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Can American Capitalism Survive?

Ralph welcomes Washington Post business columnist, Steven Pearlstein, who asks the question, “Can American Capitalism Survive?” And economist William Lazonick tells us how Boeing management buying back its own stock contributed to the decisions that led to the crashes of the 737 MAX 8.

Steven Pearlstein is an award-winning business and economics columnist for the Washington Post, who was awarded the Pulitzer Prize for commentary for columns explaining the global financial crisis. His latest work is Can American Capitalism Survive?

“That’s the fallacy of capitalism, that there could be a perfectly objective system if the government would just get out of the way. There is no perfectly objective measure of economic contribution, except in one system, which is called ‘the jungle.’” Steven Pearlstein, author of Can American Capitalism Survive?

“Delaware law has been the law that has been used to justify the idea that ‘maximizing shareholder value’ is the only purpose of a corporation. In fact, that’s a fallacy. Delaware law does not require that.  But you would be surprised at the percentage of directors and executives and even corporate lawyers who believe that to be the case.” Steven Pearlstein, author of “Can American Capitalism Survive?”

William Lazonick is a professor of economics at the University of Massachusetts Lowell. His article “Profits Without Prosperity: Stock Buybacks Manipulate the Market and Leave Most Americans Worse Off” earned the HBR McKinsey Award for outstanding article in Harvard Business Review. His latest works include “Make Passengers Safer? Boeing Just Made Shareholders Richer.”

“As these planes (the Boeing MAX 8s) were being sold, the executives had every reason to know that they were unsafe. Meanwhile, they were benefitting from having the best selling plane in the history of a company that’s over a hundred years old. For the top executive (Dennis) Muillenberg it was to the tune of a million dollars per month that he was pulling into his bank account from his various types of executive pay – most of it stock-based… They (Boeing executives) are putting boosting the stock price way ahead of passenger safety.” William Lazonick, economist and co-author of “Make Passengers Safer? Boeing Just Made Shareholders Richer”

RALPH NADER RADIO HOUR EP 276 TRANSCRIPT(Right click to download)

11 Comments

  1. Bruce K. says:

    > Can American Capitalism Survive?

    American capitalism is a system of exploitation of people and the environment
    that has, or rather always, evolves to sustain itself. The agents of that evolution
    are the super-rich and super-powerful, of those individuals that have a hierarchy
    of power and control enough to define and protect themselves and re-assert
    their power in case it is challenged.

    This question, i.e. these “question(S)”, plural, are way more complex than can
    be covered in a radio show, a book, or perhaps even demonstrated objectively
    to people through language and communication because people are not
    mathetically educated to understand the science and technology of systems
    or their infinite recursive perception and application technology.

    But some people understand it enough and deliberately withhold this
    “enlightenment” from others in order to steal from and enslave them.
    This happens at almost every conceiveable level, old over young, men over
    women, white over black, those with famous names over those without names,
    strong over weak – our whole brains are evolved to exploit our environment
    in abstract symbolic ways, which is the one thing humans can do that animals
    cannot.

    As long as the smartest construct on the planet, a group mind of powerful
    human beings has the means and desire to dehumanize nature and their fellow
    humans, one or another of these groups is going to be running our lives, or making
    us fight for our lives.

    The question is “Can American Capitalism Survive” but it should be can it be
    understood by enough people with enough in common and enough power to
    challenge it. And it must be challenged in the name of progressive evolution
    or we just end up with the same system but having gone through a destabilizing
    period of risk of destruction.

    There is a step of evolution that much collapse soon, so the questions is, does
    anyone care enough about everyone else to try for something better than
    massive planetary collapse, war and rolling the dice on extinction?

  2. Afdal Shahanshah says:

    It’s an unfortunately common misconception, but evolution is NOT a process of progressive “improvement”. Natural selection is only about adaptations that are “good enough” for an organism to survive and reproduce in a given environment. Said environments have been changing constantly throughout the history of life. The jury is still out on whether or not the current traits of humans are actually good adaptations for long-term survival. They may in fact be a recipe for self-extinction (after obliterating half the other species on Earth first).

