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Lawrence Summers: Rubin's Neoliberal Boy Larry

News Political Economy of Casino Capitalism Recommended Links Neoliberalism as a New Form of Corporatism Harvard Mafia, Andrei Shleifer and the economic rape of Russia Audacious Oligarchy and "Democracy for Winners" Amorality and criminality of neoliberal elite
Silencing of Brooksley Born Harvard Mafia, Andrei Shleifer and the economic rape of Russia Neoclassical Pseudo Theories and Crooked and Bought Economists as Fifth Column of Financial Oligarchy Invisible Hand Hypothesis: The Theory of Self-regulation of the Markets Hyman Minsky Neocolonialism as Financial Imperialism IMF as the key institution for neoliberal debt enslavement
Critique of neoclassical economics Rubinism Trickle down economics Rational expectations scam Monetarism Criminal negligence in financial regulation Financial Sector Induced Systemic Instability
Helicopter Ben Bush Clinton Jeffrey Sachs and "shock therapy" racket Milton Friedman Phil Gramm Greenspan: Grey Cardinal of Washington
Corruption of Regulators Ronald Reagan: modern prophet of profligacy John Kenneth Galbraith Sandy Weill Martin Feldstein Financial Humor Etc

Introduction

This is a really fascinating story of a guy who is almost universally hated for his personality flaws. He is arrogant, authoritarian and unlikable. He is the person who professes neoliberal ideology, a staunch supporter of deregulation of financial sector and who played a role of a hired gun in killing Glass-Steagall. It's really amazing that he after all his adventures in Clinton administration he managed to land the important position in "the change we can believe in" (aka "it could be worse") Administration, but this is just a testament of Rubin's influence in Obama administration. Like his mentor, Summers is a prominent member of pro-Wall-street wing of the Democratic party, or as it is called Clinton's gang or “plutocratic Taliban”. As an economist Summers has gone through several (questionable) revolving doors, and that mean that it is natural to suspect his level of scientific integrity.

He became a walking illustration of corruption of the academy by special interests. Like few others (and first of all his protégé Andrei Shleifer) he became a multimillionaire due to his services to financial industry and once got $135K for a single speaking engagement in Goldman Sachs. This level of corruption of academics is a disgrace, but nothing new. Mishkin did worse things. Fat cats of economic profession institutionalize the relations typical for Academician Lysenko among students, and contribute to the problems of the society instead of helping to solve them. What $100K+ per "speaking engagement" fee means, if not a bribe with a fig leaf attached (Larry Summers and the Subversion of Economics The Chronicle of Higher Education).

"Summers became wealthy through consulting and speaking engagements with financial firms. Between 2001 and his entry into the Obama administration, he made more than $20-million from the financial-services industry. (His 2009 federal financial-disclosure form listed his net worth as $17-million to $39-million.)"

"Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby. This is now, literally, a billion-dollar industry."

This is very disturbing but what is more disturbing that in case of Summers there is strong evidence of cronyism and nepotism during his meteoric rise to the top. Larry Summers is a nephew to both Ken Arrow and late Paul Samuelson. In a mandarinate that sure is US economic profession that's a tremendous help for any person in climbing to the top.

Summers' academic mentor was conservative economist Marty Feldstein, and he worked for Feldstein at Ronald Reagan's Council of Economic Advisers in the early 1980s. Being a protégée of Robert Rubin helped Summers to obtain lucrative government positions.

Both men are proteges of Robert Rubin, a former Clinton Treasury secretary who served on Citigroup Inc.’s board from 1999 until this year and has been criticized for allowing the bank to pile up $544 billion of derivatives and securities before it became the recipient of more government assistance than any other bank. Rubin declined to comment.”

Neoliberal deregulator and lobbyist of financial oligarchy

If one wants to be more sharp critic, he/she can view Summers as a staunch neoliberal, a typical academic servant of banking oligarchy, an academic lobbyist for financial industry.

Classic example of a modern type of neo-bribes for neoliberal economists: $135,000 for one speech at Goldman Sachs.

The popular joke that "the relationship between government and banking is the closest thing to organized crime taken over society" sounds alarmingly true, when applied to Summers activity (Larry Summers and the Subversion of Economics - The Chronicle of Higher Education):

As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws.

After Summers left the Clinton administration, his candidacy for president of Harvard was championed by his mentor Robert Rubin, a former CEO of Goldman Sachs, who was his boss and predecessor as treasury secretary. Rubin, after leaving the Treasury Department—where he championed the law that made Citigroup's creation legal—became both vice chairman of Citigroup and a powerful member of Harvard's governing board.

Over the past decade, Summers continued to advocate financial deregulation, both as president of Harvard and as a University Professor after being forced out of the presidency. During this time, Summers became wealthy through consulting and speaking engagements with financial firms. Between 2001 and his entry into the Obama administration, he made more than $20-million from the financial-services industry. (His 2009 federal financial-disclosure form listed his net worth as $17-million to $39-million.)

Summers remained close to Rubin and to Alan Greenspan, a former chairman of the Federal Reserve. When other economists began warning of abuses and systemic risk in the financial system deriving from the environment that Summers, Greenspan, and Rubin had created, Summers mocked and dismissed those warnings. In 2005, at the annual Jackson Hole, Wyo., conference of the world's leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis. Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other people's money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a "full-blown financial crisis" and a "catastrophic meltdown."

When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a "Luddite," dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.)

Among key "mis-achievements" of  this staunch neoliberal, we can mention the following:

Here is how Charles Ferguson summarizes Summers deregulation zeal ( Larry Summers and the Subversion of Economics - The Chronicle of Higher Education)

As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws.

Justin Fox in Time wrote the following before Summers appointment to Obama administration:

Summers was an awfully controversial guy a couple years ago. And the things that made him controversial will all be revisited if he has to sit through a Senate confirmation hearing.

Here's a quick run-through of the Sins of Larry:

1. He's a loose cannon. Summers has a long history of saying what's on his mind, regardless of whether others might find it offensive. The thing about women and science was only the most infamous. There was also that memo he signed about exporting toxic waste to the developing world. [..]

Still, Summers behaved perfectly respectably during his last stint as Treasury Secretary. He is capable of keeping his mouth shut if the job requires it. What's more, he seems to have a habit of promoting the careers of people who are willing to contradict him and take him on (Andrei Shleifer and Tim Geithner spring to mind). [..]

2. He's loyal, to a fault. One of the main things that turned Harvard's faculty against Summers was the case of his protege Shleifer. Shleifer ran a Harvard-affiliated, USAID-funded office in Moscow in the 1990s that advised the Russian government on economic reform. The U.S. government later sued Harvard and Shleifer, charging that the operation was overrrun by conflicts of interest. Summers recused himself from direct dealings with the case, but in his epic dissection of the saga for Instititutional Investor, David McClintick charged that Summers did try to shield Shleifer. Harvard and Shleifer lost the suit, and Harvard had to pay $26.5 million in damages and Shleifer $2 million. I can't get as worked up about this as some people (if we could force Harvard to give the government even more money, maybe Barack Obama wouldn't have to raise your taxes), but I also know and like Andrei Shleifer, so I'm really not the best judge.

3. He's a callous right-winger. Summers' academic mentor was conservative economist Marty Feldstein, and he worked for Feldstein at Ronald Reagan's Council of Economic Advisers in the early 1980s. Paul Krugman worked there too, so that really isn't saying much. For most of the 1980s, in fact, Summers was an outspoken skeptic of financial markets and their ability to set prices rationally and steer investment wisely. As he rose to positions of power in Washington in the 1990s, though, he became a leading defender of the Washington consensus--the idea that free financial markets, free trade and fiscal discipline would bring prosperity to the world. Lately Summers has been partially reconsidering that stance in his columns for the Financial Times. If you're favorably disposed to him, as I am, you could say he's been pulling a Keynes: "When the facts change, I change my mind." But I guess if you're not so favorably disposed, you could call him a closet right-winger, a closet left-winger, or a slave to fashion.

Anyway, I'm sure Larry Summers would make a very good Treasury Secretary. Again.

... ... ...

Update: Oh, and by the way, I forgot to gratuitously mention that he used to go out with Laura Ingraham ...

Read more: http://curiouscapitalist.blogs.time.com/2008/11/06/does-larry-summers-have-too-much-baggage-to-be-treasury-secretary/?xid=rss-topstories#ixzz10ZVl6v9c

A person who is organically incapable to be honest broker

All who have worked with Larry know that he is completely incapable of being an honest broker. He is a bully. Its always his way or the highway. Here is one comment on his departure from "Bama" Whitehouser:

Summers only changes his mind if you argue from his worldview, that's why he is so often very wrong.

  1. Summers spent all of the 90's being completely wrong on climate change, because he wouldn't interpret evidence outside of his mental box.
  2. He was completely wrong on finance, with horrible results from the 90s deregulation, and did everything to ostracize people like Rajan who argued from a different perspective. Rajan had theory and data and was right, but Summers gave him the full mean girl treatment.
  3. He did not understand the finance risks, so he got Harvard in serious trouble.
  4. He shut Romer out of the stimulus debate, for reasons we aren't sure of, but she was, of course, right. And had the data and the theory completely on her side.

Summers shows again and again on the major decisions that he makes terrible judgments. Lots of people would be better at the job.

Nothing illustrates better this feature of Summers personality then the "Support of Andrei Shleifer" saga (see also Harvard Mafia, Andrei Shleifer and the economic rape of Russia)

From the article about Lawrence Summers  in  Wikipedia:

Also during his stint in the Clinton administration, Summers was successful in pushing for capital gains tax cuts.[citation needed] During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation.[8] Under the advice of Kenneth Lay, Summers urged Davis to relax California's environmental standards in order to reassure the markets.[9]

Summers hailed the Gramm-Leach-Bliley Act in 1999, which lifted more than six decades of restrictions against banks offering commercial banking, insurance, and investment services (by repealing key provisions in the 1933 Glass-Steagall Act): "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," Summers said.[10] "This historic legislation will better enable American companies to compete in the new economy."[10] Many critics, including President Barack Obama, have suggested the 2007 subprime mortgage financial crisis was caused by the partial repeal of the 1933 Glass-Steagall Act.[11]

Support of economist Andrei Shleifer

Harvard and Andrei Shleifer, a close friend and protege of Summers, settled a $26M lawsuit by the U.S. government over the conflict of interest Shleifer had while advising Russia's privatisation program. Summers' continued support for Shleifer strengthened Summers' unpopularity with other professors:

"I’ve been a member of this Faculty for over 45 years, and I am no longer easily shocked," is how Frederick H. Abernathy, the McKay professor of mechanical engineering, began his biting comments about the Shleifer case at Tuesday’s fiery Faculty meeting. But, Abernathy continued, "I was deeply shocked and disappointed by the actions of this University" in the Shleifer affair.

In an 18,000-word article in Institutional Investor (January, 2006), the magazine detailed Shleifer’s alleged efforts to use his inside knowledge of and sway over the Russian economy in order to make lucrative personal investments, all while leading a Harvard group, advising the Russian government, that was under contract with the U.S. The article suggests that Summers shielded his fellow economist from disciplinary action by the University.[21]

Summers' friendship with Shleifer was well known by the Corporation when it selected him to succeed Rudenstine and Summers recused himself from all proceedings with Shleifer, whose case was actually handled by an independent committee led by Derek Bok.

A classic example of academic corruption

  ...rarely has one individual embodied so much of what is wrong with economics, with academe, and indeed with the American economy. For the past two years, I have immersed myself in those worlds in order to make a film, Inside Job, that takes a sweeping look at the financial crisis. And I found Summers everywhere I turned.

... ... ...

Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby. This is now, literally, a billion-dollar industry. The Law and Economics Consulting Group, started 22 years ago by professors at the University of California at Berkeley (David Teece in the business school, Thomas Jorde in the law school, and the economists Richard Gilbert and Gordon Rausser), is now a $300-million publicly held company. Others specializing in the sale (or rental) of academic expertise include Competition Policy (now Compass Lexecon), started by Richard Gilbert and Daniel Rubinfeld, both of whom served as chief economist of the Justice Department's Antitrust Division in the Clinton administration; the Analysis Group; and Charles River Associates.

In my film you will see many famous economists looking very uncomfortable when confronted with their financial-sector activities; others appear only on archival video, because they declined to be interviewed.

Larry Summers and the Subversion of Economics - The Chronicle of Higher Education

Over the past 30 years, the economics profession was not only compromised by conflicts of interests but outright bought. Bought in classic old fashion way. It just became a support group for financial oligarchy. This happens both due to dominance of neoliberal ideology ("greed is good") and also via straightforward (and sometimes pre-emptive)  buy-out of  leading economists by banks and brokerages via  outrageously high "speaking fees" (although they are much less then then similar sleaking fees for politicians like Bill and Hillary Clinton), sinecure positions,  and other inventive ways of transferring money into the pockets of selected academicians. Due to his close association with Rubin, Summers career provide almost classic example of this affect.

Revolving door style of corruption is probably dominant in the USA for former government officials and prominent economists. They do not took bribes. Instead the way "revolving door" mechanism works is that they are "awarded" lucrative positions in  private companies which they regulated during government service after they leave the  government service.

Which might well be even more damaging as for restriction of the ability to to act honestly the whole term of the government service. To need to "earn" your future positions, so to speak. While bribe restricts the ability to act dispassionately only from the point of accepting the bribe for the particular deregulation effort/deal/contract and mostly (often only) for the company which gave the bribe. Like is the case  with the revolving door mechanism, this "incapacity" lasts till the the end of the government service.  But it restrict the ability to act harshly with other companies, banks, brokerages only to the extent the person is afraid of disclosure and might even stimulate his to act harshly for competitors of particular company in order to protect himself from possible accusations in favoritism.

While his "achievements" in this area are probably less visible then, say, for Mankiw (who is mainly instrumental in brainwashing his students), they are were tremendously more damaging (from Wikipedia):

On October 19, 2006, he became a part-time managing director of the investment and technology development firm D. E. Shaw & Co.

Upon the death of his hero, libertarian economist Milton Friedman, Summers wrote an Op-Ed in The New York Times entitled "The Great Liberator" arguing that "any honest Democrat will admit that we are now all Friedmanites." Summers wrote that while Friedman made real contributions to monetary policy, his real contribution was "in convincing people of the importance of allowing free markets to operate."[25]

Henry Kissinger once said that Larry Summers should "be given a White House post in which he was charged with shooting down or fixing bad ideas." [26]

In 2006 he was a member of the Panel of Eminent Persons which reviewed the work of the United Nations Conference on Trade and Development.

He is currently the director of the White House National Economic Council[1][27].

Paul Samuelson (Swedish Bank Prize)

Summers is Samuelson’s nephew. Is this significant in any way?

The Odyssey of Larry Summers - Megan McArdle

April 7, 2009 12:54 PM

I generally agree with Megan is saying. However, Greg Mankiw did point out today that the NY Times claimed that Summers was doing consulting work for Taconic Capital while president of Harvard which does seems problematic and does weaken the apparent claim that DE Shaw was when Summers started cashing in in finance.


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[Oct 21, 2017] Socialism, Land and Banking 2017 compared to 1917 by Michael Hudson

Notable quotes:
"... Socialism a century ago seemed to be the wave of the future. There were various schools of socialism, but the common ideal was to guarantee support for basic needs, and for state ownership to free society from landlords, predatory banking and monopolies. In the West these hopes are now much further away than they seemed in 1917. Land and natural resources, basic infrastructure monopolies, health care and pensions have been increasingly privatized and financialized. ..."
"... Instead of Germany and other advanced industrial nations leading the way as expected, Russia's October 1917 Revolution made the greatest leap. But the failures of Stalinism became an argument against Marxism – guilt-by-association with Soviet bureaucracy. European parties calling themselves socialist or "labour" since the 1980s have supported neoliberal policies that are the opposite of socialist policy. Russia itself has chosen neoliberalism. ..."
"... Few socialist parties or theorists have dealt with the rise of the Finance, Insurance and Real Estate (FIRE) sector that now accounts for most increase in wealth. Instead of evolving into socialism, Western capitalism is being overcome by predatory finance and rent extraction imposing debt deflation and austerity on industry as well as on labor. ..."
"... Failure of Western economies to recover from the 2008 crisis is leading to a revival of Marxist advocacy. The alternative to socialist reform is stagnation and a relapse into neofeudal financial and monopoly privileges. ..."
"... Russia's Revolution ended after 74 years, leaving the Soviet Union so dispirited that it ended in collapse. The contrast between the low living standards of Russian consumers and what seemed to be Western success became increasingly pronounced. ..."
"... When the Soviet Union dissolved itself in 1991, its leaders took neoliberal advice from its major adversary, the United States, in hope that this would set it on a capitalist road to prosperity. But turning its economies into viable industrial powers was the last thing U.S. advisors wanted to teach Russia. [3] Their aim was to turn it and its former satellites into raw-materials colonies of Wall Street, the City of London and Frankfurt – victims of capitalism, not rival producers. ..."
"... It should not be surprising that banks became the economy's main control centers, as in the West's bubble economies. Instead of the promised prosperity, a new class of billionaires was endowed, headed by the notorious Seven Bankers who appropriated the formerly state-owned oil and gas, nickel and platinum, electricity and aluminum production, as well as real estate, electric utilities and other public enterprises. It was the largest giveaway in modern history. The Soviet nomenklatura became the new lords in outright seizure that Marx would have characterized as "primitive accumulation." ..."
"... The American advisors knew the obvious: Russian savings had been wiped out by the polst-1991 hyperinflation, so the new owners could only cash out by selling shares to Western buyers. The kleptocrats cashed out as expected, by dumping their shares to foreign investors so quickly at such giveaway prices that Russia's stock market became the world's top performer for Western investors in 1994-96. ..."
"... The basic neoliberal idea of prosperity is financial gain based on turning rent extraction into a flow of interest payments by buyers-on-credit. This policy favors financial engineering over industrial investment, reversing the Progressive Era's industrial capitalism that Marx anticipated would be a transition stage leading to socialism. Russia adopted the West's anti-socialist rollback toward neofeudalism. ..."
"... Russia joined the dollar standard. Buying Treasury bonds meant lending to the U.S. Government. The central bank bought U.S. Treasury securities to back its domestic currency. These purchases helped finance Cold War escalation in countries around Russia. Russia paid 100% annual interest in the mid-1990s, creating a bonanza for U.S. investors. On balance, this neoliberal policy lay Russia's economy open to looting by financial institutions seeking natural resource rent, land rent and monopoly rent for themselves. Instead of targeting such rents, Russia imposed taxes mainly on labor via a regressive flat tax – too right wing to be adopted even in the United States! ..."
"... Theories of Surplus Value ..."
"... This Western financial advice became a textbook example of how not ..."
"... By 1991, when the Soviet Union's leaders decided to take the "Western" path, the Western economies themselves were reaching a terminus. Appearances were saved by a wave of unproductive credit and debt creation to sustain the bubble economy that finally crashed in 2008. ..."
"... The same debt overgrowth occurred in the industrial sector, where bank and bondholder credit since the 1980s has been increasingly for corporate takeovers and raiding, stock buybacks and even to pay dividends. Industry has become a vehicle for financial engineering to increase stock prices and strip assets, not to increase the means of production. The result is that capitalism has fallen prey to resurgent rentier ..."
"... Theories of Surplus Value ..."
"... American Journal of Economics and Sociology ..."
"... Super-Imperialism ..."
"... The Great Credit Crash ..."
"... The Contradictions of Austerity: The Socio-Economic Costs of the Neoliberal Baltic Model ..."
"... Journal of Economic Issues ..."
Oct 20, 2017 | www.counterpunch.org
Socialism a century ago seemed to be the wave of the future. There were various schools of socialism, but the common ideal was to guarantee support for basic needs, and for state ownership to free society from landlords, predatory banking and monopolies. In the West these hopes are now much further away than they seemed in 1917. Land and natural resources, basic infrastructure monopolies, health care and pensions have been increasingly privatized and financialized.

Instead of Germany and other advanced industrial nations leading the way as expected, Russia's October 1917 Revolution made the greatest leap. But the failures of Stalinism became an argument against Marxism – guilt-by-association with Soviet bureaucracy. European parties calling themselves socialist or "labour" since the 1980s have supported neoliberal policies that are the opposite of socialist policy. Russia itself has chosen neoliberalism.

Few socialist parties or theorists have dealt with the rise of the Finance, Insurance and Real Estate (FIRE) sector that now accounts for most increase in wealth. Instead of evolving into socialism, Western capitalism is being overcome by predatory finance and rent extraction imposing debt deflation and austerity on industry as well as on labor.

Failure of Western economies to recover from the 2008 crisis is leading to a revival of Marxist advocacy. The alternative to socialist reform is stagnation and a relapse into neofeudal financial and monopoly privileges.

Socialism flowered in the 19 th century as a program to reform capitalism by raising labor's status and living standards, with a widening range of public services and subsidies to make economies more efficient. Reformers hoped to promote this evolution by extending voting rights to the working population at large.

Ricardo's discussion of land rent led early industrial capitalists to oppose Europe's hereditary landlord class. But despite democratic political reform, the world has un-taxed land rent and is still grappling with the problem of how to keep housing affordable instead of siphoning off rent to a landlord class – more recently transmuted into mortgage interest paid to banks by owners who pledge the rental value for loans. Most bank lending today is for real estate mortgages. The effect is to bid up land prices toward the point where the entire rental value is paid as interest. This threatens to be a problem for socialist China as well as for capitalist economies.

Landlords, banks and the cost of living

The classical economists sought to make their nations more competitive by keeping down the price of labor so as to undersell competitors. The main cost of living was food; today it is housing. Housing and food prices are determined not by the material costs of production, but by land rent – the rising market price for land.

In the era of the French Physiocrats, Adam Smith, David Ricardo and John Stuart Mill, this land rent accrued to Europe's hereditary landlord class. Today, the land's rent is paid mainly to bankers – because families need credit to buy a home. Or, if they rent, their landlords use the property rent to pay interest to the banks.

The land issue was central to Russia's October Revolution, as it was for European politics. But the discussion of land rent and taxation has lost much of the clarity (and passion) that guided the 19 th century when it dominated classical political economy, liberal reform, and indeed most early socialist politics.

In 1909/10 Britain experienced a constitutional crisis when the democratically elected House of Commons passed a land tax, only to be overridden by the House of Lords, governed by the old aristocracy. The ensuing political crisis was settled by a rule that the Lords never again could overrule a revenue bill passed by the House of Commons. But that was Britain's last real opportunity to tax away the economic rents of landlords and natural resource owners. The liberal drive to tax the land faltered, and never again would gain serious chance of passage.

The democratization of home ownership during the 20 th century led middle-class voters to oppose property taxes – including taxes on commercial sites and natural resources. Tax policy in general has become pro- rentier and anti-labor – the regressive opposite of 19 th -century liberalism as developed by "Ricardian socialists" such as John Stuart Mill and Henry George. Today's economic individualism has lost the early class consciousness that sought to tax economic rent and socialize banking.

The United States enacted an income tax in 1913, falling mainly on rentier income, not on the working population. Capital gains (the main source of rising wealth today) were taxed at the same rate as other income. But the vested interests campaigned to reverse this spirit, slashing capital gains taxes and making tax policy much more regressive. The result is that today, most wealth is not gained by capital investment for profits. Instead, asset-price gains have been financed by a debt-leveraged inflation of real estate, stock and bond prices.

Many middle-class families owe most of their net worth to rising prices for their homes. But by far the lion's share of the real estate and stock market gains have accrued to just One Percent of the population. And while bank credit has enabled buyers to bid up housing prices, the price has been to siphon off more and more of labor's income to pay mortgage loans or rents. As a result, finance today is what is has been throughout history: the main force polarizing economies between debtors and creditors.

Global oil and mining companies created flags of convenience to make themselves tax-exempt, by pretending to make all their production and distribution profits in tax-free trans-shipping havens such as Liberia and Panama (which use U.S. dollars instead of being real countries with their own currency and tax systems).

The fact that absentee-owned real estate and natural resource extraction are practically free of income taxation shows that democratic political reform has not been a sufficient guarantee of socialist success. Tax rules and public regulation have been captured by the rentiers , dashing the hopes of 19 th -century classical reformers that progressive tax policy would produce the same effect as direct public ownership of the means of production, while leaving "the market" as an individualistic alternative to government regulation or planning.

In practice, planning and resource allocation has passed to the banking and financial sector. Many observers hoped that this would evolve into state planning, or at least work in conjunction with it as in Germany. But liberal "Ricardian socialist" failed, as did German-style "state socialism" publicly financing transportation and other basic infrastructure, pensions and similar "external" costs of living and doing business that industrial employers otherwise would have to bear. Attempts at "half-way" socialism via tax and regulatory policy against monopolies and banking have faltered repeatedly. As long as major economic or political choke points are left in private hands, they will serve s springboards to subvert real reform policies. That is why Marxist policy went beyond these would-be socialist reforms.

To Marx, the historical task of capitalism was to prepare the way for socializing the means of production by clearing away feudalism's legacy: a hereditary landlord class, predatory banking, and the monopolies that financial interests had pried away from governments. The path of least resistance was to start by socializing land and basic infrastructure. This drive to free society from economic overhead in the form of hereditary privilege and unearned income by the "idle rich" was a step toward socialist management, by minimizing rentier costs (" faux frais of production").

Proto-socialist reform in the leading industrial nations

Marx was by no means alone in expecting a widening range of economic activity to be shifted away from the market to the public sector. State socialism (basically, state-sponsored capitalism) subsidized pensions and public health, education and other basic needs so as to save industrial enterprise from having to bear these charges.

In the United States, Simon Patten – the first economics professor at the new Wharton business school at the University of Pennsylvania – defined public infrastructure as a "fourth factor of production" alongside labor, capital and land. The aim of public investment was not to make a profit, but to lower the cost of living and doing business so as to minimize industry's wage and infrastructure bill. Public health, pensions, roads and other transportation, education, research and development were subsidized or provided freely. [1]

The most advanced industrial economies seemed to be evolving toward some kind of socialism. Marx shared a Progressive Era optimism that expected industrial capitalism to evolve in the most logical way, by freeing economies from the landlordship and predatory banking inherited from Europe's feudal era. That was above all the classical reform program of Adam Smith, John Stuart Mill and the intellectual mainstream.

But the aftermath of World War I saw the vested interests mount a Counter-Enlightenment. Banking throughout the Western world find its major market in real estate mortgage lending, natural resource extraction and monopolies – the Anglo-American model, not that of German industrial banking that had seemed to be capitalism's financial future in the late 19 th century.

Since 1980 the Western nations have reversed early optimistic hopes to reform market economies. Instead of the classical dream of taxing away the land rent that had supported Europe's hereditary landed aristocracies, commercial real estate has been made virtually exempt from income taxation. Absentee owners avoid tax by a combination of tax-deductibility for interest payments (as if it is a necessary business expense) and fictitious over-depreciation tax credits that pretend that buildings and properties are losing value even when market prices for their land are soaring.

These tax breaks have made real estate the largest bank customers. The effect has been to financialize property rents into interest payments. Likewise in the industrial sphere, regulatory capture by lobbyists for the major monopolies has disabled public attempts to keep prices in line with the cost of production and prevent fraud by breaking up or regulating monopolies. These too have become major bank clients.

The beginning and end of Russian socialism

Most Marxists expected socialism to emerge first in Germany as the most advanced capitalist economy. After its October 1917 Revolution, Russia seemed to jump ahead, the first nation to free itself from rent and interest charges inherited from feudalism. By taking land, industry and finance into state control, Soviet Russia's October Revolution created an economy without private landlords and bankers. Russian urban planning did not take account of the natural rent-of-location, nor did it charge for the use of money created by the state bank. The state bank created money and credit, so there was no need to rely on a wealthy financial class. And as property owner, the state did not seek to charge land rent or monopoly rent.

By freeing society from the post-feudal rentier class of landlords, bankers and predatory finance, the Soviet regime was much more than a bourgeois revolution. The Revolution's early leaders sought to free wage labor from exploitation by taking industry into the public domain. State companies provided labor with free lunches, education, sports and leisure activity, and modest housing.

Agricultural land tenure was a problem. Given its centralized marketing role, the state could have reallocated land to build up a rural peasantry and helped it invest in modernization. The state could have manipulated crop prices to siphon off agricultural gains, much like Cargill does in the United States. Instead, Stalin's collectivization program waged a war against the kulaks. This political shock led to famine. It was a steep price to pay for avoiding rent was paid to a landlord class or peasantry.

Marx had said nothing about the military dimension of the transition from progressive industrial capitalism to socialism. But Russia's Revolution – like that of China three decades later – showed that the attempt to create a socialist economy had a military dimension that absorbed the lion's share of the economic surplus. Military aggression by a half dozen leading capitalist nations seeking to overthrow the Bolshevik government obliged Russia to adopt War Communism. For over half a century the Soviet Union devoted most of capital to military investment, not provide sufficient housing or consumer goods for its population beyond spreading literacy, education and public health.

Despite this military overhead, the fact that the Soviet Union was free of a rentier class of financiers and absentee landlords should have made the Soviet Union the world's most competitive low-cost economy in theory. In 1945 the United States certainly feared the efficiency of socialist planning. Its diplomats opposed Soviet membership on the ground that state enterprise and pricing would enable such economies to undersell capitalist countries. [2] So socialist countries were kept out of the IMF, World Bank and the planned World Trade Organization, explicitly on the ground that they were free of land rent, natural resource rent, monopoly rent and financial charges.

Capitalist economies are now privatizing and financializing their basic needs and infrastructure. Every activity is being forced into "the market," at prices that need to cover not only the technological costs of production but also interest, ancillary financial fees and pension set-asides. The cost of living and doing business is further privatized as financial interests pry roads, health care, water, communications and other public utilities away from the public sector, while driving housing and commercial real estate deeply into debt.

The Cold War has shown that capitalist countries plan to continue fighting socialist economies, forcing them to militarize in self-defense. The resulting oppressive military overhead is then blamed on socialist bureaucracy and inefficiency.

The collapse of Russian Stalinism

Russia's Revolution ended after 74 years, leaving the Soviet Union so dispirited that it ended in collapse. The contrast between the low living standards of Russian consumers and what seemed to be Western success became increasingly pronounced. In contrast to China's housing construction policy, the Soviet regime insisted that families double up. Clothing and other consumer goods had only drab designs, needlessly suppressing variety. To cap matters, public opposition to Russia's military personnel losses in Afghanistan caused popular resentment.

When the Soviet Union dissolved itself in 1991, its leaders took neoliberal advice from its major adversary, the United States, in hope that this would set it on a capitalist road to prosperity. But turning its economies into viable industrial powers was the last thing U.S. advisors wanted to teach Russia. [3] Their aim was to turn it and its former satellites into raw-materials colonies of Wall Street, the City of London and Frankfurt – victims of capitalism, not rival producers.

Russia has gone to the furthest anti-socialist extreme by adopting a flat tax that fails to distinguish wages and profits of labor and capital from unearned rental income. By also having to pay a value-added tax (VAT) on consumer goods (with no tax on trading in financial assets), labor is taxed much higher than the wealthy.

Most Western "wealth creation" is achieved by debt-leveraged price increases for real estate, stocks and bonds, and by privatizing the public domain. The latter process has gained momentum since the early 1980s in Margaret Thatcher's Britain and Ronald Reagan's America, followed by Third World countries acting under World Bank tutelage. The pretense is that privatization will maximize technological efficiency and prosperity for the economy as a whole.

Following this advice, Russian leaders agreed that the major sources of economic rent – natural resource wealth, real estate and state companies – should be transferred to private owners (often to themselves and associated insiders). The "magic of the marketplace" was supposed to lead the new owners to make the economy more efficient as a byproduct of making money in the quickest way possible.

Each Russian worker got a "voucher" worth about $25. Most were sold off simply to obtain money to buy food and other needs as many companies stopped paying wages. Russia had wiped out domestic savings with hyperinflation after 1991.

It should not be surprising that banks became the economy's main control centers, as in the West's bubble economies. Instead of the promised prosperity, a new class of billionaires was endowed, headed by the notorious Seven Bankers who appropriated the formerly state-owned oil and gas, nickel and platinum, electricity and aluminum production, as well as real estate, electric utilities and other public enterprises. It was the largest giveaway in modern history. The Soviet nomenklatura became the new lords in outright seizure that Marx would have characterized as "primitive accumulation."

The American advisors knew the obvious: Russian savings had been wiped out by the polst-1991 hyperinflation, so the new owners could only cash out by selling shares to Western buyers. The kleptocrats cashed out as expected, by dumping their shares to foreign investors so quickly at such giveaway prices that Russia's stock market became the world's top performer for Western investors in 1994-96.

The Russian oligarchs kept most of their sales proceeds abroad in British and other banks, beyond the reach of Russian authorities to recapture. Much was spent on London real estate, sports teams and luxury estates in the world's flight-capital havens. Almost none was invested in Russian industry. Wage arrears often mounted up half a year behind. Living standards shrank, along with the population as birth rates plunged throughout the former Soviet economies. Skilled labor emigrated.

The basic neoliberal idea of prosperity is financial gain based on turning rent extraction into a flow of interest payments by buyers-on-credit. This policy favors financial engineering over industrial investment, reversing the Progressive Era's industrial capitalism that Marx anticipated would be a transition stage leading to socialism. Russia adopted the West's anti-socialist rollback toward neofeudalism.

Russian officials failed to understand the State Theory of money that is the basis of Modern Monetary Theory: States can create their own money, giving it value by accepting it in payment of taxes. The Soviet government financed its economy for seventy years without any need to back the ruble with foreign exchange. But Russia's central bank was persuaded that "sound money" required it to back its domestic ruble currency with U.S. Treasury bonds in order to prevent inflation. Russian leaders did not realize that dollars or other foreign currencies were only needed to finance balance-of-payments deficits, not domestic spending except as this money was spent on imports.

Russia joined the dollar standard. Buying Treasury bonds meant lending to the U.S. Government. The central bank bought U.S. Treasury securities to back its domestic currency. These purchases helped finance Cold War escalation in countries around Russia. Russia paid 100% annual interest in the mid-1990s, creating a bonanza for U.S. investors. On balance, this neoliberal policy lay Russia's economy open to looting by financial institutions seeking natural resource rent, land rent and monopoly rent for themselves. Instead of targeting such rents, Russia imposed taxes mainly on labor via a regressive flat tax – too right wing to be adopted even in the United States!

When the Soviet Union dissolved itself, its officials showed no apprehension of how quickly their economies would be de-industrialized as a result of accepting U.S. advice to privatize state enterprises, natural resources and basic infrastructure. Whatever knowledge of Marx's analysis of capitalism had existed (perhaps in Nicolai Bukharin's time) was long gone. It is as if no Russian official had read Volumes II and III of Marx's Capital (or Theories of Surplus Value ) where he reviewed the laws of economic rent and interest-bearing debt.

The inability of Russia, the Baltics and other post-Soviet countries to understand the FIRE sector and its financial dynamics provides an object lesson for other countries as to what to avoid. Reversing the principles of Russia's October 1917 Revolution, the post-Soviet kleptocracy was akin to the feudal epoch's "primitive accumulation" of the land and commons. They adopted the neoliberal business plan: to establish monopolies, first and most easily by privatizing the public infrastructure that had been built up, extracting economic rents and them paying out the resulting as interest and dividends.

This Western financial advice became a textbook example of how not to organize an economy. [4] Having rejoined the global economy free of debt in 1991, Russia's population, companies and government quickly ran up debts as a result of its man-made disaster. Families could have been given their homes freely, just as corporate managers were given their entire companies virtually for free. But Russian managers were as anti-labor as they were greedy to grab their own assets from the public domain. Soaring housing prices quickly plagued Russian's economy with one of the world's highest-priced living and business costs. That prevented any thought of industrial competitiveness with the United States or Europe. What passed for Soviet Marxism lacked an understanding of how economic rents and the ensuing high labor costs affected international prices, or how debt service and capital flight affected the currency's exchange rate.

Adversaries of socialism pronounced Marxist theory dead, as if the Soviet dissolution meant the end of Marxism. But today, less than three decades later, the leading Western economies are themselves succumbing to an overgrowth of debt and shrinking prosperity. Russia failed to recognize that just as its own economy was expiring, so was the West's. Industrial capitalism is succumbing to a predatory finance capitalism that is leaving Western economies debt-ridden. [5] The underlying causes were clear already a century ago: unchecked financial rentiers , absentee ownership and monopolies.

The post-Soviet collapse in the 1990s was not a failure of Marxism, but of the anti-socialist ideology that is plunging Western economies under domination by the Finance, Insurance and Real Estate (FIRE) sector's symbiosis of the three forms of rent extraction: land and natural resource rent, monopoly rent, and interest (financial rent). This is precisely the fate from which 19 th -century socialism, Marxism and even state capitalism sought to save the industrial economies.

A silver lining to the Soviet "final" stage has been to free Marxist analysis from Russian Marxology. Its focus of Soviet Marxology was not an analysis of how the capitalist nations were becoming financialized neo- rentier economies, but was mainly propagandistic, ossifying into a stereotyped identity politics appealing to labor and oppressed minorities. Today's revival of Marxist scholarship has begun to show how the U.S.-centered global economy is entering a period of chronic austerity, debt deflation, and polarization between creditors and debtors.

Financialization and privatization are submerging capitalism in debt deflation

By 1991, when the Soviet Union's leaders decided to take the "Western" path, the Western economies themselves were reaching a terminus. Appearances were saved by a wave of unproductive credit and debt creation to sustain the bubble economy that finally crashed in 2008.

The pitfalls of this financial dynamic were not apparent in the early years after World War II, largely because economies emerged with their private sectors free of debt. The ensuing boom endowed the middle class in the United States and other countries, but was debt financed, first for home ownership and commercial real estate, then by consumer credit to purchase of automobiles and appliances, and finally by credit-card debt just to meet living expenses.

The same debt overgrowth occurred in the industrial sector, where bank and bondholder credit since the 1980s has been increasingly for corporate takeovers and raiding, stock buybacks and even to pay dividends. Industry has become a vehicle for financial engineering to increase stock prices and strip assets, not to increase the means of production. The result is that capitalism has fallen prey to resurgent rentier interests instead of liberating economies from absentee landlords, predatory banking and monopolies. Banks and bondholders have found their most lucrative market not in the manufacturing sector but in real estate and natural resource extraction.

These vested interests have translated their takings into the political power to shed taxes and dismantle regulations on wealth. The resulting political Counter-Reformation has inverted the idea of "free market" to mean an economy free for rent extractors, not free from landlords, monopolists and financial exploitation as Adam Smith, John Stuart Mill and other classical economists had envisioned. The word "reform" as used by today's neoliberal media means undoing Progressive Era reforms, dismantling public regulation and government power – except for control by finance and its allied vested interests.

All this is the opposite of socialism, which has now sunk to its nadir through the Western World. The past four decades have seen most of the European and North American parties calling themselves "socialist" make an about-face to follow Tony Blair's New Labour, the French socialists-in-name and the Clinton's New Democrats. They support privatization, financialization and a shift away from progressive taxation to a value-added tax (VAT) falling on consumers, not on finance or real estate.

China's socialist diplomacy in today's hostile world

Now that Western finance capitalism is stagnating, it is fighting even harder to prevent the post-2008 crisis from leading to socialist reforms that would re-socialize infrastructure that has been privatized and put a public banking system in place. Depicting the contrast between socialist and finance-capitalist economies as a clash of civilizations, U.S.-centered "Western" diplomacy is using military and political subversion to prevent a transition from capitalism into socialism.

China is the leading example of socialist success in a mixed economy. Unlike the Soviet Union, it has not proselytized its economic system or sought to promote revolution abroad to emulate its economic doctrine. Just the opposite: To avert attack, China has given foreign investors a stake in its economic growth. The aim has been to mobilize U.S. and other foreign interests as allies, willing customers for China's exports, and suppliers of modern production facilities in China.

This is the opposite of the antagonism that confronted Russia. The risk is that it involves financial investment. But China has protected its autonomy by requiring majority Chinese ownership in most sectors. The main danger is domestic, in the form of financial dynamics and private rent extraction. The great economic choice facing China today concerns the degree to which land and natural resources should be taxed.

The state owns the land, but does fully tax its rising valuation or rent-of-location that has made many families rich. Letting the resulting real-estate and financialized wealth dominate its economic growth poses two dangers: First, it increases the price that new buyers must pay for their home. Second, rising housing prices force these families to borrow – at interest. This turns the rental value of land – value created by society and public infrastructure investment – into a flow of interest to the banks. They end up receiving more over time than the sellers, while increasing the cost of living and doing business. That is a fate which a socialist economy must avoid at all costs.

At issue is how China can best manage credit and natural resource rent in a way that best meets the needs of its population. Now that China has built up a prosperous industry and real estate, its main challenge is to avoid the financial dynamics that are subjecting the West to debt deflation and burying Western economies. To avoid these dynamics, China must curtail the proliferation of unproductive debt created merely to transfer property on credit, inflating asset prices in the process.

Socialism is incompatible with a rentier class of landlords, natural resource owners and monopolists – the preferred clients of banks hoping to turn economic rent into interest charges. As a vehicle to allocate resources "the market" reflects the status quo of property ownership and credit-creation privileges at any given moment of time, without consideration for what is fair and efficient or predatory. Vested interests claim that such a market is an immutable force of nature, whose course cannot be altered by government "interference." This rhetoric of political passivity aims to deter politicians and voters from regulating economies, leaving the wealthy free to extract as much economic rent and interest as markets can bear by privatizing real estate, natural resources, banking and other monopolies.

Such rent seeking is antithetical to socialism's aim to take these assets into the public domain. That is why the financial sector, oil and mineral extractors and monopolists fight so passionately to dismantle state regulatory power and public banking. That is the diplomacy of finance capital, aiming to consolidate American hegemony over a unipolar world. It backs this strategy with a neoliberal academic curriculum that depicts predatory financial and rentier gains as if they add to national income, not simply transfer it into the hands of the rentier classes. This misleading picture of economic reality poses a danger for China sending its students to study economics at American and European universities.

The century that has elapsed since Russia's October 1917 Revolution has produced a substantial Marxist literature describing how finance capitalism has overpowered industrial capitalism. Its dynamics occupied Marx in Volumes II and III of Capital (and also his Theories of Surplus Value ). Like most observers of his era, Marx expected capitalism to make a substantial step toward socialism by overcoming the dynamics of parasitic capital, above all the tendency for debt to keep on expanding at compound interest until it produces a financial crash.

The only way to control banks and their allied rentier sectors is outright socialization. The past century has shown that if society does not control the banks and financial sector, they will control society. Their strategy is to block government money creation so that economies will be forced to rely on banks and bondholders. Regulatory authority to limit such financial aggression and the monopoly pricing and rent extraction it supports has been crippled in the West by "regulatory capture" by the rentier oligarchy.

Attempts to tax away rental income (the liberal alternative to taking real estate and natural resources directly into the public domain) is prone to lobbying for loopholes and evasion, most notoriously via offshore banking centers in tax-avoidance enclaves and the "flags of convenience" sponsored by the global oil and mining companies. This leaves the only way to save society from the financial power to convert rent into interest to be a policy of nationalizing natural resources, fully taxing land rent (where land and minerals are not taken directly into the public domain), and de-privatizing infrastructure and other key sectors.

Conclusion

Markets have not recovered for the products of American industry and labor since 2008. Industrial capitalism has been sacrificed to a form of finance capitalism that is looking more pre-capitalist (or simply oligarchic and neofeudal) with each passing year. The resulting polarization forces every economy – including China – to choose between saving its bankers and other creditors or freeing debtors and lowering the economy's cost structure. Will the government enforce bank and bondholder claims, or will it give priority to the economy and its people? That is an eternal political question spanning pre-capitalist, capitalist and post-capitalist economies.

Marx described the mathematics of compound interest expanding to absorb the entire economy as age-old, long predating industrial capitalism. He characterized the ancient mode of production as dominated by slavery and usury, and medieval banking as predatory. These financial dynamics exist in socialist economies just as they did in medieval and ancient economies. The way in which governments manage the dynamics of credit and debt thus are the dominant force in every era, and should receive the most pressing attention today as China shapes its socialist future.

Notes.

[1] I give the details in "Simon Patten on Public Infrastructure and Economic Rent Capture," American Journal of Economics and Sociology 70 (October 2011):873-903.

[2] My book Super-Imperialism (1972; new ed. 2002) reviews this discussion during 1944-46.

[3] I discuss the IMF and World Bank plan to wipe out Russian savings with hyperinflation and make manufacturing investment uneconomic in "How Neoliberal Tax and Financial Policy Impoverishes Russia – Needlessly," Mir Peremen (The World of Transformations), 2012 (3):49-64 (in Russian). МИР ПЕРЕМЕН 3/2012 (ISSN 2073-3038) Mir peremen М. ХАДСОН, Неолиберальная налоговая и финансовая политика приводит к обнищанию России, 49-64.

[4] I give details in "How Neoliberals Bankrupted 'New Europe': Latvia in the Global Credit Crisis," (with Jeffrey Sommers), in Martijn Konings, ed., The Great Credit Crash (Verso: London and New York, 2010), pp. 244-63, and "Stockholm Syndrome in the Baltics: Latvia's neoliberal war against labor and industry," in Jeffrey Sommers and Charles Woolfson , eds., The Contradictions of Austerity: The Socio-Economic Costs of the Neoliberal Baltic Model (Routledge 2014), pp. 44-63.

[5] For more analysis see Dirk Bezemer and Michael Hudson, " Finance is Not the Economy: Reviving the Conceptual Distinction ," Journal of Economic Issues , 50 (2016: #3), pp. 745-768.

[Oct 18, 2017] Spy Schools How the CIA, FBI and Foreign Intelligence Secretly Exploit America's Universities by Nick Roll

Notable quotes:
"... Spy Schools: How the CIA, FBI and Foreign Intelligence Secretly Exploit America's Universities ..."
"... The Boston Globe ..."
"... Inside Higher Ed ..."
"... The Wall Street Journal ..."
"... The Price of Admission ..."
"... Inside Higher Ed ..."
"... Inside Higher Ed ..."
"... look back to Stalin, Hitler, Franco, Mao, Mussolini et.al with THIER use of domestic agencies to impose lock-step thinking and to ferret out free-thinkers. ..."
"... It is amazing how many biochemists and microbiologists from the People's Republic of China would e-mail me asking if I had a position in my "lab," touting their bench skills, every time I published a paper on the federal bioterrorism program, medical civic action programs, etc. ..."
"... When I started teaching 48 years ago, the president of my college was James Dovonan, Bill Donovan's (founder of the OSS) brother, portrayed by Tom Hanks in the movie, "Bridge of Spies." ..."
"... Beyond NIH funded grant-based research, Homeland Security, Energy, Defense, and the Intelligence Community agencies have long histories of relationships with American academia. This could be funded research, collaborative research, shared personnel relationships, or all other manner of cooperation. Sometimes it's fairly well known and sometimes it's kept quiet, and sometimes it's even classified. But it is much more extensive and expansive than what Golden describes, and much less "cozy" or suspicious. ..."
"... For years I have said that it is foolish to look to universities for moral guidance, and this story is one more instance. In this case, the moral ground is swampy at best, and the universities do not appear to have spent a lot of time worrying about possible problems as long as the situation works to their advantage financially. ..."
"... Does Golden discuss at all the way in which the CIA and other intelligence services funnel money into academic research without the source of the funding ever being revealed? This was common practice in the 1960s and 1970s, and colleges like MIT were among those involved in this chicanery. ..."
"... Where has IHE been for the past several decades? Read Rosenfeld's book, Subversives..... about the FBI's illegal acts at Berkeley. Or read this, a summary of his book: https://alumni.berkeley.edu... Or read George R. Stewart, The Year of the Oath. ..."
www.chronicle.com
October 3, 2017

The CIA Within Academe 21 Comments

Book documents how foreign and domestic intelligence agencies use -- and perhaps exploit -- higher education and academe for spy operations.
Foreign and domestic intelligence services spar and spy on one another all across the world. But it would be naïve to think it's not happening in the lab or classroom as well.

In his new book, Spy Schools: How the CIA, FBI and Foreign Intelligence Secretly Exploit America's Universities ( Henry Holt and Company ), investigative journalist Daniel Golden explores the fraught -- and sometimes exploitative -- relationship between higher education and intelligence services, both foreign and domestic. Chapters explore various case studies of the Central Intelligence Agency and Federal Bureau of Investigation using the open and collaborative nature of higher education to their advantage, as well as foreign governments infiltrating the U.S. via education.

"It's pretty widespread, and I'd say it's most prevalent at research universities," Golden, an editor at ProPublica and an alumnus of The Boston Globe 's "Spotlight" team, told Inside Higher Ed . "The foreign intelligence services have the interest and the opportunity to learn cutting-edge, Pentagon-funded or government-funded research."

Golden, who has also covered higher education for The Wall Street Journal , previously wrote about the intersection of wealth and admissions in his 2006 book The Price of Admission .

Each of the case studies in Spy Schools , which goes on sale Oct. 10, is critical. One could read the chapters on the Chinese government's interest in U.S. research universities as hawkish, but then turn to the next chapter on Harvard's relationship with the CIA and read it as critical of the American intelligence establishment as well.

"People of one political persuasion might focus on [the chapters regarding] foreign espionage; people of another political persuasion might focus on domestic espionage," Golden said. "I try to follow where the facts lead."

Perhaps the most prestigious institution Golden examines is Harvard University, probing its cozy relationship with the CIA. (While Harvard has recently come under scrutiny for its relationship with the agency after it withdrew an invitation for Chelsea Manning to be a visiting fellow -- after the agency objected to her appointment -- this book was written before the Manning incident, which occurred in September.) The university, which has had varying degrees of closeness and coldness with the CIA over the years, currently allows the agency to send officers to the midcareer program at the Kennedy School of Government while continuing to act undercover, with the school's knowledge. When the officers apply -- often with fudged credentials that are part of their CIA cover -- the university doesn't know they're CIA agents, but once they're in, Golden writes, Harvard allows them to tell the university that they're undercover. Their fellow students, however -- often high-profile or soon-to-be-high-profile actors in the world of international diplomacy -- are kept in the dark.

"Kenneth Moskow is one of a long line of CIA officers who have enrolled undercover at the Kennedy School, generally with Harvard's knowledge and approval, gaining access to up-and-comers worldwide," Golden writes. "For four decades the CIA and Harvard have concealed this practice, which raises larger questions about academic boundaries, the integrity of class discussions and student interactions, and whether an American university has a responsibility to accommodate U.S. intelligence."

But the CIA isn't the only intelligence group operating at Harvard. Golden notes Russian spies have enrolled at the Kennedy School, although without Harvard's knowledge or cooperation.

When contacted by Inside Higher Ed , Harvard officials didn't deny Golden's telling, but defended the university's practices while emphasizing the agreement between the university and the CIA -- which Golden also writes about -- on not using Harvard to conduct CIA fieldwork.

"Harvard Kennedy School does not knowingly provide false information or 'cover' for any member of our community from an intelligence agency, nor do we allow members of our community to carry out intelligence operations at Harvard Kennedy School," Eric Rosenbach, co-director of the Kennedy School's Belfer Center for Science and International Affairs, said in a statement.

While Golden said the CIA's involvement on campus raises existential questions about the purpose and integrity of higher education, Harvard maintained that the Kennedy School was living up to its mission.

"Our community consists of people from different spheres of public service. We are proud to train people from the U.S. government and the intelligence community, as well as peace activists and those who favor more open government," Rosenbach said in his statement. "We train students from a wide range of foreign countries and foreign governments, including -- among others -- Israel, U.K., Russia and China. That is consistent with our mission and we are proud to have that reach."

On the other hand, other countries are interested in exploiting U.S. higher education. Golden documents the case of Ruopeng Liu, a graduate student at Duke University who siphoned off U.S.-government-funded research to Chinese researchers. Liu eventually returned to China and has used some of the research for his Chinese-government-funded start-up ventures.

Golden is comprehensive, interviewing Duke researchers who worked with Liu, as well as dispatching a freelance journalist in China to interview Liu (he denied wrongdoing, saying his actions were taken as part of higher education's collaborative norms regarding research projects). Despite questions that arose while Liu was a student, he received his doctorate in 2009 without any formal questions or pushback from the university. A week before Liu defended his dissertation, Golden notes that Duke officials voted to move forward in negotiations with the Chinese government regarding opening a Duke campus in China -- raising questions about whether Duke was cautious about punishing a Chinese student lest there were negative business implications for Duke. ( The building of the campus proved to be a controversial move in its own right. )

The Duke professor Liu worked under told Golden it would be hard to prove Liu acted with intentional malice rather than out of genuine cultural and translational obstacles, or ethical slips made by a novice researcher. Duke officials told Inside Higher Ed that there weren't any connections between Liu and the vote.

"The awarding of Ruopeng Liu's degree had absolutely no connection to the deliberations over the proposal for Duke to participate in the founding of a new university in Kunshan, China," a spokesman said in an email.

These are just two chapters of Golden's book, which also goes on to document the foreign exchange relationship between Marietta College, in Ohio, and the controversial Chinese-intelligence-aligned University of International Relations. Agreements between Marietta and UIR, which is widely regarded a recruiting ground for Chinese intelligence services, include exchanging professors and sending Chinese students to Marietta. Conversely, Golden writes, as American professors teach UIR students who could end up spying on the U.S., American students at Marietta are advised against studying abroad at UIR if they have an interest in working for the government -- studying at UIR carries a risk for students hoping to get certain security clearances. Another highlight is the chapter documenting the CIA's efforts to stage phony international academic conferences, put on to lure Iranian nuclear scientists as attendees and get them out of their country -- and in a position to defect to the U.S. According to Golden's sources, the operations, combined with other efforts, have been successful enough "to hinder Iran's nuclear weapons program."

But Golden's book doesn't just shed light on previously untold stories. It also highlights the existential questions facing higher education, not only when dealing with infiltration from foreign governments, but also those brought on by cozy relationships between the U.S. intelligence and academe.

"One issue is American national security," Golden said. "Universities do a lot of research that's important to our government and our military, and they don't take very strong precautions against it being stolen," he said. "So the domestic espionage side -- I'm kind of a traditionalist and I believe in the ideal of universities as places where the brightest minds of all countries come together to learn, teach each other, study and do research. Espionage from both sides taints that that's kind of disturbing."

After diving deep into the complex web that ties higher education and espionage together, however, Golden remains optimistic about the future.

"It wouldn't be that hard to tighten up the intellectual property rules and have written collaboration agreements and have more courses about intellectual safeguards," he said. "In the 1970s, Harvard adopted guidelines against U.S. intelligence trying to recruit foreign students in an undercover way they didn't become standard practice [across academe, but], I still think those guidelines are pertinent and colleges would do well to take a second look at them."

"In the idealistic dreamer mode, it would be wonderful if the U.N. or some other organization would take a look at this issue, and say, 'Can we declare universities off-limits to espionage?'"

Nicholas Dujmovic , October 3, 2017 8:18 AM

Equating the presence and activities of US intelligence on campuses with that of foreign intelligence is pretty obtuse moral relativism. US academia and US intelligence alike benefit from cooperation, and the American people are the winners overall. By the way, is it really necessary to twice describe this relationship as "cozy"? What does that mean, other to suggest there's something illicit about it?

Grace Alcock -> Nicholas Dujmovic , October 4, 2017 1:30 AM

It'd be nice if American intelligence was paying a bit more attention to what goes on in academic research--as far as I can tell, the country keeps making policies that don't seem particularly well-informed by the research in relevant areas. Can we get them to infiltrate more labs of scientists working on climate change or something?

Maybe stick around, engage in some participant observation and figure that research out? It's not clear they have any acquaintance with the literature on the causes of war. Really, pick a place to start, and pay attention.

alsotps -> Nicholas Dujmovic , October 3, 2017 5:20 PM

If you cannot see how a gov't intelligence agency, prohibited from working in the USA by statute and who is eye-deep in AMERICAN education is wrong, then I am worried. Read history. Look back to the 1970's to start and to the 1950's with FBI and the military agents in classrooms; then read about HUAC.

Now, look back to Stalin, Hitler, Franco, Mao, Mussolini et.al with THIER use of domestic agencies to impose lock-step thinking and to ferret out free-thinkers.

Get it? it is 'illicit!"

Nicholas Dujmovic -> alsotps , October 4, 2017 12:38 PM

Actually, I read quite a bit of history. I also know that US intelligence agencies are not "prohibited from working in the USA." If they have relationships in academia that remind you of Stalin, Hitler, etc., how have US agencies "imposed lock-step thinking and ferreted out free-thinkers?" Hasn't seemed to work, has it? Your concern is overwrought.

Former Community College Prof -> Nicholas Dujmovic , October 3, 2017 12:12 PM

"Cozy" might refer to the mutual gains afforded by allowing the federal government to break many rules (and laws) while conducting their "intelligence operations" in academe. I do not know if I felt Homeland Security should have had permission to bring to this country, under false premises supported by ICE and accrediting agencies, thousands of foreign nationals and employed them at companies like Facebook, Apple, Morgan Stanley and the U.S. Army. While Homeland Security collected 16K tuition from each of them (and the companies that hired these F-1s didn't have to pay FICA) all our nation got was arrests of 20 mid level visa brokers.

https://www.nytimes.com/201...

Personally, I think cozy was quite complimentary as I would have chosen other words. Just imagine if there are additional "undercover students" with false credentials in numbers significant enough to throw off data or stopping universities and colleges from enforcing rules and regulations. If you set up and accredit a "fake university" and keep the proceeds, it strikes me as illicit.

alsotps -> Former Community College Prof , October 3, 2017 5:21 PM

Hey...don't imagine it. Read about Cointelpro and military 'intelligence' agents in classes in the early 1970's....

Trevor Ronson -> Nicholas Dujmovic , October 3, 2017 2:36 PM

And behaving as if the "the presence and activities of US intelligence on campuses" is something to accept without question is also "obtuse moral relativism". We are talking about an arrangement wherein a / the most prestigious institutions of higher learning has an established relationship with the CIA along with some accepted protocol to ongoing participation.

Whether it is right, wrong, or in between is another matter but please don't pretend that it's just business as usual and not worthy of deeper investigation.

alsotps -> Trevor Ronson , October 3, 2017 5:16 PM

Unfortunately for many people, it IS business as usual.

George Avery , October 3, 2017 9:46 AM

It is amazing how many biochemists and microbiologists from the People's Republic of China would e-mail me asking if I had a position in my "lab," touting their bench skills, every time I published a paper on the federal bioterrorism program, medical civic action programs, etc.

Never mind that I primarily do health policy and economics work, and have not been near a lab bench since I returned to school for my doctorate.....anything with a defense or security application drew a flurry of interest in getting involved.

As a result, I tended to be very discerning in who I took on as an advisee, if only to protect my security clearance.

alsotps -> George Avery , October 3, 2017 5:22 PM

PAr for the course for both UG and grad students from China who have not paid a head hunter. ANY school or program offering money to international students was flooded by such inquiries. Get over yourself.

John Lobell , October 3, 2017 6:25 AM

When I started teaching 48 years ago, the president of my college was James Dovonan, Bill Donovan's (founder of the OSS) brother, portrayed by Tom Hanks in the movie, "Bridge of Spies."

We had a program in "Tropical Architecture" which enrolled students form "third world" countries. Rumor was -- --

jloewen , October 3, 2017 10:38 AM

When I got my Ph.D. from Harvard in 1968, the Shah of Iran got an honorary doctorate at the same commencement. The next year, by pure coincidence!, he endowed three chairs of Near Eastern Studies at H.U.

alsotps -> jloewen , October 3, 2017 5:24 PM

Absolutely a coincidence! You don't think honoraria have anything whatsoever to do with the Development Office do you? (Snark)

Kevin Van Elswyk , October 3, 2017 9:31 AM

And we are surpised?

