By introducing a uniquely disruptive shock to both supply and demand, the COVID-19 pandemic has upended longstanding ideological debates almost overnight. Suddenly, far-reaching state intervention in the economy has become necessary to save market capitalism, which is unlikely to emerge unchanged.You may agree or not. But it is a fact.
THE DEFINITION
1. A new economic order that claims human experience as free raw material for hidden commercial practices of extraction, prediction, and sales;
2. A parasitic economic logic in which the production of goods and services is subordinated to a new global architecture of behavioral modification;
3. A rogue mutation of capitalism marked by concentrations of wealth, knowledge, and power unprecedented in human history;
4. The foundational framework of a surveillance economy;
5. As significant a threat to human nature in the twenty-first century as industrial capitalism was to the natural world in the nineteenth and twentieth;
6. The origin of a new instrumentarian power that asserts dominance over society and presents startling challenges to market democracy;
7. A movement that aims to impose a new collective order based on total certainty;
8. An expropriation of critical human rights that is best understood as a coup from above: an overthrow of the people’s sovereignty.Last month in my post on the book: Modern monopolies I wanted to highlight the current trend towards monopolies using platforms as a business model. Now you may add a complementary perspective with the book: The age of surveillance capitalism. While the former emphasizes the business perspective, the later focus on behavioral prediction surplus and how it is generated. It provides a social perspective of the current "surveillance capitalism". In my opinion there is a lot of current economy that already confirms this view, it is not a future expectation.
Our lives are rendered as behavioral data in the first place; ignorance is a condition of this ubiquitous rendition; decision rights vanish before one even knows that there is a decision to make; there is no exit, no voice, and no loyalty, only helplessness, resignation and psychic numbing; encryption is the only positive action left to discuss.
Surveillance capitalists take command of the essential questions that define knowledge, authority, and power in our time: Who knows? Who decides? Who decides who decides?As you may imagine, this is a book that once you started it's impossible to stop reading. Highly recommended if you want to understand current hot topics and social trends.
Capitalism without competition is not capitalism.
Competition matters because it prevents unjust inequality, rather than the transfer of wealth from consumer or supplier to the monopolist. If there is no competition, consumers and workers have less freedom to choose. Competition creates clear price signals in markets, driving supply and demand. It promotes efficiency. Competition creates more choices, more innovation, economic development and growth, and a stronger democracy by dispersing economic power. It promotes individual initiative and freedom. Competition is the essence of capitalism, yet it is dying.
Competition is the basis for evolution. An absence of competition means an absence of evolution, a failure to adapt to new conditions. It threatens our survival. There are fewer winners and many losers when there is less competition. Rising market power by dominant firms has created less competition, lower investment in the real economy, lower productivity, less economic dynamism with fewer startups, higher prices for dominant firms, lower wages and more wealth inequality. The evidence from economic studies is pouring in like a flood.As you may imagine, what the authors do is precisely to show the evidence of the monopolist and oligopolist activities in the US markets. Our close markets are in the same situation and antitrust authorities are failing to preserve competition. Unfortunately, recent legislation has not helped to reverse the trend. Higly recommendable book.
In modern capitalism, value-extraction is rewarded more highly than value-creation: the productive process that drives a healthy economy and society. From companies driven solely to maximize shareholder value to astronomically high prices of medicines justified through big pharma's 'value pricing', we misidentify taking with making, and have lost sight of what value really means. Once a central plank of economic thought, this concept of value - what it is, why it matters to us - is simply no longer discussed.
The logical outcome of a combination of monopoly and rigid demand is sky-high prices, and this is precisely what is happening with specialty drugs. It explains why pharmaceutical companies enjoy absurdly high profit margins: in addition to the normal profit rate, they earn huge monopoly rents.59 A value-based assessment of the kind NICE carries out can be helpful because it reduces demand for the monopolists’ drugs and prevents them from charging whatever price they choose. The downside, however, is that increased elasticity of demand for drugs comes at the cost of leaving some patients without the medicines they need, because pharmaceutical companies may not cut their prices enough to treat everyone who needs the drug if doing so would reduce profit margins by more than the companies want.