    The best way to deal with “predistribution” is to remove the power of bosses to decide how surplus value, created by workers, is distributed in the first place. For that we need to democratize work. AKA ACTUAL SOCIALISM, not the cartoon caricature of socialism that liberals like Nader and Sanders constantly trot out where socialism is anytime, anywhere that a government does anything for someone or something. Universal basic income of the kind that progressives actually want is extremely difficult if not impossible to develop the kind of political constituency to make a reality. We’re far more likely to get the version neoliberals want, where a basic income is used as an excuse to privatize other elements of the social safety net so that workers are effectively no better or worse off than before. But why go through such ridiculous lengths to keep capitalism on life support? Let’s just put an end to this absurd, irrational system already.

    If you want some truly insightful commentary on the current state of capitalism, have a chat with economist Michael Hudson sometime. He’s got a mind-blowing book out recently on the history of creditor and debtor struggles that applies directly to the modern economy. The current state of capitalism is that profitability in the industrial sector has become so low (because so much of production has been automated that it’s difficult to generate profits from labor exploitation) that the ruling class has been forced to turn to fictitious capital in the form of speculation (including stock buybacks) in order to create the kind of past profits they once enjoyed. Eventually the illusions of speculation come crashing down in the form of spectacular financial meltdowns. It happened in 2008 and it will happen again as long as the bad debts aren’t written down or unless another massive world war destroys a lot of this fixed capital to temporarily restore industrial profitability by beginning the exploitation of labor anew.

    • Mark Hughes says:

      Can’t agree with you more, Afdal. I would say that to democratize the workplace is, more accurately, Marxist and not socialist but that may be semantics kicking in. On that point, I hate it that leftists have embraced “progressivism” and continue to shy away from the evil, dreaded term “socialism”. It’s like nowadays hearing fascists call themselves libertarians, it’s BS.

      I’m ok with UBI but as you say, here in America we’ll screw it up, and intentionally so. I can see whatever UBI that people get being taxed so heavily that it’s of no real benefit to them.

      However I fear that capitalism isn’t on “life support”. Maybe the American Empire is (hopefully), but global capitalism isn’t. China and Russia are more capitalist now than in the past several decades. I fear that capitalism will end only when it decimates all life on the planet, whether through climate crisis or nuclear warfare as Chomsky points out. And Marx will be right, capitalism will indeed destroy itself – and everything else with it.

      I said in another comment that your recommendation of Michael Hudson is a great one. One of the few economists who accurately predicted the ’08 crash, and he’s also Leon Trotsky’s godson. His book on debt jubilee is one I’ll want to read sometime soon, his talks on it are very enlightening. One would think Christians would be all for it but nope.

      • Why was Andrew Yang’s UBI not discussed.
        He’s actively promoting this as a rising democratic presidential candidate!
        It’s going to become a mainstream topic and he gives the reasons why and how to pay for it.

  3. stevie p says:

    the purpose of incorporatnating (ennationnatization)

    is ideally to weft our warp so well that we can do tother

    but begin with moronity, and you have the chicago school.