Robert4787 , October 4, 2017 6:28 PM

So glad to see they're on campus. Many young people now occupy the CIA; the old "cowboys" of the Cold War past are gone. U may find this interesting>> http://osintdaily.blogspot....

TinkerTailor1620 , October 3, 2017 5:29 PM

Hundreds of government civil servants attend courses at the Kennedy School every year. That a few of them come from the CIA should be no surprise. It and all the other intelligence agencies are nothing more than departments within the federal government, just like Veterans Affairs, Health and Human Services, the FDA, Energy, and so on. Nothing sneaky or suspicious about any of it. Why anyone with cover credentials would tell the Kennedy School admin that is beyond me. When I was in cover status, I was in cover status everywhere; to not be was to blow your cover, period, and was extremely dangerous.

Beyond NIH funded grant-based research, Homeland Security, Energy, Defense, and the Intelligence Community agencies have long histories of relationships with American academia. This could be funded research, collaborative research, shared personnel relationships, or all other manner of cooperation. Sometimes it's fairly well known and sometimes it's kept quiet, and sometimes it's even classified. But it is much more extensive and expansive than what Golden describes, and much less "cozy" or suspicious.

Phred , October 3, 2017 1:49 PM

For years I have said that it is foolish to look to universities for moral guidance, and this story is one more instance. In this case, the moral ground is swampy at best, and the universities do not appear to have spent a lot of time worrying about possible problems as long as the situation works to their advantage financially.

alsotps -> Phred , October 3, 2017 5:25 PM

The key, here, is financially. The bean counters and those whose research is funded don't look hard at the source of the funding. Just so it keeps coming.

Jason , October 4, 2017 6:34 PM

Academic treason.

Sanford Gray Thatcher , October 4, 2017 6:13 PM

Does Golden discuss at all the way in which the CIA and other intelligence services funnel money into academic research without the source of the funding ever being revealed? This was common practice in the 1960s and 1970s, and colleges like MIT were among those involved in this chicanery.

Remember also how intelligence agency money was behind the journal Encounter? Lots of propaganda got distributed under the guise of objective social science research.

donald scott , October 3, 2017 6:05 PM

Where has IHE been for the past several decades? Read Rosenfeld's book, Subversives..... about the FBI's illegal acts at Berkeley. Or read this, a summary of his book: https://alumni.berkeley.edu... Or read George R. Stewart, The Year of the Oath.

In the research for my biography of Stewart I found significant information about CIA presence on the UC Berkeley campus, in the mid-twentieth century, which reached in to the highest levels of the administration and led to a network of "professors" recruited by that unAmerican spy agency.

The oaths, the current gender wars and the conviction by accusation of harassment are all later attempts to politicize education and turn fiat lux into fiat nox. IHE should be writing more about that and about the current conviction by sexual accusation, and the effect of such on free thought and free inquiry.

[Aug 17, 2017] Google Culture Wars

Notable quotes:
"... So, noting that on average, men have 90% more upper body strength than women, would I not be able to claim that any woman my height or less will not have my upper body strength? ..."
"... The problem is that PC is on the way to functioning like militant Islam with regard to unbelievers and apostates. ..."
"... "It is by the goodness of God that in our country we have those three unspeakably precious things: freedom of speech, freedom of conscience, and the prudence never to practice either of them". ..."
"... "There are only two important days in the life of any person, the day that your are born and then day you find out why." ..."
"... The supreme irony of l'affaire Damore is that was a primary point of Damore's memo and the response was perhaps the best proof of the validity of that point possible. Hence my "inept thinkers" comment. ..."
"... Look how Canadian 'hate speech laws' began with silencing 'Neo-Nazis' (fake ones, btw) and then spread to going after those who don't use proper pronouns. Self-Righteous Addiction created all these Self-Righteous Junkies. ..."
"... The bigger question is why Homo Sapiens is the only primate on the planet where The female is expected to be equal to the male ..."
"... The whole argument "for equality" is fundamentally flawed – it is the wrong goal. As individuals we humans want to be different – not equal. We want to bring something different to the table of social interaction. People who are equal have nothing to give to each other. ..."
"... P.S. No matter our intellectual capabilities, for 99% of us – doing a good job of raising our children – is the most lasting thing that we can ever do. They are our true legacy – what we do on the job is all too soon lost in the evolution of business. ..."
"... it is quite likely that variation is bigger in males, as usual with many other traits. ..."
Aug 17, 2017 | www.unz.com

Peripatetic commenter > , August 16, 2017 at 4:20 pm GMT

OT, but I am looking for a list of references to criticism of the criticism of The Bell Curve or supporters of The Bell Curve.

Can anyone help. A quick search via Duck Duck Go turned up a couple.

James Thompson > , Website August 16, 2017 at 5:05 pm GMT

@Peripatetic commenter Fine, but better to read a few chapters of the book.

res > , August 16, 2017 at 5:09 pm GMT

Thank you for your comprehensive post.

One thought about:

This argument makes me smile. Hyde seems to take as granted that males have an advantage on "tightly timed tests for mathematical and spatial tasks". Is it simply my male point of view that to do well on any test, in the sense of getting things right, and doing so quickly, would be considered a double advantage? Why regard speedy thinking as a complexity of interpretation? Why is speed in correctly completing a task judged to be "speed as much as skill"? Absurdly, the prompt and correct completion of a task seems to be cast as mere male impetuosity. Furthermore, any employer reading this argument would be justified in thinking "On difficult tasks involving maths and spatial analysis, women need more time" so, given a chance, it might be better not to employ them.

Agreed, but the timing issue for spatial tests actually strikes me as even more important than that. I am good at typical spatial tests, but one thing I have noticed is that for the hardest items I find myself going through a very working memory loaded process of checking whether a rotation works for a variety of details (number of details being limited by WM). I am pretty sure this process is more g loaded than spatial (have to find, remember, and analyze these differences). It is also slow at my WM limits (I trial and error choose which details to focus on for the hardest items). I am certain I could improve my performance by making pen and paper notes, but consider that cheating on those tests. It would be interesting to explore differences in solution speed and style both within and between groups (e.g. do similar scoring men and women differ in technique?).

Thus I tend to think the need for more time indicates a relative deficit in "real" spatial skill in favor of g. Whether this "real" spatial skill is what drives the relationship of spatial skills with programming is unclear, but I think it might be. I would hypothesize that it might not be easy for someone like me to emulate the reasoning a higher spatial ability person might use to solve real world problems (rotations are a relatively simple special case problem). If so, presumably this problem would be even worse for someone with even less "real" spatial ability.

Part of what I base my self assessment on is my sense that some people just immediately see the answer to hard spatial problems. Another part of this is my experience with tasks like navigating in complex topographical environments (I suspect that is a related skill). I routinely encounter people who I think are much better at navigation than I am (especially considered in tandem with more g loaded differences). My sense is that this instant recognition correlates with g but is a separate ability (perhaps more separate than the spatial test correlations indicate given my substitutability observation above). I would be very interested in either anecdotal observations or research discussing this!

Overall, my takeaways from the whole l'affaire Damore (surprised I haven't seen this pun used yet, just searched and here is a use , though I disagree with it that post and the comments are worth a look) are:

res > , August 16, 2017 at 5:20 pm GMT

@Peripatetic commenter Perhaps a good start is to read (or at least skim) Intelligence, Genes, and Success: Scientists Respond to The Bell Curve as a collection of critiques of The Bell Curve which seem better than most. Then look for critiques of that book and its papers.

Another approach would be to look at Linda Gottfredson's work, most notably: Mainstream Science on Intelligence: An Editorial With 52 Signatories, History, and Bibliography

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.366.7808&rep=rep1&type=pdf

Though IIRC that is more useful as a source of information to form critiques than as ready made rebuttals to any particular work.

P.S. I agree with Dr. Thompson about reading TBC, but based on your other comments assume you have done so already.

Peripatetic commenter > , August 16, 2017 at 6:29 pm GMT

The Note makes it very clear that men and women "differ in part due to biological causes", that many such differences are small, with significant overlaps, and that you cannot say anything about an individual on the basis of population level distributions.

So, noting that on average, men have 90% more upper body strength than women, would I not be able to claim that any woman my height or less will not have my upper body strength?

res > , August 16, 2017 at 7:40 pm GMT

@Peripatetic commenter Short answer, no. Though it arguably depends on where you fall in the male range and the population size (which controls how much of an outlier one can expect to occur). If you want to make this more concrete, here is a paper on strength differences which seems to imply (though I don't see it stated) a Cohen's d of about 3 for upper body strength: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4756754/
Plugging that into the visualizer here (3 is the maximum value supported) you see only 13% overlap: http://rpsychologist.com/d3/cohend/
Worth noting that these analyses don't account for size differences (so your equal height condition skews things).

To answer your question a different way, try looking at world championship weightlifting results. Can you lift more than the strongest woman there less than or equal to you in height (or weight as a proxy)? https://en.wikipedia.org/wiki/List_of_world_records_in_Olympic_weightlifting

https://rawpowerlifting.com/records/world_records/

Razib's grip strength post is a worthwhile look at this sort of thing: https://www.unz.com/gnxp/men-are-stronger-than-women-on-average

Peripatetic commenter > , August 16, 2017 at 8:04 pm GMT

To answer your question a different way, try looking at world championship weightlifting results. Can you lift more than the strongest woman there less than or equal to you in height (or weight as a proxy)?

I don't do weight training but if I did, I think I could and I would assert that world championship male weight lifters could.

Peripatetic commenter > , August 16, 2017 at 9:36 pm GMT

I started reading https://people.ok.ubc.ca/lgabora/papers/Gabora-Russon-EOI-2011.pdf

and found this:

The more we learn about nonhuman intelligence, however, the more we find that abilities previously thought to be uniquely human are not. For example, it was thought until the 1960s that humans alone make tools. But then Jane Goodall (1963) found wild chimpanzees making them. Later, several other species were found making tools too (Beck, 1980). Thus, ideas about what marks the boundary between human and nonhuman intelligence have undergone repeated

There is an enormous qualitative difference between the tools that Chimps (or other primates) use and something like, say, https://www.thoughtco.com/acheulean-handaxe-first-tool-171238 .

What is the use of making such statements? Chimps are not going to suddenly start making screw drivers or knives or bows and arrows etc. Is it thought that all other tool making is layered on top of the neural support Chimps use for making their very primitive tools?

Priss Factor > , Website August 17, 2017 at 4:38 am GMT

2 Kevins says we are living 'matriarchy'.

wayfarer > , August 17, 2017 at 4:44 am GMT

"Google Memo: Fired Employee Speaks Out!"

utu > , August 17, 2017 at 4:44 am GMT

@Peripatetic commenter

Tom Welsh > , August 17, 2017 at 8:44 am GMT

I suspect that no one with enough intelligence to think clearly understands what all the fuss is about. I have never been particularly successful at anything, despite my IQ of over 160 (according to Mensa). The only clearcut effect this has had, as far as I can make out, is that most people find my conversation obscure and boring.

If an IQ 60% above average confers no apparent practical advantage, what is the point in squabbling heatedly about hypothetical differences on the order of 1%? It is surely well established, even if it weren't glaringly obvious to common sense, that while pure intelligence is vital in some fields of work, its effects are usually swamped by those of other characteristics such as persistence, enthusiasm, charisma and empathy.

Indeed, there is a lot of anecdotal evidence to suggest that the very most intelligent people are disproportionately prone to mental disorders, existential horror, and despair. There is a lot to hate and fear in the world, and most people seem to be spared the worst consequences by the simplest of defence mechanisms – a sheer failure to notice.

Tom Welsh > , August 17, 2017 at 8:52 am GMT

@Peripatetic commenter "Is it thought that all other tool making is layered on top of the neural support Chimps use for making their very primitive tools?"

Yes. Although of course we are not chimps, nor are we directly descended from chimps. The human brain is immensely flexible and adaptable, and once the practice of solving problems by making tools became established, a whole vast new world opened up. Note that people were making stone tools for a very, very long time before the first metals were discovered. Note also that many of the human race's greatest discoveries may have been made only once or twice before spreading worldwide.

One serious weakness that most humans suffer from is an inability to visualize long periods of time. Just as, to the average citizen, a million, a billion, and a trillion are all more or less just "lots and lots", most of us really cannot conceive of a million years or what might happen in such a time. At about three generations per century, a million years represents about 30,000 generations. A mere 50 generations ago the Roman Empire was still flourishing.

James Thompson > , Website August 17, 2017 at 10:27 am GMT

@res Thanks for your thoughtful and detailed comments.

On the speed issue, for all tasks, I was objecting to Hyde's implied distinction between speed and ability, because ability is related to speed. I think that W.D.Furneaux was onto this issue years ago, and progressed it well. From memory, I have classified his key insight as saying that intellectual achievement depended on: speed, accuracy and persistence.

The first two are often a trade-off, though of course the brightest people are both speedy and accurate. Persistence is often an ignored characteristic, though it is a key part of most great intellectual achievements.

As regards g, at higher levels of ability it account for less variance.

1. Furneaux, W. D., Nature, 170, 37 (1952). | ISI |
2. Furneaux, W. D. "The Determinants of Success in Intelligence Tests" (paper read to Brit. Assoc. Adv. Sci., 1955).
3. Furneaux, W. D., Manual of Nufferno Speed Tests (Nat. Found. Educ. Res., London, 1955).
4. Furneaux, W. D., in Intellectual Abilities and Problem Solving Behaviour in Handbook of Abnormal Psychology (edit. by Eysenck, H. J.) (Pergamon Press, London, 1960)

James Thompson > , Website August 17, 2017 at 10:50 am GMT

@Peripatetic commenter I think you are right if we alter it from "any woman" to "almost any woman", simply because the difference in body strength (in the paper Res references, and in the others) is a d of 3.5 so I wouldn't bother with further calculations to correct for height. What would make a difference is the small numbers of elite women athletes, as shown in the paper Razib posted.

If one simplifies the whole issue to look at height, weight and body strength together, then women are at risk in any physical encounter with men, even old ones. This has been noticed before, resulting in kind societies paying extra respect to and showing more consideration for women, and in less kind societies to their abuse.

Miro23 > , August 17, 2017 at 12:21 pm GMT

I find the ferocity of some of the replies to Damore extreme. The vehemence of the opposition is coruscating, and absolute. These issues should be matters of scholarly debate, in which the findings matter, and different interpretations contend against each other.

Or maybe it's not for ferocious attacks or scholarly debate. It's just a difference of opinion (remember "diversity") – not something to get so excited about. The problem is that PC is on the way to functioning like militant Islam with regard to unbelievers and apostates.

Moi > , August 17, 2017 at 1:10 pm GMT

Free speech is an interesting concept – but don't try to put it into practice.

James Thompson > , Website August 17, 2017 at 1:19 pm GMT

@Tom Welsh Dear Tom,
An IQ of 160 is only found in 1 in 31,560 persons, being higher than 99.9976142490% of the population. This is more than a 60% advantage over the average citizen. IQ points are not percentages.

The work of Benbow and Lubinski shows that the higher the intelligence the greater the achievement. While other personality factors may be involved, they have yet to be shown to be as important. Typically, high ability people are shown to be more balanced than average, with lower rates of mental disorder.

dc.sunsets > , August 17, 2017 at 2:10 pm GMT

@James Thompson Not to worry. We have Hollywood providing young women with all the confidence necessary that, should she walk down a dark alley and be accosted by a man, she will likely strike him a few times in the face and walk away unscathed.

/sarc off.

If women grasped even vaguely just how great is the gulf between them and the overwhelming majority of men, I suspect we'd see a lot fewer women using their divorce attorney to torment their soon-to-be (or already) ex-husband. I've watched women metaphorically poke the most dangerous animal on Planet Earth, an adult male human, as he sits in a cage that lacks bars.

The only time I've seen the "Entertainment Industry" show what can really happen in a confrontation between a typical woman and a typical (in this case viciously predatory) man, it was in a foreign-made film titled "Irreversible," available on Amazon Video. It was without a doubt the most horrifying rape-beating ever put on film, and watching it would scare the living daylights out of women. It ran rings around any horror film ever made.

Tom Welsh > , August 17, 2017 at 2:10 pm GMT

@Moi That's nothing new, either.

"It is by the goodness of God that in our country we have those three unspeakably precious things: freedom of speech, freedom of conscience, and the prudence never to practice either of them".

– Mark Twain, Pudd'nhead Wilson's New Calendar, Ch. XX

Moi > , August 17, 2017 at 2:54 pm GMT

@Tom Welsh Sam Clemens was sui generis. And I love this one of his: "There are only two important days in the life of any person, the day that your are born and then day you find out why."

szopen > , August 17, 2017 at 3:22 pm GMT

Well, I was looking for people-vs-things preference differences expressed in easily calculable terms (i.e. something in terms of "men are rated as 10 on this trait, with SD 2, while women as 8, with SD 1.8″) but I couldn't; Can anyone help?

The best I could found was the study which claimed that in people-vs-things rating, within the top 25% of topc scorers – which would be, if I understood correctly, people who are the most interested in things (as contrasted with "interested in people") ratio of women to men is 0.287. That would mean there would be around 78% men, 22% women.

Now, the question is what is the cutoff for going to STEM, ie. what is average "things" preference for people to decide to follow career in STEM (or, more specifically, in engineering and computer science). Depending on value of this cutoff, the gap in CS and engineering might be, indeed, completely explained away by difference in people-vs-things interest, or even might imply men are discriminated against, HOWEVER, seeing as some of those preferences are calculated, I wonder whether it is not a kind of circular argument, kind of "there are more men into computer-related work, because more men are interested in computers".

Also, it seems that i saw in one study taht this difference decreases with age, which is strange. This would contradict the theory that the preference is driven by the social expectations (because, then "sexist" expectations would cause is to go up with age) but this could be explained by "it is caused by biology" theory; HOWEVER, the bad thing and the weakness is that "it's caused by biology" could be used to justify BOTH increasing and decreasing the gap – a realisation which leaves bad taste in my mouth.

Anyway I'd love to see
(1) studies quantifying the differences on a scale, not saying "the effect is large with Cohen's d=1.23″
(2) studies looking at specifically computer science and comparing their preferences with general population
(3) studies measuring the trait in very early age

res > , August 17, 2017 at 3:25 pm GMT

@James Thompson Thanks for expanding on the speed, accuracy and persistence idea. And giving references!

I am having trouble chasing down your references though. This 1967 letter gives a very similar list of references but states that there were errors in the 1952 Furneaux paper equations: http://www.nature.com/nature/journal/v214/n5092/abs/2141056a0.html

This book (The Measurement of Intelligence, edited by Michael? Eysenck, copyright 1973, I actually have a copy but am having trouble finding it, I think that chapter would be a good starting point for me): https://books.google.com/books?id=wjLpCAAAQBAJ&pg=PA236&lpg=PA236
gives a title for your first reference: Some Speed, Error and Difficulty Relationships within a Problem-solving Situation
From which I find: https://www.nature.com/nature/journal/v170/n4314/abs/170037a0.html
It is nice that Nature assigns DOIs to its old papers. That appears to be a two page letter. Interesting, but I am having trouble drawing inferences from it.

I am not sure I communicated my agreement with your earlier speed, accuracy, and persistence comments. I was trying to extend the idea to consider that slow speed might be an indicator of the substitution of skills (other than persistence, though that is certainly critical there) for the skill nominally being tested for. In my earlier example, g for spatial ability. For another example, I took an online autism test a while ago (identifying emotions from pictures). I scored above average (in a good way ; ), but found myself again using a more "logical" (g based IMHO) process for the harder items. I doubt that is the way most people approach that test (though I could be wrong) and my result might overstate my ability on the skill they are trying to test .

The fundamental distinction I am trying to make is between solving a problem in the same way (or sufficiently similar) just more slowly and solving the problem using a fundamentally different approach (or skill/ability?!). The former could be viewed as changing the clock speed on a computer and I think corresponds with the point you make about persistence. For the latter envision a case where one person solves a problem using visual intuition and a quick mathematical check while another person uses an extended mathematical derivation. I think this kind of substitutabiltity could be a problem in subtests intended to measure a specific skill (e.g. spatial!). And g is a very useful Swiss army knife ; ).

Perhaps this is a second order effect relative to the basic speed/persistence issue and should (could?) not really be considered until that has been solved? I guess I am just interested in anyone who has thought about this substitutability idea in the more general form. Furneaux seems focused on the speed side. In particular, Furneaux limits his consideration to the 10-85% range of difficulty while my personal experience is much more about the hard end of the difficulty scale.

This seems like a fairly obvious idea to me so I presume it has been considered. Perhaps some combination of "second order effect" and "hard to test" prevents something having been done about it?

One other thought that occurs to me. Does Furneaux's deemphasis of higher D(ifficulty) items say something about the difficulty of creating high ceiling tests? Is it possible that the combination of substitutability and more idiosyncratic skill profiles at the high end are part of that problem?

res > , August 17, 2017 at 3:32 pm GMT

@Miro23

It's just a difference of opinion (remember "diversity") – not something to get so excited about.

The supreme irony of l'affaire Damore is that was a primary point of Damore's memo and the response was perhaps the best proof of the validity of that point possible. Hence my "inept thinkers" comment.

Tom Welsh > , August 17, 2017 at 3:49 pm GMT

@dc.sunsets "No one is insuring your foods are safe".

Actually, Western governments have for decades been going out of their way to recommend actively unhealthy foods and drinks. In 1865, in 1910 and in 1939 it was clearly understood everywhere that meat, fish, poultry, eggs, vegetables, and nuts, together with some dairy and fruit, were the essential dietary items. Carbohydrates, sugars and grains in particular, were clearly understood to be fattening and probably causative of many diseases.

Yet since the US government led the charge with its McGovern Committee Report in the 1970s, Western governments have been warning against meat, saturated fat, and other healthy foods while urging consumption of more foods made from sugars and grains. We all require about 20% of daily energy from protein, and the rest is a mixture of fats and carbs. Cut out the fats, and that means 70-80% carbs, which leads inexorably to weight gain, metabolic syndrome, and for many people eventual diabetes.

Did I mention that Senator McGovern represented a grain-producing state?

Tom Welsh > , August 17, 2017 at 3:51 pm GMT

@res

I would like, in this context, to repeat my quotation of Alfred Korzybski's declaration.

"I have said what I have said. I have not said what I have not said".

Intelligent, let alone constructive, discourse will not be possible until everyone understands that saying and takes care to make sure they understand what others mean.

James Thompson > , Website August 17, 2017 at 4:15 pm GMT

@res Good points. Sorry about the references: I took the first ones to hand, and should have searched through my own posts. Have done that now, and found this:

http://www.unz.com/jthompson/you-want-it-good-or-you-want-it-tuesday

This will add some content, but I agree that I did not properly answer your question. I think the question you raise would be considered a task solving strategy problem: "I have tried shape, as I did on the easier items, but that doesn't work for this more difficult problems, so I will try feature categorization". That is, you went from a modular solution to a g-loaded general strategy when the module seemed to fail you.

My first point is that if we can find someone who solves even the difficulty problem easily, we hire them because their module does the job for us!
Second, and more interestingly, most problem solving approaches fail when the problem is both novel and very difficult. (I cannot say what makes a problem difficult, but it probably relates to the number of items and the number of operations involved in solving it). At that point in the act of creation, people try all manner of re-framings and re-descriptions, in the hope that an analogy might open up a new line of attack. For example, I cannot assist anyone with finding new elements. Despite that, out of ignorance I can make some suggestions. For example, would anything be gained by taking the target close down to absolute zero? Would it make it easier to hit something?

So, problem-solving strategies often become the real test. That also involves working out what problems you don't have to solve. During the Manhattan project one group started worrying that in focusing the charges they would get wear in the system which would throw out their very crucial calculations about the critical mass required. After a while a team member pointed out the obvious fact that the firing mechanism would only be used once.

You are right that a different approach is what we generally need for very difficult problems.
Sorry that I cannot answer all your interesting questions.

res > , August 17, 2017 at 5:00 pm GMT

@Tom Welsh That is a good quote. Perhaps I am being a bit dense, but I don't see the applicability to my comment 32. Especially given that I was not responding to you. Perhaps you could elaborate?

If anything the obligation to understand lies first with those criticizing Damore's memo.

Priss Factor > , Website August 17, 2017 at 6:34 pm GMT

@schrub

I don't mind DS not existing. The question is IF they can go after DS, where does it end?

Look how Canadian 'hate speech laws' began with silencing 'Neo-Nazis' (fake ones, btw) and then spread to going after those who don't use proper pronouns. Self-Righteous Addiction created all these Self-Righteous Junkies.

Delinquent Snail > , August 17, 2017 at 6:40 pm GMT

@Tom Welsh What? 3 generations a century? That would mean people are having kids in their 30s . Which didn't happen until this last century. Its more like 4-5, maybe even 6, generations a century.

I agree humans can't visualize large spans of time. Plus, a very large minority think the world was created 2017 years ago, so that doesn't help.

Astuteobservor II > , August 17, 2017 at 7:08 pm GMT

I find the ferocity of some of the replies to Damore extreme. The vehemence of the opposition is coruscating, and absolute. These issues should be matters of scholarly debate, in which the findings matter, and different interpretations contend against each other. Expressing different opinions should be a cue for debate, not outrage.

this is why I support him.

Bill Jones > , August 17, 2017 at 7:50 pm GMT

The bigger question is why Homo Sapiens is the only primate on the planet where The female is expected to be equal to the male .

Art > , August 17, 2017 at 8:04 pm GMT

The whole argument "for equality" is fundamentally flawed – it is the wrong goal. As individuals we humans want to be different – not equal. We want to bring something different to the table of social interaction. People who are equal have nothing to give to each other.

Our goal is to find a niche for ourselves – there is room for all different capabilities in a rational society. There is only so much need for rocket scientists.

Proving that men and women are equal is fools work.

Smart people will endeavor to prove that all work is of value – and deserving of a living compensation.

Peace -- Art

P.S. No matter our intellectual capabilities, for 99% of us – doing a good job of raising our children – is the most lasting thing that we can ever do. They are our true legacy – what we do on the job is all too soon lost in the evolution of business.

Bill Jones > , August 17, 2017 at 8:27 pm GMT

@James Thompson

Cspan had an excellent two hour or so interview of the guy on one of their weekend book shows a decade or so ago. Worth the search and a download of at least the audio.

szopen > , August 17, 2017 at 8:57 pm GMT

@res Thanks a lot for a link to "interpretating cohen's d"! FInally I understood the concept

However, the problem with COhen's d is that it assumes – if I am not mistaken – the equal standard deviations, while I think it is quite likely that variation is bigger in males, as usual with many other traits. That would mean that using "d" would not truly reflect the ratios of population over some cutoff, am i right?

res > , August 17, 2017 at 10:02 pm GMT

@szopen My understanding is the official definition of Cohen's d uses the pooled SDs of the subpopulations, but I am not sure how rigorously that subtlety is observed. For example, this page gives them as alternate definitions: https://en.wikiversity.org/wiki/Cohen%27s_d

I am not sure how much of a difference that makes in practice. That might be a good thing to investigate with some simulations.

Bill Jones > , August 17, 2017 at 11:45 pm GMT

@CanSpeccy

"To suggest a group of our colleagues have traits that make them less biologically suited to that work is offensive and not O.K."

Even if it demonstrably true. Can't let reality get in the way of the religion , can we?

[Aug 11, 2017] The federal government recognizes Diversity as a number of protected class groups that self-identify as being underprivileged, oppressed, disadvantaged, underutilized, and underserved. by Thompson

Aug 10, 2017 | www.unz.com

Simply because the immediate reaction to the Google Memo concentrated on sex differences I gathered together some posts on sex differences, showing that the sexes differ somewhat in their abilities: not very much, but enough to make a difference at the extremes, and it is the extremes which make a difference to technology based societies, and to a technology dependent world. I left out any mention of the notion that a "diverse" workforce is better than better than a workforce selected purely on ability to do the task in question. My mistake, which I will try to repair now.

I wondered, some years ago, what evidence there was for the proposition that diversity was a good thing. I would like to collect more proposals, because the ones sent to me proved unconvincing. You may have heard a claim that having women in the workforce boosts profits by 40%. This turns out to be a misunderstood joke.

http://www.unz.com/jthompson/davos-diversity

Now to the general claim that having women in a group boosts anything, or that having a variety of intellectual levels in a group boosts anything. That was taken apart in a set of experimental studies by Bates and Gupta.

http://www.unz.com/jthompson/group-iq-doesnt-exist

My conclusion was:

So, if you want a problem solved, don't form a team. Find the brightest person and let them work on it. Placing them in a team will, on average, reduce their productivity. My advice would be: never form a team if there is one person who can sort out the problem.

Perhaps Damore was a guy who could sort out problems, until the last problem, that is.

I repeat my January 2015 request: if you have any good studies showing that having a sexually or racially diverse workforce boosts profits over a workforce selected on competence alone, please send me send them to me in a comment to this item.

Roast beef, August 10, 2017 at 4:18 pm GMT

https://publications.credit-suisse.com/tasks/render/file/index.cfm?fileid=8128F3C0-99BC-22E6-838E2A5B1E4366DF

Some of the findings of our initial report are confirmed – greater diversity in boards and management are empirically associated with higher returns on equity, higher price/book valuations and superior stock price performance. However, new findings emerge from this added management analysis – we find no evidence that female led companies reflect greater financial conservatism where leverage is concerned. Also, dividend payout ratios have been shown to be higher. Female CEOs have proven to be less acquisitive than men when assuming the leadership position. The analysis makes no claims to causality though the results are striking.

epochehusserl , August 10, 2017 at 4:40 pm GMT

Diversity and inclusion are buzzwords made up by Gramscian marxists to rationalize group rights made up by the courts after not being satisfied with equality under the law. Those buzzwords do nothing to resolve the existential and morals issues raised by group rights. Whose diversity and inclusion are the best anyways? What if I think I would be enriched by this rather than that diversity and inclusion?

TheJester , August 10, 2017 at 5:42 pm GMT

An Example: Talented Individuals vs. Mediocre Groups

In the late 1990s, I was in charge of a regional office of a high tech company that had a problem. We had delivered a complex air defense system but the command module could not communicate with the missile batteries. This was serious stuff. The company put teams of software developers on the problem back at the main campus. They worked for over a month without result. The customer was getting antsy, which is a euphemism for nasty.

Then, the company deployed Burt (not his real name) to the customer location to see what he could do. Burt sat at the conference table in my outer office reading reams of code printed in large binders like a novel (I'm not kidding) no notes, just reading and noticing. Burt didn't even bother with a computer screen or debugging software.

Then, he exclaimed, "I've got it!" (I'll always remember that moment.) Burt noticed that the date format for the commands being sent from the command module was in a different format than the date format expected by the missile batteries.

QED a technical problem that had been plaguing the company for months, that had immobilized a major air defense system, and that had put the company's product line at risk solved by an individual with a few hours of work. I made sure that Burt got a big bonus.

The point: If you ran a startup hoping to bring "creative destruction" to a sector in a high-tech society, would you want (1) a politically correct software development team carefully tailored to meet affirmative action quotas for males, females, Blacks, Hispanics, homosexuals, lesbians, and the transgendered in spite of their IQs and personal qualities or, as James Damore argues, would you want (2) a group of "Burt's" acting alone or in concert because of their IQs and unique personal qualities?

The histories of Microsoft, Oracle, Apple, and Google suggest the latter. The former brings with it progressively higher social and financial "carrying costs" that prejudice the success of any bleeding-edge high-tech endeavor.

MikeyParks , August 10, 2017 at 6:35 pm GMT

When the "diversity" is strictly cosmetic and all points of view are basically identical, what you have is not diversity, it's as Damore described it, an "echo chamber." Google should be smart enough to know this. I would guess that this kind of non-diverse diversity hinders productivity because there are no new ideas, just regurgitations of the party line.

res , August 10, 2017 at 6:44 pm GMT

I like this one: https://www.gsb.stanford.edu/insights/diverse-backgrounds-personalities-can-strengthen-groups

In a recent article disentangling what researchers have learned over the past 50 years, Margaret A. Neale finds that diversity across dimensions, such as functional expertise, education, or personality, can increase performance by enhancing creativity or group problem-solving. In contrast, more visible diversity, such as race, gender, or age, can have negative effects on a group!at least initially.

Of course viewpoint diversity is never what is actually meant by "diversity."

Sadly that article did not include a link to the research. I think this is it (free full text): http://journals.sagepub.com/doi/abs/10.1111/j.1529-1006.2005.00022.x
The summary has a paragraph matching my quote above.

Anonymous , Disclaimer August 10, 2017 at 7:09 pm GMT

We used to abhor meetings back in the days before the US military was feminized and subject to collaborative group think. So much to do so little time.

We called meetings and other collaborative exercises "circle jerks".

From Wikipedia:

A circle jerk is a sexual practice in which a group of men or boys form a circle and masturbate themselves or each other. In the metaphorical sense, the term is used to refer to self-congratulatory behavior or discussion amongst a group of people, usually in reference to "boring time-wasting meetings or other events".

I suspect that "circle jerks" will become more frequent as Google transitions to a more female-friendly, collaborative organizational structure.

James Thompson , Website August 10, 2017 at 8:35 pm GMT

@Roast beef Thanks. Reading it now. Makes good points, but hard to find appropriate comparison companies for longitudinal comparisons. As authors say, it could be bigger companies doing the "female quota" thing while smaller companies are less inclined or less able to do so. Still reading it, and mostly thinking about the methods .

lump1 , August 11, 2017 at 1:52 am GMT

This is definitely an important question to tackle directly. My two bits is that we should try to disentangle causality if possible. It's not enough just to find correlations between high valuation and racial diversity. It might be like finding correlations between high valuation and having Michelin-star chefs in the company cafeteria. I bet the correlation exists, but it happens because already-successful companies get money to blow on inessential nice things. Diversity is a nice thing that already-successful companies can buy when they have money to spare, but just because they end up with it doesn't mean that it helped them succeed. I mean, it might – I don't know the data – but mere correlations could mislead us. Correlations across time would impress me more. If individual companies grow faster when more diverse and slower after they lose diversity, then the findings would be harder to dismiss.

YetAnotherAnon , August 11, 2017 at 8:56 am GMT

Off topic, but it seems Guardian readers are woke to the "everyone must go to university" scam. Bit late but never mind.

https://www.theguardian.com/commentisfree/2017/aug/02/i-feel-like-wasting-life-readers-overqualified-jobs

Top rated comment

I think the "50% of the population must have degrees" brigade are to blame for this. It was always going to devalue the worth of an academic degree by attempting to have half of the population wandering the job centres armed with a useless (but very costly) scrap of parchment.

What on earth were successive governments thinking?

But even if the degrees are not as valuable as the salesman (who came to your school and persuaded you, age 17, to sign up for a £60k loan with hefty interest rates) told you, at least you've had three years of leftie indoctrination (e.g. "no borders, no nations" or "Farage is a racist") which will stand our elites in good stead over your lifetime. And you've paid for it yourself!

Dieter Kief , August 11, 2017 at 11:17 am GMT

"if you want a problem solved, don't form a team"

Novels are written by one person – (as Steve Sailer mentions here and there, novels, especialy the really good ones, are very complex things). Great works of art or compositions, – mostly the same thing as in the novels-example.

Pop-music (Rock etc. too) might be an exception: Here, groups yield very interesting results.
(On usually not that high intellectual levels – is that the reason for this exception?)

James Thompson , Website August 11, 2017 at 1:56 pm GMT

Interesting example of pop-music. Usually the song writers are far fewer than the song players.

Joe Franklin , August 11, 2017 at 3:23 pm GMT

@epochehusserl Diversity and inclusion are buzzwords made up by Gramscian marxists to rationalize group rights made up by the courts after not being satisfied with equality under the law. Those buzzwords do nothing to resolve the existential and morals issues raised by group rights. Whose diversity and inclusion are the best anyways? What if I think I would be enriched by this rather than that diversity and inclusion? Diversity and Inclusion are euphemisms when employed by leftist (i.e. Democrats and Neocons) .

The federal government recognizes Diversity as a number of protected class groups that self-identify as being underprivileged, oppressed, disadvantaged, underutilized, and underserved.

Protected class groups identify the Nazi and white supremacist as their common oppressor.

The federal government recognizes Inclusion as federal entitlements for protected class groups.

Here's an example of several federal protected class groups recognized and entitled by the University of Nebraska:

http://www.unk.edu/about/compliance/aaeo/hiring_guidelines/identification_of_protected.php

Identification of Protected Class Groups

The following five groups are considered "Protected Classes" under various federal laws. The Equal Employment Opportunity Commission (EEOC) requires reporting employment information on the first two groups, females and minorities, which are traditionally underutilized.

See also

Google Sex French Fries Fear and Loathing in Psychology Friday Movies

The Motivational Quotient

The Lack of Progress in Science: Sex Differences Razib Khan July 31, 2016 1,300 Words 100 Comments Genetics Allows the Dead to Speak from the Grave Razib Khan June 14, 2015

[Aug 11, 2017] Making Sense of the Google Memo

Notable quotes:
"... Neuroscientist Debra W. Soh, writing at Quillette, observes that ..."
"... It is well-established by Pinker and other scientists that women have higher IQs on average, while men preponderate the extremes of brilliance and dullness. ..."
Aug 11, 2017 | www.unz.com

...Damore has joined an increasing number of people from the worlds of business and academia to be sacrificed at the altar of diversity. In an unsurprising public relations move, Google has succeeded in saving some face by appeasing the partisans of political correctness and of so-called equality. Meanwhile, those who don't subscribe to the progressive delusion may feel more anxious at the prospect of failing to play the coward's game correctly. Can one sneeze these days without offending the HR department?

Google CEO Sundar Pichai, in a memo laden with incoherence and hypocrisy, says that

we strongly support the right of Googlers to express themselves, and much of what was in that memo is fair to debate, regardless of whether a vast majority of Googlers disagree with it. However, portions of the memo violate our Code of Conduct and cross the line by advancing harmful gender stereotypes in our workplace. Our job is to build great products for users that make a difference in their lives. To suggest a group of our colleagues have traits that make them less biologically suited to that work is offensive and not OK. It is contrary to our basic values and our Code of Conduct, which expects "each Googler to do their utmost to create a workplace culture that is free of harassment, intimidation, bias and unlawful discrimination."

The memo has clearly impacted our co-workers, some of whom are hurting and feel judged based on their gender. Our co-workers shouldn't have to worry that each time they open their mouths to speak in a meeting, they have to prove that they are not like the memo states, being "agreeable" rather than "assertive," showing a "lower stress tolerance," or being "neurotic."

At the same time, there are co-workers who are questioning whether they can safely express their views in the workplace (especially those with a minority viewpoint). They too feel under threat, and that is also not OK. People must feel free to express dissent. So to be clear again, many points raised in the memo!such as the portions criticizing Google's trainings, questioning the role of ideology in the workplace, and debating whether programs for women and underserved groups are sufficiently open to all!are important topics. The author had a right to express their views on those topics!we encourage an environment in which people can do this and it remains our policy to not take action against anyone for prompting these discussions.

What were those "harmful gender stereotypes," so "offensive" to the good team members at Google? Let's take a look at the first paragraph of the memo that has so many people worried about the white patriarchal obstacle that, now as ever, stands cruelly in the progressive path.

I value diversity and inclusion, am not denying that sexism exists, and don't endorse using stereotypes. When addressing the gap in representation in the population, we need to look at population level differences in distributions. If we can't have an honest discussion about this, then we can never truly solve the problem. Psychological safety is built on mutual respect and acceptance, but unfortunately our culture of shaming and misrepresentation is disrespectful and unaccepting of anyone outside its echo chamber. Despite what the public response seems to have been, I've gotten many personal messages from fellow Googlers expressing their gratitude for bringing up these very important issues which they agree with but would never have the courage to say or defend because of our shaming culture and the possibility of being fired. This needs to change.

Surely no unbiased reader can fail to find Damore's words eminently reasonable. Though recently fired, the man is no enemy of diversity and inclusion, nor does he say sexism is not a real problem. There is nothing here (or elsewhere in the memo) to suggest he is not fair-minded. Indeed, if you read his memo, you will surely see!so long, again, as you are not biased!that as people go, Damore is exceptionally fair in his perceptions and reasoning, though it is well to remember Emerson's maxim: "To be great is to be misunderstood." Damore is concerned to give some nuance to understanding the issues since, after all, it is not prima facie evident that men and women are utterly the same; with the result that, where a corporation's representation of gender does not wholly reflect the national population, sexism is present by definition. The crucial phrase is "differences in distribution." Though feminists, progressives and Leftists generally are keen to deny it, men and women are not mere blank slates on which the "unequal" environment imprints its ink; we should not assume as a matter of course that something is awry if the workplace reflects! as it inevitably must !those gender differences which we all seem to notice the moment we leave it.

Neuroscientist Debra W. Soh, writing at Quillette, observes that

within the field of neuroscience, sex differences between women and men!when it comes to brain structure and function and associated differences in personality and occupational preferences!are understood to be true, because the evidence for them (thousands of studies) is strong. This is not information that's considered controversial or up for debate; if you tried to argue otherwise, or for purely social influences, you'd be laughed at.

Sex researchers recognize that these differences are not inherently supportive of sexism or stratifying opportunities based on sex. It is only because a group of individuals have chosen to interpret them that way, and to subsequently deny the science around them, that we have to have this conversation at a public level. Some of these ideas have been published in neuroscientific journals!despite having faulty study methodology!because they've been deemed socially pleasing and "progressive." As a result, there's so much misinformation out there now that people genuinely don't know what to believe.

Also at Quillette , eminent evolutionary psychologist Geoffrey Miller remarks that "almost all of the Google memo's empirical claims are scientifically accurate. Moreover, they are stated quite carefully and dispassionately. Its key claims about sex differences are especially well-supported by large volumes of research across species, cultures, and history."

Steven Pinker himself!he of the very solid liberal credentials!has published much rigorous work on natural gender differences, in both intelligence and personality traits. Here he is on YouTube, giving a talk which might be used to support James Damore's case:

Note, what is so revealing, that Pinker takes care to appease the dogmatic academic crowd via the usual trite and simplistic reduction of human history to patriarchal oppression, lest, like Ibsen's Dr. Stockmann, he be thought an enemy of the people. It can't be that man simply found himself in a harsh world in which his superior brute strength was an immense advantage. It can't be that a severe division of labor was for most of history inevitable for the sexes. Like the Jews, man has always been behind the scenes, conspiring to oppress everyone. Well, at least Pinker was prudent. After all, those aggressive, broad-shouldered feminists have been known to body slam many an hysterically logical speaker.

Like Geoffrey Miller's, Pinker's work helps us to see better what ordinary people already know well enough from everyday life (and which, thankfully for them, they feel no need to deny, outside of the increasingly touchy workplace, anyway): that men and women are indeed different; nor is it obvious, in a sane world, why that should be such a scandal. For these differences, qua differences, are value neutral. My working-class mother, who never finished high school, is not obviously inferior as a person to Heather MacDonald, despite my own admiration for that excellent and courageous scholar-journalist.

It is well-established by Pinker and other scientists that women have higher IQs on average, while men preponderate the extremes of brilliance and dullness. Many if not most Google employees surely do have exceptionally high IQs. That men should so excel at the Google corporation!as they do at so many other things at the highest level!reflects Nature itself and is consistent with a massive amount of empirical findings. It is also consistent with many traditional stereotypes, for the most part. The psychologist Lee Jusim, among others, has done excellent work on the overwhelming accuracy (though typically, much suppressed) of stereotypes. If you want to see a humorous example of the truth of stereotypes, see the exceedingly emotional reactions by the female Google employees!who have made their disgust well-known on Twitter!that Pichai describes in the second paragraph where I quote him above. It is reported that many female Google employees stayed home from work on Monday, triggered into melancholy by Damore's truthful words. Tragically, the feminist quilting bee soon degenerated into a wild intersectional tizzy, the rotund blue and pink-haired ladies of various races and gender identities squabbling over whose cat should first be allowed to peck at Damore's soon to be flayed carcass. Looking at the photos and social media accounts of Google's Diversity-rabble, one is struck by how stereotypical they are; virtually everyone looks fresh from a Judith Butler conference at Bryn Mawr college: trans-this, queer-that, communist, ad nauseam . Defective specimens of divorce culture, therapy culture, and human folly and degeneration generally. Persons who, hardly ever having been around traditional masculinity, cannot but misunderstand it, and with the all-too-human fear and hatred of the unknown. Perusing pictures of Google CEO Sundar Pichai, one perceives, quite palpably, a typical skinny, weak, effete twenty-first century Last Man: born to take orders from nasty women and resentment-pipers generally

Gender differences may be bad news for Feminist Dogma, yet as Pinker says in his talk, the truth cannot be sexist, nor should it be "harmful"!to an adult mind, at least. Of course, like Lawrence Summers, who was obliged to step down from the Harvard Presidency a while back for not going along with Feminist Dogma, Pinker has caught fire from feminists!increasingly nasty women, as it were. Sundar Pichai, like our feminists, says all the right things about diversity and the like, but when it comes to the reality of one gender being better, on average, at, say, engineering, he goes in for cant about "harmful gender stereotypes." If, though, anybody was to say, what there is also much evidence to support, that women, on average, are better at language skills than men, nobody would be troubled. Such hypocritical intolerance by the partisans of tolerance should be expected to continue apace, unless we others make a principled stand. Looking at the academy and at our intellectuals in general, we may wonder how so many people can manage to walk upright without a spine. Alas, more vital work for the deplorables.

The Diversity Idol is confused and inherently self-defeating. As Debra W. Soh puts it in the The Globe and Mail ,

research has shown that cultures with greater gender equity have larger sex differences when it comes to job preferences, because in these societies, people are free to choose their occupations based on what they enjoy.

As the memo suggests, seeking to fulfill a 50-per-cent quota of women in STEM is unrealistic. As gender equity continues to improve in developing societies, we should expect to see this gender gap widen.

The Diversity Idol also reeks of hypocrisy. Where are all the calls for more women in bricklaying and coal mining, fields in which there are hardly any women?

As for women's relative lack of leadership positions, at Google and elsewhere, much the best explanation is that by Jordan Peterson. The issue is not so much lack of ability as (sensible) lack of interest. Why, Peterson asks, should women want anything to do with what is commonly called leadership, seeing as it is generally a quite mad and foolish affair (endless work and stress, all for wealth that does not make happy)? Women's relative lack of interest in so-called leadership!which ultimately, today as yesterday, amounts in the main to men vying to outdo one another in order to win the favor of women in the sexual marketplace!signifies their greater good sense, which certainly is of a piece with their greater psychological and emotional discernment generally, and quite a long way from man's lunatic competitiveness and zeal for mammon. It is well to reflect on just what women are really missing out on by not exercising the power that men do, all in all. Is it a power worth having, most of the time? Do we not find our highest good when we are free to pursue that which has inherent value? Then too, there is the reality, hardly recognized in our time, that, as G.K. Chesterton put it, "feminism is mixed up with a muddled idea that women are free when they serve their employers but slaves when they help their husbands." For my own part, though an awful cook, I should rather be a house husband at home tending to my children than live a professional death-in-life at some touchy, humorless office.

In our status-obsessed society, there are constant gripes about how women are "excluded" from exercising power in the workplace. Meanwhile nobody says anything about the enormous psycho-biological power women possess simply by virtue of being women. This power, of course, is essentially determined by a woman's attractiveness, which is closely associated with youth and good health. No surprise, then, that women all over the world are forever trying to appear as attractive as possible, to the cost of billions every year. Such power, though inevitably prevalent in the workplace itself, far transcends it: it is a law of Nature itself, and indeed one of the strongest. As noted above, the endless male struggle for status mostly comes down to being able to obtain a desirable woman.

Today we see countless attractive young women spending vast amounts of time uploading photos of themselves on social media. How many wish to be a star! Hence that increasingly common phenomenon the duck face, which some might take for a kind of strange medical affliction: "Pucker up," thinks the generic young beauty in her vanity; "everybody's watching!" Like women on the many dating websites and apps, these social media darlings find that they can hardly keep up with all the male attention!surely an intoxicating pleasure, although doubtless often corrupting. No matter their intentions, and whether they are aware of it or not, such women are extremely powerful. The notion that a woman like Emily Ratajkowski is "oppressed" because of her "objectification" is absurd beyond description. Hers is a most willful objection; there is massive power in it; and even if the stunner was not affluent through her modeling and other endeavors, she would still not have to work: countess men would get in line to provide for her, now as ever. On the other hand, take away Bill Gates' billions, and how many women would even give that unattractive, uncharming fellow the time of day?

Google and other corporations, to maximize their profits, feel obliged to keep the diversity crowd happy. Yet there is, ironically, nothing the diversity crowd opposes more than diversity itself. To see this, consider that to effect "social justice," we must all become thesame , like a mad God who chooses to bungle His creation. For, so long as I differ from you in some way or other, it will always be possible to make a value judgment!of inferiority, of superiority, or of whatever!concerning that difference. And this would be true even if everyone had the same amount of money, even if there were no private property, and so on. For the most part, the social justice crowd is not motivated by benevolent justice, but by wicked resentment: that is why it wants not universal economic sufficiency (which I strongly support, insofar as it is achievable), but equality of outcome; with the result that comparative value judgment will be impossible.

Now equality of outcome derives from human psychology, from the permanent truth that there's nothing we children of pride detest more than the thought: "That person is better than me." Seeing other people perceive that superiority induces the same burning, violent envy, like a child who wants to destroy his parent's favored sibling. Indeed, from childhood on, man!the esteeming animal!defines himself in terms of competition, of rank, of hierarchy. No artist or athlete wants to be equal to another. Not every person, waxing indignant about inequality, wants to make the same income as every neighbor; very few do, in fact. Like suffering and death, this extreme competiveness is a law of Nature, from which we merely issue. Try to get rid of it, and see what mediocrity, corruption and degeneration follow. I say, look around you.

Biographical note: Christopher DeGroot is a writer and independent scholar in Philadelphia, Pennsylvania.

CanSpeccy > , Website August 11, 2017 at 4:27 am GMT

regardless of whether a vast majority of Googlers disagree with it.

Pichai is is an idiot. If a vast majority of "Googlers" disagreed with Damore's memorandum, how come most oppose his firing .

If Google's board wishes to avoid massive damage to the company, they should fire Pichai without delay on the grounds of his dishonesty and stupidity.

But the won't.

Good.

Let the manipulative, globalist, scum suffer massive damage to their credibility: credibility they do not deserve.

bliss_porsena > , August 11, 2017 at 4:58 am GMT

I have just staggered through Pepe Escobar on the Goolag Deep Swamp Memo and beg to be excused from more of the same, or similar.

jilles dykstra > , August 11, 2017 at 6:10 am GMT

Christopher Lasch, 'The Culture of Narcissism, American Life in an Age of Diminishing Expectations', 1979, 1980, London
already argues that truth does not matter any more.

TG > , August 11, 2017 at 7:46 am GMT

The field of Optometry is increasingly dominated by women. I have served on the admissions committee for an optometry school, and we'd like a better balance between male and female, but if most of the best applicants are female, well that's that and nobody whines. Many of these applicants are quite up-front about choosing optometry because it offers a better work-life balance than, say, ophthalmic surgery, and again, so what?

New enrollment in US medical schools is now 50/50 between men and women, and will likely become majority female before too long. Where is the angst?

And I remind you that, on average, people with degrees in medicine and optometry have significantly larger salaries than people with degrees in engineering, and significantly longer careers. On balance, I'd not say that professional women are doing all that bad. It's just that, for whatever reasons, the smart women tend to choose medicine over engineering. I fail to see a problem here.

Dieter Kief > , August 11, 2017 at 8:56 am GMT

The Pope, Emerson an Chesterton quotes are great. Especially the Pope-quote.
Thanks for putting Pinker, Peterson and Soh at the right place in the big picture.

These lines are a little bit misleading, because siblings rivlary is nothing exclusively boyish. There are women-athletes who want to win too, aren't there?

Seeing other people perceive that superiority induces the same burning, violent envy, like a child who wants to destroy his parent's favored sibling. Indeed, from childhood on, man!the esteeming animal!defines himself in terms of competition, of rank, of hierarchy. No artist or athlete wants to be equal to another. Not every person, waxing indignant about inequality, wants to make the same income as every neighbor; very few do, in fact.

((Article is very good – if a tad long, maybe.))

Zogby > , August 11, 2017 at 11:13 am GMT

How come noone is discussing the role that Pinchai is himself a product of affirmitive action plays in this? Do people really believe an Indian immigrant would serve as CEO of Google, as CEO of Microsoft if not for affirmitive action? Being CEO is not an engineering position. There are plenty of native-born mainstream Americans that could do these jobs. Most large American companies would never give the job of CEO to an immigrant from a 3rd-world country. Some of the business men that founded large companies may be immigrants, but it's different if they built the company. They're in control. Pinchai is just a hired hand, like Damore was.

Njguy73 > , August 11, 2017 at 11:26 am GMT

"Science is an odd sort of pursuit, way off the beaten track of human intellection There were theologians and politicians long, long, long before there were scientists. In dark moments I am inclined to think the former will still be with us long after the latter have been eliminated, probably via mass lynching Scientists themselves tend to forget this because they associate mainly with other scientists."

John Derbyshire, 2007

http://www.johnderbyshire.com/Opinions/Religion/religionandpolitics.html

jim jones > , August 11, 2017 at 11:28 am GMT

Good thread on Reddit by a hiring manager about the realities of diversity:

https://www.reddit.com/r/KotakuInAction/comments/6scd84/long_my_experience_as_a

Anonymous > , Disclaimer August 11, 2017 at 1:02 pm GMT

"It is well-established by Pinker and other scientists that women have higher IQs on average, while men preponderate the extremes of brilliance and dullness."

First time I'm hearing that claim. I've heard about the flatter, wider Bell Curve for men but the average IQ was either the same or even higher. That's also more logical since men need higher IQs to both prove themselves as providers and charm the pants off their mates. Women love intelligence + health in their mates while men look for beauty + health. A highly stratified, unequal and un-meritocratic (old money, castes or arranged marriages) system can distort the choices quite a bit but that's the baseline.

This is also interesting if true:

Recent research using DNA analysis answered this question about two years ago. Today's human population is descended from twice as many women as men.

I think this difference is the single most underappreciated fact about gender. To get that kind of difference, you had to have something like, throughout the entire history of the human race, maybe 80% of women but only 40% of men reproduced.

https://archive.is/9F5rK

CanSpeccy > , Website August 11, 2017 at 3:24 pm GMT

@The Alarmist Damone is somebody's shill. Nobody with two functioning brain cells would publish that memo in that environment without some expectation of losing his job; either he is looking for fame and a payout, or he is simply insane.

Damone [sic] is somebody's shill.

.So exposing the reality of liberal-leftist bigotry, bullying and discrimination is proof that you're "sombody's shill"? What kind of bullshit argument is that?

Nobody with two functioning brain cells would publish that memo in that environment without some expectation of losing his job; either he is looking for fame and a payout, or he is simply insane.

Which reveals what a scoundrel mentality you have. Exposing corruption, bigotry, and manipulation of the public mind through the control of information is something you think a sane person would do, only for fame or money.

The idea of blowing the whistle on a bunch of dirty manipulators, bigots, bullies and scumbags who routinely misdirect the public for both political ends or to boost profits because you no longer wish to work with them, or because you think the public should know what such people are doing, or because you believe in propagating truth not using the most powerful tools for the enlightenment of humanity for the purpose of pushing some grotesque leftist agenda is, apparently, to a moral numbskull such as yourself, unintelligible.

What a sick society America has become, that it can produce individuals who not only think as you do, but who think anyone who thinks otherwise is insane.

But the cherry on the cake is that Damore did not blow the whistle on anyone. He merely circulated a memorandum among what Pichai, Google's idiot savant CEO, calls "Googlers". It was Pichai, confirming his own idiocy, who blew the whistle on himself by firing Damore.

What delicious irony. The shit CEO of the dirty search engine company, dicked himself.

anonymous > , Disclaimer August 11, 2017 at 3:41 pm GMT

@jilles dykstra Christopher Lasch, 'The Culture of Narcissism, American Life in an Age of Diminishing Expectations', 1979, 1980, London
already argues that truth does not matter any more. Thanks for referencing this book. Read it when it was first published. As such it served as my introduction to Lasch, who was a very prescient thinker (read "The True and Only Heaven"). And here's what's disturbing: Lasch, as I recall, pointed out that narcissism is in fact a mental disorder which is considered to be so deep-seated as to be impossible to cure.

[Aug 11, 2017] Steve Sailer

Aug 11, 2017 | www.unz.com

From Ben Kurtz :

Google has just earned itself a lawsuit.

California Labor Code § 1102 requires that "no employer shall coerce or influence or attempt to coerce or influence his employees through or by means of threat of discharge or loss of employment to adopt or follow or refrain from adopting or following any particular course or line of political action or political activity." Furthermore, the "whistleblower" provisions at §1102.5 prohibit employers from adopting rules preventing disclosure of, or retaliating against an employee for having disclosed, "information to a person with authority over the employee, or another employee who has authority to investigate, discover or correct the violation if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the employee's job duties."

The memo in question quite plausibly falls into both statutory sections -- advocating that someone "stop alienating conservatives" sure sounds like political activity, and warning of corporate policies and procedures "which can incentivize illegal discrimination," and asking that the employer cease "restricting [certain] programs and classes to certain genders or races" sure sounds like information which an employee would have "reasonable cause to believe" concerns noncompliance with federal and state anti-discrimination laws.

Even better: Somebody could go to jail for this.

Section 1103 provides: "An employer or any other person or entity that violates this chapter is guilty of a misdemeanor punishable, in the case of an individual, by imprisonment in the county jail not to exceed one year or a fine not to exceed one thousand dollars ($1,000) or both that fine and imprisonment, or, in the case of a corporation, by a fine not to exceed five thousand dollars ($5,000).

Alec Leamas (hard at work) > , August 11, 2017 at 2:26 pm GMT

@jjbees I had this thought this morning, and while I know it has been said a million times, it still leaves me in awe:

It is so obviously true that men and women are different, that people of different races are different, that for someone to say otherwise is simply insane. These people are insane.

It is so obviously true that men and women are different, that people of different races are different, that for someone to say otherwise is simply insane. These people are insane.

The people at the top don't really believe it. But they do think saying so or acting as if it is true is a fatal breach of decorum and evidence that the speaker doesn't want it to be true. It's like telling a committed Christian that heaven doesn't seem all that nice or desirable.

From a practical perspective, it's harmful to say at Google because of the inevitable flip-outs and resultant lack of productivity.

Think about being in Babu's shoes – you've taken over a tech giant headquartered in the most socially radical region of the United States, which has employed countless employees who skew young and have been steeped from childhood in equalist fantasies. Even if James Damore's statements are correct and even if acting in conformity with the realities he sets forth would lead to the long term financial health and well-being of the Company, in the short term it's a disaster to have all of your Monster Baby employees pitching fits and potentially acting as saboteurs inside the organization to punish you for not getting rid of the heretic. It's easier to throw the occasional James Damore into the volcano (ensuring he will probably be the last) and take the legal consequences than to leave him in place and see the place burnt to the ground.

oddsbodkins > , August 11, 2017 at 2:27 pm GMT

@jjbees It's always tempting to think that one's enemies are collectively insane. They aren't.

