Friday, March 22, 2002


James Kenneth Galbraith � the Galbraiths are our favorite dynasty, much superior to the Kennedys and the Bushies � has a nice article in Daedalus entitled A perfect crime: Inequality in the age of globalization. Unfortunately, the article isn�t available on the web, but here are Galbraith�s points:

1. An old view of development and income inequality held that there was a archetypal pattern
that applied to developing economies, in which a primitive stage of industrialization would correspond to an increase in income inequality, which would then begin to level out as the
economy matured.

2. This view was disputed in the eighties and nineties, and displaced by a cultural view, which
held that one should concentrate on land holding, the level of protectionism, the willingness to sacrifice for an advantageous export position, and so on.

3. Galbraith gives us evidence to think that the older view is more realistic. Furthermore, he
holds that the increase in global income inequality since 1982 has not been the effect of the mystical machinery of globalisation, where the allocation of manufacturing effected by the magic invisible hand and the temporary availability of cheap labor � temporary in the historic sense, stretching over a generation or century or two - in diverse locales organizes itself spontaneously. His idea is that the Keynesian system fell apart on the backs of the poor. Here is
the core of his piece:

�Global inequality fell in the late 1970s. In those years, poor countries had the benefit of low interest rates and easy credit, and high commodity prices, especially for oil. Indeed, in the 1970s,
the UTIP [the University of Texas Inequality Project, headed by Galbraith -- LI] data shows that it was the lower-income workers in the poorer countries who made the largest gains in pay. But
in 1980--1981, the age of low interest rates and high commodity prices ended. In 1982, the repression took hold - a financial repression, to be sure, but not less real for having taken that form. And while the debt crisis was not accompanied by overt violence -- coups are,
indeed, often very limited in their overt violence --the effects were soon felt worldwide, and with a savage intensity that has continued for two decades. In sum, it is not increasing trade as such that we should fear. Nor is technology the culprit. To focus on "globalization" as such misstates
the issue. The problem is a process of integration carried out since at least 1980 under circumstances of unsustainable finance, in which wealth has flowed upwards from the poor
countries to the rich, and mainly to the upper financial strata of the richest countries. In the course of these events, progress toward tolerable levels of inequality and sustainable development virtually stopped. Neocolonial patterns of center-periphery dependence, and of debt peonage, were reestablished, but without the slightest assumption of responsibility by the rich countries for the fate of the poor.

It has been, it would appear, a perfect crime...�

Limited Inc should point out that there are some problems with Galbraith�s thesis. The major
one is that, as he admits, it does not account for China and India � a huge exception. But as a general thesis about the background dynamic of our present state of things, I�ll buy it.

So it is with the hauteur characteristic of inhaling theory that we read today�s NYT story about the coy corporate use of tax havens to cut down on their oh so substantial burdens. Senator Baucus and Senator Grasseley from Iowa have been tut tutting over Stanley Works decision to
�relocate� spiritually in the Bahamas � a shift in citizenship that costs the company nothing, but is a considerable tax savings. The Senators are even proposing doing away with this tax haven business. Horrors. Government interference with business once again! Here�s a couple of grafs:

�Gerard J. Gould, a Stanley Works vice president, said he had not known about the hearing. The company, he said, "feels there is nothing unpatriotic about following existing law and reinvesting the tax savings to grow the company for all of its shareholders."

In a statement, Ingersoll-Rand said, "Our move to Bermuda was approved by our shareholders, was a taxable transaction and is consistent with U.S. laws."

"We believe that upon further analysis, the committee will conclude that aspects of the U.S. tax law drive U.S. companies to change their place of incorporation in order to compete on a level playing field with international peers," it added.

Ingersoll-Rand�s idea, apparently, is that the tax rate should go down to, what? Rather like King Lear�s daughter: �What need you five and twenty, ten, or five� percent? There�s a Business Week story from March 4th that gives reports a study of the Institute on Taxation and Economic Policy that found that �52 of the 250 biggest U.S. companies paid effective tax rates of 10% or less in 1998.� Indeed, there�s competitiveness for ya! But as the Repugs in the House will suggest, their mouths full of steak, this is just too great a burden for the wealthy to bear! And of course Dumbo, the commander in chief, will march off in that general direction.

So it goes on the tax front.

