The perfect economic killer virus

The novel coronavirus appears almost perfectly fine tuned to wreck a globalized, capitalist economy

The Black Death. Smallpox. Spanish Flu. By now we have all read how these pandemics ravaged humanity, leading to death tolls in the tens of millions. We have also seen how they raved the human body in gruesome, graphic ways. The bubonic plague caused black pustulent swellings that give the disease its nickname. Smallpox deforms the body with thousands of blisters. The Spanish Flu had many symptoms, some of which included uncontrollable nose bleeds and cyanosis, a darkening of the skin into a blue-black hue due to lack of oxygen. In many cases it was so swift that people feeling fine in the morning were gone by the end of the day, often simply dropping dead. More recently we have seen the scourge of Ebola, a hemorrhagic fever, that not only has death rates of 80% among its most lethal strains but also kill you in a horrifying manner, effectively liquefying your insides and bleeding them out from every orifice.

Compared to that, the novel coronavirus known as SARS-CoV-2 (or specifically, the disease that it causes which is Covid-19) that is currently affecting the planet is remarkably unremarkable in terms of its lethality and gruesomeness. Death rates have been widely quoted as being around 3%, give or take depending on a country’s demographics as well as general levels of health and preparedness, but they are far lower when all of the untested, asymptomatic cases are considered. Certainly worse than “just the flu” but considerably lower than some of its corona-cousins like SARS (1-in-3 dead) and MERS (2-in-3 dead), the latter being by far the most deadly of the bunch and up there in lethality with most hemorrhagic fevers. And although the clinical description of what Covid-19 does to so many parts of the body is nightmarish, it is all mercifully hidden under the skin. A Hollywood summer blockbuster disease this is not.

Which leads me to believe that although Covid-19 may not be an apocalyptic “perfect killer” disease, it is quite possibly the most perfect destroyer of a modern globalized economy. In fact, if one had to design a disease to bring global capitalism to its knees, it would probably be this. Continue reading

The rentier class always wins

Once again, taxpayers will end up paying the bill while rentiers escape unscathed

As the battle for our lives against the novel coronavirus pandemic rages, another battle is being ready to be fought: for the economy. It is not an exaggeration to say that that the second quarter of 2020 will see the most severe decline in global economic activity in the history of human civilization, and the question is whether we can come up with the right policies to ensure that the this does not deteriorate into another great recession or worse, another great depression.

For starters, let’s understand the scale of the carnage. Entire sectors of the economy like restaurants, hospitality, and travel have already collapsed. Entirely collapsed. The millions of workers that are now unemployed or which will be soon unemployed as a result of this will require a social safety net of epic proportions in order to survive the 3 or more months of lockdowns, with no guarantee that their jobs will still be there when the crisis is over. For countries that have pushed forward a comprehensive package of corporate lifelines and worker’s support (pay guarantees, moratorium on interest, utilities, mortgages, and rent, etc.), it is estimated that these may end up costing as much as 10% of GDP (maybe even more), putting further strains on national finances which in many cases have not yet recovered from the 2008-09 crisis. And for developing countries, with masses of informal workers and lack of social safety nets, the outlook could end up being as apocalyptic as the virus itself. Continue reading

Healthcare: a uniquely American tyranny

Economic liberals and libertarians should love universal healthare. This is why they don’t

One of the most shocking aspects of anyone who has spent any amount of time living in the US is its lack of public healthcare provision. It is the only industrialized economy not to offer either a universal healthcare service like Britain’s NHS, or a universal healthcare insurance scheme like that which is provided in countries like Germany and France. Even most of the richer developing countries offer services that the vastly wealthier US lacks: in my country, Mexico, you have access to the main public healthcare system with most formal jobs and even those in informal jobs have some limited coverage from a separate public scheme. Worse still is that the cost of private insurance in the US is horrifically expensive: the average monthly premium is estimated at over $300 a month for individuals and over $800 for families. Then there’s the copayments and the fact that insurers may decide not to cover you at all for a myriad of reasons.