Even Japanese soldiers who held out on islands for years were not insane. What they were is loyal, dedicated, and convinced.

tullamore92 > , August 11, 2017 at 3:11 pm GMT

@jjbees https://www.goodreads.com/quotes/124952-in-my-study-of-communist-societies-i-came-to-the

schmenz > , August 11, 2017 at 3:30 pm GMT

@reiner Tor This makes them all the more dangerous. Exactly.

anon > , Disclaimer August 11, 2017 at 3:33 pm GMT

I think Google should just pack up and move a little north. They can setup shop in Canada (Vancouver is a nice city; they have lot of real estate on Vancouver Island, if they want to build a silicon valley). The politics in US is simply too poisonous for an information/knowledge/wisdom plumber.

Tim Howells > , August 11, 2017 at 3:35 pm GMT

Yeah, yeah but does the employee belong to a protected class? Don't get your hopes up.

Achmed E. Newman > , Website August 11, 2017 at 3:56 pm GMT

@reiner Tor

It is so obviously true that men and women are different, that people of different races are different, that for someone to say otherwise is simply insane. These people are insane.

This makes them all the more dangerous.

Hence, the invention of the straight-jacket – probably by some white man or something. Go long straight-jackets, bitchez! [/style: zerohedge-commenter]

San Fernando Curt > , Website August 11, 2017 at 3:56 pm GMT

The day they haul out Cherry Sundae and clap him in irons would be de day ob de Jubilee. I won't hold my breath.

KM32 > , August 11, 2017 at 4:08 pm GMT

There is zero chance that he'll be prosecuted for this. What the law says is one thing, and how it is interpreted is another.

NickG > , August 11, 2017 at 4:59 pm GMT

Is a Google Executive Headed for Jail?

This would have been vastly more entertaining in pukka colonial vernacular .

Is Google's top coolie to be banged up in the chokey?

James Bowery > , Website August 11, 2017 at 5:02 pm GMT

It's an execrable law but I wouldn't be honest if I didn't recognize the perverse "social justice" it would provide, if not selectively enforced. Of course, it will be selectively enforced, as are all such execrable laws.

If I could, I'd sentence every CEO, and every journalist covering the Damore story to read this:

http://jimbowery.blogspot.com/2017/08/the-mau-mauing-of-james-damore.html

Desiderius > , August 11, 2017 at 5:03 pm GMT

@jjbees It's sad funny reading the Heterodox Academy's response which bends over backward to take the madness seriously in a vain (in more ways than one) attempt to preserve their centrist brand.

Jack D > , August 11, 2017 at 5:11 pm GMT

@reiner Tor Any child can believe things that are simply and obviously true, but as Orwell observed, "There are some ideas so absurd that only an intellectual could believe them."

Therefore, believing in absurd stuff is sort of an intellectual badge – "I believe in stuff that is absurd on its face and have the ability to rationalize anything. So you know that I must be a bona fide intellectual."

reiner Tor > , August 11, 2017 at 5:48 pm GMT

@Jack D Yes, but it doesn't make them any less crazy. Or dangerous.

Jim Don Bob > , August 11, 2017 at 5:57 pm GMT

Please God!

whorefinder > , Website August 11, 2017 at 5:57 pm GMT

Yeah, he ain't going to jail.

Everyone knows these kinds of "crimes" are really there to be used against white men. They are selectively enforced. So California will either decline to prosecute!and if questioned, say Newspeakingly that there "not enough evidence"!or, if they are forced prosecute, give him probation.

This is rather how "hate crime" legislation (which is clearly unconstitutional, but hey, Diversity!) works. Blacks whined about how they're always criminals and whitey isn't, legislators responded with legislation giving judges the power to overpunish whiteys in white/nonwhite crimes to satisfy the bloodlust. And when blacks commit one? The prosecutors ignore the hate crime aspects and treat it as a non-hate crime.

This happens in a lot of physical fights. In fights, people tend to scream lots of demaning insults at each other; it's the nature of the adrenaline (and in men, also testosterone) kicking in. SO if a white and black and get in a fight and the white lets a racial slur slip out!even if the fight clearly began over something non-racial(i.e. a traffic incident, a fight over a girl)!-the prosecutors will climb all over each other to get whitey on a hate crime. But even if a blacks starts out with the clear intention to assault white people for being white!"I'm going to go beat up some white people, yo, I hate them"! you watch how rarely they get the "hate crime" charge.enhancement.

It's Bonfire of the Vanities 's theme writ into law.

keuril > , August 11, 2017 at 6:08 pm GMT

@Jack D Any child can believe things that are simply and obviously true, but as Orwell observed, "There are some ideas so absurd that only an intellectual could believe them."

Therefore, believing in absurd stuff is sort of an intellectual badge - "I believe in stuff that is absurd on its face and have the ability to rationalize anything. So you know that I must be a bona fide intellectual."

Therefore, believing in absurd stuff is sort of an intellectual badge – "I believe in stuff that is absurd on its face and have the ability to rationalize anything. So you know that I must be a bona fide intellectual

That is, by the way, exactly how Amazon has achieved its ludicrous valuation!an army of insecure, pseudo-intellectual analysts affirming that a company that has never managed a substantial profit in more than 20 yrs as a public corporation can indefinitely "reinvest revenues something something." The same madness we find in the political sphere exists in the financial sphere as well.

[Aug 11, 2017] Google's ideological echo chamber

The most stupid thing to do was to fire this guy. The paper raises an important question -- at what point affirmative action becomes discrimination. But the author does not understand that gender bias is an important part of identity wedge -- a powerful tool under neoliberalism to split and marginalized opposition to neoliberal fat cats adopted and polished by Clintonized Democratic Party (DemoRats).
Notable quotes:
"... ( Editor's note: The following is a 10-page memo written by an anonymous senior software engineer at Google.) ..."
"... This silencing has created an ideological echo chamber where some ideas are too sacred to be honestly discussed. ..."
"... [1] This document is mostly written from the perspective of Google's Mountain View campus, I can't speak about other offices or countries. ..."
"... [2] Of course, I may be biased and only see evidence that supports my viewpoint. In terms of political biases, I consider myself a classical liberal and strongly value individualism and reason. I'd be very happy to discuss any of the document further and provide more citations. ..."
"... [3] Throughout the document, by "tech", I mostly mean software engineering. ..."
"... [4] For heterosexual romantic relationships, men are more strongly judged by status and women by beauty. Again, this has biological origins and is culturally universal. ..."
"... [5] Stretch, BOLD, CSSI, Engineering Practicum (to an extent), and several other Google funded internal and external programs are for people with a certain gender or race. ..."
"... [6] Instead set Googlegeist OKRs, potentially for certain demographics. We can increase representation at an org level by either making it a better environment for certain groups (which would be seen in survey scores) or discriminating based on a protected status (which is illegal and I've seen it done). Increased representation OKRs can incentivize the latter and create zero-sum struggles between orgs. ..."
"... [7] Communism promised to be both morally and economically superior to capitalism, but every attempt became morally corrupt and an economic failure. As it became clear that the working class of the liberal democracies wasn't going to overthrow their "capitalist oppressors," the Marxist intellectuals transitioned from class warfare to gender and race politics. The core oppressor-oppressed dynamics remained, but now the oppressor is the "white, straight, cis-gendered patriarchy." ..."
"... [8] Ironically, IQ tests were initially championed by the Left when meritocracy meant helping the victims of the aristocracy. ..."
"... [9] Yes, in a national aggregate, women have lower salaries than men for a variety of reasons. For the same work though, women get paid just as much as men. Considering women spend more money than men and that salary represents how much the employees sacrifices (e.g. more hours, stress, and danger), we really need to rethink our stereotypes around power. ..."
"... [10] "The traditionalist system of gender does not deal well with the idea of men needing support. Men are expected to be strong, to not complain, and to deal with problems on their own. Men's problems are more often seen as personal failings rather than victimhood,, due to our gendered idea of agency. This discourages men from bringing attention to their issues (whether individual or group-wide issues), for fear of being seen as whiners, complainers, or weak." ..."
"... [11] Political correctness is defined as "the avoidance of forms of expression or action that are perceived to exclude, marginalize, or insult groups of people who are socially disadvantaged or discriminated against," which makes it clear why it's a phenomenon of the Left and a tool of authoritarians. ..."
Aug 11, 2017 | www.wnd.com

( Editor's note: The following is a 10-page memo written by an anonymous senior software engineer at Google.)

I value diversity and inclusion, am not denying that sexism exists, and don't endorse using stereotypes. When addressing the gap in representation in the population, we need to look at population level differences in distributions. If we can't have an honest discussion about this, then we can never truly solve the problem. Psychological safety is built on mutual respect and acceptance, but unfortunately our culture of shaming and misrepresentation is disrespectful and unaccepting of anyone outside its echo chamber. Despite what the public response seems to have been, I've gotten many personal messages from fellow Googlers expressing their gratitude for bringing up these very important issues which they agree with but would never have the courage to say or defend because of our shaming culture and the possibility of being fired. This needs to change.

TL:DR

Background [1]

People generally have good intentions, but we all have biases which are invisible to us. Thankfully, open and honest discussion with those who disagree can highlight our blind spots and help us grow, which is why I wrote this document.[2] Google has several biases and honest discussion about these biases is being silenced by the dominant ideology. What follows is by no means the complete story, but it's a perspective that desperately needs to be told at Google.

Google's biases

At Google, we talk so much about unconscious bias as it applies to race and gender, but we rarely discuss our moral biases. Political orientation is actually a result of deep moral preferences and thus biases. Considering that the overwhelming majority of the social sciences, media, and Google lean left, we should critically examine these prejudices.

Left Biases

Right Biases

Neither side is 100% correct and both viewpoints are necessary for a functioning society or, in this case, company. A company too far to the right may be slow to react, overly hierarchical, and untrusting of others. In contrast, a company too far to the left will constantly be changing (deprecating much loved services), over diversify its interests (ignoring or being ashamed of its core business), and overly trust its employees and competitors.

Only facts and reason can shed light on these biases, but when it comes to diversity and inclusion, Google's left bias has created a politically correct monoculture that maintains its hold by shaming dissenters into silence. This silence removes any checks against encroaching extremist and authoritarian policies. For the rest of this document, I'll concentrate on the extreme stance that all differences in outcome are due to differential treatment and the authoritarian element that's required to actually discriminate to create equal representation.

Possible non-bias causes of the gender gap in tech [3]

At Google, we're regularly told that implicit (unconscious) and explicit biases are holding women back in tech and leadership. Of course, men and women experience bias, tech, and the workplace differently and we should be cognizant of this, but it's far from the whole story.

On average, men and women biologically differ in many ways. These differences aren't just socially constructed because:

Note, I'm not saying that all men differ from women in the following ways or that these differences are "just." I'm simply stating that the distribution of preferences and abilities of men and women differ in part due to biological causes and that these differences may explain why we don't see equal representation of women in tech and leadership. Many of these differences are small and there's significant overlap between men and women, so you can't say anything about an individual given these population level distributions.

Personality differences

Women, on average, have more:

Note that contrary to what a social constructionist would argue, research suggests that "greater nation-level gender equality leads to psychological dissimilarity in men's and women's personality traits." Because as "society becomes more prosperous and more egalitarian, innate dispositional differences between men and women have more space to develop and the gap that exists between men and women in their personality becomes wider." We need to stop assuming that gender gaps imply sexism.

Men's higher drive for status

We always ask why we don't see women in top leadership positions, but we never ask why we see so many men in these jobs. These positions often require long, stressful hours that may not be worth it if you want a balanced and fulfilling life.

Status is the primary metric that men are judged on[4], pushing many men into these higher paying, less satisfying jobs for the status that they entail. Note, the same forces that lead men into high pay/high stress jobs in tech and leadership cause men to take undesirable and dangerous jobs like coal mining, garbage collection, and firefighting, and suffer 93% of work-related deaths.

N on-discriminatory ways to reduce the gender gap

Below I'll go over some of the differences in distribution of traits between men and women that I outlined in the previous section and suggest ways to address them to increase women's representation in tech and without resorting to discrimination. Google is already making strides in many of these areas, but I think it's still instructive to list them:

Philosophically, I don't think we should do arbitrary social engineering of tech just to make it appealing to equal portions of both men and women. For each of these changes, we need principles reasons for why it helps Google; that is, we should be optimizing for Google!with Google's diversity being a component of that. For example currently those trying to work extra hours or take extra stress will inevitably get ahead and if we try to change that too much, it may have disastrous consequences. Also, when considering the costs and benefits, we should keep in mind that Google's funding is finite so its allocation is more zero-sum than is generally acknowledged.

The Harm of Google's biases

I strongly believe in gender and racial diversity, and I think we should strive for more. However, to achieve a more equal gender and race representation, Google has created several discriminatory practices:

These practices are based on false assumptions generated by our biases and can actually increase race and gender tensions. We're told by senior leadership that what we're doing is both the morally and economically correct thing to do, but without evidence this is just veiled left ideology[7] that can irreparably harm Google.

Why we're blind

We all have biases and use motivated reasoning to dismiss ideas that run counter to our internal values. Just as some on the Right deny science that runs counter to the "God > humans > environment" hierarchy (e.g., evolution and climate change) the Left tends to deny science concerning biological differences between people (e.g., IQ[8] and sex differences). Thankfully, climate scientists and evolutionary biologists generally aren't on the right. Unfortunately, the overwhelming majority of humanities and social scientists learn left (about 95%), which creates enormous confirmation bias, changes what's being studied, and maintains myths like social constructionism and the gender wage gap[9]. Google's left leaning makes us blind to this bias and uncritical of its results, which we're using to justify highly politicized programs.

In addition to the Left's affinity for those it sees as weak, humans are generally biased towards protecting females. As mentioned before, this likely evolved because males are biologically disposable and because women are generally more cooperative and areeable than men. We have extensive government and Google programs, fields of study, and legal and social norms to protect women, but when a man complains about a gender issue issue [sic] affecting men, he's labelled as a misogynist and whiner[10]. Nearly every difference between men and women is interpreted as a form of women's oppression. As with many things in life, gender differences are often a case of "grass being greener on the other side"; unfortunately, taxpayer and Google money is spent to water only one side of the lawn.

The same compassion for those seen as weak creates political correctness[11], which constrains discourse and is complacent to the extremely sensitive PC-authoritarians that use violence and shaming to advance their cause. While Google hasn't harbored the violent leftists protests that we're seeing at universities, the frequent shaming in TGIF and in our culture has created the same silence, psychologically unsafe environment.

Suggestions

I hope it's clear that I'm not saying that diversity is bad, that Google or society is 100% fair, that we shouldn't try to correct for existing biases, or that minorities have the same experience of those in the majority. My larger point is that we have an intolerance for ideas and evidence that don't fit a certain ideology. I'm also not saying that we should restrict people to certain gender roles; I'm advocating for quite the opposite: treat people as individuals, not as just another member of their group (tribalism).

My concrete suggestions are to:

De-moralize diversity.

As soon as we start to moralize an issue, we stop thinking about it in terms of costs and benefits, dismiss anyone that disagrees as immoral, and harshly punish those we see as villains to protect the "victims."

Stop alienating conservatives.

Confront Google's biases.

Stop restricting programs and classes to certain genders or races.

Have an open and honest discussion about the costs and benefits of our diversity programs.

Focus on psychological safety, not just race/gender diversity.

De-emphasize empathy.

Prioritize intention.

Be open about the science of human nature.

Reconsider making Unconscious Bias training mandatory for promo committees.

[1] This document is mostly written from the perspective of Google's Mountain View campus, I can't speak about other offices or countries.

[2] Of course, I may be biased and only see evidence that supports my viewpoint. In terms of political biases, I consider myself a classical liberal and strongly value individualism and reason. I'd be very happy to discuss any of the document further and provide more citations.

[3] Throughout the document, by "tech", I mostly mean software engineering.

[4] For heterosexual romantic relationships, men are more strongly judged by status and women by beauty. Again, this has biological origins and is culturally universal.

[5] Stretch, BOLD, CSSI, Engineering Practicum (to an extent), and several other Google funded internal and external programs are for people with a certain gender or race.

[6] Instead set Googlegeist OKRs, potentially for certain demographics. We can increase representation at an org level by either making it a better environment for certain groups (which would be seen in survey scores) or discriminating based on a protected status (which is illegal and I've seen it done). Increased representation OKRs can incentivize the latter and create zero-sum struggles between orgs.

[7] Communism promised to be both morally and economically superior to capitalism, but every attempt became morally corrupt and an economic failure. As it became clear that the working class of the liberal democracies wasn't going to overthrow their "capitalist oppressors," the Marxist intellectuals transitioned from class warfare to gender and race politics. The core oppressor-oppressed dynamics remained, but now the oppressor is the "white, straight, cis-gendered patriarchy."

[8] Ironically, IQ tests were initially championed by the Left when meritocracy meant helping the victims of the aristocracy.

[9] Yes, in a national aggregate, women have lower salaries than men for a variety of reasons. For the same work though, women get paid just as much as men. Considering women spend more money than men and that salary represents how much the employees sacrifices (e.g. more hours, stress, and danger), we really need to rethink our stereotypes around power.

[10] "The traditionalist system of gender does not deal well with the idea of men needing support. Men are expected to be strong, to not complain, and to deal with problems on their own. Men's problems are more often seen as personal failings rather than victimhood,, due to our gendered idea of agency. This discourages men from bringing attention to their issues (whether individual or group-wide issues), for fear of being seen as whiners, complainers, or weak."

[11] Political correctness is defined as "the avoidance of forms of expression or action that are perceived to exclude, marginalize, or insult groups of people who are socially disadvantaged or discriminated against," which makes it clear why it's a phenomenon of the Left and a tool of authoritarians.

[Aug 09, 2017] Equality Or Diversity - An Outrageous Memo Questions Google

That reminds my witch hunt against Summers after his unfortunate speech (although there were other, much more valid reasons to fire him from his position of the president of Harvard; his role in Harvard mafia scandal ( Harvard Mafia, Andrei Shleifer and the economic rape of Russia ) is one ).
Notable quotes:
"... Google's Ideological Echo Chamber - How bias clouds our thinking about diversity and inclusion ..."
Aug 09, 2017 | www.moonofalabama.org
memo about " Google's Ideological Echo Chamber - How bias clouds our thinking about diversity and inclusion ":
At Google, we're regularly told that implicit (unconscious) and explicit biases are holding women back in tech and leadership. Of course, men and women experience bias, tech, and the workplace differently and we should be cognizant of this, but it's far from the whole story. On average, men and women biologically differ in many ways. These differences aren't just socially constructed because:
- ...
- ...

Google company policy is in favor of "equal representation" of both genders. As the existing representation in tech jobs is unequal that policy has led to hiring preferences, priority status and special treatment for the underrepresented category, in this case women.

The author says that this policy is based on ideology and not on rationality. It is the wrong way to go, he says. Basic differences, not bias, are (to some extend) responsible for different representations in tech jobs. If the (natural) different representation is "cured" by preferring the underrepresented, the optimal configuration can not be achieved.

The author cites scientific studies which find that men and women (as categories, not as specific persons) are - independent of cultural bias - unequal in several social perspectives. These might be life planning, willingness to work more for a higher status, or social behavior. The differences evolve from the natural biological differences between men and women. A gender preference for specific occupations and positions is to be expected, Cultural bias alone can not explain it. It therefore does not make sense to strive for equal group representation in all occupations.


From James Damore's memo

From there he points to the implementation of Google's policy and concludes:

Discrimination to reach equal representation is unfair, divisive, and bad for business.

Google fired the engineer. Its 'Vice President of Diversity, Integrity & Governance' stated:

We are unequivocal in our belief that diversity and inclusion are critical to our success as a company. [..] Part of building an open, inclusive environment means fostering a culture in which those with alternative views, including different political views, feel safe sharing their opinions. But that discourse needs to work alongside the principles of equal employment found in our Code of Conduct, policies, and anti-discrimination laws.

(Translation: "You are welcome to discuss your alternative policy views - unless we disagree with them.")

The current public discussion of the case evolves around "conservative" versus "progressive", "left" versus "right" categories. That misses the point the author makes: Google's policy is based on unfounded ideology, not on sciences.

The (legal) "principle of equality" does not imply that everyone and everything must be handled equally. It rather means that in proportion with its equality the same shall be treated equally, and in proportion with its inequality the different shall be treated unequally.

The author asks: Are men and women different? Do these differences result in personal occupation preferences? He quotes the relevant science and answers these questions with "yes" and "yes". From that follows a third question: What is the purpose of compelled equal representation in occupations when the inherent (natural gender) differences are not in line with such an outcome?

Several scientist in the relevant fields have stated that the author's scientific reasoning is largely correct. The biological differences between men and women do result in observable social and psychological differences which are independent of culture and its biases. It is to be expected that these difference lead to different preferences of occupations.

Moreover: If men and women are inherently equal (in their tech job capabilities) why does Google need to say that "diversity and inclusion are critical to our success"? Equality and diversity are in this extend contradictory. (Why, by the way, is Google selling advertising-space with "male" and "female" as targeting criteria?)

If women and men are not equal, we should, in line with the principle of equality, differentiate accordingly. We then should not insist on or strive for equal gender representation in all occupations but accept a certain "gender gap" as the expression of natural differences.

It is sad that Google and the general society avoid to discuss the questions that the author of the memo has asked. That Google fires him only confirms his claim that Google's policy is not based on science and rationality but on a non-discussible ideology.

Posted by b on August 8, 2017 at 01:41 PM | Permalink

TSP | Aug 8, 2017 2:03:15 PM | 1

I worked under a lady CEO. It was so refreshing compared to life under men. There was open dialogue, I felt I could voice ideas safely.

I think all CEO's would be females. It's like their social approaches to inclusion is unilaterally better than (white) men.

Is that sexist?

(From a 50 year old white man).

karlof1 | Aug 8, 2017 2:06:12 PM | 2
Thanks, b, for the change in academic realms from geopolitics to anthropology. You wrote:

"The biological differences between men and women do result in observable social and psychological differences which are independent of culture and its biases."

I disagree. From an anthropological perspective, biological differences form the basis for all cultures and thusly cannot be independent of culture since they form its core. Yes, Google's policy is ideological, but what policy can claim to be ideologically neutral? IMO, the answer is none. Here I invoke Simon de Beauvoir's maxim that females are "slaves to the species" that she irrefutably proves in The Second Sex . Fortunately, some societies based upon matrilineal cultures survived into the 20th century thus upending the male dominated mythos created to support such culturally based polities.

marxman | Aug 8, 2017 2:18:30 PM | 3
bell curve much? read the Mismeasure of Man by Stephen Jay Gould. generally your work is excellent but this post is of poor quality.
Thegenius | Aug 8, 2017 2:45:39 PM | 4
The truth is google only hire women so that the nerds working there can get laid.
Thegenius | Aug 8, 2017 2:48:13 PM | 5
@TSP

Were you beaten senselessly by your dad when you were a child?

Anti-Soros | Aug 8, 2017 2:50:21 PM | 6
Social engineering is what it is. Social engineering is what it does.

It's an elite corporate project to androgynise humanity, a la 1984.

Simply put, women will not achieve their full potential outside the family.

The corporate project will continually have to put in place special discriminatory measures to pretend they're equal in the SMET areas when all the evidence shows they're not, other than in very special cases.

It's a project that's doomed to failure in the end, but much misery will be caused to both men and women as this elite project continues.

Thankfully, the rest of the world isn't as brainwashed as Westerners.

They're the future.

Bruce Ballai | Aug 8, 2017 2:52:24 PM | 7
You can disagree with B's science, and you can disagree with James' science. James was fired for expressing his opinions and beliefs. This is so little about sexism and so much about freedom of speech and freedom to consider other ideas. Bias shut that down at Google. These comments are in line with shutting down independent thinking. I'm a little surprised to see that sort of ideology here. When people - like B, like James - put their own circumstances at risk for the sake of open mindedness, they deserve as much support as culture and society can offer.
Thegenius | Aug 8, 2017 2:54:50 PM | 8
If Google or other silicon valley tech companies dont hire unqualified women, the place would be a sausage fest of socially inept nerds
Bamdad | Aug 8, 2017 2:55:42 PM | 9
Ivan Illich wrote a very interesting and controversial book "Gender" on the difference between Gender and Sex. I do recommend every one to read this book (and all of other Illich's writings).
james | Aug 8, 2017 2:57:20 PM | 10
thanks b... this is more politically correct material.. it is what canada and probably many western countries have been doing for some time.. google is a piece of crap corporation as far as i am concerned, so this is in keeping with their neo-liberal agenda..

@7 bruce... i agree it is about freedom of speech, something sorely missing in the politically correct realm of western society at this point in time..

dh | Aug 8, 2017 3:04:46 PM | 11
'non-discussible ideology'.....great phrase b. None of it much matters because in 10-20 everybody will be bi-sexual or trans-gender anyway. Any hold outs will be required to attend re-education courses.
anon | Aug 8, 2017 3:12:33 PM | 12
he says men are better than women - women are "neurotic" and can't handle stress and don't do as much hard work as men and spend more money and on and on and on....

his level of argument and citation is about that of a teenager. he makes a lot of statements with no support, such as men are better coders than women because women like social interaction more. and even if men really are more cutthroat than women, his assumption is that being cutthroat in management makes better companies. (Microsoft made great money, not great products.)

furthermore, his definition of 'left' and 'right' are narrowed to probably his entire life experience which appears to be just out of college?

Anti-Soros | Aug 8, 2017 3:14:18 PM | 13
There is some hope though.

The whole SJW thing is being exposed day and daily for the complete nihilistic fraud it is.

Especially in America.

If you wanted to destroy a country then Gender Games is the way to go.

Globalists must destroy the US and Europe to achieve their goal, but they must just keep them alive until Russia is destroyed.

A delicate balancing act.

Anti-Soros | Aug 8, 2017 3:18:11 PM | 14
Left and Right are elite frauds, though the Left primarily carried forward the gender destruction project.

The Right was bullied into it and for the most part has jumped aboard.

They seem to be fighting back a bit now.

james | Aug 8, 2017 3:20:20 PM | 15
@11 dh.. lol.. that's about it... it isn't enough us old white males are trying to be flexible here...
Merasmus | Aug 8, 2017 3:21:12 PM | 16
@6

"Simply put, women will not achieve their full potential outside the family.

The corporate project will continually have to put in place special discriminatory measures to pretend they're equal in the SMET areas when all the evidence shows they're not, other than in very special cases."

I really wonder how someone can go through life interacting with women every day, and most likely having wives, daughters, nieces, etc, and still hold the opinion that "by the way, you're inferior shit and stupid and only good for producing babies". I would think first of all that actual interaction with women would reveal this not to be the case, but if nothing else I would think not being a freaking sociopath with a bleak worldview would prevent someone from being ending up as such a douchebag.

I also love stuff like this: "It's an elite corporate project to androgynise humanity, a la 1984."

Good god, masculinity is the most fragile thing in existence. Anything, absolutely anything, that in any way threatens its privileged position brings forth the waves of hyperbolic whinging. Talk about being triggered. How about you stop defining your manliness by subjugating women. Efforts to correct inequalities do not mean men are being turned into women, or whatever gibberish you're complaining about.

T-Sixes | Aug 8, 2017 3:22:14 PM | 17
With respect to the commenter alias "karlof1", you seem to have drifted off-topic somewhat.

Please point out specifically where the author of the now infamous Google memo seeks to in any way denigrate women to a position in any way resembling slavery.

You have signally failed to refute anything in the memo as you have resorted to the lazy straw man of sexism.

You can doubtless try harder and probably do better -- 0/10, for now, and see me at the end...

And while you're at it, why is feminism preferable to chauvinism - do please explain clearly and try to stay on point.

Anti-Soros | Aug 8, 2017 3:25:23 PM | 18
Who, I mean who!

Who truly believes that women prefer coding all day long.

You need to be a bit autistic spectrum to enjoy that.

That's why there's so many nerds in these areas.

Perhaps women need to be given extra vaccines at a young age and then they'll develop the skills necessary to succeed in these spheres.

Trading your sociality for nerdom is not a choice many women want to make.

I wouldn't make it myself, and I worked in this area.

Used to make my brain hurt, a lot.

All abstract, nothing tactile.

keep women human, is what I say!

Anti-Soros | Aug 8, 2017 3:29:57 PM | 19
Merasmus

The family is not an inferior thing. Women are not an inferior thing.

The family is the centre of life and women its masters.

That's where they will achieve a truly fulfilling life.

Why should women want to demean themselves by accepting the poor male equivalent of female creativity.

Dafranzl | Aug 8, 2017 3:36:05 PM | 20
I was a pilot for Lufthansa and really had no problems with our
ladypilots. Of course they had and have the same salary as males. But what was interesting:only a few chose to apply for the job, with LH this meant to pass a test then enter the pilotschool and passt al checks, incl. licencing. But:the percentage of the few who reallly passed all this was around 90 percent, I mean, a girl who wants this real tech job and is intelligent will get it. Boys tend to overestimate their abilities and therefor fail. Only about 10 percent who try the test actually pass it. That is pne typical gender difference. PS:I am male ;)
T-Sixes | Aug 8, 2017 3:42:57 PM | 21
Completely agree with poster "Anti-Soros" -- "Merasmus" is twisting this obtusely beyond all recognition, read the memo, "Merasmus", and make your own mind up, so as you don't come over so utterly lopsided and brainwashed in your awareness of sexual politics. And, on that note, as to "Dafranzl", is your comment not verging on real, like genuine, sexism in that you are expressing some kind of shock horror that women can actually pass a couple of tests and fly a plane?
Merasmus | Aug 8, 2017 3:46:10 PM | 22
@Anti-Soros

I'm pretty sure it should be up to the women to decide what they want to do with their lives. Some may want to be housewives, others don't. It's about freedom of choice (you know, that thing conservatives are always claim they care so much about). You really don't see any problem with men telling women what women truly want in life, and ensuring that that one thing is the only option available to them, do you? It's amazing how men will declare that the different sexes have different natural spheres, and then put family in the women's column, and literally everything else, and the freedom to choice from all those other things, in the men's column.

Anti-Soros | Aug 8, 2017 4:03:23 PM | 23
Merasmus

You seem to think that the family and children are some sort of lower form of achievement.

Where'd you get that idea?

As I said, female creativity is the closet thing to godliness any human can get.

Don't trade that for poor male efforts at creativity.

There only sadness and frustration lie.

So much so indeed that the elite project in creativity is currently engaged in attempting to undermine God and Female creativity with its own version of androids, robots and all the rest of the cheap Frankenstein tricks for which frustrated males and their ersatz creativity are famous.

When will a bridge or an app, a poem, a book, a piece of music, ever come close to creating and nurturing life itself.

Johan Meyer | Aug 8, 2017 4:07:20 PM | 24
There is a big cultural problem that keep women out of technical fields. In the west, the striving to a career leads to a sudden mid 30s realization that maybe they do want a family. My experience with west Africans is that they marry younger, have their families and get on with careers. This also has the benefit of them going into the work force when they are a bit more mature, and have actual life responsibilities.
okie farmer | Aug 8, 2017 4:19:29 PM | 25
The Mismeasure of Man
From Wikipedia

The Mismeasure of Man

Stephen Jay Gould

The Mismeasure of Man is a 1981 book by Harvard paleontologist Stephen Jay Gould.[1] The book is both a history and critique of the statistical methods and cultural motivations underlying biological determinism, the belief that "the social and economic differences between human groups!primarily races, classes, and sexes!arise from inherited, inborn distinctions and that society, in this sense, is an accurate reflection of biology."[2]
The principal assumption underlying biological determinism is that, "worth can be assigned to individuals and groups by measuring intelligence as a single quantity." This argument is analyzed in discussions of craniometry and psychological testing, the two methods used to measure and establish intelligence as a single quantity. According to Gould, the methods harbor "two deep fallacies." The first fallacy is "reification", which is "our tendency to convert abstract concepts into entities"[3] such as the intelligence quotient (IQ) and the general intelligence factor (g factor), which have been the cornerstones of much research into human intelligence. The second fallacy is that of "ranking", which is the "propensity for ordering complex variation as a gradual ascending scale."[3]
The revised and expanded second edition (1996) analyzes and challenges the methodological accuracy of The Bell Curve (1994), by Richard Herrnstein and Charles Murray. Gould said the book re-presented the arguments of what Gould terms biological determinism, which he defines as "the abstraction of intelligence as a single entity, its location within the brain, its quantification as one number for each individual, and the use of these numbers to rank people in a single series of worthiness, invariably to find that oppressed and disadvantaged groups!races, classes, or sexes!are innately inferior and deserve their status."[4]

Piotr Berman | Aug 8, 2017 4:22:17 PM | 26
For starters, good coding is not a male characteristic, because most of the gender is quite terrible. So the question is: are "good coders" a more sizable minority among men or women? Both percentages are culture related, and they probably have a gender component.

A weird thing is the gender ratio of women/men students of computer science seems quite even in some Asian cultures, like Iranian, and very lopsided (1-9, 2-8) in American culture that has a "feminity ideals" like "girls are not good at math". That is overlayed with relatively meager rewards in American society for engineering fields, compared to law and medicine. I suspect that the ratio of male jurists in Iran is very lopsided, so girls, for the want of good legal jobs, go for engineering and math. (That is not a serious theory.)

Merasmus | Aug 8, 2017 4:37:41 PM | 27
@Anti-Soros

Ah, benevolent sexism. Putting women on a pedestal and making it their prison.

"Women are not an inferior thing."

It would help in convincing others that you actually believe this if you hadn't literally opened with (and then reiterated later) saying that women are generally too stupid to work in STEM fields.

"Who truly believes that women prefer coding all day long."

You could start by asking some women programmers. Though I really should point out the false dichotomy you're engaging in here: women can be mothers or they can be something else, in your mind they can never be both.

"So much so indeed that the elite project in creativity is currently engaged in attempting to undermine God"

Because I'm sure the (supposed) creator of the entire universe can be undermined by a hairless chimpanzee. "And I would have gotten away with it too, if hadn't been for you meddling humans!"

@T-Sixes

I don't particularly care about the memo or its asinine content. I'm responding to what people have said in these comments.

As for the memo itself, neither side comes out looking particularly good. The engineer's memo essentially boils down to "girlz r stoopid, and need to get out of my workplace" (he's not attempting to engage in debate, which some of his defenders have claimed, as in 'he's just asking questions and the PC police are too scared to engage him'), and Google's response was "you voiced an unacceptable opinion so we're going to fire you" (they aren't interested in debate either, but he wasn't offering one in the first place). It also has a lot of the inane 'both sides have good points, the best answer is in the middle' centrist faux wisdom I've come to expect from the type of idiot who makes up most of the Silicon Valley echo-chamber. Ah yes, the right is 'pragmatic'. They're pragmatically destroying their economies by forever seeking tax cuts and the reduction of a national 'debt' they don't even understand the nature of. Spare me.

Thegenius | Aug 8, 2017 4:38:00 PM | 28
@26
Women are more group oriented and dont like to do solitary work like coding
Damon Harris | Aug 8, 2017 4:46:21 PM | 29
Convenient that we just ignore the substantial body of research on gender bias in professional fields, particularly tech.

Abstract

Biases against women in the workplace have been documented in a variety of studies. This paper presents a large scale study on gender bias, where we compare acceptance rates of contributions from men versus women in an open source software community. Surprisingly, our results show that women's contributions tend to be accepted more often than men's. However, for contributors who are outsiders to a project and their gender is identifiable, men's acceptance rates are higher. Our results suggest that although women on GitHub may be more competent overall, bias against them exists nonetheless.

Damon Harris | Aug 8, 2017 4:47:03 PM | 30
Link to the earlier post: https://peerj.com/articles/cs-111/
Merasmus | Aug 8, 2017 4:50:17 PM | 31
@26

The explanation for Iran I've heard is that STEM fields simply aren't held in high esteem in Iran, so at a minimum it's a dearth of male interest in the area that has created a lot of openings for women. On top of that there may be cultural/social pressure for women to go into less prestigious fields while all the 'more important' areas are dominated by men. It's certainly fun to think about how projects like Iran's recent ballistic missile test are in large part facilitated by female input. If Iran is to hold the US at bay (or punish it heavily should it actually attack), it's going to be with weapons created by people working in fields that are apparently held in low esteem.

james | Aug 8, 2017 4:58:00 PM | 32
one thing women can do that men can't? that's right.. some things are factual.. a lot of stuff is culturally and socially imposed though... women working doing coding.. have at it.. forcing equal numbers being hired sure seems like 'politically correct thinking' to me... give the job based on the qualifications.. skip with the politically correct bullshit..
Johan Meyer | Aug 8, 2017 5:05:11 PM | 33
@okie farmer
Perhaps different types of intelligence exist, but if they do, they are highly correlated, hence the emphasis on (the mathematically dubious) g .

FWIW, I advocate a modified lead/iodine deficiency model to explain most variation in IQ. Unlike older studies, more recent studies have found a small IQ gap between men and women, and women having a narrower IQ range (standard deviation) than men, i.e. fewer outliers high and low. If you look at US blacks, they have a narrower standard deviation of IQ than whites as well as a lower mean IQ. This may be understood quite readily:

Healthy pubertal brain development adds to the standard deviation e.g. 9 points standard deviation in my proposed model---12^2+9^2=15^2, where 15 is the defined std deviation over population of IQ. Poor environment e.g. poison or lacking nutrition cause mean to differ as well.

The environmental argument is usually attacked on the basis of twin studies, e.g. using the Falconer equations. That is because the equations are not usually derived from first principles. To wit, one has mean environmental effect, deviation from mean environmental effect correlated with gene, and uncorrelated with genes, which might not even be environmental, but simple developmental noise. Those arguing that twin studies show the environmental effect to be small, ignore that means are subtracted in calculating the Pearson correlation.

For women, especially after bromide replaced iodine in preparing dough for bread, late 70s or early 80s, the need for iodine will not be met sufficiently during puberty, as both breasts and the brain require iodine for development, in large quantities, and with feminising endocrine disruptors in greater quantities in the environment, breast sizes have risen on average (cup size inflation). Note deviation from previous generations' size should matter for same genes, not deviation from population mean, so if daughter is bigger than mother, e.g., then lower IQ expected, but not because daughter is bigger than agemate, as the environmental mean is shared (but does not enter Falconer equations' correlations, being subtracted)...

With US blacks, lead poisoning is still an issue, albeit much smaller than during the 90s. Look at the NHANES III data---the histogram of blood lead is nearly inverse, which suggests sporadic poisoning (lead paint, with dBLL/dt=R-BLL (ln 2)/\tau_{1/2} where R is the rate of intake (function of time, zero most of the time under sporadic poisoning). Also, sub-Saharan Africa largely avoided the Bronze Age, going straight to iron work---the Bantu used a bit of copper but not much evolutionary pressure to develop resistance to lead uptake. If you read e.g. Unz review, I did previously argue that blacks in US are more likely to live in lead painted housing, based on BLL, but US data show whites as likely to live in such housing---blacks take up more lead for same environment.

Johan Meyer | Aug 8, 2017 5:07:33 PM | 34
Forgot to add---lead almost always is present in soft metal e.g. copper deposits.
ab initio | Aug 8, 2017 5:10:44 PM | 35
I find it fascinating that the liberal snowflake SJWs claim to promote diversity except diverse opinion. There's a reason that the neocons were liberals.

And the communist heroes of the left including Lenin & Mao are comparable to the fascists with my way or the highway to death.

ben | Aug 8, 2017 5:12:48 PM | 36
depends entirely on the type of jobs applied for. If one can pass the physical and mental tests for the job applied for, gender or race shouldn't matter. That's assuming the employer's requirements are reasonable.
somebody | Aug 8, 2017 5:13:08 PM | 37
Google probably knows that Russia and China have competitive advantage in employing women.

BBC

According to Unesco, 29% of people in scientific research worldwide are women, compared with 41% in Russia. In the UK, about 4% of inventors are women, whereas the figure is 15% in Russia.

or here

Is engineering destined to remain a male-dominated field? Not everywhere. In China, 40% of engineers are women, and in the former USSR, women accounted for 58% of the engineering workforce.

Women get these jobs when they are needed, if not, they are expected to stay at home. It is not about free speech, feminism, ability or choice.

This plateau is of concern to policy experts. For the last decade, the European Commission has highlighted the risks related to the shortage of engineers and has called on member states to draw more widely on the pool of female talent. The U.S. Bureau of Labor Statistics warned last year that the demand for computer engineers in the U.S. would see an increase of 36% by the year 2012. It seems urgent in these conditions to train more women. So what are the obstacles?

Google needs those female engineers. As simple as that.

ben | Aug 8, 2017 5:19:14 PM | 38
P.S.---If men weren't so afraid of the power women weld, because of our lust for pro-creation, things could be different.
karlof1 | Aug 8, 2017 5:19:39 PM | 39
T-Sixes @17--

I didn't address the content of the memo, if you had read more carefully. I quoted a sentence b wrote and went on from there. Seems your knee-jerk hit you I the head.

Lea | Aug 8, 2017 5:34:19 PM | 40
The same thing had been said in 2011 by a Norwegian documentary, "Brainwash" (highly recommended viewing, it can be found on Youtube with English subtitles).
The Norwegian government cut its funding for "Gender studies" after its airing.

I am a woman, and its seems to me the politically correct comments here all have one thing in common: they confuse two distinct notions, difference and inferiority.
I feel different from men, I know I am, but in no way do I feel inferior. I am not interested in sports, cars or coding. I am interested in psychology, childhood and fashion. Sorry, it's not cultural, since it's the same the world over. I will add it cannot be cultural, because the sex roles are differentiated in the animal kingdom too. Take a male lion and a female - the male naps, she hunts. All the other animals equally show different patterns of behaviour according to their sex, save ants, amoebae, viruses and other microbes, bugs or non-mammals. So, pretending that there are no differences between men and women, when all it takes is two minutes of observation of nature (let alone a clothes shop during sales) is sheer gaslighting.

Men and woman are complementary, which is way more beautiful, diverse and life-enhancing than that drab uniformity/sameness that, it seems to me, emanates from people who are so narcissistic they are scared stiff of anything that is not their mirror image.

As for me, I love men, and I love the fact we are different. With men's abilities and women's, there is nothing we can't accomplish together.

T-Sixes | Aug 8, 2017 5:36:15 PM | 41
@Merasmus

"I don't particularly care about the memo or its asinine content. I'm responding to what people have said in these comments."

-- OK, so be a good girl and make yourself useful: you can start with the housework. Please explain how can you comment so vitriolically upon specific matters you admit that know almost nothing about?

"As for the memo itself, neither side comes out looking particularly good. The engineer's memo essentially boils down to "girlz [sic] r stoopid [sic], and need to get out of my workplace""

-- You are mistaken, as usual: the points are societal, biological and anthropological in their character and not AT ALL driven by chauvinism, which your bitter and ill-informed input, certainly, is.

"(he's [sic] not attempting to engage in debate, which some of his defenders have claimed, as in 'he's just asking questions and the PC police are too scared to engage him'), and Google's response was "you voiced an unacceptable opinion so we're going to fire you" (they aren't interested in debate either, but he wasn't offering one in the first place)."

-- Absolute nonsense, as usual: the guy's gripe seemed to be that there's no oxygen in which to engage with certain subject matter. There's a stultifying, stifling, suffocating, oppressive atmosphere perpetuated and sustained by people just like you, "Merasmus".

"It also has a lot of the inane 'both sides have good points, the best answer is in the middle' centrist faux wisdom I've come to expect from the type of idiot who makes up most of the Silicon Valley echo-chamber."

-- You mean, it's balanced and considered? Have you finally read it now, then?

"Ah yes, the right is 'pragmatic'. They're pragmatically destroying their economies by forever seeking tax cuts and the reduction of a national 'debt' they don't even understand the nature of. Spare me."

-- Are we drifting tediously away from the salient points, due to your total lack of knowledge or awareness of what you are talking about?

T-Sixes | Aug 8, 2017 5:41:10 PM | 42
@karlof1 - so, to be clear, you are commenting on an article regarding a memo you haven't read? Do you not think it might be an advisable next step for you to take the time to read the memo, in order to better inform yourself, so that you don't keep jerking and hitting yourself in the head?
T-Sixes | Aug 8, 2017 5:46:05 PM | 43
If you would like to read the memo, let me help you: https://assets.documentcloud.org/documents/3914586/Googles-Ideological-Echo-Chamber.pdf
Temporarily Sane | Aug 8, 2017 6:26:24 PM | 44
@TSP 1
I worked under a lady CEO. It was so refreshing compared to life under men. There was open dialogue, I felt I could voice ideas safely.

I think all CEO's would be females. It's like their social approaches to inclusion is unilaterally better than (white) men.

Is that sexist?

Your experience says more about your boss as an individual and has little or nothing to do with her gender. The worst boss I have had was a woman and so was the best boss I have worked for.

The myth of the "kinder, gentler" female leader has been thoroughly debunked. Hillary Clinton and Margaret Thatcher were both women. Thinking woman are morally and ethically "purer" than men is ridiculous.

As for Google vs. the engineer...of course he was fired. Corporations are not democracies. They are top-down dictatorships.

smuks | Aug 8, 2017 6:38:28 PM | 45
Sorry, but you miss a or perhaps 'the' crucial point here.

So let's say that men & women are indeed different, and this also influences their job preferences, independently of societal influence. I have my doubts, but let's just assume it for now.

Now if an employer thinks that men and women have different qualifications and strengths, s/he might come to the conclusion that they complement each other. It would thus make perfect sense to build teams with a balanced gender mix, in order to optimize results for the company. Whether or not each individual employee is the best possible hire is secondary - it's overall performance that counts.

Actually the first commenter TSP pretty much confirms this thesis, albeit only anecdotally.

PS. had to laugh reading post #4, thanks!

james | Aug 8, 2017 6:50:00 PM | 46
@40 lea. thanks.. i see it much the same way as you..

@45 smuks... as i mentioned - hire people, regardless of sex, race, and etc - based off merit and qualifications.. skip with the politically correct bs.. yes, i agree with @1, however anecdotal is it and i got a laugh from @4 too!

as for a lack of engineers and etc in the west.. i always think back to the joke about their being 30 engineers for every 1 banker in japan, verses 30 banker types for 1 engineer in the usa.. it was something like that... i guess you could throw in real estate sales people instead of bankers if you want... it paints a picture that probably has a good degree of relevance to the changing fortunes of countries, or cultures that pursue a certain path, over other ones also available.

George Smiley | Aug 8, 2017 7:07:43 PM | 47
What awful discussion here. Says a lot that the most adult and mature commentators here are those that I find myself somewhat in disagreement with.

Looking forward to your next piece though as always Bernard. Not that I don't like this either per se - but I'd be lying if I didn't say I find your non-geopolitical work to result in the silliest and most ideological of discussions and commentators. Though I still encourage you to keep doing what fufils you regardless.

Hoarsewhisperer | Aug 8, 2017 7:49:44 PM | 48
...
Good god, masculinity is the most fragile thing in existence.
...
Posted by: Merasmus | Aug 8, 2017 3:21:12 PM | 16

How dare you ponder male flaws in a debate about female flaws!?

Curtis | Aug 8, 2017 8:26:23 PM | 49
I agree with his ultimate conclusion:
Discrimination to reach equal representation is unfair, divisive, and bad for business.

Forced equality is not the way to go. It winds up twisting society in bad ways. Is this the number one problem facing the US and American businesses? Isn't group think bad whether from the inside or the outside? Playing one group (sex, race, etc) off against the other does make a good distraction.

Merasmus | Aug 8, 2017 8:42:28 PM | 50
@T-Sixes

I'm not a woman, you idiot. And I never said I hadn't read it, I said I wasn't addressing it, only responding to things said in these comments.

>various [sics]

Good job! It's almost like I was mocking the memo-maker as a grown up version of the kind of boy who puts 'No Girls Allowed' signs outside his treehouse. A kind of manchild, if you will.

"Absolute nonsense, as usual: the guy's gripe seemed to be that there's no oxygen in which to engage with certain subject matter. There's a stultifying, stifling, suffocating, oppressive atmosphere perpetuated and sustained by people just like you, "Merasmus"."

Riiiiiiiiiiight.

The part about centrism is in relation to the memo explicitly talking about Left and Right politics, and how each side supposedly has valid points. This is precisely the type of centrism that is a. destroying the US and the EU, and b. rapidly disintegrating, especially in America.

@Lea

One key difference would be that humans are (ostensibly) a higher lifeform that isn't driven entirely by instinct. So appealing to how things work in the wider natural world is something of a non-starter. Regardless, even if you were going to do that, there are creatures far more closely related to us than lions we could draw comparisons to. For some *strange* reason people appealing to nature never have much to say about the Bonobo...

"So, pretending that there are no differences between men and women, when all it takes is two minutes of observation of nature"

Literally no one is making this claim though. I have literally never met a feminist who claimed sexual dimorphism didn't exist in humans. What I seen is a whole lot of people who absolutely refuse to differentiate between sex and gender, however.

"Men and woman are complementary [...] With men's abilities and women's, there is nothing we can't accomplish together."

Nice sentiment. The problem is I have never met anyone who, while complaining about women in the workplace and talking about how there's some natural division of labor, then suggested anything like a 50/50 split. Or even 60/40, or 70/30. Instead, they do what Anti-Soros above does, and relegate women to breeding and housekeeping, making the divide more like 90/10 or 95/5 or some similar extremely lopsided value. They give to men by far the greater share of opportunity and freedom, and claim this is a natural and fair division, while telling the women they shouldn't even desire more, and should be content with a 'woman's unique happiness'.

NemesisCalling | Aug 8, 2017 8:46:56 PM | 51
@40 Lea

Nailed it. And I believe the purpose of b's foray into gender and/or lgbtq discrimination is that, currently, it is intrinsically tied to the empire's tactics of subversion and infiltration. It upsets me to no end that fomenting discord between the yin and the yangs of the world is the lockstep modus operandi of the bringers of chaos. "Linear" thinking a la "women can't do it" or "women must do it" are really just distractions, and they are important architectural designs of the true believers in the uniparty who are trying to crush the way to peace.

Any meddlesome actions taken by any entity, whether affirmative action or discrimination against men due to preferencing female hires, is sure to end in disaster anyway. Look at the US and tell me it is not a powder keg. Russia, in the wisdom of ages, saw the ngos in their country for what they were. Eliminating these meddlesome devices is best by nipping them in the bud.

The female always overcomes the male anyway by weakness and stillness. Water over rock. When women want to be rock (Hillary Clinton), you've got problems.

ben | Aug 8, 2017 9:08:59 PM | 52
Lea @ 40: Very thoughtful and insightful comment, thanks..

Unfortunately, most men can't get by the second strongest drive in human existence, the drive to pro-create, and it clouds our thinking. History gives credence to this theory.

psychohistorian | Aug 8, 2017 9:15:31 PM | 53
I haven't seen the term patriarchy introduced to this discussion. I think patriarchy is a good term for the historical attitudes that assert innate/generic/gender related qualitative differences between female/male capabilities.

I posit that women are better at gestating children than men and any other comparison is mostly self serving conjecture because of woefully inadequate science.

And I agree with NemesisCalling that ".....it is intrinsically tied to the empire's tactics of subversion and infiltration. It upsets me to no end that fomenting discord between the yin and the yangs of the world is the lockstep modus operandi of the bringers of chaos. "Linear" thinking a la "women can't do it" or "women must do it" are really just distractions, and they are important architectural designs of the true believers in the uniparty who are trying to crush the way to peace."

x | Aug 8, 2017 9:15:51 PM | 54
@ Posted by: Lea | Aug 8, 2017 5:34:19 PM | 40

A pleasently mature position expressed clearly.

Hoarsewhisperer | Aug 8, 2017 9:22:18 PM | 55
...
..."Dafranzl", is your comment not verging on real, like genuine, sexism in that you are expressing some kind of shock horror that women can actually pass a couple of tests and fly a plane?

Posted by: T-Sixes | Aug 8, 2017 3:42:57 PM | 21

There was nothing ambiguous about what Dafranzl wrote. He expressed genuine respect and explained why he is NOT surprised by their success.

falcemartello | Aug 8, 2017 9:27:45 PM | 56
Oh the totalitarian times we are living.
gepay | Aug 8, 2017 9:31:14 PM | 57
I read the memo. Compare the tone of the memo to the misogyny and sexism of the miners in the movie North Country starring Charlize Theron - the racism of the segregated South of the 50s. There were a number of statements he definitely should have left out even if he thinks they are true. "Considering women spend more money than men and that salary represents how much the employees sacrifices (e.g. more hours, stress, and danger), we really need to rethink our stereotypes around power." or "Women are more prone to stress" (although I would agree with him if he had said - women who are mothers worry more than men) "Neuroticism (higher anxiety, lower stress tolerance). This may contribute to the higher levels of anxiety women report on Googlegeist and to the lower number of women in high stress jobs." He could have left out his poor analysis of left-right. It is true for me that suffocating and/or just silly political correctness is found more often on the left liberal side. Of many conservatives it can be said, "The totally convinced and the totally stupid have too much in common for the resemblance to be accidental." Robert Anton Wilson He did show a bias when discussing the differences between men and women. Maybe because I'm an older white man I didn't find them so much insulting as debatable.
There are many other statements that I found correct "men take undesirable and dangerous jobs like coal mining, garbage collection, and firefighting, and suffer 93% of work-related deaths." "Philosophically, I don't think we should do arbitrary social engineering of tech just to make it appealing to equal portions of both men and women." It certainly is true that many of the problems that diverse peoples or women have are equally true of many white men not in the upper crust. "This silencing has created an ideological echo chamber where some ideas are too sacred to be honestly discussed." (Have I found this to be true - revisionist Holocaust history for example)
I certainly think he shouldn't have been fired for bring up these issues. The differences between men and women as they relate to employment should be considered and studied. His firing, in fact, proves one of the points he was trying to make.
Grieved | Aug 8, 2017 9:39:28 PM | 58
Wow.

So this is what they call identity politics. And this is how it drives out issue-based discussion - in this case freedom of expression within the corporation.

Got it, thanks.

ps.. @ 37 somebody - thanks for that slice of real life.

fudmieer | Aug 8, 2017 10:28:34 PM | 59
observable biological diffs (karlof1); womanless females (AntiSoros). google perks (thegenius); thought blockouts (Ballai); neo-liberal agenda (james); non-discussible ideology (dh); a unique corporate category-classified androgine (Merasmus); blinder-enhanced directed-answer response (T-Sixes); amazing test results (Dafranzl); the (statistically) mature woman (Hohan Meyer); determinism (okie farmer); absolutes (ab initio); train more women (somebody); different but not inferior; even complimentary (Lea); top down dictators (Sane); flaws (Hoarsewhisperer); discriminatory (Curtis); rocking women are problems (NemesisCalling);
please consider the following http://www.unz.com/jman/the-five-laws-of-behavioral-genetics/
Johan Meyer | Aug 8, 2017 10:48:34 PM | 60
@59 I actually referred to that piece obliquely, by calling variation not correlated with genes, 'noise,' in particular his last point, from Emil Kierkegaard. Btw if the latter is reading, Mr Kierkegaard, in our last email exchange, in references to a paper by Debes, you interpreted his beta (-2.2) times his proxy (blood lead level's base 10 logarithm) naively, to wit that the logarithm of blood lead level predicts IQ. A simple problem, involving that same ODE---maternal leave, paid or not---expectant mothers' exposure to lead during the pregnancy, under the frequent poisoning regime (gasoline/petrol) will roughly stop upon taking maternal leave, and thus the (linear) dose during the pregnancy will be linearly related to the logarithm of the cord (birth) blood lead level. There is more to say, and I shall email a more detailed commentary shortly...
Thirdeye | Aug 8, 2017 11:34:00 PM | 61
@45

The memo actually said something similar about using the complementary traits of men and women in teams. He mentioned how women's traits were good for the design of user interfaces and men's traits were good for the back end. What made Steve Jobs so distinctive wasn't that he was a great engineer or inventor (he wasn't). He thought about user experience like a woman. Apple was great on the "female" side of software engineering while Microsoft was great on the "male" side. Microsoft did, and still does, better on the back end but, as Jobs famously criticized them for about 25 years ago, their products lacked culture and taste.

Thirdeye | Aug 8, 2017 11:37:08 PM | 62
Camille "if it were up to the women we would still be living in grass huts" Paglia would have a field day with this one.
Thirdeye | Aug 8, 2017 11:53:56 PM | 63
@25

IQ is not biological determinism. Saying that it is strictly hereditary is. There is a strong correlation between IQ and ability to perform intellectual tasks, and with social performance up to about IQ 120. The correlation drops away above that because the extremely profound thinking at which higher IQ provides an advantage is less tied to social performance. I see no contradiction between saying IQ is a valid measure of cognitive ability and saying that it is culturally influenced. Some cultures do not foster the development of cognitive ability.

[Jul 23, 2017] Many critics of the USSR seems to fall into assessment of the Soviet Experiment mode in a careless way. It is terribly misleading to discuss theses questions without any reference to the tremendous impact external pressures had on the course of the Soviet Unions development

Notable quotes:
"... While I respect the author for raising this topic, he seems to fall into "assessment of the Soviet Experiment" mode in a careless way. I realize I tend to repetition about this, but it is terribly misleading -- perhaps "disorienting" would be a better term -- to discuss theses questions without any reference to the tremendous impact external pressures -- call it "intersystemic conflict," "international conflict," whatever -- had on the course of the Soviet Union's development. While it could be argued that capitalist economies also faced external pressures, that would miss the question of how such pressures impact on a society in the process of formation ..."
"... Then, as far as the "collapse of the Soviet Union" goes, there's no mention about the choice ..."
"... What from the standpoint of the Times editorial board looks like a necessary start-over was in fact a sloppily-carried decision, or merely an unintended outcome, of a section of the elite seizing an opportunity to enrich themselves. ..."
"... It's obvious that people can enjoyably engage in cooperative behavior, but if they can do so under a barrage is another matter. The one thing that we can be certain of is that if capitalist elites aren't thoroughly demoralized they will do whatever they can to 'prove' TINA. ..."
"... West had spent several billion dollars in cash to bribe significant portions of the Soviet elite (Soros, via his foundation, was especially active). And large part of the elite war already poisoned by neoliberalism and wanted to become rich. So while pre-conditions for the collapse of the USSR were internal (communist ideology was actually discredited in early 70th; economic stagnation started around the same time, Communist Party leadership completely degraded and became a joke in 80th ), external pressures and subversive activity played the role of catalyst that made the process irreversible. ..."
Jul 21, 2017 | www.nakedcapitalism.com

hemeantwell , July 21, 2017 at 10:58 am

While I respect the author for raising this topic, he seems to fall into "assessment of the Soviet Experiment" mode in a careless way. I realize I tend to repetition about this, but it is terribly misleading -- perhaps "disorienting" would be a better term -- to discuss theses questions without any reference to the tremendous impact external pressures -- call it "intersystemic conflict," "international conflict," whatever -- had on the course of the Soviet Union's development. While it could be argued that capitalist economies also faced external pressures, that would miss the question of how such pressures impact on a society in the process of formation . We're talking about questions of constrained path dependence of a fundamental order that the experimentalist mode of thinking misses. Etc, etc.

Then, as far as the "collapse of the Soviet Union" goes, there's no mention about the choice by significant sections of the Soviet elite to engage in looting instead of developing a transitional program that would protect viable sections of the Soviet economy under market socialism.

What from the standpoint of the Times editorial board looks like a necessary start-over was in fact a sloppily-carried decision, or merely an unintended outcome, of a section of the elite seizing an opportunity to enrich themselves.

While it is essential to try to determine the viability of alternative economic systems in comparison what we've got now, doing so without taking into account the tremendously destructive opposition a transition would face is, in a way, to blithely continue on in a "Soviet Experiment" mentality.

