Charity Scams

I received a phone call from a nice enough telemarketer calling himself "John" collecting money for The Autistic Society Fund and thanking me for prior donations, of which I was unaware of making. He was quick to inform me about the rising endemic of autism among children.  I steered the conversation to the speculation of the causes of autism and why it is ostensibly on the rise. This provoked "John" to warmly discuss vaccines, food additives, and chemicals. I then asked about the charity itself and the company he works for.

He casually admitted that he doesn't work for The Autistic Society Fund, as there is no charity actually called this, but instead is a telemarketer for Good Charity, Inc and that The Autistic Society Fund is one of a number of funds run by Good Charity, Inc. that donates money to a variety of causes. I encouraged him to discuss the charity with casual phrases like, "Well, my donation would also help keep you employed, right?" 

I asked how much of my donation would be contributed to actual autism research. He responded that "about 15% of the funds we collect get sent directly to the charity."  I asked which charity would receive that 15%, the Autism Society, for example.  But he replied, "The Autism Society Fund."

At this point I felt that there was no way I was going to contribute money until I did a little more research. I asked "John" about the Good Charity, Inc.'s track record and the various charities they provide telemarketing services for.

At this point, he indicated that his boss was encouraging him to end the phone call to "move on to other prospects".  Obviously, telemarketers work on a for-profit basis. They are not volunteers. Like miners prospecting for gold, I was one of thousands of mines they were probing for excavation.

I was particularly curious about this specific "charity" and its link to the various "charities" it claims to support.

In January the Better Business Bureau (BBB) issued a press release with a severe warning regarding Good Charity, Inc.'s tactics and its connection to Insight Teleservices, Inc.   According to the BBB report:

Good Charity is an umbrella organization for 10 related organizations with names suggestive of the kinds of causes or people they assist. The names include:

• Terminally Ill Children’s Fund
• United States Paralyzed Veterans Fund
• Children’s Leukemia of America Fund
• National Breast Cancer Awareness Fund
• Disabled Veteran Wheelchair Games
• Michigan Disabled and Paralyzed Veterans Fund
• Disaster Relief and Aid Fund
• Disabled and Paralyzed Veterans Fund
• America’s Missing Children Fund
• The Autistic Society Fund

The BBB release links Good Charity, Inc. run by Brian Maiorana to Insight Teleservices, Inc. for whom  Brian Maiorana used to work.  As the BBB noted, "A contract between Good Charity and Insight calls for Insight to retain 85 percent of the funds it raises for the charity. In 2011, Good Charity reported that it received just $180,000 from the $1.4 million Insight raised on its behalf that year. The charity made grants of $75,000, or about five cents for each dollar in donations."

The shady practices of Insight Teleservices, Inc. can be traced back to a Milwaukee Journal Sentinel article claiming that the company donated only 14 cents for every dollar collected to charity.  "In 2005, Insight cold-called Wisconsin residents and raised about $812,500 on the charity's behalf. Of that, the group got about $113,750, according to its annual report. Insight kept the rest - 86%."  While technically this type of practice is not illegal it is highly unethical.  The company is essentially taking advantage of our innate desire to help others in order for individuals within the company to prosper.  Unfortunately there are no laws that protect donors from falling prey to the predatory practices that companies like Good Charity, Inc. are employing.  

As for Good Charity and its link to autism research, its website claims to donate money to the CT Autism Spectrum Resource Center (ASRC), although it lists this non-profit organization as the Connecticut Autism Resource Center.  Good Charity claims to have donated to the ASRC since 2012 because "The Autistic Society Fund’s director Brian Maiorana decided to financially support" programs as unique as its “Parent Advocacy Boot camp”.

The ASRC is indeed holding a Boot Camp for autism advocates in 2013.  This is highly misleading.  Good Charity's website uses legitimate information that can be independently verified to support Good Charity's claims that it contributes to the ASRC.

The ASRC itself refused to respond to inquiries regarding the cold-calling tactics of groups like Good Charity and may or may not be illicitly involved.

As it turns out, though, I'm not the first to have received a phone call from Good Charity or to question its intentions.  James Albert Trankle is the Pastor of the Holy Land Spiritual Church and a former Professional Fund-raiser for Police, Fire, Veteran, Medical and Children's Charities.  His book, Badge Fraud, details his experience trying to fight charity fraud.  He's left a massive trail of letters, emails, and news stories that link Brian Maiorana to Ben Scott and to several different telemarketing companies claiming to have charitable motivations but are really just simple scams.

The prevalence of charity fraud has risen to such high levels and for such nefarious purposes that in 2009 the Federal Trade Commission (FTC), together with 61 Attorneys General, Secretaries of State, and other law enforcers of 49 states and the District of Columbia, launched “Operation False Charity.” However, their investigations particularly targeted companies falsely claiming to perform fundraising activities for veterans groups, police associations, firefighters.  The FTC does offer myriad suggestions on how to donate safely and "to avoid fraudsters who try to take advantage of your generosity."

Indicative of the ongoing difficulties in fighting seemingly ever-present charity fraud, in 1998 the FTC along with, 40 states, and the American Association of Retired Persons (AARP) today announced “Operation Missed Giving,” a sweeping nationwide campaign against fraudulent fundraising. The FTC indicated then that they would "target telephone fundraisers who misrepresent ties with police departments, fire fighters, veterans groups, childrens’ health organizations, and other community organizations and it seeks to educate consumers about things they can do to help decide whether the caller on the phone is someone they want to give money to." In 2003, the FTC launched "Operation Phoney Philanthropy".  Previously there was the related "Operation Missed Fortune" in 1996, "Operation False Alarm" in 1997, and as recent as last year the FTC issued warnings that "scams often follow disasters."

Much like their counterparts in higher education, the ubiquitous diploma mills, charity fraudsters are difficult to fight.  The common divisor in these cases is that crooks make a lot of money and leave trails that are hard to trace making prosecution next to impossible.  They often employ various addresses and seldom reveal their actual identity instead hiding behind the name of a reasonable sounding charity, like The Autistic Society Fund.  Many of these operate as limited liability companies that shelter partners from direct liability and make criminal practices hard to pin on the perpetrators.  Much like what happens in other scams, the perpetrators of charity scams modify the names of their companies fairly often and as in the case of Good Charity, utilize names that sound familiar and include information that can be verified independently. 

A little incredulity goes a long way 

Before giving to a charity, the FTC recommends that

regardless of how they reach you, avoid any charity or fundraiser that:

• Refuses to provide detailed information about its identity, mission, costs, and how the donation will be used.

• Won't provide proof that a contribution is tax deductible.

• Uses a name that closely resembles that of a better-known, reputable organization.

• Thanks you for a pledge you don’t remember making.

• Uses high-pressure tactics like trying to get you to donate immediately, without giving you time to think about it and do your research.

• Asks for donations in cash or asks you to wire money.

• Offers to send a courier or overnight delivery service to collect the donation immediately.

• Guarantees sweepstakes winnings in exchange for a contribution. By law, you never have to give a donation to be eligible to win a sweepstakes.

It's fairly clear that Good Charity, Inc. and its affiliate Insight Teleservices, Inc. are out to capitalize on American's generosity and kindness and rip off the best of the lot.  Unsurprisingly, confidence men have been running these kinds of schemes and scams since the invention of trade.

Charity Checklist

If you are contacted by telemarketers imploring for your donation, the BBB recommends the following strategy for donors:

• If you are solicited by a telemarketer, ask the names of both the fundraiser making the call and the charity he or she is representing.  Ask how much of your contribution goes to the charity and how much is retained by the fundraiser.

• If you are solicited by mail, understand that a portion of your contribution may go to a for-profit company hired to run the campaign.  Call the fundraiser or charity and ask how much of your money the charity will receive.

• Contact the charity to find out how it uses donations from the public.  Will it provide direct aid to families, buy medical supplies or be used for education or research?

The FTC has also published an extensive checklist:

Take the following precautions to make sure your donation benefits the people and organizations you want to help.