However, there is another aspect of the US’s dysfunctional and inhumane healthcare system that is arguably the most troubling. That it exists solely for the purpose of private profit is problematic in itself but its nature as an instrument for labor’s subservience to capital is much worse. This is because for the grand majority of Americans, healthcare is obtained through their employers and is widely seen as an important “perk” of a good job. Although the Affordable Care Act (Obamacare) of 2010 made it much easier for  to obtain insurance while not employed, the fact that employers can generally negotiate a better deal with insurers as an institution than you as an individual means that job-based insurance schemes generally have better coverage and are cheaper than anything that you as an individual could obtain on your own. Consequently, the cost of losing a job is two-fold: not only your obvious loss of income but also the increased risk of suffering some health-related emergency or losing coverage for any condition that you or a loved one under your plan already had. Continue reading

The endorsement game: why Britain’s liberal centrist media must share the Brexit blame

How to endorse right-wing populism while pretending to be part of a reasonable center ground

It’s Endorsement Week and Britain’s liberal centrist establishment once again did what the liberal centrist establishment does: cower out of supporting a party (Labour) that is its only hope of averting the very Brexit that they allegedly stand against, as well as the horror show that would be five years of a Boris Johnson government. I am talking, of course, of the Economist and the Financial Times, the country’s two main liberal centrist publications, which for reasons that I find quite flabbergasting, have not received a smidgeon of the blame for the political mess that Britain finds itself in despite having significantly contributed to it.

It is conventional wisdom to blame Britain’s media for much of the current political malaise. On one hand there are the obnoxious right-wing tabloids like the Daily Mail and the Sun which have spent years promoting a toxic Euroscepticism that has contributed to the widespread support for Brexit. These have been tabloids that have consistently told their working class and conservative readerships that their problems are not caused by Whitehall but by Brussels; that the country has more to fear from immigrants than elites; and that somehow Brexit is going to usher in VE Day-like euphoria. “Believe in Britain!” they say, obliviating the mountains of evidence of how Brexit is going to deepen the immiseration that nine-years of Tory government has already inflicted on working people. Continue reading

The delusions of liberalism at the end of the end of history

Why liberals need to accept that the foundational ideology of the West is obsolete

No serious political scientist or pundit today would deny that liberalism, the foundational ideology of the Western world for the last few centuries, is under attack. Autocrats like Russia’s Vladimir Putin, Hungary’s Viktor Orbán, or Turkey’s Recip Erdogan have offered an illiberal challenge to liberal democracy that has gained strong appeal with its constituents. But in the very bastions of the liberal West, liberalism is also succumbing from the onslaught of far-right populism. That people like Donald Trump or Boris Johnson would become leaders of their respective countries would have seemed inconceivable just a few decades earlier. Now the question seems to be which country will be the next to fall into the cracks.

Despite these concerns, liberals from both the left and right of the political spectrum appear hopeful in their hubris. In the first two centuries after its inception, liberalism successfully dismantled the political absolutism of the ancien regime, and universalized the Western values of individual rights and liberties that almost every society on earth now takes for granted. In the 20th century it also fended off two great illiberal challenges in the form of fascism and communism. Although the term is annoyingly taken as a synonym of “left-winger” in the US, almost everyone in the Western world today believes him or herself to be a liberal from a political-philosophical perspective. Unfortunately, this label is usually self-applied without stopping to think what being a liberal actually means which is extremely problematic: a foundational political ideology that remains unchallenged eventually becomes a hindrance rather than a help to human progress when its adherents fail to realize it may be obsolete.

This post will make the controversial point that liberalism has reached that point of obsolescence. More so, I will argue that it is a political ideology tarnished with blood, riddled with hypocrisy and contradictions, and which has become a rhetorical concept intended to justify the presumed superiority of Western civilization and thought as a justification for Western hegemony. And even if by the end of these lines you remain steadfast in your belief that liberalism is a sacred pillar of modernity and must be defended at any cost, hopefully it would make you uncomfortable enough that you will never look at liberalism the same way. Continue reading

The exorbitant privilege of capital

Why we need to rethink capital’s relationship with labor

The robber barons

Capital has an exorbitant privilege. With capital we are able to undertake productive investments and reap a potentially infinite amount of rewards. However, capital is not the only factor of production: for those investments to succeed, we also need labor. Unfortunately the rewards received by labor are infinitesimal and declining. In the majority of the industrialized world, the share of national income received by labor has been dropping over the past decades as a result of a myriad of factors like globalization, deregulation of labor markets, and the neutering of the power and influence of unions. The root of this privilege goes back to the origins of capital and its historic process of accumulation.