    jane addams was awarded the nobel peace prize for something

  4. Ben Leet says:

    Income distribution: This is a key question to capitalism surviving. FYI, the Social Security Administration produces a wage income report each year. The last one for 2017 shows that the lower-earning half of all workers, 82 million workers, earned in wages $1.027 trillion. That is 7% of the entire national income. Also the lower-earning 90% of workers earned $4.348 trillion, and that is 30% of the national income. I use the Joint Committee on Taxation figure for total national income, 2017, as $14.375 trillion. Wages of course are not total compensation which includes health insurance and pension benefits. Capitalism is taking a nose-dive because of low wages and inequality. Senator Sherrod Brown proposes to both increase the minimum wage, and would double the Earned Income Tax Credit. That would help the lower-earning 40%. But what about the other 50% earning more? That is where large corporations come in, and profit sharing becomes important. I think the highest earning 10% earn half, 50%, of all income, before taxes and transfers. The Washington Center for Equitable Growth has the data, and many, many scholars working on this issue. In one of their articles, “Economic Growth in the U.S.: A Tale of Two Countries”, the authors say, “The bottom 50 percent of income earners makes more in France than in the United States even though average income per adult is still 35 percent lower in France than in the United States . . .” And this gap would be greater if we looked at post-transfer incomes because the French social supports are more generous. Somehow the French manage to pay their low-income workers about 16% more than the U.S. pays its workers, yet the French economy is about 2/3rds as productive per worker. Hope I haven’t over-stated this issue. Could Ralph take this up? I’ve mentioned the ALICE report before, from United Way charity, showing that 40% of Americans are effectively living in “hardship”. I think corporate law should be re-written, with workers and community members on the boards, and tax law should favor those corporations that raise wages, as complicated as that would be. And lastly, for me at least, the PRO act, Protecting the Right to Organize, is a new attempt to revive unionism. Thanks.

  5. stevie p says:

    is it satirize or satorize?

  6. Mark Hughes says:

    While Ralph prefaced the program by saying Steven Pearlstein’s work is more macroeconomic (not about your mom-and-pop businesses, but about major corporations), it’s difficult to have a meaningful conversation about capitalism that most people will understand without talking about “main street capitalism”, which is where it all began and where said most people live and work.

    Since Adam Smith’s name has been dropped at least a couple times, I must say that I am currently reading Smith’s “Wealth of Nations”. That said, I’ve also read all three of Marx’ Capital volumes, and anyone who’s read Capital knows that Marx takes aim perhaps mostly with Smith, his main criticism is that Smith is way too ‘exoteric’ (superficial) in his approach to capitalism, and only rarely is ‘esoteric’ (deep). Pearlstein’s discussion rather exemplified this.

    On profit-sharing: this simply enables capitalism. How are the profits going to be shared? Because to employers, senior officials getting the lion’s share and giving a pittance to employees is technically (and cynically) ‘sharing’. Will the employees be given a voice and a vote as to how much is being shared with them? Using Pearlstein’s statement that a company which doesn’t do well, workers don’t get to share, and if it does well, they do… first problem with that is we have many companies that don’t do well at all yet the senior managers get big bonuses (Wall Street and fracking companies are a prime examples, as Max Keiser states virtually none of the banks are solvent, yet bosses get fat paychecks anyway). Secondly, managers have far more control over profits than employees – to punish workers with little or no profit-shares for something they have little control over to begin with is still no solution because they have no say in sale price of what they produce. So to penalize workers for something that they have no full control over is simply wrong. If one wants true profit-sharing in the purest sense, go with worker cooperatives as Marx advocates at times. Because it is then that workers have a say in sale price and can control how much gets paid out to them in the form of income, and how much gets reinvested back in the company (i.e., capital).

    Regarding Pearlstein’s ‘rethinking capitalism’ statement during the Wrap-Up, that “we have to go back to sort of some fundamental ideas about what capitalism is”, it’s extremely simple: worker exploitation. The appropriation of surplus value from workers by capitalists. This is where all wealth/value originates, both Smith and Marx agree on this. This is not up for argument. If you want to go back to “basic principles”, start there. Because “the purpose of a corporation, how much should businesses contribute to the total tax thing”, as Pearlstein says, are not basic enough, but “the fundamental relationship between a company and its employees” is.