• Ask for detailed information about the charity, including name, address, and telephone number.
• Get the exact name of the organization and do some research. Searching the name of the organization online — especially with the word “complaint(s)” or “scam”— is one way to learn about its reputation.
• Call the charity. Find out if the organization is aware of the solicitation and has authorized the use of its name. The organization’s development staff should be able to help you.
• Find out if the charity or fundraiser must be registered in your state by contacting the National Association of State Charity Officials.
• Check if the charity is trustworthy by contacting the Better Business Bureau’s (BBB) Wise Giving Alliance, Charity Watch, or GuideStar.  Sign up for a free account with GuideStar where you can find a non-profit's 990 forms, key figures involved in the organization, and read and provide reviews.  The 990 tax forms indicate funds received and often compensation of the top earners of the organization.
• Ask if the caller is a paid fundraiser. If so, ask:
  • The name of the charity they represent
  • The percentage of your donation that will go to the charity
  • How much will go to the actual cause to which you’re donating
  • How much will go to the fundraiser
• Keep a record of your donations.
• Make an annual donation plan. That way, you can decide which causes to support and which reputable charities should receive your donations.
• Visit this Internal Revenue Service (IRS) webpage to find out which organizations are eligible to receive tax deductible contributions.
• Know the difference between “tax exempt” and “tax deductible.” Tax exempt means the organization doesn’t have to pay taxes. Tax deductible means you can deduct your contribution on your federal income tax return.
• Never send cash donations. For security and tax purposes, it’s best to pay by check — made payable to the charity — or by credit card.
• Never wire money to someone claiming to be a charity. Scammers often request donations to be wired because wiring money is like sending cash: once you send it, you can’t get it back.
• Do not provide your credit or check card number, bank account number or any personal information until you’ve thoroughly researched the charity.
• Be wary of charities that spring up too suddenly in response to current events and natural disasters. Even if they are legitimate, they probably don’t have the infrastructure to get the donations to the affected area or people.
• If a donation request comes from a group claiming to help your local community (for example, local police or firefighters), ask the local agency if they have heard of the group and are getting financial support.
• What about texting? If you text to donate, the charge will show up on your mobile phone bill. If you've asked your mobile phone provider to block premium text messages — texts that cost extra — then you won't be able to donate this way.

In general, if you want to donate to a cause, skip the telemarketer approach and contact the non-profit organization directly but don't stop donating just hesitate before giving.

Also visit Charity Navigator, a non-profit that rates the effectiveness of over 6,000 charities and whose mission is to "guide intelligent giving."


In general, as in almost every endeavor, keep participating but practice incredulity.

________________________________________________________________________

Links for donating to legitimate autism research:


The Autism Society
http://www.autism-society.org/

The EU is set to impose new sanctions on Iran / The Myth of the Forbes 400

The European Union is set to increase sanctions on Iran on Monday after failed negotiations over Iran's contested nuclear development program. British Foreign Secretary William Hague said they will continue to increase pressure on Iran until negotiations succeed. EU Foreign Policy head Catherine Ashton said sanctions that were imposed in July are "quite clearly having an effect" and the heightened sanctions are "to persuade Iran to come to the table."

Riots broke out earlier this month due to the dramatic fall of Iran's currency, the rial, which is down by about 80 percent since the beginning of the year. The new sanctions are expected to target Iran's banks, as well as trade and gas imports. Additionally, 30 more companies will be subject to an EU assets freeze.

Meanwhile, the United States and EU are working to close loopholes in sanctions on Iran after discovering that Tehran has been covertly using offshore tax havens in order to maintain crude oil shipments.  The National Iranian Tanker Co. (NITC), Iran's largest oil-vessel operator, has reportedly registered ownership of some of its tankers in Central America.  The NITC claims it is privatized but the United States classifies it as a government entity.

Despite severe sanctions, U.S. exports to Iran have risen by 32 percent this year up to $199.5 million. Exports were comprised primarily of wheat and other grains, dairy products, and medical, dental, and surgical products.  However, some humanitarian goods have declined including medicinal and pharmaceutical products.

------------------------------------------------

On the homefront:

The Forbes 400 or 400 Richest Americans (first published in 1982) is a list published by Forbes Magazine magazine of the wealthiest 400 Americans, ranked by net worth. The average net worth of a member on the list is a whopping $4.2 million.  Their total net worth rose to $1.7 trillion.  That's about a sixth of the EU's GDP.  

In 2011 the net worth of the Forbes 400 rose $200 billion.  A net worth of $1.1 billion is the minimum to make the list.

Source: 1995-2008: Arthur B. Kennickell, "Ponds and Streams: Wealth and Income in the U.S., 1989 to 2007," Federal Reserve Board Working Paper, January 7, 2009, Table A1, p. 55. 2009-10: Forbes Magazine press release via Business Wire. Adjusted for inflation using CPI-U.

In 2011 the median household income, adjusted for inflation, dropped by 1.5% to $50,054.

Forbes 400 Reinforces Flawed "We Built It" Claims & Misleads About Wealth & Opportunity in the U.S.

Forbes Magazine calls their list of the 400 richest Americans the "definitive scorecard of wealth in America," but a new report asserts the magazine is misleading. Born on Third Base: What the Forbes 400 Really Says About Wealth & Opportunity in America, released this week by Boston-based non-profit United for a Fair Economy, examines the sources of wealth for members of the Forbes 400 and uncovers the role of inheritance and privilege in economic mobility. The report urges Forbes to stop glamorizing the "self-made man" while minimizing the other factors in wealth accumulation, including tax policies, birthright, gender, and race.

The report finds that 40 percent of the Forbes 400 list inherited a sizable asset from a family member or spouse, and over 20 percent inherited sufficient wealth to make the list. In addition, 17 percent of the Forbes 400 have family members on the list.

"Forbes spins a misleading tale of what it takes to become wealthy in the U.S. by understating the overwhelming impact of birthright and privilege," said Shannon Moriarty, co-author of the report. "Economic success should be a function of achievement, not just a guarantee for people lucky enough to be born into wealthy families. The Forbes 400 shows that birthright and family privilege are still very much at play in the American Dream."

The report explains that the net worth of the Forbes 400 grew fifteen-fold between the launch of the list in 1982 and 2011, while wealth stagnated for the average U.S. household. In 1982, the wealth threshold for the Forbes 400 was $75 million; today, every person on the list is a billionaire.

Women accounted for just 10 percent of the list in 2011, and nearly 90 percent of those women inherited their fortunes. The whiteness of the Forbes 400 list also makes clear the racial wealth divide. In the past two years, just one African American made the list. "Instead of asserting that ‘the American dream is very much alive,’ Forbes should acknowledge that the opportunity to become wealthy has never been equally shared," said Moriarty. "The billionaire members of the Forbes 400 are exceptions, not the rule."

Born On Third Base takes Forbes to task for their misuse of the loaded term "self-made" and the undervaluing of privilege and social capital in financial success. "We disagree with Forbes claim that 70 percent of the list made their fortunes entirely from scratch," said Brian Miller, executive director of United for a Fair Economy and co-author of the book The Self-Made Myth.

"The 'self-made' and 'I built this' narratives wrongly present the opportunity to become rich as equally attainable by all people in today's highly stratified society. Forbes’ story also ignores the important contributions of others and the role of government in the success of the wealthiest Americans."

"Tax policies have for decades been tilted in favor of the very wealthy," said Tim Sullivan, federal policy coordinator at United for a Fair Economy. "Tax rates on capital gains have been slashed to historic lows, which is of particular benefit to the likes of the Forbes 400." The report explains that the wealthiest 0.1 percent (including those on the list) receive half of all net increases in capital gains. "Drastic cuts to the federal estate tax made under George W. Bush and extended with the 2010 Obama tax deal have made it easier for wealthy families to keep and amass even greater fortunes," said Sullivan.

"As was once said of President George W. Bush, many of those on the Forbes 400 were ‘born on third base’ but claim to have ‘hit a triple,’ and the Forbes 400 list perpetuates this falsehood," said Moriarty.
United for a Fair Economy is launching a petition to coincide with the release of the Forbes 400 and the Born on Third Base report, asking Forbes to tell the whole story of wealth and opportunity in the U.S. Download the report and see the petition at www.faireconomy.org/BornOnThirdBase2012.

Why Socialism?

