Saturday, April 06, 2019

Dimon's capitalism vs AOC's socialism

Many of us feel that the civilization is falling into the gutter.

Pillars of the society and nation states are being systematically attacked by numerous folks. Those of us who have been asking "why did the Roman Empire decline" see an answer in the ongoing repetition of the process. Too many people simply lose any attachment to everything that is good about the society and deliberately start to promote changes that are terrifying and destructive. In the absence of truly formidable competitors, great civilizations collapse simply because the people inside want that collapse and those who don't lose their power to prevent it.

One of the aspects of the anti-civilization movement are the increasingly widespread criticisms of capitalism itself – the freedom of entrepreneurship. The young generation is increasingly absorbing pathological opinions about a great fraction of the political and societal questions. The opposition to capitalism is an example. In 2018, less than one-half of Americans between 18 and 29 years of age said to have a positive relationship to capitalism – a drop by 12 percentage points in a few years. Given these numbers, is capitalism sustainable at all?

Three days ago, these challenges were discussed by the dean of the Harvard Business School. The obvious question is whether this anti-capitalist delusion is also widespread among the HBS students. I think it is and I think it is a systemic failure. A person who can't understand why capitalism is economically superior over socialism just shouldn't be allowed in the HBS buildings – at most like a janitor. The very name indicates that the school exists to nurture business, not to decimate it. Business is a defining activity of capitalism – in socialism, we weren't quite allowed to even say "business". The understanding of the creative power of capitalism is a matter of apolitical expertise (or rudimentary knowledge), not a political issue where you should look for both sides of a "story". The story may have two sides but one side is right and the other side is wrong.



Aside from various left-wing activists, even lots of people whose positions make them the "de facto leaders of the American capitalism" have voiced not very positive things about capitalism itself. Ray Dalio, the chief of the largest hedge fund, said that "capitalism had to be reformed". Another guy, his fellow Bitcoin critic Warren Buffett, says that capitalism is still good for America. But he can't avoid all the comments that the taxation should be huge and hugely progressive and that the rich people should disperse their wealth before they die, too.



OK, the best grade may be given by a third Bitcoin critic, the boss of the largest U.S. bank JP Morgan, Jamie Dimon. In his 50-page-long annual letter to investors (full PDF), he touched lots of issues, including artificial intelligence, the essential role of stocks buybacks in capitalism, and the possibly rosy years ahead for value investors (instead of investors into the growth stocks where some reticence may be expected because of the 2008-2009 experience).

But his most catchy points were the – rare – defense of capitalism against socialism. Socialism "inevitably produces stagnation, corruption and often worse...". Exactly. He clarifies the latter: "..such as authoritarian government officials who often have an increasing ability to interfere with both the economy and individual lives – which they frequently do to maintain power. This would be as much a disaster for our country as it has been in the other places it's been tried."

Socialism just unavoidably gives too much power to people who aren't good at reproducing the well-being, who aren't motivated to do so, and who have a high enough probability to be malicious and to abuse their power. Why are they doing it? Because yes, they can. And they need to, to keep what they have accumulated (power etc.). Everything that can happen and isn't banned or discouraged by some actual mechanisms will happen, Gell-Mann's totalitarian principle says (as a rule for physics – but the whole world is a physical system). Capitalism actually discourages such bad things because it gives the – economic – power mostly to those who have done something that has been considered useful by others because they paid for it. When they cease to do useful things for others, they are running out of money, too, exactly how it should be. And it's a huge difference.

The banker keeps his "mandatory" pro-social comments reasonably contained: "I am not an advocate for unregulated, unvarnished, free-for-all capitalism. (Few people I know are.) But we shouldn't forget that true freedom and free enterprise (capitalism) are, at some point, inexorably linked." Well, I might be among the "few people". Or not. It depends. But indeed, free enterprise – a "civil right" freedom that makes capitalism unavoidable – is just another part of the freedoms and human rights and they can't really be sharply separated because you can't ever rigorously separate "financial" from "non-financial" freedoms.