It's obvious that people can enjoyably engage in cooperative behavior, but if they can do so under a barrage is another matter. The one thing that we can be certain of is that if capitalist elites aren't thoroughly demoralized they will do whatever they can to 'prove' TINA.

Outis Philalithopoulos Post author , July 21, 2017 at 1:06 pm

I was a little confused by this comment. I'm not opposed to looking at the impact of external pressures, but I am opposed to treating them as monocausal.

Your preferred pattern of historical explanation shifts during the course of your comment. When discussing the USSR in the process of formation, you concentrate on bringing out external pressures and therefore considering the choices of the leadership as highly constrained. When discussing the collapse of the Soviet Union, you instead stress the choices of the leadership elite to "seize an opportunity to enrich themselves."

I'm not even sure why you would assume that your thesis about the elite choosing to engage in looting is opposed to anything that I'm saying.

I agree with you on is that it is possible to think both about what a self-sustaining better society might look like, and also the extent to which it's hard to get there within the constraints of current power structures. They are not the same question, and I think both are worth pondering.

likbez , July 21, 2017 at 11:16 pm

hemeantwell,

Very good points:

"Then, as far as the "collapse of the Soviet Union" goes, there's no mention about the choice by significant sections of the Soviet elite to engage in looting instead of developing a transitional program that would protect viable sections of the Soviet economy under market socialism.

What from the standpoint of the Times editorial board looks like a necessary start-over was in fact a sloppily-carried decision, or merely an unintended outcome, of a section of the elite seizing an opportunity to enrich themselves. "

West had spent several billion dollars in cash to bribe significant portions of the Soviet elite (Soros, via his foundation, was especially active). And large part of the elite war already poisoned by neoliberalism and wanted to become rich. So while pre-conditions for the collapse of the USSR were internal (communist ideology was actually discredited in early 70th; economic stagnation started around the same time, Communist Party leadership completely degraded and became a joke in 80th ), external pressures and subversive activity played the role of catalyst that made the process irreversible.

The fact that neoliberalism was rising at the time means that this was the worst possible time for the USSR to implement drastic economic reforms and sure mediocre politicians like Gorbachev quickly lost control of the process. With some important help of the West.

The subsequent economic rape of Russia was incredibly brutal and most probably well coordinated by the famous three letter agencies: CIA (via USAID and "Harvard mafia") ) and MI6 and their German and French counterparts. See

Brain drain, especially to the USA and Israel was simply incredible. Which, while good for professionals leaving (although tales of Russian Ph.D swiping malls are not uncommon, especially in Israel ) , who can earn much better money abroad, is actually another form of neocolonialism for the countries affected:

Oregoncharles , July 22, 2017 at 12:57 am

It was a tragically missed opportunity to try genuine socialism. Instead of essentially selling the state enterprises to the Mafia, they could have been GIVEN, probably broken up, to the workers in them. It would have been instant worker-owned, market regulated – what? We don't have a familiar name for it, but it might be what Marx meant by "socialism."

Ironically, the Bolsheviks first set up such co-operatives, called soviets, but soon seized them in favor of state ownership. End of the socialist experiment. It's quite possible they were far more Russian than Marxist.

Moneta , July 22, 2017 at 8:14 am

The US economy hit a wall in the 70s. Instead of readjusting internally, it used its reserve currency and global exploitation to gain an extra few decades of consumerism. If exploitation is acceptable, then we could say that capitalism wins. However, capitalism will work until there is nothing left to exploit.

In the meantime, the USSR was set up in a way where it could not follow

IMO, left leaning theoretical communism would have trouble surviving when in competition with a system based on short-termism such as capitalism. This competition against short-termism would force the communist country to turn into a form of fascism just to stop the opportunists which happen to have the skills from defecting.

MikeC , July 22, 2017 at 9:51 am

While in the Peace Corps serving in Africa (after 2010), I had a former military doctor (originally from Moldavia) who I'd see due to ongoing health issues. He served in Angola as a doctor during the civil wars and had pictures of the people he helped who were injured in the war. He was hands down the most competent doctor I saw who was employed by the PC. This was by a wide margin of competence too. I had not illusions about the Peace Corps and it purpose (to put the kind face on US empire?). We'd talk quite a bit, and he was still bitter about the collapse of the Soviet Union, and Gorbachev who he blamed for its demise, due to the lower standards of living and hardships now faced by many in the Eastern bloc and in Russia itself. In all honesty, though I identify with the far Left, this was new to me since I never realized that anyone would long for those days since all I ever heard about as a youth (due to propaganda of course) was about long bread lines and the gray world of the lives of those in the Soviet Union. Kukezel's comments above, and other information I have gained over the time had somewhat expanded my ideas and understanding regarding the system, as have my growing understanding of just how unjust our system in the US is becoming more unjust year after year.

I am not knowledgeable enough, possibly not smart enough, to understand the finer points of the discussion here concerning Marx, but I do think it possible for we as a species to create better systems to organize our world other than one predicated on the profit motive. Besides being unsustainable in a world of finite resources and the possibility that we humans will destroy the possibility to exist, we need to creatively try new forms of organization. The problem with the concentration of power of present day capitalism is that it seems so adaptable to new ways to effectively change. I know some Marx but am limited, but he was very impressed with capitalism's way to adapt to preserve itself.

Unfortunately, at times I become too cynical about the ability of the human species intellect and abitlity to go beyond short-term solutions. We just may not be able to get past our limitations as a creature. In short, I just don't know if we are smart enough to do what is best for survival. Like my Peace Corps doctor, I too sometimes wax nostalgic for a past that will never return, back to the sixties when it seemed the distribution of wealth was more egalitarian, unions brought about some economic justice, and the concentration of power and wealth was not so dramatic as it is today. I just never know if I was too blind, or deluded, at the time to see that maybe those weren't actually better times in that the system itself was built upon the same exploitation has existed in all of US history. So all this good discussion at times brings me back to the question–is our historical evolution not far enough along a continuum for us to change before it is too late? That's a bummer of a thought, I know, but the present political manifestations keep blunting any optimism I still possess.

Anon , July 22, 2017 at 7:39 pm

I too sometimes wax nostalgic for a past that will never return, back to the sixties when it seemed the distribution of wealth was more egalitarian, unions brought about some economic justice, and the concentration of power and wealth was not so dramatic as it is today.

That was "white priveledge" back then. It's passing is what led to Trump and the epidemic of homelessness.

[Jul 22, 2017] USSR collapse and the evils of Yeltsin regime

Notable quotes:
"... After the processes of industrialization and urbanization had completely, there was nowhere for the economy to go, and the low growth combined with the ossification of bureacratic structures and the entrenchment of the World War II generation in power meant a lack of job opportunities. All of this contributed to the malaise that killed productivity and increased alcoholism, creating a self-feedback loop. Yeltsin and his cronies calculated that if the USSR transitioned to a capitalist economy, they stood to make a lot of money, so they met in secret and agreed to its dissolution. The public wanted reform, but they didn't want full-blown capitalism, certainly not of the variety Russia saw in the 90's. ..."
"... Especially considering the fact that Marx was arguably the greatest thinker of the modern era and his contributions were not at all limited to the 'isms' that people fought for in his name, I think a much better topic for a post would have been "common Cold War misconceptions about Russia and Marxism." ..."
Jul 22, 2017 | www.nakedcapitalism.com

John , July 22, 2017 at 4:47 am

I would rather live in Cuba than in Haiti, and the country's economic performance is all the more impressive considering the economic warfare wrought upon it by the US.

48% of Russians regret the breakup of the Soviet Union, and the second largest political party in Russia after Putin's is the Communist Party (article from The Nation circa 2012). And this isn't a political party claiming to bring about a new socialist society but rather one that promises to bring back the communism of the Brezhnev era.

Russia was a backwards country at the beginning of World War I and saw its industry annihilated by the war. The peace treaty ceded its industrial heartlands, and then it was ripped apart by the civil war of the 1920's. But this didn't compare to World War II, which wiped out an entire generation of Russians.

Yet within 12 years of the war's end, they were the first to put an object into space, and four years later they were the first to put a human into orbit. They Americans, who had been unscathed by the war, were blessed with nearly unlimited natural resources and had the most powerful economy and military in in history, saw their attempt blow up on the launchpad.

At this time in America, people actually thought socialism might win out. The Soviets certainly thought so. In the first two decades after World War II, their economy was probably the fastest growing in history. They were so confident that their system was superior that they assumed they could beat the American capitalists in every way, including providing the general populace with consumer goods. This promise, made during the "Kitchen Debates" and throughout the 60's and 70's, when the government officially embraced consumerism, was a horrible miscalculation that eventually contributed greatly to the public's discontent with the regime.

After the processes of industrialization and urbanization had completely, there was nowhere for the economy to go, and the low growth combined with the ossification of bureacratic structures and the entrenchment of the World War II generation in power meant a lack of job opportunities. All of this contributed to the malaise that killed productivity and increased alcoholism, creating a self-feedback loop. Yeltsin and his cronies calculated that if the USSR transitioned to a capitalist economy, they stood to make a lot of money, so they met in secret and agreed to its dissolution. The public wanted reform, but they didn't want full-blown capitalism, certainly not of the variety Russia saw in the 90's.

Especially considering the fact that Marx was arguably the greatest thinker of the modern era and his contributions were not at all limited to the 'isms' that people fought for in his name, I think a much better topic for a post would have been "common Cold War misconceptions about Russia and Marxism."

This is supposed to be a heterodox economics blog but it's always from the Keynesian perspective and never from the Marxist. Considering Keynes's thoughts on the Labour Party, for one, I think more perspectives are needed in informing discussion on how to approach questions of social justice. Marxian economists predicted the crisis just as well as the Keynesians. Let's listen.

[Jul 10, 2017] The article above also doesn't mention Larry Summers

www.unz.com

Maj. Kong , December 29, 2014 at 11:42 am GMT

Putin's biggest mistake was not creating the fake two party system. America has given the world many gifts, and our system of party politics is one of the best for maintaining control of a large nation. If Vlad had followed this advice, and created the real illusion of democracy in Russia, the West would have found him much harder to oppose.

http://latitude.blogs.nytimes.com/2013/03/25/till-death-berezovsky-defends-backing-putin/?_r=0

Article is by Gessen, and clearly biased against Russia, but I think the idea is still a good one.

Putin has arguably aged badly as a leader, and considers himself too indispensable, much like Jiang Zemin in China. Though by Russian standards, he's the best since Alexander II.

Dutch disease is another mark against Russia, which Putin hasn't done much about, and which arguably makes them more dependent on the West (and possibly China) than they should be.

The article above also doesn't mention Larry Summers, which is a profound insight to which particular businessmen got away with it.

http://isteve.blogspot.com/2006/03/real-larry-summers-scandal.html

Maj. Kong , December 29, 2014 at 11:48 am GMT

http://fair.org/extra-online-articles/harvards-best-and-brightest-aided-russias-economic-ruin/

http://www.thenation.com/article/harvard-boys-do-russia

Back from when the left was more interested in hating capitalism, than the eeevil White Christian male.

[Jul 04, 2017] Summers as a defender of Flat Earth theory

Highly recommended!
Apr 12, 2017 | economistsview.typepad.com

libezkova said in reply to T... April 12, 2017 at 06:05 AM

"Yes, adding more epicycles will do the trick."

http://personal.lse.ac.uk/reisr/papers/17-wrong.pdf

This guy is funny (and actually rather clueless, Summers is much better ) defender of "Flat Earth" theory:

== quote ==

A related criticism of macroeconomics is that it ignores financial factors. Macroeconomists supposedly failed to anticipate the crisis because they were enamored by models where financial markets and institutions were absent, as all financing was assumed to be efficient (De Grawe, 2009, Skidelsky, 2009). The field would be in denial if it continued to ignore these macro-financial links.

One area where macroeconomists have perhaps more of an influence is in monetary policy. Central banks hire more PhD economists than any other policy institution, and in the United States, the current and past chair of the Federal Reserve are distinguished academic macroeconomists, as have been several members of the FOMC over the years. In any given week, there are at least one conference and dozens of seminars hosted at central banks all over the world where the latest academic research is discussed. The speeches of central bank governors refer to academic papers in macroeconomics more than those by any other policymaker.

... ... ...

A separate criticism of macroeconomic policy advice accuses it of being politically biased. Since the early days of the field, with Keynes and the Great Depression, macroeconomics was associated with aggressive and controversial policies and with researchers that wore other hats as public intellectuals. Even more recently, during the rational expectations microfoundations revolution of the 1970s, early papers had radical policy recommendations, like the result that all systematic aggregate-demand policy is ineffective, and some leading researchers had strong political views. Romer (2016) criticizes modern macroeconomics for raising questions about what should be obvious truths, like the effect of monetary policy on output. He lays blame on the influence that Edward Prescott, Robert Lucas and Thomas Sargent had on field. Krugman (2009) in turn, claims the problem of macroeconomics is ideology, and in particular points to the fierce battles between different types of macroeconomists in the 1970s and 1980s, described by Hall (1976) in terms of saltwater versus freshwater camps.

...Macroeconomists, instead, are asked to routinely produce forecasts to guide fiscal and monetary policy, and are perhaps too eager to comply.

Reply Wednesday, April 12, 2017 at 08:26 AM

djb said...

"Is something really wrong with macroeconomics? - Ricardo Reis"

I appreciate that the author thinks the solution is to have young people look at economics with fresh eyes to bring up new approaches this is a quote when describing how they pick fresh young economists to go on a tour and present their findings:

"the choices are arguably not biased in the direction of a particular field, although they are most likely all in the mainstream tradition"

unfortunately the mainstream tradition is full of biase and restrictions about what is allow to be considered and what is not so if all you allow are people who are expanding on the "mainstream tradition" I think you are severely restricting yourself further a lot of good ideas from the past have been discarded, not allowed, ridiculed, not really analyzed or expanded upon.... presented or taught or represented by people who have never studied the ideas directly got them third hand or 5th hand , from people who misrepresent the ideas in the first place

want fresh new ideas? go back to the beginning of economics, understand over and over what the founds say , go read Adam Smith directly, read the generally theory by Keynes directly don't just assume the verion samuelson gave us of Keynes represents what he actually said, or Hansen or hicks, or what ever nonsense they are passing along today as "what Keynes said" reevaluation the who field over and over

And yea, study over and over the current teachings so you really understand it intuitively don't allow magical thinking to let you "pretend" you got it don't accept that its impossible to really understand it and "that's just what the equations show" understand the limitations, figure out when our fearless leaders and "great minds" and elder statesman of economics are "overplaying their hand" and concluding more than they can this is hard work and it takes dedication and don't assume that econometrics is the only real economics and that theory is "unprovable" or "always subjective" because without theory there is no econometrics, there is just a bunch of meaningless numbers

so yea we can use fresh young minds taking a new look at things but we will nowhere if all we allow is that "they are most likely all in the mainstream tradition"

[Jun 28, 2017] Considering that Russia was gang-raped by Bill Clinton's Oligarch friends .a gang rape that caused a demographic collapse of the Russian population .Russia's subsequent recovery has been miraculous

Jun 28, 2017 | www.unz.com

War for Blair Mountain

June 22, 2017 at 10:44 pm GMT

@Mr. Hack


The only thing that Russia wanted from Ukraine is not to allow themselves to become threat to Russia by joining NATO. Ukraine, having wasted all other options for normal development, couldn't resist taking the offer of cashing in on becoming a threat to Russia. Ukraine tries to justify this based on some past historical grievances from the 1930's.
What total lunacy and hippocracy. Do I really need to remind you that before 2014 and the Russian invasion of Ukraine, NATO membership was not a popular option for most Ukrainians. But now, after the deceitful land grab by Russia of Crimea and three years of proxy directed war in Donbas orchestrated in Moscow, most Ukrainians now look favorably towards NATO membership. Latest polls show that 55.9% o Ukrainians now favor NATO integration (I think that pre 2014 it was less than 15%) and 66.4% now favor EU integration. You reap what you sew, Putinista fanboys. Bye, bye 'NovoRossiya'! http://www.pravda.com.ua/news/2017/06/17/7147228/ The engine that drove the US into an economic power house was decades of violating free market principles

The engine that drove German economic success was being bailed out by the US right after WW2..

Considering that Russia was gang-raped by Bill Clinton's Oligarch friends .a gang rape that caused a demographic collapse of the Russian population .Russia's subsequent recovery has been miraculous

OOPS These comments were meant for Priss Factor not Mr. Hack

[Jun 26, 2017] After the collapse of the USSR neoliberal vultures instantly circled the corpse and have had a feast. Geopolitical goals of the USA played important role in amplifying the scope of plunder of Russia

Notable quotes:
"... The reasoning was simple and is not hard to understand: Carthago delenda est. ..."
"... In a way McCain can be viewed now as a caricature of the Roman senator Cato the Elder, who is said to have used it as the conclusion to all his speeches. ..."
Jun 26, 2017 | economistsview.typepad.com

anne -> anne... , June 25, 2017 at 04:31 PM

1994

China's experience does not show that gradual reform is superior to the shock therapy undertaken in Eastern Europe and the Former Soviet Union....

-- Jeffrey Sachs and Wing Thye Woo

[ Of course, China's experience had already showed and continues all these years after just the opposite. This is very, very important. ]

libezkova -> anne... , June 26, 2017 at 08:09 AM
Your discussion just again had shown that there is no economics, only a political economy.

And all those neoliberal perversions, which are sold as an economic science is just an apologetics for the financial oligarchy.

Apologetics of plunder in this particular case.

In a way the USSR with its discredited communist ideology, degenerated Bolshevik leadership (just look at who was at the Politburo of CPSU at the time; people much lower in abilities then Trump :-) and inept and politically naïve Mikhail Gorbachev at the helm had chosen the most inopportune time to collapse :-)

And neoliberal vultures instantly circled the corpse and have had a feast. Geopolitical goals of the USA also played important role in amplifying the scope of plunder.

No comparison of performance of Russia vs. China makes any sense if it ignores this fact.

Paine -> anne... , June 25, 2017 at 06:30 PM
Lesson for the week

Deng ?
yes

Sachs ?
Nyet

anne -> Paine ... , June 25, 2017 at 07:11 PM
While I would argue with the economic advice given the Russian government after 1988, I am simply trying to understand the reasoning behind the advice, no more than that.
libezkova -> anne... , June 26, 2017 at 08:15 AM
The reasoning was simple and is not hard to understand: Carthago delenda est.

In a way McCain can be viewed now as a caricature of the Roman senator Cato the Elder, who is said to have used it as the conclusion to all his speeches.

History repeats "History repeats itself, first as tragedy, second as farce."

[Jun 26, 2017] Jefferey Sachs shork therapy was a plunder of Russia

Unfortunatly Russia has its own fifth column of "Chicago boys" (called Chubasyata) to implement those distarous for common people measures
What Russia needed at the time was a Marshall plan. Instead Clinton mefia (Which at the very top included Rubin and Summers) adopted the plan to plunder and colonize Russia. It did not work.
economistsview.typepad.com

anne -> anne... June 25, 2017 at 04:31 PM

https://www.researchgate.net/profile/Jeffrey_Sachs2/publication/5060711_Structural_Factors_in_the_Economic_Reforms_of_China_Eastern_Europe_and_the_Former_Soviet_Union/links/572f9f5e08ae744151904b90/Structural-Factors-in-the-Economic-Reforms-of-China-Eastern-Europe-and-the-Former-Soviet-Union.pdf

1994

Structural factors in the economic reforms of China, Eastern Europe, and the Former Soviet Union
By Jeffrey Sachs and Wing Thye Woo

Discussion

By Stanley Fischer - Massachusetts Institute of Technology

The facts with which Jeffrey Sachs and Wing Woo have to contend are, first, that Chinese economic reform has been successful in producing extraordinary growth - the greatest increase in economic well-being within a 15-year period in all of history (perhaps excluding the period after the invention of fire); but second, that reform in Eastern Europe and the Former Soviet Union (EEFSU) has been accompanied not by growth but by massive output declines (in countries that are reforming as well as in those, such as Ukraine, which are not).

The interpretation of these facts with which they have to contend is that Chinese reform - described variously as piecemeal, pragmatic, bottom-up, or gradual - has been successful because it has been gradualist and EEFSU reform has failed because it has applied shock treatment. The conclusion is that EEFSU should have pursued a gradualist reform strategy, perhaps one that started with economic rather than political reform. Many also imply that there is still time for gradualism.

Sachs and Woo reject the view that economic reform in EEFSU should have been gradualist, though they do approve of the gradualist Chinese approach to the creation of a non-state industrial sector. They argue that the structure of the economy was responsible for the success of the Chinese reform strategy, and that there are no useful lessons for EEFSU from the Chinese case.

Reform in China started in an economy in which 80 percent of the population was rural, in which planning had never been pervasive, and in which economic control was in any case quite decentralized. Further, Chinese industrial growth has come largely from new firms, largely town and village enterprises, and there has been no reform of the state-owned enterprise (SOE) sector. In EEFSU by contrast, the industrial sector was extremely large, and there was no hope of starting a significant private sector without restructuring industry.

The authors make this argument with the aid of a model, basically one that says that the private sector in a reforming EEFSU economy is so heavily taxed that it does not pay an individual to move to that sector from the subsidized industrial sector. In China by contrast, agricultural reform freed up labour whose opportunity cost was below the earnings available in the industrial private (or at least TVE) sector - and in addition, because the SOE sector was relatively small, the industrial private sector was taxed less than in EEFSU. The model is linear and ignores uncertainty, but there can be no doubt that it is very difficult to start new firms in much of EEFSU. That, more than the earnings of an individual already in that sector, seems to be the equivalent of the tax that Sachs and Woo include; indeed, earnings for those who succeed in moving to the private sector are typically higher than they are in the state sector.

Sachs and Woo also argue that the data exaggerate China's success and EEFSU's output declines. I was initially inclined to discount this argument, but now believe it has a real basis, and that all that needs doing is to fill in the numbers....

Reply Sunday, June 25, 2017 at 04:17 PM anne -> anne... , June 25, 2017 at 04:25 PM
Reading the paper by Samuel Marden, which was important in understanding the economic transformation of China, was also an important experience in understanding why Jeffrey Sachs, Wing Thye Woo and Stanley Fischer expressly rejected the Chinese experience in looking to a development model for the Soviet Union as the Soviet Union was geographically transformed.

The Chinese development model worked dramatically well, the Soviet model that Sachs, Wing and Fischer supported was as dramatically disruptive and self-defeating.

anne -> anne... , June 25, 2017 at 04:31 PM
1994

China's experience does not show that gradual reform is superior to the shock therapy undertaken in Eastern Europe and the Former Soviet Union....

-- Jeffrey Sachs and Wing Thye Woo

[ Of course, China's experience had already showed and continues all these years after just the opposite. This is very, very important. ]

[Jun 26, 2017] After 1991 Eastern Europe and FSU were mercilessly looted. That was tremendous one time transfer of capital (and scientists and engineers) to Western Europe and the USA. Which helped to secure Clinton prosperity period

Notable quotes:
"... If America were a free and democratic country, with a free press and independent publishing houses (and assuming, of course, that Americans were a literate people), Williamson's book would topple the Clinton regime, the World Bank, the International Monetary Fund, and the rest of the criminal cabal that inhabits the world of modern corporate statism faster than you could say "Jonathan Hay." ..."
"... Hay, for those who need an introduction to the international financial buccaneers who control our lives, was the general director of the Harvard Institute of International Development (HIID) in Moscow (1992-1997), who facilitated the crippling of the Russian economy and the plundering of its industrial and manufacturing infrastructure with a strategy concocted by Larry Summers, Andre Schliefer (HIID's Cambridge-based manager), Jeffrey Sachs and his Swedish sidekick Anders Aslund, and a host of private players from banks and investment houses in Boston and New York - a plan approved and assisted by the U.S. Department of the Treasury. ..."
"... These third-generation Bolsheviks - led by former Pravda hack Yegor Gaidar, grandson of a Bolshevik who achieved prominence as the teenage mass murderer of White Army officers, now heads the Moscow-based Institute for Economies in Transition - became instant millionaires (or billionaires) and left the Russian workers virtual slaves of them and their new foreign investors. ..."
"... Ironically, when Harvard's Sachs and Hay started identifying Russians they could work with, they ignored - or shunned - the most capable talent at hand: those numerous Russian economists who for 20 years had been studying the Swiss economist Wilhelm von Roepke and his disciple, Ludwig Erhard, father of Germany's "economic miracle" in anticipation of the day when Communism would collapse. Somewhat sardonically, Williamson notes that one, probably unintended, benefit of Gorbachev's perestroika was the recruitment of these Russian economists by top U.S. universities. ..."
"... On another level, Contagion is about the workings of international finance, the consolidation of capital into fewer and fewer hands, and the ruthless, death-dealing policies it inflicts on its target countries through currency manipulation, inflation, depression, taxation and war - with emphasis on Russia but with attention also given to Mexico, Thailand, Indonesia, the Balkans, and other countries, and how it uses its control over money to produce social chaos. ..."
"... Those who read Williamson's book will find particularly interesting her treatment of the Federal Reserve, and how this "bank" was designed to plunder the wealth of America through war, debt, and taxation, in order to maintain what is nothing more nor less than a giant pyramid scheme that depends on domination of the earth and its resources. ..."
"... The policies inflicted on Russia by the banks were cruel to the Nth degree; but the policy implementers - Williamson employs the derogatory Russian word m yakigolovy ("soft-headed ones") applied to the Americans - were a foppish lot, streaming into Russia by the thousands (the IMF, alone, with 150 staffers) with their outrageous salaries and per diem allowances, renting out the finest dachas, bringing in their exotic consumer goods, driving up prices for goods and rents, spurring a boom in the drug and prostitution businesses, and then watching, cold-heartedly, the declining fortunes of their hosts as they lost everything - including the artistic heritage of the country. ..."
"... Gore, who was raised to be President, has impeccable Russian connections. His father, of course, was Lenin financier Armand Hammer's pocket senator, and it was Hammer who paid for Al Jr.'s expensive St. Alban's Prep schooling; and, as Williamson reports, Al Jr.'s daughter married Andrew Schiff, grandson of Jacob, who, as a member of Kuhn, Loeb & Co., underwrote anti-czarist political agitation for two decades before Lenin's coup, and congratulated Lenin upon his successful revolution. ..."
"... By March 1999, Russia was now a financial basket case, and billions, if not tens of billions of U.S. taxpayer-backed loans had vanished into the secret bank accounts of both Russian and American gangster capitalists, and the news was starting to make little vibrations on Capitol Hill. "The U.S. administration's response to the debacle was repulsively similar to a typical Bill Clinton bimbo-eruption operation: Having ruined Russia by cosseting her in debt, meddling ignorantly in her internal affairs, and funding a drunken usurper, his agents denied all error and slandered ('slimed') her," writes Williamson. ..."
"... The cost to the American taxpayers of Clinton regime bailouts in a three-and-a-half-year period, Williamson notes, is more than $180 billion! The "new financial architecture" Clinton has erected, she writes, "isn't new at all, but rather something the international public lenders have been wanting for decades, i.e., an automatic bailout for their own bad practices." ..."
"... As the extent of the corruption of the Clinton-Yeltsin "reform" plan for Russia unfolded last year, with the attendant Bank of New York scandal, the mysterious death of super banker Edmond Safra in his Monte Carlo penthouse, the collapse of the Russian stock market, and the whiplash effect in Southeast Asia, Congress was pressed to hold hearings. ..."
"... What resulted, as Williamson accurately narrates it, was just a smoke screen, show hearings that barely rose above the seriousness of a Gilbert and Sullivan farce - though they did result in proposed new domestic banking laws that, if passed, will effectively make banks another federal police force responsible for reporting to the U.S. government the most minute financial transactions of U.S. citizens. ..."
"... In this regard, it is instructive to quote Williamson at length: "If the FBI, [Manhattan District Attorney] Robert Morgenthau, or Congress were serious about getting to the bottom of the plundering of Russia's assets and U.S. taxpayers' resources, they would show far more professional interest in exactly what was said and agreed in the private meetings [U.S. Treasury secretary] Larry Summers, Strobe Talbott, and [former Treasury Secretary] Robert Rubin conducted with Anatoly Chubais [former Russian finance minister, who oversaw the distribution and sale of Russian industries], and Sergie Vasiliev [Yeltsin's principal legal adviser, and a member of the Chubais clan], and later Chubais again in June and July of 1998. ..."
"... And why did Michel Camdessus [who left the presidency of the IMF earlier this year] announce his sudden retirement so soon after Moscow newspapers reported that a $200,000 payment was made to him from a secret Kremlin bank account? . . . ..."
"... You see, as this book explains, the Clinton's Russia policy did not just plunder Russians, leaving them destitute while creating a new and ruthless class of international capitalist gangsters at U.S. taxpayer expense; it had the double consequence of bringing all Americans deeper into the bankers' New World Order by increasing their debt load, decreasing their privacy, and restricting their civil rights. If only Americans cared. ..."
Jun 25, 2017 | economistsview.typepad.com

libezkova -> anne..., June 25, 2017 at 06:47 PM

After 1991 Eastern Europe and FSU were mercilessly looted. That was tremendous one time transfer of capital (and scientists and engineers) to Western Europe and the USA. Which helped to secure "Clinton prosperity period"

China were not plundered by the West. Russia and Eastern Europe were. That's the key difference.

For Russia this period was called by Anne Williamson in her testimony before the Committee on Banking and Financial Services of the United States House of Representatives "The economic rape of Russia"

http://thebirdman.org/Index/Others/Others-Doc-Economics&Finance/+Doc-Economics&Finance-GovernmentInfluence&Meddling/BankstersInRussiaAndGlobalEconomy.htm

Paul Likoudis has an interesting analysis of this event: https://paullikoudis.wordpress.com/2011/03/24/the-plunder-of-russia-in-the-1990s/

Sorry long quote

How Clinton & Company & The Bankers Plundered Russia by Paul Likoudis

May 4, 2000

The other day I was surprised to learn that Jeffrey Sachs, the creator of "shock therapy" capitalism, who participated in the looting of Russia in the 1990s, is now NY Gov. Andrew Cuomo's top adviser for health care. So we in NY will get shock therapy, much as the Russians did two decades ago. Here is a story I wrote for The Wanderer in 2000:

===

How Clinton & Company & The Bankers Plundered Russia

by Paul Likoudis

In an ordinary election year, Anne Williamson's Contagion would be political dynamite, a bombshell, a block-buster, a regime breaker.

If America were a free and democratic country, with a free press and independent publishing houses (and assuming, of course, that Americans were a literate people), Williamson's book would topple the Clinton regime, the World Bank, the International Monetary Fund, and the rest of the criminal cabal that inhabits the world of modern corporate statism faster than you could say "Jonathan Hay."

Hay, for those who need an introduction to the international financial buccaneers who control our lives, was the general director of the Harvard Institute of International Development (HIID) in Moscow (1992-1997), who facilitated the crippling of the Russian economy and the plundering of its industrial and manufacturing infrastructure with a strategy concocted by Larry Summers, Andre Schliefer (HIID's Cambridge-based manager), Jeffrey Sachs and his Swedish sidekick Anders Aslund, and a host of private players from banks and investment houses in Boston and New York - a plan approved and assisted by the U.S. Department of the Treasury.

Contagion can be read on many different levels.

At its simplest, it is a breezy, slightly cynical, highly entertaining narrative of Russian history from the last months of Gorbachev's rule to April 2000 - a period which saw Russia transformed from a decaying socialist economy (which despite its shortcomings, provided a modest standard of living to its citizens) to a "managed economy" where home-grown gangsters and socialist theoreticians from the West, like Hay and his fellow Harvardian Jeffrey Sachs, delivered 2,500% inflation and indescribable poverty, and transferred the ownership of Russian industry to Western financiers.

Williamson was an eyewitness who lived on and off in Russia for more than ten years, where she reported on all things Russian for The New York Times, Th e Wall Street Journal, and a host of other equally reputable publications. She knew and interviewed just about everybody involved in this gargantuan plundering scheme: Russian politicians and businessmen, the new "gangster" capitalists and their American sponsors from the IMF, the World Bank, USAID, Credit Suisse First Boston, the CIA, the KGB - all in all, hundreds of sources who spoke candidly, often ruthlessly, of their parts in this terrible human drama.

Her account is filled with quotations from interviews with top aides of Yeltsin and Clinton, all down through the ranks of the two hierarchical societies to the proliferating mass of Russian destitute, pornographers, pimps, drug dealers, and prostitutes. Some of the principal characters, of course, refused to talk to Williamson, such as Bill Clinton's longtime friend from Oxford, Strobe Talbott, now a deputy secretary of state and, Williamson suspects, a onetime KGB operative whose claim to fame is a deceitful translation of the Khrushchev Memoirs. (A KGB colonel refused to confirm or deny to Williamson that Clinton and Talbott visited North Vietnam together in 1971 - though he did confirm their contacts with the KGB for their protests against the U.S. war in Vietnam in Moscow. See especially footnote 1, page 210.)

The 546-page book (the best part of which is the footnotes) gives a nearly day-by-day report on what happened to Russia; left unstated, but implied on every page, is the assumption that those in the United States who think what happened in Russia "can't happen here" better realize it can happen here.

Once the Clinton regime and its lapdogs in the media defined Russian thug Boris Yeltsin as a "democrat," the wholesale looting of Russia began. According to the socialist theoreticians at Harvard, Russia needed to be brought into the New World Order in a hurry; and what better way to do it than Sachs' "shock therapy" - a plan that empowered the degenerate, third-generation descendants of the original Bolsheviks by assigning them the deeds of Russia's mightiest state-owned industries - including the giant gas, oil, electrical, and telecommunications industries, the world's largest paper, iron, and steel factories, the world's richest gold, silver, diamond, and platinum mines, automobile and airplane factories, etc. - who, in turn, sold some of their shares of the properties to Westerners for a song, and pocketed the cash, while retaining control of the companies.

These third-generation Bolsheviks - led by former Pravda hack Yegor Gaidar, grandson of a Bolshevik who achieved prominence as the teenage mass murderer of White Army officers, now heads the Moscow-based Institute for Economies in Transition - became instant millionaires (or billionaires) and left the Russian workers virtual slaves of them and their new foreign investors.

When Russian members of the Supreme Soviet openly criticized the looting of the national patrimony by these new gangsters early in the U.S.-driven "reform" program, in 1993, before all Soviet institutions were destroyed, Yeltsin bombed Parliament.

Ironically, when Harvard's Sachs and Hay started identifying Russians they could work with, they ignored - or shunned - the most capable talent at hand: those numerous Russian economists who for 20 years had been studying the Swiss economist Wilhelm von Roepke and his disciple, Ludwig Erhard, father of Germany's "economic miracle" in anticipation of the day when Communism would collapse. Somewhat sardonically, Williamson notes that one, probably unintended, benefit of Gorbachev's perestroika was the recruitment of these Russian economists by top U.S. universities.

In the new, emerging global economy, it's clear that Russia is the designated center for heavy manufacturing - just as Asia is for clothing and computers - with its nearly unlimited supply of hydroelectric power, iron and steel, timber, gold and other precious metals.

This helps explain why America's political elites don't give a fig about the closing down of American industries and mines. As Williamson observes, Russia is viewed as some kind of "closet."

What is important for Western readers to understand - as Williamson reports - is that when Western banks and corporations bought these companies at bargain basement prices, they bought more than just industrial equipment. In the Soviet model, every unit of industrial production included workers' housing, churches, opera houses, schools, hospitals, supermarkets, etc., and the whole kit-and-caboodle was included in the selling price. By buying large shares of these companies, Western corporations became, ipso facto, town managers.

Another Level

On another level, Contagion is about the workings of international finance, the consolidation of capital into fewer and fewer hands, and the ruthless, death-dealing policies it inflicts on its target countries through currency manipulation, inflation, depression, taxation and war - with emphasis on Russia but with attention also given to Mexico, Thailand, Indonesia, the Balkans, and other countries, and how it uses its control over money to produce social chaos.

Those who read Williamson's book will find particularly interesting her treatment of the Federal Reserve, and how this "bank" was designed to plunder the wealth of America through war, debt, and taxation, in order to maintain what is nothing more nor less than a giant pyramid scheme that depends on domination of the earth and its resources.

Williamson is of that small but noble school of economics writers who believe that the academic field of economics is not some esoteric science that can only be comprehended by those with IQs in four digits, and she - drawing on such writers as Hayek and von Mises, Roepke and the late American Murray Rothbard - explains in layman's vocabulary the nuts and bolts of sound economic principles and the real-world effects of the Fed's policies on hapless Americans.

Contagion also serves up a severe indictment of the World Bank, the International Monetary Fund, and the other international "lending" agencies spawned by the Council on Foreign Relations and similar "councils" and "commissions" which are fronts for the big banks run by the Houses of Rockefeller, Morgan, Warburg, et al.

The policies inflicted on Russia by the banks were cruel to the Nth degree; but the policy implementers - Williamson employs the derogatory Russian word m yakigolovy ("soft-headed ones") applied to the Americans - were a foppish lot, streaming into Russia by the thousands (the IMF, alone, with 150 staffers) with their outrageous salaries and per diem allowances, renting out the finest dachas, bringing in their exotic consumer goods, driving up prices for goods and rents, spurring a boom in the drug and prostitution businesses, and then watching, cold-heartedly, the declining fortunes of their hosts as they lost everything - including the artistic heritage of the country.

Williamson describes brilliantly that heady atmosphere in Moscow in the early days of the IMF/USAID loan-scamming: a 24-hour party. There were bars like the Canadian-operated Hungry Duck, which lured Russian teenage girls into its bar with a male striptease and free drinks, "who, once thoroughly intoxicated, were then exposed to crowds of anxious young men the club admitted only late in the evening."

The Third Level

At a third and more intriguing level, Contagion is about America's criminal politics in the Clinton regime, and, inevitably, the reader will put Williamson's book down with the sense that Al Gore will be the next occupier of the White House.

Gore, who was raised to be President, has impeccable Russian connections. His father, of course, was Lenin financier Armand Hammer's pocket senator, and it was Hammer who paid for Al Jr.'s expensive St. Alban's Prep schooling; and, as Williamson reports, Al Jr.'s daughter married Andrew Schiff, grandson of Jacob, who, as a member of Kuhn, Loeb & Co., underwrote anti-czarist political agitation for two decades before Lenin's coup, and congratulated Lenin upon his successful revolution.

Williamson also documents Gore's intimate involvement with powerful Wall Street financial houses, and his New York breakfast meeting with multibillionaire George Soros (a key Russian player) just as the Russian collapse was underway.

Williamson tells an interesting story of Gore's response to the IMF/World Bank/USAID plunder of U.S. taxpayers for the purpose of hobbling Russia.

By March 1999, Russia was now a financial basket case, and billions, if not tens of billions of U.S. taxpayer-backed loans had vanished into the secret bank accounts of both Russian and American gangster capitalists, and the news was starting to make little vibrations on Capitol Hill. "The U.S. administration's response to the debacle was repulsively similar to a typical Bill Clinton bimbo-eruption operation: Having ruined Russia by cosseting her in debt, meddling ignorantly in her internal affairs, and funding a drunken usurper, his agents denied all error and slandered ('slimed') her," writes Williamson.

"Pundits and academics joined government officials in bemoaning Mother Russia's thieving ways, her bottomless corruption and constant chaos, all the while wringing their soft hands with a schoolmarm's exasperation. Russia's self-appointed democracy coach Strobe Talbott ('Pro-Consul Strobe' to the Russians) would get it right. An equally sanctimonious Albert Gore - the same Al Gore who'd been so quick to return the CIA's 1995 report detailing Viktor Chernomyrdin's and Anatoly Chubais' personal corruption with the single word 'Bullshit' scrawled across it - took the low road and sniffed that the Russians would just have to get their own economic house in order and cut their own deal with the IMF. . . ."

The cost to the American taxpayers of Clinton regime bailouts in a three-and-a-half-year period, Williamson notes, is more than $180 billion! The "new financial architecture" Clinton has erected, she writes, "isn't new at all, but rather something the international public lenders have been wanting for decades, i.e., an automatic bailout for their own bad practices."

As the extent of the corruption of the Clinton-Yeltsin "reform" plan for Russia unfolded last year, with the attendant Bank of New York scandal, the mysterious death of super banker Edmond Safra in his Monte Carlo penthouse, the collapse of the Russian stock market, and the whiplash effect in Southeast Asia, Congress was pressed to hold hearings.

What resulted, as Williamson accurately narrates it, was just a smoke screen, show hearings that barely rose above the seriousness of a Gilbert and Sullivan farce - though they did result in proposed new domestic banking laws that, if passed, will effectively make banks another federal police force responsible for reporting to the U.S. government the most minute financial transactions of U.S. citizens.

Double Effect

In this regard, it is instructive to quote Williamson at length: "If the FBI, [Manhattan District Attorney] Robert Morgenthau, or Congress were serious about getting to the bottom of the plundering of Russia's assets and U.S. taxpayers' resources, they would show far more professional interest in exactly what was said and agreed in the private meetings [U.S. Treasury secretary] Larry Summers, Strobe Talbott, and [former Treasury Secretary] Robert Rubin conducted with Anatoly Chubais [former Russian finance minister, who oversaw the distribution and sale of Russian industries], and Sergie Vasiliev [Yeltsin's principal legal adviser, and a member of the Chubais clan], and later Chubais again in June and July of 1998.

"Instead of allowing Larry Summers to ramble casually in response to questions at a banking committee hearing, the Treasury secretary should be asked exactly who suckered him - his Russian friends, his own boss [former Harvard associate Robert Rubin, his boss at Treasury who was once cochairman at Goldman Sachs], or private sector counterparts of the Working Committee on Financial Markets [a White House group whose membership is drawn from the country's main financial and market institutions: the Fed, Treasury, SEC, and the Commodities & Trading Commission]. . . . Or did he just bungle the entire matter on account of wishful thinking? Or was it gross incompetence?

"The FBI and Congress ought to be very interested in establishing for taxpayers the truth of any alleged 'national security' issues that justified allowing the Harvard Institute of International Development to privatize U.S. bilateral assistance. It too should be their brief to discover the relationship between the [Swedish wheeler-dealer and crony of Sachs, Anders] Aslund/Carnegie crowd and Treasury and exactly what influence that relationship may have had on the awarding of additional grants to Harvard without competition. On what basis did Team Clinton direct their financial donor, American International Group's (AIG) Maurice Greenberg (a man nearly as ubiquitous as any Russian oligarch in sweetheart public-funding deals), to Brunswick Brokerage when sniffing out a $300 million OPIC guarantee for a Russian investment fund. . . .

And why did Michel Camdessus [who left the presidency of the IMF earlier this year] announce his sudden retirement so soon after Moscow newspapers reported that a $200,000 payment was made to him from a secret Kremlin bank account? . . .

"American and Russian citizens can never be allowed to learn what really happened to the billions lent to Yeltsin's government; it would expose the unsavory and self-interested side of our political, financial, and media elites. . . . Instead, the [House] Banking Committee hearings will use the smoke screen of policing foreign assistance flows to pass legislation that will effectively end U.S. citizens' financial privacy while making them prisoners of their citizenship. . . . The Banking Committee will use the opportunity the Russian dirty money scandal presents to reanimate the domestic 'Know Your Customer' program, which charges domestic banks with monitoring and reporting on the financial transactions in which middle-class Americans engage. This data is collected and used by various government agencies, including the IRS; meaning that if a citizen sells the family's beat-up station wagon or their 'starter' home, the taxman is alerted immediately that the citizen's filing should reflect the greater tax obligation in that year of the sale. . . . Other data on citizens for which the government has long thirsted will also be collected by government's newest police force, the banks. . . ."

You see, as this book explains, the Clinton's Russia policy did not just plunder Russians, leaving them destitute while creating a new and ruthless class of international capitalist gangsters at U.S. taxpayer expense; it had the double consequence of bringing all Americans deeper into the bankers' New World Order by increasing their debt load, decreasing their privacy, and restricting their civil rights. If only Americans cared.

[Jun 25, 2017] How Clinton's Bankers Plundered Russia by Paul Likoudis

Notable quotes:
"... You see, as this book explains, the Clinton's Russia policy did not just plunder Russians, leaving them destitute while creating a new and ruthless class of international capitalist gangsters at U.S. taxpayer expense; it had the double consequence of bringing all Americans deeper into the bankers' New World Order by increasing their debt load, decreasing their privacy, and restricting their civil rights. If only Americans cared. ..."
May 04, 2000 | economistsview.typepad.com

The other day I was surprised to learn that Jeffrey Sachs, the creator of "shock therapy" capitalism, who participated in the looting of Russia in the 1990s, is now NY Gov. Andrew Cuomo's top adviser for health care. So we in NY will get shock therapy, much as the Russians did two decades ago.

Here is a story I wrote for The Wanderer in 2000:

===

How Clinton & Company & The Bankers Plundered Russia

by Paul Likoudis

In an ordinary election year, Anne Williamson's Contagion would be political dynamite, a bombshell, a block-buster, a regime breaker.

If America were a free and democratic country, with a free press and independent publishing houses (and assuming, of course, that Americans were a literate people), Williamson's book would topple the Clinton regime, the World Bank, the International Monetary Fund, and the rest of the criminal cabal that inhabits the world of modern corporate statism faster than you could say "Jonathan Hay."

Hay, for those who need an introduction to the international financial buccaneers who control our lives, was the general director of the Harvard Institute of International Development (HIID) in Moscow (1992-1997), who facilitated the crippling of the Russian economy and the plundering of its industrial and manufacturing infrastructure with a strategy concocted by Larry Summers, Andre Schliefer (HIID's Cambridge-based manager), Jeffrey Sachs and his Swedish sidekick Anders Aslund, and a host of private players from banks and investment houses in Boston and New York - a plan approved and assisted by the U.S. Department of the Treasury.

Contagion can be read on many different levels.

At its simplest, it is a breezy, slightly cynical, highly entertaining narrative of Russian history from the last months of Gorbachev's rule to April 2000 - a period which saw Russia transformed from a decaying socialist economy (which despite its shortcomings, provided a modest standard of living to its citizens) to a "managed economy" where home-grown gangsters and socialist theoreticians from the West, like Hay and his fellow Harvardian Jeffrey Sachs, delivered 2,500% inflation and indescribable poverty, and transferred the ownership of Russian industry to Western financiers.

Williamson was an eyewitness who lived on and off in Russia for more than ten years, where she reported on all things Russian for The New York Times, Th e Wall Street Journal, and a host of other equally reputable publications. She knew and interviewed just about everybody involved in this gargantuan plundering scheme: Russian politicians and businessmen, the new "gangster" capitalists and their American sponsors from the IMF, the World Bank, USAID, Credit Suisse First Boston, the CIA, the KGB - all in all, hundreds of sources who spoke candidly, often ruthlessly, of their parts in this terrible human drama.

Her account is filled with quotations from interviews with top aides of Yeltsin and Clinton, all down through the ranks of the two hierarchical societies to the proliferating mass of Russian destitute, pornographers, pimps, drug dealers, and prostitutes. Some of the principal characters, of course, refused to talk to Williamson, such as Bill Clinton's longtime friend from Oxford, Strobe Talbott, now a deputy secretary of state and, Williamson suspects, a onetime KGB operative whose claim to fame is a deceitful translation of the Khrushchev Memoirs. (A KGB colonel refused to confirm or deny to Williamson that Clinton and Talbott visited North Vietnam together in 1971 - though he did confirm their contacts with the KGB for their protests against the U.S. war in Vietnam in Moscow. See especially footnote 1, page 210.)

The 546-page book (the best part of which is the footnotes) gives a nearly day-by-day report on what happened to Russia; left unstated, but implied on every page, is the assumption that those in the United States who think what happened in Russia "can't happen here" better realize it can happen here.

Once the Clinton regime and its lapdogs in the media defined Russian thug Boris Yeltsin as a "democrat," the wholesale looting of Russia began. According to the socialist theoreticians at Harvard, Russia needed to be brought into the New World Order in a hurry; and what better way to do it than Sachs' "shock therapy" - a plan that empowered the degenerate, third-generation descendants of the original Bolsheviks by assigning them the deeds of Russia's mightiest state-owned industries - including the giant gas, oil, electrical, and telecommunications industries, the world's largest paper, iron, and steel factories, the world's richest gold, silver, diamond, and platinum mines, automobile and airplane factories, etc. - who, in turn, sold some of their shares of the properties to Westerners for a song, and pocketed the cash, while retaining control of the companies.

These third-generation Bolsheviks - led by former Pravda hack Yegor Gaidar, grandson of a Bolshevik who achieved prominence as the teenage mass murderer of White Army officers, now heads the Moscow-based Institute for Economies in Transition - became instant millionaires (or billionaires) and left the Russian workers virtual slaves of them and their new foreign investors.

When Russian members of the Supreme Soviet openly criticized the looting of the national patrimony by these new gangsters early in the U.S.-driven "reform" program, in 1993, before all Soviet institutions were destroyed, Yeltsin bombed Parliament.

Ironically, when Harvard's Sachs and Hay started identifying Russians they could work with, they ignored - or shunned - the most capable talent at hand: those numerous Russian economists who for 20 years had been studying the Swiss economist Wilhelm von Roepke and his disciple, Ludwig Erhard, father of Germany's "economic miracle" in anticipation of the day when Communism would collapse.

Somewhat sardonically, Williamson notes that one, probably unintended, benefit of Gorbachev's perestroika was the recruitment of these Russian economists by top U.S. universities.

In the new, emerging global economy, it's clear that Russia is the designated center for heavy manufacturing - just as Asia is for clothing and computers - with its nearly unlimited supply of hydroelectric power, iron and steel, timber, gold and other precious metals.

This helps explain why America's political elites don't give a fig about the closing down of American industries and mines. As Williamson observes, Russia is viewed as some kind of "closet."

What is important for Western readers to understand - as Williamson reports - is that when Western banks and corporations bought these companies at bargain basement prices, they bought more than just industrial equipment. In the Soviet model, every unit of industrial production included workers' housing, churches, opera houses, schools, hospitals, supermarkets, etc., and the whole kit-and-caboodle was included in the selling price. By buying large shares of these companies, Western corporations became, ipso facto, town managers.

Another Level

On another level, Contagion is about the workings of international finance, the consolidation of capital into fewer and fewer hands, and the ruthless, death-dealing policies it inflicts on its target countries through currency manipulation, inflation, depression, taxation and war - with emphasis on Russia but with attention also given to Mexico, Thailand, Indonesia, the Balkans, and other countries, and how it uses its control over money to produce social chaos.

Those who read Williamson's book will find particularly interesting her treatment of the Federal Reserve, and how this "bank" was designed to plunder the wealth of America through war, debt, and taxation, in order to maintain what is nothing more nor less than a giant pyramid scheme that depends on domination of the earth and its resources.

Williamson is of that small but noble school of economics writers who believe that the academic field of economics is not some esoteric science that can only be comprehended by those with IQs in four digits, and she - drawing on such writers as Hayek and von Mises, Roepke and the late American Murray Rothbard - explains in layman's vocabulary the nuts and bolts of sound economic principles and the real-world effects of the Fed's policies on hapless Americans.

Contagion also serves up a severe indictment of the World Bank, the International Monetary Fund, and the other international "lending" agencies spawned by the Council on Foreign Relations and similar "councils" and "commissions" which are fronts for the big banks run by the Houses of Rockefeller, Morgan, Warburg, et al.

The policies inflicted on Russia by the banks were cruel to the Nth degree; but the policy implementers - Williamson employs the derogatory Russian word m yakigolovy ("soft-headed ones") applied to the Americans - were a foppish lot, streaming into Russia by the thousands (the IMF, alone, with 150 staffers) with their outrageous salaries and per diem allowances, renting out the finest dachas, bringing in their exotic consumer goods, driving up prices for goods and rents, spurring a boom in the drug and prostitution businesses, and then watching, cold-heartedly, the declining fortunes of their hosts as they lost everything - including the artistic heritage of the country.

Williamson describes brilliantly that heady atmosphere in Moscow in the early days of the IMF/USAID loan-scamming: a 24-hour party. There were bars like the Canadian-operated Hungry Duck, which lured Russian teenage girls into its bar with a male striptease and free drinks, "who, once thoroughly intoxicated, were then exposed to crowds of anxious young men the club admitted only late in the evening."

The Third Level

At a third and more intriguing level, Contagion is about America's criminal politics in the Clinton regime, and, inevitably, the reader will put Williamson's book down with the sense that Al Gore will be the next occupier of the White House.

Gore, who was raised to be President, has impeccable Russian connections. His father, of course, was Lenin financier Armand Hammer's pocket senator, and it was Hammer who paid for Al Jr.'s expensive St. Alban's Prep schooling; and, as Williamson reports, Al Jr.'s daughter married Andrew Schiff, grandson of Jacob, who, as a member of Kuhn, Loeb & Co., underwrote anti-czarist political agitation for two decades before Lenin's coup, and congratulated Lenin upon his successful revolution.

Williamson also documents Gore's intimate involvement with powerful Wall Street financial houses, and his New York breakfast meeting with multibillionaire George Soros (a key Russian player) just as the Russian collapse was underway.

Williamson tells an interesting story of Gore's response to the IMF/World Bank/USAID plunder of U.S. taxpayers for the purpose of hobbling Russia.

By March 1999, Russia was now a financial basket case, and billions, if not tens of billions of U.S. taxpayer-backed loans had vanished into the secret bank accounts of both Russian and American gangster capitalists, and the news was starting to make little vibrations on Capitol Hill. "The U.S. administration's response to the debacle was repulsively similar to a typical Bill Clinton bimbo-eruption operation: Having ruined Russia by cosseting her in debt, meddling ignorantly in her internal affairs, and funding a drunken usurper, his agents denied all error and slandered ('slimed') her," writes Williamson.

"Pundits and academics joined government officials in bemoaning Mother Russia's thieving ways, her bottomless corruption and constant chaos, all the while wringing their soft hands with a schoolmarm's exasperation. Russia's self-appointed democracy coach Strobe Talbott ('Pro-Consul Strobe' to the Russians) would get it right. An equally sanctimonious Albert Gore - the same Al Gore who'd been so quick to return the CIA's 1995 report detailing Viktor Chernomyrdin's and Anatoly Chubais' personal corruption with the single word 'Bullshit' scrawled across it - took the low road and sniffed that the Russians would just have to get their own economic house in order and cut their own deal with the IMF. . . ."

The cost to the American taxpayers of Clinton regime bailouts in a three-and-a-half-year period, Williamson notes, is more than $180 billion! The "new financial architecture" Clinton has erected, she writes, "isn't new at all, but rather something the international public lenders have been wanting for decades, i.e., an automatic bailout for their own bad practices."

As the extent of the corruption of the Clinton-Yeltsin "reform" plan for Russia unfolded last year, with the attendant Bank of New York scandal, the mysterious death of super banker Edmond Safra in his Monte Carlo penthouse, the collapse of the Russian stock market, and the whiplash effect in Southeast Asia, Congress was pressed to hold hearings.

What resulted, as Williamson accurately narrates it, was just a smoke screen, show hearings that barely rose above the seriousness of a Gilbert and Sullivan farce - though they did result in proposed new domestic banking laws that, if passed, will effectively make banks another federal police force responsible for reporting to the U.S. government the most minute financial transactions of U.S. citizens.

Double Effect

In this regard, it is instructive to quote Williamson at length: "If the FBI, [Manhattan District Attorney] Robert Morgenthau, or Congress were serious about getting to the bottom of the plundering of Russia's assets and U.S. taxpayers' resources, they would show far more professional interest in exactly what was said and agreed in the private meetings [U.S. Treasury secretary] Larry Summers, Strobe Talbott, and [former Treasury Secretary] Robert Rubin conducted with Anatoly Chubais [former Russian finance minister, who oversaw the distribution and sale of Russian industries], and Sergie Vasiliev [Yeltsin's principal legal adviser, and a member of the Chubais clan], and later Chubais again in June and July of 1998.

"Instead of allowing Larry Summers to ramble casually in response to questions at a banking committee hearing, the Treasury secretary should be asked exactly who suckered him - his Russian friends, his own boss [former Harvard associate Robert Rubin, his boss at Treasury who was once cochairman at Goldman Sachs], or private sector counterparts of the Working Committee on Financial Markets [a White House group whose membership is drawn from the country's main financial and market institutions: the Fed, Treasury, SEC, and the Commodities & Trading Commission]. . . . Or did he just bungle the entire matter on account of wishful thinking? Or was it gross incompetence?

"The FBI and Congress ought to be very interested in establishing for taxpayers the truth of any alleged 'national security' issues that justified allowing the Harvard Institute of International Development to privatize U.S. bilateral assistance. It too should be their brief to discover the relationship between the [Swedish wheeler-dealer and crony of Sachs, Anders] Aslund/Carnegie crowd and Treasury and exactly what influence that relationship may have had on the awarding of additional grants to Harvard without competition. On what basis did Team Clinton direct their financial donor, American International Group's (AIG) Maurice Greenberg (a man nearly as ubiquitous as any Russian oligarch in sweetheart public-funding deals), to Brunswick Brokerage when sniffing out a $300 million OPIC guarantee for a Russian investment fund. . . . And why did Michel Camdessus [who left the presidency of the IMF earlier this year] announce his sudden retirement so soon after Moscow newspapers reported that a $200,000 payment was made to him from a secret Kremlin bank account? . . .

"American and Russian citizens can never be allowed to learn what really happened to the billions lent to Yeltsin's government; it would expose the unsavory and self-interested side of our political, financial, and media elites. . . . Instead, the [House] Banking Committee hearings will use the smoke screen of policing foreign assistance flows to pass legislation that will effectively end U.S. citizens' financial privacy while making them prisoners of their citizenship. . . . The Banking Committee will use the opportunity the Russian dirty money scandal presents to reanimate the domestic 'Know Your Customer' program, which charges domestic banks with monitoring and reporting on the financial transactions in which middle-class Americans engage. This data is collected and used by various government agencies, including the IRS; meaning that if a citizen sells the family's beat-up station wagon or their 'starter' home, the taxman is alerted immediately that the citizen's filing should reflect the greater tax obligation in that year of the sale. . . . Other data on citizens for which the government has long thirsted will also be collected by government's newest police force, the banks. . . ."

You see, as this book explains, the Clinton's Russia policy did not just plunder Russians, leaving them destitute while creating a new and ruthless class of international capitalist gangsters at U.S. taxpayer expense; it had the double consequence of bringing all Americans deeper into the bankers' New World Order by increasing their debt load, decreasing their privacy, and restricting their civil rights. If only Americans cared.

[Apr 27, 2017] Mark Ames: Credit Suisse Decries Russian Inequality After Playing Leading Role in Creating It

Notable quotes:
"... By Mark Ames, founding editor of the Moscow satirical paper The eXile and co-host of the Radio War Nerd podcast with Gary Brecher (aka John Dolan). Subscribe here . Originally published at The Exiled ..."
"... Can hugely rich new capitalists weather a backlash from the angry masses? ..."
"... Great piece. Mark Ames and his former eXile comrades Yasha Levine and Matt Taibbi write some of the most honest and ideologically neutral critiques of the current political and economic clusterfuck. The Guardian, OTOH, is pure neoliberal establishment propaganda. ..."
"... 'Why do I get the feeling that this "playbook" is being resurrected to manage a "privatization" of the American "safety net?" ..."
Apr 27, 2017 | www.nakedcapitalism.com
Posted on April 27, 2017 by Yves Smith Yves here. At the end, Ames explains why this sudden handwringing about Russian inequality is newsworthy:

Without any of this context, it's as though Russia's extremes of inequality that Credit Suisse just reported on suddenly appeared out of nowhere, as a manifestation of Vladimir Putin's innate evil. As though nothing preceded him-the 1990s had never happened, and our Establishment has always sincerely cared about how Russians must suffer from inequality and corruption. Erasing history like this has a funny way of making America look exceptionally good, and Russia look exceptionally bad.