By Albert Einstein
Albert Einstein is the world-famous physicist. This article was originally published in the first issue of Monthly Review (May 1949). It was subsequently published in May 1998 to commemorate the first issue of MR‘s fiftieth year.
—The Editors of Monthly Review

Is it advisable for one who is not an expert on economic and social issues to express views on the subject of socialism? I believe for a number of reasons that it is.

Let us first consider the question from the point of view of scientific knowledge. It might appear that there are no essential methodological differences between astronomy and economics: scientists in both fields attempt to discover laws of general acceptability for a circumscribed group of phenomena in order to make the interconnection of these phenomena as clearly understandable as possible. But in reality such methodological differences do exist. The discovery of general laws in the field of economics is made difficult by the circumstance that observed economic phenomena are often affected by many factors which are very hard to evaluate separately. In addition, the experience which has accumulated since the beginning of the so-called civilized period of human history has—as is well known—been largely influenced and limited by causes which are by no means exclusively economic in nature. For example, most of the major states of history owed their existence to conquest. The conquering peoples established themselves, legally and economically, as the privileged class of the conquered country. They seized for themselves a monopoly of the land ownership and appointed a priesthood from among their own ranks. The priests, in control of education, made the class division of society into a permanent institution and created a system of values by which the people were thenceforth, to a large extent unconsciously, guided in their social behavior.

But historic tradition is, so to speak, of yesterday; nowhere have we really overcome what Thorstein Veblen called “the predatory phase” of human development. The observable economic facts belong to that phase and even such laws as we can derive from them are not applicable to other phases. Since the real purpose of socialism is precisely to overcome and advance beyond the predatory phase of human development, economic science in its present state can throw little light on the socialist society of the future.

Second, socialism is directed towards a social-ethical end. Science, however, cannot create ends and, even less, instill them in human beings; science, at most, can supply the means by which to attain certain ends. But the ends themselves are conceived by personalities with lofty ethical ideals and—if these ends are not stillborn, but vital and vigorous—are adopted and carried forward by those many human beings who, half unconsciously, determine the slow evolution of society.

For these reasons, we should be on our guard not to overestimate science and scientific methods when it is a question of human problems; and we should not assume that experts are the only ones who have a right to express themselves on questions affecting the organization of society.

Innumerable voices have been asserting for some time now that human society is passing through a crisis, that its stability has been gravely shattered. It is characteristic of such a situation that individuals feel indifferent or even hostile toward the group, small or large, to which they belong. In order to illustrate my meaning, let me record here a personal experience. I recently discussed with an intelligent and well-disposed man the threat of another war, which in my opinion would seriously endanger the existence of mankind, and I remarked that only a supra-national organization would offer protection from that danger. Thereupon my visitor, very calmly and coolly, said to me: “Why are you so deeply opposed to the disappearance of the human race?”

I am sure that as little as a century ago no one would have so lightly made a statement of this kind. It is the statement of a man who has striven in vain to attain an equilibrium within himself and has more or less lost hope of succeeding. It is the expression of a painful solitude and isolation from which so many people are suffering in these days. What is the cause? Is there a way out?

It is easy to raise such questions, but difficult to answer them with any degree of assurance. I must try, however, as best I can, although I am very conscious of the fact that our feelings and strivings are often contradictory and obscure and that they cannot be expressed in easy and simple formulas.

Man is, at one and the same time, a solitary being and a social being. As a solitary being, he attempts to protect his own existence and that of those who are closest to him, to satisfy his personal desires, and to develop his innate abilities. As a social being, he seeks to gain the recognition and affection of his fellow human beings, to share in their pleasures, to comfort them in their sorrows, and to improve their conditions of life. Only the existence of these varied, frequently conflicting, strivings accounts for the special character of a man, and their specific combination determines the extent to which an individual can achieve an inner equilibrium and can contribute to the well-being of society. It is quite possible that the relative strength of these two drives is, in the main, fixed by inheritance. But the personality that finally emerges is largely formed by the environment in which a man happens to find himself during his development, by the structure of the society in which he grows up, by the tradition of that society, and by its appraisal of particular types of behavior. The abstract concept “society” means to the individual human being the sum total of his direct and indirect relations to his contemporaries and to all the people of earlier generations. The individual is able to think, feel, strive, and work by himself; but he depends so much upon society—in his physical, intellectual, and emotional existence—that it is impossible to think of him, or to understand him, outside the framework of society. It is “society” which provides man with food, clothing, a home, the tools of work, language, the forms of thought, and most of the content of thought; his life is made possible through the labor and the accomplishments of the many millions past and present who are all hidden behind the small word “society.”

It is evident, therefore, that the dependence of the individual upon society is a fact of nature which cannot be abolished—just as in the case of ants and bees. However, while the whole life process of ants and bees is fixed down to the smallest detail by rigid, hereditary instincts, the social pattern and interrelationships of human beings are very variable and susceptible to change. Memory, the capacity to make new combinations, the gift of oral communication have made possible developments among human being which are not dictated by biological necessities. Such developments manifest themselves in traditions, institutions, and organizations; in literature; in scientific and engineering accomplishments; in works of art. This explains how it happens that, in a certain sense, man can influence his life through his own conduct, and that in this process conscious thinking and wanting can play a part.

Man acquires at birth, through heredity, a biological constitution which we must consider fixed and unalterable, including the natural urges which are characteristic of the human species. In addition, during his lifetime, he acquires a cultural constitution which he adopts from society through communication and through many other types of influences. It is this cultural constitution which, with the passage of time, is subject to change and which determines to a very large extent the relationship between the individual and society. Modern anthropology has taught us, through comparative investigation of so-called primitive cultures, that the social behavior of human beings may differ greatly, depending upon prevailing cultural patterns and the types of organization which predominate in society. It is on this that those who are striving to improve the lot of man may ground their hopes: human beings are not condemned, because of their biological constitution, to annihilate each other or to be at the mercy of a cruel, self-inflicted fate.

If we ask ourselves how the structure of society and the cultural attitude of man should be changed in order to make human life as satisfying as possible, we should constantly be conscious of the fact that there are certain conditions which we are unable to modify. As mentioned before, the biological nature of man is, for all practical purposes, not subject to change. Furthermore, technological and demographic developments of the last few centuries have created conditions which are here to stay. In relatively densely settled populations with the goods which are indispensable to their continued existence, an extreme division of labor and a highly-centralized productive apparatus are absolutely necessary. The time—which, looking back, seems so idyllic—is gone forever when individuals or relatively small groups could be completely self-sufficient. It is only a slight exaggeration to say that mankind constitutes even now a planetary community of production and consumption.

I have now reached the point where I may indicate briefly what to me constitutes the essence of the crisis of our time. It concerns the relationship of the individual to society. The individual has become more conscious than ever of his dependence upon society. But he does not experience this dependence as a positive asset, as an organic tie, as a protective force, but rather as a threat to his natural rights, or even to his economic existence. Moreover, his position in society is such that the egotistical drives of his make-up are constantly being accentuated, while his social drives, which are by nature weaker, progressively deteriorate. All human beings, whatever their position in society, are suffering from this process of deterioration. Unknowingly prisoners of their own egotism, they feel insecure, lonely, and deprived of the naive, simple, and unsophisticated enjoyment of life. Man can find meaning in life, short and perilous as it is, only through devoting himself to society.

The economic anarchy of capitalist society as it exists today is, in my opinion, the real source of the evil. We see before us a huge community of producers the members of which are unceasingly striving to deprive each other of the fruits of their collective labor—not by force, but on the whole in faithful compliance with legally established rules. In this respect, it is important to realize that the means of production—that is to say, the entire productive capacity that is needed for producing consumer goods as well as additional capital goods—may legally be, and for the most part are, the private property of individuals.

For the sake of simplicity, in the discussion that follows I shall call “workers” all those who do not share in the ownership of the means of production—although this does not quite correspond to the customary use of the term. The owner of the means of production is in a position to purchase the labor power of the worker. By using the means of production, the worker produces new goods which become the property of the capitalist. The essential point about this process is the relation between what the worker produces and what he is paid, both measured in terms of real value. Insofar as the labor contract is “free,” what the worker receives is determined not by the real value of the goods he produces, but by his minimum needs and by the capitalists’ requirements for labor power in relation to the number of workers competing for jobs. It is important to understand that even in theory the payment of the worker is not determined by the value of his product.

Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development and the increasing division of labor encourage the formation of larger units of production at the expense of smaller ones. The result of these developments is an oligarchy of private capital the enormous power of which cannot be effectively checked even by a democratically organized political society. This is true since the members of legislative bodies are selected by political parties, largely financed or otherwise influenced by private capitalists who, for all practical purposes, separate the electorate from the legislature. The consequence is that the representatives of the people do not in fact sufficiently protect the interests of the underprivileged sections of the population. Moreover, under existing conditions, private capitalists inevitably control, directly or indirectly, the main sources of information (press, radio, education). It is thus extremely difficult, and indeed in most cases quite impossible, for the individual citizen to come to objective conclusions and to make intelligent use of his political rights.

The situation prevailing in an economy based on the private ownership of capital is thus characterized by two main principles: first, means of production (capital) are privately owned and the owners dispose of them as they see fit; second, the labor contract is free. Of course, there is no such thing as a pure capitalist society in this sense. In particular, it should be noted that the workers, through long and bitter political struggles, have succeeded in securing a somewhat improved form of the “free labor contract” for certain categories of workers. But taken as a whole, the present day economy does not differ much from “pure” capitalism.

Production is carried on for profit, not for use. There is no provision that all those able and willing to work will always be in a position to find employment; an “army of unemployed” almost always exists. The worker is constantly in fear of losing his job. Since unemployed and poorly paid workers do not provide a profitable market, the production of consumers’ goods is restricted, and great hardship is the consequence. Technological progress frequently results in more unemployment rather than in an easing of the burden of work for all. The profit motive, in conjunction with competition among capitalists, is responsible for an instability in the accumulation and utilization of capital which leads to increasingly severe depressions. Unlimited competition leads to a huge waste of labor, and to that crippling of the social consciousness of individuals which I mentioned before.

This crippling of individuals I consider the worst evil of capitalism. Our whole educational system suffers from this evil. An exaggerated competitive attitude is inculcated into the student, who is trained to worship acquisitive success as a preparation for his future career.

I am convinced there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented toward social goals. In such an economy, the means of production are owned by society itself and are utilized in a planned fashion. A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow men in place of the glorification of power and success in our present society.

Nevertheless, it is necessary to remember that a planned economy is not yet socialism. A planned economy as such may be accompanied by the complete enslavement of the individual. The achievement of socialism requires the solution of some extremely difficult socio-political problems: how is it possible, in view of the far-reaching centralization of political and economic power, to prevent bureaucracy from becoming all-powerful and overweening? How can the rights of the individual be protected and therewith a democratic counterweight to the power of bureaucracy be assured?

Clarity about the aims and problems of socialism is of greatest significance in our age of transition. Since, under present circumstances, free and unhindered discussion of these problems has come under a powerful taboo, I consider the foundation of this magazine to be an important public service.

Awesomism

A realistic economics professor schools her naive, idealistic pupil on how awesome capitalism is compared to participatory socialism.

Income Inequality and Who Represents Whom?

"Your health is precious. You are rich, respected, admired, beloved; you are happy as once I was. You are a man to be missed. For me it is no matter."
- E.A. Poe, Cask of Amontillado

There is one complicated and diverse idea expressed in two simple words that people should be deeply concerned about and debating at much greater length in this country: income inequality. It is at the heart of nearly every issue the American people face.  The wealthiest 5% have no real stake in job creation; they have no real concerns for someone who has no health insurance.  The wealthiest among us are not even among us.  They meander the halls of the Hermitage and vacation at Necker Island; they hold banquets and fund raisers; they serve as board members and they hold seats in Congress. The newest members of the 112th Congress are among the wealthiest elected in recent years.

In contrast there is you.  You're taking night classes, studying hard, working during the day, raising kids, and hoping that a job will be waiting for you when you graduate with a degree.  You see yourself working hard at that job and advancing in your career.  You may see yourself rising out of the life you currently lead and finding more material wealth - your own home, a new car, health insurance, a never ending expense account, biannual dentist visits.

Unfortunately the likelihood of any of that happening, or of any of us moving up to the east side, is dwindling with each passing year that our elected officials continue to work for the wealthy.  What once was the American dream is quickly becoming a nightmare and the Tea Party ain't helping nobody.  The reason social mobility is becoming less reliable is that more and more of the income (wealth) is being controlled by fewer people. The repercussions and consequences of this bunching up at the top can be felt through increases in a variety of societal problems.

Western Europe exhibits far greater income equality and far greater social mobility.  They are also recovering for the global session far more rapidly than the U.S.



Anyone running for office preaching the greatness of the American society, harping on how anyone can become someone in America, and how all of us our equal, is purporting to believe in a myth.  If you haven't honed your skills of sniffing out a con just remember one simple truth: Life is pain. Anyone who says differently is selling something.  The pain in America's arse is that there simply has never been equality in this country and there is nothing like it today.  America is a country run and operating for the benefit of the wealthy. 

All of our domestic policies, foreign policies, and strategic policies are based on the interests of the wealthy.  And there's no end in sight.

As a result of the disparity in income, the populace is less represented.  Additionally, the larger the income inequality, the more other sectors of society suffer.

The most commonly used method of measuring income disparity is the Gini index.  The Gini index measures the degree of inequality in the distribution of family income in a country.  The higher the number, the greater the level of income disparity.  On this scale the U.S. ranks 39th of 136 countries with a Gini index of 45 (2007).  Sweden has the lowest, 23, while Namibia has the highest, ~70.  America has the highest Gini index of any other OECD country.  Ever heard any effectual or effective discussion on how to best address the income inequality in America by today's politicians?  Likely not, nor is it likely to occur any time soon.  Here's a snapshot of what happened in congress today.

Who represents the wealthy?  Who represents the poor?  Who represents the people?

Republicans are counting on citizens to vote against their own interests and elect Conservatives to ensure that cuts in spending are made.  And they count on some of the wealthiest for donations.  For example, Ron Johnson collected over $25,000 from Koch Industries.  Fundraising personifies who Ron Johnson represents.  Can anyone reasonably think that Sen. Johnson represents the people of Wisconsin?

At a time when people are struggling to find jobs, finding themselves kicked out of their homes, our elected officials are raking in millions of bucks in donations.  But Republicans aren't the only ones reaping the monetary harvest.  Among the 25 wealthiest congress members, 13 are Democrats.

While John Kerry's net worth is around $230 million, he's collected over $9 million in donations, $76,000 alone from Bain Capital, a private equity, venture capital group based in Boston.   Just who the hell are all these people who can donate tens of thousands of dollars to bloody politicians?  It's a freaking sickness, holy shmit.

So, if you're looking for millionaires, don't bother with Monaco or the Caribbean, just go to Washington.  There's hundreds of 'em there and we the people sent 'em there.  Who do you suppose they represent?

The congressional millionaires' club: By the numbers

How rich is Congress? Well, the class of freshmen members is alone worth more than $500 million

posted on March 14, 2011, at 3:04 PM
The Week

Sen. Richard Blumenthal (D-Conn.) has an estimated
personal wealth of $95 million, making him the
wealthiest Senate freshman in the 112th Congress.
Photo: Getty SEE ALL 13 PHOTOS

Although this year's House freshmen are sharply divided by ideology, they are united by one striking measure: Many of them are filthy rich. The Center for Responsive Politics found that 60 percent of Senate freshmen and 40 percent of House freshmen were worth $1 million or more. The statistics prove that Congress is populated "overwhelmingly with millionaires and near-millionaires who often own multiple homes," says Dan Eggen at The Washington Post. Here, a look at the numbers behind the congressional millionaires' club:

96
Number of new House members in the 112th Congress

40 percent
Approximate share of House freshmen who are millionaires
16
Number of new senators in the 112th Congress

60 percent

Share of Senate freshmen who are millionaires

1 percent

Approximate share of ordinary Americans who are millionaires

$3.96 million
Median estimated wealth of a Senate freshman

$570,418
Median estimated wealth of a House freshman

$25,149
Median estimated wealth of an American over the age of 18 (2005)

$533.1 million
The estimated combined worth of the full freshman class of the 112th Congress

$95 million
Estimated personal wealth of Sen. Richard Blumenthal (D-Conn.), the richest freshman. His wealth comes mainly from his wife's family, whose real estate holdings reportedly include the Empire State Building.

