Welfare State Fares Well

WHEN THE STATE MANAGES WITH ALL EMOTIONS, IT’S A FULL HOUSE.

Caring State, Crafty Solidarity: Why The German Economy Is So Superior.

***

Abstract: Eco-Nomy is House-Management. A house is ruled by emotions. Narrowing the emotions to only a few of them, such as fear and greed, shrinks the house’s mind, and makes it stupid and unqualified.

This apparent abstraction has very practical consequences, as the example of the German socio-economy shows. The German model rejects the model where Wall Street reigns supreme. In the Wall Street model, as it exists now, small shareholders have become irrelevant.  instead financial conspiracies, and the conspirators who animate them, are supposed to steer the economy for the best (as proven by the rise of financial profits to 40% of all profits, from a historical base of 8%).

Instead, the German model is more of an old fashion paternalistic capitalism by owner-entrepreneurs. American economists who believe only in giving ever more free money to banks which are too big to fail, or flail, ought to ponder German superiority.

A narrow, Fear & Greed, Wall Street interpretation of the economy (“Profits next week!“) has come to rule the USA, and much of the West. This may have originated from the faltering of Anti-Americanism, since the USSR croaked. The failure of the Soviet plutocracy was interpreted by the masses, erroneously, as an American success, as if the well deserved death of a plutocracy justified another.

I roll out a few facts and pieces of logic pertaining to the mood of the situation, as electoral campaigns heat up in France (resident Skrozy is on his way out!) and the USA (Obama promising the moon while Gingrich wants to return there for real!). Economists have not been wrong by accident, but by design. They are paid to get it wrong, as needed.

By putting the correct accent on their campaigns the future American and French presidents can elevate the moods of the rather bovine populations in the correct direction (to restrain finance). Democracy is not just about passing laws, but realizing that a better and bigger boat make all safer. present day Germany gives an example of a better designed ship of state, at least economically speaking.

***

WHEN BAD DESIGN IS DELIBERATE, AND ENCOURAGED BY THE STATES:

A cruise ship hit a rock, off the island of Giglio, causing a huge seventy meter long breach finishing with an enormous boulder inserted inside. Whatever its faults, the crew turned the ship around, and tried to steer it into the tiny port of Giglio. It nearly succeeded. And it is good it did.

Indeed those cruise ships are incredibly poorly designed, and it’s deliberate. To maximize profits (what else?)

The Costa Concordia leaned one way, then the other, making it impossible to lower many rescue boats. This sort of thing was not supposed to happen ever since the Titanic (which was less than half the mass of the Concordia).

Even the Titanic was better designed in the sense that it stayed upright, which allowed to lower the insufficient number of rescue boats: the contemporary cruise ships stand twenty stories tall over water, but have only a draught of 8 meters. So, whereas in the Second World War it was standard to flood the compartments of a ship such as the 32,000 ton aircraft carrier Enterprise (CV-6), to keep them from capsizing, one cannot do so with modern cruise ships.

The ship which sank was 114,000 tons. The world’s largest cruise ship, the (also) European made Allure of the Seas, is 240,000 tons, but has only a draught of 9 meters. If its water tight compartments are as well designed as the ones of the Costa Concordia, it’s a disaster waiting to happen.

***

STIMULATE THE RICH; THEY LOVE IT, AND WILL REWARD YOU:

When Obama launched his insufficient stimulus program, much of it went to financial tricks. Obama was just implementing what all the democratic economists (most on the take from Wall Street, one way, or another) told him to do.

Thus the stimulus was more of the “less taxes, more economy” erroneous mantra. 75 billion dollars of the stimulus consisted in the readjusting the Alternate Minimum Tax to inflation, just as Bush always did every year. Another 287 billion went in tax rebates, mostly on the rich. (Britain and France also engaged in welfare for financiers, see below.)

It is true that direct capital was injected to save the American car industry, a justified emergency measure. But this was a brute intervention, short term, of the USA government, playing Wall Street investor. It did not solve any long term economic problems, as the German Kurtzarbeit did (see below). Worse: it ignored the underlying ethical problem of the existence of a CEO class in the USA.