As anyone who knows a smidge about this sordid history could tell you, the US's neoliberal reforms set the stage for a plutocratic land grab, with members of the Harvard team advising the State Department feeding at the trough in a big way. As we've written, the fact that Harvard paid $26.5 million in fines, yet Larry Summer not merely failed to sanction the professor who headed the team, his personal friend Andrei Shleifer, but actually protected him was the proximate cause of the ouster of Summers as Harvard president .

By Mark Ames, founding editor of the Moscow satirical paper The eXile and co-host of the Radio War Nerd podcast with Gary Brecher (aka John Dolan). Subscribe here . Originally published at The Exiled

The Guardian just published a piece on Russia's inequality problem - first and worst in the world, according to a new Credit Suisse report . Funny to see Credit Suisse wringing its hands over Russian inequality, given that bank's active complicity in designing and profiting off the privatization of Russia in the early-mid 1990s. Shortly before Credit Suisse arrived in Russia, it was the most equal country on the planet; a few years after Credit Suisse arrived and pocketed up to hundreds of millions in profits, Russia was the most unequal country on earth, and it's pretty much been that way since.

Credit Suisse's new Russia branch was set up in 1992, and it was led by a young twenty-something American banker named Boris Jordan, the grandson of wealthy White Russian emigres. Jordan was key to the bank's success, thanks to his cozy relationships with Russia's neoliberal "young reformers" in charge of privatizing the former Communist country. In the first wave of voucher privatization-when all Russians were issued vouchers which they could then either convert into shares in a newly-privatized company, or sell off-Credit Suisse's Boris Jordan gobbled up 17 million of Russia's privatization vouchers, over 10 percent of the total.

Inside connections were the key. While working for Credit Suisse, Jordan advised the Yeltsin government on how to implement its Russia's disastrous voucher privatization scheme. Jordan worked together with the two of the most powerful US-backed Russian free-marketeers: Prime Minister Yegor Gaidar, architect of the shock therapy program that led to the mass impoverishment of tens of millions of Russians; and Anatoly Chubais, architect of Russia's privatization program, which created Russia's new billionaire oligarch class. Gaidar's shock therapy confiscated wealth from the masses; Chubais' privatization concentrated wealth in a few hands. And Jordan's Credit Suisse advised, traded off, and profited from this wealth transfer. This was the trio that played a central role in creating the inequality that Credit Suisse is now wringing its hands over. (You can read an interview with Jordan about how he co-advised the voucher implementation in 1992, which is stunning for a lot of reasons- he admits they sped up its implementation of voucher privatization to make sure that Russia's parliament, i.e. representative democracy, couldn't interfere with it. Democracy was not something anyone involved in Russia's privatization in the 1990s gave a shit about.)

The conflicts-of-interest here were so over-the-top, they were almost impossible to wrap your head around: Credit Suisse banker Boris Jordan helped implement the voucher privatization scheme with Russia's top political figures; and Credit Suisse massively profited off this same privatization scheme. And it was all done with the full backing and support of the US Treasury Department and the IMF.

(Another major beneficiary of Russian privatization vouchers was a murky hedge fund run by the billionaire Chandler brothers. They made a killing snapping up vouchers cheap, converting them into stakes in key Russian industries, and selling their stakes for huge profits. I wrote about them a couple of years ago because one of the Chandler brothers plowed some of his Russia loot into something called the Legatum Institute -a Dubai-based neocon front group that's been bankrolling the "Russia disinformation panic!" for several years now, issuing report after report after report on the Kremlin disinformation scare by their protege Peter Pomerantsev . You have to let these vulture-capitalist billionaires wet their beaks a little, or they'll raise an army of human rights activists to regime-change your ass.)

Shock therapy, first implemented in 1992 and not really ended until Russia's devastating financial crash in 1998, was politically useful in that by confiscating the Russian middle-class's and lower-class's savings, it created a massively unequal society. And that alone drove Russia further from its Communist recent past, which was the political goal that justified everything.

In 1994, this same young Credit Suisse banker, Boris Jordan, told Forbes' Paul Khlebnikov about a scheme he was trying to sell to the Yeltsin regime. It was called "loans-for-shares" and when it was finally adopted at the end of 1995, it resulted in what many considered the single largest plunder of public wealth in recorded history: The crown jewels of Russian industry-oil, gas, natural resources, telecoms, state banks-given away to a tiny group of connected bankers. It was this scheme, first devised by a Credit Suisse banker, that created Russia's world-famous oligarchy.

The scheme went something like this: The Yeltsin regime announced in late 1995 auctions under which bankers would lend the government money in exchange for "temporary" control over the revenue streams of Russia's largest and most valuable companies. After a period, the government would "repay" the "loans" and the banks would give the their large stakes back to the government.

In reality, every single "auction" was rigged by the winning bank, which paid next to nothing for its control over an oil company/nickel company/etc. Even the little money paid by this bank was often stolen from the state. That's because Russia used a handful of private banks as authorized treasury institutions to transfer government salaries and other funds around the country. This allowed the same bankers who were authorized as state treasury banks to keep those funds for themseles rather than distribute them to the teachers, doctors and scientists as salaries-so they did what was in their rational self-interest and kept the money, delaying salary payments for months or even years at a time, while they used the funds for themselves to speculate, or to buy up assets in auctions they rigged for themselves. It was pure libertarian paradise on earth-everything von Hayek and von Mises dreamed of-in practice.

By the time the loans-for-shares was actually put into effect in late 1995, Credit Suisse's Boris Jordan joined up with an anointed banker-oligarch, Vladimir Potanin, to set up their own investment bank, Renaissance Capital. They raised their first private equity fund, Sputnik Capital-with George Soros and Harvard University as co-investors-and Sputnik Capital went on to take advantage of the loans-for-shares investment opportunities, which had even more help from the fact that Yeltsin made Potanin his Finance Minister in 1996.

This sudden mass wealth transfer from the many to the few had a devastating effect on Russia's population. Inflation in the first two years of shock therapy and voucher privatization ran at 1,354% in 1992, and 896% in 1993, while real incomes plunged 42% in 1992 alone; real wages in 1995 were half of where they were in 1990 (pensions in 1995 were only a quarter in real terms of where they were in 1990). According to very conservative official Russian statistics, GDP plunged 44% from 1992-1998 - others put the GDP crash even higher, 50% or more. By comparison the Soviet GDP fell 24% during its war with Nazi Germany, and the US's GDP fell 30% during the Great Depression. So what happened in the 1990s was unprecedented for a major developed country-by the end of the decade and all of the Washington/financial industry-backed reforms, Russia was a basket case, a third-rate country with an even bleaker future. Capital investment had collapsed 85% during that decade-everyone was stripping assets, not investing in them. Domestic food production collapsed to half the levels during perestroika; and by 1999, anywhere from a third to half of Russians relied on food grown in their own gardens to eat. They'd reverted to subsistence farming after a decade of free market medicine.

All of this had a catastrophic effect on Russians' health and lives. Male Russian life expectancy dropped from 68 years during the late Soviet era, to 56 in the mid-1990s, about where it had been a century earlier under the Tsar. Meanwhile, as births plunged and child poverty and malnutrition soared, Russia's death-to-birth ratio reached levels not seen in the 20th century. According to Amherst economist David Kotz, over 6 million Russians died prematurely during the US-backed free-market reforms in the 1990s. What's odd is how little pity or empathy has ever been shown for those Russians who were destroyed by the reforms we backed, advised funded, bribed, coerced, and were accessory to in every way. They weren't entirely America's fault; Yeltsin and his US-backed "market bolsheviks" had their own cynical, ideological and political reasons to restructure Russia's political economy in the most elitist, hierarchical unequal manner possible. But if the US had acted differently, given how much influence the Clinton Administration had with the Yeltsin regime, things could certainly have turned out differently. The point is-they didn't. The inequality was the surest sign of success. It only became something to wring our hands about later, a soft-power weapon to smack them with, now that we have little to zero influence over Russia.

It's interesting that our literature is filled with plenty of official empathy for Weimar German victims of that country's hyperinflation, but nothing of the sort for Russians of the 1990s, who were, it was argued, being ennobled and lifted up by the linear thread of liberal history-they were heading towards the bright market-based future, can't let a few knocks and scratches distract us! Can't make an omelet without cracking a few eggs, as the West's Stalin apologists used to say.

Here, for example, is a typical cheerleader story about the new Russian inequality, published in Businessweek in 1996-a fluff job on Boris Jordan's Russian backer, Vladimir Potanin. Notice how the headline/subheader make clear that the hero of this narrative is the Russian billionaire, and the villains are the "angry masses" of poor envious Russians:

The Battle for Russia's Wealth

Can hugely rich new capitalists weather a backlash from the angry masses?

Russia's answer to J.P. Morgan could not be less like the eccentric, bulbous-nosed original. Vladimir O. Potanin is a shy, athletic man of 35. Holding court in his rosewood-paneled office on Moscow's Masha Poryvaeva Street, the president of Oneximbank quietly gives instructions to two strapping bodyguards at his door. Cool and controlled, Potanin is a standout in a group of dynamic businessmen who have seized huge slices of the economy.

Which reads a lot like this fluff job in the Los Angeles Times, published around the same time, headlined "Whiz-Kid Banker Named to Russian Cabinet" . Which reads a lot like a Businessweek followup up with even more shameless hagiography, headlined "The Most Powerful Man in Russia" . You can try reading that last one if you want, but I recommend keeping a vomit bag close by-and a cyanide pill for good measure.

So this is the sordid and depressing backstory to the Credit Suisse report on Russian inequality-the story you definitely won't and don't read about in Credit Suisse's own account. They're a bank; their reports, while perhaps truthful, are far from The Truth-more like marketing pamphlets than serious scholarship.

Credit Suisse made a killing in Russia in the early-mid 1990s, dominating two-thirds of Russia's capital markets deals-while tens of millions sank into desperate poverty. That too is inequality.

Jordan himself remained a powerful celebrity-investor through the early Putin era. In 1997, Boris Jordan was caught up in a major scandal surrounding the privatization of the national telecoms concern, Svyazinvest-which was won by a consortium that included Soros, Harvard, and a bank owned by Finance Minister Potanin and his partner, Mikhail Prokhanov, who today owns the Brooklyn Nets. The scandal was this: The government official in charge of auctioning off the telecoms to Soros-Harvard-Potanin-Jordan consortium, Alfred Kokh, had been given a shady $100,000 book advance by a shady Swiss company connected to Potanin's bank. The book had not been written; the advance was unusually high; and the Swiss "publisher" which had never published a book before was itself incorporated and led by none other than Boris Jordan's cousin, Tikhon Troyanos.

The revelations led to scandals, and Yeltsin was forced to fire his privatization chief Alfred Kokh, along with a handful of other corrupt US-backed "young reformers" caught getting paid on the eve of a rigged auction.

But what did it really matter? What really mattered to everyone who matters was the political structure of Russia's economy. No longer egalitarian, no longer a threat to the neoliberal order-it now had the world's most unequal society, and that was a good thing, because the new elites would identify their interests more with the interests of their Davos counterparts than with the interests of the "backwards" Russian masses, whose fate was their problem, not ours. This is when racist caricatures of the "backwards" Russian masses help-you don't have to empathize with them, history is sending them to the trash heap of history, not you. The world was safe for business, and that was all the affirmation anyone needed to hear.

At the end of the Yeltsin era, I visited the sprawling suburban Moscow "compound" owned by Potanin and his banking partner, Mikhail Prokhorov, as well as Renaissance Capital-the bank first founded with Boris Jordan in the mid-1990s. It was a huge gated compound with several buildings, a mini-hotel, and a nightclub/concert hall. One of the first things I saw entering the gaming hall building was two familiar-looking men in track suits playing backgammon: Vladimir Potanin, billionaire oligarch; and Alfred Kokh, the fired, disgraced head of Yeltsin's privatization committee.

The financial crisis of 1998 left Russia's in complete tatters, and Boris Jordan was never the big shot that he had been before. His real value was providing cover for the new boss Vladimir Putin as he re-centralized power under Kremlin control. The first upstart oligarch that Putin took down was Vladimir Gusinsky. He was briefly jailed and then exiled to Israel. His once-respected opposition TV station, NTV, was "bought" by Gazprom, and Gazprom, needing a western-friendly face for its hostile takeover, hired Boris Jordan as the new general director of the network-and his old partner-in-crime, Alfred Kokh, the disgraced ex-privatization chief, as chairman of NTV's board. Almost immediately, 25 NTV journalists- half the staff- "resigned" . Jordan's job was to blunt western criticism of the Kremlin as it destroyed the lone critical voice on Russian television, and two years later, his job done, he moved on.

Today Jordan still runs the Sputnik Fund , such as it is-mostly a web site as far as I can tell. And he is listed as the founder of New York University's "NYU Jordan Center for the Advance Study of Russia" . He looks like such a minor figure now.

Without any of this context, it's as though Russia's extremes of inequality that Credit Suisse just reported on suddenly appeared out of nowhere, as a manifestation of Vladimir Putin's innate evil. As though nothing preceded him-the 1990s had never happened, and our Establishment has always sincerely cared about how Russians must suffer from inequality and corruption. Erasing history like this has a funny way of making America look exceptionally good, and Russia look exceptionally bad.

Temporarily Sane , April 27, 2017 at 3:21 am

Great piece. Mark Ames and his former eXile comrades Yasha Levine and Matt Taibbi write some of the most honest and ideologically neutral critiques of the current political and economic clusterfuck. The Guardian, OTOH, is pure neoliberal establishment propaganda. It really went downhill after Katherine Viner replaced Allan Rusbridger as chief editor. If the Snowden affair happened today they would probably be loudly calling for his arrest.

Lambert Strether , April 27, 2017 at 4:50 am

Seconded!

Lambert Strether , April 27, 2017 at 4:49 am

On the headline: "Well, I should hope so!"

ambrit , April 27, 2017 at 5:14 am

Why do I get the feeling that this "playbook" is being resurrected to manage a "privatization" of the American "safety net?" When it happened in Russia, the Russians ended up with Vladimir Vladimirovitch rising to stem the tide of officially sanctioned criminality. One could say that Russia has had precious little experience with "representational" governance, and thus a return to some form of autocracy was understandable. America, on the other hand, has, supposedly, a storied history of representative governance. So far, that "story" isn't showing signs of turning out so well for the "angry masses" of the Homeland. What, then, will America "put up with" to see the mere appearance of social justice? This is where the supposed "opposition" party, the Democrats, have fallen down. They aren't even "talking" a good game today. The longer these tensions continue, and increase, the greater the damage from the eventual unwinding will be.

Carolinian , April 27, 2017 at 9:45 am

The job of the Dems is to herd the sheep in the right direction. They do this by pretending to be lefties while keeping the true alternative, socialism, in its box. One could argue the whole history of the 20th century after WW1 was about keeping socialism in its box. Funny how the end of the Evil Empire–at least notionally committed to socialism–has made the situation in the West so much worse. It's almost a though those 20th century progressive reforms were only intended to keep the commies at bay. Now the plutocrats don't have to pretend any more.

Mark P. , April 27, 2017 at 2:22 pm

Ambrit wrote: 'Why do I get the feeling that this "playbook" is being resurrected to manage a "privatization" of the American "safety net?"

Because many of the same sociopaths who learned how to loot a collapsing empire after the fall of the USSR took the lessons learned and applied them over here.

'The Harvard Boys Do Russia'
https://www.thenation.com/article/harvard-boys-do-russia/

'Harvard Mafia, Andrei Shleifer and the Economic Rape of Russia'
http://www.softpanorama.org/Skeptics/Pseudoscience/harvard_mafia.shtml

Thuto , April 27, 2017 at 6:54 am

Well this is to be expected isn't it. The same banks that go around the world selling their brand of "market based reforms" then turn around and wring their hands when the post-reform economy has been stratified in favour of the 1%. It's almost as if registering their concern about the inequality levels they had a hand in creating somehow assuages their guilt. In my own country South Africa, one of the most unequal societies in the world, we are drowning in a constant, ad nauseum barrage of media commentary about how orthodox neoliberal thinking is the only thing that will save the country. Such stories of how orthodoxy itself plunged a country like Russia into economic anarchy are sadly lacking, in fact speaking ill of orthodoxy is anathema and one suspects that journalists are either infected with terminal gullibility vis a vis neoliberal thinking or are towing the line to stay in their jobs

David Barrera , April 27, 2017 at 9:22 am

Thanks for this great article It looks like Popper's positivism did wonders for George Soros. As he would say: "I made a killing". Sure nothing a couple of his humanitarian NGO's can not fix!

Fool , April 27, 2017 at 10:50 am

This is terrific - and the Yeltsin-Clinton photograph is too perfect.

I suppose we'll never forgive the Russians for how bad they let neoliberal capitalism look.

Martin Finnucane , April 27, 2017 at 12:19 pm

I suppose we'll never forgive the Russians for how bad they let neoliberal capitalism look.

I think that in some circles there's a deeply seated viral antagonism toward Russia and Russians that goes far beyond, and is far more deeply laid, than the liberal-v-not-liberal clash of civilizations du jour. Like herpes, this particular disease bubbles to the surface under certain conditions, such as a the Ukraine coup. Perhaps the virus first broke out around the time of the Venetian Sack of Constantinople ?

Ask a Russian. If you ask a Western liberal and you'll get nothing but a blank stare. Of course Russia bad . That's all we need to known. Full stop. My Western liberal conscience is clean.

The rank hypocrisy involved reminds one of Obama's gratuitous Russia bashing . And who is more iconically Western, more iconically liberal, than President Obama? Obama is nothing if not cool, and Western liberalism is coolness itself.

Susan the other , April 27, 2017 at 12:25 pm

I've wondered what a better alternative would have looked like – instead of looting and refitting Russia to join a neoliberal capitalist world. Wasn't it Jeffrey Sachs, now reformed, who said shock therapy would be the fastest and least painful way to get Russia up and running? And Putin has been a tightrope walker all along and seems to be very sensible. Almost too sensible. He has his nationalist opponents on one side (the late, great Boris Nemtsov was one) who say he is giving Russian wealth away to the West and his western-neoliberal detractors one the other side who call him a nationalist tyrant. In between he has the backing of the Russian people. Very agile.

PlutoniumKun , April 27, 2017 at 12:39 pm

The obvious alternative way would be the various routes followed by the former Iron Curtain countries. Most had some form of shock therapy, if none as extreme as that in Russia, probably because they don't have the easy to grab mineral resources. None have done as well as hoped, but some have been moderately successful by steering a middle course – The Czech Republic and Poland have done reasonably well over the past 20 years. In general, I would say that those which opted for slower and gentler market reform did better than the 'get it over quick' ones. The one country that tried not to change – Belarus – is still standing, if a bit of a basket case.

JohnnyGL , April 27, 2017 at 1:58 pm

Keep in mind the EU played a much more constructive role back then. The elites at the time really wanted integration and modernization to work, especially in the Central European countries like those ones you listed.

JohnnyGL , April 27, 2017 at 12:31 pm

Not directly related, but for wider context, very similar programs happened in Mexico during the Salinas administration (1988-1994) around the same time. NAFTA in 1994 was the 'reward' for the Mexican elites doing as they were told.

https://www.jacobinmag.com/2014/10/privatizing-mexico/

Here's an old NYT article which aims for a tone of 'cheerleading with reservations', but does give you a sense of the corruption involved during the biddings, especially around TelMex and the resulting problems.

http://www.nytimes.com/1993/10/27/world/going-private-special-report-mexico-sells-off-state-companies-reaping-trouble.html?pagewanted=all

Of course, we know how the story ends in Mexico with the 1994-5 Tequila Crisis, much like the story ended in Russia with the 1998 default which crushed the LTCM hedgies.

Martin Finnucane , April 27, 2017 at 12:43 pm

Also, Carlos Slim became the richest man in the world. Meritocracy rocks! Go suck a heuvo gordo, you socialistas sucias!

Susan the other , April 27, 2017 at 12:32 pm

I've wondered what a better alternative would have looked like – instead of looting and refitting Russia to join a neoliberal capitalist world. Wasn't it Jeffrey Sachs, now reformed, who said shock therapy would be the fastest and least painful way to get Russia up and running? And Putin has been a tightrope walker all along and seems to be very sensible. Almost too sensible. He has his nationalist opponents on one side (the late, great Boris Nemtsov was one) who say he is giving Russian wealth away to the West and his western-neoliberal detractors one the other side who call him a nationalist tyrant. In between he has the backing of the Russian people. Very agile.

PKMKII , April 27, 2017 at 1:40 pm

My one minor quibble is the assertion that those in the West put the blame of the downfall of the Russian masses on the masses themselves. Most of those in the West are either ignorant, or in denial, of how bad it got for the average Russian in the aftermath of the fall of the Soviet Union. They were taught that the USSR was a hellhole where everyone lived in horrific poverty except for the party leaders. So they saw the horrible conditions under Yeltsin and company as a continuation of how things had always been. Some even argue it got better, painting any report showing things were better under the USSR as communist propaganda.

[Apr 04, 2017] Larry Summers and Jeffrey Sachs were involved in economic rape of Russia. It would be nice if they wrote mea culpas.

Apr 04, 2017 | economistsview.typepad.com
Peter K. , April 03, 2017 at 01:31 PM
PGL puts the blame on Yeltsin and this is what Stiglitz writes:

"I believe what we are confronting is partly the legacy of the flawed Washington Consensus that shaped Russia's transition. This framework's influences was reflected in the tremendous emphasis reformers placed on privatization, no matter how it was done, with speed taking precedence over everything else, including creating the institutional infrastructure needed to make a market economy work."

Larry Summers and Jeffrey Sachs were involved in this. It would be nice if they wrote mea culpas.

"Many in Russia believe that the US Treasury pushed Washington Consensus policies to weaken their country. The deep corruption of the Harvard University team chosen to "help" Russia in its transition, described in a detailed account published in 2006 by Institutional Investor, reinforced these beliefs.

I believe the explanation was less sinister: flawed ideas, even with the best of intentions, can have serious consequences. And the opportunities for self-interested greed offered by Russia were simply too great for some to resist. Clearly, democratization in Russia required efforts aimed at ensuring shared prosperity, not policies that led to the creation of an oligarchy."

Just look at what the West did to Iraq. Like Stiglitz I think it is more incompetence and ideology than a sinister plan to destroy Iraq and Russia. And we are reaping the results of that incompetence.

2008 was also incompetence, greed and ideology not some plot to push through "shock doctrines."

If the one percent were smart they would slowly cook the frog in the pot, where the frog doesn't notice, instead of having these crises which backfire.

pgl -> Peter K.... , April 03, 2017 at 04:30 PM
Nice cherry picking especially for someone who never read his chapter 5 of that great 1997 book.
libezkova -> pgl... , April 03, 2017 at 10:40 PM
The book is great, the article is junk.

As Paine aptly said (in best Mark Twain style):

"Too much [neo]liberal swamp gas"

[Apr 04, 2017] Privatization in Russia was done according to the expert advice of deregulating Larry Summers gang from Harvard

Apr 04, 2017 | economistsview.typepad.com
anne , April 03, 2017 at 10:01 AM
https://www.project-syndicate.org/commentary/illiberal-stagnation-russia-transition-by-joseph-e--stiglitz-2017-04

April 2, 2017

Illiberal Stagnation
By JOSEPH E. STIGLITZ

I believe what we are confronting is partly the legacy of the flawed Washington Consensus that shaped Russia's transition. This framework's influences was reflected in the tremendous emphasis reformers placed on privatization, no matter how it was done, with speed taking precedence over everything else, including creating the institutional infrastructure needed to make a market economy work....

anne -> anne... , April 03, 2017 at 10:01 AM
https://en.wikipedia.org/wiki/Washington_Consensus

The term Washington Consensus was coined in 1989 by English economist John Williamson to refer to a set of 10 relatively specific economic policy prescriptions that he considered constituted the "standard" reform package promoted for crisis-wracked developing countries by Washington, D.C.–based institutions such as the International Monetary Fund (IMF), World Bank, and the US Treasury Department. The prescriptions encompassed policies in such areas as macroeconomic stabilization, economic opening with respect to both trade and investment, and the expansion of market forces within the domestic economy.

  1. Fiscal policy discipline, with avoidance of large fiscal deficits relative to GDP;
  2. Redirection of public spending from subsidies toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment;
  3. Tax reform, broadening the tax base and adopting moderate marginal tax rates;
  4. Interest rates that are market determined and positive (but moderate) in real terms;
  5. Competitive exchange rates;
  6. Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs;
  7. Liberalization of inward foreign direct investment;
  8. Privatization of state enterprises;
  9. Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions;
  10. Legal security for property rights.
pgl -> anne... , April 03, 2017 at 10:18 AM
"privatization, no matter how it was done, with speed taking precedence over everything else".

It does matter how it is done as Stiglitz, Dani Rodrik, and even that ProMarket blog often point out. It was done very poorly under Yeltsin.

RGC -> pgl... , April 03, 2017 at 10:34 AM
It was done according to the "expert" advice of deregulatin' Larry's gang from Harvard.
RGC -> RGC... , April 03, 2017 at 10:46 AM
Does deregulatin' Larry still have a job?

Why?

Peter K. -> RGC... , April 03, 2017 at 01:24 PM
"It was done according to the "expert" advice of deregulatin' Larry's gang from Harvard."

Yes PGL blames Yeltsin but it was the Western advisers who forced disastrous shock therapy on Russia.

See the IMF, Europe and Greece for another example. No doubt PGL blames the Greeks. He always blames the victims.

Peter K. -> Peter K.... , April 03, 2017 at 01:33 PM
PGL blames Yeltsin but even Stiglitz writes that it was the Washington Consensus which was to blame for the poor transition and disastrous collapse of Russia. Now we are reaping the consequences. Just like with Syria, ISIL and Iraq.
pgl -> Peter K.... , April 03, 2017 at 04:28 PM
Yep - you still have not read what he wrote. As usual.
pgl -> Peter K.... , April 03, 2017 at 04:27 PM
WTF? The IMF may have given bad advice but Yeltsin ran the show. And if you think Yeltsin was the victim - then you are really lost.

"No doubt PGL blames the Greeks."

You do lie 24/7. Pathetic.

anne -> pgl... , April 03, 2017 at 11:15 AM
Suppose though the matter with privatization is not so much speed but not understanding what should not be subject to privatizing, such as soft and hard infrastructure.
anne -> anne... , April 03, 2017 at 10:46 AM
That a Washington Consensus approach to Russian development proved obviously faulty is important because I would argue the approach has repeatedly proved faulty from Brazil to South Africa to the Philippines... When the consensus has been turned away from as in Brazil for several years the development results have dramatically changed but turning from the approach which allows for severe concentrations of wealth has proved politically difficult as we find now in Brazil.
anne -> anne... , April 03, 2017 at 10:48 AM
https://fred.stlouisfed.org/graph/?g=cad0

August 4, 2014

Real per capita Gross Domestic Product for China, India, Brazil, South Africa and Russia, 1990-2015

(Percent change)


https://fred.stlouisfed.org/graph/?g=cacX

August 4, 2014

Real per capita Gross Domestic Product for China, India, Brazil, South Africa and Russia, 1990-2015

(Indexed to 1990)

anne -> anne... , April 03, 2017 at 10:55 AM
The range in real per capita GDP growth from 1990 to 2015 extends from 15.8% to 19.8% to 41.1% to 223.1% to 789.1%. This range needs to be thoroughly analyzed in terms of reflective policy.
anne -> anne... , April 03, 2017 at 10:49 AM
https://fred.stlouisfed.org/graph/?g=cad4

November 1, 2014

Total Factor Productivity at Constant National Prices for China, India, Brazil, South Africa and Russia, 1990-2014


https://fred.stlouisfed.org/graph/?g=cad7

November 1, 2014

Total Factor Productivity at Constant National Prices for China, India, Brazil, South Africa and Russia, 1990-2014

(Indexed to 1990)

anne -> anne... , April 03, 2017 at 11:00 AM
The range in total factor productivity growth or decline from 1990 to 2014 extends from a decline of - 16.9% to - 12.2% to - 5.1% to growth of 40.9% and 76.4%. Again, this range needs to be thoroughly analyzed in terms of reflective policy.
anne -> anne... , April 03, 2017 at 11:10 AM
The persuasiveness of the Washington Consensus approach to development strikes me as especially well illustrated by the repeated, decades-long insistence by Western economists that Chinese development is about to come to a crashing end. The insistence continues with an almost daily repetition in the likes of The Economist or Financial Times.

I would suggest the success of China thoroughly studied provides us with remarkable policy prescriptions.

[Apr 04, 2017] It may eventually prove to be generous to describe Russias misfortune as the legacy of the flawed Washington Consensus that shaped Russias transition according to Stiglitz. It may prove rather to be the legacy of *intentionally* flawed consensus .

Notable quotes:
"... Too much liberal swamp gas [In Stiglitz's book] ..."
"... I love joe. His technical intuition is peerless. But he is mushy at heart. Social values involved. Unlike say chomsky ..."
"... It may eventually prove to be generous to describe Russia's misfortune as "the legacy of the flawed Washington Consensus that shaped Russia's transition" according to Stiglitz. It may prove rather to be "the legacy of *intentionally* flawed consensus". ..."
Apr 04, 2017 | economistsview.typepad.com
DrDick -> pgl... April 03, 2017 at 11:01 AM
A great piece by Stiglitz.
pgl -> DrDick ... April 03, 2017 at 12:29 PM
I've been encouraging folks to read his 1997 book - in particular chapter 5. When I do, the Usual Suspects decided to attack by questioning Stiglitz's credential.

One of them cited Wikipedia noting it relied on World Bank research. Of course, Stiglitz headed the World Bank back then. Go figure.

paine -> DrDick ... , April 03, 2017 at 04:43 PM
Excellent book sent Ken Rogoff on a rampage
paine -> paine... , April 03, 2017 at 04:46 PM
Read open letter to Stiglitz
anne -> paine... , April 03, 2017 at 06:13 PM
http://www.imf.org/external/np/vc/2002/070202.htm

An Open Letter *

By Kenneth Rogoff,
Economic Counsellor and Director of Research,
International Monetary Fund

To Joseph Stiglitz,
Author of "Globalization and Its Discontents"

Washington D.C., July 2, 2002

* Used as opening remarks at a June 28 discussion of Mr. Stiglitz's book at the World Bank, organized by the World Bank's Infoshop

anne -> DrDick ... , April 03, 2017 at 06:31 PM
http://www.nybooks.com/articles/2002/08/15/globalization-stiglitzs-case/

August 15, 2002

Globalization: Stiglitz's Case By Benjamin M. Friedman

Globalization and Its Discontents by Joseph E. Stiglitz

paine -> DrDick ... , April 03, 2017 at 04:22 PM
Too much liberal swamp gas [In Stiglitz's book]
paine -> pgl... , April 03, 2017 at 04:20 PM
The obvious contrast does not exist

But id conjecture the Deng path trumps the Yeltsin path

paine -> paine... , April 03, 2017 at 04:26 PM
Nothing liberal values can help

Development is not humanistic or [is] about ballot box choices

Clio sets harsh conflicts in our path albeit of our own Making

paine -> paine... , April 03, 2017 at 04:31 PM
I love joe. His technical intuition is peerless. But he is mushy at heart. Social values involved. Unlike say chomsky
anne -> anne... , April 03, 2017 at 06:22 PM
https://fred.stlouisfed.org/graph/?g=cacK

August 4, 2014

Real per capita Gross Domestic Product for China and Russia, 1990-2015

(Percent change)

https://fred.stlouisfed.org/graph/?g=cacO

August 4, 2014

Real per capita Gross Domestic Product for China and Russia, 1990-2015

(Indexed to 1990)

anne -> anne... , April 03, 2017 at 06:27 PM
https://fred.stlouisfed.org/graph/?g=cacQ

November 1, 2014

Total Factor Productivity at Constant National Prices for China and Russia, 1990-2014

https://fred.stlouisfed.org/graph/?g=cacR

November 1, 2014

Total Factor Productivity at Constant National Prices for China and Russia, 1990-2014

(Indexed to 1990)

libezkova -> paine... , April 03, 2017 at 08:28 PM
"But id conjecture the Deng path trumps the yeltsin path"

True.

point -> pgl... , April 03, 2017 at 06:28 PM
It may eventually prove to be generous to describe Russia's misfortune as "the legacy of the flawed Washington Consensus that shaped Russia's transition" according to Stiglitz. It may prove rather to be "the legacy of *intentionally* flawed consensus".

[Apr 03, 2017] Shleifer also met his mentor and professor, Lawrence Summers, during his undergraduate education at Harvard. The two went on to be co-authors, joint grant recipients, and faculty colleagues

Notable quotes:
"... Could Russia's post-communist transition have been managed better? We can never answer such questions definitively: history cannot be re-run. But I believe what we are confronting is partly the legacy of the flawed Washington Consensus that shaped Russia's transition. ..."
"... This framework's influences was reflected in the tremendous emphasis reformers placed on privatization, no matter how it was done, with speed taking precedence over everything else, including creating the institutional infrastructure needed to make a market economy work. Fifteen years ago, when I wrote Globalization and its Discontents, I argued that this "shock therapy" approach to economic reform was a dismal failure. ..."
"... Today, more than a quarter-century since the onset of transition, those earlier results have been confirmed, and those who argued that private property rights, once created, would give rise to broader demands for the rule of law have been proven wrong. Russia and many of the other transition countries are lagging further behind the advanced economies than ever. GDP in some transition countries is below its level at the beginning of the transition." ..."
"... In the matter before us – the question of the many billions in capital that fled Russia to Western shores via the Bank of New York and other Western banks – we have had a window thrown open on what the financial affairs of a country without property rights, without banks, without the certainty of contract, without an accountable government or a leadership decent enough to be concerned with the national interest or its own citizens' well-being looks like. ..."
"... And there is no mistake as to who the victims are, i.e. Western, principally U.S., taxpayers and Russian citizens' whose national legacy was stolen only to be squandered and/or invested in Western real estate and equities markets ..."
Apr 03, 2017 | economistsview.typepad.com
pgl , April 03, 2017 at 09:52 AM
Stiglitz returns to the issue of why post Soviet Union Russia has done so poorly in terms of economics(Illiberal Stagnation by Joseph E. Stiglitz - Project Syndicate):

"In terms of per capita income, Russia now ranks 73rd (in terms of purchasing power parity) – well below the Soviet Union's former satellites in Central and Eastern Europe. The country has deindustrialized: the vast majority of its exports now come from natural resources. It has not evolved into a "normal" market economy, but rather into a peculiar form of crony-state capitalism .

Many had much higher hopes for Russia, and the former Soviet Union more broadly, when the Iron Curtain fell. After seven decades of Communism, the transition to a democratic market economy would not be easy. But, given the obvious advantages of democratic market capitalism to the system that had just fallen apart, it was assumed that the economy would flourish and citizens would demand a greater voice. What went wrong? Who, if anyone, is to blame?

Could Russia's post-communist transition have been managed better? We can never answer such questions definitively: history cannot be re-run. But I believe what we are confronting is partly the legacy of the flawed Washington Consensus that shaped Russia's transition.

This framework's influences was reflected in the tremendous emphasis reformers placed on privatization, no matter how it was done, with speed taking precedence over everything else, including creating the institutional infrastructure needed to make a market economy work. Fifteen years ago, when I wrote Globalization and its Discontents, I argued that this "shock therapy" approach to economic reform was a dismal failure.

But defenders of that doctrine cautioned patience: one could make such judgments only with a longer-run perspective. Today, more than a quarter-century since the onset of transition, those earlier results have been confirmed, and those who argued that private property rights, once created, would give rise to broader demands for the rule of law have been proven wrong. Russia and many of the other transition countries are lagging further behind the advanced economies than ever. GDP in some transition countries is below its level at the beginning of the transition."

Stiglitz is not saying markets cannot work if the rules are properly constructed. He is saying that the Yeltsin rules were not as they were crony capitalism at their worse. And it seems the Putin rules are not much better. He mentions his 1997 book which featured as chapter 5 "Who Lost Russia". It still represents an excellent read.

RGC -> pgl... , April 03, 2017 at 10:11 AM
"Shleifer also met his mentor and professor, Lawrence Summers, during his undergraduate education at Harvard. The two went on to be co-authors, joint grant recipients, and faculty colleagues.[5]

During the early 1990s, Andrei Shleifer headed a Harvard project under the auspices of the Harvard Institute for International Development (HIID) that invested U.S. government funds in the development of Russia's economy.

Schleifer was also a direct advisor to Anatoly Chubais, then vice-premier of Russia, who managed the Rosimushchestvo (Committee for the Management of State Property) portfolio and was a primary engineer of Russian privatization. Shleifer was also tasked with establishing a stock market for Russia that would be a world-class capital market.[14]

In 1996 complaints about the Harvard project led Congress to launch a General Accounting Office investigation, which stated that the Harvard Institute for International Development (HIID) was given "substantial control of the U.S. assistance program."[15]

In 1997, the U.S. Agency for International Development (USAID) canceled most of its funding for the Harvard project after investigations showed that top HIID officials Andre Schleifer and Johnathan Hay had used their positions and insider information to profit from investments in the Russian securities markets. Among other things, the Institute for a Law Based Economy (ILBE) was used to assist Schleifer's wife, Nancy Zimmerman, who operated a hedge fund which speculated in Russian bonds.[14]

In August 2005, Harvard University, Shleifer and the Department of Justice reached an agreement under which the university paid $26.5 million to settle the five-year-old lawsuit. Shleifer was also responsible for paying $2 million worth of damages, though he did not admit any wrongdoing

https://en.wikipedia.org/wiki/Andrei_Shleifer

RGC -> RGC... , April 03, 2017 at 10:26 AM
Awards:

John Bates Clark Medal (1999)

"He has held a tenured position in the Department of Economics at Harvard University since 1991 and was, from 2001 through 2006, the Whipple V. N. Jones Professor of Economics."

libezkova -> RGC... , April 03, 2017 at 08:18 PM
My impression is that Andrei Shleifer was a marionette, a low level pawn in a big game.

The fact that he was a greedy academic scum, who tried to amass a fortune in Russia probably under influence of his wife (his wife, a hedge fund manager, was GS alumnae and was introduced to him by Summers) is peripheral to the actual role he played.

Jeffey Sacks also played highly negative role being the architect of "shock therapy": the sudden release of price and currency controls, withdrawal of state subsidies, and immediate trade liberalization within a country, usually also including large-scale privatization of previously public-owned assets.

In other words "shock therapy" = "economic rape"

As Anne Williamson said:

"Instead, after robbing the Russian people of the only capital they had to participate in the new market – the nation's household savings – by freeing prices in what was a monopolistic economy and which delivered a 2500% inflation in 1992, America's "brave, young Russian reformers" ginned-up a development theory of "Big Capitalism" based on Karl Marx's mistaken edict that capitalism requires the "primitive accumulation of capital". Big capitalists would appear instantly, they said, and a broadly-based market economy shortly thereafter if only the pockets of pre-selected members of their own ex-Komsomol circle were properly stuffed.

Those who hankered for a public reputation were to secure the government perches from which they would pass state assets to their brethren in the nascent business community, happy in the knowledge that they too would be kicked back a significant cut of the swag. The US-led West accommodated the reformers' cockeyed theory by designing a rapid and easily manipulated voucher privatization program that was really only a transfer of title and which was funded with $325 million US taxpayers' dollars. "

See also http://www.softpanorama.org/Skeptics/Pseudoscience/harvard_mafia.shtml

libezkova -> RGC... , April 03, 2017 at 07:51 PM
From the article:

"Many in Russia believe that the US Treasury pushed Washington Consensus policies to weaken their country. The deep corruption of the Harvard University team chosen to "help" Russia in its transition, described in a detailed account published in 2006 by Institutional Investor, reinforced these beliefs."

This was not a corruption. This was the intent on Clinton administration. I would think about it as a planned operation.

The key was that the gangster capitalism model was enforced by the Western "Washington consensus" (of which IMF was an integral part) -- really predatory set of behaviors designed to colonize Russia and make is US satellite much like Germany became after WWII but without the benefit of Marshall plan.

Clinton consciously chose this criminal policy among alternatives: kick the lying body. So after Russian people get rid of corrupt and degraded Communist regime, they got under the iron hill of US gangsters from Clinton administration.

My impression is that Clinton was and is a criminal. And he really proved to be a very capable mass murderer. And his entourage had found willing sociopaths within Russian society (as well as in other xUUSR republics; Ukraine actually fared worse then Russia as for the level of plunder) who implemented neoliberal policies. Yegor Gaidar was instrumental in enforcing Harvard-designed "shock therapy" on Russian people. He also create the main neoliberal party in Russia -- the Democratic Choice of Russia - United Democrats. Later in 1990s, it became the Union of Right Forces.

http://www.vdare.com/posts/the-rape-of-russia-explained-by-anne-williamson

Testimony of Anne Williamson

Before the Committee on Banking and Financial Services of the United States House of Representatives

September 21, 1999


In the matter before us – the question of the many billions in capital that fled Russia to Western shores via the Bank of New York and other Western banks – we have had a window thrown open on what the financial affairs of a country without property rights, without banks, without the certainty of contract, without an accountable government or a leadership decent enough to be concerned with the national interest or its own citizens' well-being looks like. It's not a pretty picture, is it? But let there be no mistake, in Russia the West has truly been the author of its own misery. And there is no mistake as to who the victims are, i.e. Western, principally U.S., taxpayers and Russian citizens' whose national legacy was stolen only to be squandered and/or invested in Western real estate and equities markets

... ... ...

A lot of people, especially pensioners, died because of Clinton's gangster policies in xUUSR space.

I am wondering how Russian managed to survive as an independent country. The USA put tremendous efforts and resources in destruction of Russian economy and colonizing its by creating "fifth column" on neoliberal globalization.

all those criminal oligarchs hold moved their capitals to the West as soon as they can because they were afraid of the future. Nobody persecuted them and Western banks helped to extract money from Russia to the extent that some of their methods were clearly criminals.

Economic devastation was comparable with caused by Nazi armies, although amount of dead was less, but also in millions.

Questionable figures from the West flowed into Russia and tried to exploit still weak law system by raiding the companies. Some of them were successful and amassed huge fortunes. Some ended being shot. Soros tried, but was threatened to be shot by Berezovsky and choose to leave for the good.

Especially hard hit was military industrial complex, which was oversized in any case, but which was an integral part of Soviet economy and employed many highly qualified specialists. Many of whom later emigrated to the West. At some point it was difficult to find physics department in the US university without at least a single person form xUSSR space (not necessary a Russian)

[Apr 03, 2017] https://www.project-syndicate.org/commentary/illiberal-stagnation-russia-transition-by-joseph-e--stiglitz-2017-04

Apr 03, 2017 | www.project-syndicate.org

April 2, 2017

Illiberal Stagnation
By JOSEPH E. STIGLITZ

I believe what we are confronting is partly the legacy of the flawed Washington Consensus that shaped Russia's transition. This framework's influences was reflected in the tremendous emphasis reformers placed on privatization, no matter how it was done, with speed taking precedence over everything else, including creating the institutional infrastructure needed to make a market economy work.... Reply Monday, April 03, 2017 at 10:01 AM anne said in reply to anne... https://en.wikipedia.org/wiki/Washington_Consensus

The term Washington Consensus was coined in 1989 by English economist John Williamson to refer to a set of 10 relatively specific economic policy prescriptions that he considered constituted the "standard" reform package promoted for crisis-wracked developing countries by Washington, D.C.–based institutions such as the International Monetary Fund (IMF), World Bank, and the US Treasury Department. The prescriptions encompassed policies in such areas as macroeconomic stabilization, economic opening with respect to both trade and investment, and the expansion of market forces within the domestic economy.

Fiscal policy discipline, with avoidance of large fiscal deficits relative to GDP;

Redirection of public spending from subsidies toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment;

Tax reform, broadening the tax base and adopting moderate marginal tax rates;

Interest rates that are market determined and positive (but moderate) in real terms;

Competitive exchange rates;

Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs;

Liberalization of inward foreign direct investment;

Privatization of state enterprises;

Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions;

Legal security for property rights. Reply Monday, April 03, 2017 at 10:01 AM pgl said in reply to anne... "privatization, no matter how it was done, with speed taking precedence over everything else".

It does matter how it is done as Stiglitz, Dani Rodrik, and even that ProMarket blog often point out. It was done very poorly under Yeltsin. Reply Monday, April 03, 2017 at 10:18 AM RGC said in reply to pgl... It was done according to the "expert" advice of deregulatin' Larry's gang from Harvard. Reply Monday, April 03, 2017 at 10:34 AM RGC said in reply to RGC... Does deregulatin' Larry still have a job?

Why? Reply Monday, April 03, 2017 at 10:46 AM Peter K. said in reply to RGC... "It was done according to the "expert" advice of deregulatin' Larry's gang from Harvard."

Yes PGL blames Yeltsin but it was the Western advisers who forced disastrous shock therapy on Russia.

See the IMF, Europe and Greece for another example. No doubt PGL blames the Greeks. He always blames the victims.
Reply Monday, April 03, 2017 at 01:24 PM Peter K. said in reply to Peter K.... PGL blames Yeltsin but even Stiglitz writes that it was the Washington Consensus which was to blame for the poor transition and disastrous collapse of Russia. Now we are reaping the consequences. Just like with Syria, ISIL and Iraq. Reply Monday, April 03, 2017 at 01:33 PM pgl said in reply to Peter K.... Yep - you still have not read what he wrote. As usual. Reply Monday, April 03, 2017 at 04:28 PM pgl said in reply to Peter K.... WTF? The IMF may have given bad advice but Yeltsin ran the show. And if you think Yeltsin was the victim - then you are really lost.

"No doubt PGL blames the Greeks."

You do lie 24/7. Pathetic. Reply Monday, April 03, 2017 at 04:27 PM anne said in reply to pgl... Suppose though the matter with privatization is not so much speed but not understanding what should not be subject to privatizing, such as soft and hard infrastructure. Reply Monday, April 03, 2017 at 11:15 AM anne said in reply to anne... That a Washington Consensus approach to Russian development proved obviously faulty is important because I would argue the approach has repeatedly proved faulty from Brazil to South Africa to the Philippines... When the consensus has been turned away from as in Brazil for several years the development results have dramatically changed but turning from the approach which allows for severe concentrations of wealth has proved politically difficult as we find now in Brazil. Reply Monday, April 03, 2017 at 10:46 AM anne said in reply to anne... https://fred.stlouisfed.org/graph/?g=cad0

August 4, 2014

Real per capita Gross Domestic Product for China, India, Brazil, South Africa and Russia, 1990-2015

(Percent change)


https://fred.stlouisfed.org/graph/?g=cacX

August 4, 2014

Real per capita Gross Domestic Product for China, India, Brazil, South Africa and Russia, 1990-2015

(Indexed to 1990) Reply Monday, April 03, 2017 at 10:48 AM anne said in reply to anne... The range in real per capita GDP growth from 1990 to 2015 extends from 15.8% to 19.8% to 41.1% to 223.1% to 789.1%. This range needs to be thoroughly analyzed in terms of reflective policy. Reply Monday, April 03, 2017 at 10:55 AM anne said in reply to anne... https://fred.stlouisfed.org/graph/?g=cad4

November 1, 2014

Total Factor Productivity at Constant National Prices for China, India, Brazil, South Africa and Russia, 1990-2014


https://fred.stlouisfed.org/graph/?g=cad7

November 1, 2014

Total Factor Productivity at Constant National Prices for China, India, Brazil, South Africa and Russia, 1990-2014

(Indexed to 1990) Reply Monday, April 03, 2017 at 10:49 AM anne said in reply to anne... The range in total factor productivity growth or decline from 1990 to 2014 extends from a decline of - 16.9% to - 12.2% to - 5.1% to growth of 40.9% and 76.4%. Again, this range needs to be thoroughly analyzed in terms of reflective policy. Reply Monday, April 03, 2017 at 11:00 AM anne said in reply to anne... The persuasiveness of the Washington Consensus approach to development strikes me as especially well illustrated by the repeated, decades-long insistence by Western economists that Chinese development is about to come to a crashing end. The insistence continues with an almost daily repetition in the likes of The Economist or Financial Times.

I would suggest the success of China thoroughly studied provides us with remarkable policy prescriptions. Reply Monday, April 03, 2017 at 11:10 AM

[Mar 31, 2017] Larry Summers is going rogue but only long after the horse has left the barn

Notable quotes:
"... As head of Barack Obama's National Economic Council during 2009 and 2010 at the height of the foreclosure crisis, Larry Summers broke many promises to help homeowners while simultaneously dismissing Wall Street's criminality. ..."
"... Now, after the Obama administration has left power and Summers has no ability to influence anything, he finds himself "disturbed" that settlements for mortgage misconduct are full of lies. ..."
"... Of course, the Wall Street Democrats, AKA Democratic partisan hacks that infest this blog, spent years defending Obama for his lax treatment of criminal bankers. (And these same folks were also among the most avid advocates of 'trickle down monetary policy,' which involved the Fed's showering cheap money on its owners, the Wall Street banking cartel and their wealthy clientele, while raising the margin over prime rates to their credit card victims/customers.) ..."
Mar 31, 2017 | economistsview.typepad.com
JohnH March 31, 2017 at 10:46 AM

Larry Summers is going rogue? (But only long after the horse has left the barn!)

"As head of Barack Obama's National Economic Council during 2009 and 2010 at the height of the foreclosure crisis, Larry Summers broke many promises to help homeowners while simultaneously dismissing Wall Street's criminality.

Now, after the Obama administration has left power and Summers has no ability to influence anything, he finds himself "disturbed" that settlements for mortgage misconduct are full of lies.

Those of us who screamed exactly this for years, when Summers might have been able to do something about it, are less than amused."

https://theintercept.com/2017/03/30/larry-summers-had-the-power-to-punish-wall-street-now-hes-slamming-obamas-gentle-treatment/

Of course, the Wall Street Democrats, AKA Democratic partisan hacks that infest this blog, spent years defending Obama for his lax treatment of criminal bankers. (And these same folks were also among the most avid advocates of 'trickle down monetary policy,' which involved the Fed's showering cheap money on its owners, the Wall Street banking cartel and their wealthy clientele, while raising the margin over prime rates to their credit card victims/customers.)

[Mar 29, 2017] I fear Summers at least as much as I fear robots

Mar 29, 2017 | economistsview.typepad.com
anne -> RC AKA Darryl, Ron... , March 29, 2017 at 06:17 AM
https://www.washingtonpost.com/news/wonk/wp/2017/03/27/larry-summers-mnuchins-take-on-artificial-intelligence-is-not-defensible/

March 27, 2017

The robots are coming, whether Trump's Treasury secretary admits it or not
By Lawrence H. Summers - Washington Post

As I learned (sometimes painfully) during my time at the Treasury Department, words spoken by Treasury secretaries can over time have enormous consequences, and therefore should be carefully considered. In this regard, I am very surprised by two comments made by Secretary Steven Mnuchin in his first public interview last week.

In reference to a question about artificial intelligence displacing American workers,Mnuchin responded that "I think that is so far in the future - in terms of artificial intelligence taking over American jobs - I think we're, like, so far away from that [50 to 100 years], that it is not even on my radar screen." He also remarked that he did not understand tech company valuations in a way that implied that he regarded them as excessive. I suppose there is a certain internal logic. If you think AI is not going to have any meaningful economic effects for a half a century, then I guess you should think that tech companies are overvalued. But neither statement is defensible.

Mnuchin's comment about the lack of impact of technology on jobs is to economics approximately what global climate change denial is to atmospheric science or what creationism is to biology. Yes, you can debate whether technological change is in net good. I certainly believe it is. And you can debate what the job creation effects will be relative to the job destruction effects. I think this is much less clear, given the downward trends in adult employment, especially for men over the past generation.

But I do not understand how anyone could reach the conclusion that all the action with technology is half a century away. Artificial intelligence is behind autonomous vehicles that will affect millions of jobs driving and dealing with cars within the next 15 years, even on conservative projections. Artificial intelligence is transforming everything from retailing to banking to the provision of medical care. Almost every economist who has studied the question believes that technology has had a greater impact on the wage structure and on employment than international trade and certainly a far greater impact than whatever increment to trade is the result of much debated trade agreements....

DrDick -> anne... , March 29, 2017 at 10:45 AM
Oddly, the robots are always coming in articles like Summers', but they never seem to get here. Automation has certainly played a role, but outsourcing has been a much bigger issue.
Peter K. -> DrDick ... , March 29, 2017 at 01:09 PM
I'm becoming increasing skeptical about the robots argument.
jonny bakho -> DrDick ... , March 29, 2017 at 05:13 PM
They are all over our manufacturing plants.
They just don't look like C3PO
JohnH -> RC AKA Darryl, Ron... , March 29, 2017 at 06:21 AM
I fear Summers at least as much as I fear robots...
Peter K. -> JohnH... , March 29, 2017 at 07:04 AM
He's just a big bully, like our PGL.

He has gotten a lot better and was supposedly pretty good when advising Obama, but he's sort of reverted to form with the election of Trump and the prominence of the debate on trade policy.

RC AKA Darryl, Ron -> JohnH... , March 29, 2017 at 07:15 AM
Ditto.

Technology rearranges and changes human roles, but it makes entries on both sides of the ledger. On net as long as wages grow then so will the economy and jobs. Trade deficits only help financial markets and the capital owning class.

Paine -> RC AKA Darryl, Ron... , March 29, 2017 at 09:59 AM
There is no limit to jobs
Macro policy and hours regulation
can create

We can both ration job hours And subsidies job wage rates
and at the same time
generate
As many jobs as wanted

All economic rents could be converted into wage subsidies
To boost the per hour income from jobs as well as incentivize diligence skill and creativity

RC AKA Darryl, Ron -> Paine... , March 29, 2017 at 12:27 PM
Works for me.
yuan -> Paine... , March 29, 2017 at 03:50 PM
jobs, jobs, jobs.

some day we will discard with feudal concepts, such as, working for the "man". a right to liberty and the pursuit of happiness is a right to income.

tax those bots!

yuan -> yuan... , March 29, 2017 at 03:51 PM
or better yet...collectivize the bots.
RGC -> RC AKA Darryl, Ron... , March 29, 2017 at 08:47 AM
Summers is a good example of those economists that never seem to pay a price for their errors.

Imo, he should never be listened to. His economics is faulty. His performance in the Clinton administration and his part in the Russian debacle should be enough to consign him to anonymity. People would do well to ignore him.

Peter K. -> RGC... , March 29, 2017 at 09:36 AM
Yeah he's one of those expert economists and technocrats who never admit fault. You don't become Harvard President or Secretary of the Treasury by doing that.

One time that Krugman has admitted error was about productivity gains in the 1990s. He said he didn't see the gains from computers in the numbers and it wasn't and they weren't there at first, but later productivity numbers increased.

It was sort of like what Summers and Munchkin are talking discussing, but there's all sorts of debate about measuring productivity and what it means.

RC AKA Darryl, Ron -> RGC... , March 29, 2017 at 12:29 PM
Yeah. I am not a fan of Summers's, but I do like summers as long as it does not rain too much or too little and I have time to fish.

[Mar 06, 2017] Robots are Wealth Creators and Taxing Them is Illogical

Notable quotes:
"... His prescription in the end is the old and tired "invest in education and retraining", i.e. "symbolic analyst jobs will replace the lost jobs" like they have for decades (not). ..."
"... "Governments will, however, have to concern themselves with problems of structural joblessness. They likely will need to take a more explicit role in ensuring full employment than has been the practice in the US." ..."
"... Instead, we have been shredding the safety net and job training / creation programs. There is plenty of work that needs to be done. People who have demand for goods and services find them unaffordable because the wealthy are capturing all the profits and use their wealth to capture even more. Trade is not the problem for US workers. Lack of investment in the US workforce is the problem. We don't invest because the dominant white working class will not support anything that might benefit blacks and minorities, even if the major benefits go to the white working class ..."
"... Really nice if your sitting in the lunch room of the University. Especially if you are a member of the class that has been so richly awarded, rather than the class who paid for it. Humph. The discussion is garbage, Political opinion by a group that sat by ... The hypothetical nuance of impossible tax policy. ..."
"... The concept of Robots leaving us destitute, is interesting. A diversion. It ain't robots who are harvesting the middle class. It is an entitled class of those who gave so little. ..."
"... Summers: "Let them eat training." ..."
"... Suddenly then, Bill Gates has become an accomplished student of public policy who can command an audience from Lawrence Summers who was unable to abide by the likes of the prophetic Brooksley Born who was chair of the Commodity Futures Trading Commission or the prophetic professor Raghuram Rajan who would become Governor of the Reserve Bank of India. Agreeing with Bill Gates however is a "usual" for Summers. ..."
"... Until about a decade or so ago many states I worked in had a "tangible property" or "personal property" tax on business equipment, and sometimes on equipment + average inventory. Someday I will do some research and see how many states still do this. Anyway a tax on manufacturing equipment, retail fixtures and computers and etc. is hardly novel or unusual. So why would robots be any different? ..."
"... Thank you O glorious technocrats for shining the light of truth on humanity's path into the future! Where, oh where, would we be without our looting Benevolent Overlords and their pompous lapdogs (aka Liars in Public Places)? ..."
"... While he is overrated, he is not completely clueless. He might well be mediocre (or slightly above this level) but extremely arrogant defender of the interests of neoliberal elite. Rubin's boy Larry as he was called in the old days. ..."
"... BTW he was Rubin's hatchet man for eliminating Brooksley Born attempt to regulate the derivatives and forcing her to resign: ..."
Mar 05, 2017 | economistsview.typepad.com
Larry Summers: Robots are wealth creators and taxing them is illogical : I usually agree with Bill Gates on matters of public policy and admire his emphasis on the combined power of markets and technology. But I think he went seriously astray in a recent interview when he proposed, without apparent irony, a tax on robots to cushion worker dislocation and limit inequality. ....

pgl : , March 05, 2017 at 02:16 PM

Has Summers gone all supply-side on his? Start with his title:

"Robots are wealth creators and taxing them is illogical"

I bet Bill Gates might reply – "my company is a wealth creator so it should not be taxed". Oh wait – Microsoft is already shifting profits to tax havens. Summers states:

"Third, and perhaps most fundamentally, why tax in ways that reduce the size of the pie rather than ways that assure that the larger pie is well distributed? Imagine that 50 people can produce robots who will do the work of 100. A sufficiently high tax on robots would prevent them from being produced."

Yep – he has gone all supply-side on us.

cm -> pgl... , March 05, 2017 at 02:46 PM
Summers makes one, and only one, good and relevant point - that in many cases, robots/automation will not produce more product from the same inputs but better products. That's in his words; I would replace "better" with "more predictable quality/less variability" - in both directions. And that the more predictable quality aspect is hard or impossible to distinguish from higher productivity (in some cases they may be exactly the same, e.g. by streamlining QA and reducing rework/pre-sale repairs).

His prescription in the end is the old and tired "invest in education and retraining", i.e. "symbolic analyst jobs will replace the lost jobs" like they have for decades (not).

anne -> cm... , March 05, 2017 at 04:36 PM
Incisive all the way through.
jonny bakho -> pgl... , March 05, 2017 at 02:52 PM
Pundits do not write titles, editors do. Tax the profits, not the robots.

