticulously reported, it confronts with the age-old enemy of both progressives and libertarian conservatives -- the power of monopoly.

-Barbara Ehrenreich, author of Nickel and Dimed and Brightsided.
This book is essential to understanding how we got into our current mess.

-Michael Mandel, chief economist, Business Week.
This is a truly groundbreaking and eye-opening work that everyone interested in understanding how the world really operates should read.

-Ha Joon Chang, winner Leontief Prize in economics, author Bad Samaritans.
Best Wishes,
The Team,

WakeUpWalMart.com

CANADIAN LABOUR:

A DEAL ?:

Canada and that tiny insignificant country to the south of us, what was its name, oh yeah the USA, have recently signed an agreement giving Canadian firms access to the stimulus money spent by the government in 37 states. The trouble is that almost all of the money has already been spent. In return these states have been granted perpetual access to bid on any municipal and provincial contracts of any Canadian provinces that may sign up to the deal negotiated by the federal Conservative government. The government, and most of the sheepish media, have been touting this as a great "victory", even though it restricts the power of Canadian localities to create local jobs in perpetuity while chasing a pot of gold that has pretty well be drained already. Others, such as the Canadian Union of Public Employees (CUPE) don't think this is so great. Here's their opinion.

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Trade deal short-changes provinces, cities:
OTTAWA - “The new trade agreement forged by Canada and the United States as a way to side-step U.S. ‘Buy America’ provisions amounts to Canada giving away the farm for very little in return,” says CUPE National President Paul Moist.

The agreement, which opens up Canada’s municipal and provincial procurement markets to the U.S., will give American companies access to over $100 billion in Canada’s annual sub-federal procurement market.

“This agreement is certainly good news for American corporate interests, but there is very little assurance that this agreement will create good jobs for Canadians,” said Moist.

With the bulk of U.S. stimulus money already spent, the deal does very little to resolve the issue that started the dispute – specifically, that Canada could not profit from U.S. stimulus dollars. However, the new agreement will leave the ‘Buy America’ provisions basically intact, and only applies to the 37 states that have signed on to the World Trade Organization (WTO) Government Procurement Agreement (GPA).

Meanwhile, under WTO rules provinces and municipalities will lose an important policy tool in the form of local purchasing power.

“Buy local policies are good for the environment and for Canadian businesses, and they keep jobs and tax revenues in the community. Why the Harper government would enter Canada into such an uneven deal for Canada is baffling,” said Moist.

The agreement may also open the floodgates to increased privatization of public services such as water and hydro. While provincial and municipal procurement was previously excluded from NAFTA, now U.S. investors will be able to launch Chapter 11 investor rights challenges if they feel provinces or municipalities are taking policy actions that harm their interests.

“This deal commits Canadian governments to forfeit valuable procurement sovereignty, while the U.S. offer is largely empty. This kind of risk is the last thing we need during an economic slowdown. Our government needs to look at improving its own record of research, development and innovation, instead of selling our provinces and municipalities short.”
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For more information, contact:

CUPE Media Relations – 613-852-1494

ANARCHIST THEORY:

INTERVIEW WITH KEVIN CARSON:

The following interview with American left libertarian theorist Kevin Carson of the Mutualist Blog first saw the light of day at the Isocracy website. Molly reprints it here from the Mutualist Blog. One of the "privileges" of sitting in the hospital recovering from surgery was that I was able to begin reading Carson's first book, 'Studies in Mutualist Political Economy', and I hope to review it here at Molly's Blog when I am finished. Aside from the people gathered around Z Communications Carson is the only anarchist in North America doing what I would consider serious theorizing in economics. Not that I agree with everything he says, but he definitely says it very well, and makes a far more scholarly case for his views than the half-hearted borrowings from Marxism so common amongst anarchists or, worse, total ignorance of economics.

In any case it is refreshing for a more or less traditionalist anarchist socialist like myself to read about the case for "free market socialism/anarchism". Once again, I have my differences, particularly around the concept of "externalities" and the ability of a market to accommodate them in cost. I still think, however, that those of us who have more traditional (outside the USA) views have a lot to learn from people like Carson. Personally I am a "pluralist" when it comes to economic forms of some future libertarian society, and I have a hard time accepting any of either the traditional or newer anarchist economic theories as being sufficient in themselves. But more of that in the planned review. For now check out Carson's blog and purchase his books there. Here's a taste of what he thinks.

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Mutualism: An interview with Kevin Carson:
Kevin Carson Interview
Kevin Carson, an American political theorist and a contemporary leader in discussions concerning mutualism and author of three extremely important books on co-operation, mutualism and capitalism (Studies in Mutualist Political Economy, Organization Theory: A Libertarian Perspective, and The Iron Fist Behind the Invisible Hand). Describing his politics as being "the outer fringes of both free market libertarianism and socialism", he certainly will find a welcoming audience among our group - which is why he's been asked several difficult questions.
The Iron Fist Behind the Invisible Hand is available in html format and Studies in Mutualist Political Economy and Organization Theory: A Libertarian Perspective are both available as PDF files.
Q.Firstly, thank you Kevin for agreeing to this interview with The Isocracy Network.
A.Thanks for inviting me.