While Obama was stimulating the richest, the Federal Reserve, the central bank, was engaging in Quantitative Easing, which is basically free money for big banks. In the USA, banks can get all the money they want, by taking it all from the public. Then they are supposed to lend it to the economy. But if the economy has no future, they will not.

(Krugman disingenuously insists to call that free money for banks the “monetary base“, and claims that is very different from money: a lie hiding behind a superficial truth. Indeed banks leverage themselves enormously from this base of money, lending, to themselves, through derivatives may be 50 times what they truly have. By contrast Obama himself has, correctly, explained that Krugman and his kind were wrong, and that what one gives to the rich, one has to steal from the poor: money grows on trees, only in Krugman’s mind! Even though there are very big trees in Hawai’i, Obama has never seen a money tree; a revealing case where the president knows more basic economy than the Nobel Laureate!)

There were no strings attached to giving free “monetary base” to banks: the banks and financial piracy outfits (the likes of Goldman Sachs and its ilk) were free to use that free money to “reimburse” the government, to pay themselves 150 billion dollars of bonuses a year, and play with seven hundred trillions of financial derivatives (yes, that is 14 times world GDP; of course no sum of transactions can exceed by a factor of 14 all of the world transactions: these people are mad, and taking the public for naïve children!)

But never mind. Now, elections are coming again, and, again Obama is promising to us all the change we can possibly imagine. Now Obama himself is not too specific on the details, besides another real estate welfare program for banks painted in camouflage to “help homeowners”. What was mostly obvious was the transparent glee Obama exuded when he informed us exuberantly, during his State of the Union speech, that he, too, belonged to the hyper wealthy class (“People like me can afford to pay more taxes“… in other exalting news, people like me. Obama, can ride waves ten stories tall, and go to idyllic pacific islands in the biggest plane you can possibly imagine, with thousands of servants attending to my every whim, and some you cannot possibly imagine…)

In this debacle, the role of economists, even supposedly left leaning economists, has been major. It led the USA astray. it led Obama astray with their aura of Very Serious Persons, fully deployed. The errance at the foot of finance is far from being Obama’s solitary sin.

During Obama State of the Union speech the Steve Jobs widow, a blonde parody, was next to the first lady (does that make her the second lady for a day?). The Steve Jobs widow is on countless boards, including Stanford, being Steve Jobs widow (that’s how plutocracy works: plutocrats get on all the boards, congratulating each other for their braininess, until there are only plutocrats on the boards, and then they take plutocratic decisions exclusively… very differently from Germany, where union representatives are on the boards of company, by law! In Europe, the lack of taste of plutocrats and their consorts parading at the head of the state as if they owned it, tends to be kept under wraps… ever since 1789… But American plutocrats are persuaded that no outrage is high enough to get the American People angry…).

***

BAD APPLES, GOOD GERMANY:

Immelt, head of General Electric, playing Obama chief economic adviser, pontificated that what was good for General Electric (namely that it pays no tax) is good for the USA. To make his case worse, he added in his towering ignorance, that it was the same in Germany:”What is good for Siemens is good for Germany.”

This is confusing today’s Germany, and Hitler’s Germany. Hitler’s big companies were made in Wall Street: for example IG Farben a made in Wall Street monopoly devised by Wall Street to turn around the anti-monopoly laws passed under president Teddy Roosevelt (there is a cover-up about the theme of Hitler and Wall Street on the Internet; nowadays there are firms whose main business is to manipulate Internet rankings and data; actually the cover-up started in 1941-1942, when American inspectors brandishing the trading-with-the-enemy act found out that the rot was so deep, it was better to cover it up…).  

In “Jobs, Jobs, and Cars” the often honorable Paul Krugman points out that:

“Apple employs very few people in this country.

A big report in The Times last Sunday laid out the facts. Although Apple is now America’s biggest U.S. corporation as measured by market value, it employs only 43,000 people in the United States, a tenth as many as General Motors employed when it was the largest American firm.