Where does capital come from? One source is from capital itself. Any increase in the value of an asset provides the owner with additional income which can then be reinvested into other capital assets. Similarly, some assets like stocks and bonds provide a regular stream of income in the form of interest payments or dividends.  Additionally, physical capital like robots or other types of automated equipment can also produce additional capital without human input. However, the main source of capital is labor. Your work, as an employee of any firm, contributes to the profits of the firm through which the firm is then able to accumulate further capital. No amount of capital will make a firm thrive in the absence of labor which is why the two are not perfect substitutes. But capital’s exorbitant privilege comes from the fact that, unlike labor, it can generate infinite returns. Let’s see how this process takes place in practice. Continue reading

On inequality and consumption

A vibrant market economy benefits from more egalitarian income distribution

Inequality matters. Not just as an issue of fairness but also because a vibrant, market economy is much better off when wealth and income are spread around more evenly among the population. There are two reasons for this. First, consumption of certain goods and services “takes off” after a population reaches a certain level of income. Secondly, because the more people consume these goods and services, the more competition there is and the cheaper they become. In other words, the same amount of GDP among two populations but with vastly different distribution of income will result in vastly different consumption patterns; and consequently, production patterns as well. Let’s see how this manifests in real life.

A tale of two countries

When it comes to inequality, it’s hard to think of two regions in the world more disparate than Latin America and Scandinavia. Latin America has long held the title of most unequal region of the world, and even though most countries in the region are now considered “middle income”, a significant share of their population are still poor. Furthermore, those in the so-called middle class still have considerably lower purchasing power than a middle-class Westerner. In contrast, Scandinavia is one of the most egalitarian regions in the world thanks to a generous cradle-to-grave welfare state. When using Gini coefficients, a measure used by economists to measure inequality (with 0 being perfectly equal and 1 being perfectly unequal), Latin America tends to fall in the .45-.55 range. In contrast, Scandinavia usually ranks at .25-35. Continue reading

Embracing democratic socialism

Be on the right side of history and start wishing capitalism goodbye

Democratic socialism

There is just one New Year’s Resolution worth having in 2019: become a democratic socialist.

If you already are one, congratulations! This post may be preaching to the choir but I’m sure you’ll enjoy it anyway and will at least give you some good arguments against those who are still in denial (which sadly includes many on the left). If you’re not, keep reading and if these arguments don’t convince you, then perhaps nothing ever will.

What is democratic socialism?

The best way to describe democratic socialism is to start by what it’s not: communism. If you’re the kind that instantly has a mini heart attack by even a fleeting mention of the word “socialism”, relax, we’re not nostalgic for a return of the Soviet Union nor are we here to provide lame apologies for the disaster that is Venezuela (more on this later). With that out of the way, let’s explain in detail. Democratic socialism is the economic system whereby the means of production are owned and directly controlled by the people who work it. The key word here is directly. Whereas communism attempted to do this by having the state take control of these means (which proved disastrous), social democracy seeks no intermediary. Imagine an economy where every business was a worker-owned cooperative and workplaces guaranteed similar democratic rights to their workers as citizens are guaranteed in the public sphere. That’s basically it.

