Originally written in 2011
You’re expecting a critique of capitalist science a la Paul Lorenzen or Jean Baudrillard, but you’re not going to get it. I think that is silly. There are limits to science and Enlightenment thinkers tend to trample them, but it’s not the kind of attacks you see from a lot of Post-Marxists and Hard problem sociology of science people. No one need to go back to that good old fashion understanding of the process and function of the demarcation line.
You see recently, I have been noticing that questions that have been left up to economists have really been being studied in other sciences. The first was psychologists studying human behavior in economic situations which led to Behavioral Economics which has been a fruitful field in which the traditionally neo-classical assumptions about Market rationality were blown straight up. Take, for example, the assumed tragedy of commons, it turns out that it doesn’t exist. Elinor Ostrom, a political scientist not an economist, won a Nobel Prize in economics for figuring this out.
So when I saw the New Scientist running article entitled: Revealed – the capitalist network that runs the world. This was an hard mathematical systems analysis from the University of Zurich, and it came up with same conclusions in with Marx’s critique of capital:
The work, to be published in PloS One, revealed a core of 1318 companies with interlocking ownerships (see image). Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What’s more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues.
When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group
Note this team is not team of Marxists hiding out in a science department, we can tell by statements like this:
[B]y identifying the architecture of global economic power, the analysis could help make it more stable. By finding the vulnerable aspects of the system, economists can suggest measures to prevent future collapses spreading through the entire economy. Glattfelder says we may need global anti-trust rules, which now exist only at national level, to limit over-connection among TNCs. Bar-Yam says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk.
One thing won’t chime with some of the protesters’ claims: the super-entity is unlikely to be the intentional result of a conspiracy to rule the world. “Such structures are common in nature,” says Sugihara
While Marx could not have known much about systems analysis and emergent system theory, this is consistent entirely with his assumptions pulled from Ricardo and Smith as well as consistent with Schumpeter’s analysis on the topic. It is not consistent with what you hear about in popular economics editorials from Tom Friedman.
Emergent systems have a structure and a logic, or, disorder has structure and chaos has a reasoning. Capital itself tends to greater wealth in few hands while the wealth of corporations actually does not go up in relative terms to GDP. (See Goren Thornborn’s Marxism to Post-Marxism? for a detail analysis of that). In other words, but monopoly tendencies and declining rate of profits is supported by empirical data.
Now this does not require you to embrace a teleology based on Marxist class theory dialectic. I am not even sure I accept that. But what it does mean is that be careful of common parlance economic wisdom and go turn to scientists for a minute for some real data.
One more thing, you have heard a lot of news about the positive trends since International spending is up in September, a systematic analysis of this by Lance Roberts, also no leftist, at Seeking Alpha, gives reason for skepticism about how good those numbers really are, :
Sales are coming from savings as incomes have been declining on a year over year basis and employment has remained stagnant. Therefore, how long do you think it will be before retail sales have to face up to reality? Also, when you look at the raw retail sales data it actually showed a 5% decline for the month and it took a quite hefty “seasonality” adjustment to get the “pop”. In fact, according to the data it was the largest seasonal adjustment in 5 years.
We have been predicting a sub-par economic growth rate with a high probability of recession in early 2012. Even with the trumpeted bump in retail sales this past month, the threat of a recession in 2012 is still highly probable given the mounting evidence from just about every other area of the economy. Given the fact that we are now fully entrenched in a balance sheet deleveraging cycle, spurts of growth will continue to be anemic as excess consumptive power is diverted into debt reduction rather than consumption. The new level of “frugality” will continue to plague economic growth until the cycle is complete.
Unfortunately, for those that are hoping for 8% annualized returns from portfolios to establish their retirement, suffice it to say that since you haven’t seen that in the last decade and things have become materially worse during that time, it is highly unlikely that you will see it in the next decade. Income over growth and capital preservation over risk strategies will be key for surviving the next 10 years of a deleveraging economic cycle.
This is why it pays to read Business and Investor news as opposed to NYTimes. Chomsky would say, “The ruling class doesn’t lie to itself.” I don’t know, but I do know I learn a lot more from The Economist, the FT, and things like Seeking Alpha than from HuffPo or the NYT.