Q.Could you begin by giving a description of mutualism from the initial definition offered by the anarchist Proudhon to contemporary examples and your own involvement in this sort of analysis of political economy?
A.Well, first of all, it's important to distinguish between mutualism as a general form of praxis, and mutualism as a theory. Mutualist practices (friendly societies and lodges, guilds, arrangements for mutual aid, etc.) are probably old as the human race. Proudhon, Owen, Warren, et al simply created a theoretical framework that emphasized such forms of organization as a building block of society. It's a bit like the centipede trying to figure out how it's been walking all this time, or the man who was astonished to learn he'd been speaking in prose all along and didn't even know it.

For that matter, there have been important anarchist thinkers like Kropotkin who emphasized mutual aid and other mutual organizations, without in any strict sense being mutualists. Cooperatives and mutuals have been central to the counterinstitution-building of much of the decentralist Left in the U.S. since the 1960s, but their thought is not explicitly mutualist either.

I n fact, I'd go so far as to say that most of the important examples of mutualist practice (the cooperative movement, the local currency and alternative credit movements, etc.) are not explicitly or self-consciously mutualist in ideology.

Having read Proudhon for some years, his thought is so complex and at times even seemingly self-contradictory, that I still hesitate to summarize it. But I'd venture to say, as an approximation, that his programme centered on 1) abolishing artificial property rights in land and artificial scarcity of credit, so that the working class could secure cheap access to the prerequisites of production; and 2) organizing the economy around associations of producers. Of course Proudhon was an important founding thinker for anarchism as a whole as well as for mutualism; so these ideas, in modified form, have heavily influenced later collectivist, communist and syndicalist variants of anarchism.

Mutualist praxis was central to the Owenite movement in the UK (e.g. Owenite craft unions organized cooperative production and distribution by strikers in their own shops), as well as such things as the Rochedale cooperatives, the Chartists, and land colonization movements. Owenism, by way of Christian socialism and guild socialism, probably had a significant (if indirect) influence on distributism.

In the U.S. mutualism's primary founder was the Owenite Josiah Warren. Warrenism, cross-pollinated with J.K. Ingalls' occupancy-and-use view of land ownership and William Greene's mutual banking theories, together led to the plumbline individualism of Benjamin Tucker. Tucker focused almost entirely on the abolition of artificial property rights and privilege in land and credit, assuming that when the legal props to rent and interest were removed and cheap land and credit were universally available, the forms of organization would take care of themselves. He displayed almost no interest whatever in cooperatives, associations for mutual aid, etc., as such.

Dyer Lum, John Beverley Robinson, and Clarence Swartz, all heavily influenced by Tucker, supplemented his focus on eliminating monopolies with some positive speculation on cooperative forms of organization; in so doing, they represented a partial fusion of Tucker's version of individualism with the older cooperativist tradition of Proudhon and Owen. Lum, in particular, was also friendly to the radical labor movement and had fairly close ties to the I.W.W.

Q.Would a highly successful large worker's cooperatives, like the John Lewis Partnership in the UK, and the Mondragón Corporation in Spain [centered in Basque Country] serve as evidence that mutualist economics can and does work in the large scale? Are credit unions evidence that mutualist economics can replace capitalist banking?
A.Although I'm quite friendly to both Mondragon and credit unions, and consider their influence to be decidedly positive, I believe their form is still distorted considerably by the capitalist milieu within which they exist. I like Mondragon's federated system of cooperative producers, distributors and banks within a single umbrella organization. But it's much too centralized a system in my opinion, with worker representation only effected at the level of the board of directors for the system as a whole; below the level of the Mondragon system as a whole, it's a fairly top-down system of conventional management, with no significant self-management at the level of individual departments or factories.

I would greatly prefer local markets with lots of stand-alone cooperative manufacturing shops on the Emilia-Romagna model, integrated with cooperative banks in some sort of barter or local currency network of the sort promoted by Tom Greco.

Most credit unions, unfortunately, have adopted the culture of the conventional banking industry, and have almost no ideological affinity for the larger cooperative or counter-economy movement. Of course they are still greatly preferable to capitalist banks; being controlled by many small, local depositors, they are far less prone to the excesses of the capitalist banking system that we've seen in recent years.
Q.Proudhon, although arguing that he opposed the idea of individuals deriving an income through rent and investments, said that he never wished "to forbid or suppress, by sovereign decree" such activities. A contemporary mainstream economist may argue that Proudhon's position here would be particularly utopian in those markets that have high barriers to entry or other monopolistic features, that a worker's cooperative versus an entrenched capitalist enterprise in such a market would require a miracle on the scale of David vs Goliath for success.
A.That sounds a bit like Tucker's pessimistic view of things in his later years, when he seemed resigned to the idea that the large industrial trusts had grown to the point that their market power would persist even after the Four Monopolies were removed.

