Consider that Capitalism is the real problem

This piece was originally published at Rational Standard, also as Consider that Capitalism is the Real Problem.

A recent op-ed in Fast Company urges us all to reconsider capitalism as the system we want for building our future society. The tacit assumption is that capitalism is responsible for plenty of malaise. More explicitly, capitalism is criticised according to the following identified maladies:

1. Opinion polls show that millennials no longer drink the capitalist Kool-Aid.
2. Capitalism is viewed as a system that churns nature and humans into capital, regardless of the costs to human well-being and the environment. 
3. Even well-meaning CEOs are hampered by the system of capitalism, so they cannot fix this hopeless system from the inside.
4. By some measures,  inequality, poverty, and hunger have all risen thanks to capitalism.

The conclusion is that we should consider alternatives, and even reconsider systems like socialism. So let's drink someone else's Kool-Aid instead.

But what about the alternative facts?

I am primarily concerned with promoting the process of scepticism, as opposed to promoting the conclusion of a particular belief system. 
I took issue with the facts and the line of reasoning used to arrive at the conclusion. The conclusion does not follow from the evidence presented, partially because most of the facts are false, and the standard for evidence employed allows opinions to suffice as evidence

Opinion polls are a poor substitute for evidence

Opinion polls are just that: An aggregate of opinions. Opinions rank very low on the hierarchy of evidence. That opinion polls return negative reviews of capitalism merely tells us that people are second guessing capitalism. It does not mean that capitalism as a system has failed any more than it shows how successful the system of capitalism is when opinion polls give it good ratings. Or that North Korea is a successful system when polls in North Korea show that Kim Jung-on is the number one supreme ultimate leader.

Capitalism churns nature and humans into capital 

I am guessing the author aimed at commodity fetishism. Suggest that humans like you and I, and our natural environment, are just capital.

Inadvertently, this means that you and I have value in a capitalist system. We are valuable, if only in terms of how much we are objects of trade in a market economy. Deplorable, but what is the alternative? To consider us all as having inherent value, but not really of value to anyone to any degree in particular? We just have value, but this value does not amount to anything tangible.

We may all have value as individuals - equal value, in fact - in alternative systems. These alternative systems refuse to treat you and I as something with tradeable value on a market, but they do view our skills and our abilities as valuable, though we are not allowed to profit from them. From us according to our abilities, and to those others without those same abilities according to their needs, in a command economy, like the one enjoyed by Kim Jon-un in North Korea.

Given that capitalism is a system of private ownership of capital, it means that you and I own our own property, our own labour, and our own capital goods. We are free to trade with each other, and free not to trade with each other as well. The alternative is publicly owned goods, which in effect means government-owned goods and services, with no freedom to choose who benefits from our abilities, and no choice regarding whose needs are being filled, or how much they are filled, or even identifying what those needs are.

Do you want labour camps? Because this is how you get labour camps and one car that is the best car by virtue of the fact that it is the only car.

The Trabant. Uncomfortable, slow, noisy, dirty, but still the best car available in a system where people are not commodities with market value and get shot for suggesting otherwise.

Well-meaning CEOs are not corrupt, they do corrupt things. Because evil capitalism

It is worth following the citations in the op-ed. For example, besides the long standing joke that you should never invest in airlines, airlines have been having a tough time to make ends meet since more stringent controls following 9/11. Airlines are probably the worst example here, since airlines continue to enjoy bailouts and struggle to earn profits for their shareholders.

Regardless, let's just take the cited example without the broader context. The author claims that the evil capitalism has been punishing a well-meaning CEO for paying his labourers more. The full story cited shows that airline shares in general have declined on Wall Street, their credit ratings were downgraded as a result of labour deals, and also that Warren Buffet invested in three airlines.

The moral of this full story is that this evil capitalism gives us various different results for the price of one: Namely, you can both take your money away from companies that you view as being unfair towards shareholders when they decide to give their workers increases, and you can also put your money where your mouth is and decide that this is a good thing and invest in such companies.

In fact, there is an entire branch of investing known as impact investing that focuses on exactly that. Max Keiser, warts and all, has started a hedge fund called Karmabanque that does this sort of thing.

I am not familiar of impact investing ever being a thing in a command economy. Perhaps someone can cite some examples whereby the non-private capital owners were punished for not making their shareholders or their customers happy in a command economy? I can't recall that the shareholders or the producers of the Trabant ever went bankrupt for producing a product with a reputation for being uncomfortable, slow, noisy and dirty? Great equality, though!

But hang on! There was a CEO who did exactly that. Dan Price paid all of us workers a minimum wage of $ 70 000 per year. Great thing, right? All his shareholders must have bailed, right? No. Not exactly. As expected, he was inundated with job applications from those for whom that's a lot of money to work for, and his 'most valued' employees who thought that it's unfair decided to quit. Point being, since he is the owner of capital in a capitalist society, he is free to do so. Good luck to him!