The crux of the argument is this:

"Governments will, however, have to concern themselves with problems of structural joblessness. They likely will need to take a more explicit role in ensuring full employment than has been the practice in the US."

Instead, we have been shredding the safety net and job training / creation programs. There is plenty of work that needs to be done. People who have demand for goods and services find them unaffordable because the wealthy are capturing all the profits and use their wealth to capture even more. Trade is not the problem for US workers. Lack of investment in the US workforce is the problem. We don't invest because the dominant white working class will not support anything that might benefit blacks and minorities, even if the major benefits go to the white working class

pgl -> jonny bakho... , March 05, 2017 at 03:35 PM
"Tax the profits, not the robots." Exactly. I suspect this is how it would have to work since the company owns the robots.
cm -> pgl... , March 05, 2017 at 03:53 PM
In principle taxing profits is preferable, but has a few downsides/differences:

Not very strong points, and I didn't read the Gates interview so I don't know his detailed motivation to propose specifically a robot tax.

cm -> pgl... , March 05, 2017 at 03:58 PM
When I was in Amsterdam a few years ago, they had come up with another perfidious scheme to cut people out of the loop or "incentivize" people to use the machines - in a large transit center, you could buy tickets at a vending machine or a counter with a person - and for the latter you would have to pay a not-so-modest "personal service" surcharge (50c for a EUR 2-3 or so ticket - I think it was a flat fee, but may have been staggered by type of service).

Maybe I misunderstood it and it was a "congestion charge" to prevent lines so people who have to use counter service e.g. with questions don't have to wait.

cm -> cm... , March 05, 2017 at 04:03 PM
And then you may have heard (in the US) the term "convenience fee" which I found rather insulting when I encountered it. It suggests you are charged for your convenience, but it is to cover payment processor costs (productivity enhancing automation!).
anne -> cm... , March 05, 2017 at 04:59 PM
And then you may have heard (in the US) the term "convenience fee" which I found rather insulting when I encountered it. It suggests you are charged for your convenience, but it is to cover payment processor costs (productivity enhancing automation!)

[ Wonderful. ]

JohnH -> pgl... , March 05, 2017 at 06:43 PM
Why not simplify things and just tax capital? We already property? Why not extend it to all capital?
Paine -> jonny bakho... , March 05, 2017 at 05:10 PM
Lack of adequate compensation to the lower half of the job force is the problem. Lack of persistent big macro demand is the problem . A global traiding system that doesn't automatically move forex rates toward universal. Trading zone balance and away from persistent surplus and deficit traders is the problem

Technology is never the root problem. Population dynamics is never the root problem

anne -> Paine... , March 05, 2017 at 05:31 PM
https://fred.stlouisfed.org/graph/?g=cVq0

January 15, 2017

Nonfarm Business Productivity and Real Median Household Income, 1953-2015

(Indexed to 1953)

anne -> Paine... , March 05, 2017 at 05:35 PM
https://fred.stlouisfed.org/graph/?g=cOU6

January 15, 2017

Gross Domestic Product and Net Worth for Households & Nonprofit Organizations, 1952-2016

(Indexed to 1952)

Mr. Bill -> anne... , March 05, 2017 at 06:30 PM
Really nice if your sitting in the lunch room of the University. Especially if you are a member of the class that has been so richly awarded, rather than the class who paid for it. Humph. The discussion is garbage, Political opinion by a group that sat by ... The hypothetical nuance of impossible tax policy.
Mr. Bill -> pgl... , March 05, 2017 at 06:04 PM
The concept of Robots leaving us destitute, is interesting. A diversion. It ain't robots who are harvesting the middle class. It is an entitled class of those who gave so little.
run75441 -> Mr. Bill... , March 05, 2017 at 06:45 PM
Sigh>

After one five axis CNC cell replaces 5 other machines and 4 of the workers, what happens to the four workers?

The issue is the efficiency achieved through better through put forcing the loss of wages. If you use the 5-axis CNC, tax the output from it no more than what would have been paid to the 4 workers plus the Overhead for them. The Labor cost plus the Overhead Cost is what is eliminated by the 5-Axis CNC.

It is not a diversion. It is a reality.

anne -> anne... , March 05, 2017 at 02:20 PM
http://krugman.blogs.nytimes.com/2009/01/03/economists-behaving-badly/

January 3, 2009

Economists Behaving Badly
By Paul Krugman

Ouch. The Wall Street Journal's Real Time Economics blog has a post * linking to Raghuram Rajan's prophetic 2005 paper ** on the risks posed by securitization - basically, Rajan said that what did happen, could happen - and to the discussion at the Jackson Hole conference by Federal Reserve vice-chairman Don Kohn *** and others. **** The economics profession does not come off very well.

Two things are really striking here. First is the obsequiousness toward Alan Greenspan. To be fair, the 2005 Jackson Hole event was a sort of Greenspan celebration; still, it does come across as excessive - dangerously close to saying that if the Great Greenspan says something, it must be so. Second is the extreme condescension toward Rajan - a pretty serious guy - for having the temerity to suggest that maybe markets don't always work to our advantage. Larry Summers, I'm sorry to say, comes off particularly badly. Only my colleague Alan Blinder, defending Rajan "against the unremitting attack he is getting here for not being a sufficiently good Chicago economist," emerges with honor.

* http://blogs.wsj.com/economics/2009/01/01/ignoring-the-oracles/

** http://www.kc.frb.org/publicat/sympos/2005/PDF/Rajan2005.pdf

*** http://www.kc.frb.org/publicat/sympos/2005/PDF/Kohn2005.pdf

**** https://www.kansascityfed.org/publicat/sympos/2005/PDF/GD5_2005.pdf

cm -> pgl... , March 05, 2017 at 03:07 PM
No, his argument is much broader. Summers stops at "no new taxes and education/retraining". And I find it highly dubious that compensation/accommodation for workers can be adequately funded out of robot taxes.

Baker goes far beyond that.

cm -> cm... , March 05, 2017 at 03:09 PM
What Baker mentioned: mandatory severance, shorter work hours or more vacations due to productivity, funding infrastructure.

Summers: "Let them eat training."

Paine -> anne... , March 05, 2017 at 05:19 PM
We should never assign a social task to the wrong institution. Firms should be unencumbered by draconian hire and fire constraints. The state should provide the compensation for lay offs and firings. The state should maintain an adequate local Beveridge ratio of job openings to Job applicants

Firms task is productivity max subject to externality off sets. Including output price changed. And various other third party impacts

anne -> anne... , March 05, 2017 at 02:33 PM
Correcting:

Suddenly then, Bill Gates has become an accomplished student of public policy who can command an audience from Lawrence Summers who was unable to abide by the likes of the prophetic Brooksley Born who was chair of the Commodity Futures Trading Commission or the prophetic professor Raghuram Rajan who would become Governor of the Reserve Bank of India. Agreeing with Bill Gates however is a "usual" for Summers.

Tom aka Rusty : , March 05, 2017 at 02:19 PM
Until about a decade or so ago many states I worked in had a "tangible property" or "personal property" tax on business equipment, and sometimes on equipment + average inventory. Someday I will do some research and see how many states still do this. Anyway a tax on manufacturing equipment, retail fixtures and computers and etc. is hardly novel or unusual. So why would robots be any different?
pgl -> Tom aka Rusty... , March 05, 2017 at 02:38 PM
I suspect it is the motivation of Gates as in what he would do with the tax revenue. And Gates might be thinking of a higher tax rate for robots than for your garden variety equipment.
Paine -> Tom aka Rusty... , March 05, 2017 at 05:22 PM
There is no difference Beyond spin
Paine -> Paine... , March 05, 2017 at 05:28 PM
Yes some equipment in side any one firm compliments existing labor inside that firm including already installed robots Robots new robots are rivals

Rivals that if subject to a special " introduction tax " Could deter installation
As in
The 50 for 100 swap of the 50 hours embodied in the robot
Replace 100. Similarly paid production line labor
But ...

There's a 100 % plusher chase tax on the robots

Why bother to invest in the productivity increase
If here are no other savings

anne : , March 05, 2017 at 02:28 PM
http://cepr.net/blogs/beat-the-press/bill-gates-wants-to-undermine-donald-trump-s-plans-for-growing-the-economy

February 20, 2017

Bill Gates Wants to Undermine Donald Trump's Plans for Growing the Economy

Yes, as Un-American as that may sound, Bill Gates is proposing * a tax that would undermine Donald Trump's efforts to speed the rate of economic growth. Gates wants to tax productivity growth (also known as "automation") slowing down the rate at which the economy becomes more efficient.

This might seem a bizarre policy proposal at a time when productivity growth has been at record lows, ** *** averaging less than 1.0 percent annually for the last decade. This compares to rates of close to 3.0 percent annually from 1947 to 1973 and again from 1995 to 2005.

It is not clear if Gates has any understanding of economic data, but since the election of Donald Trump there has been a major effort to deny the fact that the trade deficit has been responsible for the loss of manufacturing jobs and to instead blame productivity growth. This is in spite of the fact that productivity growth has slowed sharply in recent years and that the plunge in manufacturing jobs followed closely on the explosion of the trade deficit, beginning in 1997.

[Manufacturing Employment, 1970-2017]

Anyhow, as Paul Krugman pointed out in his column **** today, if Trump is to have any hope of achieving his growth target, he will need a sharp uptick in the rate of productivity growth from what we have been seeing. Bill Gates is apparently pushing in the opposite direction.

* https://qz.com/911968/bill-gates-the-robot-that-takes-your-job-should-pay-taxes/

** https://fred.stlouisfed.org/graph/?g=cABu

*** https://fred.stlouisfed.org/graph/?g=cABr

**** https://www.nytimes.com/2017/02/20/opinion/on-economic-arrogance.html

-- Dean Baker

anne -> anne... , March 05, 2017 at 02:30 PM
https://fred.stlouisfed.org/graph/?g=cABu

January 4, 2017

Nonfarm Business Labor Productivity, * 1948-2016

* Output per hour of all persons

(Percent change)


https://fred.stlouisfed.org/graph/?g=cABr

January 4, 2017

Nonfarm Business Labor Productivity, * 1948-2016

* Output per hour of all persons

(Indexed to 1948)

anne -> anne... , March 05, 2017 at 02:32 PM
https://fred.stlouisfed.org/graph/?g=cN2z

January 15, 2017

Manufacturing employment, 1970-2017


https://fred.stlouisfed.org/graph/?g=cN2H

January 15, 2017

Manufacturing employment, 1970-2017

(Indexed to 1970)

Ron Waller : , March 05, 2017 at 02:43 PM
Yes, it's far better that our betters in the upper class get all the benefits from productivity growth. Without their genetic entitlement to wealth others created, we would just be savages murdering one another in the streets.

These Masters of the Universe of ours put the 'civil' in our illustrious civilization. (Sure it's a racist barbarian concentration camp on the verge of collapse into fascist revolutions and world war. But, again, far better than people murdering one another in the streets!)

People who are displaced from automation are simply moochers and it's only right that they are cut out of the economy and left to die on the streets. This is the law of Nature: survival of the fittest. Social Darwinism is inescapable. It's what makes us human!

Instead of just waiting for people displaced from automation to die on the streets, we should do the humane thing and establish concentration camps so they are quickly dispatched to the Void. (Being human means being merciful!)

Thank you O glorious technocrats for shining the light of truth on humanity's path into the future! Where, oh where, would we be without our looting Benevolent Overlords and their pompous lapdogs (aka Liars in Public Places)?

Peter K. : , March 05, 2017 at 03:14 PM
I think it would be good if the tax was used to help dislocated workers and help with inequality as Gates suggests. However Summers and Baker have a point that it's odd to single out robots when you could tax other labor-saving, productivity-enhancing technologies as well.

Baker suggests taxing profits instead. I like his idea about the government taking stock of companies and collecting taxes that way.

"They likely will need to take a more explicit role in ensuring full employment than has been the practice in the US.

Among other things, this will mean major reforms of education and retraining systems, consideration of targeted wage subsidies for groups with particularly severe employment problems, major investments in infrastructure and, possibly, direct public employment programmes."

Not your usual neoliberal priorities. Compare with Hillary's program.

greg : , March 05, 2017 at 03:34 PM
All taxes are a reallocation of wealth. Not taxing wealth creators is impossible.

On the other hand, any producer who is not taxed will expand at the expense of those producers who are taxed. This we are seeing with respect to mechanical producers and human labor. Labor is helping to subsidize its replacement.

Interesting that Summers apparently doesn't see this.

pgl -> greg ... , March 05, 2017 at 03:38 PM
"Not taxing wealth creators is impossible."

Substitute "impossible" with "bad policy" and you are spot on. Of course the entire Paul Ryan agenda is to shift taxes from the wealthy high income to the rest of us.

cm -> pgl... , March 05, 2017 at 04:12 PM
Judging by the whole merit rhetoric and tying employability to "adding value", one could come to the conclusion that most wealth is created by workers. Otherwise why would companies need to employ them and wring their hands over skill shortages? Are you suggesting W-2 and payroll taxes are bad policy?
pgl -> cm... , March 05, 2017 at 05:15 PM
Payroll taxes to fund Soc. Sec. benefits is a good thing. But when they are used to fund tax cuts for the rich - not a good thing. And yes - wealth may be created by workers but it often ends up in the hands of the "investor class".
Paine -> cm... , March 05, 2017 at 05:45 PM
Let's not conflate value added from value extracted. Profits are often pure economic rents. Very often non supply regulating. The crude dynamics of market based pricing hardly presents. A sea of close shaveed firms extracting only. Necessary incentivizing profits of enterprise
Paine -> Paine... , March 05, 2017 at 05:47 PM
Profiteers extract far more value then they create. Of course disentangling system improving surplus ie profits of enterprise
From the rest of the extracted swag. Exceeds existing tax systems capacity
Paine -> Paine... , March 05, 2017 at 05:51 PM
One can make a solid social welfare case for a class of income stream
that amounts to a running residue out of revenue earned by the firm
above compensation to job holders in that firm

See the model of the recent oboe laureate


But that would amount to a fraction of existing corporate " earnings "
Errr extractions

Chris G : , March 05, 2017 at 04:21 PM
Taking this in a different direction, does it strike anyone else as important that human beings retain the knowledge of how to make the things that robots are tasked to produce?
Paine -> Chris G ... , March 05, 2017 at 05:52 PM
As hobbies yes
Chris G -> Paine... , March 05, 2017 at 05:55 PM
That's it? Only as hobbies? Eesh, I must have a prepper gene.
cm -> Chris G ... , March 05, 2017 at 06:50 PM
The current generation of robots and automated equipment isn't intelligent and doesn't "know" anything. People still know how to make the things, otherwise the robots couldn't be programmed.

However in probably many cases, doing the actual production manually is literally not humanly possible. For example, making semiconductor chips or modern circuit boards requires machines - they cannot be produced by human workers under any circumstances, as they require precision outside the range of human capability.

Chris G -> cm... , March 05, 2017 at 08:22 PM
Point taken but I was thinking more along the lines of knowing how to use a lathe or an end mill. If production is reduced to a series of programming exercises then my sense is that society is setting itself up for a nasty fall.

(I'm all for technology to the extent that it builds resilience. However, when it serves to disconnect humans from the underlying process and reduces their role to simply knowledge workers, symbolic analysts, or the like then it ceases to be net positive. Alternatively stated: Tech-driven improvements in efficiency are good so long as they don't undermine overall societal resilience. Be aware of your reliance on things you don't understand but whose function you take for granted.)

Dan : , March 05, 2017 at 05:00 PM
Gates almost certainly meant tax robots the way we are taxed. I doubt he meant tax the acquisition of robots. We are taxed in complex ways, presumably robots will be as well.

Summers is surely using a strawman to make his basically well thought out arguments.

In any case, everyone is talking about distributional impacts of robots, but resource allocation is surely to be as much or more impacted. What if robots only want to produce antennas and not tomatoes? That might be a damn shame.

It all seems a tad early to worry about and it's hard to see how what ever the actual outcome is, the frontier of possible outcomes has to be wildly improved.

Paine -> Dan ... , March 05, 2017 at 05:57 PM
Given recent developments in labor productivity Your Last phrase becomes a gem

That is If you end with "it's hard to see whatever the actual outcome is The frontier of possible outcomes shouldn't be wildly improved By a social revolution "

Sandwichman : , March 05, 2017 at 08:02 PM
Larry Summers is clueless on robots.

Robots do not CREATE wealth. They transform wealth from one kind to another that subjectively has more utility to robot user. Wealth is inherent in the raw materials, the knowledge, skill and effort of the robot designers and fabricators, etc., etc.

The distinction is crucial.

libezkova -> Sandwichman ... , March 05, 2017 at 08:23 PM
"Larry Summers is clueless on robots."

While he is overrated, he is not completely clueless. He might well be mediocre (or slightly above this level) but extremely arrogant defender of the interests of neoliberal elite. Rubin's boy Larry as he was called in the old days.

BTW he was Rubin's hatchet man for eliminating Brooksley Born attempt to regulate the derivatives and forcing her to resign:

== quote ==
"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"

libezkova : March 05, 2017 at 08:09 PM
Market is, at the end, a fully political construct. And what neoliberals like Summers promote is politically motivated -- reflects the desires of the ruling neoliberal elite to redistribute wealth up.

BTW there is a lot of well meaning (or fashion driven) idiotism that is sold in the USA as automation, robots, move to cloud, etc. Often such fashion driven exercises cost company quite a lot. But that's OK as long as bonuses are pocketed by top brass, and power of labor diminished.

Underneath of all the "robotic revolution" along with some degree of technological innovation (mainly due to increased power of computers and tremendous progress in telecommunication technologies -- not some breakthrough) is one big trend -- liquidation of good jobs and atomization of the remaining work force.

A lot of motivation here is the old dirty desire of capital owners and upper management to further to diminish the labor share. Another positive thing for capital owners and upper management is that robots do not go on strike and do not demand wage increases. But the problem is that they are not a consumers either. So robotization might bring the next Minsky moment for the USA economy closer. Sighs of weakness of consumer demand are undeniable even now. Look at auto loan delinquency rate as the first robin. http://www.usatoday.com/story/money/cars/2016/02/27/subprime-auto-loan-delinquencies-hit-six-year-high/81027230/

== quote ==
The total of outstanding auto loans reached $1.04 trillion in the fourth-quarter of 2015, according to the Federal Reserve Bank of St. Louis. About $200 billion of that would be classified as subprime or deep subprime.
== end of quote ==

Summers as a staunch, dyed-in-the-wool neoliberal of course is against increasing labor share. Actually here he went full into "supply sider" space -- making richer more rich will make us better off too. Pgl already noted that by saying: "Has Summers gone all supply-side on his? Start with his title"

BTW, there is a lot of crazy thing that are going on with the US large companies drive to diminish labor share. Some o them became barely manageable and higher management has no clue what is happening on the lower layers of the company.

The old joke was: GM does a lot of good things except making good cars. Now it can be expanded to a lot more large US companies.

The "robot pressure" on labor is not new. It is actually the same old and somewhat dirty trick as outsourcing. In this case outsourcing to robots. In other words "war of labor" by other means.

Two caste that neoliberalism created like in feudalism occupy different social spaces and one is waging the war on other, under the smoke screen of "free market" ideology. As buffet remarked "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."

BTW successes in robotics are no so overhyped that it is not easy to distinguish where reality ends and the hype starts.

In reality telecommunication revolution is probably more important in liquation of good jobs in the USA. I think Jonny Bakho or somebody else commented on this, but I can't find the post.

[Feb 01, 2017] WTO is very clear that income taxes cannot discriminate to favour exports

Notable quotes:
"... While the WTO process would grind on, protectionist acts by other nations would be licensed immediately. ..."
Feb 01, 2017 | economistsview.typepad.com

Peter K. -> Peter K.... February 01, 2017 at 11:33 AM , 2017 at 11:33 AM

Larry Summers:

"Third, the tax change will harm the global economy in ways that reverberate back to America. It will be seen by other countries and the World Trade Organisation as a protectionist act that violates US treaty obligations.

Proponents may argue that it should be legal because it is like a value added tax, but the WTO is very clear that income taxes cannot discriminate to favour exports.

While the WTO process would grind on, protectionist acts by other nations would be licensed immediately."

http://larrysummers.com/2017/01/08/us-tax-reform-is-vital-but-trumps-plan-is-flawed/

[Jan 21, 2017] Disillusioned in Davos

Jan 21, 2017 | economistsview.typepad.com
Larry Summers:
Disillusioned in Davos : Edmund Burke famously cautioned that "the only thing necessary for the triumph of evil is for good men to do nothing." I have been reminded of Burke's words as I have observed the behavior of US business leaders in Davos over the last few days. They know better but in their public rhetoric they have embraced and enabled our new President and his policies.

I understand and sympathize with the pressures they feel. ... Businesses who get on the wrong side of the new President have lost billions of dollars of value in sixty seconds because of a tweet. ...

Yet I am disturbed by (i) the spectacle of financiers who three months ago were telling anyone who would listen that they would never do business with a Trump company rushing to praise the new Administration (ii) the unwillingness of business leaders who rightly take pride in their corporate efforts to promote women and minorities to say anything about Presidentially sanctioned intolerance (iii) the failure of the leaders of global companies to say a critical word about US efforts to encourage the breakup of European unity and more generally to step away from underwriting an open global system (iv) the reluctance of business leaders who have a huge stake in the current global order to criticize provocative rhetoric with regard to China, Mexico or the Middle East (v) the willingness of too many to praise Trump nominees who advocate blatant protection merely because they have a business background.

I have my differences with the new Administration's economic policies and suspect the recent market rally and run of economic statistics is a sugar high. Reasonable people who I respect differ and time will tell. My objection is not to disagreements over economic policy. It is to enabling if not encouraging immoral and reckless policies in other spheres that ultimately bear on our prosperity. Burke was right. It is a lesson of human experience whether the issue is playground bullying, Enron or Europe in the 1930s that the worst outcomes occur when good people find reasons to accommodate themselves to what they know is wrong. That is what I think happened much too often in Davos this week.

JohnH -> Peter K.... , January 20, 2017 at 03:24 PM
Larry Summers lecturing us about bullies! Precious!

"Larry Summers Is An Unrepentant Bully"
http://www.huffingtonpost.com/peter-s-goodman/larry-summers-bully-fed_b_3653387.html

Like so much of the tit-for-tat between Democrats and Republicans, what's OK for to do is NOT OK for you to do!!!

anne : , January 20, 2017 at 12:24 PM
https://books.google.com/books?id=SFNADAAAQBAJ&pg=PT951&lpg=PT951&dq=%22No+man,+who+is+not+inflamed+by+vainglory+into+enthusiasm%22&source=bl&ots=ufx9GiMtls&sig=jJgSGfaCuCQFzBa9KiNBKCoaYgQ&hl=en&sa=X&ved=0ahUKEwjE7YCOxtHRAhWjLMAKHVmSDFAQ6AEIHDAB#v=onepage&q=%22No%20man%2C%20who%20is%20not%20inflamed%20by%20vainglory%20into%20enthusiasm%22&f=false

1770

Thoughts on the Cause of the Present Discontents

No man, who is not inflamed by vainglory into enthusiasm, can flatter himself that his single, unsupported, desultory, unsystematic endeavours are of power to defeat the subtle designs and united Cabals of ambitious citizens. When bad men combine, the good must associate; else they will fall, one by one, an unpitied sacrifice in a contemptible struggle.

-- Edmund Burke

anne -> anne... , -1
Edmund Burke famously cautioned that "the only thing necessary for the triumph of evil is for good men to do nothing."

-- Lawrence Summers

[ Edmund Burke never cautioned this. ]

anne -> Chris G ... , January 20, 2017 at 06:42 PM
Notice the fear of association or community of Milton Friedman:

http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html

September 13, 1970

The Social Responsibility of Business is to Increase its Profits
By Milton Friedman - New York Times

When I hear businessmen speak eloquently about the "social responsibilities of business in a free-enterprise system," I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned "merely" with profit but also with promoting desirable "social" ends; that business has a "social conscience" and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are–or would be if they or anyone else took them seriously–preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades....

Gibbon1 -> anne... , January 20, 2017 at 07:37 PM
When I used to read Delong's blog before Delong went off on Sanders because Delong thought that Hillary Clinton would give Delongs son a job...

There was economics student that penned a response where he mentioned that the economics profession generally dislikes models with negative externalities. But truly loath models that incorporate positive externalities.

A positive externality is where some action on your part benefits you _and_ benefits some third party.

One can assume Milton Friedman and his followers find that concept revolting indeed.

anne -> anne... , January 20, 2017 at 12:52 PM
While I was not in Davos, I read about the proceedings and meeting in the Western European and Chinese press and was impressed by the community emphasis placed on social justice. Possibly there was considerable individual resistance to the public theme, and Lawrence Summers would readily sense such resistance, but the public theme from the speech by Xi Jinping on was encouraging and portrayed in Western Europe and China as encouraging.
kthomas -> anne... , January 20, 2017 at 02:19 PM
The headline of his post is somewhat misleading. He was not really talking about Davos.
Chris G -> kthomas... , January 20, 2017 at 05:53 PM
Let me rephrase: Name me some Fortune 500 companies who consider potential societal impacts of their actions and, as a result, sometimes make decisions which don't maximize their profits but are the "right" thing to do for the community/their workers/the environment/etc.? What Fortune 500 companies are motivated by things beyond maximizing profits for shareholders?

My point is that corporate leaders who are charged to act to maximize profits will always be cowards when it comes to moral and ethical issues. If their job is to maximize profits. If they don't want to lose their job then that's what they'll do - act to maximize profits. Where would Summers get the idea that they would act any differently? Do the people he's referring to have a track record of choosing the moral high ground over profits? If they do then I could understand surprise and disappointment that they're folding. But they've never had to face that choice before let alone chosen moral high ground over money, have they?

anne -> Chris G ... , January 20, 2017 at 05:55 PM
My point is that corporate leaders who are charged to act to maximize profits will always be cowards when it comes to moral and ethical issues. If their job is to maximize profits. If they don't want to lose their job then that's what they'll do - act to maximize profits. Where would Summers get the idea that they would act any differently? Do the people he's referring to have a track record of choosing the moral high ground over profits? ...

[ Properly argued, sadly. ]

Winslow R. : , January 20, 2017 at 02:02 PM
I recall Summers/Romer with both houses and Obama blowing their chances to do something for the middle/working class.

Summers/Delong said if the stimulus was too small we could always get another later, yet that chance to do something never came and he did nothing.....

I'd like Larry to ponder whether it was he who did nothing.

[Jan 17, 2017] Clinton administration tried to destroy russian economics

Notable quotes:
"... U.S. assistance to Chubais continued even after he was dismissed by Yeltsin as First Deputy Prime Minister in January 1996. Chubais was placed on the HIID payroll, a show of loyalty that USAID Assistant Administrator Thomas A. Dine said he supported. ..."
"... Bill Clinton was all out after Russia, Talbot and his neocon advisors! ..."
"... The look the other way when the united Germany sent a brigade size armored set to Croatia to do Serbs. ..."
"... In Jul 1997 Poland, Hungary and Czech republic were entered in to NATO. ..."
"... Regarding Russia, Clinton was more interested in domination that development...a consistent theme in US history since its beginning. ..."
"... Instead of promoting democracy, the US rigged the 1996 election in favor of the drunkard Yeltsin. ..."
"... To hear the all the whining of Democrats and of the security state, the chickens may have come home to roost. ..."
Jan 17, 2017 | economistsview.typepad.com
RC AKA Darryl, Ron : January 17, 2017 at 03:53 AM
RE: Trump and Gorbachev

http://glineq.blogspot.com/2017/01/trump-and-gorbachev.html

"...Many people (myself included) have regretted that the Clinton administration has failed to seize the moment at the end of the Cold War to create a more just international order that would be based on the rules of law, would not be dichotomic or even Manichean one with its origin in the Cold War, and would include Russia rather than leave it out in the cold..."

[Was "Clinton administration has failed" a typo or a subtle semantic choice? Whereas "Clinton administration HAD failed" would have past perfect tense, "has failed" is present perfect tense, suggesting the subject "Clinton administration" is the continuum of compassionate conservatism beginning with Bill Clinton and ending with Barrack Obama. Semantics is why spelling is important. It is also why reading is important.]

reason -> RC AKA Darryl, Ron... , January 17, 2017 at 05:28 AM
I personally have no idea what Branko Milanovic is going on about there. As far as I can tell Russia chose to be "out in the cold", it wasn't excluded.
RC AKA Darryl, Ron -> reason ... , January 17, 2017 at 06:21 AM
[Not exactly. Sherman, set the wayback machine for 1998, near the end of the Bill Clinton administration's second term.]

http://fpif.org/aid_to_russia/

Aid to Russia

When the Soviet Union abruptly ceased to exist on December 25, 1991, it seemed that the West, particularly the U.S., finally had what it had always wanted–the opportunity to introduce quick, all-encompassing economic reform that would remake Russia in the West's own image.

By Janine Wedel, September 1, 1998.

Key Points

When the Soviet Union abruptly ceased to exist on December 25, 1991, it seemed that the West, particularly the U.S., finally had what it had always wanted–the opportunity to introduce quick, all-encompassing economic reform that would remake Russia in the West's own image. To this end, the U.S., over the past seven years, has embarked upon a fairly consistent course of economic relations with Russia. Three interrelated policies characterize this course: 1) the urging of radical economic "reforms," defined largely as the privatization of state-owned assets, to restructure the economy; 2) the backing of a particular political-economic group, or "clan," to do so; and 3) the provision of billions of dollars in U.S. and other Western aid, subsidized loans, and rescheduled debt.

The United States has consistently supported President Boris Yeltsin and a Russian cadre of self-styled economic "reformers" to conduct Western aid-funded economic reforms and negotiate economic relations with the West. U.S. support for Anatoly Chubais, Yegor Gaidar, and the so-called "Chubais Clan" (a group of savvy operators dominated by a clique from St. Petersburg) has bolstered the Clan's standing as Russia's chief brokers with the West and the international financial institutions. This support continues to the present. And, the Chubais Clan–not the Russian economy as a whole–has been the chief beneficiary of economic restructuring funding from the U.S. Agency for International Development (USAID).

Throughout the 1990s, Chubais has been a useful figure for Russian president Boris Yeltsin: beginning in November 1991 as head of Russia's new privatization agency, the State Property Committee (GKI), then additionally as first deputy prime minister in January 1994, and later as the lightning rod for complaints about economic policies after the communists won the Russian parliament (Duma) election in December 1995. Chubais made a comeback in 1996 as head of Yeltsin's successful reelection campaign and was named chief of staff for the president. In March 1997, Western support and political maneuvering catapulted him to first deputy prime minister and minister of finance. Although fired by Yeltsin in March 1998, Chubais was reappointed in June 1998 to be Yeltsin's special envoy in charge of Russia's relations with international lending institutions.

Working closely with Harvard University's Institute for International Development (HIID), the Chubais Clan controlled, directly and indirectly, millions of dollars in U.S. aid through a variety of institutions and organizations set up to perform privatization, economic-restructuring, and related activities. Between 1992 and 1997, HIID received $40.4 million from USAID in noncompetitive grants for work in Russia and was slated to receive another $17.4 million until USAID suspended HIID's funding in May 1997, citing evidence that HIID principals were engaged in "activities for personal gain." In addition to receiving millions in direct funding, HIID and the Clan helped steer and coordinate USAID's $300 million economic reform portfolio, which encompassed privatization, legal reform, development of capital markets, and the creation of a Russian securities and exchange commission.

The preferred method of economic reform was top-down presidential decree orchestrated by Chubais. Shortly after Yeltsin became the elected president of the Russian Federation in June 1991, the Federation's Supreme Soviet passed a law mandating privatization. After several schemes were floated, the Supreme Soviet passed a program in 1992 intended to prevent corruption, but the one Chubais eventually implemented contained none of the safeguards and was designed to encourage the accumulation of property in a few hands. This program opened the door to widespread corruption and was so controversial that Chubais ultimately had to rely largely on presidential decrees, not parliamentary approval, for implementation.

Instead of encouraging market reform, this rule by decree frustrated many market reforms as well as democratic decisionmaking. Some reforms, such as lifting price controls, could be achieved by decree. But many other reforms advocated by USAID, the World Bank, and the International Monetary Fund (IMF), including privatization and economic restructuring, depended on changes in law, public administration, or mindsets, and required working with the full spectrum of legislative and market participants-not just one group. The "reformers" set up still other means of bypassing democratic processes, including a network of aid-funded "private" organizations controlled by the Chubais Clan and HIID. These organizations enabled reformers to bypass legitimate bodies of government, such as ministries and branch ministries, and to circumvent the Duma.

Problems with Current U.S. Policy

Key Problems

The privatization drive that was supposed to reap the fruits of the free market instead helped to create a system of tycoon capitalism run for the benefit of a corrupt political oligarchy that has appropriated hundreds of millions of dollars of Western aid and plundered Russia's wealth.

Despite evidence of corruption and lack of popular support, many Western investors and U.S. officials embraced the "reformers" dictatorial modus operandi and viewed Chubais as the only man capable of keeping the nation heading along the troublesome road to economic reform. As Walter Coles, a senior adviser in USAID's Office of Privatization and Economic Restructuring program, said, "If we needed a decree, Chubais didn't have to go through the bureaucracy," adding, "There was no way that reformers could go to the Duma for large amounts of money to move along reform."

While this approach sounds good in principle, it is less convincing in practice because it is an inherently political decision disguised as a technical matter. As Chubais Clan member Maxim Boycko himself acknowledged in a 1995 co-authored book on privatization, "Aid can change the political equilibrium by explicitly helping free-market reformers to defeat their opponents . Aid helps reform not because it directly helps the economy–it is simply too small for that–but because it helps the reformers in their political battles."

In a 1997 interview, U.S. aid coordinator to the former Soviet Union, Ambassador Richard L. Morningstar, stood by this approach: "If we hadn't been there to provide funding to Chubais, could we have won the battle to carry out privatization? Probably not. When you're talking about a few hundred million dollars, you're not going to change the country, but you can provide targeted assistance to help Chubais."

U.S. assistance to Chubais continued even after he was dismissed by Yeltsin as First Deputy Prime Minister in January 1996. Chubais was placed on the HIID payroll, a show of loyalty that USAID Assistant Administrator Thomas A. Dine said he supported.

Much of this feels familiar to Russians raised in the Communist practice of political control over economic decisions–the quintessence of the discredited Communist system. While professing simply to support reform, U.S. policies afforded one group a comparative advantage and allowed much aid to be used as the tool of this group. Ironically, far from helping to separate the political and economic spheres, U.S. economic aid has instead reinforced the interdependency of these spheres. Indeed, the activities of HIID in Russia provide some cautionary lessons on abuse of trust by supposedly disinterested foreign advisers, on U.S. arrogance, and on the entire policy of support for a single Russian group of so-called reformers.

The July 1998 IMF bailout of Russia represents an intensification of the very policies that have produced such abuses. The $11.2 billion aid package for 1998, (with another $7.8 billion funds over three years pledged if Russia "stays on track"), is supposed to put an end to Russia's financial crisis. Yet only a very few certain political-economic players–not the population at large, including workers who have gone without wages for months–stand to reap any benefits.

Among those who spoke out against the bailout was Veniamin Sokolov, head of the Chamber of Accounts of the Russian Federation, Russia's equivalent of the U.S. General Accounting Office. Sokolov, who has investigated the destination of some previous monies from international lending institutions and aid organizations, argued, "All loans made to Russia go to speculative financial markets and have no effect whatsoever on the national economy." And it is the Russian people who are responsible for repaying those loans.

The very call for an IMF bailout is a commentary on the failure of previous economic aid to Russia: If aid had been effective, why were billions in IMF loans needed to prevent the country from falling into crisis? The IMF loan and accompanying hype were intended to revive confidence in Russia's plummeting markets and give the government time to get its financial markets under control. However, just weeks after the IMF deal was approved, investor confidence hit a new low and the Russian government was forced to devalue the ruble.

For its part, USAID, which provided Russia with $95.7 million in economic aid in 1997 and another $129.1 million estimated for 1998, is requesting from Congress $225.4 million in economic aid for Russia in 1999.

Toward a New Foreign Policy

Key Recommendations

Given the continuing socioeconomic deterioration of Russia, what should the United States do? If the U.S. government wants to adhere to its own declared objectives and help promote in Russia sound economic development and equitable growth as well as viable and transparent democratic institutions, it has no option than to reverse its current policies and practices.

The U.S. role in creating a system of tycoon capitalism and the current economic meltdown, coupled with military policies such as NATO expansion, have fueled anti-American sentiment in Russia. The first thing we should do, as Joseph Stiglitz, a leading World Bank economist, correctly suggests, is to adopt "a greater degree of humility . (and) acknowledgement of the fact that we do not have all of the answers." Washington must also accept that the future shape of Russia society will and must be determined by the Russian people. U.S. policy should at least try to adhere to some of the principles that it preaches, such as participatory democracy and the rule of law or even "no taxation without representation." In line this with, the U.S. must stop its policy of support-at-all-costs for Yeltsin and the Chubais Clan, not only in USAID targets but also in U.S. influence in IMF and World Bank lending.

Second, the U.S. government should recognize that a healthy banking and financial system cannot arise without a revival of production and distribution in the "real" economy. Measures which emphasize increases in tax collections and reductions in government expenditures under the current extremely depressed conditions simply guarantee accelerated decline of the real economy and social-political chaos. The United States should use its great influence on the IMF andWorld Bank to reduce their pressure on Russia to pursue such suicidal policies. Not only did the IMF bailout fail to restore confidence, but the business of international aid has been fundamentally ill-conceived. As Veniamin Sokolov warned: "Giving more loans to the Yeltsin government is comparable to giving a drug addict a fresh supply of narcotics. Any new loans will only go to the realm of financial speculation and to prop up support for Boris Yeltsin. Russia does not need any further such lending." In sum, further aid will go to the same corrupt niches and is likely to make the situation worse, not better.

Third, the U.S. should embark on a broad-based policy to encourage governance and the rule of law. It is essential that the United States discontinue support of non-inclusive organizations and the bypassing of democratic process through decree. Some U.S. aid funds have gone for "democracy building," including strengthening and revamping the judiciary. However, these efforts have been a low priority and have been compromised and undermined by the practice of U.S. economic advisers encouraging the Chubais Clan to enact swift economic reforms without approval of the Duma, Russia's popularly elected legislature.

The U.S. needs to adopt a pro-democracy stance that encourages institution-building and as broad a range of democratic positions as possible. We must cease to select specific groups or individuals as the recipients of uncritical support, which both corrupts our "favorites" and delegitimizes them in the eyes of their fellow citizens.

Fourth, President Clinton himself, other U.S. officials, and economic advisers need to establish contact and ties with a wide cross-section of the Russian leadership–politicians, economists, and social and political activists–and not only with Yeltsin and his allies. How Russian elites perceive the efficacy of U.S. aid programs and policies should be a source of concern, especially because many Russians have questioned American intentions. Although a reversal of policy will require a long and resolute process of diplomacy, Clinton administration officials can take steps by, for example, making efforts to meet with members of the Duma and a diversity of Russian elites.


[What the US largely did at that point was disengage aid to Russia and set them adrift.]

ilsm -> RC AKA Darryl, Ron... , January 17, 2017 at 02:00 PM
This is a jr high social studies homework assignment from a pro neocon teacher.

Bill Clinton was all out after Russia, Talbot and his neocon advisors!

The look the other way when the united Germany sent a brigade size armored set to Croatia to do Serbs.

In Jul 1997 Poland, Hungary and Czech republic were entered in to NATO.

Several undeclared wars against Serbia under Clinton. The Russians looked on helpless to aid the historic Tsarist protectorate.

The Crimean War in 1857 was fought over the same issues.

End of cold war was back to the historic west Europe versus Russia.

Milanovic is out of his element.

ilsm -> ilsm... , January 17, 2017 at 02:02 PM
Then there was Harvard's economic advisors' pillaging Russian evolution.

Documented by David Warsh.

RC AKA Darryl, Ron -> ilsm... , January 17, 2017 at 02:37 PM
It is not clear what Milanovic was trying to get at, but what Janine Wedel wrote about was how I came to understand the story. Your writing makes Milanovic seem cogent. I am talking about your organization of ideas and your semantics, as well as his. Neither of you get much across for the effort. Wedel can actually write. Whether she is right or not, I cannot say, but it is how I have heard the story told from the beginning.
ilsm -> RC AKA Darryl, Ron... , January 17, 2017 at 03:29 PM
I typed too much!

no more six word lines

libezkova -> ilsm... , January 17, 2017 at 05:55 PM
Here is a web page about Harvard mafia did Russia in 90th

http://www.softpanorama.org/Skeptics/Pseudoscience/harvard_mafia.shtml

libezkova -> libezkova... , January 17, 2017 at 06:43 PM
Looks like there was a desire to completely destroy Russian economics and turn Russia into vassal state by the USA ruling elite. So the policy was not to help, but help to destroy.

Huge profits were made by devouring Russia and all xUSSR region and plunging the population into abject poverty. But eventually it backfired.

Chris G -> RC AKA Darryl, Ron... , January 17, 2017 at 02:15 PM
Yeah, hard to argue that the U.S. did the Russian people a solid after the Soviet Union collapsed.
RC AKA Darryl, Ron said in reply to Chris G ... , January 17, 2017 at 02:38 PM
Yep. The US is good about intervening, screwing it up, and then leaving the scene of the crime.
JohnH -> RC AKA Darryl, Ron... , January 17, 2017 at 07:31 AM
Regarding Russia, Clinton was more interested in domination that development...a consistent theme in US history since its beginning.

Instead of promoting democracy, the US rigged the 1996 election in favor of the drunkard Yeltsin.
http://www.newsmax.com/Newsmax-Tv/bill-clinton-advise-boris-yeltsin-dick-morris/2016/09/08/id/747327/

To hear the all the whining of Democrats and of the security state, the chickens may have come home to roost.

pgl -> JohnH... , January 17, 2017 at 08:04 AM
Wow - Anne is not going to like this suggestion that Yeltsin was a drunkard. Of course you missed the real problem - his regime of crony capitalism was incredibly corrupt. Stiglitz covered the damage that was done in a chapter entitled "Who Lost Russia". Something else you never bothered to read.
pgl -> pgl... , January 17, 2017 at 08:05 AM
Chapter 5 of Globalization and its Discontents (2002)

https://www.princeton.edu/wwac/academic-review/files/561/8.3c_StiglitzCh5.doc

JohnH -> pgl... , January 17, 2017 at 09:54 AM
Yeltsin's "regime of crony capitalism was incredibly corrupt"...Clinton's regime on a grander scale...which was why Clinton wanted to rig the Russian election for Yeltsin?
ilsm -> RC AKA Darryl, Ron... , January 17, 2017 at 02:16 PM
Having been is Strategic Air Command, as well as a long time in the technical side of NORAD's mission I find Milanovic's concluding statement utterly misguided.

"But note that the Cold War had one good feature: it was "Cold".

"Civilization"* could have ended in less than the time to watch an NFL football game.

My experiences in the cold war were really great!! The nuclear forces I supported were on 'immediate' launch alert, several rumors abide about close calls from 'sensor errors and communication black out". Any of SAC's bomb wings could have its alert Buffs in the air in single digit minutes!

It is safer to move NATO right up to Moscow! Neocon hyperbole from Milanovic selling the US military industrial complex' marketing plans. Look how secure and prosperous the 'west' has been under the umbrella of $28T in US war spending.

It don't cause any concerns that NATO has organized former Warsaw pact against Russia.

It will be deceptively "Cold" until it goes thermonuclear over that brigade level trip wire.

ilsm -> RC AKA Darryl, Ron... , -1
Obama on cornering Russia is an extension of Wm Clinton.

[Oct 23, 2016] Mark Ames Why Finance Is Too Important to Leave to Larry Summers naked capitalism

Notable quotes:
"... The oligarchy has spent decades on a project to "defund the Left," and they've succeeded in ways we're only just now grasping. "Defunding the Left" doesn't mean denying funds to the rotten Democratic Party; it means defunding everything that threatens the 1%'s hold on wealth and power. ..."
Oct 22, 2016 | www.nakedcapitalism.com

Yves here. Mark Ames wrote this post for our fundraiser five years ago. We've turned into a fundraiser staple, since as long as Larry Summers is with us, this is the sort of classic worth reading regularly. Think of it as our analogue to Christmas perennials like The Grinch That Stole Christmas or It's a Wonderful Life. But not to worry, Ames being Ames and NC being NC, this is the antithesis of sappy. (Mark, you are on notice that if by some miraculous bit of good fortune, Summers retreats from the public sphere, we'll need you to provide an updated slant on elite venality).

And in the spirit of Christmas come a couple months early, we hope you'll leave something nice in our stocking, um, Tip Jar -- We are raising our donor target to 1350 (Lambert has yet to update our thermometer) to help us reach our final financial target for original reporting.

By Mark Ames, author of Going Postal: Rage, Murder and Rebellion from Reagan's Workplaces to Clinton's Columbine who writes regularly at Pando .

If you've been reading Naked Capitalism for any period of time without giving back in donations-and most of us have been hooked from the time we discovered Yves Smith's powerful, sharp voice and brilliant mind-then you you've been getting away with murder. Naked Capitalism is that rare blog that makes you smarter. Smarter about a lot of things, but primarily about Yves' area of expertise, finance.

By a quirk of historical bad luck, the American Left has gone two generations without understanding finance, or even caring to understand. It was the hippies who decided half a century ago that finance was beneath them, so they happily ceded the entire field-finance, business, economics, money-otherwise known as "political power"-to the other side. Walking away from the finance struggle was like that hitchhiker handing the gun back to the Manson Family. There's a great line from Charles Portis's anti-hippie novel, "Dog of the South" that captures the Boomers' self-righteous disdain for "figures":

He would always say-boast, the way those people do-that he had no head for figures and couldn't do things with his hands, slyly suggesting the presence of finer qualities.

That part about the hands-that would refer to the hippies' other great failure, turning their backs on Labor, because Labor didn't groove with the Hippies' Culture War. So the Left finds itself, fifty years later, dealing with the consequences of all those years of ruinous neglect of finance and labor-the consequences being powerlessness and political impotence.

That's why Yves Smith is so important to anyone who cares about politics and the bad direction this country is taking. In 2008, the Left suddenly discovered that although it could bray with the best of 'em about how bad foreign wars are, and how wrong racism and sexism an homophobia are, it was caught completely and shamefully by surprise by the financial collapse of 2008. The ignorance was paralyzing, politically and intellectually. Even the lexicon was alien. Unless of course you were one of the early followers of Yves Smith's blog.

It wasn't always this way.

Back in the 1930s, the Left was firmly grounded in economics, money and finance; back then, the Left and Labor were practically one. With a foundation in finance and economics, the Left understood labor and political power and ideology and organization much better than the Left today, which at best can parry back the idiotic malice-flak that the Right specializes in spraying us with. We're only just learning how politically stunted and ignorant we are, how much time and knowledge we've lost, and how much catching up we have to do.

Which is why Yves Smith's Naked Capitalism is one of the 99%'s most valuable asset in the long struggle ahead: She is both analyst and educator, with a rare literary talent (especially for finance). One thing that's protected the financial oligarchy is the turgid horrible prose that they camouflage their toxic ideas and concepts in. Yves is one of the rare few who can make reading finance as emotionally charged as it needs to be.

Naked Capitalism is our online university in finance and politics and ideology. Whereas other online universities are set up to turn millions of gullible youths into debt-shackled Wall Street feeding cows, Naked Capitalism is the opposite: Completely free, consistently brilliant, vital, and necessary, making us smarter, teaching us how we might one day overthrow the financial oligarchy. One other difference between Naked Capitalism and online university swindles: (Stanley Kaplan cough-cough!) Your donations won't end up paying Ezra Klein's salary.

Which brings me back to my whole "Shame on you!" point I was trying to make earlier. When it comes to fundraising, nothing works like shaming. That's how those late-night commercials work: You're sitting there in your nice comfortable home, and then suddenly there's this three-legged dog hobbling into its cage, with big wet eyes, and then some bearded pedophile comes on and says, "Poor Rusty has endured more abuse and pain than you can ever imagine, and tomorrow, he will be gassed to death in a slow, horrible poison death chamber. And you-look at you, sitting there with your Chunky Monkey and your central heating, what kind of sick bastard are you? Get your goddamn Visa Mastercard out and send money to Rusty, or else his death is on your head. I hope you sleep well at night."

Now I know that this sort of appeal wouldn't work on the Naked Capitalism crowd-too many economists here, and as everyone knows, you can't appeal to economists' hearts because, well, see under "Larry Summers World Bank Memo"… I can imagine Larry watching that late night commercial with the three-legged dog, powering a 2-liter bottle of Diet Coke and devouring a bag of Kettle Salt & Vinegar potato chips, calculating the productive worth of the three-legged dog, unmoved by the sentimental appeal. Larry grabs a dictaphone: "Item: How to end dog-gassings? Solution: Ship all three-legged stray dogs to sub-Saharan Africa. Africans won't even notice. Dogs saved. Private capital freed up. Problem solved."

So some of you have no hearts, and some of us have no shame. But we all do understand how vital Naked Capitalism has been in educating us. I'm sure that the other side knows how dangerous a site like this is, because as we become more educated and more political, we become more and more of a threat.

The oligarchy has spent decades on a project to "defund the Left," and they've succeeded in ways we're only just now grasping. "Defunding the Left" doesn't mean denying funds to the rotten Democratic Party; it means defunding everything that threatens the 1%'s hold on wealth and power.

One of their greatest successes, whether by design or not, has been the gutting of journalism, shrinking it down to a manageable size where its integrity can be drowned in a bathtub. It's nearly impossible to make a living as a journalist these days; and with the economics of the journalism business still in free-fall like the Soviet refrigerator industry in the 1990s, media outlets are even less inclined to challenge power, journalists are less inclined to rock the boat than ever, and everyone is more inclined to corruption (see: Washington Post, Atlantic Monthly). A ProPublica study in May put it in numbers: In 1980, the ratio of PR flaks to journalists was roughly 1:3. In 2008, there were 3 PR flaks for every 1 journalist. And that was before the 2008 shit hit the journalism fan.

This is what an oligarchy looks like. I saw the exact same dynamic in Russia under Yeltsin: When he took power in 1991, Russia had the most fearless and most ideologically diverse journalism culture of any I've ever seen, a lo-fi, hi-octane version of American journalism in the 1970s. But as soon as Yeltsin created a class of oligarchs to ensure his election victory in 1996, the oligarchs snapped up all the free media outlets, and forced out anyone who challenged power, one by one. By the time Putin came to power, all the great Russian journalists that I and Taibbi knew had abandoned the profession for PR or political whoring. It was the oligarchy that killed Russian journalism; Putin merely mopped up a few remaining pockets of resistance.

The only way to prevent that from happening to is to support the best of what we have left. Working for free sucks. It can't hold, and it won't.

There are multiple ways to give. The first is here on the blog, the Tip Jar , which takes you to PayPal. There you can use a debit card, a credit card or a PayPal account (the charge will be in the name of Aurora Advisors).

You can also send a check (or multiple post dated checks) in the name of Aurora Advisors Incorporated to

Aurora Advisors Incorporated
903 Park Avenue, 8th Floor
New York, NY 10075

Please also send an e-mail to yves@nakedcapitalism.com with the headline "Check is in the mail" (and just the $ en route in the message) to have your contribution included in the total number of donations.

So donate now to Naked Capitalism . If you can't afford much, give what you can. If you can afford more, give more. If you can give a lot, give a lot. Whether you can contribute $5 or $5,000, it will pay for itself, I guarantee you. This isn't just giving, it's a statement that you are want a different debate, a different society, and a different culture.

Who knows, maybe we'll win; maybe we'll even figure out a way to seal Larry Summers in a kind of space barge, and fire him off into deep space, to orbit Uranus for eternity. Yves? Could it be financed?

susan the other October 22, 2016 at 10:30 am

thanks – i forgot how funny this one was

rusti October 22, 2016 at 10:51 am

And you-look at you, sitting there with your Chunky Monkey and your central heating, what kind of sick bastard are you? Get your goddamn Visa Mastercard out and send money to Rusty, or else his death is on your head. I hope you sleep well at night.

I'd already shelled out for the NC fundraiser, but this one got me to pull out the MasterCard and finally get around to becoming a subscriber to Ames' fantastic Radio War Nerd podcast, which I discovered thanks to the NC commentariat.

JTMcPhee October 22, 2016 at 11:19 am

Interesting how people become the Other over time. Go back to the videos of crowds taunting and attacking black kids being escorted by federal marshals into "white" schools, and you see clean-shaven crew cuts and perms and wife-beater t-shirts and pegged pants and real boots. Go look at the videos of redneck activity now, NASCAR and "mudding" (pickups with huge tires and engines slogging through pits of slimy red Georgia mud" and gatherings of motorboats on Southern lakes, and it's all beards and pony tails (on guys and gals? Says Jeff Foxworthy) and tie-died clothing (along with the Confederate battle flags and gunz and all.

I got my BA in history from Lake Forest College, in a snotty sick-wealthy northern suburb of Chicago. https://en.wikipedia.org/wiki/Lake_Forest_College My years there, '69-72, after my volunteer "service" in the US Army and a year doing "Racket" duty in Vietnam, were a "hippie" tour de force. All social concerns and "anti-war" (actually "escape the draft" by young people who were largely those who could not get into the really prestigious Ivy League facilities, despite great family wealth, or who had been booted from the same. Heavy drug use, supine administration ("laissez faire"), endless debates over Marxism Leninism Trotskyism etc. Ineffectual "peace marches," to do stuff like "blocking" an unused entrance to Ft. Sheridan, just down the road - a few TV reporters to document the tomfoolery - "Stop The War Machine!" Motions toward communes, DOA when the practicalities of sharing, comity, ran up against the selfish consumerism of the privileged: ""I don't get my own room and stereo? I get to copulate with others, but you, my steady, must remain my sole property!" It helped the transformation that the daughter of the Dean did a Janis Joplin at the very end of my matriculation there - all of a sudden the local police were invited in, to search student rooms and cars and engage in all the funsies of "drug enforcement" with stings, etc.

Lake Forest very quickly morphed, once the draft ended, into a very much focused "business school," to teach the young budding not-ready-for-MIT-or-Wharton capitalists the rudiments of their craft. Graduating about 450 looting-ready young folks a year. ?(Not all of them, of course…) Pretty amazing, not surprising.

Neither the rednecks nor the "hippies" were much interested in what the parasites were doing to "FIRE" over those decades and generations. That's the thing about parasites: most of what they do is invisible until the infection gets severe and vital organs are damaged, while the host goes about generating the nutrition that feeds the critters until whooops! Time to shed some segments into the water supply, lay some eggs, encyst, find another host…

[Oct 21, 2016] The capitalist crisis and the radicalization of the working class in 2012 - World Socialist Web Site by David North

Its from World Socialist Web Site by thier analysys does contain some valid points. Especially about betrayal of nomenklatura, and, especially, KGB nomenklatura,which was wholesale bought by the USA for cash.
Note that the author is unable or unwilling to use the tterm "neoliberalism". Looks like orthodox Marxism has problem with this notion as it contradict Marxism dogma that capitalism as an economic doctrine is final stage before arrival of socialism. Looks like it is not the final ;-)
Notable quotes:
"... Russia Since 1980 ..."
"... History reveals that the grandsons of the Bolshevik coup d'état didn't destroy the Soviet Union in a valiant effort to advance the cause of communist prosperity or even to return to their common European home; instead, it transformed Soviet managers and ministers into roving bandits (asset-grabbing privateers) with a tacit presidential charter to privatize the people's assets and revenues to themselves under the new Muscovite rule of men ..."
"... The scale of this plunder was astounding. It not only bankrupted the Soviet Union, forcing Russian President Boris Yeltsin to appeal to the G-7 for $6 billion of assistance on December 6, 1991, but triggered a free fall in aggregate production commencing in 1990, aptly known as catastroika. ..."
"... In retrospect, the Soviet economy didn't collapse because the liberalized command economy devised after 1953 was marked for death. The system was inefficient, corrupt and reprehensible in a myriad of ways, but sustainable, as the CIA and most Sovietologists maintained. It was destroyed by Gorbachev's tolerance and complicity in allowing privateers to misappropriate state revenues, pilfer materials, spontaneously privatize, and hotwire their ill-gotten gains abroad, all of which disorganized production. ..."
"... The rapid growth and increasing complexity of the Soviet economy required access to the resources of the world economy. ..."
"... For the Soviet bureaucracy, a parasitic social caste committed to the defense of its privileges and terrified of the working class, the revolutionary solution to the contradictions of the Soviet economy was absolutely unthinkable. The only course that it could contemplate was the second-capitulation to imperialism. ..."
"... In other words, the integration of the USSR into the structure of the world capitalist economy on a capitalist basis means not the slow development of a backward national economy, but the rapid destruction of one which has sustained living conditions which are, at least for the working class, far closer to those that exist in the advanced countries than in the third world. ..."
"... The Fourth International ..."
"... The End of the USSR, ..."
"... The report related the destruction of the USSR by the ruling bureaucracy to a broader international phenomenon. The smashing up of the USSR was mirrored in the United States by the destruction of the trade unions as even partial instruments of working-class defense. ..."
"... Millions of people are going to see imperialism for what it really is. The democratic mask is going to be torn off. The idea that imperialism is compatible with peace is going to be exposed. The very elements which drove masses into revolutionary struggle in the past are once again present. The workers of Russia and the Ukraine are going to be reminded why they made a revolution in the first place. The American workers are going to be reminded why they themselves in an earlier period engaged in the most massive struggles against the corporations. The workers of Europe are going to be reminded why their continent was the birthplace of socialism and Karl Marx. [p. 25] ..."
Jan 30, 2012 | www.wsws.org

... ... ...

This analysis has been vindicated by scholarly investigations into the causes of the Soviet economic collapse that facilitated the bureaucracy's dissolution of the USSR. In Russia Since 1980, published in 2008 by Cambridge University Press, Professors Steven Rosefielde and Stefan Hedlund present evidence that Gorbachev introduced measures that appear, in retrospect, to have been aimed at sabotaging the Soviet economy. "Gorbachev and his entourage," they write, "seem to have had a venal hidden agenda that caused things to get out of hand quickly." [p. 38] In a devastating appraisal of Gorbachev's policies, Rosefielde and Hedlund state:

History reveals that the grandsons of the Bolshevik coup d'état didn't destroy the Soviet Union in a valiant effort to advance the cause of communist prosperity or even to return to their common European home; instead, it transformed Soviet managers and ministers into roving bandits (asset-grabbing privateers) with a tacit presidential charter to privatize the people's assets and revenues to themselves under the new Muscovite rule of men. [p. 40]

Instead of displaying due diligence over personal use of state revenues, materials and property, inculcated in every Bolshevik since 1917, Gorbachev winked at a counterrevolution from below opening Pandora's Box. He allowed enterprises and others not only to profit maximize for the state in various ways, which was beneficial, but also to misappropriate state assets, and export the proceeds abroad. In the process, red directors disregarded state contracts and obligations, disorganizing inter-industrial intermediate input flows, and triggering a depression from which the Soviet Union never recovered and Russia has barely emerged. [p. 47]

Given all the heated debates that would later ensue about how Yeltsin and his shock therapy engendered mass plunder, it should be noted that the looting began under Gorbachev's watch. It was his malign neglect that transformed the rhetoric of Market Communism into the pillage of the nation's assets.

The scale of this plunder was astounding. It not only bankrupted the Soviet Union, forcing Russian President Boris Yeltsin to appeal to the G-7 for $6 billion of assistance on December 6, 1991, but triggered a free fall in aggregate production commencing in 1990, aptly known as catastroika.