Democratic socialism might sound similar to social democracy but in practice, social democracy remains capitalist: there is no fundamental difference in the corporate ownership structure in social democratic countries to liberal capitalist ones. The main difference is that social democratic societies tend to provide a wider array of public services (a welfare state and state-owned firms) as well as take a more active role in preventing market excesses (regulation). They also encourage strong trade unions to give voice to workers in the workplace; in fact, many social democratic parties were born from the late 19th century and 20th century labor movements. Social democratic systems like the Nordic Model therefore sit in a muddled middle ground between socialism and capitalism, incorporating the capitalist ownership structure but with strong and active states that help ensure a socially just society. Continue reading

The New Right ecosystem

The communities and personalities behind conservatism’s lastest bid for your hearts and minds
The New Right Ecosystem

The New Right Ecosystem (click to enlarge)

The emergence of a new conservative movement in the Western world in the 21st century has been one of the most important political developments of our time. But despite the way that this movement has influenced recent elections and produced shocking results like Trump and Brexit, the grand majority of people still fail to understand how and where it emerged. Ever since Hillary Clinton first spelled out the “alt-right” in a campaign speech in 2016, this term has been used as a catch-all for all right-wing politicians and pundits that have pursued a populist, anti-establishment rhetoric but this too proven to be far too limiting in scope for understanding the breadth of the movement. It also ignores that many of the people pushing the movement’s ideas don’t identify with the alt-right, aren’t anti-establishment, and may even be coming from the left itself.

I have therefore created a convenient infographic on what I call the New Right Ecosystem: the assortment of communities that are supporting the New Right movement. Some are obvious, like the original alt-right, the men’s rights activists, or the troll and meme armies that proliferate on forums such as 4chan. Many of these were mentioned in a seminal 2016 Breitbart piece co-authored by who was then the rising superstar of the alt-right, Milo Yiannopolous. But over the past decade even other communities that once appeared to embrace left-wing values have shifted squarely into the Trump camp, as is the case with the New Atheist and skeptic communities that initially arose to combat religious fundamentalism of all kinds in the post-9/11 Bush years. Finally, others like the libertarians are using the New Right as a platform to pursue their free market agendas. The fact that nearly all alt-right and anti-establishment pundits refer to themselves as libertarians or “classic liberals” (an increasingly used euphemism for libertarian sympathies) is telling of how nationalism and market fundamentalism have formed a strange and toxic marriage.

I am confident that the infographic is mostly self-explanatory after reading the legends.  However, this post will serve as a basic F.A.Q., with more analysis coming in future posts. Continue reading

Your third-world reptilian brain

When your attitudes don’t develop in line with your incomes

Between today and Sunday, Mexicans will be able to vote in a public referendum on whether to cancel the construction of a new airport for Mexico City or allow it to proceed. The (admittedly shambolic) referendum is organized by the incoming government of Andrés Manuel López Obrador who promised to cancel the airport during his campaign but has since acceded to allow the public to settle the matter instead. But why cancel the largest infrastructure project in modern Mexican history? Well, it just so happens that the airport is being built on what’s left of Lake Texcoco, the only surviving wetland in the Mexico City metro area. It is an area prone to flooding, earthquakes, and sinking. But beyond that, it also sits on top of one of the largest aquifers in the region, one that supplies millions of people in the surrounding suburbs with fresh water.

Of course, being that most of those millions of people happen to be from poor and working class households means that their opinion on the matter had little influence on the current government when it drew up its plans. And well, the wetlands themselves have been largely abandoned, a giant greenfield site just waiting for it to be filled up with concrete and steel. Plans to restore some semblance of the old lake have not fared well in the last few decades despite its historical significance. Mexico City – or as it was called in Aztec times, Tenochtitlan – was once the Venice of America: a city built on the lake, crisscrossed by canals and floating croplands. It must have been an impressive sight to the Spaniards when they first marched across the city’s causeways. But after the conquest, the Spaniards began to dry out the lake in order to expand the city, in the process destroying the fragile anti-flooding mechanisms that the Aztecs had built. The response to constant flooding of the city was to dry out the lake further. After independence, the process of “modernizing” the capital continued, with the last canals being turned into freeways during the 1950s and 60s, and the lake itself practically disappearing by the 1990s save for a few remaining reservoirs which face an uncertain future once the airport is up and running, whenever that may be: it already faces a 2-year delay at least, a $2.5 billion cost overrun, and no shortage of corruption allegations over the opacity in the awarding of contracts. Continue reading