    Toward the end of the Wrap-Up, Ralph mentions the practice of markups leading to major price increases, but says he’s never read that anywhere before. I’m actually surprised. That neither raw materials nor labour being the causes for massive price increases? It’s in “Wealth of Nations”, a book as old as this country. In no vague terms, Smith states that it’s profit, and not labour, that jacks up prices:

    “In reality high profits tend much more to raise the price of work than high wages. If in the linen manufacture, for example, the wages of the different working people, the flax-dressers, the spinners, the weavers, etc., should, all of them, be advanced two pence a day; it would be necessary to heighten the price of a piece of linen only by a number of two pences equal to the number of people that had been employed about it, multiplied by the number of days during which they had been so employed. That part of the price of the commodity which resolved itself into wages would, through all the different stages of the manufacture, rise only in arithmetical proportion to this rise of wages. But if the profits of all the different employers of those working people should be raised five percent, that part of the price of the commodity which resolved itself into profit would, through all the different stages of the manufacture, rise in geometrical proportion to this rise of profit. The employer of the flaxdressers would in selling his flax require an additional five percent upon the whole value of the materials and wages which he advanced to his workmen. The employer of the spinners would require an additional five percent both upon the advanced price of the flax and upon the wages of the spinners. And the employer of the weavers would require a like five percent both upon the advanced price of the linen yarn and upon the wages of the weavers. In raising the price of commodities the rise of wages operates in the same manner as simple interest does in the accumulation of debt. The rise of profit operates like compound interest. Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”
    [“The Wealth Of Nations”, Book I, Ch. 9, pp. 83-84 Barnes & Noble edition.]

    So Ralph is correct, wage increases do not jack prices up to any massive level. To say they do is a lie, perpetrated by (surprise) capitalists. But we have to remember that this is not an old idea, just a vastly overlooked and ignored one. Overlooked for at least 243 years.

    How can we critique capitalism without talking about its foremost critic, Karl Marx? But since he’s dead we must go on with other guest nominations. Michael Hudson, as commenter Afdal Shahanshah mentioned earlier, would be a great guest, as Hudson was one of the very few economists to accurately predict the 2008 crash. Other great guests would be Profs. Richard Wolff and David Harvey, both prominent Marxist economists.

  7. Bruce K. says:

    >> It’s an unfortunately common misconception, but evolution is NOT a process of progressive “improvement”.

    While that is true if you are talking about Darwin and animals the word evolution has more than one meaning.

    evolution: ( noun ) 4. a process of gradual, peaceful, progressive change or development, as in social or economic structure or institutions.

    >> But why go through such ridiculous lengths to keep capitalism on life support? Let’s just put an end to this absurd, irrational system already.

    Despite our illusion of democracy and voting, it’s not like anyone has a choice or there is broad support for any one direction or system. I think the closest we have gotten to that is basically having some ideas floated by Elizabeth Warren and Bernie Sanders that are starting to appeal to people. That still does not mean there is a political, let alone legislative, let alone executive path to any realy change.

    As someone once said, “if voting changed anything it would be illegal”.

    Plus, the idea that a bunch of emotional, uneducated and uninitiated “voters” or dubious character can come together and decide the future of a system that is so complex as the American economy, or the World economy is beyond ridiculous.

    One problem with the system of the world “consciousness” is that all the people who are smart enough, in the sense of the Founders of the American system or no where near the wheels of power and influence, and the Republican party has made sure to increase that distance and alienate the people from science, morality and rationality so that they do not have to argue or defend their rights to exercise their power or ownerships as they please. We should have studied the conditions for a group of wise men to come together and devise a system that works, but then is corrupted by trying to get others to willingly submit to it.

    The idea that I once considered to absurd I begin to think is more and more reasonable, and that is to pay everyone the same for everything they do, and rely on people’s skill and interest to rise to positions of authority based on what they can and have done for everyone else in their lives … i.e. some kind of equality and “communism” ( in some sense of that term, whatever it might mean ) because as the wonderful physics experiment of “Lord Kelvin’s Thundershower” illusions on the material level, any inequality at all tends to push towards wider inequality and permanence, and if human beings want to be intelligent creatures based on rationality we have to get this defect of catastrophic self-interest and greed under control in some systematic way. Mass human behavior is inherently chaotic and out of control and we do not have the time of the protection of space any more to engage in destructive experiments that can determine our continued existence.