Apple does, however, indirectly employ around 700,000 people in its various suppliers. Unfortunately, almost none of those people are in America.

Why does Apple manufacture abroad, and especially in China? As the article explained, it’s not just about low wages. China also derives big advantages from the fact that so much of the supply chain is already there. A former Apple executive explained: “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away.”

This is familiar territory to students of economic geography: the advantages of industrial clusters — in which producers, specialized suppliers, and workers huddle together to their mutual benefit — have been a running theme since the 19th century.

And Chinese manufacturing isn’t the only conspicuous example of these advantages in the modern world. Germany remains a highly successful exporter even with workers who cost, on average, $44 an hour — much more than the average cost of American workers. And this success has a lot to do with the support its small and medium-sized companies — the famed Mittelstand — provide to each other via shared suppliers and the maintenance of a skilled work force.

The point is that successful companies — or, at any rate, companies that make a large contribution to a nation’s economy — don’t exist in isolation. Prosperity depends on the synergy between companies, on the cluster, not the individual entrepreneur.”

(Since the honorable Krugman has borrowed several of my expressions, from “Very Serious Person” to now “Greater Depression“, I will consider him thereafter a partly owned subsidiary, and will quote him even more extensively than I already did.)

OK, Krugman is all about economic clusters (although the concept if 2,000 years old). Well, one can go deeper. It’s more than that just clusters. In the technological society we have, prosperity depends upon intelligence, and a synergy between the minds.

***

INTELLIGENCE IS A SOCIAL PHENOMENON, GREED IS ASOCIAL:

Make no mistakes; a lot of American high tech success is due to the size of the American market, not the fact that Silicon Valley’s garage people are more clever than European engineers. The main problem of Europe, one that a crude man from New Jersey would deliberately refuse to understand, is that Europe is all too fragmented.

An example is the Patent System. Right now a European inventor has to apply to a patent in every country, so it takes a lot of time, and that is up to five times more expensive than applying to a patent in the USA. This allows the American venture capitalists to act like vultures and pick and chose whatever start-up tech they detect in Europe, and fly away with it, thanks to the big amplification system they can use in the USA (some cackled with satisfaction to my face about it).

That’s why the Facebook system is American, and not French. And why Obama kisses the COO of Facebook with photographers present, every three months at least.

But beware! Vultures can feast on monkeys, but that does not make them more intelligent.

(The Minitel and Skyrock were French predecessors to Google and Facebook. They were imitated by American products. The invention and use of the Internet by CERN did not translate in a commercial product, because American businessmen did it first: the fragmented and intellectual European market pales relative to the giant, profit oriented American one, and all the business conspiracies it has established, with the active complicity of the politicians. That is why Facebook moved from Boston to the Silicon Valley, center of the spider web; as Obama knows very well… Since he comes down there to milk the friendly plutocrats every few months with 38,500 dollar a plate dinners to make communion with the filthy rich.)

European conservatives are dangerous socialists, by the deranged standards of Main Stream American Thinking. Watch the ultra conservative, ultra austere Cameron and his 50 billion dollars Very High Speed train project (Britain has already two 200 km/h, 125 mph lines, and the VHS line to Paris goes at 300 km/h, putting Paris 2 hours from London).

***

INTELLIGENCE CAN DE DEVOURED BY GREED:

(This is one of the reasons for real deep thinkers to stay away from money; when Newton got rich, he stopped producing great ideas, in contrast with the poor Leibnitz and Kepler.)

One can see this devouring of society by money when comparing Britain, France and Germany. Those three places were long the world’s industrial and technological leaders. However, in the last few decades, Britain dropped off technologically, as it became obsessed by finance. Under Sarkozy, or Skrozy (as Standard & Poors has it: Sarkozy having lost his “A”, I remove it from his name, in a discreet allusion to his many children from his many wives), France also took the Anglo-Saxon turn for the worst of finance supreme.