In retrospect, the Soviet economy didn't collapse because the liberalized command economy devised after 1953 was marked for death. The system was inefficient, corrupt and reprehensible in a myriad of ways, but sustainable, as the CIA and most Sovietologists maintained. It was destroyed by Gorbachev's tolerance and complicity in allowing privateers to misappropriate state revenues, pilfer materials, spontaneously privatize, and hotwire their ill-gotten gains abroad, all of which disorganized production. [p. 49]

The analysis of Rosefielde and Hedlund, while accurate in its assessment of Gorbachev's actions, is simplistic. Gorbachev's policies can be understood only within the framework of more fundamental political and socioeconomic factors. First, and most important, the real objective crisis of the Soviet economy (which existed and preceded by many decades the accession of Gorbachev to power) developed out of the contradictions of the autarkic nationalist policies pursued by the Soviet regime since Stalin and Bukharin introduced the program of "socialism in one country" in 1924. The rapid growth and increasing complexity of the Soviet economy required access to the resources of the world economy. This access could be achieved only in one of two ways: either through the spread of socialist revolution into the advanced capitalist countries, or through the counterrevolutionary integration of the USSR into the economic structures of world capitalism.

For the Soviet bureaucracy, a parasitic social caste committed to the defense of its privileges and terrified of the working class, the revolutionary solution to the contradictions of the Soviet economy was absolutely unthinkable. The only course that it could contemplate was the second-capitulation to imperialism. This second course, moreover, opened for the leading sections of the bureaucracy the possibility of permanently securing their privileges and vastly expanding their wealth. The privileged caste would become a ruling class. The corruption of Gorbachev, Yeltsin and their associates was merely the necessary means employed by the bureaucracy to achieve this utterly reactionary and immensely destructive outcome.

On October 3, 1991, less than three months before the dissolution of the USSR, I delivered a lecture in Kiev in which I challenged the argument-which was widely propagated by the Stalinist regime-that the restoration of capitalism would bring immense benefits to the people. I stated:

In this country, capitalist restoration can only take place on the basis of the widespread destruction of the already existing productive forces and the social- cultural institutions that depended upon them. In other words, the integration of the USSR into the structure of the world capitalist economy on a capitalist basis means not the slow development of a backward national economy, but the rapid destruction of one which has sustained living conditions which are, at least for the working class, far closer to those that exist in the advanced countries than in the third world. When one examines the various schemes hatched by proponents of capitalist restoration, one cannot but conclude that they are no less ignorant than Stalin of the real workings of the world capitalist economy. And they are preparing the ground for a social tragedy that will eclipse that produced by the pragmatic and nationalistic policies of Stalin. ["Soviet Union at the Crossroads," published in The Fourth International (Fall- Winter 1992, Volume 19, No. 1, p. 109), Emphasis in the original.]

Almost exactly 20 years ago, on January 4, 1992, the Workers League held a party membership meeting in Detroit to consider the historical, political and social implications of the dissolution of the USSR. Rereading this report so many years later, I believe that it has stood the test of time. It stated that the dissolution of the USSR "represents the juridical liquidation of the workers' state and its replacement with regimes that are openly and unequivocally devoted to the destruction of the remnants of the national economy and the planning system that issued from the October Revolution. To define the CIS [Confederation of Independent States] or its independent republics as workers states would be to completely separate the definition from the concrete content which it expressed during the previous period." [David North, The End of the USSR, Labor Publications, 1992, p. 6]

The report continued:

"A revolutionary party must face reality and state what is. The Soviet working class has suffered a serious defeat. The bureaucracy has devoured the workers state before the working class was able to clean out the bureaucracy. This fact, however unpleasant, does not refute the perspective of the Fourth International. Since it was founded in 1938, our movement has repeatedly said that if the working class was not able to destroy this bureaucracy, then the Soviet Union would suffer a shipwreck. Trotsky did not call for political revolution as some sort of exaggerated response to this or that act of bureaucratic malfeasance. He said that a political revolution was necessary because only in that way could the Soviet Union, as a workers state, be defended against imperialism." [p. 6]

I sought to explain why the Soviet working class had failed to rise up in opposition to the bureaucracy's liquidation of the Soviet Union. How was it possible that the destruction of the Soviet Union-having survived the horrors of the Nazi invasion-could be carried out "by a miserable group of petty gangsters, acting in the interests of the scum of Soviet society?" I offered the following answer:

We must reply to these questions by stressing the implications of the massive destruction of revolutionary cadre carried out within the Soviet Union by the Stalinist regime. Virtually all the human representatives of the revolutionary tradition who consciously prepared and led that revolution were wiped out. And along with the political leaders of the revolution, the most creative representatives of the intelligentsia who had flourished in the early years of the Soviet state were also annihilated or terrorized into silence.

Furthermore, we must point to the deep-going alienation of the working class itself from state property. Property belonged to the state, but the state "belonged" to the bureaucracy, as Trotsky noted. The fundamental distinction between state property and bourgeois property-however important from a theoretical standpoint-became less and less relevant from a practical standpoint. It is true that capitalist exploitation did not exist in the scientific sense of the term, but that did not alter the fact that the day-to-day conditions of life in factories and mines and other workplaces were as miserable as are to be found in any of the advanced capitalist countries, and, in many cases, far worse.

Finally, we must consider the consequences of the protracted decay of the international socialist movement...

Especially during the past decade, the collapse of effective working class resistance in any part of the world to the bourgeois offensive had a demoralizing effect on Soviet workers. Capitalism assumed an aura of "invincibility," although this aura was merely the illusory reflection of the spinelessness of the labor bureaucracies all over the world, which have on every occasion betrayed the workers and capitulated to the bourgeoisie. What the Soviet workers saw was not the bitter resistance of sections of workers to the international offensive of capital, but defeats and their consequences. [p. 13-14]

The report related the destruction of the USSR by the ruling bureaucracy to a broader international phenomenon. The smashing up of the USSR was mirrored in the United States by the destruction of the trade unions as even partial instruments of working-class defense.

In every part of the world, including the advanced countries, the workers are discovering that their own parties and their own trade union organizations are engaged in the related task of systematically lowering and impoverishing the working class. [p. 22]

Finally, the report dismissed any notion that the dissolution of the USSR signified a new era of progressive capitalist development.

Millions of people are going to see imperialism for what it really is. The democratic mask is going to be torn off. The idea that imperialism is compatible with peace is going to be exposed. The very elements which drove masses into revolutionary struggle in the past are once again present. The workers of Russia and the Ukraine are going to be reminded why they made a revolution in the first place. The American workers are going to be reminded why they themselves in an earlier period engaged in the most massive struggles against the corporations. The workers of Europe are going to be reminded why their continent was the birthplace of socialism and Karl Marx. [p. 25]

The aftermath of the dissolution of the USSR: 20 years of economic crisis, social decay, and political reaction

According to liberal theory, the dissolution of the Soviet Union ought to have produced a new flowering of democracy. Of course, nothing of the sort occurred-not in the former USSR or, for that matter, in the United States. Moreover, the breakup of the Soviet Union-the so-called defeat of communism-was not followed by a triumphant resurgence of its irreconcilable enemies in the international workers' movement, the social democratic and reformist trade unions and political parties. The opposite occurred. All these organizations experienced, in the aftermath of the breakup of the USSR, a devastating and even terminal crisis. In the United States, the trade union movement-whose principal preoccupation during the entire Cold War had been the defeat of Communism-has all but collapsed. During the two decades that followed the collapse of the Soviet Union, the AFL-CIO lost a substantial portion of its membership, was reduced to a state of utter impotence, and ceased to exist as a workers' organization in any socially significant sense of the term. At the same time, everywhere in the world, the social position of the working class-from the standpoint of its influence on the direction of state policy and its ability to increase its share of the surplus value produced by its own labor-deteriorated dramatically.

Certain important conclusions flow from this fact. First, the breakup of the Soviet Union did not flow from the supposed failure of Marxism and socialism. If that had been the case, the anti-Marxist and antisocialist labor organizations should have thrived in the post-Soviet era. The fact that these organizations experienced ignominious failure compels one to uncover the common feature in the program and orientation of all the so-called labor organizations, "communist" and anticommunist alike. What was the common element in the political DNA of all these organization? The answer is that regardless of their names, conflicting political alignments and superficial ideological differences, the large labor organizations of the post-World War II period pursued essentially nationalist policies. They tied the fate of the working class to one or another nation-state. This left them incapable of responding to the increasing integration of the world economy. The emergence of transnational corporations and the associated phenomena of capitalist globalization shattered all labor organizations that based themselves on a nationalist program.

The second conclusion is that the improvement of conditions of the international working class was linked, to one degree or another, to the existence of the Soviet Union. Despite the treachery and crimes of the Stalinist bureaucracy, the existence of the USSR, a state that arose on the basis of a socialist revolution, imposed upon American and European imperialism certain political and social restraints that would otherwise have been unacceptable. The political environment of the past two decades-characterized by unrestrained imperialist militarism, the violations of international law, and the repudiation of essential principles of bourgeois democracy-is the direct outcome of the dissolution of the Soviet Union.

The breakup of the USSR was, for the great masses of its former citizens, an unmitigated disaster. Twenty years after the October Revolution, despite all the political crimes of the Stalinist regime, the new property relations established in the aftermath of the October Revolution made possible an extraordinary social transformation of backward Russia. And even after suffering horrifying losses during the four years of war with Nazi Germany, the Soviet Union experienced in the 20 years that followed the war a stupendous growth of its economy, which was accompanied by advances in science and culture that astonished the entire world.

But what is the verdict on the post-Soviet experience of the Russian people? First and foremost, the dissolution of the USSR set into motion a demographic catastrophe. Ten years after the breakup of the Soviet Union, the Russian population was shrinking at an annual rate of 750,000. Between 1983 and 2001, the number of annual births dropped by one half. 75 percent of pregnant women in Russia suffered some form of illness that endangered their unborn child. Only one quarter of infants were born healthy.

The overall health of the Russian people deteriorated dramatically after the restoration of capitalism. There was a staggering rise in alcoholism, heart disease, cancer and sexually transmitted diseases. All this occurred against the backdrop of a catastrophic breakdown of the economy of the former USSR and a dramatic rise in mass poverty.

As for democracy, the post-Soviet system was consolidated on the basis of mass murder. For more than 70 years, the Bolshevik regime's dissolution of the Constituent Assembly in January 1918-an event that did not entail the loss of a single life-was trumpeted as an unforgettable and unforgivable violation of democratic principles. But in October 1993, having lost a majority in the popularly elected parliament, the Yeltsin regime ordered the bombardment of the White House-the seat of the Russian parliament-located in the middle of Moscow. Estimates of the number of people who were killed in the military assault run as high as 2,000. On the basis of this carnage, the Yeltsin regime was effectively transformed into a dictatorship, based on the military and security forces. The regime of Putin-Medvedev continues along the same dictatorial lines. The assault on the White House was supported by the Clinton administration. Unlike the dissolution of the Constituent Assembly, the bombardment of the Russian parliament is an event that has been all but forgotten.

What is there to be said of post-Soviet Russian culture? As always, there are talented people who do their best to produce serious work. But the general picture is one of desolation. The words that have emerged from the breakup of the USSR and that define modern Russian culture, or what is left of it, are "mafia," "biznessman" and "oligarch."

What has occurred in Russia is only an extreme expression of a social and cultural breakdown that is to be observed in all capitalist countries. Can it even be said with certainty that the economic system devised in Russia is more corrupt that that which exists in Britain or the United States? The Russian oligarchs are probably cruder and more vulgar in the methods they employ. However, the argument could be plausibly made that their methods of plunder are less efficient than those employed by their counterparts in the summits of American finance. After all, the American financial oligarchs, whose speculative operations brought about the near-collapse of the US and global economy in the autumn of 2008, were able to orchestrate, within a matter of days, the transfer of the full burden of their losses to the public.

It is undoubtedly true that the dissolution of the USSR at the end of 1991 opened up endless opportunities for the use of American power-in the Balkans, the Middle East and Central Asia. But the eruption of American militarism was, in the final analysis, the expression of a more profound and historically significant tendency-the long-term decline of the economic position of American capitalism. This tendency was not reversed by the breakup of the USSR. The history of American capitalism during the past two decades has been one of decay. The brief episodes of economic growth have been based on reckless and unsustainable speculation. The Clinton boom of the 1990s was fueled by the "irrational exuberance" of Wall Street speculation, the so-called dot.com bubble. The great corporate icons of the decade-of which Enron was the shining symbol-were assigned staggering valuations on the basis of thoroughly criminal operations. It all collapsed in 2000-2001. The subsequent revival was fueled by frenzied speculation in housing. And, finally, the collapse in 2008, from which there has been no recovery.

When historians begin to recover from their intellectual stupor, they will see the collapse of the USSR and the protracted decline of American capitalism as interrelated episodes of a global crisis, arising from the inability to develop the massive productive forces developed by mankind on the basis of private ownership of the means of production and within the framework of the nation-state system.

[Oct 10, 2016] Summers now is rejecting austerity economics in favour of investment economics

Oct 10, 2016 | www.nakedcapitalism.com

Monist Lisa October 10, 2016 at 2:51 pm

More evidence Larry Summers is in recovery from autistsm-spectrum economics?

Concretely, this means rejecting austerity economics in favour of investment economics. At a time when markets are pointing to the problem over the next generation as being inadequate rather than excessive inflation, central bankers need to spur demand and co-operate with governments.

Enhancing infrastructure investment in the public and private sector should be a fiscal policy priority.

Monist Lisa October 10, 2016 at 2:55 pm

link to Summers blog

allan October 10, 2016 at 3:37 pm

Too little, too late.
The time for him to speak up was late 2008 – early 2009.
Actually, Summers did speak up. And the rest is history.

hunkerdown October 10, 2016 at 3:58 pm

You bourgeoisie had better can the autism insults or you'll find yourself in a world you no longer understand because your "inferiors" told you to take a long walk off a short pier.

It is perfectly economically rational for any one of us to go medieval on you, every bit as much as it is for a Black man to cap you for using the N-bomb. Get over yourself. Now.

Monist Lisa October 10, 2016 at 7:54 pm

Being on the autism spectrum myself I take exception to your rash mixing of metaphors.

Otis B Driftwood October 10, 2016 at 4:11 pm

Well, even if his lips are moving and the words seem to be coming out right, should Summers get anywhere close to implementation (God forbid), he'll screw it up or corrupt it catastrophically.

It's what he does. Fails upward and sideways and diagonally.

He is the model of failure of an entire generation.

Spring Texan October 10, 2016 at 7:02 pm

Yep. Too right; your first sentence is on the money.

[Oct 09, 2016] Harvard mafia actions were, of cause, a crime of the century

crookedtimber.org

Anarcissie,

@431

Harvard mafia actions were, of cause, a crime of the century. The collapse of the Russian economy exceeded the worst declines in the West during the 1930s depression almost twice. But truth be told the system was rotting from within and they could operate only by relying on the local "fifth column" of neoliberalization (Gaidar, Yakovlev, etc).

"A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear. The traitor is the plague."
Marcus Tullius Cicero

[Oct 08, 2016] Part of Soviet nomenklatura changed camps and become turncoats fighting tooth and nail for the establishing neoliberal regime in Russia by using "color revolution" mechanisms and relying on support and financing from the USA and other foreign powers (to the tune on one billion in cash) and then helping foreign powers to plunder Russia

Oct 08, 2016 | crookedtimber.org

stevenjohnson 10.06.16 at 1:06 pm 42 7

likbez@415

"USSR nomenklatura is yet another example of the same. It was so close in spirit to neoliberal elite, that the transition in 1991 was almost seamless." Yes, well, it is impossible for someone as limited as myself to comment on your spiritual knowledge. But on a more earthly plane, it is not so obvious that the oligarchs and their favored employees are (or were) drawn from the nomenklatura, that there was no change in personnel in the rulers of the new Russia. Gennady Zyuganov and his KPRF of course are the prime recruiting grounds for adminstration, and the favored home of Russian businessment. But, quite aside from the gaping seam of the attempted removal of Gorbachev in 1991, there are quite a few other seams. Yeltsin's attack on parliament, for instance, strikes me as seamy indeed. But you may feel this sort of thing is just law enforcement. Your insistence that the old CP members never noticed a change, except they had official title, seems an extraordinary needing rather more support. A this point, it appears to be non-factual.

Will G-R @421 "One doesn't even have to compare different types of government to grasp this point, when in still-existing Communist Party regimes like the People's Republic of China, the party cadres are the neoliberal capitalist elites, no political transition required at all. It's George Orwell's final ironic revenge on those who would conscript his Animal Farm into service as a procapitalist propaganda tract: they forget that the final lines aren't just an indictment of the pigs (Communist nomenklatura) for being no better than the men (capitalists) but also of the men for being no better than the pigs."

Two issues arise. First, there are rather obvious transitional points even to reaching today's regime in China. Although such events as the Ching Ming disturbances, the Democracy Wall protests, the slow motion journee at Tian An Men square may have formally failed their aims, there is little reason to doubt powerful effects. The coup that overthrew the so-called Gang of Four was however a huge and extremely obvious transition. Deng's invasion of Vietnam to seal the opening to the US was notable as well.

Not so long ago, the current leadership purged Bo Xilai relying on testimony from people in admitted contact with foreign powers. How this sort of thing doesn't count is a mystery to me.

What is not so mysterious is the belief that China is now a capitalist country with the essence of Communism, dictatorship as opposed to the glorious benefits of classless American-style democracy. It is to be expected that any admirer of Orwell would firmly believe, without a moment's hesitation, that a capitalist economy can abolish the business cycle. I think that's silly, but then, I'm not an admirer of Orwell.

Second, the final lines of Animal Farm are a prediction about the real world. The point about the men being no better than pigs is irrelevant. The point is that the pigs were men, i.e., the same as capitalist oppressors. Aside from being manifest nonsense, this prediction was of course falsified by history. Any notion that the late USSR was a totalitarian terror regime was nonsense. But even if it were, the execution of Beria, Zhukov's coup against the so-called anti-party group, the removal of Khrushchev, the shenanigans of Gorbachev, give the lie to the notion that Stalinism was unchangeable. As for the notion that Soviet socialism was the same as capitalism? Only virulent anti-Communism could make such nonsense acceptable for a minute.

The final lines have to be read in context with early lines as well. In those lines, Orwell compares the horrors of the Great War to a farm getting run down. It takes a vile human being to do that.

Will G-R 10.06.16 at 2:45 pm 428

Lee, if all you're willing to do is compose minor variations on the theme of "you're a fundamentalist! Marxism is a religion!", you don't seem ready to sit at the big-kids' discussion table. I alluded to the idea of Marxist doctrine as dogmatic catechism in an ironic way back @ the second paragraph of #208, but the more serious point from that graf seems relevant here too.

Steven, you seem to be confused as to what point I was actually making, albeit understandably so because I wasn't entirely clear (which is perhaps a natural outcome of spending too much time trying to get through to liberals). The point isn't that literally no political events have taken place at all in the modern People's Republic of China, it's that the transition from state socialism to neoliberal capitalism didn't require an outright abolition of centralized Party control the way it did in the former USSR. I entirely agree with you about the nonsensical contradictions of the typical Cold Warrior critique, especially when it comes to the USSR: in particular, the economic dynamism of Stalin's time and the relatively dialed-down political repression after the Khrushchev thaw are typically minimalized in order to emphasize the brutality of the Stalin era and the post-Stalin economic stagnation, with no effort to coherently account for any real political or economic shifts within the formal framework of Soviet state socialism. I didn't intend to make such a simpleminded critique, although again I can see how it might have come across that way.

And neither did I claim to be any great admirer of George Orwell; everything else about his political line aside, nobody who rats out fellow leftists to Red Scare witch-hunters can deserve too much esteem, especially when this involves outing people as gay in the UK in the 1940s. Still, to the extent that he was a leftist critic of actually existing socialisms and has been anachronistically beatified by liberal Cold Warriors as a critic of all socialist projects as inherently repressive, it's hard to deny that liberals' adoption of Animal Farm into their ideological canon has a certain poetic kick given that today's most prominent remaining "actually existing socialists" are among the most ruthless and effective administrators of global imperial capitalism.

likbez 10.07.16 at 3:36 am 430

stevenjohnson,
@427
likbez@415 " But on a more earthly plane, it is not so obvious that the oligarchs and their favored employees are (or were) drawn from the nomenklatura, that there was no change in personnel in the rulers of the new Russia."

This is a topic way too complex for the posts like this one, but considerable part of new Russian neoliberal elite did come from nomenklatura. The most brutal, the most criminal oligarchs came from academia (Berezovsky) and Komsomol elite ( Khodarkovski, in Ukraine Turchinov - who actually was the head of propaganda department of Komsomol )

Gennady Zyuganov and his KPRF of course are the prime recruiting grounds for adminstration, and the favored home of Russian businessment.

This is simply wrong. This is a statement, completely disconnected with reality.

But, quite aside from the gaping seam of the attempted removal of Gorbachev in 1991, there are quite a few other seams. Yeltsin's attack on parliament, for instance, strikes me as seamy indeed.

You are mixing two events which are on completely opposite sides of barricades.

Your insistence that the old CP members never noticed a change, except they had official title, seems an extraordinary needing rather more support. A this point, it appears to be non-factual.

You completely misunderstood and misinterpreted my point. The essence was that certain substratas of Soviet nomenklatura mainly connected with KGB, Komsomol, Ministry of Foreign Affairs, Ministry of Foreign Trade, Academia ( and a couple of other institutions) changed camps and become turncoats fighting tooth and nail for the establishing neoliberal regime in Russia by using "color revolution" mechanisms and relying on support and financing from the USA and other foreign powers (to the tune on one billion in cash) and then helping foreign powers to plunder Russia (which was favorite pastime of many members of Clinton criminal administration; for example Summers).

Kind of Russian variation of Chicago boys. Or like a bunch of US Trotskyites which became neocons.

Anarcissie 10.07.16 at 3:56 am 431

likbez 10.07.16 at 3:36 am @ 430:
'… Summers….

This reminds me to yet once again mention How Harvard Lost Russia where Summers is a featured supporting character. Best read it now; copies of it seem to be evaporating from the Net for some reason. A crucial document.

[Oct 07, 2016] How Harvard lost Russia

This is pretty idealized account of Harvard mafia criminal activities but it touched on several important topics and first of all criminality of Clinton administration which intended to weaken and, if possible, dismember Russia (via Chechen trump card as the first move) converting it into vassal state.
Notable quotes:
"... Shleifer's involvement was more intimate. Traveling frequently to Moscow, he was directing key elements of the reform effort under the banner of the renowned Harvard Institute for International Development. ..."
"... in 2004, after protracted legal wranglings, a judge in federal district court in Boston ruled that the university had breached its contract with the U.S. government and that Shleifer and an associate were liable for conspiracy to defraud the U.S. ..."
"... Harvard, Shleifer and associates agreed to pay the government $31 million-plus to settle the case. Shleifer and Zimmerman were forced to mortgage their house to secure their part of the settlement. ..."
"... Summers was positioned uniquely to influence Shleifer's career path, to shape U.S. aid to Russia and Shleifer's role in it and even to shield Shleifer after the scandal broke. Though Summers, as Harvard president, recused himself from the school's handling of this case, he made a point of taking aside Jeremy Knowles, then the dean of the faculty of arts and sciences, and asking him to protect Shleifer. ..."
"... Months after Harvard was forced to pay the biggest settlement in its history, largely because of his misdeeds, Shleifer remains on the faculty. No public action has been taken against him, nor is there any sign as this magazine goes to press in late December that any is contemplated. ..."
"... "The relativism with which Harvard has dealt with the Shleifer case undermines Harvard's moral authority over its students." ..."
Feb 27, 2006 | institutionalinvestor.com

Since being named president of Harvard University in 2001, former U.S. Treasury secretary Lawrence Summers has sparked a series of controversies that have grabbed headlines. Summers incurred the wrath of African-Americans when he belittled the work of controversial religion professor Cornel West (who left for Princeton University); last year he infuriated faculty and students alike when he seemed to disparage the innate scientific abilities of women at a Massachusetts economic conference, igniting a national uproar that nearly cost him his job; last fall brought the departure of Jack Meyer, the head of Harvard Management Co., which oversees the school's endowment but had inflamed some in the community because of the multimillion-dollar salaries it pays some of its managers.

Then, in quiet contrast, there is the case of economics professor Andrei Shleifer, who in the mid-1990s led a Harvard advisory program in Russia that collapsed in disgrace. In August, after years of litigation, Harvard, Shleifer and others agreed to pay at least $31 million to settle a lawsuit brought by the U.S. government. Harvard had been charged with breach of contract, Shleifer and an associate, Jonathan Hay, with conspiracy to defraud the U.S. government.

Shleifer remains a faculty member in good standing. Colleagues say that is because he is a close longtime friend and collaborator of Summers.

In the following pages investigative journalist David McClintick, a Harvard alumnus, chronicles Shleifer's role in the university's Russia Project and how his friendship with Summers has protected him from the consequences of that debacle inside America's premier academic institution.

ff duty and in swimsuits, the mentor and his protégé strolled the beach at Truro. For years, with their families, they had summered together along this stretch of Massachusetts' famed Cape Cod. Close personally and professionally, the two friends confided in each other the most private matters of family and finance. The topic of the day was the former Soviet Union.

"You've got to be careful," the mentor, Lawrence Summers, warned his protégé, Andrei Shleifer. "There's a lot of corruption in Russia."

It was late August 1996, and Summers, 42, was deputy secretary of the U.S. Treasury. Shleifer, 35, was a rising star in the Harvard University economics department, just as Summers had been 15 years earlier when he had first taken Shleifer under his wing.

Summers' warning rose out of their pivotal roles in a revolution of global consequence -- the attempt to bring the Russian economy out from the ruins of communism into the promise of Western-style capitalism. Summers, as Treasury's second-in-command, was the architect of U.S. efforts to help Russia. Shleifer's involvement was more intimate. Traveling frequently to Moscow, he was directing key elements of the reform effort under the banner of the renowned Harvard Institute for International Development.

Working on contract for the U.S., HIID advised the Russian government on privatizing its economy and creating capital markets and the laws and institutions to regulate them. Shleifer did not report formally to Summers but rather to the State Department's Agency for International Development, or AID, the spearhead of the U.S.'s foreign aid program.

Personal affection as much as official concern prompted Summers' admonition. He had come to know that Shleifer and his wife, Nancy Zimmerman, a noted hedge fund manager, had been investing in Russia. Though he didn't know specifics, he understood just enough to worry that the couple might run afoul of myriad conflict-of-interest regulations that barred American advisers from investing in the countries they were assisting.

Summers did not restrict his warnings to Shleifer.

"There might be a scandal, and you could become embroiled," Summers told Zimmerman. "You should make sure you're clear with everybody. People might want to make Andrei a problem some day. The world's a shitty place."

Summers' warnings proved at once prophetic and ineffectual. Even as Shleifer and his wife strove to reassure their friend, they were maneuvering to make an investment in Russia's first authorized mutual fund company. Within eight months their private Russian dealings, together with those of close associates and relatives, would explode in scandal -- bringing dishonor to them, Harvard University and the U.S. government. The Department of Justice would deploy the Federal Bureau of Investigation and the U.S. Attorney's Office in Boston to launch a criminal investigation that would uncover evidence of fraud and money laundering, as well as the cavalier use of U.S. government funds to support everything from tennis lessons to vacation boondoggles for Harvard employees and their spouses, girlfriends and Russian pals. It would, in the end, be an extraordinary display of an overweening "best and brightest" arrogance toward the laws and rules that the Harvard people were supposed to live by.

Says one banker who was a frequent visitor to Russia in that era, "The Harvard crowd hurt themselves, they hurt Harvard, and they hurt the U.S. government."

Mostly, they hurt Russia and its hopes of establishing a lasting framework for a stable Western-style capitalism, as Summers himself acknowledged when he testified under oath in the U.S. lawsuit in Cambridge in 2002. "The project was of enormous value," said Summers, who by then had been installed as the president of Harvard. "Its cessation was damaging to Russian economic reform and to the U.S.-Russian relationship."

Reinventing Russia was never going to be easy, but Harvard botched a historic opportunity. The failure to reform Russia's legal system, one of the aid program's chief goals, left a vacuum that has yet to be filled and impedes the country's ability to confront economic and financial challenges today (see box, page 77).

Harvard vigorously defended its work in Russia, but in 2004, after protracted legal wranglings, a judge in federal district court in Boston ruled that the university had breached its contract with the U.S. government and that Shleifer and an associate were liable for conspiracy to defraud the U.S. Last August, nine years after Summers and his protégé took their stroll along that Truro beach, Harvard, Shleifer and associates agreed to pay the government $31 million-plus to settle the case. Shleifer and Zimmerman were forced to mortgage their house to secure their part of the settlement.

Russia's struggles today certainly don't result entirely from Harvard's misdeeds or Shleifer's misconduct. There is plenty of blame to share. It is difficult to overstate the challenge of transforming the economic and legal culture, not to mention the ancient pathologies, of a huge, enigmatic nation that once spanned one sixth of the earth's land surface, 150 ethnicities and 11 time zones. The Marshall Plan, by comparison, was simple.

Summers wasn't president of Harvard when Shleifer's mission to Moscow was coming apart. But as a Harvard economics professor in the 1980s, a World Bank and Treasury official in the 1990s and Harvard's president since 2001, Summers was positioned uniquely to influence Shleifer's career path, to shape U.S. aid to Russia and Shleifer's role in it and even to shield Shleifer after the scandal broke. Though Summers, as Harvard president, recused himself from the school's handling of this case, he made a point of taking aside Jeremy Knowles, then the dean of the faculty of arts and sciences, and asking him to protect Shleifer.

Months after Harvard was forced to pay the biggest settlement in its history, largely because of his misdeeds, Shleifer remains on the faculty. No public action has been taken against him, nor is there any sign as this magazine goes to press in late December that any is contemplated.

Throughout the otherwise voluble university community, there has been an odd silence about the entire affair. Discussions mostly have taken place sotto voce in deans' offices or in local Cambridge haunts, such as the one where a well-connected Harvard personage expressed deep concern, telling II: "Larry's handling of the Shleifer matter raises very basic questions about the way he governs Harvard. This is fraught with significance. It couldn't be more fraught."

The silence is now beginning to break, thanks to the leadership of academic worthies like former Harvard College dean Harry Lewis, who is finishing a book about the university to be published in the spring by Perseus Public Affairs. Lewis agreed to show II the manuscript, in which he asserts, "The relativism with which Harvard has dealt with the Shleifer case undermines Harvard's moral authority over its students."

Whether this new questioning will erupt into yet another crisis engulfing Summers and the university remains unclear. What is certain, though, is that the story of Harvard and its representatives' malfeasance, told in full for the first time over the following pages, shows how much damage can be done when the considerable power and resources of the U.S. government are placed in the wrong hands.

THE SEEDS OF RUSSIAN REFORM WERE planted in the late 1980s -- when Russia was the Soviet Union and Harvard hadn't yet arrived. The U.S.S.R.'s seven-decade experiment with Marxist-Leninist totalitarianism lay in shambles. By 1989, even as the Berlin Wall fell in Germany, the Soviet Union and its economy were imploding.

Reform-minded Mikhail Gorbachev, the last general secretary of the Communist Party, strove to introduce limited economic and political change. The first competitive elections for the Congress of People's Deputies were held in March 1989. In May 1990, Gorbachev's populist rival, the maverick Boris Yeltsin, was elected chairman of the Russian Republic's Parliament. A month later Russia declared itself independent of the Soviet Union.

That summer Gorbachev and Yeltsin ordered two economists to draw up a "500 Days" plan for converting the Soviet Union to a market economy based on private property. Gorbachev also sought advice from the West. In October 1990 the then-chairman of the New York Stock Exchange, John Phelan Jr., led a group of U.S. securities lawyers and academics to Moscow to begin showing the Soviets how to form capital markets. The meeting was organized by the Big Board's Russian-speaking legal counsel, Richard Bernard, then 40.

... ... ...

[Oct 01, 2016] Four Modifications To Feds Current Posture - Larry Summers

Notable quotes:
"... ...Second, it should acknowledge at least to itself that it has damaged its credibility by repeatedly holding out the prospects of much more tightening than the market anticipated, being ignored by the market, and then having the market turn out to be right. It should recognize output and inflation and unemployment would all be closer to their target levels today and in their forecasts if rates had not been increased last December... ..."
Oct 01, 2016 | economistsview.typepad.com

RC AKA Darryl, Ron : October 01, 2016 at 06:13 AM

RE: Four Modifications To Fed's Current Posture - Larry Summers

[It is wonderful to see Larry Summers has redeeming social value. As far as monetary policy goes then Larry has nailed it here.]


...First, it should acknowledge that the neutral rate is now close to zero and it may well remain under 2 percent for the foreseeable future...


...Second, it should acknowledge at least to itself that it has damaged its credibility by repeatedly holding out the prospects of much more tightening than the market anticipated, being ignored by the market, and then having the market turn out to be right. It should recognize output and inflation and unemployment would all be closer to their target levels today and in their forecasts if rates had not been increased last December...


...Third, the Fed should make real the idea that its inflation target is symmetric by being clear that in the late stage of prolonged expansion with low unemployment it is comfortable with inflation rising a little bit above 2 percent with the confidence that it will decline when the next recession comes...


... Fourth, the Fed should make clear that it sees risk as asymmetric right now...


[I can agree with all that without changing my view of last December's 25 basis point FFR hike. That hike did very little to change the economic conditions compared to how much it did to change the conversation. How could the hawks be capitulating to the doves now had they not gotten their chance to be proven wrong? That goes double for the neo-Fisherites.]

[Oct 01, 2016] The Decline of the Middle Class is Causing Economic Damage

Notable quotes:
"... Isn't the title of his article backward? Shouldn't it be "The economic damage wrought by those in power (including me) is causing the decline of the middle class". Poor Larry doesn't appear to understand cause and effect. ..."
"... You better believe the man is not stupid and understands this very well. Cue Upton Sinclair's "it is difficulty to convince a man to understand something" quote. ..."
"... It is very common for former officials to come forward with critical accounts of current goings-on *including their own term in office* after they have retired from their post. While in office they can simply not let on this kind of thing. It is not polite, or inconsistent with what they are hired and paid to do. (Which is the second and here unstated part of the Sinclair quote.) ..."
"... Let me see. The rich run the country, and the government. and they have figured out how to suck $400 Billion per year out of the real economy and into their financial pockets. And Larry proposes that the government, controlled by these same rich, remember, adopt policies which will put an end to the feeding frenzy. ..."
"... Even that "reduction" is debate-able. Summers ignores the credit boom and the 98-06 spending orgy. Credit markets drive spending more than base income. Ig spending starts rising "above potential" in 2017-19, then his thesis will collapse along with another correction/recession in the early 20's. ..."
"... America ran a "soft" national socialist economy during and after WWII. ..."
"... Trump supports a complete deregulation of capital markets while the Clinton's a modest firming of them. This is what people don't understand. It isn't trade that determines national production and consumption. ..."
"... You simply can't bring back the Nazi/Soviet bubble back that created the late 20th century middle class. The Capitalists won't allow it. The system is going back to where it was in March of 1929. It always was. ..."
"... Yeah okay, except you might be able to explain it to the kleptocrats better if you use simple economics to show that there'll be more interest income for them if they just lift their jackboot off the throat of the working class, instead of trying to stripmine the West for dirt and dumping their trillions in tax haven accounts earning negative rates. ..."
"... The median household income is approximately $56,000, therefore the IMF study places the breakpoint between "middle" and "high" income at $84,000 (150% of median income). It strikes me that this is unrealistically low. The really meaningful divergence in lifestyles and consumption behavior certainly occurs at a significantly higher level than this. ..."
"... The other question this study raises is, what is the quantifiable extent to which economic growth in the mid-90's to the mid-aughts (prior to the meltdown) was the result of the debt bubble (more broadly than just housing bubble). It would be very interesting to see an estimate of the aggregate impact on the economy has been from the suppression of workers' wages over the past several decades. ..."
"... I don't follow the argument to be honest. The US has a chronic trade deficit. It doesn't actually suffer from inadequate domestic demand, but from an overvalued dollar. His argument might hold for other countries though. ..."
"... That doesn't mean that a "hollowed-out" middle class doesn't have a negative impact on the economy, but it means that you won't see the problem looking at the macro-data (apart from productivity growth statistics perhaps) but in the structure of the economy. It is very hard to find a new high value added niche in mass markets today, because of the lack of disposable income of the masses. ..."
"... Such an article can be viewed as a sign of the collapse of neoliberal model. ..."
Sep 29, 2016 | economistsview.typepad.com
Larry Summers:
The decline of the middle class is causing even more economic damage than we realized : I have just come across an International Monetary Fund working paper on income polarization in the United States that makes an important contribution to the secular stagnation debate. The authors ... find that polarization has reduced consumer spending by more than 3 percent or about $400 billion annually. If these findings stand up to scrutiny, they deserve to have a policy impact.

This level of reduction in spending is huge. For example, it exceeds by a significant margin the impact in any year of the Obama stimulus program. Alone it would be enough to account for a significant reduction in neutral real interest rates . If consumers were spending 3 percent more, there would be scope to maintain full employment at interest rates much closer to normal. And there would be much less of a problem of monetary policy's inability to respond to the next recession.

What is the policy implication? Principally, it is the macroeconomic importance of supporting middle class incomes. This can be done in a range of ways from promoting workers right to collectively bargain to raising spending on infrastructure to making the tax system more progressive. ...

David said...

Isn't the title of his article backward? Shouldn't it be "The economic damage wrought by those in power (including me) is causing the decline of the middle class". Poor Larry doesn't appear to understand cause and effect.

cm -> David...

You better believe the man is not stupid and understands this very well. Cue Upton Sinclair's "it is difficulty to convince a man to understand something" quote.

It is very common for former officials to come forward with critical accounts of current goings-on *including their own term in office* after they have retired from their post. While in office they can simply not let on this kind of thing. It is not polite, or inconsistent with what they are hired and paid to do. (Which is the second and here unstated part of the Sinclair quote.)

greg : September 29, 2016 at 01:10 PM

Let me see. The rich run the country, and the government. and they have figured out how to suck $400 Billion per year out of the real economy and into their financial pockets. And Larry proposes that the government, controlled by these same rich, remember, adopt policies which will put an end to the feeding frenzy.

Ha, Ha, Ha. No. I think not. Any policy our- *their* government would adopt would be purely cosmetic. If, after 40 years of depredations, they finally feel the need to put lipstick on this particular pig.

To be sure, 3 % per year will probably be lethal to society, and sooner rather than later. But, sustainability has never been a feature of capitalism.

rayward : September 29, 2016 at 12:22 PM

Polarization has reduced "consumer spending" by more than 3 percent or about $400 billion annually. Consumer spending. Not spending (investment). I'm not disagreeing with Summers, just pointing out the qualification.

Ben Groves -> rayward... September 29, 2016 at 01:08 PM

Even that "reduction" is debate-able. Summers ignores the credit boom and the 98-06 spending orgy. Credit markets drive spending more than base income. Ig spending starts rising "above potential" in 2017-19, then his thesis will collapse along with another correction/recession in the early 20's.

Most of the myth of the American middle class was a Nazi/Soviet driven illusion. America ran a "soft" national socialist economy during and after WWII. It was about organic cohesiveness between government, business and labor. It is part of the reason Hillary is getting her own white nationalist support, even though they don't like her.

Most of Trumps are ex-neocons, other various "old" white nationalist like conman, gambler David Duke (aka, I took my non-white mistress to France for a abortion) and other useless tools like Stormfront, which only represent 25% of the total "white nationalist" vote, yet because of jewish pact money, get the most noise in the media.

Trump supports a complete deregulation of capital markets while the Clinton's a modest firming of them. This is what people don't understand. It isn't trade that determines national production and consumption.

You simply can't bring back the Nazi/Soviet bubble back that created the late 20th century middle class. The Capitalists won't allow it. The system is going back to where it was in March of 1929. It always was.

ken melvin :

Well known, the housing prices in the Bay Area are insane. Along with goes the 'house poor' syndrome. The 'middle class' spends all it's money on housing, leaving little or nothing for such as dining out, skiing trips, triops o the beach, ...

As consequence, those restaurants that used to cater to the dining out of these folks are all closed. So, the little resort town stops, motels, ... on the way to ski resorts, the beach, etc.

Dan Kervick said...

The decline of the middle class IS economic damage, not just a cause of economic damage. You don't have to demonstrate that the decline of the middle class has had some negative impact on some further economic aggregate, such as the aggregate purchased output of consumables, in order to see it as a form of damage in itself.

pgl -> Dan Kervick...

I absolutely agree. So well said as this is a very important point. Regardless of all the other issues that may be attributable to income inequality - we need to address income inequality period.

vic twente -> pgl...

Yeah okay, except you might be able to explain it to the kleptocrats better if you use simple economics to show that there'll be more interest income for them if they just lift their jackboot off the throat of the working class, instead of trying to stripmine the West for dirt and dumping their trillions in tax haven accounts earning negative rates.

vic twente -> vic twente...

Point being it's the kleptocrat class who has to decide to let the working class gain some income improvement and increased ability to consume. Unless of course you're all for just killing the lot of them, in which case I merely find your position intriguing and may subscribe to your newsletter.

Dan Kervick -> vic twente...

I agree that's probably part of what Summers is up to in this piece. His audience is the big wheels, and he's probably aiming at convincing them that the problems of the middle class are ultimately their problem as well.

reason -> Dan Kervick...

Yes, let me third that. A very good point. Another case of treating the "economy" as that it is something that has a value independent of the people that it is supposed to be serving.

Who Ma Weeny said...

decline of the middle class is causing even more economic damage than we realized: I have just come across an International Monetary Fund working paper on income polarization in the United States that makes an important contribution to the secular stagnation
.....
policy implication? Principally, it is the macroeconomic importance of supporting middle class incomes. This can be done in a range of ways from promoting workers right
"

By definition, income polarization is the divide between upper vs lower caste, not middle caste. Forget middletons! We need less contrast between upper and lower caste. Even Keynesian-s admit that it is the transfer of buying power from upper to lower caste that "stimulates", lower propensity to upper propensity to consume. Hell! LS, don't stop off in the middle!

A Boy Named Sue said...

Lets remember, Larry Summers was one of the persons who drove Brooksley Born out of town for sending up the red flag on toxic derivatives.

Summers was one of the free market crowd under Clinton, Rubin, and Greenspan who ignored the warnings of toxic derivative tradings.

While Summers is able to have a change of heart, unlike many conservatives, he was a part of the neo-liberal elite who helped crashed the economy.

Would I ever expect an apology out of him? No.

Tom aka Rusty -> A Boy Named Sue...

If I remember correctly Summers was a big advocate of "too big to prosecute" and had at least one ugly conversation with Elizabeth Warren at the White House.

Tom aka Rusty -> Tom aka Rusty ...

More correctly he did not want to prosecute foreclosure fraud because it might slow market clearing in the housing sector.

Chris Lowery said...

The median household income is approximately $56,000, therefore the IMF study places the breakpoint between "middle" and "high" income at $84,000 (150% of median income). It strikes me that this is unrealistically low. The really meaningful divergence in lifestyles and consumption behavior certainly occurs at a significantly higher level than this.

And if the authors had performed their analyses using a higher breakpoint, they probably would have seen much greater income stagnation and a greater divergence in the propensity to consume. I haven't delved into the math, but I'd guess they might have seen an even greater impact -- as if 3% weren't enough! -- on the economy from lower consumption.

The other question this study raises is, what is the quantifiable extent to which economic growth in the mid-90's to the mid-aughts (prior to the meltdown) was the result of the debt bubble (more broadly than just housing bubble). It would be very interesting to see an estimate of the aggregate impact on the economy has been from the suppression of workers' wages over the past several decades.

kaleberg said...

I don't have a lot of hope, but at least they are realizing that square wheels don't seem to rotate all that well. All of this was rather obvious back in 1930. That's why the New Deal created a US middle class, to get a sustainable economy. This is only non-obvious now thanks to a well funded disinformation campaign that succeeded in the 1980s.

David said...

I totally argree that middle class income stagnation and income inequality decrease aggregate demand and probably hurts consumer confidence. But it also creates political instability. For 40 years the Republican Party has resentment, tribalism, and increasingly less subtle racist tropes to push for policies that increase inequality and Trump is doing that on steroids.

The Republican Party needs be called out on this bait and switch.

reason said...

I don't follow the argument to be honest. The US has a chronic trade deficit. It doesn't actually suffer from inadequate domestic demand, but from an overvalued dollar. His argument might hold for other countries though.

That doesn't mean that a "hollowed-out" middle class doesn't have a negative impact on the economy, but it means that you won't see the problem looking at the macro-data (apart from productivity growth statistics perhaps) but in the structure of the economy. It is very hard to find a new high value added niche in mass markets today, because of the lack of disposable income of the masses.

Again, I appeal, please let us concentrate on more on the dynamics of the economy (for instance the life cycle of new products and new processes) and less on comparative static (equilibrium) perspective. Far too much talk about "growth" or "productivity" sees these processes as governed by magic, rather than by observable dynamics. I sincerely believe that this is the direction economics needs to go.

likbez said...

Such an article can be viewed as a sign of the collapse of neoliberal model.

Summers was/is a staunch supporter of deregulation of financial sector. He also played a role of a hired gun in killing Glass-Steagall.

Later with his fees for speaking (for example, $135K for a single speech from Goldman Sachs) he became a walking illustration of the corruption of the academy by special interests. Essentially he became an academic lobbyist for financial industry.

During his stint in the Clinton administration, Summers was successful in pushing for capital gains tax cuts.

[Sep 15, 2016] Whats Behind The Revolt Against Global Integration?

Notable quotes:
"... Elites can continue on the current path of pursuing integration projects and defending existing integration, hoping to win enough popular support that their efforts are not thwarted. On the evidence of the U.S. presidential campaign and the Brexit debate, this strategy may have run its course. ... ..."
"... I think some fellows already had this idea: "Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project" -- "Workers of the World, Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848 ..."
"... Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of China to Bangladesh. Like $3 an hour is just way too high for workers. ..."
"... The "populists" are raging against global trade which benefits the world poor. The Very Serious economists know what is really going on and have to interests of the poor at heart. Plus they are smarter than the "populists" who are just dumb hippies. ..."
"... And what about neocolonialism and debt slavery ? http://historum.com/blogs/solidaire/245-debt-slavery-neo-colonialism-neoliberalism.html ..."
"... International debtors are the modern colonialists, sucking the marrow of countries; no armies are needed anymore to keep those countries subjugated. Debt is the modern instrument of enslavement, the international banks, corporations and hedge funds the modern colonial powers, and its enforcers are instruments like the Global Bank, the IMF, and the corrupt, collaborationist governments (and totalitarian regimes) of those countries, supported and propped up by these neo-colonials. ..."
"... Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious, planned attack on homogeneous societies in Western Europe, the US, and now Japan? ..."
"... The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans to get into the US -- but easier for non-Europeans. Now why would that be? Hmm .... ..."
"... The only trade that is actually free is trade not covered by laws and/or treaties. All other trade is regulated trade. ..."
"... Here's a good rule to follow. When someone calls something the exact opposite of what it is, in all probability they are trying to hustle your wallet. ..."
"... ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's group, just like "COMMUNISM!!!!" to control people. To manipulate them. ..."
"... Guys, the bourgeois state is a protection racket and always has been. It makes you feel safe, secure and "feel like man". So we can enjoy every indulgent individual lust the world has to offer. Then comes in dialectics of what that protection racket should do. ..."
"... To me, the bourgeois state is nothing more than a protection racket for the rich, something you should not forget. ..."
"... I find it rather precious that Summers pretends not to understand why people hate TPP. I do not think there is any real widespread antipathy toward global integration, though it does pose some rather substantial systemic dangers, as we saw in the global financial collapse. What people, including me, oppose is how that integration is structured. These agreements are about is not "free trade", but removing all restrictions on global capital and that is a big problem. ..."
"... TPP is not free trade. It is protectionism for the rich. ..."
"... All or most modern "free trade" agreements are like that. What people oppose is agreements which impoverish them and enrich capital. ..."
"... More free trade arrangement are not always better trade arrangements. People have seen the results of the labor race to the bottom caused by earlier free trade agreements; and now they are guessing we're going to get the same kind of race to the bottom with TPP when we have to put all of our environmental laws and other domestic regulations into capitalist competition with backward countries. ..."
"... progressive states (WA, OR, CA, NV, IL, NY, MD) could simply treat union busting the same way any OTHER major muscling or manipulation of the free market is treated: make it a felony. ..."
"... Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and environmental groups -- sounds great to me, but I can't for the life of me figure out why the goods and service producers (i.e. capital owners) would have any incentive to promote trade under such a negotiated trade agreement... or that trade would actually occur. You'd have to eliminate private enterprise incentives to profit I think.. not something the U.S.'s "individualism" god can't tolerate. ..."
"... Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe. ..."
Apr 11, 2016 | economistsview.typepad.com
Larry Summers:
What's behind the revolt against global integration? : Since the end of World War II, a broad consensus in support of global economic integration as a force for peace and prosperity has been a pillar of the international order. ...

This broad program of global integration has been more successful than could reasonably have been hoped. ... Yet a revolt against global integration is underway in the West. ...

One substantial part of what is behind the resistance is a lack of knowledge. ...The core of the revolt against global integration, though, is not ignorance. It is a sense - unfortunately not wholly unwarranted - that it is a project being carried out by elites for elites, with little consideration for the interests of ordinary people. ...

Elites can continue on the current path of pursuing integration projects and defending existing integration, hoping to win enough popular support that their efforts are not thwarted. On the evidence of the U.S. presidential campaign and the Brexit debate, this strategy may have run its course. ...

Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences. This would mean a shift from international trade agreements to international harmonization agreements, whereby issues such as labor rights and environmental protection would be central, while issues related to empowering foreign producers would be secondary. It would also mean devoting as much political capital to the trillions of dollars that escape taxation or evade regulation through cross-border capital flows as we now devote to trade agreements. And it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope desperately, that their kids can have better lives than they did.

Tom aka Rusty : , Monday, April 11, 2016 at 07:15 AM
Is Summers really this naive?
Jedgar Mihelic : , Monday, April 11, 2016 at 07:21 AM
I think some fellows already had this idea: "Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project" -- "Workers of the World, Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848
pgl -> Jedgar Mihelic ... , Monday, April 11, 2016 at 07:28 AM
Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of China to Bangladesh. Like $3 an hour is just way too high for workers.
pgl : Monday, April 11, 2016 at 07:32 AM
A large part of the concern over free trade comes from the weak economic performances around the globe. Summers could have addressed this. Jared Bernstein and Dean Baker - both sensible economists - for example recently called on the US to do its own currency manipulation so as to reverse the US$ appreciation which is lowering our net exports quite a bit.

What they left out is the fact that both China and Japan have seen currency appreciations as well. If we raise our net exports at their expense, that lowers their economic activity. Better would be global fiscal stimulus. I wish Larry had raised this issue here.

Peter -> pgl... , Monday, April 11, 2016 at 08:12 AM
The "populists" are raging against global trade which benefits the world poor. The Very Serious economists know what is really going on and have to interests of the poor at heart. Plus they are smarter than the "populists" who are just dumb hippies.
likbez -> pgl... , Monday, April 11, 2016 at 04:48 PM
pgl,

And what about neocolonialism and debt slavery ? http://historum.com/blogs/solidaire/245-debt-slavery-neo-colonialism-neoliberalism.html

=== quote ===

One of the most fundamental reasons for the poverty and underdevelopment of Africa (and of almost all "third world" countries) is neo-colonialism, which in modern history takes the shape of external debt.

When countries are forced to pay 40,50,60% of their government budgets just to pay the interests of their enormous debts, there is little room for actual prosperity left.

International debtors are the modern colonialists, sucking the marrow of countries; no armies are needed anymore to keep those countries subjugated. Debt is the modern instrument of enslavement, the international banks, corporations and hedge funds the modern colonial powers, and its enforcers are instruments like the Global Bank, the IMF, and the corrupt, collaborationist governments (and totalitarian regimes) of those countries, supported and propped up by these neo-colonials.

In reality, not much has changed since the fall of the great colonial empires. In paper, countries have gained their sovereignty, but in reality they are enslaved to the international credit system.

The only thing that has changed, is that now the very colonial powers of the past, are threatened to become debt colonies themselves. You see, global capitalism and credit system has no country, nationality, colour; it only recognises the colour of money, earned at all cost by the very few, on the expense of the vast, unsuspected and lulled masses.

Debt had always been a very efficient way of control, either on a personal, or state level. And while most of us are aware of the implementations of personal debt and the risks involved, the corridors of government debt are poorly lit, albeit this kind of debt is affecting all citizens of a country and in ways more profound and far reaching into the future than those of private debt.

Global capitalism was flourishing after WW2, and reached an apex somewhere in the 70's.

The lower classes in the mature capitalist countries had gained a respectable portion of the distributed wealth, rights and privileges inconceivable several decades before. The purchasing power of the average American for example, was very satisfactory, fully justifying the American dream. Similar phenomena were taking place all over the "developed" world.

Kgaard : , Monday, April 11, 2016 at 07:32 AM
Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious, planned attack on homogeneous societies in Western Europe, the US, and now Japan?
anne -> Kgaard... , Monday, April 11, 2016 at 07:44 AM
There is of course no reasonable answering to prejudice, since prejudice is always unreasonable, but should there be a question, when was the last time that, say, the United States or the territory that the US now covers was a homogeneous society?

Before the US engulfed Spanish peoples? Before the US engulfed African peoples? Before the US engulfed Indian peoples? When did the Irish, just to think of a random nationality, ruin "our" homogeneity?

I could continue, but how much of a point is there in being reasonable?

Kgaard -> anne... , Monday, April 11, 2016 at 11:21 AM
The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans to get into the US -- but easier for non-Europeans. Now why would that be? Hmm ....

Also ... What is your definition of prejudice?

Benedict@Large -> pgl... , Monday, April 11, 2016 at 08:56 AM
The only trade that is actually free is trade not covered by laws and/or treaties. All other trade is regulated trade.

Here's a good rule to follow. When someone calls something the exact opposite of what it is, in all probability they are trying to hustle your wallet.

Has anyone been trying to hustle the wallets of the people who became ISIS? Oh please. That's a stupid question to even ask.

So is free trade, as in regulated trade that is called the opposite of what it is, responsible for ISIS? Of course it is.

Ben Groves -> pgl... , Monday, April 11, 2016 at 10:10 AM
ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's group, just like "COMMUNISM!!!!" to control people. To manipulate them.

It is like using the internet to think you are "edgy". Some dudes like psuedo-science scam artist Mike Adams are uncovering secrets to this witty viewer............then you wonder why society is degenerating. What should happen with Mike Adams is, he should be beaten up and castrated. My guess he would talk then. Boy would his idiot followers get a surprise and that surprise would have results other than "poor mikey, he was robbed".

This explains why guys like Trump get delegates. Not because he uses illegal immigrants in his old businesses, not because of some flat real wages going over 40 years, not because he is a conman marketer.........he makes them feel safe. That is purely it. I think its pathetic, but that is what happens in a emasculated world. Safety becomes absolute concern. "Trump makes me feel safe".

Guys, the bourgeois state is a protection racket and always has been. It makes you feel safe, secure and "feel like man". So we can enjoy every indulgent individual lust the world has to offer. Then comes in dialectics of what that protection racket should do.

To me, the bourgeois state is nothing more than a protection racket for the rich, something you should not forget.

DrDick : , Monday, April 11, 2016 at 07:35 AM
I find it rather precious that Summers pretends not to understand why people hate TPP. I do not think there is any real widespread antipathy toward global integration, though it does pose some rather substantial systemic dangers, as we saw in the global financial collapse. What people, including me, oppose is how that integration is structured. These agreements are about is not "free trade", but removing all restrictions on global capital and that is a big problem.
pgl -> DrDick ... , Monday, April 11, 2016 at 07:57 AM
OK - some substance finally. TPP is not free trade. It is protectionism for the rich.
DrDick -> pgl... , Monday, April 11, 2016 at 11:10 AM
Actually, this is my first actual response to the post itself, but you were too busy being and a*****e to notice. All or most modern "free trade" agreements are like that. What people oppose is agreements which impoverish them and enrich capital.
Dan Kervick -> pgl... , Monday, April 11, 2016 at 03:33 PM
This has become a popular line, and it's not exactly false. But so what if it were a "free trade" agreement? More free trade arrangement are not always better trade arrangements. People have seen the results of the labor race to the bottom caused by earlier free trade agreements; and now they are guessing we're going to get the same kind of race to the bottom with TPP when we have to put all of our environmental laws and other domestic regulations into capitalist competition with backward countries.
Denis Drew : , Monday, April 11, 2016 at 07:38 AM
" The promotion of global integration can become a bottom-up rather than a top-down project. "

" ... whereby issues such as labor rights and environmental protection would be central ... "

+1

Now if we could just adopt that policy internally in the United States first we could then (and only then) support it externally across the world.

Easy approach: (FOR THE TEN MILLIONTH TIME!) progressive states (WA, OR, CA, NV, IL, NY, MD) could simply treat union busting the same way any OTHER major muscling or manipulation of the free market is treated: make it a felony. FYI (for those who are not aware) states can add to federal labor protections, just not subtract.

A completely renewed, re-constituted democracy would be born.

Biggest obstacle to this being done in my (crackpot?) view: human males. Being instinctive pack hunters, before they check out any idea they, first, check in with the pack (all those other boys who are also checking in with the pack) -- almost automatically infer impossibility to overcome what they see (correctly?) as wheels within wheels of inertia.

Self-fulfilling prophecy: nothing (not the most obvious, SHOULD BE easiest possible to get support for actions) ever gets done.

Peter : , Monday, April 11, 2016 at 08:31 AM
http://jaredbernsteinblog.com/new_path_forward/

I'm not the only one seeking a new path forward on trade.

by Jared Bernstein

April 11th, 2016 at 9:20 am

"...

Here's Larry's view of the way forward:

"The promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences. This would mean a shift from international trade agreements to international harmonization agreements, whereby issues such as labor rights and environmental protection would be central, while issues related to empowering foreign producers would be secondary. It would also mean devoting as much political capital to the trillions of dollars that escape taxation or evade regulation through cross-border capital flows as we now devote to trade agreements. And it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope desperately, that their kids can have better lives than they did.

Good points, all. "Bottom-up" means what I've been calling a more representative, inclusive process. But what's this about "international harmonization?""

It's a way of saying that we need to reduce the "frictions" and thus costs between trading partners at the level of pragmatic infrastructure, not corporate power. One way to think of this is TFAs, not FTAs. TFAs are trade facilitation agreements, which are more about integrating ports, rail, and paperwork than patents that protect big Pharma.

It's refreshing to see mainstreamers thinking creatively about the anger that's surfaced around globalization. Waiting for the anger to dissipate and then reverting back to the old trade regimes may be the preferred path for elites, but that path may well be blocked. We'd best clear a new, wider path, one that better accommodates folks from all walks of life, both here and abroad."

anne : , Monday, April 11, 2016 at 09:12 AM
"What's Behind The Revolt Against Global Integration?" -- Washington Post editors title.

"Global trade should be remade from the bottom up" -- Lawrence Summers title.

I find the difference in titles important in showing just how slanted Washington Post editors are.