-$317,498
Estimated net worth of the poorest freshman lawmaker, Rep. Joe Walsh (R-Ill.). Walsh, who lost his condo to foreclosure in 2009, is the only freshman in the red. He calls this a "badge of honor."

17
Number of freshmen who own stock in General Electric. Eleven invest in Bank of America, while 9 freshmen each invested in AT&T, Cisco, Johnson & Johnson, Microsoft, and Procter & Gamble.

Between $1 million and $5 million
Amount of money collectively invested in Citibank by freshman lawmakers

261
Number of millionaires in the last Congress, out of a total of 535 members

$911,510
Median wealth of all members in the last Congress

$303.5 million
Estimated wealth of the richest member of Congress, Rep. Darrell Issa (R-Calif.), in 2009

Sources: OpenSecrets.org (2), Washington Post, CNBC, Politico, U.S. Census

Sources:

http://www.insidehighered.com/news/2011/08/04/study_compares_tuition_charges_for_international_students

http://www.insidehighered.com/news/2011/08/04/study_looks_at_debt_to_degree_ratio_across_sectors

http://www.insidehighered.com/news/2011/08/05/georgetown_study_links_college_degree_attainment_to_lifetime_earning_power

http://www.insidehighered.com/news/2011/08/11/study_says_low_income_students_can_t_outpace_wealthy_peers_at_selective_colleges

Gini index: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/0,,pagePK:180619~theSitePK:136917,00.html

Social Mobility and Education solutions: http://www.economist.com/node/15911314

http://www.equalitytrust.org.uk/why/evidence

Social Mobility myth: http://www.economist.com/node/15908469

How the Billionaires Broke the System

August 1, 2011

The US deficit reduction plan makes no sense – until you remember who’s behind the Tea Party movement.

By George Monbiot. Published in the Guardian 1st August 2011

Who are the most ruthless capitalists in the western world? Whose monopolistic practices make Walmart look like a corner shop and Rupert Murdoch a socialist? You won't guess the answer in a month of Sundays. While there are plenty of candidates, my vote goes not to the banks, the oil companies or the health insurers, but – wait for it – to academic publishers. Theirs might sound like a fusty and insignificant sector. It is anything but. Of all corporate scams, the racket they run is most urgently in need of referral to the competition authorities.

Everyone claims to agree that people should be encouraged to understand science and other academic research. Without current knowledge, we cannot make coherent democratic decisions. But the publishers have slapped a padlock and a "keep out" sign on the gates.

You might resent Murdoch's paywall policy, in which he charges £1 for 24 hours of access to the Times and Sunday Times. But at least in that period you can read and download as many articles as you like. Reading a single article published by one of Elsevier's journals will cost you $31.50. Springer charges €34.95, Wiley-Blackwell, $42. Read 10 and you pay 10 times. And the journals retain perpetual copyright. You want to read a letter printed in 1981? That'll be $31.50.

Of course, you could go into the library (if it still exists). But they too have been hit by cosmic fees. The average cost of an annual subscription to a chemistry journal is $3,792. Some journals cost $10,000 a year or more to stock. The most expensive I've seen, Elsevier's Biochimica et Biophysica Acta, is $20,930. Though academic libraries have been frantically cutting subscriptions to make ends meet, journals now consume 65% of their budgets, which means they have had to reduce the number of books they buy. Journal fees account for a significant component of universities' costs, which are being passed to their students.

Murdoch pays his journalists and editors, and his companies generate much of the content they use. But the academic publishers get their articles, their peer reviewing (vetting by other researchers) and even much of their editing for free. The material they publish was commissioned and funded not by them but by us, through government research grants and academic stipends. But to see it, we must pay again, and through the nose.

The returns are astronomical: in the past financial year, for example, Elsevier's operating profit margin was 36% (£724m on revenues of £2bn). They result from a stranglehold on the market. Elsevier, Springer and Wiley, who have bought up many of their competitors, now publish 42% of journal articles.

More importantly, universities are locked into buying their products. Academic papers are published in only one place, and they have to be read by researchers trying to keep up with their subject. Demand is inelastic and competition non-existent, because different journals can't publish the same material. In many cases the publishers oblige the libraries to buy a large package of journals, whether or not they want them all. Perhaps it's not surprising that one of the biggest crooks ever to have preyed upon the people of this country – Robert Maxwell – made much of his money through academic publishing.

The publishers claim that they have to charge these fees as a result of the costs of production and distribution, and that they add value (in Springer's words) because they "develop journal brands and maintain and improve the digital infrastructure which has revolutionised scientific communication in the past 15 years". But an analysis by Deutsche Bank reaches different conclusions. "We believe the publisher adds relatively little value to the publishing process … if the process really were as complex, costly and value-added as the publishers protest that it is, 40% margins wouldn't be available." Far from assisting the dissemination of research, the big publishers impede it, as their long turnaround times can delay the release of findings by a year or more.

What we see here is pure rentier capitalism: monopolising a public resource then charging exorbitant fees to use it. Another term for it is economic parasitism. To obtain the knowledge for which we have already paid, we must surrender our feu to the lairds of learning.

It's bad enough for academics, it's worse for the laity. I refer readers to peer-reviewed papers, on the principle that claims should be followed to their sources. The readers tell me that they can't afford to judge for themselves whether or not I have represented the research fairly. Independent researchers who try to inform themselves about important scientific issues have to fork out thousands. This is a tax on education, a stifling of the public mind. It appears to contravene the universal declaration of human rights, which says that "everyone has the right freely to … share in scientific advancement and its benefits".

Open-access publishing, despite its promise, and some excellent resources such as the Public Library of Science and the physics database arxiv.org, has failed to displace the monopolists. In 1998 the Economist, surveying the opportunities offered by electronic publishing, predicted that "the days of 40% profit margins may soon be as dead as Robert Maxwell". But in 2010 Elsevier's operating profit margins were the same (36%) as they were in 1998.

The reason is that the big publishers have rounded up the journals with the highest academic impact factors, in which publication is essential for researchers trying to secure grants and advance their careers. You can start reading open-access journals, but you can't stop reading the closed ones.

Government bodies, with a few exceptions, have failed to confront them. The National Institutes of Health in the US oblige anyone taking their grants to put their papers in an open-access archive. But Research Councils UK, whose statement on public access is a masterpiece of meaningless waffle, relies on "the assumption that publishers will maintain the spirit of their current policies". You bet they will.

In the short term, governments should refer the academic publishers to their competition watchdogs, and insist that all papers arising from publicly funded research are placed in a free public database. In the longer term, they should work with researchers to cut out the middleman altogether, creating – along the lines proposed by Björn Brembs of Berlin's Freie Universität – a single global archive of academic literature and data. Peer-review would be overseen by an independent body. It could be funded by the library budgets which are currently being diverted into the hands of privateers.

The knowledge monopoly is as unwarranted and anachronistic as the corn laws. Let's throw off these parasitic overlords and liberate the research that belongs to us.

Follow George Monbiot on Twitter: @GeorgeMonbiot.
www.monbiot.com

References:
1. http://www.whitehouse.gov/the-press-office/2011/04/13/remarks-president-fiscal-policy
2. http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105
3. http://www.guardian.co.uk/world/2011/jul/31/us-debt-crisis-washington-poverty
4. http://www.nytimes.com/2011/08/01/opinion/the-president-surrenders-on-debt-ceiling.html
5. http://www.guardian.co.uk/world/2011/jul/31/us-debt-congress-tea-party
6. http://www.cnbc.com/id/29283701/Rick_Santelli_s_Shout_Heard_Round_the_World
7. http://astroturfwars.org/
8. http://www.newyorker.com/reporting/2010/08/30/100830fa_fact_mayer?currentPage=all
9. http://www.portfolio.com/executives/features/2008/10/15/Profile-of-Billionaire-David-Koch/index3.html
10. http://www.forbes.com/wealth/forbes-400
11. Tony Carrk, April 2011. The Koch Brothers: What You Need to Know About the Financiers of the Radical Right. Center for American Progress Action Fund. http://www.americanprogressaction.org/issues/2011/04/pdf/koch_brothers.pdf
12. As above.
13. http://astroturfwars.org/

Are religious fundamentalists damaging public education?

