Sunday, June 22, 2008

Leland Stanford

Last week my wife and I spent several days with our daughter at a parent-student freshmen college orientation. Spending that time walking around her university campus inspired me to share a brief biography about the founder’s of one of America’s great universities: Leland Stanford.

Leland Stanford was born in1824 on a farm near Albany, New York. In 1848 Stanford passed the bar and moved to Port Washington, Wisconsin to begin a law practice. After his business was destroyed in a fire Stanford packed up and struck out on his own to join his brothers in California to operate a mercantile business. On his way to the Golden State he stayed in Michigan to work in a general store. Stanford did very well at the store and after three years he was able to purchase it and bring his wife from Albany.

Leland Stanford’s wealth came not from the store but from the railroad. Stanford along with other high risk investors formed the Central Pacific Railroad, most famous for building the transcontinental railroad. It was Stanford who had the honor of hammering in the golden spike at the meeting with the Union Pacific in Utah.

The year prior to the completion of the transcontinental railroad his son, Leland, was born. Young Leland was a creative child. He raised dogs and horses and had an interest in both farm equipment and trains. He was a tall child, at 15 young Leland stood taller than 5 feet 10 inches, he was fluent in French, and had interests in art and archeology.

After finally arriving in California, Leland Stanford helped organize the state Republican Party. He worked for Abraham Lincoln during his election in 1860 and was elected governor in 1861. Stanford was elected by Californians to the U.S. Senate in 1885 and 1893.

In 1884 tragedy struck when young Leland contracted typhoid fever. Young Leland died in Florence just two months before turning 16. This tragic event, a heart ache that few can imagine, changed Stanford forever. The day after his son’s death, when Stanford awoke he turned to his wife and said, “The children of California shall be our children.”

After the death of his son Stanford took on a new mission in life. His goal was to replace capitalism and corporations with an economy based on worker-owned cooperatives. His solution to the problem of capitalism was, “through co-operation, labor could become its own employer.”

As a senator he was the author of several cooperative related bills. One bill was to provide a legal basis for worker cooperatives to incorporate. The text of the bill, oddly enough, actually stated how the cooperatives were to be organized. Rather than one person-one vote the voting rights were to be based on the amount of capital that each member provided. Not only did that go against the basic operating principles of cooperatives as established by the Rochdale Principles but it seems to reflect Stanford’s capitalist mentality. No matter what he still unconsciously gave preference to those with wealth.

Along with the legislative efforts, there was also the founding of Stanford University. Stanford explained that the three objectives of the university were education, conservation of the great doctrines, and “the independence of capital and the self-employment of non-capitalist classes, by such system of instruction as will tend to the establishment of cooperative effort in the industrial systems of the future.”

So how successful was Stanford? In both the legislative and the educational arena he failed utterly. None of the senate bills he proposed ever became legislation. And while Stanford University is today known as one of the great universities of the world it never became a center of cooperative economics. Today there is no reference to Stanford’s third objective anywhere on the official school web site.

For a good online article about Leland Stanford and his historic role in Economic Democracy I recommend:

Sunday, June 8, 2008

The Price of Oil

You can’t get away from it. Even if you don’t drive you’re going to be affected by the price of gas. Not only is the high cost found at the pump but it’s also to be found in the cost of food along with services. No matter what you are affected by the rising cost of oil and gas.

Everyone from the local barbershop to the TV commentators to the politicians is talking about the causes of the price of gas. People blame the high prices on OPEC, the executives of Big Oil, or government regulations. It’s safe to say that to some degree supply and demand is indeed an issue. China, India, and the US are consuming more and more every day. Plus, there’s good reason to accept the Peak Oil Theory. Originating in the 1950s the Peak Oil theory predicts that at some point the amount of available cheap crude oil would eventually be used up.

But the rise of “third world” economies, American addiction to oil and Peak Oil can truly account for the rise in gas prices. The real reason for the high prices of gas is actually the product of the very nature of globalized corporate capitalism.

The Low dollar And Corporate Earnings
Part of the problem is the dramatic drop in the value of the dollar. A weak dollar means that it cost more for Americans to purchase a barrel of oil than much of the rest of the world. As much as a third of the price of gas in the US is the result of the drop in the dollar. (Dallas Morning News, 5/25/08, page 10A)

While most politicians say they support a strong dollar little effort is actually spent to increase its value. The reason is because the low dollar helps to increase corporate profits. Kathy Lien of the investment web site “Seeking Alpha” wrote, “The further the dollar drops, the more that it will help corporate earnings.”

The reason it helps corporate profits is that it helps exports by making US products cheaper. So those US industries that are heavily reliant on free trade benefit from a declining dollar.

Corporate Obligations to Shareholders
This benefit to the corporate bottom line by the depressed dollar leads to the next major reason for the high cost. Corporations are legally obligated to their shareholders to maximize their profits. It’s in the nature of corporations to take steps to maximize their bottom line regardless of the consequences to society. This is why that even though they could reduce their prices and still make large profits for their shareholders they won’t.

Commodities market
The biggest influence on the price of oil is activity by capitalists who invest directly in oil through the commodity and futures markets. According to that same article in the Dallas Morning News the Cambridge Energy Research Associates, “estimates that crude oil trading is up 350 percent since 2002. And the daily average trading volume in energy futures contracts on the New York Mercantile Exchange rose 53 percent for 2008 from last year.”

So who are these investors? They’re primarily large hedge funds, which are investment partnerships that often prefer high risk trading strategies. The average hedge fund doesn’t consist of small time investors. Instead, many of them require enormous personal investments in the range of millions of dollars.

What’s driving these hedge funds is the Peak Oil theory. With the likelihood that the Peak Oil theory is correct the capitalist predators are seeking to turn this into an opportunity to make a profit. To show that the capitalist hedge fund investors are listening when T Boone Pickens, a prominent oilman and hedge fund operator, recently went on television to promote the Peak Oil theory the next day oil futures hit an all time high. Capitalists are driving the prices up by speculating that the prices would go up and are therefore creating a self-fulfilling prophesy.

As we have seen it’s in the structural nature of capitalism that largely responsible for the current rise in the price of oil. In each element listed here there is one common theme, which is the insatiable drive to reproduce capital for the capitalist class.