Wednesday, March 20, 2002


The Odd, Old decencies

Lefty nostalgia always makes Limited Inc nervous. It makes sense that it is rampant: another defeated ideology compensating for losing the future by claiming the past. Alas, these consolation prizes don't bring much comfort. That said, I am as wet eyed about the world we've lost as any old Wobbly. I've been reading Richard Lourie's biography of Andrei Sakharov for a review, and I was struck by one passage. When Sakharov met Brezhnev, who was, at that time, the Commisar for military research, Brezhnev told him a story. In his father's opinion, Brezhnev said, the people who invented new weapons should be hung from gallows on hills, pour encourager les autres. Brezhnev, of course, didn't follow his Dad's advice.

Still, Brezhnev's daddy was just displaying sans culottes common sense, if you ask LI. The feeling of a value beyond the value of political or economic power -- well, it dies a little every day. But we still catch glimmerings of it in the damnedest places.

Which leads us, by a cerebral by-way that might not be entirely clear to the rest of you, to today's news about Avon. It seems that they are firing 3500 people. These people are the packers in their plant. They aren't the Avon ladies themselves, who number, worldwide, something like 3.4 million people. To each of whom, when the order is written up, an individual package is sent off. WNET did a nice piece about Avon a while back, calling it the Company of Woman. I particularly liked the quote from Andrea Jung:

For all the effort Avon is putting into the U.S., the most dynamic growth is taking place overseas. Jung claims, "One of our fastest-growing regions of the world has been the entire Eastern European region. We've grown at 43 percent in dollars compounded over the last several years, with 45 percent more reps every year. We call it Avon heaven. Down the road I think China's an enormous opportunity."

I know all about Avon Heaven, since my mother and grandmother were part of the Avon work force. Sobel, in his history of the Great Boom, as he calls the last fifty years in America, rightly points out that the effect of franchising in American culture hasn't really been publicized. It isn't just the potential owners of small shops who took, instead, the franchising route, but also housewives, or in my Mom's case secretaries, retirees -- the great American muddle. My grandmother persevered long after my Mom had abandoned Avon heaven. So my memories of her, my grandma, are fused with the sickly sweet smell of Avon perfumes, or the sheer wierdness of soap on a rope. My grandmother was a connector because of these products.

The Avon Lady reversed the old trope of the travelling salesman, his bibles or cleaning products in his briefcase, his penis some fabulous cuckolding engine. Yes, in the old days we were all just a doorbell away from a dirty joke. In place of that mythology, the Avon Lady instantiated another one: that of the harem. Briefly, all too briefly, the split level suburban ranch (2 ba, 3br, covered garage) was transfigured into some female tropic.

And, not incidentally, my grandmother earned enough to handsomely supplement the inadequate pension her husband received from Smith Corona.

It has to be remembered about capitalism: it is a way of life. It also has to be remembered that, just like the revolutionary tribunals that accompanied its birth in the West, capitalism is very prone to irrational capital punishment, condemning ways of life to sudden extinction, eroding our sense that any way of life is grounded, or an intrinsically good thing. Human nature at its finest, the economist says. MENE TEKEL UPHARSIN, as Adam Smith once said. I don't know. I'd like to consult Leonid Brezhnev's daddy on the question.

Monday, March 18, 2002


The fight about Intellectual Property goes on. Listen to the shots outside your window in the lonely night, listen to the sirens coming closer. Converts to the Open source idea, which is also the idea of the commons, come out of their closets, in the business world, are attacked, and then go back in. One such is the Michael Capellas, CEO of Compaq, who made a slip the other day. He was speaking before a biotech conference in Boston. Here's a couple of grafs from the Globe report: "The hundreds of biotech executives and venture capitalists at yesterday's conference hope to make immense profits by turning that processed data into salable products. Some aim to do this by obtaining patents on genetic information that they discover along the way. But this is a controversial idea, with some critics arguing that because genes are a part of nature, businesses shouldn't be able to own them.

In a comment that stunned the audience into several seconds of silence, Capellas responded to a question on the issue by flatly saying that companies shouldn't be able to patent genes. But he quickly backed away from the comment, pleading ignorance of all the ramifications of the issue. ''If you're asking me what should be patentable,'' Capellas said, ''I don't know.''

In a later telephone interview, Capellas stressed that companies had a right to control their scientific discoveries. ''I absolutely believe that the intellectual property must be protected,'' he said. Original processes and products growing out of genetic research should definitely be subject to patent protection, he said.But he repeated his concern that patent law might not be the best way to deal with basic genetic information. ''I'm not sure if the best way you do that is taking individual components and patenting them,'' Capellas said. ''That process doesn't lend itself well to this new world of bioinformatics.''

