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Anti-Capitalist Meetup: Sustainability, capitalism, and the tendency to oligopoly by Don Mikulecky

1:58 pm in Uncategorized by Anti-Capitalist Meetup

It has been said many times that “sustainable capitalism” is an oxymoron. There are reasons why people believe this. The nature of capitalism has the need for growth built in. If there were any really strong contradictions in Tuesdays SOTU speech they rest right here. The call for economic growth and some sort of action toward addressing the climate change problem are really at odds with each other in their present context. Here is one example of the claim that capitalism is not in harmony with sustainability: Is Sustainable Capitalism an Oxymoron?

The root problem with capitalism is not that individual firms are incentivized to grow, but that the economy as a whole must grow…

When oligopolies are the form of economic structure the need for regulation and the effect of regulation on growth is even more important.On the Need for Regulation of Oligopoly and Oligopsony

This is the important point. Unregulated oligopy, with its extra normal profits, when it becomes extensive, arrests the growth of the entire economy. Indeed, the situation is actually worse, because by continuing to purge the rest of the economy of its normal income, it can cause the rest of the economy’s revenue to be less than its expenses. Thus, the remainder of the economy, the oligopist’s market, may actually be forced into contraction. But this is bad for the oligopist as well.

This is a familiar theme and would be resented by those who detest regulation. Maybe if their wishes are not followed the result is more favorable for growth, but what will that growth do to sustainability?
The nature of oligopolies

Firms often collude in an attempt to stabilize unstable markets, so as to reduce the risks inherent in these markets for investment and product development. There are legal restrictions on such collusion in most countries. There does not have to be a formal agreement for collusion to take place (although for the act to be illegal there must be actual communication between companies)–for example, in some industries there may be an acknowledged market leader which informally sets prices to which other producers respond, known as price leadership.
In other situations, competition between sellers in an oligopoly can be fierce, with relatively low prices and high production. This could lead to an efficient outcome approaching perfect competition. The competition in an oligopoly can be greater when there are more firms in an industry than if, for example, the firms were only regionally based and did not compete directly with each other.

The way these things are discussed in economic theory would lead you to believe that these are just another form of business groupings. Yet is seems clear that they are a natural way for a capitalist system to develop. Read on below and I will try to make this clear.

Here are some of the attributes of oligopolies:

Profit maximization conditions: An oligopoly maximizes profits by producing where marginal revenue equals marginal costs.

Ability to set price: Oligopolies are price setters rather than price takers.

Entry and exit: Barriers to entry are high. The most important barriers are economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms designed to discourage or destroy nascent firms. Additional sources of barriers to entry often result from government regulation favoring existing firms making it difficult for new firms to enter the market.

Number of firms: “Few” – a “handful” of sellers. There are so few firms that the actions of one firm can influence the actions of the other firms.
Long run profits: Oligopolies can retain long run abnormal profits. High barriers of entry prevent sideline firms from entering market to capture excess profits.
Product differentiation: Product may be homogeneous (steel) or differentiated (automobiles).

Perfect knowledge: Assumptions about perfect knowledge vary but the knowledge of various economic factors can be generally described as selective. Oligopolies have perfect knowledge of their own cost and demand functions but their inter-firm information may be incomplete. Buyers have only imperfect knowledge as to price, cost and product quality.

Interdependence: The distinctive feature of an oligopoly is interdependence. Oligopolies are typically composed of a few large firms. Each firm is so large that its actions affect market conditions. Therefore the competing firms will be aware of a firm’s market actions and will respond appropriately. This means that in contemplating a market action, a firm must take into consideration the possible reactions of all competing firms and the firm’s counter-moves. It is very much like a game of chess or pool in which a player must anticipate a whole sequence of moves and counter-moves in determining how to achieve his or her objectives. For example, an oligopoly considering a price reduction may wish to estimate the likelihood that competing firms would also lower their prices and possibly trigger a ruinous price war. Or if the firm is considering a price increase, it may want to know whether other firms will also increase prices or hold existing prices constant. This high degree of interdependence and need to be aware of what other firms are doing or might do is to be contrasted with lack of interdependence in other market structures. In a perfectly competitive (PC) market there is zero interdependence because no firm is large enough to affect market price. All firms in a PC market are price takers, as current market selling price can be followed predictably to maximize short-term profits. In a monopoly, there are no competitors to be concerned about. In a monopolistically-competitive market, each firm’s effects on market conditions is so negligible as to be safely ignored by competitors.