I think such a view neglects the extent to which capital-intensiveness is a source of high overhead cost and inefficiency, and is only made artificially profitable by the state's subsidies and protections. In fact production as such has become far less capital-intensive over the past three decades, with the old mass-production core outsourcing increasing shares of total production to flexible manufacturing networks and job-shops, and some of them retaining little more than control over marketing and "intellectual property." The development of cheap, small-scale CNC tools in the 1970s meant that the capital outlays required for manufacturing imploded by one or two orders of magnitude. That was the beginning of a long shift from older mass-production industry to Emilia-Romagna, the Toyota supplier network, the job-shops of Shenzhen and Shanghai, etc.

The process continues even further in the same direction with the desktop manufacturing revolution of recent years: cheap, homebrew CNC machines scalable to the small shop and garage.

When physical capital costs are so low, most of the financial role of the old industrial core is becoming redundant. And with small-scale production driven by local orders on a lean, demand-pull, JIT basis, marketing is similarly redundant.

"Intellectual property" is the main surviving buttress to the old corporate walls, and it's becoming increasingly unenforceable.
Q.A follower of Henry George would argue in the realm of natural resources it would be impossible for success and that land-rents should be socialised. How would you respond to these claims?
A.I'm quite friendly to George, and think the lines between individualism and Georgism are a lot less harsh than (say) Tucker would have believed. But I believe a great deal of rent could be eliminated simply by removing subsidies to economic centralization and positive externalties created by taxpayers--not to mention by removing state enforcement of title to vacant and unimproved land. If as much urban infrastructure as possible were funded by user fees, and cities broken up into lots of mixed-use neighborhoods in which residential areas had their own miniature "downtown" cores, differential rent would be far less significant. I think a majority of George's aims could be achieved by Tucker's means, or even by a throughgoing application of Rothbard's means.

Q.With examples of worker's self-management in the former Yugoslavia, and modelling by economists such as Jaroslav Vanek and Benjamin Ward, it has been shown in some cases (especially in critical infrastructure) it is advantageous for labor-managed firms, in their objective of increasing income per worker, to either lay-off workers or - like a monopolistic capitalist firm - to reduce productivity and thus derive monopoly profits. How would a contemporary version of mutualism prevent these problems?
A.It's been a long time since I read Vanek's work on worker-managed economies, but my immediate reaction is that there's probably no fool-proof set of governance rules. When the firm is controlled by capital-owners, they'll behave in such a way as to maximize returns on capital; when it's controlled by managers, as in most large Western corporations, they'll maximize benefits to management at the expense of both labor and capital. At least in a worker-managed firm, the decisions will reflect the interests of a bare majority, which can't be said of the other two mechanisms. Beyond that, I think the answer to the kind of behavior you describe lies in exit as much as in voice: the lower the capitalization requirements and the lower the barrier to entry for most forms of production, and the lower the cost threshold for comfortable subsistence, the less catastrophic changes in employment will be. I'd like to see an economy where a much larger share of total consumption needs are met through production for subsistence or barter in the household/informal sector, and the average time spent in wage employment is much less than at present.

That would mean a significantly larger share of the population would be self-employed than at present, a very large share would work hours that we would regard as "part-time," household arrangements for pooling wages and hoarding labor-time would be much more resilient, and even wage-earners would tend to accept as normal prolonged periods of unemployment during which they lived off subsistence resources while waiting for a job to their liking.
Q.Pro-capitalist neoliberals, such as George Reismann, Roderick T. Long have criticised your advocacy of mutualism. Reisman and Long both argue that you do not support John Locke's ownership of landed property that has been mixed with labour or, to use the peculiarly U.S. vernacular, "homesteading". It seems that both this critics have fundamentally misunderstood Locke's concept of land ownership, which recognises a public cost for exclusion and use in addition to the right of added value. How do you respond to these criticisms?
A.To be frank, I can't say with any degree of confidence what Reisman understands about anything. But I think Long acknowledged Locke's Proviso and explicitly characterized his own position as "non-Proviso Lockeanism." I'm not a Georgist myself, although I'd be well-disposed to a local property rules system based on some form of common ownership and community collection of rent. In any case, justifiably or not, when answering Lockean critics I tend to tacitly work from the premise that "Lockean" means "non-Proviso Lockean." And for the most part, I think a radical and consistent application of non-Proviso Lockean rules would go most of the way toward achieving the aims of the Tucker-Ingalls land theory.