Skrozy cut down the taxes on the hyper wealthy, in the Clinton-Bush-Obama style (according to his own numbers to the tune of 73 billion euros in tax reduction, and 50 billion in tolerated fraud; a year, that’s more than 3% of GDP! So most of the present 5.5% French deficit is due to Skrozy making gifts to plutocrats). Skrozy has several major plutocrats in his immediate family, he was just trying to do his part. with a bit of luck, like his mentor Chirac, he will end up with a jail sentence. Just warming up to handle the banksters.

The result of the financial turn of Skrozy is that France collapsed, relatively to Germany. France went from a balanced balance of trade to now a deficit of 75 billion euros, American style. Industry has left France, so France has to import industrial products more than she can pay for, American style. Skrozy was nicknamed ‘the American’ for good reason. Thanks, Skrozy.

In Germany, engineers and qualified workers stayed kings, and industrial production has increased, relative to France. Now, contrarily to what the likes of Krugman have been arguing, Germany is pulling the rest of Europe with it, in a positive feedback loop: the country exports massively to China. Positive for Europe, that is, not so positive for New York and New Jersey, which Krugman haunts. But not just that.

France’s present false leadership has betrayed France’s proud, time honored tradition of seventeenth century Colbertism. At Valmy in 1792, it is superior French artillery which saved the republic against the Prussian fascist juggernaut. Superior technology: the main axis of Colbertism, resting on a social contract.

What is Colbertism? It is the state intervening to rearrange society and companies to make them technologically supreme. What Germany has been doing in the last decade is pure Colbertism, on steroids. Just like under Colbert, Germany, to feed its high tech export machine, is now drafting qualified workers from all over Europe.

*** 

KURZARBEIT MACHT FREI:

[OK, I could not resist; but it’s important not to resist a joke in poor taste from time to time: respect and the politically correct are terrible masters!]

The present German exportation supremacy was the result of a program of general, but intelligent, austerity implicating all agents of the German society, including owners, management of companies, unions, workers, government and taxpayers. This was started under the Socialist Party (Chancellor Schroeder).

One could even argue that the austerity was started under Chancellor Kohl, Merkel’s mentor, who engaged in a first austerity policy to forcefully gobble East Germany (with the complicity of his friend Mitterrand, who secretly financed Kohl, while getting the euro in exchange, to tie the new, much bigger Germany down to France).

When the bank crisis hit, the German government of Conservative Angela Merkel went for Kurtzarbeit.

Once again all the preceding actors cooperated: workers were paid less, worked less, went to school more, and the state paid the workers directly so that the workers and the companies they worked for not only did not lose their skills, but improved them. it helped that the owners of companies tend to be, in Germany managers and owners of the premises on which they work, rather than faceless, nameless Wall Street style financial pirates with addresses in remote Caribbean islands.

A German welder employed by a manufacturer whose order book had collapsed, for example, would work only half of what he used to, but would be paid 30% by the state, 60% by his employer, and then would learn laser welding.

His American colleague would get fired, lose his house, his health insurance, his health, and then contribute to the shortening for American life span recently observed. So doing the USA would lose a qualified welder, a house, a family, etc. In Detroit City hall is destroying houses rather than having them as dilapidated ruins…

The coming new German cars and machine tools are much better than those which preceded them, from this program of improvement of the minds (this is good for Europe, because Europe, through Germany can preserve supremacy, exportations, and employment!).

Thus it is the deep involvement of the state in its noblest functions which has made the success of German capitalism.

Now, Merkel is no greedy would be plutocrat. She is not going around, flaunting the fact she is a rich multi millionaire. Indeed, she is not. She has been in politics for twenty years, but, differently from an American politician, she has not been on the take. Merkel, an ex-research physicist lives very modestly, in an apartment she has owned for a very long time with her husband, a university professor.

By contrast all the eight American republican candidates for the presidency had palatial residences (more than 5,000 square feet, 500 square meters; of course Romney has some in many states). Some of these wealthy politicians are heirs of multi billionaire (for instance the ex Obama ambassador to China, “republican” Hunstman; then his dad created a super pac for him, a political spending fund…).