Non-Price Competition: Oligopolies tend to compete on terms other than price. Loyalty schemes, advertisement, and product differentiation are all examples of non-price competition.

Here are some examples in our economy:

Many media industries today are essentially oligopolies.
Six movie studios receive 90% of American film revenues.[citation needed]
The television and high speed internet industry is mostly an oligopoly of seven companies: The Walt Disney Company, CBS Corporation, Viacom, Comcast, Hearst Corporation, Time Warner, and News Corporation. See Concentration of media ownership.
Four wireless providers (AT&T Mobility, Verizon Wireless, T-Mobile, Sprint Nextel) control 89% of the cellular telephone service market. This is not to be confused with cellular telephone manufacturing, an integral portion of the cellular telephone market as a whole.
Healthcare insurance in the United States consists of very few insurance companies controlling major market share in most states. For example, California’s insured population of 20 million is the most competitive in the nation and 44% of that market is dominated by two insurance companies, Anthem and Kaiser Permanente.
Anheuser-Busch and MillerCoors control about 80% of the beer industry.

In March 2012, the United States Department of Justice announced that it would sue six major publishers for price fixing in the sale of electronic books. The accused publishers are Apple, Simon & Schuster Inc, Hachette Book Group, Penguin Group, Macmillan, and HarperCollins Publishers.

In today’s global economy there are far more:The world’s seed oligopoly

PLAYERS: A fistful of transnational firms, the Gene Giants, dominates global seed sales. Monsanto, DuPont, Syngenta – all among the world’s top-ranking pesticide firms – lead the pack.

The fossil fuel oligopoly has its special qualities:Capitalism = Corporatism = Oligopoly = Rentier Stagnation

I contend that corporations have always been the main instrument of this drive toward oligopoly, and they have been the only significant modern form of it. It would have been difficult if not impossible for Oil Age economic actors to achieve oligopoly if not for the way the corporate form tilted the playing field and rigged the markets. Cheap, plentiful oil in itself would have been a radically democratizing force. (Who knows? Perhaps textbook “free markets” could even have thrived.) Only a severe artificial restriction on economic freedom could ever have enabled oligopolies to cohere. This artifice was the corporation.

Similarly, modern technology, whatever its other issues, would have been a tremendously liberating egalitarian force if not artificially enclosed and controlled. The corporate form was the main mode of this enclosure.

In all ways legally and politically possible, corporations have monopolized the vast bounty and freedom which fossil fuels and the modern human mind held in potential. Privatization of public commons like the resources of the earth, including fossil fuels, is at one, physical extreme. The radical extension of the IP regime to the point that it constitutes a new enclosure of a potentially infinite public commons is at the other extreme of intellect and spirit. In both cases, and all in between, there’s been little of private individual involvement. In every case I can think of, the corporate form is preferred. Certainly if the genius of capitalism could conceive of a non-corporatized way to compete, someone would be doing it.

Not only is the corporation the most efficient wealth-extracting machine. By design it’s forbidden to do anything but all it can to maximize its extractions. According to the responsibility of management to shareholders, a corporation is required to subvert the rules of capitalist competition. If the more effective expenditure for short-term gain in lobbying for anti-competitive legislation or regulatory treatment, that must be chosen over longer-term research investment. Same for the mergers and acquisitions and offshoring which we know are so destructive and serve no purpose even from the “capitalist” point of view, but which can accomplish a short-term goosing of the stock price.

It’s clear that in reality capitalism always seeks oligopoly; that corporatism is the only viable form of oligopoly under the conditions of the Oil Age and now energy descent; and therefore that capitalism is synonymous with corporatism.

Economic theory is one thing. Actual practice is another. We are witnessing what is being said above in many ways right now. The corporations with successful oligopolies are quite content with what we have. They will only welcome changes (growth) that increases their profit. They will distribute propaganda that projects various myths about the role of government to protect themselves. These groupings of corporations are one reason for limits on growth that are systemic. Changing this is a goal that can only lead to a better situation if the changes are done in an intelligent manner with planning and ongoing monitoring to change course when the outcome conflicts with desired goals. As we make fun of republican obstruction it may pay to ask ourselves if they are really as dumb as we paint them. Clearly profits are high and their world is grinding along very securely. Meanwhile speeches from the Whitehouse seem to speak to a fictitious world.