Did inequality, poverty and hunger all rise due to capitalism?

The short answer is no. At least not according to people like Hans and Osla Rosling who work with the data. Watch their TED talk entitled How not to be ignorant of the world for more information regarding this.

What about particular answers, such as China and Ecuador mentioned by the author?

It is well-known and often cited that China's labourers only started doing better thanks to economic reforms - that is after they became more capitalist. Their income inequality did go up, though. It is worth reading up on income inequality in China, and noticing what is causing this.

In China's case, poverty and hunger became alleviated, while inequality became worse. This means there is something fishy about inequality - both in how it is measured with the Gini Coefficient, and in the concept. The truth is people don't really care about inequality. People care about fairness. Ask Dan Price about that.

"... I’m sorry to say we’re capitalists, and that’s just the way it is"

There is a fair point made in the op-ed, and that is that just-so answers are unacceptable. If millennials raise doubts about capitalism, then they deserve substantiated answers to address those doubts. What the opinion polls do show, if they are reliable, is that millennials doubt capitalism, however defined.

Just like those who oppose capitalism enjoy the burden of proof to substantiate their claims, the rest of us who support capitalism should also be willing and able to get the dialogue going - and able to substantiate our answers.

Obsessing over GDP and economic growth

Welcome to my new angry nerd blog! I decided to split my writing into themes, with this blog being more about soft science issues, my medium blog being about computer science, and my main blog, the Necro Files, returning to its horror and heavy metal reviews. This piece was originally published in the Rational Standard. This is a response to an op-ed about economic growth that seems extremely confused about what economic growth is in the first place. The glaring overall errors have been dealt with on Daily Maverick, but I would like to deal with this piece as it stands.

The author claims that economic growth is a fuzzy concept, not clearly defined, but anyway it's something that has undesirable side effects, particularly on the environment.

Contrary to the author's claims:

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP, usually in per capita terms.

The author deals with GDP, but not with GDP per capita, and as a result does not deal much with the concept of economic growth in this piece.

Gross domestic product (GDP) is a monetary measure of the market value of all final goods and services produced in a period.

The results are that the cited examples are either patronising to the extent that they are too reductionist to provide any clarity to the layman, or they testify of plain ignorance of the topic. I shall deal with a few examples here:

If I sell my kidney for some cash, then the economy grows. But if I educate my kids, prepare and cook food for my community, improve the health conditions of my people, growth doesn’t happen.

If you educate your kids and their earnings potential increases, GDP would grow. Why is this? Because GDP is merely concerned with the final market value of all products and services. Someone with a degree has the potential to earn more, and there is a clear correlation between earnings potential and obtaining degrees.

There is a catch, though: you have to have a useful degree, which means one that is valued by the market. Useful in most markets means a STEM degree. Though an increase in GDP does not necessarily indicate an increase in earnings potential, which is why economists also employ GDP per capita as an indicator. This is not foolproof, but it does give a better indication of where individuals lie within the overall system.

But what about the environment? Well, if you want to tackle environmental concerns, you would be in even greater need of STEM skills. Otherwise, you're going to hurt your own cause by going about it like Greenpeace.

Conversely, you can only grow the economy with organ harvesting for as long as you have organs to harvest.

If a country cuts and sells all its trees, it gets a boost in GDP. But nothing happens if it nurtures them.

It depends on your time period. There are countries which do rely on nurturing their trees and it does show up in the GDP. Costa Rica, Ecuador, Nepal, Kenya, Madagascar and Antarctica are but a few which rely greatly on eco-tourism for their GDP.

Besides, by cutting off all your trees, you would merely boost GDP for one year. Unless you've cut off your trees as part of a broader plan to boost products and services in the long run, you'd just see one lonely spike in the GDP of your country for one year, and nothing more.

This example makes no sense when compared with the lucid concept of growth, which is per definition over time.

If a country preserves open spaces like parks and nature reserves for the benefit of everybody, it does not see this increase in human and ecological well-being reflected in its economic performance.

Only it does. GDP includes both private and public products and services.

Preserving our infrastructure, making it durable, long-term and free adds nothing or only marginally to growth.

Yes, yes it does. That's exactly how Ireland started the Celtic Tiger: With public infrastructure spending on borrowed funds from the EU that added more than marginally to its growth.

The Celtic Tiger is not without its problems, but it did help Ireland to move from one of the poorest countries in the EU to one of the richest.

GDP is not without its issues, but it's a far less problematic measure than say the Gini Coefficient. Its problems are known to economists already, though as noted economists tend to opt for GDP per capita, and then combine it with notions of standards of living and spending power to alleviate the known concerns with GDP.

It's healthy to be sceptical of often repeated yardsticks, but this piece is a straw man argument against GDP. Not to mention that the fuzzy concept of well-being economics stinks of the kind of woo worthy of Deepak Chopra.