  8. Elsa Shepherd says:

    I found Mr Pearlstein nothing more than a noise maker to cloud the argument around what to do about wealth inequality. He is of an age where he simply accepts terms as “investment” “dividend” “profits” etc, etc as though they are akin to the laws of nature. These are simply definitions made by capitalists without regard for the greater societal problems they now create. Global capitalism has made it so that no one can exist outside of that system. It affects all decisions on how social programs, infrastructure, schools, etc, are allowed to survive. Several problems with this interview.

    1). 3000 per person will not lift anyone out of poverty. This is throwing crumbs at the problem. It will have a large price tag but will yield little in terms of changing the lives of people who need help.
    2). He does not address current social programs. I can guess what his answer to that would be. Probably what many UBI advocates usually believe but do not state – that this would replace funding for social programs because they would “no longer be needed”
    3) Ralph and Steven talk about how companies should return profits to “investors”. But most stocks are held by fewer than 10% of the population and of course it is the upper 10% who then would reap even more returns. So not only would they benefit from the rising share prices which has disproportionately gone to the rich, but now they will be larded dividends to boot.
    4). Mr. Pearlstein “does not want to mandate” how companies use their profits. I bet he doesn’t. Companies continue to buy their way into markets, not innovate new solutions. This activity alone destroys existing companies as they get gobbled up and then the new owners slash jobs. Amazon is in every business – Groceries, News, Government Contracts, All Retail, Security, Finance, etc, etc. Facebook has bought up any company that threatens to grab it’s market share. How about regulation on companies not allowing them to buy into other industries and severely limit consolidation within their own lanes? Probably too restrictive for Mr. Pearstien.
    5). I love how he says people with money have it because of their “success”. Haven’t we dispelled this myth, yet? Most wealth is a result of existing family wealth. Most increase in wealth is not always a result of hard work, it is huge portions of luck and connections and those things are not easily duplicated nor would most wealthy want them to be. We need to address this concept so that we quit idolizing wealthy people as fundamentally more capable, hard working and therefore deserving. I have seen hard work. Come down to California and look who is building houses, taking care of kids and the elderly, making his food, etc, etc. These people probably work harder in a month than most wealthy investors have in their entire lives.
    6). And three years of government service? For 3k per year? I thought we got rid of the 13th amendment. I would guess Mr. Pearlstein would be exempt from this as he would means test out of the dividend, much like many of his age did during the call to go to Vietnam?

    This guy is out there because he is probably pretty sure a dem is going to get in office and it is now time to give the appearance of some change in the rules that benefit the working class. His solution is perfect for him as it will not cost companies any money (he suggested means taxation and wealthy people are not going to cry about paying taxes on 12,000 for a family of 4.). He would almost certainly advocate for a cut of social services to help fund this “citizen dividend”. This “solution” gives all the look of being bold, but would not help poor families, help them with their basic needs, nor even lightly touch the current structure of global finance which continues to vacuum up every financial advantage they can increasingly leverage.

    What is needed is funding of our social systems to allow all to access health care, all to access basic housing, all to access food, all to access the keys to “success” (I would call it maximizing personal potential) through free education. This is at least a floor where everyone can start and no one can fall through. If you want to allow for greater wealth beyond that for those “successful” (luck in terms of family inheritance, etc…) that is fine. But these programs will cost a lot of money. And where do we get it? Start taxing companies by enforcing actual tax rates (read drastically cut deductions and tax dodging scams), start taxing financial transactions, stop taxing cap gains at half the rate of income and then we can get to regulations of global companies who offshore jobs and are free to move their capital across all walls and borders.

  9. stephen warren says:

    Great discussion. Please excuse the nitpicking, but I’d like to make a small correction to something Steven Perlstein said. Charles Darwin did use the phrase “survival of the fittest.” Herbert Spencer coined the phrase after reading “The Origin of Species,” published 1859. Then Darwin used the phrase in the 1869 edition.

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