In 1989, Wisconsin passed Wisconsin Act 336 that established the Milwaukee Parental Choice Program (MPCP).  Wisconsin was the first state to offer parents a choice of either staying at a public school or taking a voucher in order to pay for private education.  The program had its participation capped at 15% of the population of Milwaukee Public Schools (MPS). The legislation set up a voucher program for low income families at 175% the national poverty level or below to attend non-sectarian private schools.  In the 2010-2011 school year, 20,996 students (based solely on 3rd Friday head count) were enrolled in 102 participating schools that were predominantly religious. 

Studies have indicated that voucher programs do not achieve statistically better results than their public school competitors.  According to the Department of Public Instruction, the WSAS results are worse than MPS's. At the same time, they are sapping needed money away from MPS.  At best the research and current literature are inconclusive about consistent results.  And data does not track students from the time they enroll to the time they leave.     

Funding
Every year, funding for the next year is based on the 3rd Friday head count.  Private schools collect their vouchers based on this count.  Invariably, teachers in MPS prepared for the 4th, 5th, and 6th weeks of the school year because then there would be a sudden surge in enrollment.  This practice takes place every year in every MPS school.

The students that arrive later in the year are welcomed to secular public classrooms that cost them no additional money.  At the same time, if the student had been kicked out of a private voucher school, the school keeps the $6,700 that the MPCP had paid as part of the 3rd Friday count.  The best data would trace the student from the beginning of the year until the end of the year regardless of mobility.     

This funding structure leads to a plethora of problems for MPS.  In my eight years as an elementary and middle school teacher at two different schools, it was rare to have a text book for each child.  We made do; we learned to share.  In order to ensure there was paper in the classroom, teachers asked parents to make  donations, still teachers paid out of pocket for most supplies, even in the high-achieving, effectively run schools.  As the population of voucher students rises each year this funding scenario grows worse for MPS.

The funding for many of the institutions that receive vouchers is also much higher because they charge tuition and have wealthy contributors.  The type of investment that the billionaires in the religious right have made on private schools is the type of investment that should be made in every school for every child.  Private voucher schools have intensified income inequality in education.  Conservative fundamentalists are pushing the voucher agenda all over the country selling it as reform that works.  In Milwaukee, the lobbying by religious groups swayed the debate and by 1998 private religious schools were added to the list of participating private schools.  Now rather than tax dollars designated for public education, the money goes to religious education.

Parental Involvement
When Howard Fuller became a strong advocate for MPCP, he leaned hard on the idea that it was a way to get parents involved with their children's education.  The main message to parents was and is that they should have a choice.  One of the lead cheerleaders for MPCP in Wisconsin is Leah Vukmir.  "The voucher program has caused dramatic improvement in the public schools," Vukmir explained. "As a result of choice and competition, there are more opportunities for students."  The biggest problem with this idea is that the programs provide opportunities for a small percentage of the student population whose parent(s) were already highly involved in the child's life.  In many cases these are students who would perform equally well had they attended their local neighborhood school.  Thus, the voucher program removes high achieving students from public schools.  As a result test scores at MPS schools drop and achievement overall drops because high achieving students often act as the role models at the school.

Special Education Needs (SEN)
Private institutions are under no mandate to provide individual education programs (IEP) for students with special needs (SEN).  Because of this many students do not receive the services they would had they attended a public school.  What does happen is that, for example, speech therapists by law are required to provide services.  A student who is not registered at the MPS school where a speech therapist works, but is instead enrolled at a private institution, may still receive services from that speech therapist.  When the therapist could be spending time with students that are actually enrolled in his/her school, the therapist m,ust attend to the needs of the private school student.  Not only is this a disservice to the members of the public school, but it also means that taxpayers are paying for services in addition to the voucher.

As the voucher cap increases, the results will be that MPS will become the school district for all of the challenging kids that get kicked out of the private schools.  Eventually the population in MPS will be entirely of those students who can't afford private schools, don't have parents who are involved in the decision making, or don't function well in the traditional educational setting.   

Focus of Teaching
Additionally, the focus at schools is increasingly about competition.  The competition is only comparable in data - test scores.  So, everyone is preparing for testing, all year long.  The authentic learning experience will no longer exist if education becomes driven by the capitalist notion that competition leads to improvement.  This is an obvious obfuscation but regardless, in education competition leads nowhere.  Students need to learn how to work together in order to solve problems rather than vying against each other.  Cooperation and collaboration ought to become far more important skills than competition.

While all of the finagling over money and cap limits is taking place, sectarian schools are quietly taking tax dollars and teaching children biblical myths; some go so far as to to teach that the bible is the word of god, that the earth is 6,000 years old, and that evolution is not science-based but only a hypothetical theory.  To many forward-minded people, the idea that our tax dollars are funding children to be proselytized would be hard to accept and unfathomable in a developed country, after all this is not Saudi Arabia.  But the religious right have successfully focused the attention on the failing public school system not on the content or learning provided by the private religious schools.

The religious right have dominated the debate and are succeeding in forcing their agenda on parents, especially in urban districts.  The cost of all of this is that public education is being damaged irrevocably.  The gap in educational attainment between the poor and the wealthy is increasing and vouchers contribute to that crisis. 

What do you think?  Are religious fundamentalists damaging public education?

                                     ==============================================
Read more about it and decide for yourself:
http://dpi.wi.gov/sms/choice.html

http://dpi.wi.gov/oea/mpcp/results.html

http://www.newcoalition.org/Article.cfm?artId=18915

http://www.eric.ed.gov/PDFS/ED462502.pdf

http://www.inthesetimes.com/working/entry/5512/as_milwaukees_economy_fails_how_can_public_schools_succeed/        

http://www.scsba.org/voices/Milwaukee%20Voucher%20Program%20Info.pdf

http://www.progressive.org/rc032911.html

http://thirdcoastdigest.com/2011/05/walkers-expansion-of-school-choice-moves-forward/

Spassibo - the Capitalist Effect in Russia

Back in 2009, TIME magazine declared that capitalism had taken root in Russia.  This dramatic conclusion was based on the fact that Premier Putin earned 11% more than President Medvedev.

Back in 2005, the New York Times insinuated that the Russia had finally broken through the transitional doldrums and earned its Capitalist wings as the World Bank declared poverty lessening in the former Soviet Union and income equality growing.   

As one person sitting behind a computer I officially declare the dawn of CAPITALISM on Russia.  This story comes directly from Moscow where the Capitalist Effect has settled in to a stark and harsh new reality.  In the past eight years, the homeless population has risen by 8%.  According to Gazeta.ru, multitudes of people are being evicted from their homes by court order, reported ombudsman Aleksander Muzikantcki (омбудсмен Александр Музыкантский).  "Citizens are being completely denied the right to housing, although they committed no culpable action."

According to the story, people who have been living in and paying for homes for years are losing them because the law allows property to be seized by the legal owner.  The other reason is that changes in housing legislation has negated some spaces for living that are currently being occupied as residential property.  So people are being kicked out of their homes and not provided any other means of accommodation.  As a result of these policies, the streets of Moscow are slowly flooding with vagrants.  The homeless rate has been steadily climbing.

If this situation in Russia sounds eerily familiar, it should.  For the past year, the journal sentinel has reported on Central States Mortgage Co. and the deceptive practices of its founder Richard Jungen.  Central States was back in the news this week because it failed to properly handle the refinancing of a Milwaukee resident.  This Milwaukee resident actually had his house sold at a Sheriff's auction even though he was perfectly compliant with what he thought was his only loan.  Unfortunately what he thought was one mortgage being refinanced with a lower interest rate, it was essentially two loans.  The second loan was intended to buy out the first mortgage.  However, Central States and their affiliate Interim Funding LLC failed to buyout the previous loan, instead paying off other debts.

Whether the picture is of Russian homemakers kicked out into the street or working class people in Milwaukee whose locks get changed while at work, the resulting loss of shelter is a Capitalist Effect.  People have grown utterly devoid of compassion and driven by one thing, profit.