The Great Economic PendulumAt the end of the book there are two issues that concern the author: inequality and the degradation of environment. The need for internation cooperation on taxation is critical for the first issue, and the functioning of democratic institutions for both. His final comment is a call for action:
The Limits of Capitalism
External Limits of Capitalism
Internal Limits of Capitalism
The Utopia of Self-Regulation in the Market System
Who can Save the Market System from Destruction?
External Limits of Governments
Internal Limits of Governments
Who is in Charge? Market or Government?
Rise and Fall of Capitalism: Linear or Cyclical?
The Euro is a Threat to the Market System
The World of Piketty
Pendulum Swings between Markets and Governments
The Myth of Sisyphus
Sisyphus was a Greek king who felt stronger and wiser than Zeus, and was punished for his hubris. He was sentenced to push a rock up a mountain every day, after which the rock would roll back down each evening. The following day Sisyphus had to start all over again, continuing for eternity. In his essay The Myth of Sisyphus Albert Camus gave an existentialist interpretation of this well-known Greek myth. Camus sees Sisyphus’s punishment as a metaphor for the absurdity of life. How should we deal with this absurdity, he wonders? One option is to commit suicide. Camus rejects this option. Instead he suggests that we should rebel against the absurdity of life by throwing ourselves into it, living intensely, and being creative. The revolutionary hero is the one who despite the absurdity and knowing that his rebellion will eventually achieve nothing, still sets the rock in motion and remains happy. ‘Il faut s’imaginer Sisyphe heureux’ (‘One must imagine Sisyphus happy’), Camus decided.
That is the position I would like to offer as a guiding principle for the end of this book. It will be extraordinarily difficult to prevent future catastrophes. It may even already be too late. (I am at least a little more optimistic than Albert Camus with his Sisyphus interpretation, which is very bleak indeed.) We have a small chance of preventing decline with the reforms I outlined above. But even if that does not work, we are left with the option of doing as Sisyphus did, of starting again each day. It is the only way of giving meaning to our existence. If we do not take action, our grand children will not forgive us for failing to try to save them. That in itself is sufficient motivation to persist.
Populism's core is a rejection of pluralism. Populists will always claim that they and they alone represent the people and their true interests. Müller also shows that, contrary to conventional wisdom, populists can govern on the basis of their claim to exclusive moral representation of the people: if populists have enough power, they will end up creating an authoritarian state that excludes all those not considered part of the proper "people." The book proposes a number of concrete strategies for how liberal democrats should best deal with populists and, in particular, how to counter their claims to speak exclusively for "the silent majority" or "the real people."Two comments:
"Populism is not just antiliberal, it is antidemocratic—the permanent shadow of representative politics. That's Jan-Werner Müller's argument in this brilliant book. There is no better guide to the populist passions of the present."—Ivan Krastev, International New York TimesSadly, populism is on the right and on the left, they adopt the same strategies and they finally will undermine democracy. Now is the moment to keep away from populism, to fight against populism.
"No one has written more insightfully and knowledgeably about Europe's recent democratic decay than Jan-Werner Müller. Here Müller confronts head on the key questions raised by the resurgence of populism globally. How is it different from other kinds of politics, why is it so dangerous, and how can it be overcome? Müller's depiction of populism as democracy's antipluralist, moralistic shadow is masterful."—Dani Rodrik, Harvard University
6. Populists should be criticized for what they are—a real danger to democracy (and not just to “liberalism”). But that does not mean that one should not engage them in political debate. Talking with populists is not the same as talking like populists. One can take the problems they raise seriously without accepting the ways in which they frame these problems.PS. In London Review of Books, Jan-Werner Müller says:
Populists aren’t just fantasy politicians; what they say and do can be in response to real grievances, and can have very real consequences. But it is important to appreciate that they aren’t just like other politicians, with a bit more rabble-rousing rhetoric thrown in. They define an alternative political reality in which their monopoly on the representation of the ‘real people’ is all that matters: in Trump’s case, an alt-reality under the auspices of the alt-right. At best, populists will waste years for their countries, as Berlusconi did in Italy. In the US, this will probably mean a free hand for K Street lobbyists and all-out crony capitalism (or, in the case of Trump, maybe capitalism in one family); continual attempts to undermine checks and balances (including assaults on judges as enemies of the people when they rule against what real citizens want; and life being made extremely difficult for the media); and government as a kind of reality TV show with plenty of bread and circuses. And the worst case? Regime change in the United States of America.