Dimon also reminds everybody that the U.S. wouldn't be any exception if it tried socialism. This point is often contradicted by some kind of nationalist superstitions. Americans are exceptional so surely America would remain the most glorious land even if it switched to socialism, wouldn't it? Well, it almost certainly wouldn't. America isn't exceptional enough to beat the basic laws of mathematics – and the reasons why socialism harms the growth and the well-being of societies are basically mathematical theorems.

Germans were also skillful but you could still observe the different fates of East Germans and West Germans – which started as two completely comparable parts of a single nation, parts that were defeated by different "allies". Of course, after some 40 years, the ratio of GDP per capita could have been 10-to-1 in some meaningful measures. When this factor is translated to an annual rate, you may want to know that 101/40 = 1.059. It looks like capitalism is producing a whopping 6% of an extra growth per year. Like me, you surely find this number implausible because the capitalist Germany doesn't even seem to grow at a 6% rate. At any rate, the degree of stagnation and corruption that you get along with socialism is enough to beat basically "all of" the growth. For a country, to suffer from socialism may be a fatal problem.



A West German and East German car, 1989 – perhaps the most widespread car models in each country. Can you tell the difference between the Mercedes and the Trabant? After 40 years of divergence, these products were made by people whose DNA was almost identical. Socialism ruins any economy and there are no racial exceptions!

And we're bombarded by advertisements promoting people who are completely ignorant about the totally basic issues deciding about the happiness and prosperity of the nations – like AOC, a Congresswoman who has nontrivial chances to become a presidential candidate soon enough because lots of the activists in the media etc. just find it "cool". So she is also signed under a "Green New Deal", a more devastating plan for the future of America than the – hopefully abolished – North Korean plans to nuclear carpet bomb the U.S. territory. Along with the ban on airplanes and reliable power plants, she wants to add some massive communist machinery as a "cherry on a pie" extending her environmentalist plans. So she impresses the folks by saying "we will have the wind turbines everywhere" so you may only watch the TV if the wind blows. And by the way, just a detail, to make the life easier for the turbines, we will copy most of the Soviet bureaucracy, too.

There are lots of contradictions in her statements. For example, she says that in 75 years, her grandkids will do something – despite the fact that the world will end in 12 years and she doesn't want to have any kids, as she announced elsewhere.

Two days ago, she broadcast a one-hour-long monologue from her apartment in D.C. to her 3 million Instagram followers – some 8,000 watched live. Search for AOC popcorn at various servers (see John's favorite parody). OK, she's been a Congresswoman for half year, collecting at least $174,000 as her salary. But we learn from the young bartender – who is serving wine to herself, eating popcorn, and speaking with a full mouth – that she still sleeps on a mattress and doesn't have a chair or a bed. She just constructs a chair in front of the webcamera – which is claimed to be "Ikea" but it seems to be "Made in China". She doesn't use any nuts and bolts.

Despite the $174,000 salary (and some staff, I guess), she doesn't have a bed that could cost some $50 – this cheap one would surely be more than enough for her who clearly has no trouble with much less luxurious furniture, as we see. I obviously relate to her approach to some extent. While moving from New Jersey to Greater Boston around my 9/11/2001 PhD defense, I also slept on a mattress for two weeks on both places. Well, not exactly six months but good enough. Lots of ordinary people may surely see her as being "just like them" which seems helpful to her politics.

But should it? At the end, I have never been proud about non-representative apartments etc. And I think that no one should be proud. From any meritocratic viewpoint, "depraved" (her word) living conditions are signs of a lack of management. Those considerations are particularly relevant for a politician. You know, if she cannot reasonably quickly allocate a $50 from her annual $174,000 salary, it means that despite the $4 trillion U.S. federal budget, expenses that are as small or as large as $1 billion may also fail to work for half a year.

She was born to a Puerto Rican family in Bronx, in 1989. Assuming a woman with a similar background, there is absolutely nothing remarkable about her popcorn-and-wine diet or the missing furniture. She's probably more civilized than the average Puerto Rican woman from Bronx. But what is remarkable is the suggestion that "it is cool and desirable" for folks like that to run for the highest offices in the U.S.