Catch that explanation of open source resistance: since genes are "a part of nature,' businesses shouldn't be able to own them. There are, as my puss-in-boots readers will know (oh you heady slicers and dicers of the dialectic!)
two major problems with that sentence. The first is that opposition is based on businesses 'owning nature." If a business exists, it is going to own nature somehow -- unless, of course, it is one of those Enron style "asset-free" companies, in which case its claims (and its year end accounting) are more super-natural. No, the question is about particular kinds of nature. The question is about the commons.

The other mistake resides, of course, in the verb "own." As in the equivalence between patent and own. Patents, as we have said before (and said and said) are grants of monopoly. They are inventions of state governance. Unlike contracts, monopolies of this type have a time limit. The reason for this is simple: the perpetual ownership of things intellectual, whether it is the sentences in a book or the method for clicking through the webpages to own the book, are eventually common property. The patent office is borrowing from you every time they issue a patent. The copyright people are doing the same. And you -- you out there, scribbling a poem, or working on a new fuel cell, are continually borrowing from the commons to do what you do. There is no work of art or man that refers only to itself. Well, outside of a nuthouse. This isn't a controversial point. It is, in fact, the reason nobody had ever heard of the phrase Intellectual Property until a couple of decades ago. If we go back to the discussion of patents in the Constitutional era, as Lawrence Lessig has shown, you will see that Jefferson, like Adam Smith, viewed patents as monopolies, and was accordingly reluctant to encourage their growth. Only lately has this insidious ownership idea crept out of the teeming minds of Monsato, Microsoft and their ilk. This isn't the new economy, this is the Hubris Economy. Only in the current atmosphere would it be possible for a company to actually think it can buy the idea of corn seeds -- which is what Monsanto has done in Mexico. And the reason this is happening is that the conservative judiciary, far from displaying that fealty to the past which they like to entertain themselves with at the Federalist Society banquets, are actually wildly, promiscuously legislating.

SO: sorry LI has to be so casuistical, so ... boring. But let's go over it. In the sense that I own the apartment I am living in -- that is, I rent it -- yes, one can talk of ownership. But owning in the sense of my ownership of the computer I'm using is out of the question. Ah, the thing is to prevent, by semantic means, the question from even being posable. So the question won't be posed, the question will be perpetually distorted, as long as Business Journalists go along for the ride and quietly seed the ownership-patent equivalency in their little business stories.

Sunday, March 17, 2002


Limited Inc has been quiet about the Middle East for a while. Since despair is the only rational response to the confluence of American inanity and Sharon's wet dream of a frontier war, we've been driven into internal exile on this one.

Still, even in the sea of distant bloodshed, there are humorous points to be made. LI has particularly liked the new patriotic strategy of the American press. As Quick Dick Cheney makes his grand tour of the world, '002 (get your t shirts now!) the NYT in particular has been interlarding every article with assurances that the unanimous hostility of both Arabs and Europeans to Bush's potential cavalry op in the badlands of Iraq conceals unamimous agreement with every burp and growl of the Heimat's foreign policy. This is truly a unique defense. We have to go way back to the Soviet-German peace treaty to find rhetoric that peculiar in the foreign policy sphere. Not that circular logic doesn't have a good and honorable place in our hearts. Remember the old Freudian argument that any objection to Freud's theory is really 'resistance" to the theory. And resistance stems from (hey presto) the unconscious id. Which proves there is an Id, which proves that Freud's theory is legitimate. QED. We all agreed with Freud, then, and we agreed more the more we disagreed.

Alas, there is another phrase of Freud's that occurs to LI: the reality principle. The reality principle seems to be breaking into the Heimat lovefest. Witness this last report from Saudi Arabia:

"American officials said before Mr. Cheney's trip to the Middle East that they thought Arab leaders would eventually acquiesce in an American military campaign against Iraq, even if they made a public show of disapproving of it. But the persistence and calculated nature of Arab response show how Middle East politics has intruded in Mr. Cheney's mission."

Is that the darndest thing? Middle Eastern politics intruding into OUR WAR! Why there ought to be a law.
However, not to fear. The more Bushypoo presses the war with Iraq button, the more he will maintain his ultrapatrotic poll numbers. Life is good for the former cheerleader!

The synthetic progressive

I have been searching for a term to encompass one of the great features of capitalism – the non-necessary synthesis. I guess I will call it ...