... all the fruits it naturally produces, and beasts it feeds, belong to mankind in common, as they are produced by the spontaneous band of nature: ... Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property... For this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good left in common for others.John Locke: Of Civil Government - Second Treatise

For that matter, over time I've come to see the bounderies between the Tucker-Ingalls and non-Proviso Lockean systems as less distinct, and to perceive some practical problems with the Tucker system (at least the more radical variant--he seems to promote different versions of the system at different times). At times Tucker himself seemed to concede the existence of house-rent, but to argue that the nullification of titles to vacant land would (through market competition) cause the land-rent component of rent to disappear and overall rent to fall to the value of rent on buildings. Now, to me, that seems to imply that Tucker wasn't necessarily (at least at times) dead-set against absentee ownership in principle. That variant of his land theory, at least, seems to imply that the important thing was to eliminate large-scale absentee title to vacant and unimproved land.

In any case, I tend to think that doing so would go a long way to eliminating landlord rent through market competition.
Q.Another critic, Walter Block argues that you are actually some sort of Marxist because you use the labour theory of value for deriving a theory of exploitation. It would seem that (a) Block is unaware that Adam Smith and David Ricardo also used the labour theory of value and (b) using it to calculate a rate of exploitation is hardly the same as using it as an anchor to exchange values.
A.I think the Austrians also, for the most part, exaggerate the extent to which marginalism/subjectivism is a radical departure from classical labor and cost theories. It's closer to the truth to say that marginalism provides a mechanism for explaining the tendency that Ricardo et al described. The marginalist/subjectivist claim that "utility determines value" is true in a technical sense, if you add the qualification "at any point in time given the snapshot of supply and demand in the spot market." But it's not true in the ordinary way we use those words. If you allow changes in supply over time to enter the picture, then supply alters until the utility of the marginal unit reflects the cost of producing it--i.e., exactly what Ricardo said.

It makes far more sense to treat marginalism as a complement or fulfillment to classical political economy, rather than as supplanting it.
Q.Politically, where do you think mutualists should align themselves. Should they spend their efforts in building cooperative organisations, like Proudhon's advocacy of dual power? Or is there some mileage to be made in being involved in existing political organisations, such as the Labour Party - Cooperative Party groups in the U.K.? What about in the United States; is the Libertarian Party salvageable?
A.I think by far the most important, and the most interest, of our tasks is actually building the kind of society we want, and doing so so far as possible without regard to the state. But there's something to be said for putting external pressure on the state, and participating in political coalitions to remove as much state interference with our activities as possible. Of course the primary emphasis of such coalition-building should be forming pressure groups, rather than attempting to become part of a governing coalition.

A lot of this parallels Daniel DeLeon's disputes with the anarchists in the I.W.W. DeLeon argued that "building the structure of the new society in the shell of the old" (i.e. building industrial unions to serve as organs of self-management) would not be enough by itself. So long as the capitalists controlled the state and its armed force, and the significant minority of people whose class interest was tied up with it, there was the danger of the "Iron Heel" being brought to bear against counter-organizations. On the other hand, political victory alone wasn't sufficient; he gave the example of threats by Jay Gould to organize a national capital strike and lockout if the socialists ever captured the national government. Workers, DeLeon argued, should be focused on building counter-institutions, but also be prepared to seize the commanding heights of the state long enough to dismantle them and prevent them from being used against themselves.

What we need is a primary focus on institution building, without entirely neglecting the need for a political movement to run interference for the counter-institutions.

What's more, there's the very real danger an authoritarian state might make a concerted effort to stamp out the counter-economy through (for example) the kinds of totalitarian surveillance Richard Stallman described in "The Right to Read," intensified licensing and zoning to suppress low-capital producers, etc. It's a waste of effort and probably corrupting to seriously run our people for Congress or the White House. But it's perfectly sensible to carry out propaganda against legislation like the DMCA, to support lobbying campaigns organized by groups like the Electronic Frontier Foundation and NORML, etc.
Q.Proudhon argued that through a society of contracts between individuals, a federal structure could arise. This of course must presume that individuals have the capacity to engage in uncoerced contractual arrangements. What other political requirements do you think have a particular priority in breaking down authoritarian elements in statist rule?
A.Well, it could be that the authoritarian elements of statist rule will persist on paper right up to the point at which they become irrelevant. But in my opinion it's at least worth a shot to pressure the state from outside, and form ad hoc alliances to pressure the state, in order to minimize its interference and fend off attempts at intensified interference. That includes local efforts against licensing and zoning that impede household microenterprise and micromanufacturing, local pressure to defend peaceful squatters and vagrants, pressure against the regulatory suppression of self-organized mutual-aid efforts, pressure at the national level against further expanding "intellectual property" law, and so forth.
Q.Kevin, thank you for your time and views.