I am just amazed how many people fail to realize the sheer insanity of the situation when folks like the AOC, who just can't get a $20 chair or a $50 bed for a very long time, despite the massive funding, are encouraged to design plans like the Green New Deal that would cost some $93 trillion, a group estimated. The total cost of the Green New Deal is some 1 trillion (1,000,000,000,000) times greater than the "exercise involving the bed" that is still well beyond her abilities.

If you're given $93 trillion to play with, you're very likely to waste most of the amount, aren't you? Well, she surely is, the furniture is one proof. A system that works well – like the U.S. economy – is rather fancy, delicately fine-tuned, and lots of people and companies must do "almost exactly" what they do for them not to go out of business and for billions not to be thrown away. The "right behavior" depends on lots of expertise, careful reactions, and more.

Now, AOC is illiterate as a manager, financier, scientist, and everything else. But for some reason, we're being told by the media that it's a good idea if such a lady is encouraged to mastermind a plan what to do with some $93 trillion. And it could be more money because someone who becomes the U.S. president could increase the taxation and the size of her projects – she has explicitly expressed that desire. And she is almost certainly eager to micro-manage everything much more than other politicians do – although she's clearly incompetent at managing even the simplest things.

In some "potentially dangerous" political climate, there is still some balance between the ideologically driven and fashionable "cool" things on one side; and some common sense or meritocracy on the other side. The hype and ideology were clearly getting stronger for decades. But I think that we have reached the point that at least the world as sketched and planned by the "mainstream" media doesn't even have a tiny trace of the common sense and meritocracy anymore. A Congresswoman who fails a $50 furniture test is encouraged to think about playing analogous things with $93 trillion – construct a plan that is an incoherent mixture of some manipulated science about the climate, superstitions about the society and the money, fabricated grievances and conspiracy theories, and more. If the expansion of a budget in the wake of a failure by a factor of one trillion isn't agreed to be insane, then nothing will be agreed to be insane.

Under the popcorn videos on YouTube, most people write similar things like I do. But then you also encounter a substantial portion of the commenters who are her fans, who don't seem to think about the economical and social consequences (and logic) of any of these things, and who like that she's similar to them or they want to date her, aside from other mundane considerations. These people have the same vote in the elections as the people with the brain do. The brainless side may easily win the elections – they have already won numerous such elections. The windows to the AOC universe are wide open. Lots of people have been indoctrinated to support any "cause" that is pushed by the "mainstream media", and on top of that, lots of the "apolitical folks" may vote for such candidates because they find a chaotically speaking lady with wine and a full mouth of popcorn sexy.

So be sure that the massive expansion of her power is not universally agreed to be insane. In fact, people who just point out the obvious fact that AOC is incompetent for all issues like that and her plans are insane are being attacked by her MSM attack dogs. Their self-evidently correct criticism is "politically incorrect" because she belongs into the intersection of several privileged groups. In effect, the likes of AOC – while having a modest content of the brain – end up being politically stronger than the likes of Jamie Dimon – who knows quite a lot and has done quite a lot of successful things. Because identity politics is so powerful in raising some people above others and the "problematic" minorities are the privileged ones, we really live in an anti-meritocratic regime in which the people who are professionally worse get more influential in average and systematically.

This world is a very dangerous one. Many parts still work well because many companies, activities etc. that make it work aren't really being attacked. Jamie Dimon still has a lot of freedom to make his delicate financial decisions on behalf of JP Morgan, for example. They operate in a feasible way that isn't far from being the only feasible one. But people who have absolutely no respect towards the fine mechanisms that have been found by centuries (and billions of years) of evolution are waiting to make their revolution almost complete and destroy almost everything that we considered dear about our world. JP Morgan may face man-made existential problems, too. Why do they want to do it? Because yes, they can.

Meanwhile, even in the Democratic Party there are people who know that capitalism is obviously needed for prosperity. House Democrat Stephanie Murphy (Florida, Vietnamese American) declared herself a proud capitalist who is offended by the very existence of this conversation about socialism, a system that U.S. troops have spent blood to defeat in other countries. But such declarations are amplified or deamplified by the media and most of the media people belong among the socialism fans, not among the people with a brain.

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