The economy we have is locked into well established patterns of resource depletion, needless consumption, and deadly waste production. Clearly we do not want that economy to grow. We do not need growth we need change. We need to build a sustainable system and to create jobs for both the unemployed and those who now work in places that are doing us harm. If people are to live a decent life they need to earn wages to make that possible. Excess profits and needless consumption can be eliminated to make this happen. Manufacturing those things we need to last and in a form that is repairable is imperative. Growing food in sane ways locally whenever possible is also a part of such a transformation. Such measures would include green energy sources and life styles that cut back on energy and other resource consumption.

No, it is not possible to ask a sitting president to start such a revolution. Yet if you understand what is really needed the kind of theater we are given in our political world is not even close to satisfying. We need better weathermen to tell the people which way the wind is blowing. And we need them soon.

Anti-capitalist meetup: How did we get here? A look at human social evolution. And a book preview by Don Mikulecky

2:51 pm in Uncategorized by Anti-Capitalist Meetup

Our new book: Global Insanity: How Homo sapiens Lost Touch with Reality while Transforming the World Is about to come out. This diary is a brief introduction to the book with additional comments about why it is in the Anti-Capitalist Meetup tonight. I will start by saying that the frames “capitalist” and “anti-Capitalist” are really not of much use anymore. We have created an entire new epistemology. The old categories neither work nor do the free us from what has caused us the problem. Any attempt to work within the old paradigm feeds the system that enslaves us. We need a revolution that is total. Capitalism, as it has evolved to this day is very much like an economic and social cancer. As one who has developed computer models of cancer and then therapy to fight it I can speak with some authority.Cancer is not an infectious disease. It is a way the system develops that eventually does that very system in. So my analogy is appropriate here. Capitalism has grown as a system that will do in the system it arises from. In that context, who could be for cancer? Once the present state of capitalism is understood, who could be for it? Clearly we have large numbers of people who are so there is more to the story than my simple analogy. That is really the simple part even though large parts of the human population still do not understand. Let’s carry the cancer analogy a bit further. How do we “cure” cancer? It can not be reversed. It must be stopped. All ways of stopping are harmful to the host. That is because it is such an integral part of the host. Chemically killing or surgically removing or radiating cancer cells does damage beyond just the cancer itself. Stopping capitalism before it destroys us is a similar problem. You and I are part of capitalism and we contribute to the damage it is doing by the way we live. You can not even have a remote hope that we can survive its destructive march to the cliff without dealing with our contribution to the disease. Every treatment for cancer involves pain and suffering. We claim to be concerned about future generations but will we willingly put that claim into action? Before you jump to the conclusion that I am trying to lay a guilt trip on you, realize that our book deals with how we got here and why no one is “to blame”. On the other hand knowledge transforms people and once they see the problem further inaction is certainly no longer excusable. I have spent my life trying to understand. Fortunately, when I thought I was close I published my initial thoughts and my friend and colleague Jim Coffman read that paper. Now we have this book. In it we speak about our continuing contribution to the cancerous blight of capitalism as an addiction. They pushed the “drug” and we are hooked! So if you are able to handle a quick diagnosis that is not at all pleasant then please continue reading

Our book is not a recapitulation of anything you have seen before. It is a radical new analysis that uses a lot of our cultural evolution to put that evolution into an entirely new perspective. First from the preface:

To work against your own short-term interests requires that you acknowledge that those interests are harmful or unhealthy. So it is reasonable to ask why more people do not acknowledge and act on the increasingly serious health problems that confront us all as a result of anthropogenic environmental degradation. The answer to this is, in a word, complex.
The efforts of science to speak to the condition of the planet are often met with hostility, to say the least. One working scientist who has been subjected to a living hell merely for doing his job is climatologist Michael Mann. A quote from his recent book gives a flavor of what is at stake:
We look back now with revulsion at the corporate CEOs, representatives, lobbyists, and scientists-for-hire who knowingly ensured the suffering and mortality of millions by hiding their knowledge of tobacco smoking’s ill effects for the sake of short term corporate profits. Will we hold those who have funded or otherwise participated in the fraudulent denial of climate change similarly accountable—those individuals and groups who both made and took corporate payoffs for knowingly lying about the threat climate change posed to humanity, those who willfully have led the public and policy makers astray, and those politicians and media figures who have sought to intimidate climate scientists using McCarthyite tactics?