Longtooth : , Monday, April 11, 2016 at 01:41 PM
Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and environmental groups -- sounds great to me, but I can't for the life of me figure out why the goods and service producers (i.e. capital owners) would have any incentive to promote trade under such a negotiated trade agreement... or that trade would actually occur. You'd have to eliminate private enterprise incentives to profit I think.. not something the U.S.'s "individualism" god can't tolerate.
pgl -> Longtooth... , Monday, April 11, 2016 at 01:46 PM
Imagine a trade deal negotiated by the AFL-CIO. Labor wins a lot and capital owners lose a little. We can all then smile and say to the latter - go get your buddies in Congress more serious about the compensation principle. Turn the table!
kthomas -> pgl... , Monday, April 11, 2016 at 03:01 PM
Not being rude, but I fail to understand your response.

AFL-CIO? turn the table?

Peter -> kthomas... , Monday, April 11, 2016 at 03:51 PM
It's okay. He's drunk again.
New Deal democrat : , Monday, April 11, 2016 at 03:07 PM
"consensus in support of global economic integration as a force for peace and prosperity " -- "The Great Illusion" ( https://en.m.wikipedia.org/wiki/The_Great_Illusion )
That increased trade is a bulwark against war rears its ugly head again. The above book which so ironically delivered the message was published in 1910.

Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe.

George H. Blackford :
Our problems began back in the 1970s when we abandoned the Bretton Woods international capital controls and then broke the unions, cut taxes on corporations and upper income groups, and deregulated the financial system. This eventually led a stagnation of wages in the US and an increase in the concentration of income at the top of the income distribution throughout the world: http://www.rwEconomics.com/Ch_1.htm

The export-led growth model that began in the 1990s seriously exacerbated this problem as it proved to be unsustainable: http://www.rwEconomics.com/htm/WDCh_2.htm

When combined with tax cuts and financial deregulation it led to increasing debt relative to income in the importing countries that caused the financial catastrophe we went through in 2008, the economic stagnation that followed, and the social unrest we see throughout the world today. This, in turn, created a situation in which the full utilization of our economic resources can only be maintained through an unsustainable increase in debt relative to income: http://www.rwEconomics.com/htm/WDCh3e.htm

This is what has to be overcome if we are to get out of the mess the world is in today, and it's not going to be overcome by pretending that it's just going to go away if people can just become educated about the benefits of trade. At least that's not the way it worked out in the 1930s: http://www.rwEconomics.com/LTLGAD.htm

[Mar 02, 2016] Four Common-Sense Ideas for Economic Growth

economistsview.typepad.com
Larry Summers:
Four common-sense ideas for economic growth : Let me begin with two facts that I think should be cause for concern. First, since the summer of 2009, the US economy has grown at about 2 percent. Two percent isn't a very good growth rate. Second, the 10-year interest rate at the end of trading today ... was just a bit below 1.8 percent. ...

What's the way to think about these two facts together? I believe that we are dealing with a situation that goes beyond the usual cyclical issues associated with recession-and for many years the policy debate has been confounded by that. The Fed has been substantially too optimistic in its one-year-ahead forecast every year for the last six, and its forecasts are pretty close to the consensus forecasts. The prevailing expectation in markets has always been that significant tightening will take place in nine months. That's been true for the last six years. It has not happened yet.

If you accept all of this, what should be done? I would suggest four things at a minimum. First, there is an overwhelming case in the United States for expanded public infrastructure investment. ... It's hard to imagine a better time for expanded infrastructure investment, yet the rate of infrastructure investment is lower now than it's been anytime since 1947. ...

Second, we should increase support for private investment in infrastructure. ...

Third, we should grow our effective labor force. ...

Fourth, our financial system requires continuing attention. ...

I would say to you that whatever you care about, if all you care about is that we've got an excessive federal debt, the most important determinant of the debt-to-GDP ratio in 2030 is how rapidly the economy grows between now and then. If what you care about is American national security, the most important determinant of how much we are respected and how much influence we have in the world is how well our economy performs. If what you care about is inequality and poverty, the most important determinant of the employment prospects of the poor is how rapidly the economy is growing.

I would suggest to you that there is no more important question for the American prospect than accelerating the rate of economic growth. It seems to me, whether you're a demand sider or a supply sider, a Democrat or a Republican, there's a great deal of common sense that should lead you to support increased economic growth.

[There is quite a bit of discussion of each point in the full post.]

Posted by Mark Thoma on Wednesday, March 2, 2016 at 09:57 AM in Economics , Fiscal Policy , Monetary Policy | Permalink Comments (68)

[Feb 12, 2016] An Interview with Larry Summers

Notable quotes:
"... Theres another aspect of the connection between secular stagnation and inequality that bears emphasis. Experience suggests that in an economy where there are more workers seeking jobs than there are jobs seeking workers, the power is on the employer side, and workers do much less well. A tight economy, where employers are seeking workers, shifts the balance of power toward workers and leads to higher pay and better benefits. That, in turn, leads to more spending being injected into the economy, which supports further economic growth. ..."
"... But I also believe there are many areas in which its possible to reform policy to promote both economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting demand at times when there is slack in the use of resources. ..."
"... Right, in a democracy, the elected leaders must view the voters as idiots and execute to the total opposite of the expressed policies of the candidates who won. ..."
"... Paul Krugman and Larry Summers both have very good columns this morning noting the economys continuing weakness and warning against excessive rate hikes by the Fed. While I fully agree with their assessment of the state of the economy and the dangers of Fed rate hikes, I think they are overly pessimistic about the Feds scope for action if the economy weakens. ..."
"... While the Fed did adopt unorthodox monetary policy in this recession in the form of quantitative easing, the buying of long-term debt, it has another tool at its disposal that it chose not to use. Specifically, instead of just targeting the overnight interest rate (now zero), the Fed could have targeted a longer term interest rate. ..."
"... For example, it could set a target of 1.0 percent as the interest rate for the 5-year Treasury note, committing itself to buy more notes to push up the price, and push down the interest rate to keep it at 1.0 percent. It could even do the same with 10-year Treasury notes. ..."
"... This is an idea that Joe Gagnon at the Peterson Institute for International Economics put forward at the depth of the recession, but for some reason there was little interest in policy circles. The only obvious risk of going the interest rate targeting route is that it could be inflationary if it led to too rapid an expansion, but excessively high inflation will not be our problem if the economy were to again weaken. Furthermore, if it turned out that targeting was prompting too much growth, the Fed could quickly reverse course and let the interest rate rise back to the market level. ..."
"... Amazing how unconventional monetary is always the go-to option. Pessimism about the effectiveness of the Feds policy options is well warranted. You only need to look at the results of the last seven years. ..."
economistsview.typepad.com

Part of an interview of Larry Summers at Equitable Growth :

... When I went to graduate school in the 1970s, the prevailing view among economists, captured by Art Okun's book "Equality Versus Efficiency: The Big Tradeoff," was that equality and efficiency were both desirable, but they were likely to trade off-that more progressive taxation would achieve more equality but would inevitably in some way distort economic choices and, so, reduce efficiency, for example.

I believe there are still many areas in which one does have to trade off equality versus efficiency. But I also believe there are many areas in which it's possible to reform policy to promote both economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting demand at times when there is slack in the use of resources.

Recall that I defined secular stagnation as having at its essence an excess of savings over investment, desired saving over desired investment. There are many reasons for that. Some of them have to do, for example, with reduced investment demand because so much more capital can be purchased with fewer dollars. I think of the fact that my iPad has more computing power than a Cray supercomputer did when Bill Clinton came into office in 1993.

One aspect of that excess in saving over investments is that rising inequality has operated to reduce spending. We are fairly confident that what economists call the "marginal propensity to consume" of those with high incomes is less than the marginal propensity to consume of those with middle incomes.

And so the combination of rising inequality in the distribution of income across income levels and a shift in inequality toward the higher profit share slows economic growth. In normal times, such a change might be offset by easier monetary policy. But in the current environment, where interest rates are very close to the zero lower bound, the capacity for that kind of offset is greatly attenuated.

There's another aspect of the connection between secular stagnation and inequality that bears emphasis. Experience suggests that in an economy where there are more workers seeking jobs than there are jobs seeking workers, the power is on the employer side, and workers do much less well. A tight economy, where employers are seeking workers, shifts the balance of power toward workers and leads to higher pay and better benefits. That, in turn, leads to more spending being injected into the economy, which supports further economic growth.

And so, as Keynes recognized when he wrote to FDR in the late 1930s urging the importance of wage increases, measures that strengthen workers' capacity to earn income by increasing spending power can promote both equality and strengthen the economic performance of the country. ...

pgl :

Excellent interview with this as a key sentence:

"But I also believe there are many areas in which it's possible to reform policy to promote both economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting demand at times when there is slack in the use of resources."

Summers makes two arguments with respect to promoting aggregate demand:

(1) his case for more infrastructure investment; and
(2) his defense of the expansionary monetary measures taken by the FED from 2008 until recently.

He does note that Obama started talking about "belt tightening" after Summers left the White House and to Summers regret.

mulp -> pgl...
Right, in a democracy, the elected leaders must view the voters as idiots and execute to the total opposite of the expressed policies of the candidates who won.

Or do you think the voters were calling for massive explosions of debt and massive increases in jobs forced by government policies to force exploding labor costs which would necessarily result in exploding consumer prices when they voted Democrats out and Republicans in?

Perhaps you think Bernie Sanders got far more leftist laws passed by being a radical leftist socialist in Congress able to lead a revolution in Congress to redistribute wealth?

The Republican Party is divided by Obama highly divisive politeral tactics which played Republicans against Republicans, doing a far better job dealing with Republicans than Clinton's "triangulation" which implemented massive austerity tempered by government dictates that were highly profitable to crony capitalists in the computer industry. Bush-Cheney served a different set of crony capitalists leading to an implosion in the tech sector dragging down pretty much everything good for the American people. Obama has since created incentives with rewards to both sets of crony capitalists, that has now imploded for the Bush-Cheney crony capitalists (fossil fuels) but still reward the Elon Musk, Bezos, google, hollywood, Ellison, Apple sector.

Neither Clinton nor Obama were allowed to help the bottom 50% of workers because voters demanded austerity by voting for Republican control of Congress in 1994, 1996, 1998, 2000, 2002, 2004, 2010, 2012, 2014, and if Sanders is the Democratic nominee in 2016, then Republican control of Congress in 2016, 2018, and probably 2020 and 2022. And only a Republican president will end the austerity, but it will lead to slower growth, high unemployment, likely severe recession, but wars. Just like the end of austerity of Bush-Cheney.

pgl said in reply to mulp ...
WTF this has to do with what Summers wrote??? Never mind. So much babbling, so little time.
JohnH :
"One aspect of that excess in saving over investments is that rising inequality has operated to reduce spending. We are fairly confident that what economists call the "marginal propensity to consume" of those with high incomes is less than the marginal propensity to consume of those with middle incomes.

And so the combination of rising inequality in the distribution of income across income levels and a shift in inequality toward the higher profit share slows economic growth."

Hate to say this, but Summers is making a lot of sense.

The way to address the problem of slow economic growth is to tax the wealthy, who have a low propensity to consume, and use the funds for government programs (infrastructure, education, healthcare) and redistribution to the poor...exactly as I have been arguing.

JohnH said in reply to JohnH...
pgl should take up his fight with Larry Summers, not me.

But Summers is fairly confident...as pgl just can't accept that a) increasing inequality reduces consumption and economic growth and that b) addressing inequality by taxing high incomes and wealth would lead to increased consumption and economic growth if it was spent on social programs and redistribution to those with a high propensity to consume (the poor).

It appears the we now have two pgls here--one that support high top tax brackets and another who opposes taxing the wealthy.

Or maybe we just have a single, very confused dude!

BenIsNotYoda -> JohnH...
pgl's solution is - give them a rate cut. always. grandmother is ill - give her a rate cut
pgl said in reply to JohnH...
You do know BINY is cheating on you. Good luck getting back with granny.
BenIsNotYoda -> JohnH...
he is not happy because his cheap stocks are getting cheaper.
JohnH said in reply to BenIsNotYoda...
I already called him on demanding QE4, which he advocated as soon as stocks went into correction territory back in August.

It was the same lousy economy. But as soon as stocks started to correct, and pgl's portfolio was getting hurt, he jumped right into action!

lower middle class -> pgl...
I'm trying to avoid being confused.

We hold the folowing as true, correct?

MPC is less than one.

"Income" refers to "disposable income"

As wealth and income rise, consumption also rises.

Falls in income do not lead to reductions in consumption because people reduce savings to stabilize consumption. (the poor get poorer by consuming wealth; wealth inequality accelerates?)

Increases in income do not lead to increases in consumption because people add to savings to stabilize consumption.
(high income people increase wealth faster the low income people while consumption increases; wealth inequality decelerates?)

JohnH said in reply to lower middle class...
General propensity to consume depends on income. Wealthy people tend to save a good chunk of their incomes...and become wealthier. Most people save a very small part of their incomes (middle class) or nothing at all (poor). Obviously there are exceptions to this generalization, as pgl is quick to point out with his tearful evocations of the plight of the 'hand to mouth' rich. But the general pattern is as I have described.

Marginal propensity to spend is a little more complicated, and a lot depends on whether the additional money is seen as a windfall or not. For people who do not generally save much, windfalls may be saved for a while or go to pay off debt, or be spend on durable goods or just spent.

Peter K. :
"In normal times, such a change might be offset by easier monetary policy. But in the current environment, where interest rates are very close to the zero lower bound, the capacity for that kind of offset is greatly attenuated."

Larry Summers agrees with the obnoxious trolls like JohnH and BINY. Monetary policy doesn't help.

I agree with Dean Baker and Bernie Sanders. (This is not to say fiscal policy doesn't work better. Funny how the trolls always toss out red herrings.)

http://cepr.net/blogs/beat-the-press/paul-krugman-larry-summers-and-the-fed-s-unused-ammunition

Paul Krugman, Larry Summers, and the Fed's Unused Ammunition by Dean Baker

Paul Krugman and Larry Summers both have very good columns this morning noting the economy's continuing weakness and warning against excessive rate hikes by the Fed. While I fully agree with their assessment of the state of the economy and the dangers of Fed rate hikes, I think they are overly pessimistic about the Fed's scope for action if the economy weakens.

While the Fed did adopt unorthodox monetary policy in this recession in the form of quantitative easing, the buying of long-term debt, it has another tool at its disposal that it chose not to use. Specifically, instead of just targeting the overnight interest rate (now zero), the Fed could have targeted a longer term interest rate.

For example, it could set a target of 1.0 percent as the interest rate for the 5-year Treasury note, committing itself to buy more notes to push up the price, and push down the interest rate to keep it at 1.0 percent. It could even do the same with 10-year Treasury notes.

This is an idea that Joe Gagnon at the Peterson Institute for International Economics put forward at the depth of the recession, but for some reason there was little interest in policy circles. The only obvious risk of going the interest rate targeting route is that it could be inflationary if it led to too rapid an expansion, but excessively high inflation will not be our problem if the economy were to again weaken. Furthermore, if it turned out that targeting was prompting too much growth, the Fed could quickly reverse course and let the interest rate rise back to the market level.

Of course, it would be best if we could count on fiscal policy to play a role in getting us back to full employment (lowering supply through reduced workweeks and work years should also be on the agenda), but the Fed does have more ammunition buried away in the basement and we should be pressing them to use it if the need arises.

Paine said in reply to Peter K....
Excellent

Despite a finessed genuflex to inflation

JohnH said in reply to Peter K....
"Larry Summers agrees with the obnoxious trolls like JohnH and BINY. Monetary policy doesn't help."

Amazing, isn't it?

Agreed: "Of course, it would be best if we could count on fiscal policy to play a role in getting us back to full employment." And the best course is higher taxes on the wealthy, who have more than what they know with to do with.

Taxes on the wealthy directly tackles inequality, increased debt doesn't.

JohnH said in reply to Peter K....
Amazing how unconventional monetary is always the go-to option. Pessimism about the effectiveness of the Fed's policy options is well warranted. You only need to look at the results of the last seven years.

So why not advocate unconventional fiscal policy...which at this point would include taxing the wealthy to fund stimulus? Why constantly flog the debt option, which does nothing to directly tackle inequality?

pgl said in reply to JohnH...
You need to shut up and go read that Ando-Modigliani paper on consumption. Once again you got everything exactly backwards. But then you are the dumbest troll ever.
JohnH said in reply to BenIsNotYoda...
pgl was against tax increases on the wealthy... before he was for tax increases on the wealthy...before he was against tax increases on the wealthy...

but he has always been for lots more debt...

PPaine :
" one persons rent may be another persons incentive "

That relies on a muddled use of the term rent

Which by construction
Means
non supply regulating revenue or income

But still a point lies under that mud dimness of articulation

Separating rents from incentives ain't easy

But in the last analysis
Very often it's very doable

Take my specialty
Ground rent
There are clever ways to tease out the rent

[Dec 29, 2015] The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed

Notable quotes:
"... The obvious candidate for this dark force [correlation between (rising) inequality and (low) growth] is crony capitalism. When a country succumbs to cronyism, friends of the rulers are able to appropriate large amounts of wealth for themselves -- for example, by being awarded government-protected monopolies over certain markets, as in Russia after the fall of communism. That will obviously lead to inequality of income and wealth. It will also make the economy inefficient, since money is flowing to unproductive cronies. Cronyism may also reduce growth by allowing the wealthy to exert greater influence on political policy, creating inefficient subsidies for themselves and unfair penalties for their rivals. ..."
"... The real problem is that money does not go to where it should go, as we see for example in the United States. The money does not flow into the real economy, because the transmission mechanism is broken. That is why we have a bubble in the financial system. The answer is not to tighten monetary policy, but to reform monetary policy so as to ensure that the money gets to the right place... ..."
"... As Stiglitz notes, the transmission mechanisms are broken. Economists trickle down monetary policy might work in theory, but not in practice, as we have seen for the last seven years, when low rates dont trickle down and were wasted instead on asset speculation by the 1%. ..."
"... Reform of the Fed, and the end of cronyism are essential to making sure that the stimulus of low rates gets to Main Street, to ordinary people, and not primarily to asset speculators. ..."
"... The recent decision by the Fed to raise interest rates is the latest example of the rigged economic system. Big bankers and their supporters in Congress have been telling us for years that runaway inflation is just around the corner. They have been dead wrong each time. Raising interest rates now is a disaster for small business owners who need loans to hire more workers and Americans who need more jobs and higher wages. As a rule, the Fed should not raise interest rates until unemployment is lower than 4 percent. Raising rates must be done only as a last resort - not to fight phantom inflation. ..."
"... And in one sentence Summers illustrates exactly why we dodged a bullet in not appointing Summers to be Fed Chair. Preserving the power of the Fed is not the most important policy. Changing the Fed composition so that it is more consumer friendly and not dominated by Wall Street interests is the most important policy change needed. ..."
"... the Balkanized character of US banking regulation is indefensible and would be ended. The worst regulatory idea of the 20th century-the dual banking system-persists into the 21st. The idea is that we have two systems one regulated by the States and the Fed and the other regulated by the OCC so banks have choice. With ambitious regulators eager to expand their reach, the inevitable result is a race to the bottom. ..."
"... Summers is also calling for higher capital requirements. Excellent stuff! ..."
Dec 29, 2015 | Economist's View

'The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed'

This is the beginning of a long response from Larry Summers to an op-ed by Bernie Sanders:
The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed : Bernie Sanders had an op Ed in the New York Times on Fed reform last week that provides an opportunity to reflect on the Fed and financial reform more generally. I think that Sanders is right in his central point that financial policy is overly influenced by financial interests to its detriment and that it is essential that this be repaired.

At the same time, reform requires careful reflection if it is not to be counterproductive. And it is important in approaching issues of reform not to give ammunition to right wing critics of the Fed who would deny it the capacity to engage in the kind of crisis responses that have judged in their totality been successful in responding to the financial crisis.

The most important policy priority with respect to the Fed is protecting it from stone age monetary ideas like a return to the gold standard, or turning policymaking over to a formula, or removing the dual mandate commanding the Fed to worry about unemployment as well as inflation. ...

JohnH said...
Disagree!!! There is more to this than just interest rates. There is the matter of how the policy gets implemented--who gets low rates. Currently the low rates serve mostly the 1%, who profit enormously from them. Case in point: Mort Zuckerberg's 1% mortgage!

"The obvious candidate for this dark force [correlation between (rising) inequality and (low) growth] is crony capitalism. When a country succumbs to cronyism, friends of the rulers are able to appropriate large amounts of wealth for themselves -- for example, by being awarded government-protected monopolies over certain markets, as in Russia after the fall of communism. That will obviously lead to inequality of income and wealth. It will also make the economy inefficient, since money is flowing to unproductive cronies. Cronyism may also reduce growth by allowing the wealthy to exert greater influence on political policy, creating inefficient subsidies for themselves and unfair penalties for their rivals."

http://www.bloombergview.com/articles/2015-12-24/cronyism-causes-the-worst-kind-of-inequality

As we know (although most here steadfastly ignore it) the Fed is rife with crony capitalism. As Bernie pointed out, 4 of the regional governors are from Goldman Sachs. Other examples are abundant. Quite simply, the system is rigged to benefit the few, minimizing any potential trickle down.

If a broad economic recovery is the goal, ending cronyism at the Fed is likely to be far more effective that low interest rates channeled only to the 1%.

JohnH said in reply to JohnH...
Stiglitz:

The real problem is that money does not go to where it should go, as we see for example in the United States. The money does not flow into the real economy, because the transmission mechanism is broken. That is why we have a bubble in the financial system. The answer is not to tighten monetary policy, but to reform monetary policy so as to ensure that the money gets to the right place...

Small and medium enterprises cannot borrow money at zero interest rates - not even a private person, I wish I could do that (laughs). I'm more worried about the loan interest rates, which are still too high. Access for small and medium enterprises to credit is too expensive. That's why it is so important that the transmission mechanism work..."
http://www.cash.ch/news/alle/stiglitz-billiggeld-lost-kein-problem-3393853-448

And let's not forget consumer credit rates, which barely dropped during the Great Recession and are still well above 10%. Even mortgage lending, which primarily benefits the affluent, have been stagnant for years despite historically low rates.

As Stiglitz notes, the transmission mechanisms are broken. Economists' trickle down monetary policy might work in theory, but not in practice, as we have seen for the last seven years, when low rates don't trickle down and were wasted instead on asset speculation by the 1%.

Reform of the Fed, and the end of cronyism are essential to making sure that the stimulus of low rates gets to Main Street, to ordinary people, and not primarily to asset speculators.

Peter K. said in reply to JohnH...

Bernie Sanders:

"The recent decision by the Fed to raise interest rates is the latest example of the rigged economic system. Big bankers and their supporters in Congress have been telling us for years that runaway inflation is just around the corner. They have been dead wrong each time. Raising interest rates now is a disaster for small business owners who need loans to hire more workers and Americans who need more jobs and higher wages. As a rule, the Fed should not raise interest rates until unemployment is lower than 4 percent. Raising rates must be done only as a last resort - not to fight phantom inflation. "

http://www.nytimes.com/2015/12/23/opinion/bernie-sanders-to-rein-in-wall-street-fix-the-fed.html

EMichael said in reply to Peter K....

It is hilarious.

"He's right! But his policies are wrong!"

You couldn't make this up......

JF said...
The financial system reform legislation in 2017 will also need to include these matters:

1. Licensure fees and higher and more differential income taxation rates based on the type of financial trading ratios the entities have (in order to direct more emphasis to real-economy lending and away from speculative and leveraged positions used in the financial asset trading marketplaces, so hedge funds probably would face the highest rates in income taxation). For a certain period after enactment these added taxes would be payable by the banks using their excess reserves, which will simply be eliminated until the reserve accounts return to the historically normal period when excess reserves were very small (there would no longer be a need for IOER, as the excess would be eliminated by operation of the taxation statutes). Attaching added ways & means statutes to all the financial service entities also serves to 'cover' some more of huge financial risk held by society and produced by them while the success of this huge sector actually contributes to the financing of self-government - which is also an indirect way to attach high Net Worth being used).

2. New statutory provisions need to reach any and all entities in the financial community regardless of definitions based on the functions they serve or provide (or the way they are named - so yes, the prior separation for deposit-management banking from investing activities can still happen, but this only helps to define which of the differential provisions apply, not help the entity escape them). Perhaps as a result Bank Holding Companies and other large entities won't use a complex network of hundreds of subsidiaries as these would not then serve as a way to avoid taxation, regulatory standards on what are prudent expectations, or supervision; or be used simply to obfuscate -- so investors and regulators can't see the truth of matters.

3. The newly named central bank needs to hold the discretion to buy Treasury bonds directly from the Treasury. This would discipline these fundamental asset-trading marketplaces and the huge primary dealer group of entities, and weaken the fox-and-hen-house influence on public finance.

4. New accounting approaches for the central bank would clarify what happens should the Congress direct redemption amounts or asset sales for the public's purposes. A good portion of the current FRB's book of owned assets can be redeemed or sold without affecting the 'power' of the central bank, and the proceeds used then, for example, to lower payroll taxes via a direct transfer to the social security trust fund's set of accounts).

Senator Sanders, good stuff. Bring out the vote, let us get others in Congress with whom you can work.

BillB said...
Summers: "The most important policy priority with respect to the Fed is protecting it from stone age monetary ideas like a return to the gold standard, or turning policymaking over to a formula, or removing the dual mandate commanding the Fed to worry about unemployment as well as inflation."

And in one sentence Summers illustrates exactly why we dodged a bullet in not appointing Summers to be Fed Chair. Preserving the power of the Fed is not the most important policy. Changing the Fed composition so that it is more consumer friendly and not dominated by Wall Street interests is the most important policy change needed.

Summers argument is the same we always hear from so-called "centrists." "You hippies should shut up because you are helping the opposition."

You hear the same sort of argument with respect to Black Lives Matter.

pgl said in reply to pgl...

On financial regulation - Summers is spot on here:

"the Balkanized character of US banking regulation is indefensible and would be ended. The worst regulatory idea of the 20th century-the dual banking system-persists into the 21st. The idea is that we have two systems one regulated by the States and the Fed and the other regulated by the OCC so banks have choice. With ambitious regulators eager to expand their reach, the inevitable result is a race to the bottom."

It is called regulatory capture.

Summers is also calling for higher capital requirements. Excellent stuff!

[Dec 02, 2015] Larry Summers and the Subversion of Economics

Notable quotes:
"... As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws. ..."
"... Over the past decade, Summers continued to advocate financial deregulation, both as president of Harvard and as a University Professor after being forced out of the presidency. During this time, Summers became wealthy through consulting and speaking engagements with financial firms. Between 2001 and his entry into the Obama administration, he made more than $20-million from the financial-services industry. (His 2009 federal financial-disclosure form listed his net worth as $17-million to $39-million.) ..."
"... In 2005, at the annual Jackson Hole, Wyo., conference of the worlds leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis. Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other peoples money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a full-blown financial crisis and a catastrophic meltdown. When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a Luddite, dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.) ..."
"... Over the past 30 years, the economics profession-in economics departments, and in business, public policy, and law schools-has become so compromised by conflicts of interest that it now functions almost as a support group for financial services and other industries whose profits depend heavily on government policy. The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And its due not just to ideology; its also about straightforward, old-fashioned money. ..."
"... Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby. This is now, literally, a billion-dollar industry. The Law and Economics Consulting Group, started 22 years ago by professors at the University of California at Berkeley (David Teece in the business school, Thomas Jorde in the law school, and the economists Richard Gilbert and Gordon Rausser), is now a $300-million publicly held company. Others specializing in the sale (or rental) of academic expertise include Competition Policy (now Compass Lexecon), started by Richard Gilbert and Daniel Rubinfeld, both of whom served as chief economist of the Justice Departments Antitrust Division in the Clinton administration; the Analysis Group; and Charles River Associates. ..."
"... I think it is interesting that Summers led the financial deregulation efforts of the Clinton administration and then made a bundle on Wall Street. I think that should be taken into account when evaluating his discussions of economics. ..."
"... It is difficult to get a man to understand something when his salary depends upon his not understanding it. ..."
economistsview.typepad.com

RGC, December 02, 2015 at 06:09 AM

Larry Summers and the Subversion of Economics

By Charles Ferguson October 03, 2010

The Obama administration recently announced that Larry Summers is resigning as director of the National Economic Council and will return to Harvard early next year. His imminent departure raises several questions: Who will replace him? What will he do next? But more important, it's a chance to consider the hugely damaging conflicts of interest of the senior academic economists who move among universities, government, and banking.

Summers is unquestionably brilliant, as all who have dealt with him, including myself, quickly realize. And yet rarely has one individual embodied so much of what is wrong with economics, with academe, and indeed with the American economy. For the past two years, I have immersed myself in those worlds in order to make a film, Inside Job, that takes a sweeping look at the financial crisis. And I found Summers everywhere I turned.

Consider: As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws.

After Summers left the Clinton administration, his candidacy for president of Harvard was championed by his mentor Robert Rubin, a former CEO of Goldman Sachs, who was his boss and predecessor as treasury secretary. Rubin, after leaving the Treasury Department-where he championed the law that made Citigroup's creation legal-became both vice chairman of Citigroup and a powerful member of Harvard's governing board.

Over the past decade, Summers continued to advocate financial deregulation, both as president of Harvard and as a University Professor after being forced out of the presidency. During this time, Summers became wealthy through consulting and speaking engagements with financial firms. Between 2001 and his entry into the Obama administration, he made more than $20-million from the financial-services industry. (His 2009 federal financial-disclosure form listed his net worth as $17-million to $39-million.)

Summers remained close to Rubin and to Alan Greenspan, a former chairman of the Federal Reserve. When other economists began warning of abuses and systemic risk in the financial system deriving from the environment that Summers, Greenspan, and Rubin had created, Summers mocked and dismissed those warnings. In 2005, at the annual Jackson Hole, Wyo., conference of the world's leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis. Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other people's money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a "full-blown financial crisis" and a "catastrophic meltdown."

When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a "Luddite," dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.)

Soon after that, Summers lost his job as president of Harvard after suggesting that women might be innately inferior to men at scientific work. In another part of the same speech, he had used laissez-faire economic theory to argue that discrimination was unlikely to be a major cause of women's underrepresentation in either science or business. After all, he argued, if discrimination existed, then others, seeking a competitive advantage, would have access to a superior work force, causing those who discriminate to fail in the marketplace. It appeared that Summers had denied even the possibility of decades, indeed centuries, of racial, gender, and other discrimination in America and other societies. After the resulting outcry forced him to resign, Summers remained at Harvard as a faculty member, and he accelerated his financial-sector activities, receiving $135,000 for one speech at Goldman Sachs.

Then, after the 2008 financial crisis and its consequent recession, Summers was placed in charge of coordinating U.S. economic policy, deftly marginalizing others who challenged him. Under the stewardship of Summers, Geithner, and Bernanke, the Obama administration adopted policies as favorable toward the financial sector as those of the Clinton and Bush administrations-quite a feat. Never once has Summers publicly apologized or admitted any responsibility for causing the crisis. And now Harvard is welcoming him back.

Summers is unique but not alone. By now we are all familiar with the role of lobbying and campaign contributions, and with the revolving door between industry and government. What few Americans realize is that the revolving door is now a three-way intersection. Summers's career is the result of an extraordinary and underappreciated scandal in American society: the convergence of academic economics, Wall Street, and political power.

Starting in the 1980s, and heavily influenced by laissez-faire economics, the United States began deregulating financial services. Shortly thereafter, America began to experience financial crises for the first time since the Great Depression. The first one arose from the savings-and-loan and junk-bond scandals of the 1980s; then came the dot-com bubble of the late 1990s, the Asian financial crisis; the collapse of Long Term Capital Management, in 1998; Enron; and then the housing bubble, which led to the global financial crisis. Yet through the entire period, the U.S. financial sector grew larger, more powerful, and enormously more profitable. By 2006, financial services accounted for 40 percent of total American corporate profits. In large part, this was because the financial sector was corrupting the political system. But it was also subverting economics.

Over the past 30 years, the economics profession-in economics departments, and in business, public policy, and law schools-has become so compromised by conflicts of interest that it now functions almost as a support group for financial services and other industries whose profits depend heavily on government policy. The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And it's due not just to ideology; it's also about straightforward, old-fashioned money.

Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby. This is now, literally, a billion-dollar industry. The Law and Economics Consulting Group, started 22 years ago by professors at the University of California at Berkeley (David Teece in the business school, Thomas Jorde in the law school, and the economists Richard Gilbert and Gordon Rausser), is now a $300-million publicly held company. Others specializing in the sale (or rental) of academic expertise include Competition Policy (now Compass Lexecon), started by Richard Gilbert and Daniel Rubinfeld, both of whom served as chief economist of the Justice Department's Antitrust Division in the Clinton administration; the Analysis Group; and Charles River Associates.

In my film you will see many famous economists looking very uncomfortable when confronted with their financial-sector activities; others appear only on archival video, because they declined to be interviewed. You'll hear from:

But could he be right? Are these professors simply being paid to say what they would otherwise say anyway? Unlikely. Mishkin and Portes showed no interest whatever in Iceland until they were paid to do so, and they got it totally wrong. Nor do all these professors seem to make policy statements contrary to the financial interests of their clients. Even more telling, they uniformly oppose disclosure of their financial relationships.

The universities avert their eyes and deliberately don't require faculty members either to disclose their conflicts of interest or to report their outside income. As you can imagine, when Larry Summers was president of Harvard, he didn't work too hard to change this.

Now, however, as the national recovery is faltering, Summers is being eased out while Harvard is welcoming him back. How will the academic world receive him? The simple answer: Better than he deserves.

While making my film, we wrote to the presidents and provosts of Harvard, Columbia, and other universities with detailed questions about their conflict-of-interest policies, requesting interviews about the subject. None of them replied, except to refer us to their Web sites.

Academe, heal thyself.

http://chronicle.com/article/Larry-Summersthe/124790/

EMichael said in reply to RGC...
Yeah, after an economist has had one job in the government; one job in the banking system; and one teaching job he should be required to stop working as an economist.
RGC said in reply to EMichael...
I think it is interesting that Summers led the financial deregulation efforts of the Clinton administration and then made a bundle on Wall Street. I think that should be taken into account when evaluating his discussions of economics.
EMichael said in reply to RGC...
Of course it should.

At the same time this is not taking anything into account, this is about "subverting" economics.

Can you make a case that the only reason Summers made a "bundle" working on Wall Street is because of the financial deregulation efforts he made? Last time I looked he did not have a vote on the legislation.

RGC said in reply to EMichael...
I think this is especially troubling for the economics profession:

"Over the past 30 years, the economics profession-in economics departments, and in business, public policy, and law schools-has become so compromised by conflicts of interest that it now functions almost as a support group for financial services and other industries whose profits depend heavily on government policy. The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And it's due not just to ideology; it's also about straightforward, old-fashioned money."

EMichael said in reply to RGC...
Cause no economists actually believed in any of the policies that caused all of those things nor did any economist fail to vote for the policies adopted.
RGC said in reply to EMichael...
Upton Sinclair:

"It is difficult to get a man to understand something when his salary depends upon his not understanding it."

Tom aka Rusty said in reply to RGC...

As Hemingway and F. SCott Fitzgerald exchanged in their writings (the reputed face-to-face conversation may not have happened):

The rich are different.

Yes, they have more money.

Combine elite and rich and you get a toxic combination.

[Oct 18, 2015] Brooksley Born foresaw disaster but was silenced

Dec 5, 2010 | SFGate

There's a brief scene in "Inside Job," the locally produced documentary on the Great Financial Meltdown, in which a colleague of the head of the Commodity Futures Trading Commission in 1997 describes how "blood drained from her face" after receiving a phoned-in tongue-lashing from deputy Treasury Secretary Larry Summers.

The target of Summers' wrath was Brooksley Born, a San Francisco native, who graduated from Abraham Lincoln High School and became the first female president of the Stanford Law Review and a recognized legal expert in the area of complex financial instruments.

Her crime: Born had the temerity to push for regulation of the increasingly wild trading in derivatives, which, as we learned a decade later, helped bring the U.S. economy, and much of the world's, to its knees. Summers, with 13 bankers in his office, told Born to get off it "in a very grueling fashion," said the colleague.

The story is told in much more detail in "All the Devils are Here," the latest, but eminently worthwhile, book on the roots of the crisis, by Bethany McLean best known as a co-author of the book on the collapse of Enron, "The Smartest Guys in the Room," and New York Times business columnist Joe Nocera.

It makes for dispiriting, even appalling, reading.

Responding to growing evidence of manipulation and fraud in unregulated derivatives trading - "the hippopotamus under the rug," as Born and others referred to it - Born suggested the commission should perhaps be given some sort of oversight. She had a 33-page policy paper drawn up, full of questions and suggestions, like, for example, whether establishing a public exchange for derivatives might not be a bad idea.

But this was the age of Ayn Rand acolyte Federal Reserve Board chairman Alan Greenspan, and a Democratic administration that unquestioningly embraced his markets-can-do-no-wrong ideology. Responding to the policy paper, Summers, "screaming at her," according to the book, told Born the bankers sitting in his office "threatened to move their derivatives business to London," if she didn't stop.

Other members of President Bill Clinton's inner circle were equally unhappy. Like Summers' boss, Treasury Secretary Robert Rubin, who had previously expressed qualms about derivatives, but was now all about toeing the party line.

At an April 1998 meeting of the President's Working Group to discuss the paper, "his reaction to Born's arguments was almost visceral," the authors write. "He bullied Born in a way that seemed out of character to anyone used to watching him manage a meeting," according to the book.

Born went ahead and published the internal paper, which "incensed" Rubin and other members of the working group who "immediately sent a letter to Congress requesting that it block the CFTC's effort to solicit comment."

It didn't stop there. "Rumors were spread that Born was just an impossible woman - too shrill and strident to work with." The book describes Born's appearances at congressional hearings on the policy paper, as "an extraordinary spectacle: in one hearing after another, an array of Clinton regulators lined up to publicly denounce the action of another Clinton regulator."

Born's ideas got nowhere. Rubin, according to the book, never spoke to her again. After leaving the administration, he joined Citigroup as "senior counselor," a sinecure that paid him approximately $15 million a year.

In the meantime, Long Term Capital Management had collapsed, sending shock waves and panic around the world. "Even after LTCM, she remained the only administration official to talk about the need for government oversight over the derivatives business," the authors note. A few weeks later, Born left the administration, declining Clinton's invitation to a second term.

After her experience with government service, Born, now 70, returned to private practice and teaching, before retiring professionally. A co-founder of the National Women's Law Center, she is a member of the bipartisan Financial Crisis Inquiry Commission, which is due to report on its findings next month.

In 2009, Born was awarded the John F. Kennedy Profiles in Courage Award in recognition of the "political courage she demonstrated in sounding early warnings about conditions that contributed to the current global financial crisis."

One might say Born also deserves a congressional medal, and an apology.

[May 29, 2015] Summers and Swiss bitcoin hoards by Izabella Kaminska

May 27, 2015 | FT Alphaville
The FT's Richard Waters reports that Larry Summers, former US treasury secretary and secular stagnation theorist, is to form part of the advisory board at Xapo, a Silicon Valley Bitcoin start-up specialising in deep cold storage of bitcoins in Swiss vaults and the issuance of bitcoin debit cards.

Worth noting in this context, of course, is that Larry Summers is also the man arguing that bubbles are a bit of an inevitability in a secular stagnated world. Or as he explained in the Financial Times back in December 2014:

Some have suggested that a belief in secular stagnation implies the desirability of bubbles to support demand. This idea confuses prediction with recommendation. It is, of course, better to support demand by supporting productive investment or highly valued consumption than by artificially inflating bubbles. On the other hand, it is only rational to recognise that low interest rates raise asset values and drive investors to take greater risks, making bubbles more likely. So the risk of financial instability provides yet another reason why pre-empting structural stagnation is so profoundly important.

We'll give Summers the benefit of the doubt and assume the logic is that if you can't fight new fangled bubbles you might as well sit on the advisory boards of the companies pumping them so as to advise and steer them? Who knows.

What we do know is that there are clear synergies between bitcoin and the secular stagnation thesis.

For example, Bitcoin - in its most idealised form - could be judged a citizens' attempt to organise something akin to a universal basic income. Alternatively, it could be judged a giant Keynesian coal-mine thought experiment to mobilise the unemployed. Whilst neither of these is economically optimal for mobilising capital to invest in critical infrastructure, renewables or technologies, it's certainly better than doing nothing. Or so the Keynesian doctrine goes.

By any means, following Summers' own thesis, the sooner we can deploy capital properly into social infrastructure development the better for all of us.

Yet bitcoin as it stands is a system that pulls critical resources and capital away from producers and infrastructure developers and passes them over to predators or undeserving spendthrifts, often in a way that allows them to get something for nothing or which facilitates value hoarding.

Perhaps the thinking is that we need real economists to teach the bitcoin faithful the importance of investing rather than hoarding money?

But if that's the case it could be a steep uphill challenge.

Unlike the dollar money system, which draws value from the bonds it creates between parties, Bitcoin is designed to count as an asset in its own right. In that sense, bitcoin represents a particularly unsociable type of money system. It is no-one's liability. And that means no-one guarantees a bitcoin's minimum worth.

This in turn means if you hoard bitcoin, that capital sits idle in your account, undeployed, unutilised.

To the contrary, dollar savings are always someone else's liabilities, meaning capital is always being deployed in the system in a way that keeps the economy growing so that by the time you wish to redeem your savings, there's more than enough for everyone.

... ... ...

We're not even going to note the hypocrisy/irony/double standards of this policy as it applies to the Bitcoin scene. This speaks for itself. All we will say is that the above comes just as the standing system is being pressured to rely less on cross-subsidisation and to become more transparent about the costs in the business.

3) Perhaps Larry Summers is on hand to guide Xapo on its final transition to conventional financial intermediary status: the mastering of credit provision?

Gordon Moat

I suppose there is a bit of name recognition to build respectability and confidence in Xapo. However, the idea reminds me more of when Gary Coleman did those Cash-4-Gold commercials.

[May 05, 2015] Okun's Equality and Efficiency

May 4, 2015 | Economist's View

An excerpt from Larry Summers' prepared remarks delivered at the Brookings Institute on the 40th anniversary of Okun's "Equality and Efficiency: The Big Tradeoff":

Okun's Equality and Efficiency: ... For many years now, it has been the case that the income distribution has been growing much more unequal. ... Certainly because of what has happened in the economy, I would in thinking about tax policy put much more emphasis on distributional issues relative to efficiency issues than I would have during much of my career. Similarly, I believe that concern with issues relating to the cost of capital and the adverse effects of taxes in increasing it has been very legitimate at points in the past. At present, when zero interest rates make capital costs as low as they have ever been but corporate profits are at record levels, there needs to be much less concern with capital costs and more concern with the distributional aspects of capital taxation.
The same basic idea that rising inequality tips the balance between fairness and efficiency applies in other areas of policy as well. ... I would judge that he benefit cost ratio seems tilted towards minimum wage increases and towards relaxation of the rules regarding the rights of private sector workers to bargain with management.
Another area where conditions have changed over the years is with respect to policy directed at the financial sector and corporate governance. The financial sector has shown itself to be less of a source of diversification and stability and more of a source of instability than most judged a generation ago. At the same time compensation levels in the sector, and in firms engaged with the sector has gone up rapidly. The simultaneous emergence of high profits and low interest rates raises the question of whether monopoly power is on the increase. So the question of regulatory actions looms much larger than it has for many years. ...


400 ppm -> pgl...

"
Treasury Department was pushing some of the deregulations that fueled this.
"
~~pgl~

Did Tip O'Neil once quip, "all scams are local, are local to Capitol Hill"? Who knows? One thing for sure : He left us with a memorable hint.

"
more emphasis on distributional issues relative to efficiency issues
"
~~Larry Summers~

Can you see the *hidden persuader*? The hideous persuader? Presenting regressive taxation as providing less of equality but more of efficiency, an efficient form of preventing inflation? From my prospective, regressive is much more inefficient. Do you see how it could work?

When taxation code is modified to allow a *living standard-deduction* for the impoverished thus poor will have more money in pocket to pay the rent. Landlord will quickly detect this thus raise the rent some, but the residual pocket change can *stimulate* inventory draw thus greater production utilization thus more rehiring thus more *efficiency for America the Beautiful*, efficiency which is vital to our defense initiative.

Did Summers personally code that speech? Doesn't matter. What matters is the alertness of the reader and his logical interpretation of

"what needs to be done"
~~Garrison Kieler~

Gibbon -> 400 ppm...

One thing I remember my Grandmother a renter on a fixed income saying. Every time there was a social security cost of lining increase the landlord would raise the rent by the same amount. Which instilled in me the idea that any benefits you want hand over to low income people need to somehow be protected from the landlord, etc etc etc.

Better to tax wealth and property and use the money to pay for the poor folks kids to go to school, then to give poor folks an income tax break. Second best is to tax the poor and use it to pay for stuff they use.

Social Security is exactly the latter. The government takes some $$$ which in reality comes out of the landlords pocket. And in return promises some income during retirement. probably all of Social Security really comes out of the landlords pocket.

RGC :

Short version of Larry's talk: "I wasn't wrong back then when I made those proposals that turned out so badly. Conditions changed and my proposals had nothing to do with it."

RGC -> RGC ...

Larry again: "Oh, and all that money the banksters paid me and Bob Rubin and Rahm Emanuel and Ben Bernanke..... that didn't have anything to do with it either. We all give terrific advice."

pgl:

The Congressional Research Service documents one source of inequality - multinationals doing base erosion:

http://op.bna.com/der.nsf/id/klan-9w7qwb/$File/CRS%20BEPS.pdf

"of the $1.2 trillion in overseas profits American companies reported earning in 2012, $600 billion was attributed to seven tax havens: Bermuda, Ireland, Luxembourg, the Netherlands, Singapore,
Switzerland, and the U.K. Caribbean Islands. The Netherlands was the most popular location to report profits, accounting for 14.1% of all overseas earnings of American companies. Further analysis reveals that the share of profits reported is significantly disproportional to the amount of hiring and investment made by American companies in these countries."

Inequality yes but Greg Mankiw with his Efficiency sign endorses this reduction in the effective tax rate on corporate profits.

pgl:

Krugman cites some important work from his new colleagues at CUNY:

http://krugman.blogs.nytimes.com/2015/05/04/explaining-us-inequality-exceptionalism/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body

Barkley Rosser:

I am not sure if it is funny or sad that "Okun's Law" was taken so seriously for so long, entering Principles textbooks as a standard truism barely questioned. All along simple correlations between Gini coefficients and either growth rates or income levels at the global level never supported it, although usually such simple regressions were insignificant. But the signs were almost always the wrong way.

A later argument developed, although it did not show up in the textbooks much, that the relationship was more likely to be some sort of inverted U-shape. So, we knew that super equality as in Maoist China or other parts of the Communist world were not associated with rapid growth or very high income after awhile. But, at the same time, until very recently, the very unequal countries in Latin America and parts of Africa were also not impressive performeers on either growth or income levels. It was those more in the middle on inequality that did the best, with the source of inequality also important, "earned" being good, but inherited or due to corruption not so good.

Of course, as time went on, even that story seemed skewed as those simple correlations that teneded to show growth equality related kept popping up, and we saw fairly egalitarian East Asis top the growth charts, while super unequal Latin America continued to stagnate (yes, it has done better more recently, but then it has been almost the only part of the world with increasing equality as well).

So, to get to the bottom line, it simply looks like "Okun's Law" was simply dead wrong. It was an outLaw, not a Law. Basically a giant mistake that got spread to justify policies increasikng inequality without a shred of foundation. We forgive you, Okun, you were mostly a good economist and nice guy, but this was a big f-up from start to finish.

Sandwichman -> Barkley Rosser...

"I am not sure if it is funny or sad that "Okun's Law" was taken so seriously for so long..."

Sad. Pathetic, really.

Sandwichman -> Barkley Rosser...

Except, to be precise, "Okun's Law" is about the relationship between rates of growth and rates of unemployment. It had a certain amount of empirical persuasiveness for a while, just like the Cobb-Douglas production function or the Phillips Curve. But these empirical rules of thumb are particularly vulnerable to changes in the underlying structures.

anne -> Sandwichman...

"Okun's Law" is about the relationship between rates of growth and rates of unemployment....

[ I was waiting for an expression of the relationship or "law." What does 38 years of 9.7% growth yearly mean in such theoretical terms then? Where and when, China 1977-2014? ]

Barkley Rosser -> anne...

Thanks anne, I stand corrected. Indeed, Okun's Law was about this relationship between rates of growth and changes in the unemployment rate, not all that far off.

However, it was indeed Okun who introduced, at least very publicly to the point of getting textbook credit for it (and with Summers still identifying it with him), the supposed equality-efficiency tradeoff. He did it big time in his 1975 Brookings book, Equality and Efficiency: The Big Tradeoff, which contained his Goodkin lectures from the year before at Harvard.

This was what was dead wrong from Day One, but Okun's Law is not so far off and indeed higher growth tends to reduce the unemployment rate, even if Okun's old rule of thumb numbers are not precisely correct.

anne -> Barkley Rosser...

However, it was indeed Okun who introduced, at least very publicly to the point of getting textbook credit for it (and with Summers still identifying it with him), the supposed equality-efficiency tradeoff....

[ Agreed. ]

anne -> Sandwichman...

https://twitter.com/billmon1/status/595289719082061824

Would it kill Krugman (or other "saltwater" economists) to acknowledge the virtues of old-school targeted job creation programs?

paine -> Barkley Rosser...

Bark

The E-E trade off is not Os law

anne -> paine...

The Equality-Efficiency trade off is not Okun's Law

[ Agreed. ]

pgl -> paine...

There are several versions of the Euler equation so I guess Art Okun can get credit for many things. But yea - when I say Okun's law, it is a proxy for the output gap by something akin to a(U - U*) whatever U* means.

anne -> Barkley Rosser...

A later argument developed, although it did not show up in the textbooks much, that the relationship was more likely to be some sort of inverted U-shape. So, we knew that super equality as in Maoist China or other parts of the Communist world were not associated with rapid growth or very high income after awhile. But, at the same time, until very recently, the very unequal countries in Latin America and parts of Africa were also not impressive performers on either growth or income levels. It was those more in the middle on inequality that did the best, with the source of inequality also important, "earned" being good, but inherited or due to corruption not so good....

[ Worth developing. ]

anne:

http://www.federalreserve.gov/newsevents/speech/bernanke20120326a.htm

March 26, 2012

Recent Developments in the Labor Market
By Ben Bernanke

The Change in Unemployment and Economic Growth: A Puzzle?

About 50 years ago, the economist and presidential adviser Arthur Okun identified a rule of thumb that has come to be known as Okun's law. That rule of thumb describes the observed relationship between changes in the unemployment rate and the growth rate of real gross domestic product (GDP). Okun noted that, because of ongoing increases in the size of the labor force and in the level of productivity, real GDP growth close to the rate of growth of its potential is normally required just to hold the unemployment rate steady. To reduce the unemployment rate, therefore, the economy must grow at a pace above its potential. More specifically, according to currently accepted versions of Okun's law, to achieve a 1 percentage point decline in the unemployment rate in the course of a year, real GDP must grow approximately 2 percentage points faster than the rate of growth of potential GDP over that period. So, for illustration, if the potential rate of GDP growth is 2 percent, Okun's law says that GDP must grow at about a 4 percent rate for one year to achieve a 1 percentage point reduction in the rate of unemployment....

Sandwichman:

Basically, the supposed efficiency/equality tradeoff commits a same yardstick fallacy. What is judge efficient depends on what you select as your numeraire. Select a different numeraire and what was efficient becomes inefficient.

The Kaldor-Hicks compensation criterion commits the same fundamental cognitive error. "Unacceptable nonsense" in the words of I.M.D. Little. I'm sure Okun was a nice man and very smart. It was very nice of Paul Samuelson to say in a eulogy that he never said a stupid thing. But he did. What is more stupid, though, is the almost unquestioning acceptance of that stupid thing by the economic mainstream. No, maybe that was not so stupid after all, just self serving.

anne -> Sandwichman...

http://en.wikipedia.org/wiki/Num%C3%A9raire

In mathematical economics, the numéraire or numeraire is a tradeable economic entity in terms of whose price the relative prices of all other tradeables are expressed.

anne -> Sandwichman...

Fine, I am suitably impressed but now set down the criticism in terms a fool like me can actually understand rather than just be impressed by.

Sandwichman -> anne...

David Ellerman, "On a fallacy in the Kaldor–Hicks efficiency–equity analysis"

http://www.academia.edu/6999811/On_a_fallacy_in_the_Kaldor_Hicks_efficiency_equity_analysis

Abstract: This paper shows that implicit assumptions about the numeraire good in the Kaldor–Hicks efficiency–equity analysis involve a ''same-yardstick'' fallacy (a fallacy pointed out by Paul Samuelson in another context). These results have negative implications for cost-benefit analysis, the wealth-maximization approach to law and economics, and other parts of applied welfare economics-as well as for the whole vision of economics based on the ''production and distribution of social wealth''.

I suspect that there is similarity between this fallacy and the Kahneman-Tversky framing bias I mentioned in an earlier thread -- and thus also with the cognitive challenge posed in the stock-flow systems dynamics question (Sterman and Booth-Sweeney).

[Apr 05, 2015] Do not Underestimate the Power of Microfoundations

Apr 04, 2015 | Economist's View

Darryl FKA Ron -> pgl...

At the risk of oversimplifying might it not be as simple as stronger leanings towards IS-LM and kind are indicative of a bias towards full employment and stronger leanings towards DSGE, microfoundations, and kind are indicative of a bias towards low inflation?

IN general I consider over-simplification a fault, if and only if, it is a rigidly adhered to final position. This is to say that over-simplification is always a good starting point and never a good ending point. If in the end your problem was simple to begin with, then the simplified answer would not be OVER-simplified anyway. It is just as bad to over-complicate a simple problem as it is to over-simplify a complex problem. It is easier to build complexity on top of a simple foundation than it is to extract simplicity from a complex foundation.

A lot of the Chicago School initiative into microfoundations and DSGE may have been motivated by a desire to bind Keynes in a NAIRU straight-jacket. Even though economic policy making is largely done just one step at a time then that is still one step too much if it might violate rentier interests.

Darryl FKA Ron -> Barry...

There are two possible (but unlikely) schools of (generously attributed to as) thought for which internal consistency might take precedence over external consistency. One such school wants to consider what would be best in a perfect world full of perfect people and then just assume that is best for the real world just to let the chips fall where they may according to the faults and imperfections of the real world. The second such school is the one whose eyes just glaze over mesmerized by how over their heads they are and remain affraid to ask any question lest they appear stupid.

A more probable school of thought is that this game was created as a con and a cover for the status quo capitalist establishment to indulge themselves in their hard money and liquidity fetishes, consequences be damned.

Richard H. Serlin

Consistency sounds so good, Oh, of course we want consistency, who wouldn't?! But consistent in what way? What exactly do you mean? Consistent with reality, or consistent with people all being superhumans? Which concept is usually more useful, or more useful for the task at hand?

Essentially, they want models that are consistent with only certain things, and often because this makes their preferred ideology look far better. They want models, typically, that are consistent with everyone in the world having perfect expertise in every subject there is, from finance to medicine to engineering, perfect public information, and perfect self-discipline, and usually on top, frictionless and perfectly complete markets, often perfectly competitive too.

But a big thing to note is that perfectly consistent people means a level of perfection in expertise, public information, self-discipline, and "rationality", that's extremely at odds with how people actually are. And as a result, this can make the model extremely misleading if it's interpreted very literally (as so often it is, especially by freshwater economists), or taken as The Truth, as Paul Krugman puts it.

You get things like the equity premium "puzzle", which involves why people don't invest more in stocks when the risk-adjusted return appears to usually be so abnormally good, and this "puzzle" can only be answered with "consistency", that people are all perfectly expert in finance, with perfect information, so they must have some mysterious hidden good reason. It can't be at all that it's because 65% of people answered incorrectly when asked how many reindeer would remain if Santa had to lay off 25% of his eight reindeer (http://richardhserlin.blogspot.com/2013/12/surveys-showing-massive-ignorance-and.html).

Yes, these perfect optimizer consistency models can give useful insights, and help to see what is best, what we can do better, and they can, in some cases, be good as approximations. But to say they should be used only, and interpreted literally, is, well, inconsistent with optimal, rational behavior -- of the economist using them.

Richard H. Serlin -> Richard H. Serlin...
Of course, unless the economist using them is doing so to mislead people into supporting his libertarian/plutocratic ideology.
Darryl FKA Ron -> Richard H. Serlin...
A big YEP to each the long and short of it.

dilbert dogbert

As an old broken down mech engineer, I wonder why all the pissing and moaning about micro foundations vs aggregation. In strength of materials equations that aggregate properties work quite well within the boundaries of the questions to be answered. We all know that at the level of crystals, materials have much complexity. Even within crystals there is deeper complexities down to the molecular levels. However, the addition of quantum mechanics adds no usable information about what materials to build a bridge with.

But, when working at the scale of the most advanced computer chips quantum mechanics is required. WTF! I guess in economics there is no quantum mechanics theories or even reliable aggregation theories.

Poor economists, doomed to argue, forever, over how many micro foundations can dance on the head of a pin.

RGC -> dilbert dogbert...

Endless discussions about how quantum effects aggregate to produce a material suitable for bridge building crowd out discussions about where and when to build bridges. And if plutocrats fund the endless discussions, we get the prominent economists we have today.

Darryl FKA Ron -> dilbert dogbert...

"...I guess in economics there is no quantum mechanics theories or even reliable aggregation theories..."

[I guess it depends upon what your acceptable confidence interval on reliability is. Most important difference that controls all the domain differences between physical science and economics is that underlying physical sciences there is a deterministic methodology for which probable error is merely a function of the inaccuracy in input metrics WHEREAS economics models are incomplete probabilistic estimating models with no ability to provide a complete system model in a full range of circumstances.

YOu can design and build a bridge to your load and span requirements with alternative models for various designs with confidence and highly effective accuracy repeatedly. No ecomomic theory, model, or combination of models and theories was ever intended to be used as the blueprint for building an economy from the foundation up.

With all the formal trappings of economics the only effective usage is to decide what should be done in a given set of predetermined circumstance to reach some modest desired effect. Even that modest goal is exposed to all kinds of risks inherent in assumptions, incomplete information, externalities, and so on that can produce errors of uncertain potential bounds.

Nonetheless, well done economics can greatly reduce the risks encountered in the random walk of economics policy making. So much so is this true, that the bigger questions in macro-economics policy making is what one is willing to risk and for whom.

The arguments over internal and external consistency of models is just a convenient misdirection from what policy makers are willing to risk and whose interests they are willing to risk policy decisions for.]

Darryl FKA Ron -> Peter K....

unless you have a model which maps the real world fairly closely like quantum mechanics.

[You set a bar too high. Macro models at best will tell you what to do to move the economy in the direction that you seek to go. They do not even ocme close to the notion of a theory of everything that you have in physics, even the theory of every little thing that is provided by quantum mechanics. Physics is an empty metaphor for economics. Step one is to forgo physics envy in pursuit of understanding suitable applications and domain constraints for economics models.

THe point is to reach a decision and to understand cause and effect directions. All precision is in the past and present. The future is both imprecise and all that there is that is available to change.

For the most part an ounce of common sense and some simple narrative models are all that are essential for making those policy decisions in and of themselves. HOWEVER, nation states are not ruled by economist philosopher kings and in the process of concensus decision making by (little r)republican governments then human language is a very imprecise vehicle for communicating logic and reason with respect to the management of complex systems. OTOH, mathematics has given us a univ