Merkel could never afford the complex of sea side mansions Obama and his entourage rent when they go to Hawai’i (I have been there). She could not, even for a day. Merkel’s modesty is not just an indication that she did not make a Faustian deal with the devils who man western finance. It also allows her to identify with common people.

The revolving door between American politicians and the plutocracy have made the former identify with the latter. Obama even crowed about it in his state of the union address… in the guise of criticizing the tax code. You could read the glee on his face: “I am a very rich success, look at me!”

(By the way it was not reassuring to see that glee was the main emotion on Obama’s face, as his hands pointed to himself: that means that the main true message he perceived was:”I am very rich, look at me, and my huge smile“. It was not: “I am going to raise the taxes of the hyper wealthy“. If the latter emotion had been ruling him, he would have exhibited the dour determination necessary to overrule all his very wealthy friends he has all around him. Instead Obama exuded self satisfied glee about himself, an entirely inappropriate emotion if his purpose had been genuine.) 

The consensus in France is that the wrong social and economic turn was taken by the country. By becoming more intelligently social, Germany beat France at her own French game. Polls show a great admiration for all things German.

So lamentable president Skrozy will have to go, with major consequences on the international mood about how to handle the financial vultures (the German Socialist Party, the century old SPD, is on the same frequency as the French Parti Socialiste: more Europe, less financial piracy, more schooling, more engineering).

A good occasion to put the plutocracy of the USA back in its place, by yanking the French army out of Afghanistan (there are French weapons going to the rebels in Syria, and Turkey and Iran are all enraged, so no worry to be had by those afraid to run out of wars; the afghan war, aiding a Fundamentalist Islamist Regime, is in contradiction with the French secular constitution).

***

THE RULE OF FEAR & GREED MAKES PEOPLE STUPID:

The economy, how to manage the house, is articulated around the various emotions to which the inhabitants of the house react. Greed is just one emotion people have, and not the most important. Care is more important. Germany cared, Germany is rewarded. It’s not all about business clusters, professor Krugman!

And what about the USA? Well, fear is another emotion. The USA is more organized around fear than the European, and other, countries (that is why Greeks or Senegalese go to violently demonstrate in the streets; they are not afraid, they refuse to be!).

American citizens have good reason to be afraid. As the magazine the New Yorker puts it:

Mass incarceration on a scale almost unexampled in human history is a fundamental fact of our country [the USA] today—perhaps the fundamental fact, as slavery was the fundamental fact of 1850. In truth, there are more black men in the grip of the criminal-justice system—in prison, on probation, or on parole—than were in slavery then. Over all, there are now more people under “correctional supervision” in America—more than six million—than were in the Gulag Archipelago under Stalin at its height.

(Last I checked myself, it was more like ten millions, as several more millions are under state punishment in various guises labeled differently.)

Right wing Americans love to criticize what they call disparagingly the “European Welfare state” (forgetting many of these states are richer, per capita than the USA). They typically condemn the presence of the European state in everyday life. Maybe they think that presence is just like the carceral American state, just bigger? In truth, few people are in prison in Europe. France, with more than 65 million citizens, has only 65,000 incarcerated. When Reagan the actor got to power, in 1981, there were about two hundred and twenty people incarcerated for every hundred thousand Americans; by 2010, the number had more than tripled, to seven hundred and thirty-one.  

Fear and Greed rule Wall Street. Successful traders play with both, like surfers with waves. Thus Wall Street maniacs consider that this is the best model to run an economy, as they know little else (many of the operators are ignorant brutes selected for their good brutish looks with a background in football, or other team sports).

Fear and greed also increasingly rule the USA, because the American economy is increasingly organized that way (by the Wall Street operators inside the White House, and halls of Congress).

Fear and greed are plain not enough to manage the house of man. Just as a democracy is stronger because many rule, and think, an economy is stronger when many emotions rule, and think. And care is one of them.

The welfare states fares well. Get a grip.

***

Patrice Ayme

Tags: Colbertism, Concertation, Germany, Kurtzarbeit, Welfare State