Two things need to be pointed out in preparation for what we are offering here. First, the issues described by Mann are not isolated. The entire spectrum and character of political and civic life is subject to powerful economic forces, and while those forces may on the surface reduce to simple greed, below the surface are undercurrents that are not at all that simple, emanating from among other things our animal nature, human psychology and the historical origins of our culture. The second point concerns why political arguments cannot be won with empirically demonstrable facts and logic. We will attempt to address these issues in what follows.

Clearly I can not develop what we put forth in this short diary. There are those who will see this as a “book promotion” and it is that too, but it is also, and more importantly, an attempt to get get your attention for we have something very important to say. Here is the beginning of the introduction:

Introduction: Our Thesis, and What We Hope to Achieve
The thesis of this essay is that Western science has misconceived life. As a consequence, civilized humanity, by way of its scientifically informed industrial economy cum existential nihilism cum retreat into fantasy, is destroying the biosphere—and hence itself.
The misconception is that life is engendered and fully explained by mechanisms.
This is absurd. In biology anything that can be construed as a mechanism can also be logically construed as having a purpose. Means imply ends, and are thus meaningful. Life is neither created by mechanisms, nor an emergent property thereof: to the contrary, mechanisms, to the extent that they perform useful work, are created by living systems in the service of life. Wherever they exist, they do so in order to realize some subjective goal.
And at some level, all biologists know this to be true.

Let me try to remind you that George Lakoff and others have been saying these same things to us in a political context and our book bravely marches into that forbidden territory. Forbidden to “objective” science which is one of the myths that makes change so hard. Going further into the introduction:

We contend that Western civilization, in developing a global consumer economy based on industrial mechanization requiring rapid dissipation of non-renewable, high-grade energy, lost touch with reality and embarked on a path of self-destruction. Accessing a new path conducive to long-term human survival and quality of life will require that we fundamentally change our relationship with nature, which will in turn require that we significantly improve our comprehension of nature—including human nature. It will require that we develop a more realistic way of life, and healthier ways of imbuing our existence with meaning.
We are not alone in calling attention to the urgency of our situation. We do however have a unique explanation for how we got here, and the role of human intellect in that process. Contrary to what is now almost universally accepted as given, our technological creativity and scientific inquisitiveness have not served us well. The reason for this is that the development of our cognitive abilities produced an unhealthy mental imbalance. The technological aspect of the human mind has come to repressively dominate other aspects, and this is intimately linked to the unconstrained development of the consumer economy. Science and technology feed that system by supplying a continuous stream of ‘disposable’ commodities, as well as techniques for ensuring that people keep buying them, in order to drive economic growth, which then feeds back to drive science and technology. What many (perhaps most) people fail to appreciate is that this is a vicious cycle whose continuance assures the collapse of civilization, and quite possibly the extinction of humanity.
As will become clear in what follows, meaning is constructed by way of interpretation, and interpretation is a subjective matter. Depending on your perspective, the world can appear either simple or complex—and either very big or very small.

That should challenge you to read the book. I’ll be here when the diary is published to discuss what I have said. Thank you for the opportunity.

A footnote,/strong>: We develop a thesis based on the acknowledgement That “Cartesian Reductionism” is one of the fundamental epistemological bases for modern “enlightened” thought. What Descartes left us with is the mind/body dualism and the idea that all things can be seen as machines and therefore reduced to their parts. Then the study of the parts would lead to total understanding of the whole. We refute this and base our argument on the idea that reducing systems to parts removes their essence and makes them impossible to understand..

