21st Century Capitalism Subverting Democracy, Says Top Investment Manager
Posted by Paul Braterman
Financial system failing; real problems of climate, environment, resource limitation, and looming food shortages ignored; long-term consequences never considered; rising inequality; a rewards system that stops the market from behaving rationally; democracy ineffective against the influence of the financial elite.
Who says? Left-wing intellectuals like Naomi Klein, contrarian Nobel Prize economists like Krugman and Stiglitz, political dissidents like Syriza in Greece, Podemos in Spain, or Scottish National Party, Green, and a cetain Labour would-be leader in the UK? No; one Jeremy Grantham, financial strategist whose firm manages more than US $118 billion in assets, in his keynote address to the 2015 Morningside Investment Conference in Chicago. I don’t normally write about financial matters, but here we have the chief strategist of one of the world’s largest asset management firms delivering one of the sharpest critiques of what now passes for capitalism that I have ever seen, and his remarks* deserve far wider circulation.
Grantham lists the following 10 major problems [my comments in brackets]:
Resource constrains, low capital expenditure, inequality itself, climate pressures, and the low-hanging fruit is mostly gone. Facebook is not the steam engine.
Human folly, avoiding unpleasant information, leading to bubble after bubble as we repeat past mistakes, and deny or ignore the really important matters, like climate change.
Resource limitations. Conventional economics pays no attention to this, and assumes endless growth, as if the free market were a perpetual motion machine that would never run out of anything.
In particular, oil. Our economy was built on cheap oil, which is running out now. [Shale gas has reversed this, but only for the moment.]
Climate problems. Tree ring data show that California is the driest it’s been in 1,200 years. The cotton crop in Texas failed for 6 years in a row because of drought, and then came devastating floods.
Food problems. Probably, the biggest problems that we face, with water running out, soil erosion, population growth, and climate change. This may well lead to chaos in the world’s poorest countries. [Food problems were predicted in the 1940s, and failed to materialise, but that was because of the Green Revolution and Haber process fertiliser. There are no comparable innovations in sight.]
Income inequality. The economy can’t grow when wages are failing to rise.
Slow rise in output, for many reasons. What technology can most readily provide, we already have [as in my example regarding food]. As Grantham puts it, “Resource constrains, low capital expenditure, inequality itself, climate pressures, and the low-hanging fruit is mostly gone. Facebook is not the steam engine.”
Systematic failings of modern capitalism, which focuses exclusively on profit, neglects common resources such as air, water, and soil, and discounts the future of our grandchildren. As a Princeton University study shows, the [US] financial elite has massive influence on legislation, while public opinion has little or none; “This is not really effective democracy in action.”
Bad management by the central banks, and a corporate culture where 80% of the rewards of top management are in stock options, making financial manipulation (specifically, share buyback using cheap borrowed money) more rewarding than real investment in new productive capacity.
This is not really effective democracy in action.
Finally, market bubbles. These are built into the structure of the financial industry. Investment managers protect their jobs by following the herd. So everyone does the same thing, pushing markets away from correct valuations, and making the rational distribution of resources, which is after all the whole point of free market capitalism, impossible.
The rest of Grantham’s presentation was highly technical, directed at his fellow investment managers; that part of his talk is summarised here, as reported by an investors’ website, which did not, however, bother to relay his remarks on the wider issues discussed above.
*Behind a pay and membership wall, but this summary is my own personal review and may be freely copied with acknowledgement.
Jerry Coyne at the Glasgow Skeptics – a personal account
Posted by Paul Braterman
Monday night, November 26, I had the great pleasure of hearing Jerry Coyne at the Glasgow Skeptics on the subject of Why Evolution is True (And Why Most People Don’t Believe It), and had a short enjoyable chat with him in the interval. This report reflects his views, and on occasion mine. To avoid misunderstanding, I should emphasise that it does not represent BCSE as an organisation, which is neutral on matters of faith.
He was aware of and approved of the broad coalition, ranging from Richard Dawkins to Canons of the Church of England, that forced the UK Government to clarify its position against creationism. I had to tell him that Gove had nonetheless ignored his own guidelines by allowing creationist groups to set up publicly funded schools. We had some discussion about whether different religions had different degrees of tolerance towards evolution; I suggested that the reason I was much more accommodationist than him, is that for me religion suggested positions like C of E, whereas for him it suggested anti-intellectual fundamentalism. He seemed to take kindly to this idea, and also to my suggestion that different varieties of religion may differ greatly in their willingness to accept evolution.
Most of his talk covered much the same ground as his book, Why Evolution is True (a must read if you haven’t already), though I certainly benefited from seeing the argument laid out in such concentrated form, and am posting my notes on this part of the talk separately.
Jerry quoted depressing statistics, mainly from the US, about how few people accepted evolution and how many preferred creationism. According to a 2005 Harris poll, only 12% of Americans thought that only evolution should be taught in schools, while 23% thought that only creationism should be taught, and most wanted both.
Why does this matter? Because evolution is a matter of self-knowledge, basic knowledge about what kind of place the Universe is, and our place in it. It is a wonderful example of science in action, and besides, there’s a lot of cool stuff in there.
After discussing the science, he made some very interesting observations about how societies react to it. Given that the evidence for evolution is so overwhelming, why do so many people continue to deny it, and why are the numbers so slow to change? In the US, since 1982, the proportion of creationists has held steady at 44%, those believing in theistic evolution has changed from 38% to 36%, and the only notable change has been an increase in acceptance of materialistic evolution from 9% to 14%, no doubt reflecting the growing number of unbelievers. (I think that the preference for theistic over naturalistic evolution may be less worrying than it sounds, since I doubt if many people distinguish between overall divine control of nature, which would be perfectly compatible with naturalistic evolution, and specific supernatural intervention in the process, which would not).
Clearly, a situation where more Americans believe in the reality of angels than accept evolution is deeply worrying.
So why is evolution so maligned by religion? Because it undermines religious views of human specialness, and of the purpose and meaning of individual life, and (a common and deeply felt objection) is seen as undermining morality. If we compare different countries, religious belief has a powerful negative correlation with acceptance of evolution. It would follow that if we want people to accept evolution, what we need to do is weaken the influence of religion. In support, Jerry quoted a survey according to which, if faced with a scientific finding that contradicted the tenets of their faith, 64% of Americans said that they would reject the finding.
What I found most interesting was Jerry’s quoting from recent (2009 and 2011) studies, showing that religion correlates with social dysfunction (see http://www.epjournal.net/wp-content/uploads/EP073984414.pdf ) and economic inequality (see http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6237.2011.00777.x/abstract ; cut and paste links if necessary). If so, the way to improve public acceptance of science may be to tackle inequality and social dysfunction. This would point in the direction of very broad alliances indeed, and I can see how recent political campaigns in the US may have made this prospect more attractive.
We are left with a final paradox. People fear evolution, seeing it as subversive of morality. And yet, the more moral (in the matters that seem to me most important), the more equitable, and the more effectively functioning a society, the more accepting it is of evolution.
Posted in Creationism
Tags: Accommodationism, Americans, BCSE, Church, Church of England, Creationism, Evolution, Fundamentalism, Glasgow, Glasgow Skeptics, Gove, Inequality, Jerry Coyne, Moralilty, Morality, Richard Dawkins, Schools, Social dysfunction, Theistic evolution, United States, WEIT, Why Evolution is True