Thomas Piketty’s (2014) ambitious work proffers a bold, sweeping theory of inequality applicable to all capitalist economies. Though we believe that the focus on inequality and the ensuing debates on policy are healthy and constructive, we have argued that Piketty goes wrong for exactly the same reasons that Karl Marx, and before him David Ricardo, went astray. These quests for general laws ignore both institutions and politics, and the flexible and multifaceted nature of technology, which make the responses to the same stimuli conditional on historical, political, institutional, and contingent aspects of the society and the epoch, vitiating the foundations of theories seeking fundamental, general laws. We have argued, in contradiction to this perspective, that any plausible theory of the nature and evolution of inequality has to include political and economic institutions at the center stage, recognize the endogenous evolution of technology in response to both institutional and other economic and demographic factors, and also attempt to model how the response of an economy to shocks and opportunities will depend on its existing political and institutional equilibrium.They offer an easy proof of the most salient Piketty failure: his inability to provide any correlation between the rate of growth of the economy and the real interest rate and its impact on inequality. Acemoglu and Robinson do that and no conclusions arise.
In my book What Money Can't Buy: The Moral Limits of Markets (2012), I try to show that market values and market reasoning increasingly reach into spheres of life previously governed by nonmarket norms. I argue that this tendency is troubling; putting a price on every human activity erodes certain moral and civic goods worth caring about. We therefore need a public debate about where markets serve the public good and where they don't belong. In this article, I would like to develop a related theme: When it comes to deciding whether these or those goods should be allocated by the market or by nonmarket principles, economics is a poor guide. Deciding which social practices should be governed by market mechanisms requires a form of economic reasoning that is bound up with moral reasoning. But mainstream economic thinking currently asserts its independence from the contested terrain of moral and political philosophy. If economics is to help us decide where markets serve the public good and where they don't belong, it should relinquish the claim to be a value-neutral science and reconnect with its origins in moral and political philosophy.There are health economics implications, with a little effort you can find them.
The real shortcoming of my book was that, like many others, I did not discuss the financial sector and how its activities could undermine the capitalist order even if there were no overt inflation or deflation of consumer prices. Any working market order requires there to be some way of marrying savings with the desire to borrow; a market for investible funds and some way of insuring against the vicissitudes of life as well, of course, as a better way of keeping ready cash than storing it under the mattress. But none of this justifies the threat posed by masses of invented money to institution after institution and country after country. Capitalism is a means to freedom and prosperity, not an end in itself. Improvement here may justify not merely international regulation but the retention for quite a long time in public ownership of banks and other institutions that have had to be rescued by government.
Mancur Olson, a theorist on institutional economics, could now be a posthumous beacon on how to manage the aftermath. Olson argued that nations decline because of the lobbying power of distributional coalitions, or special-interest groups, whose growing influence fosters economic inefficiency and inequality.***
When he was writing, the main interest groups were trade unions and business cartels. Today, the pre-eminent interest group consists of finance professionals on Wall Street and in London. Through campaign finance and political donations, they have bought themselves protection from proper societal accountability. And they pose a continuing obstacle to the de-risking of banking of the kind recommended by the Vickers commission in the UK. Tackling such interest groups both in the US and Europe is one of the biggest post-crisis tasks for policymakers and a key to addressing concerns about systemic legitimacy. The inchoate nature of the public’s complaints is another. Not the least of the difficulties, to reformulate Winston Churchill’s famous remark on democracy, is that capitalism is the worst form of economic management except for all those other forms that have been tried from time to time. The public relations problem implicit in that pale endorsement is an underlying reason why legitimacy crises recur.