As Faust said: “When concepts fail, words arise.” by Don Mikulecky

3:55 pm in Uncategorized by Anti-Capitalist Meetup

The remainder of the title would not fit: “The destruction of language in politics”.  The series this is a part of has the labels:Anti-capitalist meet-up and anti-capitalism.  No better a way to introduce my topic.  Those are “buzz words” and have been around for a very long time.  What do they mean?  I would guess that the vast majority of the people who use these words along with “communism”, “socialism”, “democracy” , “freedom”, liberty”and many others have no real idea what they are talking about.  Political exchanges are the “good guys” and the “bad guys” just like in our Western movies.  But many of us are more sophisticated or at least we think we are.  Read the diaries here and you will be able to see what I am getting at.  Language is a very interesting thing.  We have dictionaries and now the Google and Wikipedia sources for word meanings.  The technology is racing ahead faster than we can comprehend.  Umberto Eco calls it the modern magic.  We use it like magic not really knowing how it works or where it originates.  This diary is meant to blow your mind.  It comes from the strange creature I am, a hybrid between scientist (but very unconventional), political activist (but very radical and unconventional) and citizen of the world rather than of a Nation.  Oh yes I am an American citizen because that’s the way things have to be at this point in time.  It will change, but I will be dead.  When I die I cease to exist. I am 76 now.  If I haven’t turned you off yet read on below.  I hope to shock you.

First of all, how anyone can be anything but “anti-capitalist” at this point in time is beyond my comprehension.  Clearly the plutocrats that run the show have no love for capitalism.  If they did they would practice it.  Here  we are into words and their meaning.  Give me a definition of capitalism that fits where we are today.  You can’t.  We have a system that has evolved to a point that words do not exist to describe it.  Show me a place where the words “socialist” or “communist” have meaning.

What is worse about these names is that they imply something that can be defined out of context.  If there is one “capitalism” there are many.Each depends on context.  Context dependence is my field of study in a way.  I study complex systems.  They are not something that the reductionist science that has produced modern technology are even remotely like.  We live in a world of machines and mechanisms even though our economic myths try to convince us otherwise.  The real world, on the other hand, is not a world of machines and mechanisms.  Thus we are out of touch with the real world.  Very much out of touch.  If you understand this you understand why our words have so little meaning.  They describer a mythical, fairy tale world.

But we deal in facts and figures you say!  Facts and figure only have meaning in a context.  If the context is unreal they tell us nothing.  One of my sources is George Lakoff.  His wisdom has clearly failed to register among us.  I won’t even try to repeat it here.  It falls on deaf ears among political “experts”.  Unfortunately these very same experts continue to wonder why “people vote against their best interests” and why the likes of Romney and his ilk can give Obama a challenge.  It is humorous to me that this theater goes on unchallenged and that no one has caught on that they are playing a game that stabilizes a system that they claim to want to change.

Let’s get back to the words thing.  We live in a world that is run by corporations that have no National loyalty.  Is this Capitalism?  Certainly not as Marx saw it.  We live in a “Nation”?  We vote to “elect” our leaders?  How many of these myths can one swallow?  Apparently they are very palatable.

I have asked here what difference the outcome of the 2012 election in this country will have on the global system we are a part of.  I had no real response.  Slowly, very slowly, the  realization that as we we gave away our industrial capacity to feed the “capitalists” we lost our clout as well.  The global plutocrats (another inadequate word in this modern context) have castrated us and we are really no longer a “Nation” in the old sense of the world.  They have as little loyalty to Nations as they do to any other entity that lacks the power to stop them.  Yet we live with myths and myths are fed by words.  words need not have meaning if they can trigger the wanted responses (Lakoff).

Social evolution is now driven mainly by technology.  Communication is instant.  The rate of change is beyond comprehension.  Meanwhile we plod along believing words we used in the past can  help us in this context.  We have lost touch with the concepts and we have used words to pretend we know what we are doing.  Faust was clear when he made this observation.  I wonder what he would say if he could see us now?

An interesting coincidence as a foot note:  This diary appeared as I came on to finish this one and it is very much relevant. Slang dissected The contrast between slang, which evolves very rapidly, and political jargon which is basically static, is very interesting.  Political language is not alive in the sense that slang is.  Some new terms come in fleetingly (etch-a- sketch, for example or mission accomplished)  but they have not the same way of becoming viral. I suspect that this helps make my point.  Our political language is locked to obsolete concepts but it is locked.  The self referential side of this is that it therefore makes new concepts hard to find their way into the discussion.  For one reason there is no common language to use to bring them into our consciousness.  The old words are buzz words and they evoke the old concepts.