The real problem with the drive to accumulate wealth is in the sacrifice of everything else.  The republican State legislature is bent on building a surplus in the state of Wisconsin.  Most people like the idea of a surplus.  But the idea of building a surplus at the expense of the citizens is not right.  Wisconsinites should not accept it.  Gov. Walker can bandy about his ideas about a surplus but what he should be honest about is that his use of the word surplus is an euphemism for what really amounts to harsh losses for working families.

Just as in Russia where average citizens are being thrown into the street because there is no plan for them once they are out of their homes, Walker has no plan for the future.  How will the State government address the need for health insurance when the hundreds of thousands lose the coverage currently provided by Badger Care and Badger Care Plus?

How will the republicans accept the repercussions that will inevitably be attached to allowing the largest public school district in the State to effectively operate without being fully funded?

This new breed of republicanism spurred on by the zealous tea partyers has no intention on reneging their promise to bring in spending and cut costs all at the expense of the citizens.  Losing teachers and cutting funding for schools will not be felt immediately but will be felt eventually.  The effect of improperly investing in education is revealed a few years down the road as students move through the system with the new changes in place.  What will be the effects on a school like the Milwaukee German Immersion School, which is consistently placed in the upper bracket of successful Wisconsin schools?  According to the Principal, the German Immersion School will lose six people the Phy Ed, Music, and Art teachers, a classroom teacher and two aides because of the cuts in Gov. Walker's budget.  There is no way these cuts won't be damaging.

What Wisconsinites should demand to know is this: how are we all tightening our belts? Is the prestigious Brookfield Academy losing teachers?

The Capitalist Effect creates gaping holes not only in the class structure but in reason.  It allows one group of people to profit while a larger group suffers.  It allows decision to be made on the sole grounds of how much money can be earned.  Russia is waking up to the reality that capitalism is no better than communism and in some ways it is far worse.  There is no space in capitalism for welfare unless the government demands it through  intervention, i.e. regulation.  Whereas the Soviet Union did function as a welfare state, the Russian Federation functions more like a business.  The world is watching our government now as capitalism could see another casualty unless the US can get its house in order.  We could very easily end up like Portugal.

_______________________________________

According to the World Factbook, the CIA ranks Russia 52 of 136 countries for distribution of family incomes, the Gini index.  The higher the Gini index, the higher the income disparity in the country.  Russia's Gini index is 42.2.  The US Gini index is 45.0.  The 136th country - the country with the lowest Gini index is Sweden.  Its Gini index is 23.0.

____________________________________

Read about Market Reform in Russia: http://users.polisci.wisc.edu/hendley/PS%20633/Lecture%20PPTs/April%205,%202011.pdf
Read more about Russia's rural poor: http://www.ucis.pitt.edu/nceeer/2003-816-14g-5-Wegren.pdf
The "New" Poverty of Russia: http://www.soclabo.org/UserFiles/Journal/2010.02/Art_pdf/11_eng.pdf
Read Sergei Shelin: http://www.gazeta.ru/column/shelin/3589305.shtml
Politics of anti-poverty policy: http://www.psa.ac.uk/journals/pdf/5/2008/Mussorov.pdf
Globalisation and the Development of Capitalism in Russia

Competition and Capitalism

I remember as a child watching the Wild America series seeing three female lions hunt a Wildebeest.  After they killed it, a male lion approached, scared the lionesses away, and started eating their kill.  In both instances, the killing and the stealing, the narrator intoned it was an example of the survival of the fittest.  The footage left an indelible picture in my mind of the fierce competition that exists in the world.

So it was that many of us were introduced to the ostensibly inherent presence of competition.  From the beginning of life, many of us, especially in the US, are taught that the key to success is to win at all costs.  As most Americans head off to school around the age of five, and quickly find that out competition is embedded in every activity from answering questions in class to being first in line.

This idea of competition stands as the centerpiece of the American capitalist machine that ingrains its mantra of rugged individualism and ambition as the certain path to success.  Adam Smith wrote in The Wealth of Nations that competition is the result of self-interested individuals vying with other equally self-motivated individuals for accumulation.  Smith argues that the result of open competition will be the production of the goods that society wants, in the quantity society wants, and at the prices that society is able to pay.  For Smith, it was competition that controlled rampant greed and self-interest.  The reason one ambitious person won't get all of the wealth is that there are others who are competing with him/her.  As long as there is competition then the society functions healthily.

According to Smith's theory, the struggle to accumulate wealth keeps production growing and keeps the labor force working.  The natural downfall of the system is when the the capitalists run out of their means to produce, namely the laborers.  In order to combat the loss of laborers, Smith introduced the law of population.  As long as the population grows, there will be more and more laborers to produce. 

In Karl Marx's critique of capitalism, Das Kapital, he paints the picture of a perfect capitalist system that must keep producing so that capitalists can keep accumulating. As Robert Heilbroner wrote, "he [the capitalist] must strive for accumulation, for in the competitive environment in which he operates, one accumulates or one gets accumulated."  In other words, if you aren't taking advantage of someone else, someone else is taking advantage of you.

The flaw in this logic, as Marx illustrates, is that if all of us endeavor to be entrepreneurs and successful capitalists, everyone will strive to accumulate, wages of the labor force will rise, rising wages leads to no profit.  The entrepreneur must introduce time-saving and labor-saving machinery in order to continue earning profits.  This is of course an overtly simplified summary of Marx's criticisms of capitalism.  But what Marx describes as the result of the competition between capitalists is "That which is now to be expropriated is no longer the laborer working for himself, but the capitalist exploiting many laborers. This expropriation is accomplished by the action of the immanent laws of capitalistic production itself, by the centralization of capital."  In other words, fewer people have the ability to accumulate the wealth in the system.  Competition effectively eliminates competitors and monopolies rule.  As fewer people obtain more of the wealth and control the commodities, so "grows the mass of misery, oppression, slavery, degradation, exploitation."

American capitalists will argue that the fall of the Soviet Union marked the victory of capitalism. (It should be pointed out that again the capitalist is winning or losing a competition.)   But capitalists fail to realize that not every system requires competition in order to operate successfully.  Unlike the basic tenet of capitalism, a socialist society is not naturally promoting competition amongst its participants.  On the contrary, a socialist society is more concerned with the collaborative efforts of the whole versus the singular accomplishments of the few. 

A capitalist might argue that without competition, there is no innovation or motivation to create.  Is it possible for a socialist society to encourage innovation?  On smaller scales, there are communities, companies, and villages in the United States that function this way.  Additionally there are countries that function more communally than does the United States.  Japan, Korea, and Finland are just a few countries in which society is more concerned about the whole versus the individual yet offer remarkable innovation.  One of the healthiest countries to be born in is Finland.  In each of these systems, capitalism is at work but it is highly regulated by a central government.  The result is far more cooperation and collaboration and far less income, education, health, and legal disparity.

Looking more closely at Japan provides a good example.  First is Toyota's CEO who earned $900,000 in 2009.  Japan ties the earnings of CEOs to a percentage of the average workers' salary.  Second, in schools, the beginning teacher does not teach full time.  For the first few years, a beginning teacher spends time planning, observing other more experienced teachers teach, and receiving myriad feedback on the effectiveness of his/her teaching.  The focus in the school just as it is in the corporation is how the individual effects the functioning of the whole.  Third, health insurance is far more efficient and reliable than the US system.  When the Japanese establish their health care system, they analyzed many different systems and purposely chose not to follow the US model.

In contrast, in the US in 2009 Rick Wagoner the CEO of GM earned some disproportionate amount of money in the 10 to 20 million dollar range.  In American schools, beginning teachers get thrown into a classroom, told to make sure no students get hurt, receive less books than students, no resources, and get little if any support.  If that teacher seeks help, he/she is placed under scrutiny and suspicion of being an inadequate teacher.   Is it at all surprising to learn that the average beginning teacher today lasts about 4 or 5 years before burnout sets in?  In health care, there was an attempt to establish a national health care service that was denied by conservatives who believe in privatizing the health insurance industry.  The belief being that competition will bring prices down.  It hasn't and it won't.

The differences are startling.  In Japan the community comes together not in a competitive or malicious manner, but in a much more constructive and collaborative manner.  Every citizen has affordable health care coverage.  In the US, the teacher and CEO are thrown into the fire and expected to thrive on his/her own or face replacement, although the CEO is compensated disproportionally, and thousands have gone bankrupt unable to pay for the costs of their own health care.

In Korea, the same illustrations can be drawn.  However, there are indications that the capitalist effect is taking root in Seoul.  Recently protests erupted over concerns about corruption in the government, about some people gathering more wealth at a faster pace compared to the average workers.  The Gini index indicates that income disparity is a growing global trend, even in Finland and Japan and Korea.  The trend will continue as the capitalism thrives on cheap labor.  As the wages of global labor rise, however, corporations will rely on more and more drastic measures in order to accumulate.

The growing disparity in America and internationally indicates that Marx's criticisms of capitalism carry more weight, and perhaps more accuracy, than can be quickly denied.  Trends indicate that the income gap is in no way closing.  Conversely, poverty in America is on the rise while the population of the working (or as in the case of Milwaukee, non-working) class (the proletariat) is growing.  There is some hope that the situations for most of the world's poor may be improving (see Fareed Zakaria) even while income inequality rises.  But America will be judged on how it tends to the welfare of its people.  Smith also recognized this responsibility and noted that "no society can surely be flourishing and happy, of which by far the greater part of the numbers are poor and miserable." 

Is this happening in the US?  Are the greater part of the population poor and miserable?  Examples abound, e.g. Detroit, Milwaukee, etc.  It will be interesting to see how the cities hit by the disastrous storms this week rebound from the devastation.  Is this the next Katrina recovery, which has not been handled admirably?

Reflecting on the scene of the lions, what I failed to recognize was the coordinated hunt of the lionesses.  What turns out to be a more accurate observation of nature is not the sense of competition but that animals display a large variety of collaboration and cooperation techniques.  Although life is a struggle, it more often than not turns out to be survival of the most adaptable and the most cooperative. "Despite the depiction of nature "red in tooth and claw," cooperation is actually widespread in the animal kingdom."

Who will adapt to the changing climates of the world markets?

Will America be able to compete in the face of growing disparity and amidst the rise of the conservative base that seems determined not to negotiate and collaborate? 

What will America look like in 50 years?  Will many of the cities be abandoned because of the reckless decisions of current legislators who gave up on public education, public transport, went all in on privatization, and left the poor in the cold?

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Read more about Marxism: http://www.marxists.org/archive/marx/works/1867-c1/
Read more about the debate between Socialism and Capitalism: http://www.idebate.org/debatabase/topic_details.php?topicID=400
Read about the defense of Socialism: http://www.marxists.org/archive/bax/1898/12/defsoc.htm
Read more about Socialism: http://home.vicnet.net.au/~dmcm/
Read about economics: http://www.pbs.org/wgbh/commandingheights/hi/resources/
Read about political science and animal behavior: http://politicalscience.stanford.edu/faculty/weingast/BiologicalInstitutionsManuscript1.pdf
Read more about Capitalism and Competition: http://jparnell.com/blog/?p=254
http://cameroneconomics.com/capitalism.pdf
Alfie Kohn's book on competition: http://www.alfiekohn.org/books/nc.htm

All for a profit, but at what cost?

Should everything we do be weighed against what we stand to profit?

One of the mindsets that develops in a capitalist society is that for every action there is either a net loss or a net profit.  The goal naturally is to earn the highest net profit possible.   The effective capitalists find ways to ensure that the chances of net loss are minimized.  The easiest way to achieve minimal loss is to bring down cost while increasing revenue.  The side effect of this view is that the perfect example of minimizing costs is by reducing salaries and wages or the size of the work force.  Historically the most common way to reduce wages is through slave labor and indentured servitude.  They've been a part of our entire civilized human history.  Both have been common practice throughout American history and are common practice today around the world.

Multinational companies find cheap labor in emerging and third world markets.  When more markets need to be created, corporations often enlist the US government to intervene militarily.  Military interventions have occurred regularly in order to allow for regime change more favorable to American business.  Noam Chomsky, Michael Parenti, James Loewen, Howard Zinn, and many other have written extensively about US intervention in countries like Cuba, Chile, Guatemala, Nicaragua, Iraq, Afghanistan, and Libya.  After regime change, American corporations move in to take advantage of cheap and abundant resources and cheap and abundant labor.  This is currently happening all around the world but the largest players today are India, China, and Indonesia.

Apple's connection to China and Singapore is a well known example.  A computer manufactured by an Apple subsidiary in Singapore for a couple hundred dollars, sold to the Apple headquarters in Cayman Islands for $900, then sold to distributors in America for $1000.  No taxes are paid on the transactions in the Cayman Islands.  Apple only pays tax on the $100 while $700 was preserved tax free in Cayman Islands.  None of this is illegal.

Freeport-McMoran Copper & Gold Inc (FCX) is an American mining corporation with headquarters in Arizona and mining operations around the globe.   According to their website (http://www.fcx.com/company/who.htm), FCX "operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum."  The site also claims that "The company has a strong commitment to safety performance, environmental management and to the local communities where it operates."  The Latest News section shows that profits are up and a declaration of a 50 cent dividend. 

Do a Google search for FCX and it may be difficult to turn up negative stories about them until the 18th or 19th page when more stories start to crop up.  Search Jakarta news sources and stories abound.  Recently FCX was in the spotlight (albeit a very dim one) when one of their mines in Indonesia collapsed killing two people.  Since the mine's founding protests have been staged, workers assaulted, and several people have been killed.  According to the Jakarta Globe, "The mine has been a frequent source of friction in Papua because of its environmental impact, the low share of revenue going to local Papuans and the legality of payments to Indonesian security forces who help guard the site."

Freeport has had its share of problems in Indonesia ranging from injuries and deaths to paying the government for military protection.  And although they are the largest private taxpayer in Indonesia and one of the largest employers, they employ very few Papuans and those receive lower level jobs.  In the US, FCX has been in the news as the company's stock has risen 1.8% and profits by 59%.  You would think that this would have incredibly beneficial effects on Timika's local economy but you wouldn't be surprised to learn that it hasn't.

Timika Marketplace

Unfortunately for Papuans even though negative news has been widespread, FCX is too big to face earnest prosecution or face ardent reparations.  The destructive pattern that FCX follows has continued for the past 40 years.

What is both astonishing and deplorable is how advocates of a free-market system cry for less government regulation because, the argument goes, the free-market will correct itself.  What will it correct, pricing, injury to workers?  Apple and FCX are evidently lousy examples of self-correction in free-markets.

The myth of self-correction in the free-market should be disputed with vigor.  The Capitalist Effect eliminates correction because it eliminates morality; capitalism is itself an amoral system.  The only morals and ethics that are applied to capitalism are created and imposed on the it through governance.  Much to the workers chagrin, capitalist motivated governments seem uninterested in regulating how corporations garner wealth.  And so, CEOs are multi-millionaires and billionaires, leaders earn profits, shareholders seek profit driven companies, and yet the common workers can barely afford the products they produce.  The Papuans employed at the Freeport mine probably don't earn enough money to buy one share of FCX.  Additionally the environment suffers beyond repair.  As it goes, all of this exploitation barely begins to satisfy, if at all, the open greed and apathy of the Plutonomy, who after ravaging one community will simply pack up and find another ripe free-market to exploit for personal power and wealth.

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Read more about FCX:

http://www.reuters.com/article/2011/04/08/freeport-indonesia-idUKL3E7F81R720110408

http://www.thejakartaglobe.com/home/freeport-says-1-dead-1-missing-in-mining-accident/436290

http://www.globalwitness.org/library/freeport-payments-indonesian-military-draw-official-scrutiny

http://www.globalwitness.org/library/freeport-payments-indonesian-military-draw-official-scrutiny
Environmental impact: http://www.westpapua.ca/?q=node/124
Profits:
http://www.advfn.com/nyse/StockNews.asp?stocknews=FCX&article=47370518&headline=freeport-1q-profit-up-59-on-higher-metals-prices
Corporate Watch report:
http://www.corpwatch.org/article.php?id=986

Read about Apple: http://business.globaltimes.cn/world/2011-01/615066.html